Solid as Barack!

On August 4, this author mentioned Obama’s “would-be” American Presidency. On October 13, our proposal that Filipino entrepreneurs create a Barako Coffee brand - “Star Baracks” - reiterated this. On October 20, we categorically projected Obama’s November 4 “World…err...US presidency” victory, supported by the Gen Y’ers (14.5% of voters were aged 18-29), that supplanted a dwindling Republican GI generation.

The President-Elect faces a US gross National Debt-GDP ratio of 69% and a tattered US economy saddled with a budget deficit (end-FY2008) of $455 billion (3.2% of GDP) that will further swell with the bailouts and recession, to about $750 billion (6% of GDP), by FY2009.

His character leadership of “Hope” begins limiting the infection of developed and emerging economies in Western and Eastern Europe invested in subprime, like in Budapest, where foreign denominated loan mortgages spiked after the Hungarian Forint’s (HUF) 39% depreciation last October 22.

Of mixed heritage and audacious character, Obama’s phenomenal victory has captivated the world’s interest and support.

Rock-steady

Our leader possesses a similar audacious character that steels her to do the right – sometimes unpopular or unconventional - thing. (It is shared by her only daughter, whose wedding, instead of becoming a venue for social networking, had only 26 guests).

She projects hope through action and accomplishment, not just oratory and rhetoric. By her discerning, economic foresight, our National Debt-GDP ratio has dropped to 51.7%. Her intellect has led her to become a major initiator of the ASEAN plus Three (China, Japan, and South Korea) $80 billion fund that will calm the region’s economy, a market larger than the EC in GDP terms.

The Administration’s goal of food security (98% self-sufficiency by 2010) has led to the Php43.7 billion FIELDS (Fertilizer, Irrigation, Education, Loans, Dryers, Seeds) program, even utilizing Php4 billion of the Php12 billion Malampaya royalties towards this goal. Dovetailed with infrastructure investments in roads, bridges, and ports (easing market access, and lowering factors of production), TESDA education, and mining, we stand solid as Barack, the man.

The Administration also allocated Php1.7 trillion for a four-year infrastructure program ending in 2010, pump-priming the economy way before the Crisis. It is an economically-proven fiscal stimulus also adopted by South Korea, who is devoting $8 billion of a recent $10.5 billion stimulus package to infrastructure.

As a result, a flood of investments from the US, Middle East, and the Asian Mainland will hit Asia. Even Donald Trump, partnered with a South Korean company, is developing a Subic beachfront complex.

Real estate will benefit, with global money going into Real Estate Investment Trusts (REIT), which promise returns of 7.23% (12-month average) for the Vanguard REIT Index, or 10.1% (quarterly) for the Neuberger Berman Real Estate Fund.

Rock-solid

Confidence in the Philippine economy is evident. Versace invited a well-known Filipino businessman to Dubai for a spa and wellness Joint Venture at the Palazzo Versace. A Rothschild scion sent US property managers to finalize Real Estate and Tourism projects in Boracay, and expressed further interest in spearheading REITs. Last week, UAE investors, awash in Petrodollars, were here seeking Philippine Agriculture and Mining Joint Ventures.

On 11 August, we stated the Global Meltdown will benefit the Philippines’ BPO Industry. Indeed, Spanish-American friend Harold James BPO business recently rose 42%, 60 days ahead of schedule.

On 15 September, this author recommended Filipino entrepreneurs partnering with foreigners to expand Philippine oil exploration. Another two new oil wells, Tindalo and Yakal, were discovered off Palawan’s coast last week.

Above all, our Filipino Expats remain a saving grace, with $16.5 billion in remittances expected by end-2008.

Rock and Roll

This crisis has people generally avoiding the stock market. Evaluated properly, however, it is still lucrative. Equity markets allow companies to raise capital and continue operations, keeping the economy running. Robust stock markets also attract foreign investors. If our stock market is performing better than the failing Dow Jones or Nasdaq, they will invest.

Reduce risk by evaluating ratios, like forward price-equity (what investors willingly pay per unit of expected earnings), and price-to-cash-flow (how much cash a company generates). Finally, consider total debt. Companies with less debt can better weather the crisis.

Consider other alternatives, like the US ETF (exchange-traded fund), a conservative, higher yielding fund composed of a broad spread of stocks. Vanguard High Dividend Yield’s ETF currently pays 3.4%, significantly better than local FCDU time deposits’ under 1%, gross.

Let’s also heed the Taipans. Their buying into the country’s schools (Manny Pangilinan into Mapua, John Gokongwei into Ateneo, Lucio Tan into UE), acknowledges that development requires education, education, education. The happy consequence of their altruistic intentions is that their graduates will eventually become the captive market for their Telecommunications services, coffee, airlines and malls.

Obama’s “Hope” will help him get the US economy – and the rest of the world’s – back on track. The pragmatic Filipino isn’t waiting, forging ahead on his own. As Kipling said, “…Triumph and Disaster…treat those impostors just the same…” Because as opportunity transforms crisis, “doing” manifests “hope.”

More in the next article.

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