By Digoy Fernandez

THIS blog is inspired by a lament from one of my relatives who sent us an email wherein she stated her frustration at the huge decline in the values of country-issued bonds, like those of the ROP for example.

In a normal market situation, conservative investors find solace in long term bonds, or issues like second tier capital requirements of well known banks. This is no longer a normal world, nor are the financial and capital markets behaving normally in the sense that we have known them to be.

Consider therefore, a corporation that dutifully set aside its contributions to a pension and health plan for its employees. It is a safe bet to make that, unless the monies in the fund were invested in super secure and bullet-proof assets, that one would find a serious decline in said pension fund (and in most others besides).

Is there really such a thing as a bulletproof investment these days? Probably not. But it pays to know ones fundamentals and limit oneself to going for the safest investment alternatives that your financial planner can suggest. Most derivatives would certainly be thrown out of the window. Country bonds? Only if you are in for the long haul and will not choke at seeing the lower redemption rates that are prevailing in the markets today. Long term deposits? Only if your bank(s) is/are doing their job conservatively and not taking long positions on risky assets.

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By Digoy Fernandez

ONE of the unintended casualties of the present financial crisis is the temporary sidelining of the Global Warming debate from front and center in the attention of the world and its leaders. While understandable, we hope that the world will not lose focus on this very important aspect of our survival as a species on this planet.

The falling price of crude oil is welcome, of course. But it may also deflect efforts aimed at conceptualizing and bringing to actual production various alternative fuels and their respective machinery. Low crude prices should not tempt car manufacturers, for example, to keep on producing gas guzzling SUVs, but make them realize that the reprieve may be temporary. In this era of difficult funding and credit, we hope that enough wise financial institutions and foundations find the motivation to support the development of alternative fuels and machines that use them.

On the other hand, one unintended beneficiary of the decline in global economic activity and production may be the ability of the planet to regenerate itself. Hopefully, less harmful economic and personal activity would mean less greenhouse gases produced, and a chance to make up for lost time in the battle to clean our air.

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By Digoy Fernandez

THIS particular blog will not bore you with statistics nor will we provide a chronology or a timeline for the present economic crisis. I have received enough forwards, looked into a myriad number of web-pages and articles about how the crisis began and how it is playing out. Instead, I would like to dwell a bit on the motivation that drove otherwise sensible bankers and finance whizzes into making catastrophic (in retrospect) decisions on a truly grand scale. In a word, we find that, in almost all cases, the common denominator was GREED!

Someone commented that bankers and finance men (and women) who are currently in their 50s or 60s and above, would be boggled at the type of financial products developed and marketed during the past two decades. These so-called financial products tend to confuse the traditional finance people, schooled as we were in the basics of borrowing and lending. But the new mavens have gotten to the point of fashioning intricate debt or credit instruments that have become less based on fundamentals and more on an ability to flip the products through the mill, earning one a hefty commission in the process.

In the good old days, our bosses told us to know our clients very well, and to know their companies and products to the point of being well-versed in the nuances of these businesses. We did cash flows of the firms’ products and their cycles, and we knew when and how much to lend to these corporations. Lending and investment were based on good old fundamentals.

Unfortunately, the traditional way of doing business was deemed too arcane and too sluggish for the financial wizards of today. Born and schooled in an age of instant gratification, they tended to live in a world divorced from the Main Streets of the world. In another publication where I write with a group of the country’s top finance people, I have long tended to look askance at financial derivatives and financial analysts who track a company based on quarterly results. Because of this tendency to focus on quarters, top executives have also been inclined to take short cuts or measures that would ensure good quarterly results, often sacrificing a firm’s long term prospects in the process. I am not sure if there is a direct correlation, but the pressure to produce regular rosy reports has probably tempted not a few CEOs to sweep problems under the rug…like hiding them in innocuous sections of the contingency accounts of the balance sheet.

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By Digoy Fernandez

ONE of the unintended casualties of the current global financial meltdown may be corporate social responsibility programs. CSR projects are not exactly favorites of the sharp scissors of most budget cutters, who also cast an evil eye on what they consider as expensive programs like Training and Manpower Development, the upgrade of Information Systems, and the like. In fact, for CSR and the others mentioned to survive the budget cutters’ wide strokes, these would need strong sponsors from the upper reaches of top management or the ownership. Otherwise, kaput!

When CSR programs get short shrift, it also sends a signal to various publics of the corporation that the company has ceased to care about some of these sectors and is buckling down into self-defense (or self-preservation) mode. There are many ways of cutting down on expenses without sending the wrong signals to the public. In fact, I am particularly enamored of a continuously running short feature on CNN and Discovery Channel showing a denuded piece of land in Malaysia that was replanted in 2004, and that has began to show signs of becoming a true wildlife habitat just 4 short years later. This is the kind of project that can be replicated by companies, groups, and individuals: regenerating parcels of land — small to large — and reclaiming them in the interest of the environment.

In fact, the project that finally won the Grand Anvil for the bank I worked with was conceived by this author way back in the early 80s when the country was reeling from the economic and financial crisis that accompanied the assassination of Ninoy. In short, I suggested that companies or groups each adopt a depressed community, and work with them in developing skills that could eventually be made use of by the trainor / adopting units. Our own parish council has some programs aimed at helping the depressed sectors assigned to us, under the concept of Stewardship. For example, used paper could be given to these people to be recycled into stationery or other paraphernalia that both the company and the public could make use of.

It is unfortunate that the rapacious greed of a few high flying financial mavens finally caused them to crash, bringing along with them practically the whole world economy. It will be a long time before companies begin to think of CSR again…which would be very very bad indeed. Let us hope that enlightened individuals and companies manage to rise above the projected morass and think of how they can help those who may be in worse shape then even they are.