'If the duck quacks, feed it'

During the height of the 1997 Asian contagion, then US Federal Reserve chairman Alan Greenspan lectured Asian governments about the superiority of market capitalism as practiced particularly in the United States, even predicting that Asian economies would soon come to this realization. With the way things are shaping up, however, it looks like the vaunted superiority of the western model is about to become history. No one certainly expected the world’s biggest economy to deteriorate in such a bizarre manner and for capitalism to display what can only be described as its death throes.

As my friend Ramon Arnaiz, chairman of investment firm ATR Kim-Eng said, “The heyday of capitalism is over.” Short of saying “I told you so,” experts who have been predicting the collapse of the stock market agree that the culprit is the unfettered greed cultivated by the US laissez faire approach to capitalism. The quest for easy money and profit has made people very covetous, taking on bad loans and risky bets, dodging fair accounting standards and regulations. These abuses have certainly burst so many bubbles. While it’s the US economy that has been largely hit, the financial crisis is affecting the whole world.

Perhaps this is why there is so much resistance against the Yahoo-Google 10-year advertising deal not only in the US but even Canada. While the two Internet giants emphasize that the ad deal is not a merger, there are fears of unfair competition since Yahoo and Google would control 80 percent of the US search advertising market. The US Department of Justice is carefully scrutinizing if the deal violates anti-trust laws and if it will create a monopoly. The deal’s impact on advertisers and consumers is also a cause of concern since it could raise advertising costs –which could end up getting passed on to consumers. The strong resistance particularly from anti-trust regulators is making industry observers predict that the deal could end up in the trash bin – which could spell doom for Yahoo. The financial crisis has forced the search engine to lay off 1,000 employees in February, and it’s about to fire 1,500 more to cope with plummeting profits and help it rebound from a low stock price of $12-13 per share. Investors are still fuming about the missed opportunity to sell to Microsoft last May for $47.5 billion or about $33 per share. Yahoo CEO Jerry Yang refused the offer saying the price was too low, arguing that his turnaround plan would yield even bigger profit.

It’s examples of missed opportunities like this which remind me of an adage by Ramon Arnaiz that “if the duck quacks, feed it” – meaning when somebody wants to buy and you have an opportunity to sell at the right price, then by all means, sell. Despite the crunch, a lot of ducks are “quacking,” meaning there are still a lot of opportunities for people to buy. That’s why when I had a meeting with PLDT chairman Manny Pangilinan the other day, he said he was very happy with the acquisition by First Pacific of Philex Mining. PLDT is cash rich, and he’s looking for a lot of opportunities to invest in other sectors. As they say, cash is king – but definitely not the kind of Euro cash that retired PNP comptroller Eliseo dela Paz was carrying in Moscow.

At any rate, many are blaming George Bush for the US financial crunch mainly due to his failure in reining in Wall Street executives and curbing their excesses. But others are saying the collapse is inevitable given the fact that even Bill Clinton was oblivious to the dangers of market speculation and the enormous trade deficits the US has incurred for many years. One good thing that has come out of this fiasco, however, is the growing clamor among governments for more regulation. While UK Prime Minister Gordon Brown reiterates his government’s belief on business, he also said society should not live by markets alone. “The ethics of fairness means we reward hard work, thrift, enterprise, efforts and responsible risk taking, but refuse to condone or reward irresponsible or excessive risk taking,” Brown underscored. European heads of states are pressuring the US to take the lead in instituting reforms and imposing regulations in the global financial market.

Even in the Philippines, people are asking for more regulation. GMA’s economic adviser Joey Salceda wants an overhaul of the financial and banking sector to protect small investors and depositors, suggesting “well-designed state interventions” as part of counter-crisis measures. We’re lucky we are outside the radar so our economy has not been as affected by the crisis. In hindsight, it looks like countries like China has the better market model after all. Prior to this, the Chinese government has been getting some flak for putting restrictions and not fully opening up its financial system to the global arena, and for being slow in deregulating. “In the past, China has been blamed for the low-degree of internationalization of its financial industries. Now it seems we are profiting from this ‘fault,” a commentary by the Xinhua News Agency said.

An executive of a European finance and stock market consultancy firm says the financial crisis is proof of an emerging economic paradigm shift where “capital moves from east to west.” Many have been predicting China and India to become the market of the future and the world’s most successful economies. The Philippines must take advantage by firming up ties with its Asian neighbors, looking towards the east instead of the west because that is where the future of the world economy is.

Every crisis offers an opportunity. As the old saying goes, “if it walks like a duck and quacks like a duck, then it must be a duck.” In this case, China certainly has a lot of ducks for the picking. (Pardon the pun for Peking duck.)

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