Investment Gem Or Potential Rip-Off? Part 1

NOTE: This Investment Scheme report was originally published in April 2005 and then followed up in November 2005. The scheme is still going strong, paying the dividends and interest and making money for all involved! You can learn more by visiting Dave Whittal’s Blog: Tell Dave Perry sent you!

There is an old saying that I firmly believe, “if it seems too good to be true, then it probably is”. There are a lot of opportunities in life, however, that may seem to some too good to be true. Their lack of experience with that particular opportunity may make it seem almost surreal and far too good to be kosher. Meanwhile others who may have more information or previous experience recognize the opportunity for what it is and make the proverbial killing. How do you know which is which then?

Recently a friend of mine posted how he had looked into a scheme to invest a lump sum on a time deposit with a local Rural Bank and he would earn 20% p.a. interest on his money. His first deposit was for a modest P100,000 and if it played out, he was planning on investing several million in different accounts, different banks and in his and his wife’s names. Spread the risk so to speak.

On the surface his actions seem prudent and sensible and he would be looking at bringing in around P50,000 a month in interest as a form of income, and all without touching his pension and other savings! Brilliant! But is it too good to be true?

Firstly, I don’t think my friend is easily taken in by scammers. He has lived overseas for most of his working life and has been around the block once or twice. He is also an engineer, a technical type who is pedantic, even anal, in getting all the details sorted out, weighing up each nuance and really squeezing the decision of every drop of “if” before committing. One of those “show me” types who don’t accept someone else’s’ word for things unless they have seen it for themselves. In other words, unlike me, he isn’t the type to leap in boots and all on a whim! If I asked him to research an item and find out the best value for money example on the market, he would bore me to death with all the details but I would buy the model he recommended because I trust his judgment in those matters.

But this investment scheme doesn’t sit right with me. I know the deposit would be protected by the PDIC, the government body that insures deposits in member banks, and it appears the chosen Rural Bank is a member. I don’t like Rural Banks here because they have a history of going squishy on depositors. There are three basic types of banks here, Thrift, Rural and Commercial. Each have different areas they can supply services in and also different degrees of difficulty (i.e. protection for depositors) they must comply with when being set up.

I knew a German in Danao who ventilated his skull with a pistol bullet after losing P5 million when his Rural Bank went belly up and the CEO went on holidays with the cash! In those days the PDIC only covered P100,000 per depositor per bank. Now that amount has risen to a more respectable P250,000 per depositor. With my friend making (less than) P250,000 deposits in several participating Rural Banks and in his and his wife’s names he is indeed spreading the risk and also utilizing the protection of the PDIC. Providing there isn’t a problem somewhere should he need to make a claim. Sounds like he has it covered but I still hear those alarm bells!

I can’t think how a bank in the Philippines can legally loan money at such a rate they can afford to pay investors/depositors, 20%? Are they getting into the 5/6 business and lending money at extortionate rates to high risk borrowers? Heaven forbid! No business can borrow money at 20%, pay it back and stay in business unless we are talking drugs or prostitution so how can a small Rural Bank pay that kind of interest on time deposits?

What if the CEO’s of the Rural Banks have every intention of doing the right thing but they fall into a cash flow shortage problem and can’t make the monthly interest payments? What if they are intentionally defrauding the investor, or misleading them as to the risks? What if they put aside enough of the deposit to pay the first year’s interest payments, then bug out? They take the rest of the principle with them and are long gone before the lack of funds to keep making interest payments is discovered. Meanwhile, buoyed by the regular interest payments you not only invest more, you urge your friends to share the good fortune.

How about they get to the end of the five years, have made every interest payment due but the principle is no longer in existence due to “unforeseen circumstances”, honest or otherwise? What if this is similar to the SEC Share Float scam? A company genuinely releases a float to raise funds but then misuses the money to pay whopping salaries and dividends to managers and board directors and fail to reinvest in the business, which soon goes under. It can be totally above board, the request to SEC to raise capital with a float, the raising and then the board voting on how to utilize the money, despite it not being in the best interests of the shareholders per se. It happened here recently with the first owners of a Master Franchise with an internationally recognized fast food brand.

For me, there are not enough guarantees and too many iffy details. It does sound too good to be true but I hope for my friend’s sake I am wrong. Very wrong. If I am, then I am perfectly happy to not only pass on the news to the Dreamers, but to apologise for ever doubting his judgment. I do hope I am wrong, I just really don’t think I am. What do you think?

Business Ideas Anyone?

Are There Business Opportunities To Be Had in The Philippines? We Take A Look.

The concensus of opinion is that the Philippines are totally bereft of decent business opportunities for Expats. Or, there is money to be made here if you have the right contacts. Or maybe the truth for most of us lies somewhere inbetween. If I was a multi national corporation looking to invest in a third world country I wouldn’t choose the Philippines. Not when other countries are more investor friendly. Agreed, when you hit the dizzy heights of multi-million dollar investment life here gets amazingly easier for those with the cash and the clout. Try “investing” just US$50,000 and the best they will offer you is a spurious SRRV, or special residents retirement visa. If you are thinking even less money, just something to get the family off your back but maybe provide you with a few bucks and something to do, then it is even more difficult.

You see, at the top end the oligarchy have it sewn up tight and enough political and commercial influence to keep things going their way. Down the bottom end of the scale they have no personal interest in the micro economy so they are happy to legislate against any non-Filipino involvement in most areas of business. In the middle, the small percentage of the population with the education and capital to fight over the remains have enough local clout to keep foreigners running around like headless chickens for years to come just trying to abide by the rules. In other words, it is pretty much a closed shop.

Or is it? Like anywhere else in Asia, there are always loopholes and exceptions and ways and means. Never take anything at face value and always believe there is another way. For some that is to operate in the name of the wife, or to bring on board tame locals even though this practice starts to dip into the posion jar known as the anti-dummy laws. Basically, anyone with the money to run with the big boys isn’t reading this newsletter and anyone who is looking at competing for a few peso’s a day won’t last long here anyway. What I’m looking at are business opportunities for the average expat and his kith and kin.

Firstly, you can set up family in business, or simply give them a few bucks and tell them to blow it, the end result for many is often the same. Cynicism aside, many family members do actually succeed in small business ventures. At first glance you might think the Philippines is a haven of natural entreppeneurship but the reality is that there is simply insufficient employment. If there are no jobs to be had then the only alternative other than begging is to create your own job by running a small business. The smallest of these I would say would be the cigarette vendors that walk the streets selling single cigarettes amongst the traffic. Opportunity Number 1: Buy up bulk cigarettes and gum and then onsell to these vendors at a mark up but less than what they buy their stock for from Prince and other warehouse outlets. The best deal for the customer would be to have the stock out on consignment, they only pay for what they sell each day. Hmmm, perhaps not the best business opportunity, lets move on.

Notice how every second or third house has a small opening in the grill around one of the windows. From this the goods are dispensed from the family Sari Sari store. If you peer inside you see the fridge with the coke and beer and ice chilling away, sachets of shampoo hang from the ceiling and the shelves have jars of candy and bags of junk food and cigarettes can be had singly or in packs. How does anyone expect to make a living when everyone sells the same products for the same price and there are almost as many stores as there are customers? The answer is that nobody really makes a living, everybody just scrapes by until the stock is consumed by family members and there is no cash left to buy more. What sales were made are on “utang” or credit and you won’t see that money in a long month of Sundays! Opportunity Number 2: This one was suggested by Ronald Turley on one of the Yahoo Groups. Set up a wholesale distribution service that supplies numerous stores with their basic staples, but at a better price than what they already pay.

I think it would be a workable venture but you would have to be good at stock control and have a decent inventory program on your computer. Plus you really have to stay abreast of prices and what sells and what doesn’t but it could be a going concern. I have always said one of the two ways to make money in the Philippines is to sell lots of little stuff for little prices to lots of people. There are lots of people here, they have small amounts of money and so they buy small amounts of stuff. Where else have you seen sachets of shampoo, ketchup, shoe polish and snacks?

Another idea I once had is Opportunity Number 3: Taking it to the streets! I suggested a variation of this to a Yahoo Group member who had a banca and was looking for things to do with it to make money other than fishing. I said why not stock up with lots of stuff and go visiting the small islands where the people have a hard time getting to a supermarket or big store. Another version of this would be to outfit a vehicle, even a tricycle but ideally a multi cab, fill it with goods and cheap clothes and such and head into the hills. Of course your first visit might not be a huge success but people might have saved some cash by the time you come around again. Of course you would have to refuse the utang and deal strictly cash. I think it might be a lucrative business and you could develop runs and even territories which could be sold off or franchised.

If you used a larger vehicle you could even start a mobile beauty shop or hairdressers. I just imagine a converted jeepney rolling along a provincial goat track with half a dozen Bayot hairdressers whistling at every Dong they pass! You might design a mobile disco truck and go from barangay to barangay and hold discos’ charging P10 each to enter. Or better still, combine the disco with the beauty parlour and have your own mobile beauty pageant! The mind boggles! Time for a Tanduay and a lie down while I think of more opportunities!

AlleyCatting In Cagayan De Oro

Some Words Of Advice On How To Find A Friend In This Southern City.

By “Kissy”

You don’t have a lady here? I will give you a few tips on how to find one. This depends on what you are looking for. Do you want a little darling to fall in love with and eventually marry? Or do you want a lady of the night? You will find many lovely ladies that fit in both categories. There are several malls here with ladies just waiting to find you! Take advantage of the mall where you will find aircon to keep you cool. There are shops of all kinds and the prices are great. You will also find several restaurants. It is a great way to spend the day just looking around and relaxing.

There will be many beauties to feast your eyes on and some will follow you around like groupies. Don’t be shy, just smile and you most likely will be approached by a few gorgeous women who will find you very attractive just because you are white. If you are older and fat that is even better. It shows you are mature and must be rich to be able to have so much to eat. You are already a target for marriage, so play all your cards right and you will get there eventually. You have the upper hand since there is only one of you, and many of them. They are everywhere; so don’t stop with just trips to the mall.

These are the nice ladies, so don’t think you can just offer money for a roll in the hay. That can get you in deep trouble, even land you in jail, and perhaps have you deported. I will tell you more on how to find your sweetie in my book, “StreetWise Cagayan De Oro!” due out soon.

If you want a lover only, there are places for that. Just as Ma would say “son wear your rubbers!” You don’t know what disease could be waiting for you in there, so be wise and listen to Ma. Besides, you don’t want to make a baby!

What to do on a lonely Friday night!

There is an area of CDO that is wide-awake all weekend. You will find Live bands, women, several places to eat, loads of fun and more women. It is very well lit up at night and is like an outdoor concert and a huge street party rolled into one. You can eat, shop, relax to great music, and meet a lot of people. There will always be other foreigners there in the crowd. There is tight security with all the cops, so it is a safe place. Just please watch out for pickpockets, they can be anywhere.

This place is “DIVISORIA”, located in the center of the city. Anyone can show you where it is. There are also many restaurants, and shops there, including pharmacies, and Internet cafes. This area is off limits to anything with wheels on the weekend, so have no fear of being hit by a car or even a bike. Just let the kid in you come out and enjoy this fun event!

Too Easy To Stay Tubby!

A Few Thoughts On The Importance Of The Expat Exercise Plan.

I came back from two years of living in the Philippines 12kg (26lb) heavier than when I had left Australia. I was several inches wider and I could hardly tie my shoe laces without panting. I am sure my blood pressure was up there somewhere I didn’t want to go and I know I was in line for the hereditary diabetes since I was knocking back 2 litres of Coke a day, the cola drink not the narcotic.

I was in bad shape and it hadn’t happened overnight. Two years of sedentary living, even when I was working it was pushing a mouse and keyboard around for a living, had gradually pushed me up and over the self set bounds of comfort. I smoked 20 or more cigarettes a day, slept badly and snored like a freight train. Something had to give sooner or later.

After the first week of stuffing my face with real bread, enjoying not sweating, ever, shivering and scraping ice off the windscreen of the car, I got to work on myself. First thing was to get an exercise routine happening so it would become a habit.

Just as not exercising can become a habit, the reverse is true and far better for you. The secret is to take it so easy to begin with you are champing at the bit to get sweaty and really work out. Everything is about pleasure and pain, so associate more pleasure with exercising and more pain with being a couch potato and you have the motivation thing beat!

I use the Royal Canadian Air Force 5BX program, or at least my version of it. 5BX and 10BX were the fitness fads of the sixties at some point although originally developed as an exercise regime for flight crews. My version is you pick five simple exercises and do them five times each as soon as you get out of bed. I did a waist spin, a deep knee bend, a side stretch, an arm swing and a bend over and touch my toes set of five each side. At first it hurt and I could hardly do these five simple exercises!

Gradually, each day got easier but I resisted the temptation to try and rip along to 10BX. The regular, simple, limited exercise started to not only get me in the habit of doing SOMETHING, but it got the blood flowing and stopped the foot cramps and other problems lack of circulation had been causing. Sitting in front of a computer can bring on pain in the feet, cramps in the stomach, all sorts of weird ills and aches all due to not using muscle groups. Use it or lose it!

The next thing I did was quit smoking. I had known that going from fifty cents a pack to ten dollars a pack would be both a shock and a good incentive to quit. In the three and something months since I last smoked, I have not smoked 2300 plus cigarettes! Can you imagine laying out over two thousand cigarettes in front of you and saying, ok, stick each one in your face, set it alight and suck in the carcinogens! So far I have not spent (can’t really say saved as where is the money?) AUD$920 (US$644 or P36,000). Awesome!

How did I do it? Firstly I had nicotine patches (three of them) but I never used them. They can cost as much as the cigarettes and can be just as hard to quit as they are merely a different method of nicotine delivery. I just got my head around it and associated more pleasure with quitting and more pain with staying a smoker. The money factor helped, especially when I rationalised I was here, away from my wife and kids to make money, not set fire to it. Believe me, the mental factor is the major one and unless you really have a handle on your personal motivation for quitting, it ain’t going to happen!

Then I had to look at my diet. That came about after I lost a sedentary job selling cars and got another, more active job working with road repair crews. One of my old martial arts students owns the company and two of the old gang work for him. They found me just when I needed a job and, unknowingly, a change of lifestyle. Funny how these things happen!

I went onto a low carbohydrate diet, cut out sugar, bread, potatoes, rice, noodles etc. Ate lots of meat and fat and suffered for the first two weeks as my body cleansed itself of the toxins and sugar. I was already sleeping better from quitting smoking, but now I slept even better still without the glucose spikes and sugar rushes. Check out the Atkins Diet for yourselves, it may be what you need, it may not. I’m not a nutritionist or a health professional, I’m just telling you what worked for me!

So now I am back in Cebu several kilos lighter, cleansed of my nicotine addiction and feeling so much more active and physically fit than ever before. I am walking everyday, using the wonderful pavement (sidewalk) the Cebu South Road provides, the only decent walking track in the entire province! I am starting to get back into a Boxing Workout (I used to be a professional Boxing Trainer and before that an Inter-Service Heavyweight Boxer in the Army) I drink only Diet Coke or water, have less caffeine each day and each one of those has half the sugar they used to have. Once or twice a week I drink booze and every now and then I eat whatever the heck I want, then get back on track!

Not eating bread is easy here, the same goes for potatoes and the rice I consume is far less than before and always washed for starch after cooking. I eat less each meal and move more and the weight is staying off. More importantly, I have more energy for doing stuff with my kids. So many of us expats marry women half or more our own age and then start a new, young family. We owe it to them and ourselves to be around to enjoy the family and the new lease on life as long as we can. Taking better care of yourself is the first step. It really has made a world of difference for me.

Lola’s Died Again, How Much This Time?

Taking A Look At The Cost Of A Funeral.

Unfortunately Philippines law prevents foreigners from operating funeral parlors and that is a shame as they are a very lucrative business, indeed. I know of one Chinoy (Chinese-Filipino) who owns three funeral homes in Cebu and he makes around P3million a month. Even allowing for overheads and expenses, wages and taxes, he still does extremely well by Filipino standards and not too badly by anybody else’s.

As Benjamin Franklin noted, the only two things in life that are certain and unavoidable are death and taxes. In the Philippines you can actually avoid one, but not the other. The whole business of dying makes money for several people. Of course the hospital has usually pumped thousands out of the relatives in a vain last ditch attempt to sustain life. Some canny relatives though, sensing the inevitable, will hold back that last transfusion, knowing the blood will only leak out onto the bed with the rest of the donations (at P1500 a pop!) so why not keep the money and put it toward the funeral? When you live in such close proximity to the poverty line, you learn to be a little more pragmatic than those better off might have to.

Once the patient becomes the deceased, the funeral home is called and a van sent around to pick up the body. The relatives may accompany the body back to the funeral home in the hearse or mortuary van, if only to save on taxi fares and also to ensure the body doesn’t disappear en route. It happens from time to time, especially around the time medical students are in need of body parts for their studies. You think I’m joking, don’t you?

At the funeral home the bereaved will be asked if the deceased had SSS, social security insurance. If they were employed and lucky enough to have paid in SSS contributions, they will have nearly all of their funeral expenses paid for them. Funeral homes like SSS contributors as clients. They know they will get most of their money, guaranteed. SSS pays the firt P20,000 or so of the bill, which guarantees you aren’t getting out of there for less than about P30,000. Fortunately you can pay the balance three days before the interment of the body.

Depending on what standard of service the relatives have asked and paid for, the funeral parlor will begin to prepare the body.. They clean the body and then make an incision and pump it full of preservative. If you have paid for the good stuff then it behooves you to hang around and make sure you aren’t short changed. Some parlors are notorious for slipping in the cheap stuff. If the body is to lie in state for the full ten days or so, then the cheap stuff will have it turning nasty colors before the coffin lid is closed and the body buried. Not nice.

P35,000 buys a nice casket and all the trimmings, such as the stand, the candle sticks and flower baskets, a lectern for the prayer readers to use and so on. You also get the hearse to deliver the body to the house where it will lie in state for up to ten days, and then take it to the church and graveyard.

You can get cheaper caskets but sometimes they have a tendency to soak up the fluids from the body and quickly rot and fall apart in the tropical heat. I have seen one collapse as the body was carried from the house to the hearse, not very dignified.

The ten days lying in state might get expensive also. You may need to hire a marquee to cover the mourners who will be keeping vigil day and night (just in case the deceased changes their mind). Mahjong will be played, refreshments served numerous times a day and a service will be held every night. Same service. Every night. You will pay for the lay preachers to hold the service and of course the musicians, blind ones are preferred.

The priest will show up on the last day and hold a Mass, and expect to be paid of course. The usual minimum is P1000, but wealthier mourners are expected to pay more. On the way to the cemetary you may recoup some of your expenses as passing motorists will throw three coins in front of you to ward off the evil spirits that may be hanging around the procession. When you get to the cemetery you will have had to buy the plot, usually from the Barangay Captain. You need a cement sarcophagus made and once the coffin is entombed, the local mason will come and seal it up for you.

Then, each year when you visit on All Souls Day (1 November) you can plan that roof to shade everyone from the sun, maybe some seating built in and so on. Before that happens you will have been to the Lapidera and ordered the headstone, maybe another P5000 or more, depending on how fancy you order it to be. Watch for spelling and grammar, I have seen references to “Her Wife” and “His Husband” lying there in eternal rest.

All up even a modest funeral can set you back P50,000, say just under US$1000. Halve that if the deceased had SSS insurance, but still quite a burden for the average Filipino family to shoulder. Yes, if it was legal for me to open one, I’d be into the funeral business like a scalded cat.