Can Italy Be Far Behind?

Why Read:  Because what is going on in the Eurozone impacts, and will continue to some perhaps significant degree impact, everywhere else.

Featured Articles:  Two articles, the second summarizing the first, reported that on April 17 The International Monetary Fund released its 2012/2013 forecast for Italy.  That forecast is reported as targeting:

• Italy’s deficit as a % of output at 2.4% and 1.5% in 2012 and 2013 respectively, as contrasted with the Italian Government’s current forecasts of 1.6% in 2012 and a balanced budget in 2013;
• Italy’s public debt, said to be 2^nd highest to Greece in the Eurozone, at 123.4% in 2012, and 123.8% in 2013;
• Italy’s economy to shrink by 1.8% in 2012, and by a further 0.3% in 2013;
• Italy’s ‘primary balance’, being the budget balance excluding debt service costs, at +3.0% and +4% of GDP in 2012 and 2013 respectively, as contrasted to higher recent Italian Government targets of 3.4% and 4.9% respectively; and,
• Italy’s ‘tax burden’, being fiscal revenues expressed as a % of GDP, at 48.3% and 49.0% of GDP in 2012 and 2013 respectively, as contrasted to lower the recent Italian Government target of 43.8% in both years.

My Comments:  Only about three months ago, shortly before Greece Sovereign Debt was restructured, I began to warn about Spain as the next Eurozone country to focus on.  That has turned out to be ‘all the news’, and reports abound every day on Spain’s:

• Sovereign Debt:GDP ratios;
• current federal deficits;
• unemployment rate (latest reported around 23%) and youth unemployment rate (latest reported around 51%);
• (this week’s) rising bond interest rates;
• required further European Central Bank and IMF funding; and on
• fear of Spain-related contagion issues.

Measured by GDP, Spain is the fourth largest Eurozone economy, the fifth largest European economy when the United Kingdom is considered, and the world’s twelfth largest economy.

And so we come to Italy.  Italy (IMF 2011 statistics from Wikipedia) is:

• the third largest Eurozone economy, with only Germany and France being larger;
• the fourth largest European economy when the United Kingdom is considered;
• the world’s eighth largest economy; and,
• measured by GDP, boasts an economy that measured by GDP is about 50% larger than Spain’s.

Neither article reports the current Italian unemployment rates, which in February 2012 is said to be 9.3%, with a youth unemployment rate of 31.9%.

The cited articles do not include commentary on the IMF’s Eurozone and World Macro-economic assumptions that must underlie the IMF’s 2012 and 2013 forecasts for Italy’s economy.  Perhaps importantly, the IMF is reported as having recently upgraded its World and U.S. 2012 economic growth targets from 3.3% to 3.5%, and from 1.8% to 2.1% – while maintaining a +8% 2012 economic growth rate for China.

Forecasting much of anything is extremely tenuous in the current world economic climate.  This is true for forecasts are generated by the IMF, the U.S. Federal Reserve, the ‘economist on the street’, or anyone else.  One has only to reflect on recent U.S. Federal Reserve forecasts for confirmation.

Accordingly, given ongoing world economic uncertainty and volatility, I suggest you begin to pay very careful attention to Italy going forward, but do so without losing sight of what is transpiring in Spain.

Italy to Miss Budget Deficit Targets, Debt to Rise: IMF

Source:  CNBC, (from Reuters), April 17, 2012

Reading time:  3 minutes, thinking time longer

As We Assured Clients Two Years Ago, Italy’s Riding the Broken Promise Express To Restructuring

Source:  BoomBustBlog, Reggie Middleton, April 17, 2012

Reading time:  4 minutes

Italy’s Jobless Rate Increases to Highest Since 2001

Source:  Bloomberg, Chiara Vasarri and Lornzo Totaro, April 2, 2012

Reading time:  3 minutes

Gold needs to re-establish safe have appeal in the short term

Content includes:  IMF growth forecasts

Source:  Commodity Online, April 18, 2012

Reading time:  4 minutes

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

Europe’s Economic Honeymoon Is Over: Nouriel Roubini

Overview:  Discusses emerging markets growth and other copper price supply/demand factors

Source:  Economy Watch, April 17, 2012

Reading Time:  4 minutes

Spanish banks’ bad loans rise to highest level since 1994

Overview:  Discusses potential looming Spanish bank defaults

Source:  The Telegraph (from Reuters), April 18, 2012

Reading Time:  2 minutes

Today’s Unabridged E-mail includes three other ‘Speak For Themselves’ Headlines dealing with the following topics:

• Canadian mine permitting change;
• UK Central Bank and inflation;
• IMF on Europe; and,
• America and Debt Wall.

Today’s ‘How Crazy Is This’ World Headlines

Why Read These Headlines:  To Save Time, Stay Informed, and Be Concerned.

White House renews veto threat over Keystone XL

Overview:  Report on latest White House Position

Source:  The Financial Post (from Reuters, Roberta Rampton), April 18, 2012

Reading time:  3 minutes

Indonesia Country Risk

Why Read:  To keep up to date with Country Risk developments.

Featured Article:  An April 18 article focuses on Indonesian Country Risk in the contexts of:

• a 25% export tax on copper, other base metals and coal that is expected to be introduced in June; and,
• a law introduced in March that will force divestiture ….. (continue reading)    

Commentary reading time 3 minutes.

Referenced article(s) reading time 10 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!
• An Accident Waiting to Happen, or ‘Ever Closer To The Cliff’!
• After Spain, is Italy Next?
• Spain and Spanish Bank Dilemma!

Social Unrest – World Food Prices!

Why Read This Article:  World and country specific food supply and prices need to be a macro-economic investor focus.

Featured Article:  An April 5 article reports that according to the United Nations Food Agency global food prices have risen in each of the first three months of 2012.  The article also:

• says record high staple food prices were a main factor contributing to the so-called Arab Spring uprisings in 2011;
• quotes from one expert that “Rising food prices are placing fresh pressure on policymakers globally at a time when many governments just have less money”;
• says people in North Africa, especially in Egypt and Tunasia, “can be expected to take to the streets to demand social justice”; and,
• quotes a commodity analysis as saying “The food price index has an extremely high correlation to oil prices and with oil prices up it’s going to be difficult for food prices not to follow suit”.

My Comments:  Social unrest was a big deal in many countries in 2011.  It is likely to be a bigger deal going forward.  Aside from humanitarian issues, which cannot be seen as unimportant, lack of food availability and higher food prices either:

• in combination in countries where food availability is an issue; or,
• in the case of food prices where food is readily available

from an investor and financial markets point of view have to include consideration of:

• increased risk in the context of potential, and in the end actual, country specific societal unrest;
• increased inflation risk in all countries, but importantly in the developed countries whose Main Street populations are already struggling with high unemployment rates, tightening credit and spending abilities, and reducing standards of living – none of which are making those populaces happy;
• their indirect affect on consumer confidence, and negative impact on consumer spending on durable goods.  This is because what incremental amounts consumers spend on food is not available to be spent elsewhere;
• their impact on income tax revenues of all countries.  Sustained and growing income tax revenues are fundamental to the economic well-being of all countries.  This is particularly so when the Sovereign Debt of many developing and developed countries is already at unprecedented levels; and,
• in a general context, the importance of increasingly being aware of, focusing on, and continuously monitoring and assessing ‘Country Risk’ in the context of one’s investment and trading strategies and one’s individual investments and trades.

These are fundamentally important investment strategy, trading strategy, and investment and trading execution issues. These things should be ‘top of mind’ for everyone who invests in, speculates in, or trades in, the financial markets.

World food price rise further, raising fears of unrest.

Source:  Reuters, Svetlana Kovalyova and Veronica Brown, April 5, 2012. Reading time:  4 minutes.

Today’s ‘ Speak For Themselves’ Headlines

Why Read These Headlines:  They have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.   Reading them, and the underlying articles, will keep you better informed and save you time.

Chinese Inflation Heats Up On High Food Prices.

• Overview:  Something to read, think about, and keep on your radar screen.
• Important Statements:  “The World Bank and International Monetary Fund have warned China and other developing countries to prepare for a possible global slowdown this year.
• Source: Business Insider, April 8, 2012.
• Reading time:  2 minutes.

JPM Trader Bruno Iksil Driving Derivatives Markets with ‘Massive Positions’ and ‘Excess Capital’.

• Overview:  Must read and watch article/video on credit indices derivatives markets.
• Source:  Jesse’s Café Americain Blog, with attached Bloomberg video, April 9, 2012.
• Reading and Viewing time:  2 minutes and 5 minutes respectively.

Today’s Unabridged E-mail includes three other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• European Debt Crisis;
• Bank of Japan easing; and,
• Chindia growth rates.

Greece – Grasping At Straws!

Why Read This:  To get a sense of the Greek Government thought process in what has to be for ‘desperate times’ Greece.

Featured Article:  An April 5 article reports that the Greek Prime Minister said on April 3 that Greece will ‘accelerate the development of a 20 billion euro (U.S.$27 billion) solar energy project as a national priority to aid that country’s economic recovery.  He apparently said ….. (continue reading)         

Commentary reading time 2 minutes.

Referenced article(s) reading time 2 minutes.

Country Risk – Zimbabwe?

Why Read This:  Because it is an example of extreme Country Risk, and emphasizes the importance of country risk assessment by investors, speculators, and traders.

Featured Article:  An April 5 article reports that Zimbabwe’s government said on that day that Zimbabwe now considered it owned 51% of the shares of all mining companies owned by foreigners.  The article ….. (continue reading)       

Commentary reading time 1 minute.

Referenced article(s) reading time 3 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!
• An Accident Waiting to Happen, or ‘Ever Closer To The Cliff’!
• After Spain, is Italy Next?
• Spain and Spanish Bank Dilemma!

Country Risk Must Read!

Why Read This:  Because continuous focus on, and monitoring, Country Risk is very important to all financial market participants.

Featured Article:  An April 3, 2012 article begins by reiterating that risk assessment of companies in the resources sectors are “some of the most unpredictable out there”.  It then focuses on ‘Country Risk’, as one category of risk under which a number of ‘Company Specific Risks’ fall.   The article makes states:

“For the investor, the best way to approach country risk is with a truckload of knowledge, a boatload of patience, and a management team with proven risk management skills. If you have decided the potential reward is worth the risk, go for it. But prepare an exit strategy too, because when it comes to country risk situations change very quickly and problems can drag on for decades.”

The article goes on to discuss ‘country risk’ as it has specifically impacted select oil and gas companies in Nigeria, Ecuador and Brazil.  Near the end, the author says:

“For investors, the most important message is: never downplay country risk. Even stable, resource-friendly, First-World countries have made abrupt changes to resource laws that threw companies under the bus.”

The article ends by saying (my words) that:

• each country has its own specific ‘country risk’ related elements;
• every company has its own ‘country risk’-management methodologies; and,
• investors need to understand their own individual risk tolerances to participate in the resource sectors in the context of ‘Country Risk’.

My Comments: While the article focuses on energy companies, it is equally applicable to mining exploration, development and producing companies.  Further, had the author wanted to write a book on the subject instead of an article, he could have expanded what he wrote to deal with specific ‘Country Risk’ events that have transpired in Argentina, Peru, Mali (ongoing as this is written) and elsewhere over the course of the past 12 months.

As I have said frequently in these Commentaries, Country Risk currently is a ‘big deal’, and is going to become an increasingly ‘Bigger Deal’ going forward.  No investor, speculator or trader should participate in the Resource Sectors without clearly focusing on ‘Country Risk Issues and Prospects’.  The referenced article is well worth reading, and you ought to do that.

Read:  Never Underestimate Country Risk.  Source:  Casey Research, Marin Katusa, April 3, 2012.  Reading time 5 minutes.

Today’s ‘Speak For Themselves’ Headlines

Why Read These Headlines:  They have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.   Reading them, and the underlying articles, will keep you better informed and save you time.

Illinois Admits $83 Billion in Pension Liabilities, $54 Billion in Retiree Health Liabilities, $9 Billion in Current Unpaid Bills; Who is to Blame? 

• Overview: This article emphasizes U.S. State Government fiscal problems.
• Source:  Mish’s Global Economic Trend Anslysis, Mike Shedlock, April 8, 2012.
• Reading time 2 minutes.

It’s All About Jobs.

• Overview:  A detailed look at the U.S. Jobs picture, with charts.
• Source:  Gold Speculator Blog (from John Mauldin’s ‘Thoughts from the Frontline’), April 8, 2012.
• Reading time 12 minutes.

Today’s Unabridged E-mail includes three other ‘Speak For Themselves’ Headlines dealing with the following topics:

• Gold;
• Key Economic News This Week; and,
• U.S. – Iran Negotiations.

Important – Service Jobs Migration?

Why Read This:  Because the Service Sectors are becoming ever more important in developed countries.

Featured Article:  An April 8 article suggests that service industries are contributing “to overall high growth” in developing countries.  Its authors say that in developing ….. (continue reading)         

Commentary reading time 3 minutes.  Referenced article(s) reading time 5 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!
• An Accident Waiting to Happen, or ‘Ever Closer To The Cliff’!
• After Spain, is Italy Next?
• Spain and Spanish Bank Dilemma!

Worrisome – Ben Bernanke Seems Uncertain!

Why Read This:  The well being of the U.S. Labor market is fundamental to U.S. economic recovery, and it is important to keep abreast of developments and opinions related to both.

Featured Article:  On Monday Fed Chair Bernanke spoke to ‘Recent Developments in the (U.S.) Labor Market’ at the National Association for Business Economics Annual Conference.  The U.S. Labor Market and Unemployment Rate are critically important issues in the U.S. ‘economic recovery or reversion to recession’ debate.  In a nutshell, he said:

• there isn’t certainty the recent reported improvements in the U.S. labor market will be sustained;
• real (inflation excluded) economic growth will be necessary for the U.S. unemployment rate to drop to acceptable levels – this in circumstances where there has been a disconnect since 2008 between conventional thinking with respect to the relationship between the U.S. real growth rate (or lack thereof) and changes in the U.S. unemployment rate;
• there is uncertainty over the real unemployment rate because of the manner in which it is calculated – that is, it excludes persons who give up on finding work;
• because the monthly increase (or decrease) in payroll employment is a net change, in circumstances where of late a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hirings, further survey results may not report the same growth that recent jobs reports have suggested;
• he ‘argues’ that the loss in U.S. jobs is cyclical and not structural (i.e. where structural unemployment means there is a mis-match of jobs and worker training or worker physical location); and,
• he believes cyclical unemployment can be addressed (at least in part) by accommodative policies (read ‘quantitative easing’), but that if there are significant structural unemployment problems they will be more difficult to deal with.  Mr. Bernanke does not acknowledge structural unemployment exists in the United States, but simply seems not to have an opinion on this.

My Comments:  I read Mr. Bernanke’s speech carefully.  It did not leave me with warm and fuzzy feelings.  What it left me with were the following views:

• Mr. Bernanke doesn’t have a very good handle on what specifically is going on in the U.S. labor market, and is uncertain as to what and where the U.S. unemployment rate prospectively is going to be.  Stated differently, he is far from being as bullish on this topic as President Obama has been in his public speeches of late;
• confirmation that Mr. Bernanke is a theoretician dealing with large practical problems in circumstances where the theories he espouses were developed when world countries were far less inter-dependent than they are in today’s globalized world; and,
• as Fed Chair he is dealing with a circular economic problem.  Without growth generally, and specifically growth in consumer demand for American made goods:
• the U.S. consumer remains dependent on low cost manufactured imports,
• the U.S. net trade deficit continues at high monthly levels, and
• U.S. unemployment becomes ever more structural as its work force trained for specific manufacturing tasks that become scarcer are out of work longer, and become ever less employable.

That scenario has to be a recipe for disaster.

Mr. Bernanke subsequently was interviewed by Diane Sawyer on the Tuesday CBS Newscast.  I watched that interview.  What was most noticeable to me was not what Mr. Bernanke said, but how nervous and worn-down he looked.  If his body language is an indicator, he currently is a man in arguably the world’s most important financial job who finds himself under tremendous pressure – and sitting on ‘big pins and gigantic needles’ where what he is dealing with is a puzzle too complex for he or anyone else to unravel and set right.

It took me about 12 minutes to read Mr. Bernanke’s March 26 speech on U.S. Labor Markets.  The speech is very important, not so much for what it says, but for what it doesn’t say.  I recommend you take the time to read it.

Read: Recent Developments in the Labor Market. Source: The U.S. Federal Reserve, March 26, 2012. Reading time 12 minutes.

Mining – Where Not To Invest?

Why Read This: This commentary will help you identify one Advisory Group’s ranking of Country Risk in 25 countries – where Country Risk is important to all business sectors, but in many respects particularly so in the mining and oil & gas sectors.

Featured Article: The Behre Dolbear Group recently has published its annual compartive country risk assessesment of twenty-five countries that host….. (continue reading)

Commentary reading time 5 minutes.  Referenced article(s) reading time 27 minutes. It is suggested you pass this e-mail or other notice of the Behre Dolbear Group Report on to friends, acquaintances and colleagues interested the Resource Sectors, and to your Investment Advisor.

Some Agree With Me On Spain!

Why Read This: Economic Uncertainty is far from over in the Eurozone. Spain is important to that uncertainty and should be on your radar screen. 

Featured Articles: Two articles, one dated March 16 and one dated March 17, speak directly to Spain’s current economic circumstances.  Between them, these articles cite ….. (continue reading)                                     

Commentary reading time 4 minutes, thinking time much longer.  Referenced article(s) reading time 12 minutes. It is suggested you discuss the contents of this commentary with your Investment Advisor.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!
• An Accident Waiting to Happen, or ‘Ever Closer To The Cliff’!
• After Spain, is Italy Next?
• Spain and Spanish Bank Dilemma!