Amando M. Tetangco,Jr.

Laurence Neville said that the origins of a country's growth are political and social forces- and possibly luck in having the right leaders.  

The Philippines is being lucky to have   Amando M. Tetangco, Jr. at the helm as Governor of the Bangko Sentral ng Pilipinas since July 2005.
He was cited in 2011 as having the highest grade of A in the Global Finance Annual Central Banker Report Cards. No head of Central Banks from The Americas and Europe received a Grade of A. The recognition validates his expertise on controlling inflation, achieving economic growth goals, stabilizing the Peso, manage interest rates and standing up to political interferences.


Under his term the Philippines as an emerging market was recognized as possessing  the characteristics necessary to join the elevated heights of of the BRICs ( Brazil, Russia, India and China). Two leading financial institutions have devised new groupings of countries , Goldman Sachs invented the Next Eleven (N11) Citi coined 3G or the Global Growth Generators both include the Philippines (Global Finance, December 2011).

The GDP of the Philippines grew 7.7% to P2.42 trillion  and the inflation from January-March 2012 was a low 3.1% (Business World (June 2, 2012).


Mr. Tetangco said yesterday that "BSP is ready to make adjustments as needed to ensure a non-inflationary growth environment.mindful of the external rsiks, particularly the weakness in the Euro zone, tentative growth in the US and slowdown in China".

The noise of politics are always in the headlines but the good news as recognizing Mr. Tentagco for his outstanding work of stabilizing our financial system and for making difficult and controversial decisions under trying circumstances we rarely heard in the evening news.

Am I who belong to the only few who noticed his miracle work?

Arnel L. Cadeliña
Director-Research and Development
Sacred Heart College-Lucena City
email: lenra1967@yahoo.com
blog: nelcadelina.blogspot.com

A daughter is a gift of love.

The Index Fund of BPI

     Index Funds are generally an investment that are low-cost, low risk funds that track the performance of the Philippine Stock Exchange. They generally are not actively managed and have low turnover so they don't generate a lot of taxable income.

     In lay man's term the Index Fund is a mutual fund that is run virtually on autopilot. Generally stockbrokers don't recommend index funds because no commissions can be derived for them. For the first-time investors, investing a small amount of their portfolio in an index fund is a very good start.

    I will focus on one index fund offered by the Bank of the Philippine Islands (BPI) and will tackle it without the complicated finance terms for the majority of the blog readers to understand.

First, Why an Index Fund?. The primary benefits of investing in a mutual fund is that our gains are exempted from taxes based on the Comprehensive Tax Reform Program (CTRP). This was done to promote long-term savings in the country. Secondarily, over the long term index funds have outperformed other mutual funds because they charge low fees. The BPI Fund managers charged 0.75% per annum for the management and distribution fees while others charged 1.75%.  In terms of sales load, the BPI Index Fund charged 1.5% while other mutual funds charged 2% this will result on more shares for you if you choose an Index Fund.

Second, What are the Risks of an Index Fund?Mutual Funds are registered with the SEC and they are neither insured with the PDIC nor any other agency of the government, nor guaranteed by the Fund Manager. Before investing  investors are expected to understand that the Fund is not a bank deposit product and any income, or loss, shall be for the account of the investor. Investors are advised to read the Prospectus of the Fund before investing.

Third, How much do I need to Invest in an Index Fund?. The minimum investment is P5,000 if you avail of the BPI regular subscriptiion plan (RSP). The plan require you to invest minimum of P1,000 additional investment per month deducted from your BPI savings account. If you will not avail of the RSP your minimum initial investment is P10,000 and additional investment is your prerogative.

Fourth, How will I earn money in an index fund?. If the present Net Asset Value (NAV) is higher than your buying NAV you will earn money. Historically, the BPI Index Fund is earning money. 

Fifth, How will I redeem or encash my investment? Submit to your BPI bank your Purchase Order starting 9:00 a.m. to 2:30 p.m.. You will be paid in full via a Debit Authority you indicated in your  application Settlement Account you signed on the date of your application..

The 5 years annualized return  of the Philippine Index Fund is 9.79% per annum beating the inflation rate and other type of mutual fund. (see figure above).       

For my blog readers, it is time you consider investing in an Index fund.

Arnel L. Cadeliña

Top Ten Reasons Why SSS will hike their contributions

In the tradition of the great David Letterman, Here is my top ten list why our SSS will increase their contribution rate. Enjoy!
 
10. They want to extend the life of SSS to 35 years or up to year
       2046. As of today, the current fund will last only up to year
       2039.


9. They want to increase the benefits of the SSS members but first
    you have to cough up more until your payslip net pay drops to...
    zero.

8.  Our SSS contribution rate is only 10.4% of our monthly salary
     while GSIS members pay 21%.  No wonder their pension is
     higher!.


7. They want to lend more to SSS members and corporate sector.
    The profit will help them increase their own salaries and benefits
    while ours stagnates.

6. They can reason out that we have a low inflation rate therefore
    an increase will not be "felt' by the SSS members.

5. The 29.2 million members of SSS contributed P79 Billion pesos
    but they paid P76 billion for SSS benefits.This thin margin made
    them sleepless.

4. They are projecting a possible loss of overseas jobs which means
    lower SSS collections from the OFW.

3.  They are aware that Filipinos are adept in changing eating
     pattern in order to cope up with deductions and high prices.
     Noodles anyone?

2. In 2007, the SSS spends 11% of our contribution for their
   operating expenses while Malaysia spends only 2%.

1. They want to increase your minimum pension of P2,400 after working and contributing to them for 20 years and increased it possibly by 10%. Meaning an increase of P240 to achieve a minimum pension of.............. ( no laughing please).........P2,640.
  

Pretty Good ( Translation: Pwede na 'yan)

I love poetry especially related to education and economic thoughts. Here's one that you will love reading to your children, students.... well I guess for everybody. 

Thank you to Mr. Charles Osgood. 
 

Pretty Good ( Translation:  Pwede na 'yan)

by  Charles Osgood  (1933-)
from the Osgood File, 1986

There once was a pretty good student
   Who sat in a pretty good class
And was taught by a pretty good teacher
  Who always let pretty good pass.
He wasn’t terrific at reading,
   He wasn’t a whiz-bang at math,
But for him, education was leading
  Straight down a pretty good path.
He didn’t find school too exciting,
  But he wanted to do pretty well,
And he did have some trouble with writing
  Since nobody taught him to spell.
When doing arithmetic problems,
  Pretty good was regarded as fine.
5+5 needn’t always add up to be 10;
  A pretty good answer was 9.
The pretty good class that he sat in
  Was part of a pretty good school,
And the student was not an exception:
  On the contrary, he was the rule.
The pretty good school that he went to
  Was there in a pretty good town,
And nobody there seemed to notice
  He could not tell a verb from a noun.
The pretty good student in fact was
  Part of a pretty good mob.
And the first time he knew what he lacked was
  When he looked for a pretty good job.
It was then, when he sought a position,
  He discovered that life could be tough,
And he soon had a sneaking suspicion
  Pretty good might not be good enough.
The pretty good town in our story
  Was part of a pretty good state
Which had pretty good aspirations
  And prayed for a pretty good fate.
There once was a pretty good nation
  Pretty proud of the greatness it had,
Which learned much too late,
  If you want to be great,
Pretty good is, in fact, pretty bad.

Short advice for the Graduating students

My Dear Graduating students:

In an era of joblessness you will be faced with a lot of challenges. My advice would be to build on your career; accept a job even if it is not your dream job and USE that experience.

The Philippine working environment are full of loop holes and you need to be OPEN to different career paths.

When you finally get your first job take on difficult projects that will allow you to DEMONSTRATE your skills.

Invest on continued learning, this separates the slick and the slack.

Remember those who value professionalism and ethics always stand out in the long run.

Do not forget that faith and reason always complement one another. Do not forget what you learned from your humanities and philosophy classes because in the workplace there are people who are full of logic but they lack the soft skills. Learn from them by taking the right path.

Good luck on your job hunting, My prayers are intended for you.

Arnel L. Cadeliña

Political will

 In a difficult time like this, a leader should understand what are the primary problems of the nation and act on it with utmost determination to fix them.

Last night, the US President announced in his State of the Union addressed universities and colleges that the higher education on notice he said. "Higher education can't be a luxury— it's an economic imperative that every family in America should be able to afford." What Obama showed was leadership, vision, courage and political will.

When can we find our own  politicians allocate their pork barrels to train college students for high-growth industries that would provide financial incentives to colleges and universities who offer programs that ensured their students find work?. When can we find a leader that will say and at the same time act to make college degrees at quality universities affordable?

candor dat viribus alas.

Escalating college costs killing the dream

My friend Ruben enrolled his son at an elite college in Quezon City. His dream seeing his son graduating in that university is their family’s ultimate goal. Since he is working in Saudi Arabia he has no problem in terms of paying the tuition fee. Until now. His company was coded red meaning that Saudi citizen will be prioritized in terms of employment. His income, which is not increasing for the past three years, is in jeopardy. This year he paid around P53,000 for one semester tuition fee of his son but his incomes barely budge..

In the Philippines, the parents are now experiencing the escalating college costs in an era of very slow increase of income. There are families now who opted to enroll their children in city or state colleges because college is becoming so expensive.

The crux of the problem: Tuition and fees which surged to more than 400% over the last 20 years -- while middle class incomes have stagnated.

During my college time tuition in 1988 rang in at about P2000, adjusted for inflation. By 2012, that number had climbed about roughly P36,500 a semester -- and that doesn't include books or room and board.
Income: If incomes had kept up with surging college costs, the typical Filipino would be earning around P600,000 a year. But in reality, it's nowhere near that.

In 2009 -- the latest data available -- the average family income of Filipinos was P129,000  or roughly P10,750 a month. This only validates that there is growing disparity between income and the cost of higher education.


Being a college professor I am now seeing families are taking on unprecedented levels of debt or downgrading their child's education from private to public to cut costs.

It is a reality that a college degree is not an assurance to be employed but it will give you a fighting chance. Economic statistics validate that there is more opportunity for college degree holders than a high school diploma.

To solve this problem it requires the direct intervention of the government.It is true that the government allocated 3.1% of the GDP for education but it is far below compared to Malaysia whose spending forms at least 8.1% of their GDP for education or to Thailand whose budget for education amounts to 5.2% of their GDP.

We can not speak of comparative advantage when the costs of college education is now the foremost barrier to enter hence the government should intervene before dreams will be put in a wayside.



Arnel L. Cadeliña

References:
.http://www.nationmaster.com/graph/edu_edu_spe-education-spending-of-gdp

The Retreat : leave the temporal in order to find the eternal,

Last month, I accompanied my business students in their retreat at Tagaytay City. The spiritual "recharging" we all need because there are lot of noises in our environment nowadays. The technology and the gadget can always "connect" us to everyone we know or even to strangers. The media and the social networks really made our life easier but our spiritual need is getting colder because of these.

The only chance to see our real selves and to connect to a higher calling is to have a silence for a few days. Without TV, cellphone, IPad, internet and even temporary disconnection to our family. This is the time to know who we really are and what is our purpose in this place called earth.

The three day retreat gave me these realizations:
1. Everyone of us on whatever beliefs we have are longing to connect to God.
2. We pray mainly in order for God to give us what we need but there are cases that what we asked can not be given for reasons we don't know..

3. There are two kinds of prayer: the prayer of God's suitor and the prayer of God's workers.
4. The God's suitors are Christians who only prays to ask but not helping in the propagation of His kingdom either by words or deeds.
5. The prayers of God's workers are the first to be answered because his prayers are like the prayers of the prophets, apostles and healers before and during Jesus time. You can check the bible and see how the prayers of Job, Jonah, Paul, Peter and the other were heard. Miracles do happened and it usually given to God's workers.

Retreat is truly beneficial to everybody and all of us are called to be God's workers in our own ways. The benefits: He will always take our prayer into account and give us what we "really" need.

Life is difficult according to Scott Peck but one way to cope was  written centuries ago by St. Ignatius of Loyola: go on a 5 day retreat to discern spirits and to learn following the inspirations of God.


This Lenten Season, I encouraged you to try one.

Lucena City Population as a Target Market

  Small and Medium Enterprises in Lucena City are finding it difficult to write their marketing plan due to the absence of statistics about the target market. In order to help them in writing their feasibility study and business plan the "Filipino Investor by Arnel L. Cadeliña" blog is sharing the research about Lucena City population. The target market is a vital component of the marketing plan, without it all other components of the feasibility study can be considered irrelevant.
  Here is the statistics of the Lucena City Population:.

Now that you know your target market, you may now aligned your management , operations & production and financial plans. Good luck!

Arnel L. Cadeliña

BEAT INFLATION

Today January 9, 2012 is my birthday. My gift to my dear blog readers is this article. Enjoy!

Inflation is the reason why the price of your shoes and the price of your bread  increased as the time goes by. Almost everything that we consume or buy are subjected to inflation. All of us and even the government cannot avoid nor eliminate it. The best thing that the government do is to mitigate and reduce it.

When our Bangko Sentral announced that the Inflation rate for December 2011 eased to 4.4. % I am glad because compared to previous years the inflation in the year 2011 is only minimal. It means that Filipinos experience "only" an increased price of food and energy to around 4%. In Business and Economics when we experience a low inflation, the BSP usually cut interest rates in order for Filipinos to borrow more as additional capital for their business or to improve their infrastructure.

While low inflation is beneficial to businesses, for ordinary people though the low inflation rate has no meaning to them because  there are still limited options for savers to earn a real return on their savings. The Inflation figures released last Friday reveal that the consumer prices index – the index used by the government to measure inflation – decreased to 4.4% per cent in December. The price hikes in housing, water, electricity, gas and other fuels – which is seen as a more accurate gauge of the cost of living – fell from 5.7 per cent in November to 5.1 per cent in December.

As Filipino investor we can say that the small drop in inflation announced by BSP will not be enough to curb the woes of the nation’s savers. The lower and middle class are still not given real opportunity because there are no regular savings accounts available in the market that negate the effects of tax and inflation.

In order for us to beat inflation an ordinary Filipino should  find a savings account paying 5 per cent or more a year.Can we identify one Philippine bank that pays 5% interest rate for our savings?. There is none. The number 1 bank, Banco De Oro is paying a low of 2.0% and a high of 2.75%. If you put your money in a bank,  your profit will be eaten by inflation therefore the only way to beat inflation is to increase the risk scale.

There are many ways to beat inflation but not all are accessible to Filipinos. We can not buy gold, we can not trade currencies and we can not buy junk bonds. Maybe you heard all of these anti-inflation strategies but 99% of us are not investing on these because skill, access and capital prohibit us.

What then can we do as ordinary Filipinos?

1. Delay getting your Pag-IBIG Fund benefits

    You can get your Pag-IBIG Fund savings after 240 monthly payment and if you are not yet retiring by that time better continue the Pag-IBIG deduction. Your employer will give a share to your deduction and you will receive dividends at the end of the year.    

2. Delay getting your Social Security

   If you have enough money to have an early retirement, go ahead but to those who are not financially prepared, one way to beat inflation is to postpone taking benefits until age 60 or 65 you make an investment in the form of forgone monthly checks and get a return in the form of enhanced benefits thereafter. The incremental annuity you are buying is inflation indexed.

3. Plant your own vegetables and raised your own chicken or pig.
     On this strategy the city people with no access to agricultural lot and people who has opportunity cost in other endeavors are exempted. For the rest who are willing and able, one basic way to beat inflation is to plant your own vegetables and raised your own chicken or pig. The technique here is to spend less in order for us to invest more.

 3. Invest in Stocks and/or stock mutual funds

  This kind of strategy is only for those who are prepared to take risk. If you are not, stay away and look for other ways. For those who are brave  buy shares of oil, mining, and water companies. They should benefit from rising commodity prices. Real estate investment are another traditional haven for inflation worriers. But this sector is extremely pricey today,be very selective and consult experts before you buy.

     Inflation can have its positive and negative effects in our family and our investing strategies. Again , we have to make sure that our investments will give interest higher than the inflation rate 

       As I say to my Finance students: "Beat Inflation".

My best wishes always,
arnel l. cadeliña

references:

Inflation hits 11-month low. ( 2012, January 7). Business World.

http://learnfinancialeducation.com/what-is-inflation/

http://www.indexmundi.com/

Got Job Interview? Here are top 50 most common questions

I remember my first job interview as the most nerve-wracking experience. My hands were trembling, my knees shaked and I totally goofed.

For you out there who are scheduled to be scrutinized by the persons you don't know personally but who can decide if you are employable material here are the interview questions they will throw based on researched by Glassdoor :

Most Common Interview Questions

1. What are your strengths?
2. What are your weaknesses?
3. Why are you interested in working for [insert company name here]?
4. Where do you see yourself in 5 years? 10 years?
5. Why do you want to leave your current company?
6. Why was there a gap in your employment between [insert date] and [insert date]?
7. What can you offer us that someone else can not?
8. What are three things your former manager would like you to improve on?
9. Are you willing to relocate?
10. Are you willing to travel?
11. Tell me about an accomplishment you are most proud of.
12. Tell me about a time you made a mistake.
13. What is your dream job?
14. How did you hear about this position?
15. What would you look to accomplish in the first 30 days/60 days/90 days on the job?
16. Discuss your resume.
17. Discuss your educational background.
18. Describe yourself.
19. Tell me how you handled a difficult situation.
20. Why should we hire you?
21. Why are you looking for a new job?
22. Would you work holidays/weekends?
23. How would you deal with an angry or irate customer?
24. What are your salary requirements? (Hint: if you’re not sure what’s a fair salary range and compensation package, research the job title and/or company .)
25. Give a time when you went above and beyond the requirements for a project.
26. Who are our competitors?
27. What was your biggest failure?
28. What motivates you?
29. What’s your availability?
30. Who’s your mentor?
31. Tell me about a time when you disagreed with your boss.
32. How do you handle pressure?
33. What is the name of our CEO?
34. What are your career goals?
35. What gets you up in the morning?
36. What would your direct reports say about you?
37. What were your bosses’ strengths/weaknesses?
38. If I called your boss right now and asked him what is an area that you could improve on, what would he say?
39. Are you a leader or a follower?
40. What was the last book you’ve read for fun?
41. What are your co-worker pet peeves?
42. What are your hobbies?
43. What is your favorite website?
44. What makes you uncomfortable?
45. What are some of your leadership experiences?
46. How would you fire someone?
47. What do you like the most and least about working in this industry?
48. Would you work 40+ hours a week?
49. What questions haven’t I asked you?
50. What questions do you have for me?                                                             source:http://www.glassdoor.com/blog/common-interview-questions/

Jobs: The Best Gift for the Filipinos

Jobs: The Best Gift for the Filipinos
By: Arnel L. Cadeliña

Labor is the most important asset of the poor hence economists assert that the determinants if a country is rich or poor is by checking mainly the unemployment and the underemployment rate . Ramon (not his real name) has a degree in sociology he earned two years ago. He submitted his resume to more than 60 companies and after several interviews still there were no job offers. He cannot believe the claimed of the government that they created 2.1 million new jobs and that the unemployment in the Philippines hit a four-year low of 6.4 percent. Ramon is now applying as a service crew of a fast food chain and he will be paid by the hour making him an additional member of the more than 4 million underemployed in the country.

Looking closely with the employment figures it is true that unemployment decreased but the quality of jobs they reported asserted that these are low quality jobs that will not help lessen the poverty in the country. Added to that, according to Prof. Benjamin E. Diokno of the UP School of Economics the 500,000 new jobs were in the nature of unpaid work in family-owned businesses.

As a professor who is connected to a school whose vision is to serve the poor, I have seen how poverty crippled a family in our immersion activities. But I came into a conclusion that the basic problem of the poor is not so much lack of employment but the low wages and the underemployment of the parents. Their penchant of unwanted pregnancies linked to their persistent poverty. According to Asian Development Bank the low wages, underemployment and too many mouths to feed of a family reduces growth savings and reduces funds available for investment in productive capacity. This underinvestment will result in a domino effect of reduces in overall economic growth and prospects for poverty reduction.

Source: NSO Labor Statistics, October 2011
http://www.indexmundi.com/about.html (retrieved December 20, 2011)

It is not a surprise then that the Philippines ranked among the highest in terms of unemployment in the ASEAN region.

The best gift then this Christmas and new year is to help somebody to have his/her own job. What then we need to do in order to create more jobs in the country?.

Here are some actions we can consider:


1. In agriculture, buy local fruits, vegetables and meat. We have seen a rapid increase in imports of basic necessity commodities especially from China. Buying and selling of local food is beneficial not only to the producers and buyers but also for the nation as a whole. Local food purchases happen to be cheaper because there is slashing of expenditure on transportation and warehousing. As far as the national economy is concerned, there has always been an impetus to local food markets since it helps to curtail the drainage of cash reserves on account of import payments. All that we wanted to cook for our next meal was right there in our public market. Our local food products are definitely fresher due to their proximity of our farms to our markets. Your buying of our own agriculture products will create more jobs.


2. Help our local and national government in their governance. A weak and inefficient state is unable to efficiently deliver the necessary services to its population as a result of low capacity. Pay your correct taxes and support the police in maintaining peace & order. Your taxes will create more jobs.

3. Petition our president, senators and congressmen to initiate work programs that will employ huge numbers of unemployed to take a minimum wage paying civil service job like cleaning and maintaining schools, nursing homes, roads, and museums among other jobs. To prevent fraud and abuse, the program should be accurately measured and track results, This is what Germany did to avoid the recession. Your petition will influence them to create more jobs.

4. Adopt and implement the 22-Point Labor and Employment Agenda of the Department of Labor and Employment. This is the platform and policy pronouncements on labor and employment over-arching goal:Invest in our country’s top resource, our human resource, to make us more competitive and employable while promoting industrial peace based on social justice.

This is Christmas and those who are gainfully employed should be thankful and those who are still looking, just like Ramon, don't lose hope. The gift is there waiting and the best thing is to never give up: stand up and fight for the right to live a full life even when challenged by uncertainty.



My best wishes always.

Arnel L. Cadeliña
nelcadelina.blogspot.com

Investing in Skills

In my rush of daily office and teaching life it is easy to be overwhelm in grades, meetings and day-to-day business. One night when I step back one question popped in my head: " Am I preparing my students for the world they will face upon graduation?".

The beauty of having experience in the corporate and academe is that you possess the ability to understand both world. Connecting these world is like merging two rivers and the merging point results to a bigger one.

To navigate a turbulent river will require skills and putting it in analogy: to navigate the future will require skills.

The following then are the skills:

1. Knowledge on the major subjects . They must be firmly grounded in Finance content knowledge if they major in Finance. The process is the same whatever major they choose.

2. Flexibility. They should develop their skills to cope in rapid change of tasks or job description. The world now is different and job conditions may be subjected to exponential change.

3. Critical Thinking and Problem Solving skills. In the workplace, you will decide based on limited information. Students should be trained to solve problems mostly should be a complex one.

4. Communication and collaboration skills. Nothing beats skills in writing and oral communication because this is important in an increasing technology usage.

5. Self-management and IT literacy. Students must know how to set personal goals and use various IT software relevant to his/her profession.

6. Values. Telling the truth and acting based on respect & honesty are highly valued in an effective organization. Those who practices good values are always rewarded.

The students should invest on the above skills and teachers like me should be updated to meet the needs of the modern economy.

Arnel L. Cadeliña