An inflation tends to demoralize those who gain by it as well as those who lose by it. They become used to “unearned increment.” They want to hold on to their relative gains. Those who have made money from speculation prefer to continue this way of making money to the former method of working for it…The trend in an inflation is toward less work and production, more speculation and gambling—Henry Hazlitt
In this issue:
The Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble
I. Why Our Prescient Warning? Seven Disturbing Parallels
II. One: Gaming at the Core
III. Two: Distortions: Market Dominance and Turnover
IV. Three: Post-Crisis Timing
V. Four: Inflation and the Illusion of Prosperity
VI. Five: Prohibition, the Satirical Theater of Morality and Potential Political Controversies
VII. Six: The South Sea Parallel
VIII. Seven: Bull Traps and Secular Cycles
IX. Conclusion: Bubble Cycles: The Rhyming of History
The Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble
From BW Resources to PLUS and BLOOM: The Anatomy of a Gaming Stock Market Bubble Reborn, 7 disturbing parallels
I. Why Our Prescient Warning? Seven Disturbing Parallels
At the peak of the euphoria surrounding the Philippine gambling bubble, I issued a subtle warning via tweet (x.com post): (Figure 1)
Figure 1
"Strange fascination with gaming bubbles. Has the Philippine financial community forgotten the BW Resources bubble, w/c soared in a bear market's 'bull-trap' phase & crashed in 1999, exposing unsustainability & 'manipulation?' Learn from history—recurring bubbles in market cycles"
Certainly, 2025 is not 1999. The economy, financial architecture, and technological landscape have evolved. The composition of the Phisix—now the PSEi 30—has changed. The circumstances behind the BW scandal were unique.
Despite the passage of time and evolution of market instruments, a troubling déjà vu grips the Philippine financial landscape. The current gaming bubble echoes the BW Resources scandal with unsettling fidelity—both in structure and in consequence.
Below are seven disturbing parallels that merit scrutiny, not dismissal.
II. One: Gaming at the Core
BW Resources began as an online bingo firm with a nationwide franchise. It was, fundamentally, a gaming enterprise.
Today’s speculative darlings—Digiplus Interactive Corporation [PSE: PLUS] and Bloomberry Resorts Corporation [PSE: BLOOM]—are likewise gaming firms, riding a digital demand boom.
Figure 2
PLUS has enjoyed a windfall: retail sales surged 181% (YOY) year-on-year in 2024, while net income growth vaulted 207%. In Q1 2025, net income soared 110% to Php 4.2 billion. (Figure 2, topmost window)
Riding on the coattails of PLUS, BLOOM—a relative newcomer to online gaming—launched its digital platform in April, coinciding with a sharp rally in its share price. The timing fueled market excitement, further amplifying speculative fervor toward the sector.
III. Two: Distortions: Market Dominance and Turnover
BW Resources once commanded a disproportionate share of market turnover. (Figure 2, middle graph)
At its peak, its market cap eclipsed stalwarts like San Miguel and Ayala Corporation (Hamlin, 2000).
In mid-June 2025, PLUS and BLOOM’s combined turnover reached over 20% of the mainboard. (Figure 2, lowest image)
As the bubble began to deflate, their aggregate volume still accounted for 16.9% of June’s total.
The collapse saw a further explosion in turnover: in June, PLUS plunged 48.15%, BLOOM fell 17.2%, and their combined turnover share spiked to 22.2%. PLUS alone captured 17.8% of weekly volume—33.3% on Friday alone! Astounding.
The stunning magnitude of PLUS's volume share—a firm which used to be on the sidelines—suggests that this represents a corporate-specific boom-bust episode driven not by savings but by leverage.
Remember that the banking system's credit portfolio stands at an all-time high, mostly powered by consumer credit.
The spike in volume as PLUS shares collapsed may indicate ‘margin calls’ or the selling of other PSE-listed shares to bolster collateral backing leveraged PLUS positions. This could explain the PSEi 30's 1.13% drop last Friday.
IV. Three: Post-Crisis Timing
Figure 3
BW Resources peaked and imploded in 1999, two years after the Asian Financial Crisis (AFC), when GDP contracted by 0.51% in 1998. (Figure 3, upper chart)
The current bubble climaxed four years after the pandemic-induced recession of 2020, when GDP shrank by 9.6%.
V. Four: Inflation and the Illusion of Prosperity
The BW Scandal was a product of easy money-fueled inflation.
Since peaking at 12.5% in 1994, the CPI headed downhill until the 9.4% spike in 1998, belatedly brought about by the AFC. The CPI dropped significantly to 6.1% in 1999 as the BW scandal unfolded.
Similarly, CPI rose from 3.9% in 2021 to 6% in 2023, then plummeted to 3.2% in 2024.
As the great economist Henry Hazlitt noted,
"A vital function of the free market is to penalize inefficiency and misjudgment and to reward efficiency and good judgment. By distorting economic calculations and creating illusory profits, inflation will destroy this function. Because nearly everybody will seem to prosper, there will be all sorts of maladjustments and investments in the wrong lines. Honest work and sound production will tend to give way to speculation and gambling. There will be a deterioration in the quality of goods and services and in the real standard of living" (Hazlitt, 1969). [bold added]
As Hazlitt warned, inflation distorts economic calculation, rewards speculation over production, and erodes real living standards. Despite disinflation, the purchasing power of the common tao continues to decline.
Elevated self-rated poverty and hunger suggest a deteriorating standard of living. (Figure 3, middle and lowest panes)
As a side note—and quite ironically—despite the falling rate of CPI, sentiment metrics such as self-rated poverty and hunger continue to trend upward, even in the face of recent declines. Consider this: the current environment operates under an easy money regime that has buoyed all-time highs in fiscal stimulus, near-record employment, unprecedented public debt, expanding bank credit, and systemic leverage. But what happens if this constellation of highs begins to unravel?
Many turn to gambling not for leisure, but as a desperate attempt to bridge income gaps, service debt, and or as a coping mechanism—a form of psychological escapism from personal financial straits.
In this prism, rising gaming revenues hardly represent economic progress, but rather a transfer from the vulnerable public to the house casino.
VI. Five: Prohibition, the Satirical Theater of Morality and Potential Political Controversies
The implosion of the BW Resources stock market bubble effectively opened a Pandora’s Box of political ramifications. It exposed systemic corruption, egregious stock market manipulation, and other conflicts of interest with connections reaching the highest echelons of power (Pascual and Lim, 2022).
Following the contemporary political assault on Philippine Offshore Gaming Operators (POGO), political evangelists have opportunistically piggybacked on this sentiment, advocating for increasingly vocal and deeper prohibitions anchored on the supposed social sanctity or righteousness of a total ban on digital gambling.
Yet the crackdown on POGOs appears entangled in deeper geopolitical currents—linked to Chinese interests under the previous administration and potentially reflecting the broader US–China hegemonic rivalry, made manifest through diverging diplomatic relations between alternating political regimes in the Philippines.
Crucially, in a populist climate framed by social-democratic ideals, the magnitude of state intervention often becomes a currency of political capital—the larger the crackdown, the louder its resonance among voters.
History repeats: the public once clamored to ban jueteng, which helped trigger People Power II and the ouster of President Joseph E. Estrada. Eventually, the state legalized it through STL under PCSO.
Wikipedia notes: "One of the suggested reasons for legalization was to eliminate repeated corruption scandals... It has been compared to the tribulations in the United States regarding their prohibition of alcohol."
Or rather, legalization signified the ‘nationalization’ of what was once a fragmented, decentralized, and implicitly local government (LGU) controlled shadow economy—effectively converting informal vice into formal state enterprise.
In the same vein, one might ask: what became of the Philippine drug war, "Operation Tokhang"?
Aside from the escalating calls for prohibition, will other political controversies emerge from this bubble bust?
If history is a reliable compass, financial distortions often leave behind trails of corruption, regulatory compromise, and partisan leverage. The unraveling may reveal ties between speculative fervor and institutional patronage—suggesting that what began as financial exuberance could metastasize into yet another political saga. When markets deflate, the silence seldom lasts.
Echoing the BW scandal, will malfeasance reemerge? As economic historian Charles Kindleberger once warned: "The propensity to swindle grows parallel with the propensity to speculate during a boom; the implosion of an asset price bubble always leads to the discovery of frauds and swindles" (Kindleberger & Aliber 2005)
VII. Six: The South Sea Parallel
Figure 4
While intense volume spikes amid a share collapse are associated with 'capitulation' or a theoretical ‘bottom,’ we harbor doubt that this is the case.
From our humble perspective, whether a bounce occurs or not, the Philippine gaming bubble may have likely been pricked.
PLUS’ chart, born of BSP’s easing cycle, evokes the South Sea Bubble of 1720—a spectacle of leverage, speculation, and political complicity. (Figure 4, upper and lower graphs)
The South Sea Bubble was a major financial crisis that shook Britain in 1720, driven by wild speculation in the South Sea Company. The company had been granted a monopoly on trade with Spanish South America and took on a central role in managing the national debt by converting the King’s personal debt into the nation’s debt. Investors were drawn in by promises of immense profits. The company fueled the frenzy by allowing shareholders to borrow against their own South Sea stock as collateral, encouraging dangerous levels of leverage. The bubble was also part of a broader shift toward modern finance, including the creation of paper money and the rise of institutions like the Bank of England, which was established in 1694 to help manage government borrowing and stabilize the financial system. When confidence collapsed, share prices crashed, collateral became worthless, and forced liquidations deepened the ruin. The episode exposed corruption at the highest levels of government and business, leading to political fallout and reforms in financial regulation. (Cwik, 2012)
Isaac Newton, emblematic of intellectual prowess, became entangled in the bubble. After initially profiting, he reinvested heavily—and ultimately went broke. It’s often said the experience prompted him to declare: "I can calculate the motions of the heavenly bodies, but not the madness of people." (chart from Dr. Marc Faber)
Ironically, Newton’s third law of motion—"for every action, there is an equal and opposite reaction"—finds metaphorical resonance here: South Sea shares returned to their starting point, as did the illusions of prosperity they once inspired.
VIII. Seven: Bull Traps and Secular Cycles
Figure 5
The BW scandal unfolded and climaxed in 1999 during a "bull trap" in a secular bear market. Once exposed, the market plunged until its 2002 trough—where the next bull cycle began. (Figure 5, upper chart)
Today, the bear market persists. A “bull trap” rally is being engineered through easy money, fiscal stimulus, market interventions, and statistical optics—all framed within a carefully curated Overton Window, reminiscent of the ‘easing cycle’ powered "bull trap" of Q3 2024, as exhibited by prevailing media headlines. (links here, here and here) (Figure 5, lower diagram, Figure 6, media images)
Figure 6
IX. Conclusion: Bubble Cycles: The Rhyming of History
The bursting of the Philippine gaming bubble represents more than a mere market correction—it embodies the cyclical nature of speculative excess that has plagued financial markets throughout history.
The parallels between today's gaming bubble and the BW Resources scandal of 1999 are symptomatic of deeper structural patterns in market psychology, monetary policy and political misdeeds and imbroglios.
As Mark Twain allegedly observed, "History doesn't repeat itself, but it often rhymes." Beneath the veneer of technological advancement and regulatory sophistication, the fundamental drivers of speculation—easy money, leverage, political interventions and human greed—remain unchanged.
For those who understand the pattern, the current gaming bubble's burst may indeed signal the end of the artificial "bull trap" and the resumption of the secular bear market that never truly ended.
In the end, the house always wins—not just in gaming, but in the grander casino of speculative markets where bubbles, once formed, must eventually burst.
Yet, the silence after bubbles burst is rarely permanent. It’s often the prelude to scapegoating, reform, or reinvention—sometimes all three.
___
References
Henry Hazlitt, Comments on Inflation, May 1960 Fee.org
Kevin Hamlin, Confidence Game, Institutional Investor, August 1, 2000
CLARENCE PASCUAL AND JOSEPH LIM Corruption and Weak Markets: The BW Resources Stock Market Scam, March 2022 UP Center for Integrative and Development Studies, cids.up.edu. ph
Henry Hazlitt, Man vs. The Welfare State p. 133 Arlington House, 1969, Mises.org
Wikipedia, Jueteng
Kindleberger, Charles P., and Robert Z. Aliber. Manias, Panics, and Crashes: A History of Financial Crises. 5th ed., Palgrave Macmillan, 2005. Chapter 9.
Paul F. Cwik, The South Sea Bubble, April 3, 2012, Mises.org
