Archive for the ‘business’ Category



October 13, 2008

The crippling financial crisis being felt globally…and conveniently being blamed on the Bush administration is actually Democrat initiated and Democrat supported. The whole issue is in truth and in fact solely triggered by the sub prime lending woes – the mechanics of which are seemingly too complicated for an ordinary citizen to even try to comprehend and understand … an issue which is now conveniently exploited by the Democrats to their political advantage in this presidential elections. The Democrats knew they can easily hoodwink the ordinary suffering citizen into believing that the Republicans should be faulted for all the misery. The sorry and miserable plight of the citizenry makes them susceptible to calls for changes and this is exactly what the Democrats are doing – exploiting the miseries of their fellow Americans!

Let us try to understand the root causes and beginnings of this financial crisis.

Everything that we are encountering now a days,,,, widespread foreclosures, paralyzing credit crunch, bankruptcies, and the over-all slack in the economy, are all solely triggered by one problem …the problems with sub prime mortgage industry’s?

Just what are these subprime woes and how did they come about?

Normally to spur economic growth, the Fed would entice industries to grow their businesses by making available credit facilities at low lending rates through the banks. The Fed started cutting rates in 2001 at the time when the country was in a recession. The lowest point the Fed rates reached was at 1% in 2004 which after inflation, actually yields negative interest rates. As a result of this, mortgage rates also went into all time lows. This was normally followed by an increase in borrowing and lending because people are apt to take advantage of the low interet rates .

Meanwhile, the real estate boom started in 2000 with property values rising as much as 50%. The cut in Fed rates from to 2001 to 2004 coincided with the boom further fueling increases in new real estate projects. Low interest loans had to be extended by banks and new housing projects have to be sold.

The rise of the housing industry into a bubble (where the prices of real estate properties are higher than their actual intrinsic values) is actually a regular economic cycle occurrence. What made it irregular is the fact that at the onset of the boom in the housing industry sector, sub prime lending was also being done with careless abandon by the banks. (Sub prime lending are mortgages extended to individuals deemed as “sub prime” or high risk individuals – people who have little or no capacity to pay.)

It must be remembered that In 1995, it was President Clinton who mandated new regulations that coerced banks to make significantly more subprime loans to inner-city residents previously viewed as unqualified buyers in high-risk areas. Banks were even rated on how well they complied and faced big fines if they didn’t do what government regulators wanted.The House Financial Services committee meets. Committee members sit in the tiers of raised chairs, while those testifying and audience members sit below.Image via Wikipedia

To make matters worst, the Democrat dominated legislature after Clinton’s term allowed the two big giant mortgage companies Fannie and Freddie to package the risky sub prime loans together with regular prime mortgage loans into mortgage backed securities which were passed off to investors as safe investments since both Fannie and Freddie were government sponsored. These mortgage backed securities were gobbled up by both local and international investors. The inflow of capital from these securities made Freddie and Fannie buy more and more of the risky sub prime loans as the demand for their mortgage backed securities also increased. Banks on the other hand also aggressively extended more and more loans to high risk individuals since they can always sell them back to Fannie and Freddie. And when the inevitable happened… when sub prime mortgage defaults started to mount and mortgage foreclosures started to rise, the mortgage backed securities of Freddie and Fannie lost their luster. Banks started tightening by 2007 and the ensuing credit crunch was simply paralyzing.

And what was government doing all these time? After Clinton, the Republicans took over. What have the Republicans done? Or,did they do anything at all?

Today, very few people remember the fact that it was President Clinton (a Democrat) who mandated that sub prime lending to be offered extensively by banks in 1995.PaulsonFreddieFannieImage by robertodevido via Flickr

Very few people knew the fact that with the predominantly Democrat legislature after Clinton, Freddie and Fannie were practically allowed to perpetrate this pyramiding scam on the American people. Many even try to forget the fact that Freddie and Fannie were major campaign contributors to the political campaign kitty of known Democrats who have been their patrons in the government, the list of which includes Barney Frank, Chris Dodd, and Barack Obama. It’s quite ironic that now with the unexpected dismal turn-out of their own political follies, and with a likelihood of a financial meltdown staring us in the eye, the Democrats are still able to throw blame on President Bush and the Republicans.

I am neither a Republican nor a Democrat, but I find it abhoring to hear the double talk in Obama’s political campaigns blaming Bush and the Republicans for the economic ills they themselves perpetrated!

Take a look at this chronology of events leading up to current crisis and decide for yourself who should be blamed for this crisis: (- from the Investor’s Business Daily Editorial)

April 2001: The Bush administration’s fiscal budget stated that the size of Fannie and Freddie was “potential problem because financial trouble of a large Government-Sponsored Enterprise could cause repercussions in financial markets, affecting federally insured entities and economic activity.”

May 2002: The Office of Management and Budget wanted disclosure and governance principles in Bush’s 10-point plan for corporate responsibility to apply to Fannie and Freddie.

February 2003: A federal housing oversight report warned that unexpected problems at Fannie Mae could immediately spread into financial sectors.

September 2003: Treasury Secretary John Snow, in testimony to the House Financial Services Committee, recommended that Congress enact legislation to create new agency to regulate and supervise financial activities of housing-related government entities to set prudent and appropriate minimum capital requirements.

Rep. Frank, the committee’s ranking member, strongly disagreed, saying: “Fannie Mae and Freddie Mac are not facing any kind of financial crisis . . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we’ll see in terms of affordable housing.”

February 2004: The president’s new budget again highlighted risks of the explosive growth of these government enterprises and the then-low levels of required capital. It also called for the creation of a world class regulator. The administration determined that housing regulators of government agencies lacked the power and stature to meet their responsibilities and should be replaced with a strong new third regulator.

February 2004: Greg Mankiw, chairman of Bush’s Council of Economic Advisers, cautioned Congress against taking the strength of financial markets for granted. He too called for reducing the risk by ensuring that housing GSEs are overseen by an effective regulator.

April 2004: Rep. Frank ignored warnings, accusing the administration of creating an “artificial issue.” “People pay their mortgages,” he told a group of mortgage bankers. “I don’t think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren’t there.”

From 2004 to 2008 the Bush administration made 12 more attempts to get Congress to pass legislation to have safer, sounder regulatory oversight of Fannie and Freddie and capital rules. You can see them for yourself on the White House Web site. But here are a couple of examples that show how Democrats resisted:

July 2005: Senate Majority Leader Harry Reid rejected legislation on reforming Fannie and Freddie. “While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that would limit Americans from owning homes and harm our economy in the process,” he said.

August 2007: Sen. Dodd, another Democrat, ignored President Bush’s emphatic calls for Congress to pass Fannie and Freddie reform legislation and called for him to immediately reconsider his ill-advised position.

Wake up America, Indeed!

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October 2, 2008

What a nasty situation U.S. congressmen are finding themselves in courtesy of the $700M financial bail-out plan. The U.S. senate has now passed on the ball to the U.S. Congress after approving a sweetened version of EESA to force another showdown at the lower house. Lobbying is being done around the clock to insure the passage of the bill. Concessions from both parties are being offered and accepted without hesitation or second thoughts. And why not, everyone was a given a terrifying preview of what might happen again if approval of the modified Emergency Economic Stabilization Act of 2008 is once more derailed. The 778 points Dow dive last Monday after Congress failed to pass the bill, sent a terrifying reminder to everyone concerned. The spill off effect in other bourses worldwide was just as unnerving.

A lot of finger pointing ensued in the aftermath of the failed passage of the bill. Had the congressmen simply done their jobs clean without the unnecessary political grand standing and uncalled for fire brand speeches aimed at gaining political advantage over the issue, the Dow would not have dropped that much. The current scenario is a chilling reminder of the stock market crash of 1929. Stocks started to nose dive on October 24, 1929 – Black Thursday. Leading Wall Street Bankers tried to remedy the situation by pooling their resources together. Their efforts failed resulting into the now infamous Black Tuesday Stock Market Crash of October 29, 1929. This pulled down the country into the era of the Great Depression.

We may really see a repeat of 1929 , and, what a friend and fellow blogger aptly termed as “The Collapse of The House of Card.” The effect will be felt in all corners of the globe and will be long lasting. Recovery will be slow and painful.

The congress men who will once again shoot down this bill come Friday will be praised by the growing number of their discontented constituency. But, will they be willing to put in their hands the blame for not doing anything to prevent another Black Friday scenario in the U.S. I doubt it. On the other hand if they choose to support the bill and pass it, they may prevent a world wide financial crisis but they risk the chance of not being voted back into office by their disgruntled constituents.




September 30, 2008

  • 1. Thou must first know thy self and thy market well.

Trading stocks, currencies gold, or commodity futures, or any other securities(fast moving markets) via the internet can be terribly taxing! Before you decide to plunge into it you must know offhand if you are ready to lose a lot of good night sleep for just monitoring the markets; or if you have the stomach to take frequent roller coaster rides during peak market activities (like watching your investment tremendously grow within seconds just to see it melt down in the next)! You must know first if you have the discipline to be able to maintain your cool during wild and wide price swings and still be able to call the shots objectively according to your pre-determined trading objectives. This means you should not to let fear overshadow you when the market moves against your position, nor allow greed to take the better of you when the market is in your favor. Remember always that markets are frequently unpredictable and that you must learn to adapt to its peculiarities fast otherwise it will eat you up alive.

  • 2. Thou must deal only with registered brokers.

Make sure the broker is registered! If the broker is based in the U.S., contact the Securities and Exchange Commission (SEC) and also check with your state securities regulator as well. You can research the investment online using the SEC’s EDGAR database at To contact your state regulator call the North American Securities Administrator’s Association (NASAA) at (202) 737-0900 or online at You may also contact the Commodity Futures Trading Association (CFTC) at and the Financial Industry Regulatory Authority (FINRA) at The rule of the thumb you must use here is “avoid the unregistered and junk the brokers with recorded complaints.”

For non-US based brokers, you must demand verifiable documentations from the broker regarding their affiliations and representations. Some online brokers are merely introducing brokers (IB), meaning they act as marketing representatives for a bigger broker, in which case you must demand to see the IB contracts and investigate the affiliation of the principal broker. Other brokers “white label” for their principals. Their websites may appear and have the looks of a big broker when in fact they are mere affiliates of other brokers. Don’t deal with white labelers if they don’t publish their principals. White labelers make money through an additional spread of a pip or two built in into their price quotes. While I don’t have anything against white labelers who are affiliated with established brokers of good standings, I would advise you to avoid them unless they have incorporated more add-on features or services other than those offered by their principals to justify the additional cost to you.

Big Daddy’s suggestion that you deal only with registered brokers is not being biased against overseas brokers. It’s just that online investors must always be provided with a forum or a venue to file any claims they may have against their online brokers in the future. And at this point in time,only U.S. based brokers can provide us with this safety net.

  • 3. Thou shall shall not invest money you can not afford to lose!

One of the major pre-placement considerations an investor must make is determining the amount of capital he will be using. There is not set rule for this. In fact, everything is left to the discretion of the investor. However, one must understand that every investment involves a certain amount of risk. Placing an investment (online or otherwise) is in reality a form of risk-taking with the hope that the placement will generate a certain amount of profit after a while. However, the presence of the entailing risks also tells us that there is a possibility of losses. In fact, in fast moving markets the likelihood of losing all of your investment is all too real. This is the very reason why you must not invest more than your ‘risk capital’. Risk capital is that part of your liquid assets or your wealth which if lost will not affect your lifestyle or your family’s way of life. Never ever invest money meant for your your family’s daily subsistence. Doing so will make an emotional wreck out of you. You will turn out to be an emotional trader; setting aside fundamentals; trading out of fear of losing the money on which you and your family depends on; holding on too long to losing positions hoping the market will finally turn into his favor. Once you become emotional trader you start trading on false hopes which ultimately lead you to disaster and the total loss of your investment.

  • 4. Thou shall not use unprotected computers!

Never use computers, whether at an airport, library or an office when accessing your financial accounts or records. Make sure you only enter confidential information on websites with the “locked padlock” icon in the browser frames (must have https at the beginning of the web address) Avoid using public wi-fi facilities in accessing your account or executing your online trades. Hackers are everywhere nowadays. It is advisable to do your online transactions only at the comforts and confidentiality of your abode. Turn off and unplug the computer you are using for trading when you are not on trade.

  • 5. Thou shall not trade without a plan!

Never attempt to trade without a trading plan. A good money manager does not buy or sell out of whims and intuitions. No matter how long his experiences have been in trading a particular market, the successful investor/trader always prepare a plan before taking a plunge, so to speak. His every action stems from a careful study of a particular security, commodity, or currency contract. He always has a sound fundamental basis (underlying economic data) and/or a reliable technical view for the following trading decision parameters:

o the choice of item/market to trade, (which security, commodity, or currency)
o the specific position to take (whether to buy or to sell)
o the specific price range on which the position will be executed (entry point)
o the targeted price objective or exit point on which the trade must be closed

All these trading decision parameters must be clearly defined and set before executing any trade. Never attempt to trade fast moving markets online in the same manner and with the same do or die spirit as in p lacing bets on online gambling sites. Every trading decision must be based on a trading plan and every trading plan must be followed to the letter.

  • 6. Thou shall not execute orders without trading stops!

Every trading plan must incorporate trading stops which shall act as a safety nets to limit your losses in case the market moves unfavorably against your established positions. There is no set or fast rule for creating your stops. However, in establishing your initial position you need to set your initial stop with a wider range – taking into account the highs and lows of the trading range established for the day, the proximity of your entry price to historical turn points (chart supports and resistance levels), and your tolerance level as dictated by your initial equity. (Make it a point that your initial stop must not be beyond the price level where it will eat up more than 20% of your equity). When the market starts to move in your favor, adjust your initial stop turning it into a trailing stop in the direction of the price movement. You must adjust your trailing stops tighter and tighter (closer to the spot price) as prices approach historical turn points or significant technical price levels (such as those established using the Fibonacci theory).
Stops are vital to your becoming a disciplined investor. They help you decide without hesitation when to cut a losing or winning trade. They prevent you from becoming an emotional trader and a perpetual loser. But most important of all,trading stops limit your actual loses. I have seen people lose all their investments in one single session because they adamantly held on to losing positions in the hope that the price will soon make a turn-around. I have also seen people who have reached their profit objectives but out of greed, held on to their positions. And when the market whipsawed they ended up losing everything.


One of the main attractions of trading on line is the fact that most brokerage houses offer trading opportunities on margin basis (where you are allowed to put up only a fraction of the cost of the contracts you are buying or selling). This ratio may vary from broker to broker. While this is an advantage to the investors since it allows them to maximize the returns on their investments, it can also work against them because high margin ratios can also wipe out their equity fast in very volatile markets. For the more experienced traders who are incorporating strict money management strategies into their trading plans, the margin ratio may be a non-issue. However, for the ‘newbies’, trading with a lower margin ratio (between 50:1 and 250:1 ratio) will keep them in on volatile markets and allow them ample time to react to rapid price changes in the market place. At the same time, the lower margin ratios allow investors to avoid margin calls because it provides them elbow room to make the necessary adjustments on their positions (like temporarily freezing their positions by executing an opposite trade) thus temporarily avoiding actualizing losses. Investors must remember that brokers are not required to issue margin calls when an account falls below the required maintenance margins. They can just go ahead and cut your positions at a loss. Investors need to read, remember, and understand the fine lines in the brokers’ agreement regarding margins and margin calls.


Most online brokers offer demo trading on their sites which allows you to open demo accounts and trade live markets using only virtual money. This is a good chance for you to hone up your trading skills in real live market situations without risking your own money. You may do demo trades for as long as necessary (although some online brokers allow you only a maximum of 30 days to use their platform). Never open a real account unless you already feel comfortable with yourself, your trading plan, the broker’s trading platform, and the volatility of the market you are trading. If you are not yet satisfied with the outcome of your initial demo account, then go ahead and request for an extension of the demo account or, better still, open other demo accounts with other online brokers. Do not forget that trading volatile markets requires a large amount of self-restraint and discipline so never rush to a decision at all times.


You must update yourself with everything that is going on in the financial marketplace. The internet has plenty of sources for real-time financial news updates, commentaries, and forecasts and projections. You must find time to go through the more important items which are relevant to the market you are trading. Do not look only or limit your search to information favoring your current position in the market. You must also be sensitive to contrary news, opinions, and forecasts. Use favorable factual data and information as your basis for initiating your trades. On the other hand, use any contradicting information, opinion or forecast as your basis for setting your trading stops (whether they should be tighter or wider). Subscribe to newsletters from as many online brokers as are available. Most important of all, you must sharpen your skills at digesting all of the available information you happen to go through and be able to create an informed and calculated trading decision from the same as fast as the need arises.


Online investments depend a lot on your uninterrupted internet connections with your broker. Your trading could be adversely affected if for example your internet connection is down at the time the market makes a major move. You can lose a big opportunity to cash in on that market movement, or lose an opportunity to cut your loss if you happen to be on the other side of that market movement. There may also be instances where even the broker’s system breaks down due to heavy traffic, or computer glitches, or other natural calamities which may prevent orders from being filled. The online investors must be prepared for such contingencies. They must be familiar with the broker’s alternative options in case they cannot access their accounts online. And this should include automated telephone trading, fax orders, and direct phone dealing arrangements. All these alternative trading options must be arranged with your brokers prior to instituting your initial trades.



September 12, 2008

All the three credit reporting agencies (Equifax, Experian, and Transunion) have been swamped with “Fraud Alert Calls lately after clients of the largest home mortgage company in the U.S., the Countrywide Home Mortgage Loans informed their clients by snail mail that their confidential personal data may have been compromised. It seems one of Countrywide’s employees who have access to the company’s confidential files, stole all information about its clients and sold it to a still undidentified third party. Included in the stolen information are sensitive information such as Social Security numbers, credit card numbers and expiry dates, birthdays and other pertinent information vital to any credit transaction. While the matter is still being investigated, Countrywide advised its clients to immediately inform any one or all the three credit reporting agencies to tag their accounts with a Fraud Alert. This is a free service provided by the credit reporting agencies to anyone who wishes to avail of it. The initial tag will stay for 90 days with an option for the client to extend it for the next seven years.

Simply put, the fraud alert is a notice attached to the client’s credit files. What it does is it informs creditors that the account may have been compromised and may possibly be used by identity thieves. So every time a client whose credit file has been tagged with a fraud alert avails of a credit facility like using a credit card or opening a new one or applying for any form of loan, the creditor is immediately informed of the delicate situation. Extra care is taken by the creditor who has the option to require the client for other proofs of identity. In the store front, if you swipe a credit card with a fraud alert tag, you will be required to produce other supplementary ID’s more than what is normally asked for. It is a preventive measure to avoid identity theft but may also cause some delay in credit processing. But hey, this is definitely better than having your card or your credit facility be used by thieves!

If you are one of Countrywide’s clients, you better make the call now! Countrywide Financial to which the Countrywide Home Mortgage is affiliated with, is a large conglomerate. They are into home mortgage loans, banking services, and insurance. We are not exactly sure whether the stolen information is limited only to clients of of Home Mortgage. There is a distinct possibility the guy may have hacked the whole caboodle of confidential information from the conglomerate. Besides, the fraud alert service is free!

Toll Free Number: 1-888-766-0008

Toll Free Number: 1 888 397 3742

Toll Free Number: 1-800-680-7289



September 7, 2008

“[Private] I have read your post and I wanted to write a brief comment but your template
doesn’t have a clickable link for the comment form. Anyway, I just wanted to say that I agree with your views on how to spot fake online FX brokers. I’m still baffled though why some previous victims of other scams keep on falling for the same trap (I have studied the chatroom dialogues at PinoyMoneyTalk and other Pinoy Forums). Why don’t they seem to learn their lessons? Is it plain greed or plain stupidity? I cannot seem to figure out anything in between.”

Posted on my message board in one of the social networks I am affiliated with was this note. The sender is a financial professional who also blogs about the many investment scams in the Philippines particularly the most recent PIPC-Michael Liew Forex Scam which is the subject of my continuing blog-expose.

Why don’t they (referring to Filipino investors) seem to learn their lessons? Is it plain greed or plain stupidity? ”

Before I give my “two-cents worth” of opinion on this, let us approach his query from the opposite side and re-hash the questions
to try to get a clearer picture of the situation.

How were these scammers able to do the same scam over and over again and in the same place at that? How were these con artists able to dupe more investors repeatedly when all that they did every time were to merely relocate to other offices and hire a new staff?

In my own opinion, these con artists, armed with years of experience in plying their trade all over the globe, knew their target market here by heart. For one, they knew that they can easily pass off as legitimate enterprises within the local business communities here since the regulatory authorities are drowned in a culture of corruption and bribery is a way of life. For another, they knew damn well that the market is simply big and is still growing! Despite years of their plundering activities, they knew they have not yet tapped the full potential of the already established “have money to invest sector“of the Philippine society – the old rich.

On top of this, they are quick to recognize that there is this emerging sector or the evolving “new rich” – successful newbies or business owners who are fast accumulating new found riches – and, there are also the OFW’s whose years of hard work abroad are now showcased via sizable savings ready to be tapped for investments.

The marketing savvy of of these con artists are truly amazing. Yet, they have not changed their proven marketing approach at all through these years. The game plan is to undertake mass recruitment by way of offering easy-to-land high paying marketing jobs. They target people with connections to the well-heeled sector of the community to join their marketing staff. Business patronage is simply established via personal cognizance. A rich uncle or two, a well off neighbor, or long time business associate with excess money to invest, they all easily fall prey to a well prepared marketing presentation made by a relative,a trusted neighbor or a long time business associate. The norm of “throwing caution to the wind” when a new business is offered is easily forgotten. The personalized marketing approach swings the tide to their favor. And decision making is now influenced by local culture which dictates them not to offend the relative, the neighbor, or the business associate by turning down their offer. Often the personal assurances of the ‘related’ marketing staff become the sole factor for the decision to make the investments.

This marketing approach was so successful in the past because there was a dearth for high profile jobs available for the ever growing workforce and so these con artists were able to grow their businesses without a hitch. However, with the entry of and proliferation of high paying call center jobs in the country in the last three years, recruitment slowed down for these con artists. Their businesses suffered a slack. Obligations to pay up clients were rising faster than the generation of new investments. Finally, rather than to wait for the scam to blowup in their faces, they flew the coop bringing with them the whole caboodle of money invested with them.

Going back to my blogger friend’s posted question, the victims of the latest PIPC-Michael Liew Forex scam as well as the investors in the Franc-Swiss capers (the latest forex investment scams to hit the Philippine scene) can not be deemed stupid. They were new victims of an old scam. My friend may argue this with me and say “if this is not plain stupidity then what is?” Well, I believe, if you have been duped before and allowed yourself to be duped again then that is plain stupidity. However, more than 90% of the PIPC and Franc-Swiss scam victims were not the same investors conned by the fake forex brokers in the last decade that they have been active in the country. They were mostly relatively new investors. I would moderate my call and term this as simple ignorance.

Again,my blogger friend may argue with me and say that this is plain stupidity since all the other scams that transpired in the last two decades have been well publicized in both print and broadcast media! Ahh, but here again is were the marketing savvy of the con artists shines out. They knew that there is a high chance that their targeted new victims never heard or read about forex scams in the country or if they did, there is a greater chance that they may not recall them at all. It is quite hard to recall a news item of no interest to you at all at that time, and which happened one or two years ago. These new victims may have been too busy building up their riches to even pay attention to news items of no direct bearing to them at that point. And, if there were those who could recall, these are easily overturned by personal assurances by the marketing staff who happen to be their relatives or close associates. A perfect staging ground for a scam indeed!

It is not plain stupidity that Filipino investors fell prey once more to investment scams. It is plain ignorance and total indifference to what is going on around them. To avoid recurrence of such incidents therefore, every one (investors, regulatory authorities and legislators alike) must be continually vigilant.

As for the greed, I should say investment decisions are often accompanied by a certain amount of greed.



August 30, 2008


Like a birth mark, each one of us has been tagged with a distinctive numbered marking called credit score! It is a tag that stays with us forever.

But unlike the real static birthmarks, this distinctive numbered tag called credit score is dynamic and changes over time. It depends entirely on our own individual credit histories (or how we manage our credit). Every time we apply for credit, like making a car loan, or a personal loan from a bank, or apply for a mortgage or a new credit card, lenders look mainly on our credit scores to determine the level of credit risks they will have to take with each of us before making their credit decisions.

What is a credit score?

Whether we like it or not, our credit history is being reported to and stored by three major credit reporting agencies in the United States (Equifax, Experian, and Transunion). Lenders who have extended credit to us provide these reporting agencies with details of our credit history such as the type of credit we’ve used, the length of time our account has been open, and whether or not we have paid our bills or not. These are incorporated into individual credit reports which also include information on how much credit we’ve used and other pertinent information like if we are applying for new credit sources.

In making credit decisions, lenders buy these reports from the three credit reporting agencies. However, based only on these credit reports, the credit granting process by lenders were quite slow, inconsistent, and oftentimes biased; up until the Fico Score (more popularly known as credit score) was invented.

Using data from our credit history (as provided by the three credit reporting agencies, which in turn is based on data provided by our lenders), a company called Fair Isaac Corporation (FICO) developed an objective scoring system using advanced math and analytics. The new scoring system allowed for faster credit decision making by lenders, in fact it now only takes seconds for credit decisions to arrive on line. The new system took away personal biases and opinions and made credit decision making fair and objective. On top of these, the new credit scoring system allows our past credit problems to fade away in time especially with the entry of new data showing improved payment patterns. These Fico Scores are now the most widely used credit scoring system worldwide.

The FICO® score is calculated by a mathematical equation that evaluates many types of information from our credit report in any of the three credit reporting agencies. By comparing this information to the patterns in hundreds of thousands of past credit reports, the FICO score estimates our level of future credit risk. Our level of future credit risk is then calculated and expressed as a number which ranges from 300 to 850 where the higher the score means the lower the credit risk and vice versa. However, while many lenders use the Fico scores to help them make their lending decisions, there is no set cut-off range or score for all of them. Each lender has his own strategy and sets his own cut off score based on the level of risk it finds suitable for his own credit product.

Here is the breakdown of how Fico score assesses the data from our credit report:

· Payment History 35%

· Amounts Owed 30%

· Length of Credit History 15%

· Types of Credit in Use 10%

· New Credit 10%

Please note that while Fico scores considers only the data contained in our credit reports, lenders may want to also consider other information before making the final lending decisions. The additional information may include our household income, the length of time we have worked at our jobs and the type of credit we are applying for.

It is important to regularly manage our credit health well and maintain a high Fico score at all times because the benefits are enormous such as getting better credit offers, lower rates of interests, and speedy credit approvals. So, if we are planning to make a major purchase such as buying a car on installment, or applying for a mortgage on a new home, it is best to check on our credit scores six months earlier to give us enough time to take actions to improve our Fico scores.

We’ve been scored and there’s nothing we can do about that but to maintain a healthy credit status!



August 29, 2008

In 1987, after our attempt to make an actual delivery of Copra (dried coconut meat used to produce coconut/vegetable oil and one of four commodities traded at the defunct Manila International Futures Exchange) was blocked with an offer to withdraw our maturing contracts at a nifty profit, the brokerage house I used to work for decided to close the branch where I was assigned. We were offered two options: resign and get a severance pay or be reassigned to the main office in Makati, the country’s premier financial district. I decided to be reassigned, and you wouldn’t believe what I went through next!
Having first-hand knowledge that prices can be manipulated at the exchange, I set out to find out more about this well-hidden secret. With the help of a friend who used to work at the trading floor of the exchange, I learned the hand signals used at the MIFE trading floor (in contrast to the open outcry system used by established exchanges like

CBOT and NYSE). I would visit MIFE’s viewing deck and take down notes. I noted which big broker protects certain price levels in each commodity traded at the exchange. With this knowledge, I would scamper back to the office to place my orders. Guess what? Every time I place a limit order, the price would be off by a pip or two, making me more convinced that indeed I am trading in the right direction. But, my orders were not getting hit (the market wasn’t going to give me a free ride). In the succeeding sessions I decided to put in a market order (at any price order). Usually, this kind of order would be immediately confirmed. But lo and behold, my order for merely 2 contracts moved the price limit up for two consecutive sessions. In a limit up situation your order will not be confirmed even if you place a market order, meaning even if you are willing to take the order at any price. The convenient excuse they gave to justify the situation is that there were more buyers than sellers and so my order cannot be filled! Bullshit my ass, as if I didn’t know that the volume of trade in the exchange is a farce. Anyway, I could sense that I am being watched closely by then.
Finally, realizing that I can wreck havoc to the company and to the exchange itself, the head trader (a HK-based Chinese) talked to me and told me outright that if I want to make money I must place my orders with another brokerage house. He told me he would even help me and gave me a list of brokers who are not that closely linked to our company. He gave me specific instructions to open accounts and place orders only with the brokers he had just shortlisted. And sure enough my orders were getting hit and my clients were making money for a while, until it stopped once again. My orders were not getting hit once more. I later realized that this must have been the times when no new orders were coming in to the member brokers of the exchange. Then, one day the head trader approached me and talked to me heart to heart. He asked how many new accounts I could immediately open and when I told him I could open as many as he wanted, he finally made me an offer! He wanted 25% of the profits from my trades in exchange for information he would provide me (when to get in, what commodity to trade, what price to write, what specific session to enter). Not only that, he gave me his own money to open an account for him with another broker and I was to get 25% this time while he gets the rest. I fell for it, besides who wouldn’t? It was sure money for me and my clients. We did make a killing then!
Later on, I learned from the guy himself that there was a huge order from China (they were operating sweat shops in China too) and they simply were bucketing this huge placement. We merely took a free ride with them, in the process hitting the other unfriendly, or uncooperative brokers of the exchange. It was all dirty! And, they have been doing this for the past 10 years…milking Philippine investors dry.
I knew then that I needed to stop. Innocent investors were getting duped dry of their hard earned savings. This was not the kind of career path I wanted to take. So, when an offer to work with a forex broker came along, I and my group made a plunge without hesitation, thinking then that the forex market cannot be manipulated as with MIFE. I was wrong because I encountered more surprises after that.
In the light of renewed efforts to re-establish the Manila International Futures Exchange by some known figures in the banking industry here in the Philippines, I am compelled by conscience to blog about my real life experiences in this industry hoping that similar pitfalls can now be avoided by both investors and the regulatory authorities alike. Extra effort must be spent to unmask who the real people behind the revival of MIFE are. My blog site shall serve as a watch dog for similar investment undertakings. It shall be a forum to expose those who are out there to scam innocent investors. Big daddy will be vigilant and this is now his newfound advocacy.