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9:40 am Thursday June 4, 2009

Philippine stocks closed down 19.23 points (-0.77%) Wednesday while the Hang Seng (+1.02%) and Shanghai Composite (+1.99%) were both up.  Overnight, New york stocks were down and so were most of Europe.  Finally.  I was afraid that investors were cruising brain-dead.

I like it that the markets are down.  I’m ecstatic that Philippine stocks are down.  I was afraid that cerebral reflexes of investors had all gone numb.  I’m looking for more declines in the following days because I think that would be good for the market. I had mentioned earlier that I thought stock prices here had gone ahead of themselves.  I still believe that is true for a good number of counters.  ALI, AC, AGI, BPI and MER, I believe are due for some correction simply because their valuations have gone through the ceiling.  Other stocks like GMAP, FLI, MBTand SMPH (and even JFC) are due for some correction simply because prices have soared to high too fast.  Aviators avoid flying at a very steep climb because their planes could stall.  It’s the natural law of physics.  I think the same principle holds true for stock prices.  You can’t have a very steep climb without expecting a stall.  It just doesn’t happen.  If anyone thinks otherwise, please call me or send me an email; there’s a bridge that I want to sell.

What I would like to see is a meaningful correction that brings prices to decent valuations given the economic risks that we still face.  What I am looking for is a level of the market where I feel that I am being compensated for putting my money on a stock rather than expect prices to simply rise.  With a little homework, we can determine which stocks these are.  After all, it is June already.  In a few weeks, the second quarter will close and we’ll have better guidance of how earnings will perform.

As far as I’m concerned, I’ll probably take a course in patience over the next couple of days, maybe weeks.

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