human life (financial) cycle

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tax season

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Cathy

veiled solution/s

An editorial in the Philippine Daily Inquirer talks about the current situation in the Philippines -- rising costs of rice, oil crisis, wage problems -- provides an insight about corresponding effects if particular decisions are imposed by the government.  It may provide a breather on ordinary individuals like me, but what is needed would be some long-term solutions that should provide an integrated check and balance addressing monetary problems facing majority of the population -- carrying a huge debt, underpaid and underemployed.  

Immediate need 

Philippine Daily Inquirer

First Posted 23:41:00 04/20/2008

MANILA, Philippines - Are we being stampeded into a wage increase? The international Standard Chartered bank seems to think so. An analysis by a bank regional economist based in Hong Kong suggests that the current rice emergency may be forcing both private and public sectors in the Philippines to bite off more than they can chew.

“[The] current boiling climate surrounding food inflation has clearly given teeth to demands for measures to assist low-income families, which spent a larger proportion of their income on food. This plus the timing of the public servant wage hike clearly increase the risk of the government giving more ground than usual,” reads the Standard Chartered report dated April 18.

Set aside the delicious absurdity of the breathlessly mixed metaphors (boiling climate “clearly” giving teeth, resulting “clearly” in lost ground)—is Standard Chartered on to something?

The “public servant wage hike” it refers to is the 10-percent salary increase government workers will receive starting July 1. President Macapagal-Arroyo is set to sign the executive order on May 1. Budget Secretary Rolando Andaya said the other Friday that the cost of the increase will amount to P12 billion; Standard Chartered estimates the increase for the government’s million workers would cost twice that, or P24 billion. Either sum, it must be emphasized, is not a one-off cost, but an annual expense.

The “food inflation” Standard Chartered refers to is the subject of recent headlines: rice prices are going up, and in their wake the prices of other commodities too. But because the Philippines is the world’s biggest rice importer, and a confluence of international realities including a shortage in supply has turned the rice trade into a seller’s market, the country’s own buying is a major factor in the higher cost of imports.

The “boiling climate” the bank refers to describes the current summer of discontent: the sight of the poor queuing up under a broiling sun, a general sense of government’s untrustworthiness feeding a growing sense of panic—and, not least, the impassioned clamor for wage increases, to help counter higher costs of food and fuel.

The President herself has led the chorus of appeals. A week ago, she called on the regional tripartite wage boards to determine wage increases for private sector workers. “Because of the increasing prices of fuel and rice, we are calling for a meeting of the regional wage boards all over the country to discuss how they can help the workers cope,” she said in Calamba, Laguna.

Two big business groups, the Employers Confederation of the Philippines and the Makati Business Club, immediately expressed support for region-based increases. Since then, however, the public pressure for a salary increase for private-sector employees shifted emphasis, to a legislated wage hike. (The last time salaries were ordered increased through legislation was 1989, in the middle of the turbulent post-Edsa transition.)

All this, Standard Chartered fears, may set off a “home-grown inflation spiral.” It noted that “the rhetoric that surrounds this increase [in government workers’ salaries], timed to be approved before the Labor Day, is now closely associated with the latest food price spikes and risks setting off more aggressive demands from the rest of the labor force.”

That, in fact, is exactly what is happening.

What is to be done then? It is crucial to note that local and international experts agree on the short-term nature of the rise in food prices; prices may stabilize later this year, and fall in a couple of years. The rise in oil prices, however, is more worrisome. What these two realities mean is that the immediate need is for non-wage measures, such as an additional rice allowance or income-tax rebates for minimum wage earners, to help tide over those most vulnerable to the higher food prices. The next step is for a proportionate salary increase, implemented nationwide but determined by regional boards to reflect regional conditions, to prepare all wage earners for the continuing uncertainty of an oil-dependent economy. What about an across-the-board increase of P125 per day, mandated by Congress? This proposal looks tempting, but it may well prove indigestible.

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Cathy

Investment Roadblock

I dream of investing in some business interest/s amidst predators in the financial market as I discovered in an article below.  The risks, if one is not careful, are really increasing.

ASK Dr. NOET
Line between scams, creative investments getting fuzzy 

By Dr. Johnny Noet Ravalo
INQUIRER.net
First Posted 10:05am (Mla time) 06/27/2007

Questions:

“I am planning to invest my money but I’m not sure where. Currently, I have two things in mind: first, put my money in some kind of pyramiding investment honored by our government, it follows leveraging procedure ‘daw’.”

“I would like to ask your help in protecting the investing public. Two firms are soliciting funds from the public for 'investment' purposes. I'm 95% sure it's a scam because they're guaranteeing 100% profit or double your money in 22 days! It has attracted quite a number of clueless investors. It just started last month in the Philippines and it could be the next ‘Multitel’ of Baladjay fame. But this could be worse because nobody knows who’s behind it. No company, no personality, no office. It just operates online. You give your money to agents who are also investors and will also pass it to their upline, ala networking style.”

These are part of emails sent to this column via email. I have taken out the names of those who sent the emails as well as the institutions that they referred to. Their emails, though, would be forwarded to the proper authorities.

Financial products in general have become increasingly complex through the years. To a large extent, this is a reflection of the needs of the public — both retail and institutional — which is seeking better ways to either use or acquire surplus funds.

Many savers want to get higher returns without taking on substantial risks. Can it be done? With some structuring creativity and risk substitution, new bank products are constantly being churned out by the market, the latest buzz word of which are structured products that are not exactly suited for those who have little cash to spare or the faint-hearted.

However, individuals or institutions do take advantage of savers who are on a fool’s hunt for ‘guaranteed investment opportunities’ that will earn big buckets of cash, quickly. The consequence is that the line between creativity and outright scams has been very difficult to draw. An offer to double your money is no longer a dead give-away for something awry. With the exemption of specific forms of deposits from the final withholding tax, it was possible for banks to provide such schemes under specific realistic conditions. But doing so in less than a month as supposedly suggested by one of the firms cited above? Now that is just suspicious.

So how can one distinguish between a creative solution and a possible scam?

First, there is no substitute to consumer awareness. As a potential investor, making the right choice starts from knowing what your choices are and how one product is different from another. This gives you a sense of what is available in the market and therefore a sense of what is possible. Textbooks tell us that the risk-return investment frontier is the same across investors of different risk preference. This must be true because this frontier merely outlines the realm of the possible in the market, nothing more and nothing less. Anything outside this frontier is either not possible or the best-kept secret. If it’s a secret, shouldn’t you wonder why, if indeed their objective is to be an investment vehicle?

Second, despite the complexities of financial products, they are often imperfect substitutes to each other. A product that simply overwhelms all other products (i.e., very high returns in very short periods at supposedly low or no risk) would be mobbed by market participants. This dominance will force other products an early product death. In that case, there would be no investment frontier to speak of, just this one product that dominates everyone else. If a particularly profitable and fabulous product is “marketed” by word of mouth only, there is something that doesn’t quite add.

Third, talking about adding, some amount of quick calculations here and there never hurts. Just take the 100 percent return in 30 days. Without the compounding complication, that comes out to about 3⅓ percent everyday, weekends included. That rate can compete with the famous “5-6" scheme in the informal market and certainly much, much higher than what bank deposits command or even the government’s own treasury products, whether its 91-day Treasury Bills or 5-year fixed rate Treasury notes (FXTNs). If we are talking about trading in Philippine pesos, that scheme is saying they are guaranteeing that the peso will go worse than P90 per dollar in one month. Are these in the realm of the possible (meaning with one month)? Personally, I would rather spend my money cooking my next meal for my family or going out to the kids’ favorite restaurant.

Fourth, to me it is always telling if these schemes come from institutions with real offices in visible locations. Image is important to a reputable financial institution. In contrast, so-called “boiler rooms” are nothing but a cramped place which you communicate with through their phone lines. Remember those warnings to be cautious about phone calls with messages of accidents of relatives who need quick cash or jewelry? Boiler rooms are the financial scam equivalent.

I don’t really think there are finite rules out there that work all the time because scams are creative enough to go around them. Discretion, it would seem to me, is the best protection.

At the end of the day, scams exist because we are naturally attracted to the possibility of making a “quick buck”. There is any wrong with hoping to be lucky every now and then. But to constantly participate in schemes where the odds are just not realistic, we expose ourselves to the high likelihood of loss. And if we are the lucky one not to be hurt, our mere participation makes it viable for these scams to exist which will surely hurt someone, sometime, somewhere.

Lotto and Dreams

Update: lotto and dreams

The dreams of millions of Filipinos wanting to win the largest price ended with a single winner.

Here's the article about that win.  Until the next frenzied betting again for everyone who dreams of becoming rich without the hard work.

SAYS PCSO
Winning combination for largest lotto pot not a ‘lucky pick’ 

By Beverly T. Natividad
Philippine Daily Inquirer
First Posted 19:48:00 03/31/2008

MANILA, Philippines -- (UPDATE) The mystery person who won Sunday's monster SuperLotto prize beat odds of one in 13 million. And the winning combination consisted of numbers that were not generated by any system but were probably personally meaningful to him or her.

"The winner used a maintained set of number combinations. Most probably these are numbers that are relevant to his or her life," Philippine Charity Sweepstakes Office (PCSO) spokesperson Larry Cedro said in an interview.

All bets placed for the online lotto go to a central database of the PCSO and data such as number combinations also include whether such are standard play -- chosen by the bettor -- or a system-generated lucky pick or random play. These data could also be seen on the ticket, said Cedro.

As of Monday, the unnamed bettor had yet to claim the P249,005,120.40 jackpot prize and the PCSO still had no idea who he or she was, said Cedro.

He said the winner was known only to be from Luzon and that he or she placed his or her bet in one of the lotto outlets in the 2nd district of Quezon City.

The bettor hit the winning combination -- 47-32-1-46-15-29 -- after a series of 17 SuperLotto draws that began on January 17.

The SuperLotto is also known as the 6/49 game.

Cedro said the PCSO database showed that the winner used standard play in placing a bet -- that is, he or she bet on his/her own set of numbers instead of letting the system generate a combination for him (called random play or lucky pick).

Cedro said that based on the permutations of the 6/49 game, the lucky bettor had a one in 13 million chances of picking the winning combination.

But Cedro said that in the whole scheme of a lotto game, the use of standard or random play may not be a factor in hitting the jackpot since lotto was essentially a game of chance. 

“It is a game of luck. The odds against you will always be high. But if it is meant for you, then you will win it,” said Cedro. 

Previous to Sunday’s draw, the biggest jackpot prize won in the history of the country’s online lottery game was P202 million, which six people won on October 17, 2002.

Sunday’s ticket sales surged to P180,850,180, surpassing the previous record sales of P176 million.

Jackpot winners are given a year to claim their prize but are advised to claim it as early as possible from the PCSO office, according to Cedro.

He reminded the winning bettor that the lotto ticket was made of thermal paper which would be sensitive to extreme temperatures. 

The winning bettor, Cedro said, must claim his or her prize before the deterioration of the ticket quality so that all pertinent data could still be read on the thermal paper.

“That ticket is essential to us in processing claims,” said Cedro. 

Cedro added that it has been the PCSO’s policy to keep the winner’s identity a secret so as to ensure the security of the new multi-millionaire.

If only the situation is this simple.....

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Andy