The next U.S. president and Business Process Outsourcing and why we should care

American jobs have been pouring into the Philippines via Call Centers. With the election coming up, Filipinos should wonder if the next American President will allow this to continue. After all, its not just call center jobs that we have received.


BPO is an important issue for anyone investing in the Philippines. Its growth will carry some industries with it but if it weakens, it can pull others down as well.


Democrat position
Obama and Clinton claim to be opposed to outsourcing of American jobs. They both advocate the removal of tax cuts favoring companies that ship their jobs overseas.

Republican Position
Mccain's position on the matter is not as clear. Blogoshere opinion places him supporting outsourcing.

Importance of Business Process Outsourcing (BPO)
BPO, best known by the call center industry brought many new jobs and strengthened supporting industries. The real estate industry is one to have benefited. Call Center Companies are providing demand for office space and the employees are providing demand for residential space. Megaworld (MEG) for instance, is riding the wave and is reaping happy rewards by providing much needed office space to the BPO industry players. Beyond real estate, the list will go on and include even transportation and information and communications technology.

Peso and Dollar spending power
BPO places dollar revenues in the hands of the Philippine companies and more peso income in the hands of the employees. Relatively, the salaries of BPO workers are high. This is a significant contribution to the flourishing domestic demand.

Beyond Call Centers
BPO includes outsourcing of Human Resource Functions. An example of this would be IBM. A few years back, IBM took over P&G's human resource department and began outsourcing the hr work of P&G and other firms.
Accounting is also another popularly outsourced function. Companies like citibank perform accounting and related activities for foreign clients.

BPO in its Infancy
There is so much more ground to cover in this industry and tremendous growth potential. Legal and Medical transcription is another area where the Philippines can become a major player. However, we still need privacy laws to be in place before we can gain a major share of the U.S. and E.U. market.

infamy: the worlds largest trade losses and the losers

While the world loves to watch how great traders continue to amass fortunes, let's take a look at those found their place in infamy by losing fortunes in trading.

The latest to join the list of infamy is a frenchman named Jerome Kerviel. He has been charged in the January 2008 Société Générale trading loss incident, resulting in losses valued at approximately €4.9 billion. ($7.5B)

Others:
1. Nick Leeson: Barings PLC, Britain's oldest investment banking firm, collapsed after one of its Singapore-based securities traders (Nick Leeson) lost more than $1.4 billion by gambling on Tokyo stock prices; http://www.kipnotes.com/Scandal.htm

2. Yasuo Hamanaka : a Japanese national caused a loss of about $2.6 billion, over ten years, in unauthorized copper trading on the London Metal Exchange (wikipedia)

3. John Meriwether an american, lost $4.6 billion trading interest rate and equity derivatives in 1998. He was working for Long Term Capital Management. (wikipedia)

4. Brian Hunter : A canadian, lost $6.5 billion trading gas futures working for Amaranth Advisors in 2006 (wikipedia)

the world's richest man

Forbes has put Warren Buffett on top of their list at $62 Billion unseating Bill Gates after he held it for 13 years. He's on a roll having jumped $10 billion a year for the past two years. I think its very cool that he gives lots of money to charities.

Here's the Forbes top five:

1. Warren Buffett - $62 billion
2. Carlos Slim - $60 billion
3. Bill Gates - $58 billion
4. Lakshmi Mittal - $45 billion
5. Makesh Ambani - $43 billion

most dangerous month for stocks

What is the most dangerous month to invest in stocks?

"October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February."
-Mark Twain

how long will the world let the dollar slide?

Falling dollar and advantage/disadvantage
Many countries like the Philippines arguably enjoy more advantages than disadvantages from the falling dollar, however that's not the case for everyone. It may not be long before there is a concerted effort to push the dollar up or at least pressure the U.S. to take some serious steps to shore up its dollar's value. After all, many states have not only invested heavily in U.S. T-bills but use the popular greenback as the currency for their reserves.

Oil pressure on economy
If that does happen, the Philippines and others may have to watch out. For the Philippines, one of the largest benefits is that the increase of the peso vs the dollar cushions the blow of the rising world oil prices. As it is the cost of the oil is weighing heavily on the economy and keeping our GDP growth from reaching higher levels. If the dollar rises again, there will be more pressure exerted by oil prices on our economy.

A weak dollar is preferred
My gut feel is that the U.S. shouldn't want a strong dollar at this point in time. U.S. industries need to look abroad for new markets since domestic demand is falling. A relatively weaker dollar will help boost sales to foreign markets. Its a strategy that China has benefited from tremendously. Although the U.S. has long been condemning it, they may find themselves gaining much from a similar strategy.

The question remains then, how long will the world let the dollar keep sliding?

signs of hope

The market's movement last week shows us signs of hope. 2700 was a level that some TAs pointed to as a possibility. While that may still be true at this point, it also seems that there is a possibility that we'll see the bulls take charge for a change.

Tsupitero's says the level to watch is 3333. High value turnover breaking above this level will point to a rally that will likely push to the higher end of the market's current consolidation between 2900-3900.

We may finally be able to find good short term trades with a lot less trouble.