$ALT's Big Picture

For the past few weeks, I have been bashing $ALT due to its price action after lifting that 21 October suspension. However, reading an email about the importance of biotech sector, I got interested searching for biotech stocks in the PSE, and I found two: $ALT and $EURO.

After reading several news articles and company disclosures about $ALT, a big picture in my mind was formed about what's going on in the company. 

It all started with Mr. Navasero's dream of putting up the largest BPO in Asia for genomics. The challenge is for him to find a capital to fund Philab's business expansion. He's targeting a CAPEX of Php 2 to 3 B and included in that CAPEX is the plan to purchase the 20 hectares in UPLB and to create a healthcare mobile application. Once such capital is achieved, he is looking forward to a 4B revenue and he is expecting it to double into 8B the following year. In order to achieve this goal, he thought of backdoor listing Philab instead of taking the IPO road. 

Backdoor listing is a cost-effective way for a private company to go public in order to access the capital market. To do this, Mr. Navasero has to acquire an already publicly-listed company. In this case, he thought of $ALT as the way to go. And so last 12 August 2016, he purchased the 208,624,801 common shares of $ALT amounting to Php 362,324,961.21M or 1.74 per share.

Two months after, on 21 October 2016, $ALT obtained approval to acquire up to 361,390 shares of Philab or 100% of its issued and outstanding capital stock with a total price of Php 500M. Results of the transaction include the change in authorized capital stock of $ALT from 20M to 2B and the change in corporate name from Alterra Capital Partners Inc. to Philab Holdings Corp. Finally, on 16 November 2016, Mr. Navasero disposed 50M common shares @ 2.88 amounting to Php 144M.

Two questions come to mind:

One, why that buyer bought 50M common shares if the price of $ALT will continue to decline? I think that buyer contrary to the speculation of many traders that $ALT's price would drop to 1.74, was anticipating a higher price in the coming months and years.

Two, now that Mr. Navasero has disposed his 50M common shares of $ALT, what do you think is he going to do with that Php 144M cash in hand?

Remember 2008

One of the privileges in studying the Austrian school of economics is knowing how the business cycle works. Unfortunately, the mainstream media does not go beyond mere description of booms and busts. They just accept it as facts and an inherent nature in a "capitalist" society.

The two most recent examples of busts were the collapse of the 2000 dotcom bubble and the 2008 housing bubble. Those who have been trading and investing in the PSE for decades have a lot of experience to share how they survived those financial storms. As a PSE newcomer, the only thing I can do is to review the past.

If you were a long-term investor in 2008, I don't know how did you deal with a 58.27% loss in your capital in just 4 months, from September to December? In fact, entering PSE in January 2015, my original plan was to invest long-term. But after experiencing the huge drop in months of June and August, I changed my mind. 

I admire those who confidently say that they are not worried about busts and see them as buying opportunity. However, at the back of my mind, I am thinking that perhaps these people have no first-hand experience of market crash.

I have been warning people I know that the current market situation is ripe for a massive correction. However, since I am no market expert and have no finance-related credentials, my warning was just simply brushed off particularly by those who happened to be fortunate enough to start investing after the 2008 market crash. They thought that the "cyclical bull" that followed would extend beyond 2016.

Even as a newcomer, I could not avoid worrying about the potential financial loss of my friends investing long-term in PSE. I came up with a list of alarming events in global finance since 2008. Some of them are accelerating and others are coming soon in the next few years.

Here is the list: ZIRP, NIRP, war on cash, decreasing international reserves, SDR, rising USD, rising bond yields, European banking crisis, political promise of huge infra spending funded by fiscal stimulus, and global taxation using climate change as a convenient platform.

Determine if this list contains facts or simply fear-mongering. If these are facts and you combine them into one, what message do they tell you?

Wild Guess

BUY: 6727
SELL: 7070
BUY: 6574
SELL: below 7070
BUY: 6100
SELL: below 7070

Gold and Equity Markets: Four Different Voices

I don't like this kind of feeling. I am confused listening to four different authoritative voices. I sense both an approaching danger and an opportunity. March 11 is the day. I need to cool down and gather my thoughts.

The four guys that confuse me are Martin Armstrong, Sol Padha, Adam Hamilton and Michael J. Ballanger. I don't know which one to believe. All of them were bullish on gold, but they differ when it comes to timing and their views on equity market.

Martin Armstrong wrote last 11 February that markets' correction was fast approaching. He saw 2017 as the beginning of the end in the so-called "confidence game." As for gold, though he is bullish, he remains cautious. He wants to see the 1362 level broken to join the camp of those who have been claiming for a trend reversal. Nevertheless, he is still expecting for a price below 1000 USD. 

As for Sol Padha, though he is also long-term bullish on gold, but at the moment he refuses to join those who forecast for market correction. He understands that fundamentals in the current manipulated market no longer applies. The Fed in particular is forcing everyone to speculate. Though he affirms elsewhere in his other articles that the end of this is a big USD devaluation, but contrary to the message of doom prophets, such anticipation will still take a long way into the future. For now, he is expecting that with the power of the Fed, the three primary US stock indices will soon start "another monstrous rally."

Adam Hamilton is the third voice. In his 5 February article, he anticipated that as a result of the rising price of gold, gold stocks would be the 2016 best performing sector. And then just yesterday he wrote that investors should carefully watch GLD for this gold ETF provides the signal for the direction of capital flow from stock market into and out of gold. And based on his observation, investors have already "aggressively taken the gold-buying baton from speculators. . ." and concluded that "a new bull market in gold has been born!" 

And finally, we come to Michael J. Ballanger. I first encountered this guy through this report. In it, he presented both the long-term opportunity and the short-term threat to the gold market. It is him who alarmed me that March 11 would be the turning point in the gold market. I sensed that he doesn't like the change in sentiment given to gold by those who formerly ridiculed this market. He interpreted this as a warning that something hostile would be unleashed. This is how he described such threat in the above report: 

I am delighted to report that the long-term and intermediate-term status of the gold market and its associated gold miners is unequivocally BULLISH with every indicator I have used since the late 1970s kicking into gear. That's the good news. The bad news is that in the short term, I see an ever-increasing probability for a seriously sharp correction and one that will ignite all of the recent memories of what just happened back in the 2011-2015 bear market. 

Of course, he might be wrong as all analysts do. . . 

The Bear and Bull Markets

Are the three primary US indices about to correct?

SPX . . .

NASX . . .

DJYO . . .

How about the gold market? Has the bull market already started? 

GLD has still a long way to go to break that resistance line from 2011, but as far as that 20 February 2012 down trend line is concerned, GLD has already broken it last 01 February this year. 

I think among gold indices, GDX etf is the most advanced trading outside of the 2011 resistance line. . . 

Followed by HUI . . .

How about the XAU/USD?

And what's the meaning of all of these for PSEi?

Don't take these charts seriously. I am simply a newbie trader in search for a macro trading trends . . . but once the 7000 resistance was broken, perhaps Sol Padha was right. PSEi will just follow the direction of its western counterparts. 

PSEi: In Search for the 4th Downleg

4.5% Interest on Gold and Silver?

In Odd Twist, Canadian Bullion Dealer Offers To Pay Interest On Gold And Silver

4.5% interest appears too good to be true in a world immersed in 0.4% gold lease rate, ZIRP, 0.25% USD interest rate and NIRP. It's a good deal anyhow if there is nothing sinister behind it. This shows that for CBS to be willing to pay an interest of up to 4.5%, it found a way to profitably utilize such gold holdings with higher yield. However, knowing the history of gold, India's recent failed attempt to lure its people to hand their gold into govt safekeeping and the current state of Canadian economy, I am suspicious that this could be a precursor to a subtle form of confiscation, a Canadian version of FDR's EO 6102.