I can only give you my view as to why I’m skeptical, or at the very least, not totally entranced by, the government’s claims of economic achievements. It’s a view based simply on what people tell me, not just in Metro Manila but in the provinces I’ve visited. What they tell me is this: the reason enrollment in the private schools is down isn’t always because the public schools are better. It’s because they’re almost free.
In his column yesterday, Manuel Buencamino clearly demonstrates why -to borrow a phrase used by Solita Monsod, who was referring to the government’s pleasure with the strong peso- campaigning on the economy can be a double-edged sword. Let’s assume that for most voters, economics is Quantum Physics -barely comprehensible. If you try to boil down the message for the masses -“the peso is strong, the stockmarket is high, investments are up,” then you are essentially asking people to believe you and trust in you.
But as Buencamino points out, if you get caught fudging the numbers (you can halve the number of classroom-less kids by simply stuffing in twice as many kids into existing classrooms), or tinkering with them (you can seriously reduce poverty by redefining who gets to be classified as poor), then the grounds for trust, the incentive for faith, gets eroded.
Thus, you trumpet the stock market going for strength to strength, and when news comes that’s suffered a reverse, the cognoscenti will know that every set back presents an opportunity, but in a society where activity in the market isn’t prevalent, how do you look anything but vulnerable?
Yesterday’s plunge in the stock market –the biggest one-day drop in nine years (January 9, 1998 to be exact, and the biggest monthly decline since March 2005)- had the President making a point of being chirpy, while inspiring this curious quote from a trader:
“The sell-offs on the US and China markets have caused worldwide jitters. This is definitely a good reality check and for the Philippine market, it’s the major correction that we have been waiting for,” said Astro del Castillo at First Grade Holdings Inc.
So the question is this. Does this mean there was too much hype, and that the drop in the market reflects where the market should really be? Overseas, markets continue to “wobble” though bargain-hunting has begun in the local bourse. One thing though: the government unloaded its PLDT shares in the nick of time.
Joey Salceda’s instinct, to face the opposition’s claim that its statistics are either fabricated or misleading, was correct: let’s dispute the data in an open debate. The problem is, the Palace began waffling and dodging the challenge of a debate. Perhaps the Palace propagandists believe that the middle- and upper-class message of “everything’s hunky dory and it will eventually trickle down,” isn’t a good one when dealing with a mass audience. Jove Francisco in his blog shows one of the reasons why: a government that has the President roving neighborhoods handing out relief goods (just because there isn’t a calamity doesn’t mean handouts aren’t relief) obviously knows the trickle-down isn’t a function of the market, it’s still the job of the patronage politicians.
To be sure, we aren’t where we were in the Erap years, and for quite a few people, things are better now, than then. IT and construction are two industries that are pretty happy: jobs continue to be created, investments are being made, there’s a building boom, as Lucio Tan’s expansion into real estate proves. The malls and their owners seem pretty content. I’d add another group: smugglers are delighted with the situation and ironically, the consumer is probably happy with the cheap goods that get smuggled in. Add, too, drug dealers, who also do well when smuggling is widespread.
A minimum of professionalism, then, characterizes the administration of the government. But a tremendous opportunity is being lost by the President’s instinctive attitude to fixing problems: to buy support. The rattles she throws at the political class to keep it distracted -Charter Change, etc.- are very expensive and ultimately futile playthings.
Meanwhile, aside from coddling the big players (political and economic), and pandering to the masses while ultimately relying on the pandering to keep them quiet but not appreciably make them more independent or self-reliant, the middle and the opportunities that could be theirs gets the squeeze. A case in point is where government could do more for the furniture industry.
BusinessWorld, which unfortunately doesn’t have Monsod’s interesting column online (she argues the opposition is wrong in claiming there haven’t been any economic gains since the Estrada years, but that the administration has some explaining to do about its statistics), also has a report (p.6 S1) on the local furniture industry (“Furniture makers struggle to survive,” by Marites S. Villamor and Kristine L. Alave):
The local furniture industry does not expect to recover this year from the past six years of contracting revenues, amid a persisting strong peso, lack of industry cohesion, and increasing competition from neighbors which manufacture cheaper furniture copied from local designers…
CFIP data showed furniture export growth has dropped at least 7% yearly since 2000. The industry posted about $300 million in export revenues in 2005 from $420 in 2000 -quite small compared with new entrant Vietnam, which earned about $1 billion in 2005 alone….
The entire industry employs around 80,000 people directly and 140,000 indirectly…
First among industry woes is expensive inputs.. inputs sourced locally are 30% to 50% more expensive than those from China… more and more Philippine furniture makers have resorted to just importing raw materials from China like paint, abrasives, beads and fashion accessories, and wrought iron… “We can’t increase prices because the peso is stronger and our production cost is higher” [an industry member said]…
…[Also there’s a] “gap” between good Filipino designs and poor production efficiencies… Philippine furniture makers have to contend with inefficiencies in production, high electricity price and high wages…
To top it all, it does not help that industry efforts are disjointed.
But the opportunities for asking tough questions are narrowing, for now. If the Comelec proceeds by granting dominant minority party status to Kampi, a distinction traditionally given the leading opposition party (and not to a coalition partner of the administration of the day), I don’t know how anyone will be able to ignore the attractiveness of simply boycotting the elections.
My column for today is How it works.
In his column, Lito Banayo does a masterly analysis of the voter’s preference survey in Manila, extrapolating how it might reflect voter preferences in Mega and not just Metro, Manila (in crunching and interpreting the numbers, analysts like Banayo have to be pretty objective in identifying existing strengths, weaknesses, and opportunities for gain).
Gail Ilagan in her column, describes the pleasures and the value of academic conferences.
In the blogosphere, RG Cruz looks into emerging news on the local races. katataspulong also takes an interesting look at the dynamics surrounding the national vs. provincial campaigns. james cartmire thinks the opposition’s being too negative.
Behind the Clouds has something interesting to say about some popular attitudes towards politicians and politics.
Baratillo@Cubao delves into opinion and political blogs, their inherent flaws and weaknesses. Blackshama thinks the Supreme Court should put together a booklet of its most influential decisions.
I wish I could read the entry in Meretas Pemekiran which quotes Sukarno quoting Quezon. Perhaps Visayan readers can tell me if Bahasa is easier for them to read?
Technorati Tags: Blogging, elections, philippines, politics, president, Senate, society
Yesterday’s market collapse could really damage the chances of the administration’s candidates. I can’t believe the opposition hasn’t pounced on the issue yet.
It was all because of Greenspan, if you were in FOREX trading right now your either a big winner or licking your wounds….
part of yesterday’s post on my blog:
What happened in China, was probably the result of the following events.
The market has been on a tear, it doubled in value, the day before the selloff it reached a brand new record high, this is sometimes a classic sign to the end of a bullish run, the market has gone up so high so fast, so this was a combination of a natural correction in the market, as well as reports that the government will be cracking down on illegal trading, and the speculative market.
And back to The United States, Alan Greenspan used the big “R†word hinting at a possible recession in the near future.
So, a market wide selloff in China, continuing bad news in middle east (including Cheney’s near death experience), and a possible end to the bull run, probably were all key in this decline in the market  showing just how interconnected the global market truly is, that a decline in one market can have such influence in other markets in the world.
So, what is the psychology of the market?
When you near the end of a Bulll run, it sort of becomes a game of musical chairs, where investors start to respond to any signs of a stoppage in music.
BTW great title, the opposition will scratch their head when peso hits 47 next month.
They might do a seance to talk to FPJ if that happens.
Because the collapse was not due to administration but to the pronouncement of the financial guru Greenspan.
The Ca t, do you honestly think the opposition cares about that? hehe. What they’re interested on is to pin every problem of our country to GMA without really promoting any alternatives as solutions.
A temporary decrease during a bull market is called a correction if the decrease is below 10 to 20 per cent. The decrease is only 7.9 per cent and the stock market was able to rebound after one day.
Those who will associate this to the downfall of the administration candidates do not know about the irrational behaviour of stock market.
Mass panic caused by press releases and major political events affect stock market.
Besides, there are a lot of corporations in the US which are being required to restate their financial statements for committing “errors” in stock options management.
With these, the market prices of their stocks are going to decline since the EPS goes down with the bottomline figures.
Investigations and corrections have not been widely publicized.
But there should be a better explanation of this phenomenon.
dito pa lang, gaguhan na ano?
Welcome to the world. If people would not accept the fact that China can flood the world market with cheap goods and continue blaming the government, they will go nowhere.
All knockdown furnitures that you can buy here in the States are made in China…that is a truth that the people of the Republic of the Philippines should be made to understand.
The invisible costs that include revolutionary/protection taxes from the so-called justified “armed strugglers” in the bondoocks must have been charged to overhead under the caption transportation and handling fees. Bohohoho.
I wonder what is the percentage of these “costs” to the total overhead.
Economic growth would be exactly equal to the population growth rate if not for the OFW contribution. Their 12.5 billion dollar officially countable contribution and perhaps an equal amount sent through informal channels to avoid high repatriation costs is for me virtually the entire story on growth. It fuels that expansion in real estate, keeps kids in school, finances cell phone and computer purchases, and the wolves of poverty at bay for about half the population.
Maybe that is why the elite nationalists like Conrado de Quiros and Rina Jimenez David of your newspaper have quit calling them “toilet bowl cleaners of the world” or worse “traitors” and “ingrates.”
They most certainly are not! They’re just our middle class with the longest commute to and from work. Since there are so many of them where they came from, we should make more of them by educating larger numbers of nurses, doctors, teachers, engineers, and send them out to the wide world.
Key to this is English language capability, which, along with the hard sciences (like Quantum Physics and Econometrics) is also the key to the future high tech industries that will propel the Philippines into a bright future.
Domestically, the Philippines ought to be equivalent to about a hundred Hawaiis as far as its tourism potential is concerned. But first these insane insurgencies have got to end. Then you’ll see, even the OFWs will have a reason to come back.
I like to introduce your to the bull and the bear market.
In between, there is a cat errm a correction. if not, the runaway bull might just crash.
That’s what you call trends.
Kung pwede nga lang sigurong i blame nila ang pagkamatay ni Rizal, gagawin nila.
Meron naman silang proposal di ba. Yong kay Escudero. (Mahilig sa Tagalog si Escudero eh). Yong bawasan ang mga subjects sa elementary level.
Kailangan niya talaga ang more math subjects. Pag-inalis niya ang mga subject na ito magkicreate siya ng unemployment sa mga teachers na nagtuturo ng subjects. Lalo niyang papupuntahin sa abroad ang mga ito. In-demand pa naman sila sa States dahil mahina sa math ang mga bata dito.
Gagawin niyang elective subjects, eh mga core subjects ito sa general education curriculum.
Naloloko ba siya.
Bakit kya magaling ang mga Narses natin kaya tayo ay nirerequest ng mga bansa para i-train ang mga narses nila
kagaya ng China at Libya?
http://www.manilastandardtoday.com/?page=politics01_july19_2006
Dahil ang mga narses natin ay Bachelors’ degree holder na may General education subjects that develop them not only as skilled workers but compassionate well-beings. Kumpara sa mga narses dito sa States na pagnameet nila ang minimum required nursing courses, pwede na silang mag-apply para maging Licensed nurse.
The 2002 Revised Basic Education Curriculum signed by GMA and first approved by Raul Roco savaged the Science education program by ELIMINATING the Grades 1 and 2 Science subject. Science is no longer taught in any public school at those two crucial stages of a child’s learning experience. Instead 60% of the curriculum (and therefore about 58% of the education budget) goes to a subject called “Makabayan”, which is really seven component subjects and full of part-time teachers that Roco was coddling for his 2004 election bid.
It’s also the main reason for the classroom shortage! Here’s is the complete analysis of the curriculum I did last year:
http://philippinecommentary.blogspot.com/2006/06/our-patriotic-curriculum-and-classroom.html
“First among industry woes is expensive inputs.. inputs sourced locally are 30% to 50% more expensive than those from China… more and more Philippine furniture makers have resorted to just importing raw materials from China like paint, abrasives, beads and fashion accessories, and wrought iron…”
But why stop at paints and abrasives and wrought iron? Our economist Shamin Malipot will probably agree to the wisdom of outsourcing the entire production line, considering that Chinese workers are 20% cheaper than Filipinos?
Net result is Filipino-designed made-in-China furniture sold in Makati 15% cheaper.
The Ca t
Yeah, I blogged about the Algebra thing three days ago. I can’t believe that piece of news was 6 months old! Why didn’t people call him out back then? Where are the MATH GEEEEKS?!
‘Reality check’? His words betray him.
Why is it called a correction? What is it that needs to be corrected?
So do you mean that the increase in the stock market that happened in the past is also a result of irrational behaviour?
It is too long to lecture about the stock market, the technical the financial trend and behavioral analyses.
Why do you think Greenspan made that pronouncement?
Correction btw is not the brainchild of any Filipino corporate geek associated with GMA administration. It is part and parcel of the stock market phenomenon.
As i have said, it is differentiated from bear market trend because the decrease is lower than ten per cent and it is short-lived in nature.
Are you thinking that this is again another trick of the government to cover up for something. Spare me.( roll eyes). It is a terminology just like your landslide aka natabunan.
When the local stock market was up, GMA was quick to claim credit. She kept saying it was a sign of investor confidence, stability etc.
After it plunged, she said,”The world markets may go up and down, but the Philippine economy can no longer be pulled back.” It’s true. If our growth goes up another percent we will be growing as fast as Bangladesh.
She assured jittery investors, “Our fundamentals are rooted well and spread over a wide range and cannot be overcome easily in a single sweep.”
And who are we to thank for this?
“…the eight million Filipinos working abroad whose remittances buoyed up the economy, giving “a solid picture of economic stability relatively impervious to the vagaries and glitches in the world economy.” (OPS press release)
As Casey Stengel once said, “Ability is claiming credit for all the hime runs sonebody else hit.”
So that means that what the investors are correcting are their own perceptions? If that’s the case, then i would say that you are correct. The daily rise and fall of the stock market is all about the investors’ perceptions and resulting expectations, particularly with regard to the present and future value of the stocks they own, or are considering to buy.
What then determines the value of a stock? As economist Paul Krugman explains, “what a stock is worth is the present discounted value of the dividends on that stock” He gives the following illustration:
“Imagine the whole U.S. corporate sector as if it were a single company. And imagine that this company – and the economy – will grow steadily forever, say at 5 percent nominal (3 percent real plus 2 percent inflation). Suppose also that the interest rate is 6 percent. What is this company worth? The answer should be that it is worth 100 times dividends. A dividend that grows at 5 percent per year, discounted at 6 percent, has a present value of 100 times this year’s level.” [Source:Dow 36,000: How Silly Is It? – Paul Krugman]
In the above example, if the dividend was 6 dollars a year, with the economy growing at 5% a year, at 6% interest rate, the stock will be worth 600 dollars i.e. 6/(6%-5%) = 6/0.01 = 600. If one day, someone like Greenspan comes along and predicts that gdp growth might slow down from 5% to 3%, then all things equal, the value of the stock will go down to 200 dollars, i.e. 6/(6%-3%) = 6/0.03 = 200. If instead, investors for some reason, become more nervous and demand a higher risk premium for their investment in the market of 7% (from the original 6%), then the value of the stock will be 300 dollars i.e. 6/(7%-5%) = 6/0.02 = 300.
We can see that stock trading is largely a confidence game. Investors in the stock market, based on their perception of gain (e.g. 5% vs. 3%) and risk (e.g. 6% vs. 7%), are correcting themselves everyday.
As economist John Maynard Keynes said:
“We are assuming, in effect, that the existing market valuation, however arrived at, is uniquely correct in relation to our existing knowledge of the facts which will influence the yield of the investment, and that it will only change in proportion to changes in this knowledge; though, philosophically speaking, it cannot be uniquely correct, since our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation. In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield”
Something we need to know lest we fall for the government’s (or the stock trader’s) propaganda.
Ca..t, An item you (and Abe) will probably find noteworthy. Go to Home Depot and you will find Stanley Tools (tape measure, screwdrivers, wrenches) made with Yankee Pride on Yankee soil are now priced exactly the same as similar tools made in China, while 4 years ago all the Stanley-US-made products were 15% more expensive. Either China is starting to price itself out, or American engineering is eking out the productivity to catch up with China on the hand-tools product line.
The Casey Stengel saying , “Ability is claiming credit for all the home runs sonebody else hit.†is a lesson for all Filipinos to take to heart, especially those so despondent about the hopelessness in their hearts that to them, each sunrise is just the 12-hour prelude to the sunset.
A person who knows economics does not have to be a president not to know that the bullish market is due to business investors confidence.
MB, I forgive you for showing you are a not-a-know-it-all individual. Economics is four year-degree course and stock market is just one chapter in it. Don’t push too hard. Concentrate on issues you know fully well.
Thank you for the info, UPn. I checked the company which was founded in 1843. Its corporate strategy for expansion is licensing. In fact, it got it assembly plants in China and Japan.
In licensing, there are agreements that could affect pricing to become more competitive. Other strategies could be to look for cheaper raw materials with the same degree of quality.
Backward integration could make use expensive raw materials manufactured in countries where labor is cheap.
Assemblies could be done in the Mainland USA.
If your explanation will just focus on Gloria and the Philippines, spare me, I rather concentrate on the Hope/Yap/Aquino scandal in my blog. Think global please. Philippines is not the only planet on earth that can affect thr stock market. (rolleyes) Economics is not only 101. There are such subjects as Ecoanalysis, Economic Development, blah blah blah.(eats dark chocolate).
That Krugman example that you gave me is just his an assumption if the corporate sector is a single company.
In reality, it could never happen. Dividends do not necessarily follow the economy’s growth rate. Declaration of dividends are the whims of the board of directors. Dividends can be declared in the form of stocks.
Confusing? Yeah because they really mean to confuse. If they will lay it out in layman’s language, then everyone will understand. No more mystic and no more “greatness” for economists who have not offered suggestions for countries to attain full employment.
Cat,
Like the way you “roll your eyes”. I dont know I just have the a feeling that it makes you sexy!….
“Philippines is not the only planet on earth that can affect thr stock market.”
Oh geez, review your science.
“Economics is not only 101. There are such subjects as Ecoanalysis, Economic Development, blah blah blah.(eats dark chocolate).”
Ecoanalysis–you mean you took up the ecology of habitat in either macro or micro economics. Another gee whiz: I never had this subject. I wonder if your empty intellectual vacuousness is betraying you.
That is abbreviated Economic Analysis with a lot of quantitative analysis and graphs. Want some dark chocolate. It enhances brain power. duh
Micro and Macro are GE subjects. You never get past the bachelor’ degree.
Nice rebuttal.(roll eyes to the floor. hahaha)
you mean econ analysis. ecoanalysis is technically a field in architecture and environmental related courses. no thanks for the dark choc, it’s fattening.
past bachelor’s degree? yeah right. at least i know my elementary science: there is no planet called philippines on earth. i think, hmmm, if i recall correctly, we call this group of islands that make the country an archipelago, not a planet. have some more of your dark chocolates. you badly need to enhance your brain power.
from philippine star:
“Foreign business groups in the country hailed President Arroyo yesterday for implementing vital economic reform and security measures that helped restore investor confidence.”
it would take foreign businessmen to appreciate what the administration is doing, while these guys here are simply in denial sate of suspension since 2004.
they will simply rant and whine just about anything but refused proposal for reform in the system too. so what do you do? nuts.
suplico admitted- GO rally cancelled in iloilo cause of disappointing turn-out.
Economy is still not good we still have the widest interest rate spread in Southeast Asia.
Is economics still being taught in schools as a science? No wonder we’re screwed. 😀
Philippine furniture caters to the more high-end markets in Europe, the US and the Middle East. It may be a challenge to compete with Indonesia and China in the lower end market but we shouldn’t lose sight of the fact that there are other markets. For one, how about providing the local Philippine market with better products?
To my understanding this latest stock market crash was due in part to a NASDAQ computer glitch when their systems went awry due to heavy trading which made them switch to their back-up system. The heavy trading was spurred by the Shanghai market frenzy, which was fueled by nothing but rumors. At this point, the US market has more to worry about than we do. China has just proven that when China, not the US, sneezes – the rest of the world catches a cold….
Overall, I think it benefits the electorate when economic issues are brought up during elections…if only to increase our knowledge.
If anyone from GO is reading this, may I suggest refraining from making pronouncements that will be taken back in the next 24-48 hours. I’m referring to dropping Kiko and replacing him and the change in campaign managers…it really doesn’t project well when you change statements so soon.
Hihirit ka pa eh ako ang gumagawa ng curriculum. Ang eco ay hindi lamang sa ecology. ito rin ay ginagamit pag may sumasagot sa boses. my ec(h)o, my shadow … tralalala
buti naman di mo tinanggap. mahal din yata isang bar.
yum.
But of course, its my style of writing. You would not like me when I am serious. Sampalin din kita ng mga degrees ko.
(beh)
Mita,
The “panda” market trend in China was caused by jitters because of the anticipation for capital gains tax of 20 per cent and the report that a special task force was formed to investigate questionable bank lending to stock buyers.
This is not good for financial markets because when the market goes bearish, bank receivables that may not be collected will become NPL.
In the past, the US had already dealt with China about their non-performing loans which when written off surely affect the international finance institutions.
Because of the so many foreign investments in China, stock markets all over the world are affected by the dancing of the panda.
Hindi dinidiscuss yan sa ecology analysis. *heh*
It’s just one of those hysterical days, Greenspan starting the week with a recession probability, a bad US Durable Goods Orders data and the Yen suddenly rise because of “carry trade liquidation” fears. Subsequent US economic data were good though.
Chinese drop by 9%
US by 3%
Philippines by 7%
US US Economic Calendar
Magsasaya lang ako pag ganito stats natin:
Unemployment rate: 7%
Underemployment: 5%
Interest rate: 5%
It’s just about the right time of the year in the northern hemisphere, and the Ca t may have a case of spring fever… or maybe it’s the catnip… or maybe the chocolate.
or maybe constipation for the vacuity inside.
Cat,
“When the local stock market was up, GMA was quick to claim credit. She kept saying it was a sign of investor confidence, stability etc.”
“A person who knows economics does not have to be a president not to know that the bullish market is due to business investors confidence.”
“MB, I forgive you for showing you are a not-a-know-it-all individual. Economics is four year-degree course and stock market is just one chapter in it. Don’t push too hard. Concentrate on issues you know fully well.”
Lesson number 1.
When gamblers put money on a dark horse it doesn’t mean they are betting on a sure winner, it means they are betting on a long shot.
Out of all the bourses in the world, where do the bulk of bets go?
Masyado kang marunong kasi.
Napahiya ka sa eco mo?
Lesson no. 100
When you can’t beat an argument, muddle the issue.
Masyado ka kasing nagmamarunong. Hindi ka naman doctor, gusto mong manggamot.
hehe, very entertaining reading, this. nothing like the Ca t jumping in the middle of the henhouse getting feathers all ruffled. excellent antidote to the smugness endemic here.
muddle?
Sorry Cat, hindi ko na alam kung papaano ko pa gagawing mas simple yun stock market psychology para sa iyo.
Sa madaling salita, kung ang stock market natin ay hindi na tapunan ng barya ng mga fund managers, pwede mo ng ipagmalaki si Gloria.
But for now, stay in the kitty litter.
The explanation above applies regardless of location. Don’t be too defensive.
The assumption is made for the purpose of simplifying the explanation without sacrificing the accuracy of what is being explained. It is true that dividends are based on the declaration of the board of directors, but this does not affect the principle since what counts is the expected present value of all future dividends. As Krugman explains (using the example of Microsoft which at that time was not known for paying dividends):
“what makes Microsoft worth so much is the expectation that stockholders will at some future date either receive large dividends or have their stock bought back by the company at high prices. Or to put it differently, in the case of Microsoft the expectation is that dividends will grow more rapidly than profits in the future (easy when they start from zero). There are other stocks that pay large dividends but do not have high prices (utilities), because those dividends are not expected to grow rapidly.“[Source: Dow 36,000: How Silly Is It? – Paul Krugman]
Speak for yourself.
Hindi naman tatapon ang fund managers sa stock market para lang pasayahin si Gloria. Tatapon sila ng pera kung saan alam nilang kikita. Ano sila nababaliw?
Kaya muddling the issue kasi maglalabas ka ng dark horse pag nagdidiscuss sa stock market, eh ang mga hayup sa stock market ay bull, bear, at panda.
I am not confused. YOu, maybe. Because the present value method can just be explained by:
May isang lalaking nasa coma nang sampung taon. May pera siya sa bangko na kumikita ng interest . Nang magising siya ay mayroon na siyang dalawang milyon. Tuwang -tuwa siya dahil makakabili na siya ng magarang bahay na hindi niya kaya.
Habang tulog siya ay may inflation ng 3 per cent.
Hindi siya nakabili ng bahay dahil ng halaga ng pera niya ay mas mababa kay sa halaga nang siya ay makatulog.
Ganiyan lang kasimple yon kung eexplain and present value method ng pagdedesisyon sa alternative investment opportunities.
Ca t, baliktad yata. Ang dalawang milyon sa kuwento mo ay maituturing future value, dahil may halo na itong interest income. Ang present value ay ang orihinal na halaga ng salapi na dineposito ng na-coma, o sa madaling salita, ang principal (at the beginning of year 1). Para makuha uli ang present value, dapat ay tanggalin mo ang interest income, sa hakbangin na tinatawag na discounting. (Nakasaad sa wikipedia: “discounting is the process of finding the present value of an amount of cash at some future date“.)