Jose Mari Molejon Invema Learnings No.1 February 19, 2022 INVEMA INSIGHTS: WHAT GOES DOWN, MUST CAUSE PANIC. Part 1: Financial Markets Updates – Insights Last Saturday (12 February), I was hoping to recite on the financial updates in the US stock market. US stocks were lower on Friday (11 February) after Thursday’s (10 February) sell-off prompted by the January Consumer Price Index (CPI) report indicating that prices rose 7.5% in January year over year, registering the highest annualized growth in CPI inflation in 40 years.1 The growing tensions between Russia and Ukraine sent oil prices climbing amid lack of supply encouraging investors to move to safer investments such as government bonds. The S&P 500 tumbled 85.44 points or 1.9% in Friday trading, to settle at 4418.64. Its combined two-day loss over Thursday and Friday amounted to 3.7%, the index’s largest two-day percentage decline since October 2020. The technology-heavy Nasdaq Composite slid 394.49 points, or 2.8%, on Friday to finish at 13791.15. The Dow Jones Industrial Average lost 503.53 points, or 1.4%, to end at 34738.06. All three major indexes ended the week with losses. The S&P 500 and Nasdaq Composite lost 1.8% and 2.2%, respectively, for the week. The Dow ended with a weekly loss of 1%. 2 I aim to have a better grasp of how the US stock market works but I do understand that when stock prices fall, investors have a gut reaction to panic sell following a decrease in the value of their portfolio. Any good investor would have determined beforehand their risk tolerance. How market volatility affects stocks and how an investor is able to manage his fear or greed is grounded on their risk appetite. To mitigate the adverse impact of sharp declines in the stock portfolio, our FINMAN professor stressed the importance of diversification.3 It is also essential to be informed of the latest finance and business news to be able to form an opinion enabling investors to make smart investment choices whether to buy or sell stocks. Part 2: Learnings from Group 1 Presentations/Recitations Group 1 made their presentation on Introduction to Investment Management. Group 1 talked about risks in investment and the attitude towards risk. They distinguished investment from speculation and gambling. I couldn’t help myself and had to ask where they think cryptocurrencies fall under. I remember our FINMAN professor said that cryptocurrencies fall under gambling because there is no sound basis to make an informed decision on how to manage the investment. Unlike stocks, cryptocurrencies do not rely on financial ratios and even on industry changes. In addition, Group 1 discussed the basics of the financial market, market functions, market regulations, and how we can participate in trading. They have also discussed the measures of indexes and made comparisons between 1 https://www.forbes.com/advisor/investing/why-is-stock-market-down-today/ https://www.wsj.com/articles/global-stocks-markets-dow-update-02-11-2022-11644568508?siteid=yhoof2 3 https://www.investopedia.com/articles/investing/030716/one-thing-never-do-when-stock-market-goesdown.asp 2 types of investment companies. Overall, the presentation was informative and provided a strong substructure for the course. I wish they had more time to expound the topics from experience or incorporate real world applications. This is an ongoing issue with Death by Powerpoint and I myself am a repeat offender. It is a challenge to the reporting group to make presentations more interactive and more relatable to the audience in order to effectively absorb the lessons they convey. This is where I appreciate the ice-breakers because it offers a respite where students are nearing the point of information overload. What I do though, is that if I am unable to absorb the points discussed in class, I would go to Youtube and find the same topic in the hopes that one of the videos may provide me the understanding I seek. I also appreciate that the group saved their slide deck to the class’ google drive for future reference. Part 3: Learnings (Most Recent experiences i.e setup, stock execution) from Stock Investments The initial instructions for the stock investment setup were a bit ambiguous. At the start, I was informed that opening the trading account was per individual group. I had to take a leave on Monday to submit my signed application to the bank (BPI). It turns out one trading account per parent group will suffice. There was some disappointment but admittedly, looking forward to this activity is like looking forward to Spiral buffets and so I ignored circumstances beyond my control. This was an opportunity I cannot miss. As of this writing, my application for a BPI trading account was approved and I was able to transfer Php1,000 just to comply with the required minimum average daily balance (MADB). This is my first time to venture into stocks, cue in background music “The Journey” by Lea Salonga. The investment team was able to establish group dynamics early on. There seemed to be more than one interpretation as to how the stocks will be selected and what the definition of the assigned roles are to the individual groups. Thankfully, our Professor was able to provide the needed clarification and we were able to move forward with the process. The group leaders have instructed the members of their individual groups to choose amongst themselves who will act as Auditor and Strategist/Trader. For group 5, we assigned P-Pie (May) as our auditor and O (Ohara) as our strategist/trader. One of the CIOs from our team, Carms, was able to open a trading account with BDO Nomura. This will be our official trading account for Parent Group Blackrock Advisors. Except for one member, everyone was able to transfer the agreed per member contribution of Php10,000 to the trading account. We were able to buy MBT stocks on Friday and we intend to purchase the second stock on Monday, well into the specified buying window.
