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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