Just How Rich Are The Marcoses Today?

Marcos is widely believed to have plundered US$ 5 billion to US$ 10 billion from the Philippines during his regime from late 1965 to early 1986.  Although some studies have estimated the plunder to be as high as US$ 17 billion, these are not widely cited.  The Presidential Commission on Good Government (PCGG), the government agency tasked with the recovery of the Marcos Wealth, has recovered around US$ 4 billion in the past 28 years.

Does this mean the Marcoses only have US$1 billion to US$ 6 billion left?

Definitely not!

First of all, the US$ 4 billion that the PCGG has recovered was recovered over a stretch of 28 years, giving the Marcoses enough time to squirrel away and hide most of those assets beyond the reach of the PCGG.  Moreover, the Marcoses have had more than enough time to grow those assets to even more unimaginable sums.

People of Great Wealth tend to have one primary investment strategy: Capital Preservation.  This capital preservation investment strategy generally has two goals:

• Preserve the Absolute Amount of the Wealth:

In other words, if the Marcoses had US$ 5 to US$ 10 billion in assets, they would like to have at least the same amount (US$ 5 to 10 billion) so many years later. In this case, at least 28 years later.

• Preserve the Amount of Wealth Relative to Inflation:

Most people intuitively understand inflation: that the buying power of one peso today is much less than the buying power of one peso ten years ago.  Similarly, having US$ 5 billion today is not the same as having US$ 5 billion in 1986.  You could buy more stuff with US$ 5 billion back in 1986.  Therefore, the Marcoses would have liked to preserve their wealth on an inflation-adjusted basis.

Just how much would the Marcos Plunder be on an inflation adjusted basis?  What was US$ 5 billion to US$ 10 billion in 1986 dollars would be worth US$ 10.7 billion to US$ 21.3 billion in 2014 dollars.

People of Great Wealth and Ambition also have another, often overriding goal: to grow their capital even further over and above what it would be on an inflation adjusted basis.  In other words, the Marcoses would most certainly want to grow their wealth beyond US$ 10.7 billion to US$ 21.3 billion.

There are many, many ways to do this.  The possibilities are infinite.  There are a multitude of ways for a wealthy but law-abiding citizen to grow his wealth in a most tax-efficient manner.  Just ask Mitt Romney. Given the magnitude of the Marcos wealth, its stateless status, its illegal origin, and the Marcoses' determination to evade the law, there are even more ways to hide and grow this wealth way beyond what they have lost to PCGG's recovery efforts.

This blog post will merely explore the investment possibilities that are available to anyone with much much more modest financial assets: the affluent but ordinary investor.

Given the size of the Marcos wealth, it would be inconceivable for the Marcoses not to have a significant portion of it invested in what the world deems the biggest, the safest, and most liquid investment market: US financial securities. Also, given the size of the Marcos wealth, it is entirely possible for them to invest in these securities and reinvest 90% of the interest payments received.  The income from the remaining 10% of interest payments would be more than sufficient to provide the Marcoses with a decent amount of cash flow to pay living expenses and whatever taxes they cannot avoid.  The calculations below assume that the investment instruments were held to maturity.  They account only for returns due to the stated interest rate and not total return (yield plus gain/loss in price of security)

Risk Free Investments

The safest US financial instruments are US Government Securities such as US Treasury Bills and US Treasury Bonds.

3-Month US Treasury Bills

If the Marcoses had invested all their assets in 3-Month US Treasury Bills from 1986 to 2013 and reinvested 90% of the interest payments they received, they would still have an estimated net worth of US$ 12.71 billion to US$ 25.42 billion as of year-end 2013. Moreover, they would have received a cumulative income distribution of US$ 0.86 billion to US$ 1.71 billion during this time.

10-Year US Treasury Bonds

If the Marcoses had invested all their assets in 10-Year US Treasury Bonds from 1986 to 2013 and reinvested 90% of the coupon payments they received, they would still have an estimated net worth of US$ 18.46 billion to US$ 36.92 billion as of year-end 2013.  Moreover, they would have received a cumulative income distribution of US$ 1.50 billion to US$ 2.99 billion over that time period.

Safe But Not Risk Free Investments

1-Month Eurodollar Deposits

If the Marcoses had invested all their assets in 1-Month Eurodollar Deposits from 1986 to 2013 and reinvested 90% of the interest payments they received, they would still have an estimated net worth of US$ 13.81 billion to US$ 27.61 billion as of year-end 2013.  Moreover, they would have received a cumulative income distribution of US$ 0.98 billion to US$ 1.96 billion over that time period.

AAA Rated US Corporate Bonds

Triple A Rated US Corporate Bonds are safe and have higher yields than US government securities.  They are not entirely without risk because even blue chip corporations can and do default from time to time but the risk is minimal.  If the Marcoses had invested all their assets in AAA Rated US Corporate Bonds from 1986 to 2013 and reinvested 90% of the interest payments they received, they would still have an estimated net worth of US$ 26.64 billion to US$ 53.28 billion as of year-end 2013.  Moreover, they would have received a cumulative income distribution of US$ 2.40 billion to US$ 4.81 billion over that time period.

Tax-Free Investment

20-Bond Municipal Bond Index

The Marcoses could also have invested in tax-free US Municipal Bonds.  If the Marcoses had invested all their assets in 20-Bond Municipal Bond Index from 1986 to 2013 and reinvested 90% of the interest payments they received, they would still have an estimated net worth of US$ 19.53 billion to US$ 39.05 billion as of year-end 2013.  Moreover, they would have received a cumulative income distribution of US$ 1.61 billion to US$ 3.23 billion over that time period.

US Equities

US Equities, by definition, have higher risks than debt instruments such as AAA Rated Corporate Bonds, Municipal Bonds, Eurodollar Deposits, and US Government Securities.  The easiest way to invest in US Equities is by buying into an Index Fund, preferably one that tracks the S&P 500 Index, which is often cited as a measure of the broad equity market.  Such a strategy would have certainly been available to the Marcoses in 1986 because Vanguard, which pioneered this investment strategy, has been offering this since the 1970s.

Why invest in an index fund? Because most fund managers cannot beat the broader market on a consistently long-term basis and at a lower cost

S&P 500 Index Fund

If the Marcoses had invested all their assets in the S&P 500 Index from 1986 to 2013 and withdrawn all the dividends they received, they would still have an estimated net worth of US$ 45.18 billion to US$ 90.35 billion as of year-end 2013.  Moreover, they would have received a cumulative dividend income distribution of US$ 11.75 billion to US$ 23.50 billion over that time period.

If the Marcoses had invested all their assets in an S&P 500 Index Fund from 1986 to 2013 and reinvested 90% of the dividend payments they received, their net worth would be significantly higher: US$ 77.61 billion to US$ 155.22 billion as of year-end 2013.  Moreover, they would have received a cumulative dividend distribution of US$ 1.67 billion to US$ 3.33 billion over that time period.

If the Marcoses had invested all their assets in an S&P 500 Index Fund from 1986 to 2013 and reinvested all dividend payments they received, their net worth would be significantly higher: US$ 82.35 billion to US$ 164.71 billion as of year-end 2013. 

Conclusion

Most likely the Marcoses would have employed a mix of all these investment instruments (stocks, bonds, deposits, government securities) plus many many more investment vehicles only available to the extremely wealthy.  In 1986, their wealth was already diversified with investments in art, jewelry, real estate, etc.  to reduce the risk of loss of capital.

How much are the Marcoses really worth? No one really knows.  Not even the PCGG.  Some of it turns up here and there.  But when Imelda Marcos says that she can pay off the Philippines foreign debt, she wasn't kidding.

Data Sources: New York University Stern School of Business.  St. Louis Federal Reserve.  Worldbank.org

A Stealing Analysis of the Marcos Regime

Marcos is often listed as one of the world's most corrupt leaders.  In fact, based on this list, which was ultimately sourced from Transparency International's Global Corruption Report, the Philippines has the dubious distinction of having two Philippine Presidents in the top ten most corrupt leaders: #2 Marcos and #10 Erap.

			Plunder (In US$ Billions)
Leader	Country	In Office	Low	High
Suharto	Indonesia	1967 to 1998	$15.000	$35.000
Marcos	Philippines	1965 to 1986	$5.000	$10.000
Mobutu Sese Seko	Zaire	1965 to 1997	$5.000
Sani Abacha	Nigeria	1993 to 1998	$2.000	$5.000
Slobodan Milosevic	Serbia/Yugoslavia	1989 to 2000	$1.000
Alberto Fujimori	Peru	1990 to 2000	$0.600
Jean-Claude Duvalier	Haiti	1971 to 1986	$0.300	$0.800
Pavlo Lazarenko	Ukraine	1996 to 1997	$0.114	$0.200
Arnoldo Aleman	Nicaragua	1997 to 2002	$0.100
Joseph Estrada	Philippines	1998 to 2001	$0.078	$0.080

Some of this wealth was acquired in a few short years.  Some of it was acquired over decades.  Some of it was stolen from relatively small economies.

Given all these factors, which leader stole the most as a percentage share of their respective economies?

The answers might surprise you.  For instance, Suharto of Indonesia, who is estimated to have plundered as much as US$35 billion, is fourth on this list, stealing just 0.56% to 1.32% of his nation's economy.  Mobutu Sese Seko of Zaire (now the Democratic Republic of Congo), who stole US$ 5 billion over 32 years, stole the most from his country's economy: an astounding 10.49%, more than three times the second most corrupt leader: Sani Abacha of Nigeria, who stole as much as 3.35% of his nation's GDP.

And Marcos?  Marcos, who ranked number two in terms of absolute amount plundered, was demoted to number three, stealing anywhere from 1.20% to 2.39% of the Philippine economy during his time as President.  Our beloved Erap still ranks as #10, stealing 0.03% of the Philippine economy from mid 1998 to early 2001.

Marcos Plunder as a Share of the Philippine Economy

From the time Marcos became President of the Philippines on December 30, 1965 till the time he fled the country on February 25, 1986, the Philippine economy had a cumulative nominal GDP of US$ 418.311 billion.

If Marcos stole US$ 5 billion, then Marcos stole 1.20% from the country's total output.

If Marcos stole US$ 10 billion, then Marcos stole roughly 2.4% from everything that was produced by the Philippine economy during his years in office.

There are also strong indications that Marcos did much of his stealing after the declaration of Martial Law because, as everyone knows, "absolute power corrupts absolutely."

If this is so, then Marcos stole a bigger share from a slightly smaller pie: US$ 361.530 billion in cumulative GDP from 1973 to 1985.

If he stole US$ 5 billion, then Marcos stole 1.38% of the nation's economy after 1972.

If he stole $10 billion, then he stole as much as 2.77% of the entire Philippine economy during the 13 to 14 years after the declaration of Martial Law.

Marcos Plunder as a Share of Philippine Government Spending

During the Marcos years, the Philippine government racked up at least US$ 40.648 billion in general government consumption expenditures.  In other words, it spent at least US$ 40.648 billion from 1966 to 1985.

If Marcos plundered US$ 5 billion, then this represents 12.30% of all government consumption expenditures during this period.

If Marcos plundered US$10 billion, then he stole almost 25% of total Philippine government spending.

If much of the stealing was done after the declaration of Martial Law, then if he stole US$ 5 billion, he stole 14.39% of all Philippine government consumption expenditures of US$ 34.736 billion.

If he stole US$ 10 billion, then he stole almost a gargantuan 29% of Philippine government spending!

So Marcos' well-deserved reputation as Mr. Ten Percent should really be Mr. Thirty Percent!


How much would Marcos be stealing if he were in power today?

When Marcos left in 1986, the Philippines was a US$ 33.09 billion economy.  As of 2013, the Philippines is so much bigger - a US$ 272.07 billion economy.  In 1986, Philippine government consumption expenditures amounted to just US$ 2.88 billion.  Today, it amounts to US$ 30.37 billion.

In 1986, Nominal GDP per capita in the Philippines was US$ 535.  Today, it's multiples of that: US$ 2,765.

So if Marcos were alive today or if his family were in power today, the Marcoses would be stealing anywhere from 1.20% to 2.77% of the Philippine economy or 12.30% to 28.79% of total Philippine government spending.

If Marcos were to continue stealing from the Philippine economy on the same rapacious scale during his regime, he would be stealing anywhere from a low of US$ 3.3 billion to as high as US $7.5 billion from the Filipino people every year!

If the Marcoses were to incorporate, their annual plunder would easily put them in the top six Philippine corporations in terms of 2013 revenues.  At the high end of US$ 7.5 billion, the Marcoses would rank a distant third to San Miguel Corporation's Top Frontier Investment Holdings (with revenues of US$ 16.7 billion) and ahead of Meralco (with revenues of US$ 7.0 billion).  At the low end of US$ 3.3 billion, they would rank below PLDT (with revenues of US$ 4.0 billion) and slightly above Ayala Corporation (with revenues of US$ 3.2 billion).

In 2013, the Philippine government had general government consumption expenditures of Php 1.282 trillion or US$ 30.368 billion.  In other words, government spending amounted to 11.16% of the entire Philippine economy.  Government spending's share of the economy has climbed significantly since Marcos fled the Philippines in 1986.  During the Marcos years, government spending comprised 9.72% of the economy.  In the post Marcos years (1986 to 2013), government spending has averaged 10.46%.

If Marcos plunders the government treasury at the same rapacious scale during his regime,  his "take" from government spending would be significantly higher than his "take" from plundering the Philippine economy, simply because government spending occupies a larger proportion of the economy now than during his time.

In Peso terms, their annual plunder would amount to Php 157.74 billion (US$ 3.74 billion) to Php 369.21 billion (US $ 8.74 billion).  In contrast, total annual expenditures from the scandalous Disbursement Acceleration Program (DAP) amounts to only Php 136.75 billion.  The equally scandalous Priority Development Assistance Program (PDAF) amounts to only Php 10.21 billion.  The amounts for DAP and PDAF assume that everything from these current government programs are stolen, which does not seem to be the case, so the actual amount plundered through these programs could be much lower.

How much would the Marcoses be stealing from every Filipino today?  Anywhere from Php 1,403.51 (US$ 33.24) to Php 3,239.78  (US$ 76.72) for every Filipino man, woman, and child every year.  DAP annual disbursements only amount to Php 1,389.83 (US$ 32.91) per person per year.  PDAF annual disbursements are much, much lower than that: only Php 103.76 (US$ 2.46) per person per year.

Data Sources: www.worldbank.org, www.bsp.gov.ph

On the Collective Amnesia of the Philippine Electorate Regarding the Marcos Dictatorship

Filipinos of a certain age have been lamenting about the collective amnesia of the Filipino Voter regarding the Marcos years, particularly now that the Marcoses aim to recapture the Presidency in 2016.  This is one such lamentation.

Why is this so?

Some have attributed it to the lack of education. For instance, there are reports that the current textbooks on Philippine History that are in use throughout the nation's public schools are hopelessly outdated, containing almost zero information on Martial Law and the Marcos Dictatorship.

Others have attributed it to the social media onslaught of the Marcos family, wherein they have scrubbed popular online repositories of information of any meaningful information regarding the Marcos Dictatorship.

All this maybe true.

But another factor is age.

For instance, many baby boomers may have heard what it was like during World War II or even World War I from countless books, movies, newspaper articles, and personal stories from parents and grandparents.  But all this imparted knowledge just resides in their brains, somewhat cold, distant, and abstract.  In other words, baby boomers have no living memory of those events.  They have not lived in those times at all.  And that could make all the difference.

So the same could be true of the Filipino voter.

Population Distribution

As of 2013, the Philippine population was estimated to number around 98.4 million people.  So far, population growth has averaged 1.7% a year.  By 2016, the total population could number 103.5 million people.

The Philippine population skews very young.  The Philippine Statistics Authority placed the median age at just 23.4 years as of 2010.  That means half the population is younger than 23.4 years old.  This, believe it or not, represents an increase over the year 2000, when the median age was only 21.3 years.  Despite this increase in median age, we still have one of the lowest median ages in the ASEAN region. Only Lao PDR has a lower median age - 22.0 years old.

Another way to look at it is through the Philippine Population Pyramid, again courtesy of the Philippine Statistics Authority.

Projected Philippine Population Distribution

Based on projected population distributions from the 2012 World Population Prospects, a publication of the Population Division, Department of Economic and Social Affairs, United Nations, the total population will number 101.8 million people by 2015.

Around 43.60% of the population, or 44.4 million people will be younger than 20 years old.  Around 57.4 million people or 56.40% will be 20 years or older.

Philippine Voting Age Population By 2016

Conservatively, this means that 57.4 million people will be eligible to vote by 2016.  This is a conservative estimate is because the actual minimum voting age requirement is 18 years old and not 20.  Moreovoer, the projections are for the year 2015 and not 2016, when the total population is expected to grow by another 1.7%

Again, the voting age population will skew to the young side:

Based on this data, by 2016, at least 16.67% of the voters will have no living memory of the Cory Administration, 31.74% will have no living memory of EDSA I, 44.68% will have no living memory of Martial Law.  Moreover, 65.78% of the voters will have no living memory of the declaration of Martial Law, and a stunning 74.47% of the voting population will have no living memory of what life was like before Marcos assumed the Presidency in 1965!

Singapore, Malaysia, and Thailand Post Flat to Declining Housing Prices, Can the Philippines and Indonesia be Not Far Behind?

Singapore


Singapore's home prices slid for a third straight quarter, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  86% above their year end 2004 levels.

Malaysia

Neighboring Malaysia's House Price Index actually topped out at 141.25% in the second quarter of 2012 and has posted a 3.37% decline since then to 136.48% as of the fourth quarter of 2013.  Home prices are just 36.48% above their year end 2004 levels.

Thailand


In Thailand, which has been experiencing political turmoil for some time, home prices have remained essentially flat since the end of 2004. Home Prices ended 2013 with the index at 100.54%, just 054% higher than the end of 2004, but showing a substantial recovery since the recent low of 74.08% posted in the third quarter of 2009.

Indonesia

Meanwhile in Indonesia, home prices have showed no signs of slowing down their upward trajectory.  In fact, prices seem to have gone parabolic, climbing 4.63% in the last quarter of 2013, from a base of 121.49% as of the third quarter of 2013 to 127.11% as of year end 2013.  Since 2006, home prices have risen 36.48%

Philippines

Philippine house price index stands at 196.65% at year end 2013, 96.65% above their year-end 2004 levels.  Philippine home prices have posted the largest 10 year gains among all the countries considered in this blog post.  Like Indonesia, home prices have so far no signs of slowing down their upward trajectory for the foreseeable future.   The question is, is this momentum sustainable?  Or will the Philippines and Indonesia follow its ASEAN neighbors, Singapore, Malaysia, and Thailand, in exhibiting plateauing or declining house prices?  That remains to be seen.