Archive for January, 2010

Let’s face it, like many Asian countries, the Philippines is a US Dollar Remittance driven economy and I have been asked many times about how to deal with the rise and fall of the USD as many Filipino Dollar Earners, Overseas Filipino Workers, as well as Export and Import driven businesses earning capacity and/or profit margins largely depend on learning how to effectively deal with this issue.

So in this very special 2 part article, I will explain why the USD rises and falls, how it affects the peso and what you can do about it right now so that you can protect your money and possibly even make a nice profit for your self.

Before we begin, let me say that I have been invested in currencies since 1998, I am one of the very few in the Philippines who teaches currency trading and if I do say so myself, I am very good at it. So I hope you are excited to learn because here we go.

Free Seminar Orientation

Click Here To Sign Up For FREE!

A couple of years ago I gave a seminar to a group of Exporters about how they can protect themselves against the rise and fall of the Dollar. This seminar was an eye opener for all of them because the solution that I showed them was far simpler than they could ever imagine. Now you don’t have to be an exporter to know and apply this simple strategy yourself, as long as you have some dollars in your possession, this article should shed some more light on the subject and make you more intelligent in how you deal with your money.

To understand what makes the US Dollar fluctuate, let me first open your mind to what goes on outside the Philippines and talk about the fantastic world of global currencies. Then I’m going to zone in on the Peso and why and how the USD affects it and what I recommend that you do about it.

Now I’m sure that you have heard of Euros, British Pounds, Swiss Francs, the Japanese Yen, the Canadian Dollar, The Australian Dollar, The New Zealand Dollar and of course the US Dollar right? Well among these major currencies that I talked about, the US Dollar is the “heavy weight” of them all.

The US Dollar is what we call the world’s reserve currency which means that everything that is bought and sold in the global markets are all priced in US Dollars. If you are an exporter of whatever product from the Philippines selling to Japan, you do not get paid in Yen, you get paid in US Dollars. If we import rice from Thailand (which we do, in fact, we are the biggest importer of rice in the world) we do not pay in Thai Baht, we pay in US Dollars. Even if you are an overseas worker in Saudi Arabia, your salary will most likely be in US Dollars. This is why all countries for the purposes of global trading has to have an adequate supply of US Dollars in their reserves.

Now keep that in mind while I now teach you a little economics to understand why the US Dollar fluctuates.

In Economics, there is the most basic law of “supply and demand”. In simple terms, there will be Sellers (Supply) and Buyers (Demand). To explain how this law works let me talk about one of my favorite canned goods of all time: Hormel’s SPAM.

Now for example Hormel, the producer of SPAM says, “Okay starting tomorrow we will no longer produce SPAM (Supply diminishes) people like me who loves SPAM will start buying up the remaining cans right? (Demand goes up) So if supply continues to diminish because there are more buyers (demand), what will happen to the price of spam? It will go up (price fluctuates). Now, what if the next day Hormel announces: “we were just kidding, we’re not going to stop production, we’re going to triple production and just change the brand”…(Supply goes up) People like me will not be very happy and will most probably be disinterested in buying spam again (Demand diminishes), now what will happen to the price of spam? It will go down (price fluctuates again).

Now let’s go back to the US Dollar. All you have to do to understand why and how the dollar fluctuates is to simply replace the word SPAM with US Dollars, then replace Hormel with the US Federal Reserve (The US Central Bank that regulates the production of US Dollars) then read the example again.

The US Federal Reserve says, “Okay starting tomorrow we will no longer produce US Dollars (Supply diminishes) people like me who loves US Dollars will start buying up the remaining Dollars right? (Demand goes up) So if supply continues to diminish because there are more buyers (demand), what will happen to the price of US Dollars? It will go up (price fluctuates). Now, what if the next day the US Fed announces: “we were just kidding, we’re not going to stop production, we’re going to triple production”…(Supply goes up) People like me will not be very happy and will most probably be disinterested in buying US Dollars again (Demand diminishes), now what will happen to the price of USD? It will go down (price fluctuates again).

Understand it a little better now?

So the real reason why the US Dollar goes up or down is because of the mixture of buyers of US Dollars, sellers of US Dollars, Production of US Dollars, and the Allure of US Dollars.

Click here for part Two. I will explain how the USD affects the Peso, your business / income and what you can do to protect yourself.

Author box:

Mark So is a fervent businessman, forex trader and educator.  He is the Chairman and CEO of Businessmaker Academy—a business, finance and corporate training center.  He is also the Chief Forex Trainer of Forex Club Manila.  A sought after speaker for business and forex, he is scheduled to conduct his signature seminar series on Forex Trading this Feb 2, 4, 9, 11 (Tue & Thu).  To know more about these seminars, you may visit www.businessmaker-academy.com or call (632)6874645.  You may email your comments and questions to:   markso@zerocapitalclub.com

FREE Forex Orientation

Click Here To Sign Up For Free!

In my article last week, I explained that the US Dollar fluctuates because of the mixture of buyers of US Dollars, sellers of US Dollars, Production of US Dollars, and the Allure of US Dollars. (If you have not yet read that article, please click here: http://wp.me/pjUVO-2a

Now if you are an individual or a business that is greatly affected by USD fluctuations (i.e. Export-Import Companies, OFW’s or Local Dollar Earners), I’m going to share exactly what I do to protect the value of my money against erratic USD fluctuations.

***Disclaimer: This article is for educational purposes only and explains what I do with my own personal funds. This does not constitute financial advice and should not be treated as such. However, I do strongly recommend that you first consult with a Professional Financial Adviser about my methods AND get more educated first before you do anything***

So let’s begin our lesson today by first explaining how the fluctuations of the USD affect the Peso. I want you to remember this first and very important rule: The relationship between the USD and the Peso is “inversely proportional” to one another, meaning when one currency goes up by a certain amount, the other currency goes down by the exact same amount, at the exact same time always.

To make this concept clearer, I want you to think of and imagine a “see-saw”. The principle behind a see-saw is that when one side goes up, the other side goes down. Now imagine the USD sitting on one side of the see-saw, and the Peso on the other side. So when the USD goes up, the Peso goes down and when the USD goes down, the Peso goes up.

For example: You see in the papers that the USD is equivalent to 45 Pesos today, if tomorrow the published rate of USD becomes 46 Pesos that means the USD went up in value by 1 Peso, or in other words, became more expensive by 1 Peso. So if I wanted to buy the USD at the new rate, I would need 1 Peso more which means that the Peso dropped in value by the exact same amount (and the exact same time) that the USD rose in value.

Let’s continue the example, now let’s say that the USD is equivalent to 45 Pesos today, and tomorrow becomes 44 Pesos, that means the USD went down in value by 1 Peso, but at the same time, the Peso also went up by the exact same value because if I wanted to buy the USD now, I would need 1 Peso less.

(If my example is giving you a nose bleed, read it a few times and you will get it eventually)

Now keeping this in mind, here’s how I protect the value of my money against USD fluctuations. In the world of finance, this is what is known as “Hedging” or “dynamically protecting your asset(s) / investments against losses”.

So let’s say I have in my bank account $1,000 right now. If the USD is currently at 45 pesos and goes down to say 43 pesos, my $1,000 would lose value right? For some people / businesses in the same position, they would simply shrug their shoulders and just go with it, but for a great number of people / business, they might start to panic and start “converting” all of it to Peso for fear of losing even more money.  (Take note:  A small rise or fall of the price of dollars can be staggering if you are dealing with hundreds of thousands of dollars.)

Here’s a typical example: You have $1,000, the price goes from P45 to P43, you panic, change all your dollars to Peso which will now mean, your holding on to P43,000 ($1,000 x P43) but the next day the price goes back up from 43 to 45, because you panicked and did not know how to properly time your exchange, you lost P2,000 (P45,000 – P43,000).  If you have $10,000, you would have lost Php20,000.  If you have $100,000, you would have lost Php200,000.

While panicking is understandable, the problem with changing your USD to Peso may make you lose even more money unnecessarily as you can see in the example above. This would be especially true if you do not know if the value will continue to go down and more importantly, if you do not know how to “properly time” your currency exchange.

So in order to avoid these losses, and panicking altogether, here’s a simple strategy that I do to “hedge” or protect myself against these fluctuations.

If I have a Dollar account with my local bank (where I keep my dollar holdings), I simply open a brand new Peso savings account with the same bank. Take note, this is separate from my existing Peso account which I use for regular expenses. The purpose of this new Peso account is for me to start “hedging” my Dollars.

Once I have this new Peso account, all I do now is to “slowly” divide my dollar holdings into these 2 accounts. Meaning if I had $1,000, the end goal is to only have $500 in my dollar account and I will convert the other $500 to peso and deposit it in the newly created peso account. When I say “slowly” I mean I change a small amount every week until I completely divide my dollars into these 2 accounts.

This is what my dollar holdings will look like when I am done:

Why you ask? Because, and remember the “see-saw” example I gave a while ago, if and when the USD goes down, one half of my funds, the one half that I kept in dollars will go down, but the other half of my funds, the one that I converted to Peso will go up by the exact same amount, at the exact same time. This simple account split that I just did, will now protect me from USD fluctuations.

Of course, this method will have costs associated with it, the cost is the conversion rate from USD to Peso at the time that I convert my money plus the cost of maintaining another bank account. However, in the long run, regardless of the fluctuations of the USD, having a “hedged” account will “lock” in the value of my money until I choose to do something more profitable with it.  And as businessmen or dollar-earners, knowing how to protect your hard-earned money is a necessary skill that you must learn.  I hope that this article helps open your minds to the world of finance and how it affects money.  That way, we will all be able to manage our money better.

Author box:

Mark So is a fervent businessman, forex trader and educator.  He is the Chairman and CEO of Businessmaker Academy—a business, finance and corporate training center.  He is also the Chief Forex Trainer of Forex Club Manila.  A sought after speaker for business and forex, he is scheduled to conduct his signature seminar series on Forex Trading this Feb 2, 4, 9, 11 (Tue & Thu).  To know more about these seminars, you may visit www.businessmaker-academy.com or call (632)6874645.  You may email your comments and questions to:   markso@zerocapitalclub.com

Happy New Year! It is now 2010 and I hope you are looking forward to a great and wonderful year ahead. This is the time of the year when I am often asked, what’s a good business or investment to get into?

So for my very first column of the year, I wanted to share something basic but very often overlooked about succeeding in Business or Investing in general and that is, before you invest in anything, you must  invest in yourself first.

Sounds simple enough but many times, we place all our efforts and even our hard earned money in opportunities that come our way without knowing what it is we are getting into. Most of the time, we hear and see a new business or investment fad and immediately start thinking of putting money into it. And because we so badly want to progress in this world, we let impulse and greed take control over reason, raise our hopes and inevitably shake our heads later when the opportunity turns out to be another dead end, or worse, another scam. Is this the cycle that you continuously experience every year? So if you are asking what’s a good business or what’s a good investment to get into this 2010? My answer is start investing first in the one thing that you have probably overlooked for so many years…Yourself.

For those who want to start businesses, educate yourself first. The following areas are where you should start:

  • Sales and Marketing Skills

This is perhaps the most important skill to learn first. I often say that Sales is the purest form of business. Without it, you can never be in business. If you are a shy person and don’t think that selling is something you can do, think again. In my Sales and Marketing seminars you’d be happily surprised to know that the shy persons will always outsell the outspoken ones.

  • Capital Raising Skills

A lot of people think that they need capital to start a business, although that may be true for some businesses, would you know how to source capital without getting into debt?  Increasing your knowledge in this area will help you in your business ventures.  This is an important skill that every aspiring entrepreneur needs to learn.

  • Cash Flow Management Skills

A business is like a car.  Sales is money coming in or the gas that fuels the business while Business Expenses is what will deplete the money coming in. Cash Flow management is simply about knowing how to keep your business running smoothly even when the money coming in is not enough to sustain the business operations for a few months as sometimes experienced by many entrepreneurs.  If there is one skill that is critical to the survival of your business, this is it.  That’s why I make it appoint to equip my students with the proper tools and systems for cashflow management—it can make or break your business.

  • Human Resource Management Skills

As your business grows, you will need good people to help you run it. Forming your dream team is a must and improving your people handling skills will help you build this team.  For this, you will need to know basic knowledge in Human Resource Management.  From there, you will be able to develop systems to guide your employees, as well as programs to develop and motivate your team.  Applying what our HR training consultants have taught in our seminars, many companies including my own have greatly benefited from the best practices shared.  I’ve learned over the years that it pays to invest in your people too.

For those who want to do better in financial investments, the following areas are where you should look at:

  • Money Management Skills

The most important part of investing is not about how good you pick what to invest in. It’s about what you do with your money when things go bad. In other words, what is your exit strategy and what’s your plan B? As an investor, this is the most crucial thing for you to learn first.

  • Fundamental Analysis Skills

When you decide on what to invest in, you have to understand the underlying reasons for choosing that investment in the first place. For example I chose to invest in real estate because fundamentally, this particular area is a prime area and also because 5 to 10 years from now, this area will continue to increase in value due to continues development improvements by the private and government sectors.

  • Technical Analysis Skills

An important part of investing is also knowing the past price movements of whatever it is you are buying (or selling) Investors use these past price movements to determine trends in the markets which when properly combined with fundamental analysis can greatly improve your investments and the timing of when you get in and out of them.

  • Discipline in following a plan

Lastly, one of the hardest things to master about being an investor is to develop the discipline to only invest when the probabilities of investing is optimal. Too many times newbie investors will have no discipline and will invest based on gut feel and intuition resulting in catastrophe more often than not.

So you see, when you start asking yourself what’s a good business or investment to get into in 2010, do not just look at what people tell you to get into. Instead invest first in educating yourself and developing your skills in these areas. Then determine for yourself if these business or financial investments are indeed worth it.

Invest in yourself in 2010 because you are worth it.

Author box:

Mark So is a fervent businessman, forex trader and educator.  He is the Chairman and CEO of Businessmaker Academy—a business, finance and corporate training center.  He is also the Chief Forex Trainer of Forex Club Manila.  A sought after speaker for business and forex, he is scheduled to conduct his signature seminar series on Business Start Up and Entrepreneurship this January 16 to February 13, 2009.  To know more about these seminars, you may visit www.businessmaker-academy.com or call (632)6874645.  You may email your comments and questions to:   markso@zerocapitalclub.com

Aside from building businesses, another passion of mine is investing in assets. Both of them are a means to make more money if you know what you are doing, but how money is made between the two are very different.

I’m going to simplify the difference for both of them for you right now by sharing my perspective: In business, to make money you need two critical assets: Customers and Employees. While in Investments, to make money you need two different kinds of assets: Money and Experience.

Let me elaborate, the key to making money in business is that you have to concentrate on selling to your customers. Even if you have no money to begin with, even if you have no experience to begin with, as long as you can find a customer willing to buy something from you (emphasis on buying from you) then you are in business. And the more customers you have, the more business you have. If you have no customers, then you are not in business regardless of how much products / services you have to offer or how many branches you have.

Next, you can not properly maintain a business on your own, sooner or later your business will grow, you will have more customers and you will need help, and so the next critical asset in making money in business is to have very good and very loyal employees.

Now finding and maintaining really good employees is very critical to your business’ success. It is not easy but once you have assembled a great team of superstar employees, trust me, your business will be making money during good times and even bad times.

Now, let’s explore the world of Investing. Let me ask you, do you think you need customers and employees as an investor of say paper assets like stocks, mutual funds or bonds? What about real estate? Or more liquid assets such as currencies? Think about it, and you’ll realize that you don’t.

What you should know in the world of investments, is that instead of customers, you will need money and instead of employees, you will need experience. Why? because the main way to make money in investments is to “convert” your money into “something else” that will make you even more money. This is the world where the now famous line of Robert Kiyosaki comes in: “The rich do not work for money, the rich make money work for them”. But to make your money work for you, you need to find that “something else” that will make you money without you having to work for it, and to do that without being scammed or duped requires experience.

In my business classes as well as my investment classes, I ask my students if it is really businesses that they want to pursue or would they rather pursue investing because I explain to them that you do not have to be a business person to be an investor nor do you have to be an investor to be a business person. The two roads are mutually exclusive and you do have a choice to pursue one or the other (or even both).

So I’ll ask you my dear reader the same question. “To make more money right now, and given a choice, would you like to start a business, would you like to learn how to invest?, or would you like to learn both?”

To help you decide on which road to take first, let me share some more practical advice. If you love people (customers / employees), if you do not have a lot of money to spare but you have time and a willingness to make sacrifices as well as learn along the way, then I suggest that you pursue the road of business ownership. It is a tough and challenging experience but should you overcome the many hurdles and obstacles, I assure you, you will be a cleverer person because of it.

On the other hand, if you have a job that you love and that pays you well, or already a business owner and you have some money to spare. (money that you can afford to risk) I suggest you pursue the road of the investor. There are many seminars on investing out there right now, most of them free, but be careful on which seminars you attend as it may cost you more in the long run.

For me, I am both a business owner and a seasoned investor. It has taken me a little over 10 years to get to where I am, and having traveled both roads, and exploring both worlds I would like to wish upon you the same rich experience that I have and the kind of success that you deserve.

About Mark So

Mark So is the Chairman and CEO of Businessmaker Academy and Forex Club Manila.
He regularly holds seminars on Business, Finance and Investments.
P.S. Click Here To Attend Mark’s Seminar where 2 of his students made 170,000+ right after
P.P.S. Click Here To Know More About Other Seminars from Businessmaker Academy