“We make a living by what we get, but we build a life by what we give.”

– Anonymous

Below is one of my all-time favorite true stories, printed in a newspaper in the United States years ago, and quoted by religious leader Thomas S. Monson in his talk, The Profound Power of Gratitude. There’s a personal finance lesson in it :-).

Here’s hoping that you all have a Merry Christmas, a bright year ahead come what may, and a heart full of gratitude for all that the year will bring.

The District of Columbia police auctioned off about 100 unclaimed bicycles Friday. “One dollar,” said an 11-year-old boy as the bidding opened on the first bike. The bidding, however, went much higher. “One dollar,” the boy repeated hopefully each time another bike came up.
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We Filipinos traditionally blow away a huge chunk of our Christmas budgets on Noche Buena. We can cut back on gifts and decorations but not on Christmas dinner! Not even plates of lechon and sweet spaghetti can make us veer away from the traditional, lavish handaan. Filipino parents feel like they are lousy providers when they can’t at least provide hamon and queso de bola.

So, what are you personal finance enthusiasts having for Noche Buena? Are you making do with less or is the dinner still a tradition that will remain untouched despite the gloomy forecasts?

In the Duplito household where Christmas dinner is basically a simple family affair (no cousins, lolos and lolas because they live far away), adjusting is not a difficult thing because we have kept the traditions simple from the very beginning.

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My apologies for not posting my news roundup last Saturday. Here it is, finally, including some developments today that point to trends in the economy.

Personal Finance

My sincerest thanks to you guys for making the Personal Finance section a hit among INQUIRER.net readers. I heard that some readers who would normally not read the Business Section at all do so because they find personal finance to be practical and useful.

My editor-in-chief once asked me why I chose to write about personal finance and I replied with a laugh that I had been merely typecast. I realize though that it’s the chance to change lives that makes personal finance for me very fulfilling.

Enough of the speech. Sniff.

Hope you like my article “Top personal finance lessons for 2008” as a yearender sort of thing. There are also tips on how to “Buy a house amidst a crisis” and how those with cash should consider next year a good time to buy one. Our Take Charge of Your Money article has a timely “On shopping wisely” article for those still doing their Christmas shopping.

There’s an 11-day holiday in the offing but if you need to work on some of those days, make sure your company pays you well. Here’s our guide: Pay rules for long holidays.

Here’s an interesting crisis-related development. Divorce rates in the United States have gone down because couples realize its cheaper to stay together. Heh. Interesting? Read more here: Hitched to the economy.

Macroeconomy

Economic data that came in last week about the economy showed we weren’t pummeled (yet) by the crisis. The peso last week touched P46.90 to a dollar because of the Fed’s historic decision to cut rates to zero, and we know that there will always be winners and losers regarding peso fluctuations.

The central bank responded by cutting rates by 50 basis points and that means you’ll see money getting cheaper and interest rates on loans going down even more. Next year, there might even be more rate cuts as the outlook for inflation gets rosier. The Bangko Sentral ng Pilipinas now expects price increases to be even tamer at 9.4 percent for the entire year or the lower end of its target range. If you are curious whether making money cheap will soften the economic landing for all of us, read Cielito F. Habito’s “Will easy money work.”

It’s not clear whether NEDA director general Ralph Recto already inputted the central bank rate cuts in his 4.6 percent prediction for gross domestic product growth in the fourth quarter. He is also talking about a P300-billion sustainability plan to help the economy move along. He didn’t say if this is new money and how the government will raise the amount, or just a re-packaging of the budget.

Other macroeconomic signs still point to a clear sky despite more gloomy talk about a total global economic meltdown, this time by Spain’s central bank governor Miguel Angel Fernandez Ordonez. Remittances as of October still grew 15 percent at P14 billion and while the month of October alone showed a sharp slowdown, the Bangko Sentral ng Pilipinas believes the growth will stay at 15 percent for the whole year given that Filipino expats send more during the Christmas holidays.

Remember that last year, analysts said remittances will slow down because of the crisis and it didn’t? It appears that the Filipino culture surprised most of these foreign economists. Come what may, we find ways to send what our families need. We will see this time what happens with the possibilities of layoffs across the globe. Locally, however, the jobless rate was still at 6.8 percent in October and the balance of payments swung into a surplus in November of $19 million. No wonder one of the most respected businessmen in the Philippine economy, Jaime Augusto Zobel de Ayala remains bullish on Philippine prospects.

Banking and Investing

The saga of rural bank failures continued last week. BSP is investigating 9 rural banks for “unsafe and unsound” banking practices and now politicians, as always eager to get in on any chest-beating discussion, would like to investigate as well. Here is the list of the rural banks to be investigated: Dynamic Bank, Rural Bank of San Jose, San Pablo City Development Bank, Rural Bank of Paranaque, Rural Bank of Bais, First Interstate Bank, Pilipino Rural Bank, Bank of East Asia, and Philippine Countryside Rural Bank.

Another corporate drama last week came to a head when PSE suspended trading of Meralco shares. Dig deeper through the legal brouhaha and you’ll find that this put a monkey wrench on government financial institutions’ plan to sell its Meralco shares to San Miguel Corp.

Meanwhile, we have Gotianun’s East West Bank winning the bid for Philam Savings Bank. The bigger question, however, is who will bag the insurance business deal? The answer will all depend on the valuation of the company. I heard that Philamlife is too expensive for many of its suitors.

Investing-wise, San Miguel Corp., the country’s biggest food and beverage conglomerate, is preparing for a $1-billion preferred stock offer for next year for its acquisitions.

Corporate news:

For those who are constantly looking for air travel options, you might be interested to know that Dragonair has launched Manila-HK flights, but that the Texas Instruments plant has retired 400 people, listed firms’ third-quarter profits are down 20% and bank lending growth has slowed down in October.

These storm clouds mar what appears to be a clear economic sky and give some signs of the difficult road ahead for everyone as the crisis takes a bigger toll on the economy.

From the blogosphere:

I found an interesting piece from Soul who is ranting about bad customer service here. I find that while we don’t have to be shrews when complaining (customer service representatives are people too!), too many Filipinos are too shy to complain even when we deserve to be heard.

“The myth of wonderful capitalism is dead but not capitalism, just the nice warm fuzziness.”

– former International Monetary Fund chief economist Simon Johnson

Careers in the financial services industry seem to be especially vulnerable to economic downturns. Remember in 1997 when then highflying stockbrokers and analysts suddenly found themselves out of jobs?

All of a sudden, their P100,000 sign-on bonuses gave way to depressing talks about who was getting laid off and who was losing his house. These days, those working in the sector are in the same boat especially in the United States.

Some workers in the financial sector are finding a way to avoid this vulnerability. The International Association of Registered Financial Consultants (IARFC) recently observed more of their members going into independent financial planning services, setting up their own companies, and using their skills to create a unique career for themselves.
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It’s my pediatrician this time .

“Hi Salve. You know what, I’m keeping my mutual fund investments. After all, I’m investing for the long-term naman eh. As long as the value of my shares don’t go down to zero!,” she said.

This appears to be a common concern among mutual fund investors, who have watched the net asset value per share (NAVPs) of their mutual fund holdings drop to precarious levels this year. Many have decided to stop checking the values every day as the movements make them nervous. Others have decided to withdraw their investments altogether even at a huge loss.
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The year is almost about to end. I’ve been thinking about the top personal finance lessons we can glean from 2008. Here are mine. If you want to share your own lessons, write via the comment section or email me at lightdream (at) gmail (dot) com. I will feature the best ones in my article for Business Monday at the Philippine Daily Inquirer.

1. Crisis-proof your finances. Don’t put too much money in one investment. Diversify. Invest only what you can afford to lose.
2. Plan for the long-term, but revisit your goals regularly.
3. Don’t be too greedy. Know what you’re getting into. If you don’t understand something, ask for plain English explanation and if that doesn’t work, just walk away from it.
4. Live within your means.
5. Money is not everything.

I watched with rapt attention in the last few days as Wall Street reported the arrest of former Nasdaq chairman and veteran money manager Bernard Madoff last Thursday, who has duped a wide range of investors—from a Jewish youth charity in Boston to major banks like HSBC and BNP Paribas, as reported by Associated Press.

The extent of losses is still unknown. As of now, though, the figures are eye-popping. Banco Santander, Spain’s biggest bank, may have a $3-billion exposure. HSBC at $1 billion. Royal Bank of Scotland $98 million. France’s Natixis investment bank, already brought low by subprime losses, $606 million. Japanese financial giant Nomura $303 million and officials in South Korea said financial institutions there a total exposure of some $95 million.

How did he do it? Using the good ol’ Ponzi scheme, says US authorities. That means paying off his investors with unusually large returns, consistently, using money from new investors. As we have already discussed extensively in this blog, this form of scam always ends in tears.
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You don’t approach a “bank holiday” with anticipation; you think of it with trepidation. There are no party hats, treats and food. There’s confusion. Even anger and frustration.

As bankers and the media use this expression, it refers to a regular banking day when a bank closes its doors and refuses to service depositors, normally because of liquidity (cash) problems.

The Rural Bank of Subangdaku did not open its doors last December 11, leaving depositors “out in the cold” and yet the administrative officer didn’t want to call it a bank holiday. Whatever you want to call it, a bank holiday is a bank holiday is a bank holiday.

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