Business Circuit

“Profit is like health, necessary but not the reason why we live.”- Anonymous, Management Today, April 1999

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It is dangerous to put money in the stock market at this time. Nearly across the board, prices of shares have been bubbling for quite some time. The only reason is that foreign portfolio managers are pouring in huge amounts of money.

The bubble is ready to burst. By that is meant that the foreign portfolio managers have made enough money. They are ready to go elsewhere.

When that happens, the market will be at near-collapse. It will regain its sanity. Meaning, the little domestic liquidity -- about 30 percent of total -- will be left alone to keep the market alive.

Small domestic liquidity will never be able to create a stable market. This is the main reason prices at the Philippine Stock Exchange behave in peaks and valleys.

When portfolio money comes in to stay for a while, the market soars. When they fly out for a profit, needless to say, the market is left high and dry. It cannot fend for itself.

This has always been the problem of the equities market in this country.

Lawmakers may want to consider a bill that requires companies to list more of their shares. I have not gone over the percentage of listed shares as a ratio of total paid capital but I would guess it is small.

There are companies which have 20 percent of or less of their shares listed. On the other hand you have a company like Philex whose paid-up capital is nearly all listed.

The listing of all shares or at least 60 percent of paid capital acquires the true meaning of public corporation.

It has been proven in the case of Philex that stockholders will keep the board and management which give them profits. There has never been a proxy fight for the board.

On the other hand, companies which list less than 50 percent of paid capital are kept perpetually by the same management group. Or the seats in the board are rotated among friends and members of the family.

Listing more shares makes for higher liquidity. Apart from that there is the other advantage of more meaningful competition. It is easy to raise, in fact manipulate, prices of companies which have fewer listed shares.

Many listed companies reported hefty profits for the past year. This is one of several so-called fundamentals that perk up prices. But without foreign portfolio money, the market will never be half as bullish as it is now.

There is not enough domestic liquidity to keep the market at least stable.

Higher profits should be an indication of economic growth. No one argues that. But we have to examine the factors or reasons for the growth.

First, we admit that demand that in turn pushes up sales is basically created by the remittances of our overseas workers. With their purchases, they help many companies, particularly those producing and importing consumer goods, make profits.

Then we have to take note of the reality that the volume of imported consumption goods is increasing. Consequently, listed companies involved in the production and importation of consumption goods are also seeing bigger profits.

The other fundamental, if it may be called as such, are high prices of metals particularly gold and nickel.

None of these fundamentals helps create more jobs, at least not half the extent that President Arroyo promised in 2004.

Well, maybe not enough, but at least the importation will not be in the present increasing volumes.

The past governments have completely ignored the potentials of using prison land in Palawan for rice production.

There are thousands of hectares in the penal colony of Iwahig, Abuyog, San Ramos, and Sablayan, all in Palawan that can produce big volumes of palay.

In nearly all of these towns, irrigation water is available. Equally important is the use of prison labor to work on the farms. Of course they have to be paid. After all, they will produce their own rice and supply the market demand.

Technology is available for a cost that small farmers cannot afford. That is why the government of President Arroyo should support the project.

My high school classmate, Ricardo Macala, former director of prisons, argued the project until he was hoarse. He never got the ears of the authorities. They were too busy with the politics of rice, not in increasing its production.

Pasture leases

It is probably because pasture leases in the thousands of hectares are held by powerful people that government never saw the necessity of finding out whether the cattle industry is growing even if slowly.

Definitely, it is not growing.

We have pasture leases in the thousands of hectares, many of which do not have cattle.

There is good fertile land sitting idle out there.

The government should cancel all pasture leases that do not have a single head of cattle. As I have mentioned frequently, the government should conduct soil analyses and provide money to produce the crops that fits the soil.

But nobody is even looking at it.

It is entirely possible that the leases have been titled. The owners of the leases or lessee should be sent to jail. They help make the country poorer but they not necessarily enrich themselves.

I noticed that pasture leases are not included in the inventory of public land announced by agriculture Secretary Arthur Yap. Did he forget or was he told not to remember?