Tuesday, July 3, 2012

Marc Faber: Germany Should Have Left The Euro

On Bloomberg:

Remember: nothing has been fixed...

“If you put one or 100 sick banks in a union, it does not change the fact that they're sick. In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher. I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.”

“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”

“Yes. In Portugal, Spain, Italy, and France, the markets are either at the lows of March 2009, or lower. Along with bad companies and the banks, there are also reasonably good companies. Stellar companies, but they have been dragged down. I see value in equities, regardless of whether the eurozone stays or is abandoned.”

 “anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%...I am not buying banks, but maybe they could rally. I am just not buying them because I think there will be a lot of equity dilution and recapitalization. I’m not that keen on banks.”

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Tuesday, June 26, 2012

28 Banks Downgraded, Yields Double

It's not raining, it's pouring in Europe. This was all expected, in spite of the flowery stock market on this first half of the year,

Moody's downgraded 28 Spanish banks yesterday, just when Spain formally requested loans to bail out its banking sector. Moody's said the downgrades were driven by the Spanish government's "reduced creditworthiness", which impacts its ability to bail out the country's banks.

They also said that the banks will sustain further losses in Spain's moribund real estate market.

The auction of Spanish bills resulted in yields that were more than double the previous auction.

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Friday, June 22, 2012

Big Bad Banks Downgraded

Yesterday Moody's downgraded 15 banks by one to three notches to reflect "the risk of losses they face from volatile capital markets activities".

Banks of course criticized the move as backward looking.

Morgan Stanley had its long-term debt rating lowered by two notches. The downgrade left Morgan Stanley more highly rated than Bank of America Corp and Citigroup Inc., but a step below Goldman Sachs Group.

Barclays PLC, BNP Paribas SA, Royal Bank of Canada, Citigroup, Goldman Sachs Group Inc, JPMorgan Chase & Co., Credit Agricole SA, and Deutsche Bank AG were also cut two nothces.

HSBC Holdings plc, Bank of America, Royal Bank of Scotland Group plc and Societe Generale SA were cut by one notch.

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Thursday, June 21, 2012

Euro Bailouts: A Giant Ponzi Scheme; At the End of the Day The Whole Thing is Going Bust

I have been saying this for years. These bailouts don't do anything to fix the underlying causes, it's just can-kicking and a Ponzi scheme.

"The Whole Thing is a Giant Ponzi Scheme".

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Wednesday, June 20, 2012

European Bailout Drawing From From ESM, What ESM?

These events in Europe are not going away, they simply can't until the real issues are dealt with. How is lending more money going to solve anything?

From Phil Davis today:

 "From what we know, the eurozone's leaders aim to deploy the European Stability Mechanism (ESM) to cap borrowing costs for Spain and Italy by purchasing sovereign bonds on the open market.  Unfortunately, the ESM fund does not yet exist. It has not been ratified by Germany and Italy. When it does come into being, it won't have much money.  It has a theoretical limit of €500bn — a nice wish — but its paid up capital will start at just €22bn.

Britain's George Osborne cautioned against exuberance. "One thing we have learnt is: don't expect a single summit to solve the eurozone's problems, otherwise you are going to be disappointed. The eurozone is inching towards solutions."

They are promising, yet again, to fix the problem.

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Monday, June 11, 2012

The Great Bailout Dellusions: Gone faster and Faster; Spanish Bank Bailout Turns Sour

The markets jumped at the open, but The Wall Street sums it up:

Bailouts have been great delusions, or illusions, but their effects are dissipating faster and faster. As if a bailouts would fix anything!

Spanish bond market has been very unimpressed: Spanish 10 year bonds fell all day long, closing with yields up 30 basis points from Friday's close, to 6.5%.

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Thursday, June 7, 2012

Like A Broken Record: Spain Downgraded Again, Near Junk

This looks like broken record, well, that's because they have so many countries in bad shape over there. Fitch downgraded Spain's sovereign debt rating not by one but by three notches today, and warned that the nation is at risk of being downgraded into junk bond status.

The nation's debt rating was cut from "A" all the way to "BBB," the lowest rating that is considered investment grade, with a negative outlook.

"Fitch pointed to the estimated cost of a Spanish bank bailout, which it said is likely to cost between €60 billion to €100 billion, as well as a prolonged recession that Fitch now expects to run throughout 2013.
"Spain's high level of foreign indebtedness has rendered it especially vulnerable to contagion from the ongoing crisis in Greece," the agency said in the note. "The much reduced financing flexibility of the Spanish government is constraining its ability to intervene decisively in the restructuring of the banking sector and has increased the likelihood of external financial support."

The firm said that part of the reason for the downgrade was "policy missteps at the European level that in Fitch's opinion have aggravated the economic and financial challenges facing Spain.
"The absence of a credible vision of a reformed [eurozone] and financial 'firewall' has rendered Spain and other so-called peripheral nations vulnerable to capital flight and undercut their access to affordable fiscal funding," said the report.

Fitch said Spain is helped by a relatively high value-added and diverse economy, one that is competitive enough that it might have a trade surplus this year". (CNN)

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Friday, June 1, 2012

Investing in 2012: 6 Months Later... Back to Square One

Enter this on Google Finance: http://www.google.com/finance?q=INDEXSP:.INX and add INDEXDJX:.DJI as comparison.

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Eurozone Unemployment Hits All-Time High

The bizarre recent market optimism has gone down the drain  today.  On top the dreadful U.S. employment numbers, the eurozone's unemployment rate reached the highest level since the Euro was created 13 years ago.

The rate has risen to 11% in April. Employers cut 110,000 jobs.

In the larger 27-nation area that makes up the European Union the rate also rose to 10.3% in April, the highest EU unemployment rate on records that go back to 2000.

Staggering Figures. There were 24.7 million unemployed in the EU in April, 17.4 million in the eurozone.

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Unemployment Ticks Higher Again Sinking Silly Markets

Jobs creation abruptly hit a stop in May, with the economy adding just 69,000 new jobs. Unemployment rate climbed to 8.2%,  rising the first time in nearly a year. 

The Bureau of Labor Statistics reported that job creation missed economist estimates for 158,000 new positions (where did they get that from?).

The actual figures may be much worse as labor force participation remains near 30-year lows though incrementally better than last month, rising to 63.8%.

The number unemployed for 27 weeks or more jumped from 5.1 million to 5.4 million. The average duration of unemployment moved from 39.1 weeks to 39.7 weeks.

All bad news, not really unexpected, but the silly markets react negatively.

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Wednesday, May 30, 2012

Euro Hits Near 2-Year Low on Spain Troubles

The euro fell today to it lowest level in 23 months against the U.S. Dollar.

Spain's banking sector and soaring borrowing costs are the topic of the day, and after Italy was forced to pay dearly to sell debt.

"The euro was seen highly vulnerable to further falls, with many analysts looking for a drop towards $1.20.
Concerns are growing that Spain may have to tap debt markets at a time when bond yields are near unsustainable levels. Market players fretted that it may be forced to seek an international bailout.
Adding to the euro's woes, Italy sold bonds at a very high cost, with 10-year yields topping 6 percent for the first time this year as sentiment on the indebted economy looked vulnerable to contagion from Spain's worsening problems". (Reuters)

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO). Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss. Computed with StraddlesCalc Tool

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Thursday, May 24, 2012

Fitch Donwgrades Japan

Fitch lowered its assessment of Japan’s sovereign credit to A+, still investment grade but just above countries like Spain and Italy.

The agency criticized Japan for not doing more to pare down its burgeoning debt.

According to the agency, Japan’s public debt will hit almost 240% of its gross domestic product by the end of the year.

 "The new rating also heightens the pressure on Prime Minister Yoshihiko Noda to rein in spending and raise taxes at a delicate time, when the Japanese economy is still recovering from natural and nuclear disasters last year.

Mr. Noda has warned that Japan could eventually face a debt crisis akin to that afflicting Europe and is staking his job on a plan to double the consumption tax rate to 10 percent by late 2015. That increase, he has argued, is necessary to pay for soaring welfare costs and pension payments".  {New York Times)

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Thursday, May 10, 2012

Der Spiegel: Bundesbank Has No Clue What is Happenning To Spanish Banks

German magazine Der Spiegel  has an article emphasizing the need for financial reform not only in Spain but throughout Europe.

The publication emphasizes that at this time, the Spanish banking system is built on unstable loans worth approximately one billion euros and encrypts the Spanish banking rescue between 50,000 and 200,000 million.

"Since that amount of money would be an overload for both banks to the government budget, experts believe that the Spanish government should seek urgent assistance to European Financial Stability Fund (EFSF).

However, Der Spiegel notes that Mariano Rajoy "resists this movement," because it would give members of the euro "a voice in governing the country." Also displayed are the magazine, also hang the disgrace to Spain as a country of high risk and, probably, "this will cause isolation of the international financial markets for a long time."

Under the circumstances, says Der Spiegel, direct payments to the banks of the euro countries become "a sensitive issue." The German Government completely rejects the idea "for fear that their money disappear into a bottomless pit." In fact sources said that the German central bank, the Bundesbank, say they have no clue what is happening in Spanish banks.

To Der Spiegel, this lack of knowledge is a consequence of nationalism in Europe has allowed the flourishing of its financial industry. The European banking industry is more connected internationally than any other, however, "each country controls its national bank and, if necessary, rescue their banks on their own."

Therefore, the journal recognizes citing Clemens Fuest, a German economist, professor at Oxford University and adviser to the German government, "without a fundamental reform of the European banking sector, the euro is in danger."

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Wednesday, May 9, 2012

Spain Bonds Plunge

There is no relief in Europe. Spanish 10 year bonds hit a new cycle high today, with the yield moving up to 6.08% - 23 basis points in one day.

The previous cycle high was 6.07% reached April 16th.  (Chart)

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Monday, May 7, 2012

Europe Burns, Buffet Comments on U.S.

While Europe burns today after the defeat of the "austerity" governance, Warren Buffett commented on the bad jobs reports last week. He states the obvious: no construction, no jobs. He says he is not surprised there were no more jobs created without a more meaningful pickup in residential construction.

"When we see a million residential units constructed annually," (CNBC's Squawk Box), "only then will we see more decent numbers on jobs growth."  

He says GDP growth of 4 to 5% "would be unsustainable in the long term," He believes that a 2.2% GDP print is not as abysmal is is being made currently. 

"If you have a 2.2% growth in annual GDP and have a 1% growth in population, that would be 1.2% increase in real per-capita growth."  

That, according to him is equivalent  a generational growth of ~20%. "That means that every succeeding generation has a 20% better standard of living than the preceeding one,"

"If we were guaranteed 2.2% for the next 100 years, that would be Nirvana!"  

Is the population growth only 1%?

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Friday, April 27, 2012

Canada's Ontario Downgraded

Moody’s Investors Service’s downgraded Canada's Ontario, following a sharp warning and dimmer outlook one day earlier by Standard & Poor.

The downgrade reflect the provinces very high debt and dim prospects for improvement.

The Globe and Mail says that Moody’s downgrade of the province’s debt rating to Aa2 with a stable outlook from Aa1 with a negative outlook brings the agency’s score more in line with S&P and DBRS, which both downgraded Ontario by one notch in the fall of 2009. DBRS, which also weighed in Thursday on Ontario’s fiscal state, decided to maintain its “stable” outlook on its debt rating for Canada’s largest province, saying the government’s increased focus on controlling spending was “an encouraging step in the right direction.”

But DBRS, too, struck a note of caution. Limiting debt growth will be very challenging and require a “significant pickup in fiscal resolve,” DBRS analysts Travis Shaw and Eric Beauchemin said in a report to clients.

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Spain Downgraded Again: Shocking?

Not a real topic for the "shocked" investor since there is nothing shocking here, it was all expected.

S&P downgraded Spain’s rating by two notches due to “mounting risks to Spain's net general government debt as a share of GDP in light of the contracting economy”.

Spain's GDP is expected to shrink by 1.5% in 2012 and 0.5% in 2013. 

The US-based ratings agency is also worried Spain’s troubled banking sector will require fiscal support from the government.

Now the country is rated at the same level as Ireland and Italy, which are also struggling with debt problems.
Meanwhile experts believe the Spanish economy is likely to show some improvement in the next few years.

But the country probably won’t meet its 2012 budget deficit target of a 5.3%. 

Spain said that borrowing costs surged despite a 27.3B euro austerity program announced by the government late last month.

The country’s authorities pledge Spain won’t follow Greece and ask for financial help.


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Monday, April 23, 2012

France Elections: Hollande and Sarkozy Battle for 1st, But Anti Euro Protest Votes Steals The Show

The 1st round of the french election was a show of the protest vote. Centre-left Hollande narrowly beat the conservative Sarkozy in Sunday's 10-candidate first round by 28.6% vs 27.1%, with 99% of votes counted.

 She wants France to abandon the euro currency

 Le Pen, the far right candidate daughter of former paratrooper and National Front founder Jean-Marie Le Pen stole the show by surging to 18.0%, the strongest result for a far-right candidate.

First Round Totals

  • Hollande: 28.6%
  • Sarkozy: 27.1%
  • Le Pen: 18%
Le Pen's "breakthrough mirrored advances by anti-establishment Euroskeptical populists from Amsterdam and Vienna to Helsinki and Athens as anger over austerity, unemployment and bailout fatigue deepen due to the euro zone's grinding debt crisis".

 "The battle of France has only just begun," She said: "We are now the only real opposition."

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Wednesday, April 11, 2012

Stunning Natural Gas Drop to Below $2: 1 Handle is Here

A '1' handle was reached today, simply amazing:

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Thursday, April 5, 2012

Golds Repeats the 2008 Period: You Know What Happened Afterwards

Gold has been dropping lately, but that is a very short term view. Please see the various cycles of gold prices:

In particular, the 5 and 10 year charts show a very similar period during the 2008 crisis.

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Wednesday, April 4, 2012

The Effects of Eurozone Constraints On Greece: Greek Federation of Athletism Suspends All Operations

This is not good for sports, for young people, and for the kids in Greece. The Greek Federation and Athletism today suspended all its operations after performing an emergency meeting. The decision was made because of cuts in government funding and represents the last act in the financial crisis facing the country over the past three years.

A text of the decision on Wednesday, released after the emergency meeting of the federation board, explained that the suspension is indefinite. The decision suspending all athletics competitions in the country, including a competition that was scheduled for May 12.

Initially, the suspension does not affect international competitions such as the London Olympics, but members of the federation will meet again in two weeks, when they can harden their position if the government fails to act. "We call the sports leadership to intervene and avoid the deadlock and economic disintegration of athletics," the federation said in a statement.

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Monday, April 2, 2012

Spain's Youth Unemployment Now Exceeds 50%

The unemployment rate in Spain is the largest in all Europe, and among young people it has exceeded 50%, Something that had not happened since at least 1986, from which the data of this research are available on Eurostat's office statistics of the European Union.

More than half (50.5%) of the Spaniards up to 25 years were unemployed in February. This figure shows that the labor market for young people in Spain is already so difficult as those of Greece, where the rate is 50.4%.

Unemployment map, for both youth and general population:

Chart from O Estado de Sao Paulo.

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Friday, March 30, 2012

Food Shortages and The Dissapearing Bees

Think bees are not important? Think again.

Don Coxe has alluded several times to the mystery of the disappearing bees, a problem which may have devastating effects on agriculture worldwide.

Two studies to be published in this month's Science journal., one by UK researchers and one in French researchers, suggest that neonicotinoid insecticides, could be the culprits and harm bee populations worldwide.  These have been in use since the early 1990s.

Scientists have in the past proposed that pesticides could be partially to blame for the disappearing bees, but it's been unclear exactly how. In the last few years, much time has been devoted to the mysterious disappearance of bees, referred to as Colony Collapse Disorder. Honeybee populations have been decimated and bumblebee species have also gone missing.

In the US, the Environmental Protection Agency says on its website  that France, Germany, Italy and Slovenia have all instituted bans on neonicotinoids over fears of their effect on bees, but says that "to the EPA's knowledge, none of the incidents that led to suspensions have been associated with Colony Collapse Disorder".

Not so says Dave Goulson of the University of Stirling, co-author on the British study: “Some bumblebee species have declined hugely. For example in North America, several bumblebee species which used to be common have more or less disappeared from the entire continent. In the U.K., three species have gone extinct,”

Dr. Goulson and his colleagues exposed developing bumblebee colonies to a neonicotinoid called imidacloprid at doses comparable to what they might find in the wild. These colonies were around 10% smaller than those that weren't exposed. They also produced 85% fewer queen bees (which means far fewer bee-leaders that can set up new colonies).

“Bumblebees pollinate many of our crops and wild flowers. The use of neonicotinoid pesticides on flowering crops clearly poses a threat to their health, and urgently needs to be re-evaluated,”

Lost. The French study  stuck tiny RFID chips on to honeybees so they could track them as they buzzed in and out of their hives. The French National Institute for Agricultural Research (INRA) found that bees they had blasted with a sublethal dose of the neonicotinoid thiamethoxam got disorientated and couldn't find their way home.

Honeybees have a homing ability that lets them navigate back to their hives, which the researchers think was  messed up by the pesticide. The lost honeybees were two to three times more likely to die outside the nest, pushing populations down to levels that would be difficult to recover from.

Says study author Mikaël Henry of INRA: "Our study raises important issues regarding pesticide authorization procedures. So far, they mostly require manufacturers to ensure that doses encountered on the field do not kill bees, but they basically ignore the consequences of doses that do not kill them but may cause behavioral difficulties," Read More

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More Bailouts: Greece Now Talks About New 3rd Bailout

Nobody really expected Greece to have a balanced budget, possibly ever, so that new bailouts would not be needed. . Today, Lucas Papademos, Greece's Prime Minister  said that Greece may need a third bailout package "if the sweeping austerity measures demanded by its international creditors fail to stabilize its shattered economy and restore market confidence".

It was the first time Papademos talked about the risk that the austerity program might fall through if they don't try hard enough.

"Greece will do everything possible to make a third adjustment program unnecessary," (!) "Having said that, markets may not be accessible by Greece even if it has implemented fully all measures agreed on". (Yahoo)

"It cannot be excluded that some financial support may be necessary, but we must try hard to avoid such an outcome."

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Thursday, March 29, 2012

FIFA WC2014 In Brazil: Costs To Skyrocket; As If It Was Unexpected

You read this here before, years ago.

Prestigious newspaper O Estado de Sao Paulo reports that delays in the 2014 World Cup will make the final cost of the 2014 World Cup be far higher to what everyone imagined five years ago. The finding was made by the leaders of FIFA, which on Wednesday put full pressure on the country because of the difficulties in the organization and made it clear: Brazil should not save money to ensure that everything is prepared.

Sure... As if none of this was known and expected. Somebody will make lots of money.

The actual costs are conflicting. A recent report by the TCU (Court of Audit) indicates a value of just over R$25 billion (US$ 15B), based on data from the Responsibility Matrix. But the agency itself complained of outdated data and gave 60 days within the Ministry of Sports to update the information in the Matrix.

In the evaluation of the members of FIFA, the delays will make the final price of the world cup explode.

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Push This Button On Your Fridge And It Automatically Orders Pizza for You

It's real, push the button, it sends a bluetooth signal to your cell phone, and pizza is delivered to your door.

Available only in Dubai - for now.

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The Perfect Storm For Natural Gas and UNG, Now You See Why UNG Reversed Split Was the Kiss of Death; Full Report

This is quite remarkable: Natural gas prices are almost at a 1 handle.

Today's reason for the big drop was that storage actually increased in North America, this still in March. The red curve is the current year's curve, compared with the average 5 year range in shaded gray. Amazing.

The woeful UNG reacted accordingly, remember the kiss of death post on UNG?

5 year chart:

Contango is now at a huge 5.5% on the two front months contracts.

Contango us UNG's killer.

Indeed the perfect storm for UNG today.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbol in the Technical Trend Analysis Tool, (powered by INO).

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Monday, March 26, 2012

Why You Should Stay Away From Volatility ETFs

Larry Berman today explained why investors should stay away from volatility ETFs, specially vehicles like the TVIX.

The reason is that they invest in futures, and as pretty much all of them, they are money-losing machines when there is contango In the case of TVIX, that is clearly the case as investors expect volatility to increase in the future, thus, the ETF has to lower (lose) the number of contracts every month. These ETFs should really be banned.


Note: You may receive technical analysis and alerts of TVIX sent automatically to you by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

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Thursday, March 22, 2012

Airlines About To Go Belly Up

Emirates, the biggest airline by international traffic, warned yesterday that airlines will go bust this year due to fuel costs and "sluggish economies".

Interesting that the same was feared about Air Canada, and most likely many others.

Tim Clark, Dubai-based carrier’s president, said that  “We can reel off a whole load of airlines that are teetering on the brink or are really gone,” “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”

Bloomberg reports that "Airline profits will plunge 62 percent in 2012 to $3 billion, equal to a 0.5 percent margin on sales, as oil prices rise, the IATA aid this week. Emirates’s fuel bill accounts for 45 percent of costs and may jump by an “incredibly challenging” $1.7 billion in the year ending March 31, according to Clark, who says he’s sticking with a no-hedging strategy rather than risking a losing bet.

“You think you’re going to win, but in the long term you always lose,” Clark said yesterday at the Gulf carrier’s head office near Dubai International Airport. “When we enter into derivatives, betting whatever it may be with counterparties who actually control the price of fuel in the first place, you have to ask yourself, ‘Is that smart?’”

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Friday, March 16, 2012

Risky Business: Apple Stock Goes Ballistic

Apple stock passes to $600.

You know how this story ends when a stock goes like that..

Note: You may receive technical analysis and alerts of AAPL, sent automatically to you, by entering the symbol in the Technical Trend Analysis Tool, (powered by INO).

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Wednesday, March 14, 2012

The Banks That Borrowed The Most In Europe

These are the banks that have borrowed the most from Europe's LTRO, represented as a ratio of amount of funds borrowed to the size of each entity:

(click to enlarge)
The ECB's balance sheet now  represents over 30% of euro area GDP.  Portuguese Commercial Bank is in first place, followed by Bankinter, Bank of Ireland.

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Friday, March 9, 2012

The Greek Restoration Project: Greece "Fixed" Again: Rates Already Creeping Up

From Phil Davis today:

"Greek bonds are already passing the 20% mark again  so this "fix" has lasted all of a few hours and already we're seeing rates creep up in Italy, Spain and Portugal (Ireland can't even borrow money – at any price)"

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Greek Debt Swap Participation Reaches 85%; Collective Clauses Forced on 95%; Potential "Credit Event"

 So the question now is whether the CDS will finally be triggered. Was this a default or not? ;-)

Bondholders tendered 152B euros of Greek-law bonds, or 85.8%, and 20 billion euros of foreign-law debt. Greece also extended its offer to holders of non-Greek law bonds to March 23, after which the "sweeteners" will no longer be available.

After the collective action clauses are triggered investors with 95.7% of Greece’s privately held bonds will participate in the swap.

 Officials from the International Swaps and Derivatives Association will meet later today to consider a “potential  credit event” relating to Greece.

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Thursday, March 8, 2012

U.N. Says Food Prices Rising Again

The U.S.'s Food and Agriculture Organization says global food prices have risen for the second time in two months. The main reason being blamed is bad weather in major exporting countries. Rising oil prices must affect prices too. 

A near record wheat production is  forecasted for this year, expected to reach 690 million tons, just below the record 2011 harvest.

The agency's price index rose 1 percent from January to February. The index had climbed nearly 2 percent in January, its first increase in six months.

The latest increase was mostly caused by higher prices of sugar, particularly in leading exporter Brazil because of bad weather, oils and cereals.  

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Wednesday, March 7, 2012

Germany Openly Discussed With Greece That They Leave Euro

The Financial Times just reported that German finance minister Wolfgang Schaeuble admitted that he discussed openly with Greece's finance minister Evangelos Venizelos whether it would be better for the country to leave the euro.

However, Greek officials said they are 100% committed to staying. it sounds like somebody else does not want them to stay.

"However, Mr Schaeuble added that even though it may have been wrong for Greece to join the euro, the country had “100pc decided” that they wanted to stay inside the 17-nation bloc, and it was “ridiculous” to think that other countries wanted to punish Greece.

But Greece has more work to do, he said, and the eurozone as a whole must work to solve the competitiveness gap."

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What's In An X-Ray? Thieves Stealing Old X-Rays For The Silver Content

The thief's hand?

We had heard about the manholes and the bronze statues. With the price of precious metals up in the clouds, thus was only a matter of time. Thieves are now stealing old x-rays.

Ottawa police have charged a Toronto man caught with 30,000 X-rays stored in 13 barrels. The man has been impersonating an employee of a recycling company.

The films were confiscated from a U-Haul truck the man was driving after a botched effort in Smiths Falls,  about 75 km southwest of Ottawa. They believe the scam was operating across Ontario.
The man had told hospitals and diagnostic clinics in the Ottawa, Toronto and London, that he worked for Environmental Control Systems, who then gave the man the X-rays.

The company, which is contracted out by most Ottawa medical centres, confirmed  the man was pretending to be one of its employees.

Police also believe the man wanted the X-rays for the silver that can be extracted from the film. New forms of X-rays also include a lower amount of about 5 grams of silver per kilogram, while old film X-rays have 12 grams of silver per kilogram.

A search on the Internet reveals many such instancesThe emulsion on an X-ray consists of silver. During the silver recycling process using a simple chemical solution, the silver is released from the emulsion.

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Tuesday, March 6, 2012

Greece and Those CDS Create Market Havoc Again

A done deal is not really a done deal when it comes to Greece! Forbes reports that the debt swap with private sector bondholders may not come off as planned.

"Twelve banks in Europe have signed on to the swap – which will see creditors take a 53.5% haircut to the face value of their holdings – including BNP Paribas, Deutsche Bank, Commerzbank and National Bank of Greece, but only hold about one-fifth of the Greek bonds eligible for the swap".

While the deal could win 75%-80% participation, enough to execute the swap, however, the 90% that could require holdouts to acquiesce without enforcing retroactive collective action clauses (CAC).

ISDA, the body deciding whether the Greek deal will trigger credit default swaps (CDS) on the Hellenic Republic’s debt, has said that the use of CAC would lead it to revisit its current determination that Greek CDS will not pay out.

All to be likely "resolved":

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Friday, March 2, 2012

Rampant Oil Manipulation Caught

I loved this today from Phil Davis, the trading and options guru.

"The news was that a pipeline in Saudi Arabia had been attacked and oil had been running up all day into this "news," which, funnily enough, turned out to be fake.  We caught the news at 3:05 in Member Chat (thanks Kustomz) and we had been waiting for oil to stop going up so we could short it.  The turn came at the $110.50 in the Futures (/CL) and we caught a nice run down to $109 and I reiterated, at 3:36, with oil still at $109.88 my love for the USO April $40 puts, which were $1.08 at the time and finished the day at $1.15.

As Malsg pointed out in Member Chat: "The pictures of the fire are taken in daylight … but Saudi sunset was several hours ago … the oil market only stared going nuts after the close."  A very good observation that gave us the resolve to stay short on oil – which is working out fantastically this morning as well. "

Phil mantains a lively intra-day market chat. You can join here (link for free trial).

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Thursday, March 1, 2012

Video of German Finance Minister Playing Sudoku While Parliament Debates Greek Bailout

What the German Finance minister was doing while his parliament debated the latest Greek Bailout.

In other countries, this would be Alfiderzen.

It is unknown whether he managed to finish the puzzle.

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Rousseff Strongly Criticizes U.S, Europe, Japan for $4.7T Fiscal Tsunami: Brazil To Fight Easy Money With Its Own Weapons

Brazil's President Rousseff today strongly criticized the actions of countries in crisis for generating excess liquidity in the global market. Without mentioning any specific country, the president said that "we care about these fiscal tsunami."

"They pour U.S. $ 4.7 trillion, it's very adverse, very wicked, for the rest of the countries, especially those in growth that are emerging. They compensate fiscal rigidity with utterly inconsequential monetary policy in what it produces on world markets,"

The president warned that one must understand "that we have to create other tools to fight the processes that are triggered by U.S. $ 4.7T today." "Only yesterday was a trillion euros. Japan is also doing the same monetary policy". The criticism was made at the launching ceremony of the "National Commitment to Improvement of Working Conditions in the Construction Industry".

The president made it clear the concern with the actions being taken by developed countries in crisis to overcome their problems. She explained that the Brazilian government is ready to defend national industry from predatory competition from foreign competitors. "We will be defending the industry, the methods of preventing the crisis from developed countries involving the cannibalization of markets in emerging countries,".

The President stressed, though, you want to promote economic growth in Brazil, with the development of a mass market, but also with the distribution of wealth and protection of social rights. "We want the mass market to grow. That the country to grow, but we want social rights, social protections, rights of the elderly.

She was very critical countries are abdicating that social safety net as a way to circumvent the effects of the current crisis.

"It is obvious that countries that do not have or do not need this protection, and then reduce this protection, throw in the trash historic achievements. But they are accountable to their people,". She then highlighted that Brazil will not give of social protections. "I mean that we are at another stage. We are not wasteful. We get the best possible quality of public spending. Let's get with the workers, entrepreneurs,".

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Greece Events "Do Not Constitute a Default", But They May Change Their Mind Later!

The EMEA said today that the events in Greece do not constitute a default (no no trigger for CDS payouts!

Who voted for this (unanimously, by the way):

  • Bank of America Merrill Lynch
  • Barclays
  • Credit Suisse
  • Deutsche Bank AG
  • Goldman Sachs
  • JPMorgan Chase Bank, N.A.
  • Morgan Stanley
  • UBS
  • BNP Paribas
  • Societe Generale
  • Citadel Investment Group LLC
  • D.E. Shaw Group
  • BlueMountain Capital
  • Elliott Management Corporation
However, if you read their statement, you'd see that they may change their mind!

" The EMEA DC noted, however, that the situation in the Hellenic Republic is still evolving and today’s EMEA DC decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating to the Hellenic Republic nor is it an expression of the EMEA DC’s view as to whether a Credit Event could occur at a later date, in each case, as further facts come to light."

Full Text:

 "In light of today’s EMEA Determinations Committee (EMEA DC) unanimous decisions in respect of the two potential Credit Event questions relating to the Hellenic Republic (DC Issue 2012022401 and DC issue 2012022901), the EMEA DC has agreed to publish the following statement:

The first submitted question (DC Issue 2012022401) asked whether the holders of Greek law bonds had been subordinated to the ECB and certain NCBs whose bonds were acquired by the Hellenic Republic prior to the implementation of new Greek legislation such that such subordination constitutes a Restructuring Credit Event. (The full text of the question is available here http://www.isda.org/dc/view.asp?issuenum=2012022401.)

The EMEA DC unanimously determined that the specific fact pattern referred to in the first submitted question does not satisfy either limb of the definition of Subordination as set out in the ISDA 2003 Credit Derivatives Definitions (the 2003 Definitions) and therefore a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions.

The second submitted question (DC Issue 2012022901) asked whether there had been any agreement between the Hellenic Republic and the holders of private Greek debt which constitutes a Restructuring Credit Event. (The full text of the question is available here http://www.isda.org/dc/view.asp?issuenum=2012022901.)

 The EMEA DC determined that it had not received any evidence of an agreement which meets the requirements of Section 4.7(a) of the 2003 Definitions and therefore based on the facts available to it, the EMEA DC unanimously determined that a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions".

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Wednesday, February 29, 2012

Brazil Registers Huge Primary Surplus

The tale of two countries! The Brazilian  Treasury said that the country's primary surplus accounts of the central government in January registered $20.8 billion (about USD $13B), the largest for the month and the second largest in history for all months.

It is second only to the surplus of $ 26 billion recorded in September 2010 when the government received an extraordinary income of $ 31.9 billion due to the process of capitalization of Petrobras.

Treasury secretary Augustin also commented the result of the primary surplus in 12 months, which reached R $ 100.1 billion (2.4% of GDP). "It is evident that we are on the rise with the primary. This is positive because it reflects the great effort that the new economic policy mix is the best, "Augustin said, referring to the term used last year by the economic team to define a strategy for strengthening of fiscal policy to help the Central Bank to reduce interest rates.

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Indian Economy Slows To Weakest in 3 Years

Reuters reports today that the Indian economic growth slowed to 6.1% in the three months ending in December, the weakest annual pace in almost three years, as high interest rates and rising raw material costs constrained investment and manufacturing.

"The dismal numbers are certain to intensify pressure on the authorities to stimulate the flagging economy and they render official forecasts for 6.9 percent growth in the financial year ending in March as optimistic.
Yet economists doubt much stimulus will be forthcoming as a fiscally constrained government focuses on finding money for fuel and food subsidies to win votes and rising oil prices urge caution at the central bank over cutting rates too quickly.

The 6.1 percent rise in gross domestic product in October to December was lower than the consensus view in a Reuters poll of 6.4 percent, the official data showed.
That marked a sharp pullback from 6.9 percent growth in July to September and was the seventh successive quarterly slowdown, providing a gloomy backdrop for a central bank policy meeting and federal budget, both due in just over two weeks".

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Free Money Festival: European Banks Take In New Record $712B In Cheap Money To Flood The Markets

European banks outdid themselves  and borrowed a new record from the  ECB's LTRO "in an operation that may boost bond and equity markets" (you think?).

The ECB said today it will lend 529.5 billion euros ($712.2 billion) for 1,092 days  800 financial institutions.

Economists predicted an allotment of 470 billion euros, according to the median of 28 estimates (Bloomberg). In the ECB’s first three-year operation in December, 523 banks borrowed 489 billion euros.

 “The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy at Barclays in London, who estimates about 300 billion euros of the total is new lending. “So the impact may be bigger than with the first one.”

“There’s a big difference between stopping the rot and starting a recovery,” said Steve Barrow, head of Group-of-10 research at Standard Bank Plc in London. The loans “might have done the first, but they won’t do the second,” he said.

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Tuesday, February 28, 2012

ERJ, Embraer, Enters Top 100 In The World

Embraer entered for the first time in the list of top hundred military companies in the world. Data released yesterday by the entity Swedish Stockholm International Peace Research Institute (SIPRI) reported  the Brazilian company in 94th position in a ranking dominated by American and European companies.

Despite the global crisis, the arms trade continues to expand, albeit in a much more modest than in previous years. The ambitions of emerging countries have maintained strong market, despite cuts in military budgets in rich countries.

The global leadership continues with the American Lockheed Martin, with $ 35.7 billion in arms sales just in 2010. In total, the company employs 132,000 employees.

In the case of Embraer, the company first enters the select list, after a major leap last year on sales of aircraft for military purposes. The list, however, does not include Chinese companies, due to the lack of reliable information on sales of military enterprises in Beijing. Between 2009 and 2010, sales of the Brazilian company in the sector increased from U.S. $ 470 million to $ 670 million. Today, 12% of its sales come from Embraer's military sector.

Since 2005, the Brazilian company's sales nearly doubled in a growth rate higher than the world average. According to SIPRI, military sales in the world had a 60% increase between 2002 and 2010, but only 1% between 2009 and 2010. In total, the sector was responsible for sales of U.S. $ 640 billion in 2010. In 2002, the movement reached $ 280 billion.

Another finding is that there is an increasing number of companies from emerging countries in a list so far dominated by rich countries. Of the one hundred companies, three are Indian, one of Singapore, two from South Korea, as well as companies from Kuwait and Turkey. In Asia and the Middle East, local companies already represent $ 24 billion in sale

You may receive technical analysis and alerts of  ERJ, sent automatically to you, by entering the symbol in the Technical Trend Analysis Tool, (powered by INO).

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Monday, February 27, 2012

Spain Says It Would Be Suicidal To Slash GDP As Demanded by Eurozone; Unemployment Would Soar to 25%

Mariano Rajoy has concluded that it would be "suicidal" to try to slash the budget deficit from 8% of GDP to 4.4% as demanded by the Eurozone.
Says Evan-Pritchard: "Such a policy would require a further €40bn or €50bn of cuts and accelerate the downward spiral already underway, beyond the 1.7pc contraction expected this year by the International Monetary Fund.

The unemployment rate would rise to well over 25% with six million out of work by the end of the year, equivalent to 30pc under the old definition used in the last jobless crisis in the early 1990s".

"There is near unanimity across the political spectrum that drastic pro-cyclical tightening at this stage is unwarranted and dangerous. Josep Borrell, ex-president of the European Parliament and the voice of Spain's pro-European establishment, said such debt-deflation risks pushing the banking system over the edge. "To cut the deficit almost four points in one year would be a true depressionary shock for an anaemic economy, made worse by the requirement for banks to mark their real estate losses to market prices."

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Thursday, February 23, 2012

China Has Outsourced Its Monetary Policy to Ben Bernanke

The always entertaining Don Coxe was on BNN today discussing commodities, oil, gold.

He says that:

  • Oil is at a 9-month high but is not in a bubble. There are prospects of military confrontation out there.
  • China has outsourced its monetary policy to Ben Bernanke!
  • He add to to buy gold, deflation is being fought on a majestic scale, BoE, Bernanke, Draghi with LTROs money printing at an unbelievable scale. Now even the Bank of Japan is printing money. Even central banks are buying gold.

Watch interview.

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Following UNG's New Kiss of Death, a Very Ugly Natural Gas Storage Curve Appears

UNG reversed split yesterday, shockingly, for the 2nd time in less than year. The first one was a 1:2 and resulted in a 50% loss. The 2nd one was 1:4. Shocking is why anyone buys this ETF.

A beautiful chart - if you were short UNG.

More worrisome is the very ugly natural gas storage report:

The red curve is where we are, compared to previous years. Ouch.

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EU Now Says Eurozone Will Contract in 2012

The EU has changed its forecast and s now saying that the European economy will shrink in 2012. Italy and Spain will have a really hard time with projected contractions of 1.3 percent in Italy and 1 percent in Spain.

The 17-nation euro economy will contract 0.3%, not grow 0.5% as they had originally said.

Bloomberg: “The euro area has entered into a mild recession,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today after releasing the forecasts. “Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization.”

Two days after Greece clinched a second bailout, the forecasts showed an economy pockmarked by the two-year-old fiscal crisis and looked set to stiffen resistance in southern Europe to further doses of German-demanded austerity.

The full-year Europe-wide contraction would be the first since 2009, when a 4.3 percent drop in the wake of the U.S.-led banking crisis exposed the overborrowing and imbalances that plunged Europe into its sovereign debt troubles.

Mr   Rehn said that Financial markets “remain still rather fragile, but there arre also signs of stabilization,”

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Wednesday, February 22, 2012

Chile: The Star Faces Hurdles; Major Earthquake, Severe Drought, Crumbling Electricity Grid

Note: The ETF for Chile is ECH. You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

There is no doubt that Chile has been and is a star in the developing world. After the major earthquake the country pulled together and started a massive recovery. The country however, has been faced with a severe drought for over 3 years, as La Nina takes its toll. Reservoirs were at 40% capacity last month.

In addition, its older infrastructure may further risk energy blackouts, the "creaking power grid that threatens the economy".

Chile's power network is creaking after decades of underinvestment and it will take years to shore it up to head off a repetition of massive blackouts such as one in September that hit operations at major mines and the cost state copper company, Codelco, more than 1,400 tonnes in lost output".

The government has taken energy saving measures that include reducing voltages and saving water in reservoirs. It had said the measures would be lifted in April, but this may be reviewed in March.

The  Ottawa Citizen reports: "Rain shortages force generators to rely on expensive fuel-driven plants, compounding inflation risks in an economy that is expected to slow sharply this year to around four per cent growth after growing over six per cent in 2011.

Guinea provided nearly half of all liquefied natural gas (LNG) imports in 2010, according to Energy Ministry data, while Trinidad and Tobago, Egypt and Qatar together provided 44 per cent of the total.
The United States, South Korea and Japan each accounted for roughly a third of 2010 diesel imports, the data showed.

"It's a real barrier to our productivity," Alvarez said. "We have expensive energy compared with competitor countries in Latin America, as well as expensive energy compared with other member countries of the OECD."

President Sebastian Pinera wants to boost energy generation to head off possible rationing, but key projects such as the massive HidroAysen hydropower dam project in Patagonia face strong resistance from environmental activists.

Industry groups, such as key miners BHP Billiton Ltd. and Codelco, have urged the government to do more to meet growing energy needs and lower the cost of power, which has hurt their margins.

Pinera is due to announce a revamping of the country's shaky energy grid, which could include building a transmission line to link Chile's south-central and northern grids.

"Our government has taken the decision to not continue burying its head in the sand like an ostrich," Pinera said during an annual energy dinner last month. "We could face serious problems in the second part of the decade if we don't make decisions now."

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Friday, February 17, 2012

Brazil's PC Market is Third Largest in the World

A Brazil Quarterly PC Tracker reports says that the PC market grew 12% last year, with sales of 15.4 million notebooks, netbooks and desktops. 2011 consolidated Brazil as the third-largest PC market in the world, behind only China and the United States.

In the fourth quarter of last year 4.2 million computers were sold, with 40.8% of desktops and 59.2% laptops and notebooks. This represented an increase of 10% over the same period of 2010. "The fourth quarter was good, but could have been even better if not for the high dollar and difficulty in acquiring hard disk (HD) due to floods in Thailand,"

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Thursday, February 16, 2012

Royal Bank of Canada Threatened With Downgrade, Plus Citi, Bank of America, Goldman Sachs

This is indeed shocking. Moody's is placing under review the long-term ratings and credit assessments of the Royal Bank of Canada, in the good (bad?) company of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase,  Morgan Stanley.

All except JPMorgan Chase and are having some or all short-term ratings reviewed.

Moodys said actions reflect "the adverse and prolonged impact of the eurozone crisis, which makes the operating environment very difficult for European banks"  and "the deteriorating creditworthiness" of eurozone countries.

The agency added that banks and securities firms "with significant capital market activities" face "longer-term, substantial challenges."

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Tuesday, February 14, 2012

The Seven Deadly Sins of Investors

In the book Behavioural Investing, A Practitioners Guide to behavioural Finance, James Montier, discusses the "Seven Deadly Sins of Investing". larry Berman discussed the same yesterday on BNN (watch)

  1. Forecasting (Pride)
  2. The Illusion of Knowledge (Gluttony)
  3. Meeting Companies (Lust)
  4. Thinking You Can Outsmart Everyone Else (Envy)
  5. Short Time Horizon or Overtrading (Greed)
  6. Believing Everything You Read (Sloth)
  7. Group-Based Decisions (Wrath)
1. Pride/Forecasting: We know how wrong they are. At best, they are 50% right. larry comments on the The Federal Reserve has the worst economic forecasting record of all financial forecasters. In addition, over 80 percent of portfolio managers do not beat the index. 

2. Gluttony/Knowledge: The more information analysts have about a company, does not mean better forecasting. In fact, it can work agaisnt you as you get lost in meaningless information for which incorrect impiotance is assgined. Humans also have cognitive limits to process information.
3. Lust/Meeting Companies: Most investment managers interview management as part of the investment process. However, management does not tell everything there is to know and we can't tell when they are lying.
4. Envy/Overconfidence: Wanting to show we know more than others makes us overconfident and stick with wrong decisions.
5. Greed/Short Time Horizon:  Greed is part of human nature. Excessive trading can be a significant problem for those that do not understand risk management.

6. Sloth/Believing what you read:  If you invest based on what some "guru" or so called "financial adviser" says, then you pay for your laziness. You must do your own due diligence. There is no substitute for hard work.

7. Wrath/Group-based decisions: Investing based on group decisions prevents the contrarians from posting differring opinions to balance out the ideas and come up with the best ones. There is a the danger of positive reinforcement in group think.
You can buy the book from Amazon:

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Monday, February 13, 2012

Moody's Downgrades European Countries: Spain, Italy, Portugal, Revises U.K. and France

Late today it was Moody’s Investors Service turn to cut the debt ratings of European countries. The downgrades today  included Italy, Spain and Portugal. The agency also revised its outlook on the U.K.’s and France’s top Aaa ratings to “negative,” citing the usual: Europe’s debt crisis.
Spain was downgraded to A3 from A1, Italy was downgraded to A3 from A2,and Portugal was downgraded to Ba3 from Ba2.

It also reduced the ratings of Slovakia, Slovenia and Malta.

“The uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework”

“Europe’s increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programs and the structural reforms that are needed to promote competitiveness,”

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Apple: The Half a Trillion Dollar Company

Apple, whose price hit $500 for the first time. The company’s valuation is about $460 billion, or about $8 billion more than the market cap of Google.

Wow. From a nearly dead company to the highest market cap. Amazing.

Disclaimer: I am not an Apple person, I own no Apple gadgets at all.

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Fraud: Security Flow Allows Major Transportation Tickets to be Recharged Indefinitely

Considered infallible for 7 years and a source of revenue of almost U.S. $200M per month, Sao Paulo's unified transportation ticket has a security flaw that allows defrauding it him in just five seconds. The breach was discovered by a researcher, who sent all the details for the SPTrans, a company that manages the City buses.
SPTrans has now investigated the problem for over a week and has not disclosed what steps will be taken - however, it has announced that it will exchange all 25 million tickets this year. Sao Paulo's unified ticket is the second largest electronic ticketing system in the world, second only to the Octopus card in Hong Kong.

The flaw was discovered by a young computer researcher named Gabriel Lima, a partner in the security company Pontosec, which specializes in detecting threats and flaws in websites and virtual networks.

After three weeks analyzing the system of internal data storage of the ticket, he got a way around the recharge card. For this, he just needed just a computer program developed by himself and a card reader imported from China which costs about $ 70.

The loophole allows you to save a virtual copy of a single ticket credits and use them indefinitely. In practical terms: if a person has a single ticket to $15, you can save that credit on the computer, and after normal use, recharge the card at home, with the value that had been recorded earlier. And then redo the process endlessly, without ever spending a dime to ride the buses and subways of Sao Paulo.

(O Estado de Sao Paulo, in Portuguese)

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Thursday, February 9, 2012

Greek Leaders Fail to Agree To Terms

Fox has just reported that Greek leaders have failed to agree on reforms and austerity measures needed to secure a bailout to avoid a messy default, "forcing Finance Minister Evangelos Venizelos to go to the country's financial backers with an incomplete deal".

The problem is that if they do accept the bailout, this is a major time bomb that will explode int the future.

"Athens' partners in the European Union and the International Monetary Fund are increasingly exasperated by a lack of agreement on the measures they demand in return for a 130 billion euro ($172 billion) bailout and time is running out for Greece before a major March 20 bond redemption.

Euro zone officials say the full package must be agreed with Greece and approved by the EU, IMF and European Central Bank by Feb. 15"

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Canada: Highest Population Growth In G-8

Canadian census data was released today.

Canada has the highest population growth of the G8:

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Tuesday, February 7, 2012

BLS Labour Surge or Labour Headache? How About Using Income Taxes in Real-Time?

Something I have wondered for a lonmg time is why don't they use collected taxes to determine the number of jobs as opposed to this BLS predictions and estimates figures.

Well, Trimtabs seem to be just that! The results are expected: not good.

" The biggest headline for all financial media today is that the US economy added a much more than expected 243,000 jobs in January, and 446,000 jobs over the past two months. That is many more new jobs than our estimate of less than 50,000 for January and our estimate of 90,000 for December and January.

Our estimate of a slowly growing economy is based primarily upon daily income tax collections. Either there is something massively changed in the income tax collection world, or there is something very suspicious about today’s Bureau of Labor Statistics hugely positive number. We continue to check and recheck our analysis of income tax collections. We are aware that another service believes that incomes are growing faster than we do. So far we have not found any errors or discrepancies in our work, but if we do, we will let you know.

No one I know has any idea as to how the BLS does this seasonal adjustment. BLS historic data is changed almost every month until the income tax returns for each year are available three years in arrears. In other words, the BLS currently has accurate data for 2008 and before.

I keep repeating that the BLS refuses to use the data embedded in income tax collections to be able to report real time jobs and wages. Why does it refuse? Could the reason it refuses to use real time data on jobs and incomes be because perhaps this jobs number is politically motivated? The entire world is looking at US job creation as a proxy on how well Obama is doing? Could the Obama administration be pressuring its economist employees to create the best possible new jobs number?

Obviously I am quite suspicious of the numbers that I see in today’s BLS press release. Remember most financial journalists and even stock market strategists do nothing more than rewrite government press releases. So do not expect very few others to question the good news".

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Monday, February 6, 2012

Simply Crazy: Bailout Funds Must Be Used by Greece to Pay Debt Only; Therefore Greece Must No Longer Have a Deficit!?

The current Greek fiasco news on the media reads:  "European officials are insisting any new Greek bail-out programme specifically earmark funds to pay off remaining holders of Greek debt, giving lenders the freedom to withhold aid to Athens without risking a messy default that could reignite panic in financial markets".

Thus, if the bailout funds are to be sued to pay off prior debt only, then, Greece must no longer be running  a deficit since it would nto required money to fund operations.

Apparently, the latest plan says Eurozone officials would create an escrow account to accept new bail-out funding instead of paying it all directly to Athens"

"The new fund would then ensure bondholders are paid off, while additional cash to run the Greek government could still be withheld if Athens did not live up to tough new reform demands".

So, they give bailout money to pay banks only then (?!). Simple Crazy.

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European Debt Is Not Manageable Until 2030; Rises To 82.2% of Output

The World Bank had said last month that Europe's debts may not reach manageable levels until 2030. Today, Eurostat said that the European Union's total government debt rose to 82.2% of economic output in Q3 2011.

Estonia had a debt-to-GDP ratio of 6% in the third quarter, compared with 159.1% in Greece!

Interestingly, while all the news and media has been focused on Europe, this figure is lower than the United States

For the 17 country euro zone, total government debt fell slightly to 87.4% of GDP (U.S. debt-to-GDP was  100% in 2011).
Only 13 EU members had debts below the 60% set by the European Commission (that the bloc judges to be the maximum for a healthy economy), with only four of those countries being members of the 17-nation single currency area.

France and Britain both had a level of 85.2% and Germany was at 81.8% in the July to September period.

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Friday, February 3, 2012

Unemployment Numbers, Youth Unemployment In Crisis 11.3% in U.S., 48% in Spain; 7% in Germany

Not all  the media is focusing today on the "good" unemoployemnt numbers for the U.S, and the bad ones for Canada.

Brazilian newspaper O Estado de Sao Paulo reports today on the current unemployment numbers for youth. The crisis for the youth is still really bad. Some youth unemployment numbers:

  • Spain: 48.7%
  • Italy: 31%
  • Portugal: 30.3%
  • France: 23.8%
  • U.S. 16.8%
  • Germany: 7.8%

Watch BBC report.

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Tuesday, January 31, 2012

U.S. Home Prices Tumble Again

The Standard & Poor's Case-Shiller index was revealed today showing that U.S. home prices fell once again in November. In fact, most metropolitan markets posted declines.
In spite of lower prices and record low interest rates there is still an overwhelming number of foreclosures,

David M. Blitzer, chairman of the index committee at S&P Indices, noted that for November, the Case-Shiller index of 10 major metropolitan areas and the 20-city index both fell 1.3% from the previous month. that 19 of the 20 major U.S. metropolitan markets covered by the indices in November saw prices decline from October.

"The only positive for the month was Phoenix, one of the hardest hit in recent years," "Annual rates were little better as 18 cities and both composites were negative."

The 10-city and 20-city composites recorded negative annual returns of  3.6% and 3.7%, respectively, versus November 2010.

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European Banks to Borrow a Trillion in February

Last time the ECB offeed generous loans to European banks they borrowed a record 489B Euros. The Financial Times says next time they will take a trillion in long-term refinance operations (LTRO).

"European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze.

Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds in the ECB’s three-year money auction on February 29.

“Banks are not going to be as shy second time round,” said the head of one eurozone bank at last week’s World Economic Forum in Davos. “We should have done more first time.”

Three bank chief executives, all of whom asked to remain anonymous, said they were planning to increase their participation twofold or threefold".

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Friday, January 27, 2012

Italy, Spain, and Belgium Downgraded Two Notches

The Euro mess continues. Today, Fitch Ratings cut the credit ratings of Italy, Spain, belgium and two others, stating that "they lack financing flexibility in the face of the regional debt crisis".

Italy was cut two levels to A- from A+. Spain was cut to A from AA-. Belgium’s was cut to AA from AA+, Cyprus to BBB- from BBB, and Slovenia was downgraded to A from AA-.

Fitch said that the countries downgraded today still lack financial flexibility.

“The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability” “These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve- currency status.”

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Thursday, January 26, 2012

Housing: The Tale of Two Countries: U.S. Worst on Record; Canada Soars

While the median value of a U.S. house sale dropped to $210,300 (figures announced today), in Canada the situation is quite different, with an average of over $340,000.

In te U.S. 2011 was the worst sales year on record (over 50 years)

A total of 456,749 homes traded hands via Canadian MLS® Systems in 2011. This stands broadly in line with the average over the past ten years, and represents an increase of 2.2 per cent from annual levels reported in 2010.

Says the Canadian Real Estate Association:

“The momentum in sales activity provides clear evidence that low interest rates continue to draw homebuyers to the housing market,” said Gary Morse, CREA President. “While buyers have become increasingly cautious, the hand off for sales activity going into the New Year suggests that Canada’s housing market will continue to benefit from low interest rates in 2012, and continue making a significant contribution to Canadian economic activity. Even so, prospects among housing markets and neighbourhoods differ, so buyers and sellers should talk to a local REALTOR® to understand how trends are shaping up where they live.”

The number of newly listed homes rose three per cent on a month-over-month basis, reversing an equivalent monthly decline in November. New listings rose in almost 70 per cent of local markets, including some of Canada’s most active.

With sales and new listings having climbed in tandem, the national housing market remained in balanced territory in December. The national sales-to-new listings ratio, a measure of market balance, stood at 54.8 per cent in December, down slightly from 55.5 per cent in November.

Based on a sales-to-new listings ratio of between 40 to 60 percent, just over half of local markets in Canada were balanced in December. This result is little changed from November.

The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is a further measure of the balance between housing supply and demand. Nationally, it stood at 5.8 months at the end of December, down from 5.9 months at the end of November. While it has held fairly steady near six months since April 2011 onward, it peaked in August, with December marking the fourth monthly decline and a return to where it stood at the end of the first quarter".

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