Economic Crisis 101

Last night, October 10, 2008, the Quezon City Government had our annual Testimonial Dinner in honor of Quezon City’s Top Taxpayers for the year 2007. This is our own small way of extending our gratitude to those business establishments who have entrusted their precious businesses in our city … as well as being very honest and compliant in paying their taxes. Indeed, these businesses are also the primary reason why from a slump of negative numbers in our account, Quezon City was able to rise high up with surplus of 8.6B – in only a span of 6 years!

Quezon City is currently ranked 7^th among the Asian Cities of the Future (2007) and 2^nd among the Most Competitive Cities in the Philippines. We are growing and developing and expanding more … and we are very confident that your investments in our city will go a long long way.

Last night’s Guest Speaker is the Executive Vice President and Chief Financial Officer of SM Investment, Inc. Instead of the typical prepared speeches during formal events, Mr. Jose Tan Sio gave a power point lecture and a crash course regarding the current Economic Crisis sweeping the world today. (And because the ballroom was filled with 300++ businessmen, the whole room was QUIET, listening attentively to his lecture!)

Honestly, I do not know jack about economics, business, stocks, bonds and what have you. The closest I got to the stock market was standing like a lost tourist when I was in Wall Street and having my picture taken by the bronze bull! I never cared about economy until now … what with all the hype (and the scare) regarding the financial crisis that started in the US.

Thanks to Mr. Sio. I somehow already have an idea about what happened, what will happen and what we should do! (I was taking down notes as if I was in a classroom while he was giving his speech! Heehee!) Ending his hour long speech, he gave us precious pointers to consider during this Economic downfall.

How to Weather the Crisis

1. BACK TO BASICS

Do not spend more than what you earn. Self explanatory.

2. STAY LIQUID

The economy at present is very fluid. You do not know when the recovery is. It is best to keep your money and stay liquid. Avoid investing in things you are unsure of and avoid getting more debts. Make sure that you have cash for “emergency purposes.”

3. RISK MANAGEMENT

Despite very high finances that they can play around with, SM Investments only concentrated on 4 lines of business : malls and retail, banking and finance, property and corporate social responsibility. People suggested they should expand, but they only focused on things that they are very sure about. Managing risks means investing only in things that you know and understand. When taking risks, make sure that it is geared more towards your advantage.

4. LOW GEARING RATIO

Debt is the cheapest cost of economy, however, it is also a double edged sword. Make sure that your debt to equity ratio is maintained low. (In short, mas marami dapat kita kaysa sa utang!)

5. SUPERVISION AND CONTROL

“Bigness is not always good.” It does not mean that because it is a huge company (eg. Lehman Bros, AIG etc) it is impossible for these corporations to collapse. Lack of control in giving out subprime housing mortages, together with the country’s concept of free economy caused their death. Lesson learned: Businesses should always be coupled with control.

6. STAY CALM AND BE PREPARED

A blog is not enough to narrate the entire meat of his speech! It is best to contact Mr. Sio and ask for a lecture! I learned a lot … and I shall be keeping my notes (written on the dinner menu and on tissue paper).

I left the ballroom with high hopes than with fear.

I know we will get through this!