First Metro Asset Management Inc

On the margin, by Gus Cosio

10:20 am  Friday  26 August 2011

I have been quite busy these past few days that I haven’t had a chance to share my thoughts.  I am sure that many are wondering if the game is over on LC/B.  While I think there is a lot more juice in the stock, I normally do not argue with market action.  Yesterday, over 1 billion shares traded with value of Php 1.8 billion.  That is a lot of people being shaken out from a high of 1.80 the previous day to yesterday’s low of 1.60.  What I am afraid about is that the confidence in the stock might have been shattered by the somewhat panicky behavior of the market.  Of course, one critical factor was the $100 plunge in gold prices which puts some doubt in people’s minds whether the gold bull bought LC/B for its value in the index since the weights were very small.has slowed down.  Another was the removal of LC/B in the PSEi; although I never really thought that people Nevertheless, there was excuse for people to take profits at these levels simply for cash management purposes.  Another possibility is the call on margins by brokers on the stock.  When a stock falls sharply, many of those who buy on margin get called to pay up or sell down.  To be transparent, I did sell my LC trading position yesterday and managed to get out at relatively higher prices.  I think people should now be careful about being whipsawed by the flows on LC/B.  The key is not to panic but to carefully manage cash, i.e. sell and buy to make sure that there is enough cash in your portfolio.  Nevertheless, I kept the positions that I bought at the foot of this rally since it is way below where the market is now, and I am confident that LC will not go back to that level again. Read more

Prospecting the city, by Gus Cosio

7:25 pm   Tuesday  23 August 2011

I was just watching 2 Philippine stocks today because they were the most interesting – LC and TEL.  Obviously, I was expecting LC to open a tad easier because of the very strong buying yesterday that ought to have enticed profit takers today.  To my surprise, buyers did not wait for the profit takers to bring the stock cheaper.  apparently, there is still pent up demand for LC/B out there as less and less of early buyers are putting shares into the market.  I, for one, have locked my earliest purchases in my bottom drawer in order not to be tempted to sell.  With my average cost way below current price levels, I am so inclined to see LC/B all the way to next year.  Actually, beyond my core position, I did add more shares and sold to profit take only to buy the same shares higher.  For my last purchase which I made at 1.40, I prefer to be patient and wait it out until the stock rises above 2 pesos.  It may be just around the corner. Read more

Somewhere over the rainbow, by Gus Cosio

6:49 pm Tuesday 16 August 2011

I noticed from today’s trading activity in LC that signs that the stock is overbought is showing up. Why am I not surprised? First of all, many of those who buy LC are not long term investors. Many come in for a punt and quickly take profits. Nothing wrong with that. For those who share a longer time horizon with me, I would like to share this transcript from the quarterly report of Gold Fields which is actually available on line. The person being quoted is Gold Fields CEO Nick Holland: Read more

Something in the way, by Gus Cosio

6:10 pm Monday 15 August 2011

Judging from today’s stock market action, it looks to me that local investors will have to carry the ball for the time being as Philippine stocks continue to see net foreign selling. Portfolio re-alignment will likely continue until there is a consensus on the risk-free status of the U.S. treasury market. The 10-year U.S. treasury bond has been the traditional measure of risk free interest rate upon which various valuation methods are performed. With the downgrade of U.S. debt, it can no longer be classified as risk-free, therefore, most market evaluation tools have to make some extrapolations to simulate a true risk-free yield. This is a discipline that professional analysts use arising from various theories learned from the top global business schools. Going forward, we will probably some academic research forwarding new theories on deriving risk free returns apart from U.S. benchmark. Read more

Got a ticket for my destination, by Gus Cosio

8:30 am  Monday  15 August 2011

Waiting for my flight gives me some time to write my thoughts.  In my over 30 years of following the New York stock exchange, I have never seen a week as volatile as the week just past.  For those who can still remember the September 2008 sell-off on account of the Lehman Brothers failure, the market direction was pretty clear.  It was down.  In the recent sell-off, we have been seeing over 500 point declines in the Dow in both directions day after day.  The S&P downgrade of U.S. debt was something that people could not digest that easily.  Consequently, people just sell and speculators short the market then cover shorts or buy back exacerbating directional market moves.  I think the investment community is already digesting the consequences of the down grade. Read more

Cash, but not cashing in yet by Gus Cosio

7:25 Wednesday 10 August 2011

After a good bounce in Philippine stock prices, I believe what is going on in investors minds is the anxiety whether or not the selling has ended. The rally today does not overshadow yesterday’s blood bath. Many investors are still hurting, and many more are worried that the remaining profit in their existing positions might be eroded further in the coming days. For those who are deep in the red, what is in the back of their minds is how to limit the damage. I do not believe that there is a closet bull in our midst today Read more

Did you catch that knife? by Gus Cosio

5:04pm Tuesday 9 August 2011

What I would like to do now is to put Philippine stocks in perspective. On Monday, 1 August 2011, the PSEi shot up to its highest close ever as people thought that the bullishness in July would carry momentum through to August. At that time, the U.S. markets had already been experiencing six consecutive days of decline. The following day, local players had started to take profits although most participants saw this simply as a correction since the market had just reached historic highs, and the U.S. market was declining in spite of the U.S. debt ceiling was raised averting a potential default by the U.S. government. The local market was quite impervious to foreign developments because the apparent flows by global investors favored emerging markets. Read more

Haste is Waste by Gus Cosio

8:48 am   Monday  8 August 2011

The biggest headline item in the news over the weekend was the credit rating downgrade of the U.S. by the agency Standard & Poors.  I think if one watched CNN, CNBC, Bloomberg and BBC over the weekend, commentators analyzed this issue to death already.  What people expect should no longer come as a surprise to us.  Of course there will be a lot of political bickering in Washington D.C. as well as populist and conservative economic and political analyst painting their own doomsday scenario. Read more

A bit of CAUTION by Gus Cosio

8:45 am Friday 5 August 2010

The 500 point drop in the DJIA should keep us very cautious. We will not be able to escape a bloodbath today. While much of the market’s fundamentals had been in our favor, the unfortunate fact is that the tail cannot wag the dog. Our market is so small that ripples seem like waves to us. I had mentioned the mining sector in yesterday’s post. Personally, I think we can find refuge there since most investors who are exposed to the sector are Philippine funds or individuals. If we can keep our cool, we could mitigate the damage.

Nevertheless, if you are low on cash, I recommend that you choose a few stocks that you can sell to generate future buying power. In times like these, it is always good to have liquidity. You can always redeploy positions when all the chaos has died down.

Do we need a diamond ring? by Gus Cosio

7:00pm Wednesday 3 August 2011

With cracks showing further in the U.S., our markets should probably brace up for some more of the blood-letting we saw today. In my view, much of the injury will be felt among the stronger stocks that performed the past year. Read more

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