I’ve written more than once in this journal about some strangely structured and ill-advised investment schemes (scams?) in the Philippines. Sadly some of them were even heavily touted by fellow expats, and I’ve lost friends over the issue as well.
One huge scheme, the Legacy Group Rural Bank fiasco is still playing out in many levels of the Philippine government. A number of banks have been closed, many people have been accused of crimes, some have been formally charged and fortunately for the depositors involved, the Philippine Deposit Insurance Corporation (PDIC) is in the process of paying claims of depositors. Will everyone get back every penny they invested? I surely don’t know, I hope so, but it surely can’t leave a very good taste in the mouths of anyone involved. I think it’s better to make investments that you don’t need ‘scoundrel insurance’ for.
The reason I smelled a rat long ago and the reason the Legacy Group house of cards tumbled, in simple terms, is greed and an unsound business plan. If you ask people to invest, guarantee to pay them a certain high rate of interest and then have no suitable investment vehicle bringing money in to pay the interest going out, it doesn’t matter if you are Bernie Madoff or if your heart is pure as the driven snow … the scheme can’t survive.
On the other hand, I myself surely hate having money in the bank earning little or no interest. My US-based credit union proudly touts 5 Year certificates of deposit paying a whopping 3.0% per annum … fully subject to income tax, of course.
Or the old safe and secure standby, US Savings Bonds .. buy some today while the simply astounding rate of return is a whopping 0.70% PA. (That’s not a misprint, I went and looked it up and had to clean my glasses to make sure I wasn’t misreading the information at the official government site. Pretty unattractive in my book
For those of us who live in the Philippines and have a bank account here there is an interesting alternative. Before reading further, do bear in mind that:
- An investment advisor advisor I am not. Invest in any thing at your own risk and if you think you need professional guidance, get it.
- I have no interest in these investment vehicles at all. I do not sell them, get any commission or anything else of value and only mention this as an item that interests me and may thus interest you.
That out of the way, I’m talking about Government of the Philippines Retail Treasury Bonds. Here’s some information regarding these investment instruments along with a link to an excellent source of financial data here in the Philippines:
First, what is a Retail Treasury Bond?
The Philippine Retail Treasury Bond (RTB) is a direct and unconditional obligation of the Philippine government generally considered a safe and liquid investment opportunity. The RTB, issued by the Bureau of Treasury (hence the name), is one way for the government to raise needed funds.
It is safe because it is fully backed by the government and rarely does a government, including the Philippines, defaults on a debt security such as this. It is liquid because it can be traded in the secondary market prior to maturity.
It is called Retail because at Php5,000 (US$112) minimum investment, even individuals can invest here … learn much more about TRB’s and other finances at the excellent Pinoy Money Talk
9% before taxes sounds pretty good to me. I’m on my bank manager’s list for a couple hundred thousand Pesos’ worth … if the bonds get offered later this summer. Last year there was no offering because the government was meeting its income goals and didn’t need to borrow, this year we will see what we will see.
Regardless of what you think of the bonds … or if they even get offered this year, I highly recommend a regular read of Pinoy Money Talk … an excellent resource to learn what’s going on here in the Philippines financially, written at a level we non-financier types can easily understand
Popularity: 31% [?]
Philly,
The date on that Pinoy Money Talk article is July, 2008.
I should have explained that Laurence, sorry. That information was for the July/August 2008offerring that did not come to pass. So far as anyone, including my bank manager knows, the terms and details will be essentially the same for 2009 … again assuming there is an offering. I haven’t seen anything offcial on the proposed 2009 bonds themseleves in a month or so now, but there was some other economic indicator news last night that says the Philippines is doing far better than expected as we near the end of the second quarter so they may never issue any again this year … too bad, but not being broke is a good thing.
PHI is traded on the NYSE as an ADR. Despite the brutal run down in stock prices you would have to think this stock is a winner. I have traded this ADR in the past but I do not know of any other worthwhile investments in the Philippines. I am thinking about venturing into the stock again.
Are there any reasons why I should not? Just interested.
I am certainly not plugging the stock and every investor should research before investing in any stock, mutual fund ect.
Joe, thanks for commenting. Of course this is all my personal opinion, but you asked for it. I would consider the stock being listed in the NYSE a huge risk factor. How many Americans have had their life savings and retirement funds wiped out over the past two years by various crooked thieves and their friends .. like the current sec treasury word is he was agreat freind of Bernie Madoff while pres of the New York Fed, many people at the Fed were known to be virtually enthralled by Mr. Madoff’s “talents”), or the outgoing one who just lest (moved right into a highly paid position at a company he had just dumped millions of your money and mine into ( wonder if he picked the clor of his drapes and his office furniture while still writing checks from TARP that can’t be accounted for these days … you wnat _these_ guys, Republican or Democrat handling your savibngs?)). This you would consider an investment? I consider it playing poker with a blindfold on.
Please note I don’t consider the Philippine stock exchange much better. I do not recommend stocks in today’s world, period. Government Bonds, such a I mentioned here are an investment, stocks are blind speculation, pour and simple, and I wouldn’t touch them with a 10 foot pole.
That tirade out of the way, PHI (PLDT) is not something I consider good for future gains, They are still an old-line telephone company and telephone companies as we know them are buggy whip stocks. Most of them think the ‘old ways’ wil come back … so did the buggy whip comanies. Skype is notwthe world’s _largest_ long distance carrier. Telcos with wires and wire-based business policies are shaky at best.
If I were investing in the stock market, I’d get into something that was promiing in alternative energy, or a pharmaceutical company that looked to be going places. Americans are addicted toprescription drugs for every conceivable ailment and the current US government policy/lobbying group base gives them a license to print money … there is no Skype breathing doen Pfizers neck, in other words.
I loved the budget you published with saving being the number one item. That is a very smart way to save money and cover for those unplaned expences. I also enjoy your blogs on cost of thing there.
Thanks, Don. I know there are people who differ with me on the way I displayed this, but people come here looking for advice on living in the Philippines, not being an accountant
I don’t have large following, but people get in touch with me frequently … and I have already heard dozens of sad, sad stories, about people who moved here and then ran into unforeseeable expenses and are flat broke.
Many of these people are better educated than I, amd a great many of them started out wealthier. But even the people who haven’t suffered a setback,yet, need to understand that they likely will. Sickness, crime victimization or even a downright ’senior moment’ can happen to anyone from high school dropout to Harvard Phd. If you put actual, real money in the bank … here, where it is accessible, _first_ thing each month … before the rest of your income just gets frittered away, the _worst_ that can happen is your grandkids get rich when you pass on.
But if you, or worse yet, your spouse or other family member suddenly has a life threatening illness or something like that which happens to everyone, dumb or smart, the ability to walk up to that window at your bank and just draw out a couple big handfuls of Pesos is going to feel like something so good you can’t even describe it.
More than one person has said, Oh I keep my savings back in my home country’. Good. I keep savings in my home country too. But do you know how long it might take to ‘tap’ that bank account? Could take a week … which is a hell of a long time when your kid is lying in a hospital bed and you have a prescription in your hand that you can’t buy becuase Mercury Drug store demands payment first.
Thanks for the response. I rarely talk about finance on the web.
I enjoy your blog and I hope you continue writing as I will continue to read.
Best
Joe
No problem, Joe, thanks for the kind words. We can certainly discuss finance here any time …anyone who joins in, though, will just have to endure my opinions.
I’m not a big fan of the government licensed/condoned thievery of my fellow US citizens that has been going on for the past couple years … this isn’t a political thing, both parties are as ‘dirty’ as the other. It’s an example of how the US government really has little or no control over huge segments of the ‘moneyed aristocracy’ … if you have the right freinds you can just outright pillage the ordinary folks out there who are just trying to raise afamily and earn aliving. It saddens me as much as it angers me. One reason I live here is it isolates me from a lot of what’s going on back in the USA … ostrich-like, I know, but then again every man has to cope with stress in his own way. Be well.
You can find retail Philippines Government Bonds on this website:http://investment-income.net/rates/government-bonds-rate-page
Hi! Would you know if the 5 and 7 year TRBs are subject to the 20% with holding tax?
Yes they are, a few years ago five year and longer bonds were exempt from interest taxation, but no more. The ROI’s on the site I mentioned take this into account.