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Message: Lot of Reading here .....
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Today's Commentary on Economic & Resource Stocks News by Ian R. Campbell, FCA, FCBV
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August 8, 2012 |
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In Today's Newsletter
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Today's Detailed Commentaries
Eurozone >> Italy: Update on Italy - reading time 2 minutes
World >> Economy: The consequences of contagion? - reading time 2 minutes
World >> Economy: Are Central Banks now emasculated? - reading time 2 minutes
Brief Commentaries prompted by world headlines
Eurozone >> Greece: Precedent setting austerity to begin - reading time 1 minute
Eurozone >> Italy: S&P downgrades 15 Italian banks - reading time 1 minute
Brief Country Risk Commentaries prompted by world headlines
Central America >> Guatemala: Reversal of previous position on mining ownership by State - reading time 1 minute
Important Snippets From Today's Commentaries
Important Snippets from today's commentaries - reading time 1 minute
Newsletter Methodology & Objectives
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Today's Detailed Commentaries
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Why Read: Because Italy may already be 'the next big thing' in the Eurozone economic crisis. Everyone needs to be aware of that, and one 'buries their head in the sand' on this at their own peril.
Commentary: In 2011 Italy's GDP rang in at U.S.$2.2 trillion, making it the Eurozone's third largest economy after Germany (U.S.$3.6 trillion), France (U.S.$2.8 trillion), and larger than 4th largest Spain (U.S.$1.5 trillion). In 2011 Italy's reported GDP was just over 3% of world reported GDP.
To put the Eurozone's 2011 combined 17 country GDP in perspective, at U.S.$17.6 trillion it was 16% larger than that of the United States.
Reports today say that Italy's economy contracted by 0.7% in Q2 2012, which is the third consecutive quarter of Italian recession - with no end and seemingly worsening conditions in sight.
Moreover, one news report this morning reproduced an interview with Italian President Mario Monti where - assuming the interview is reported correctly - he is quoted as saying (among many other things):
"If everything goes according to plan, I will remain in office until April 2013, and I hope that I can rescue Italy from financial ruin by then -- and this with moral support from a few European friends, led by Germany".
On the face of things, and assuming Mr. Monti meant what he apparently said and he didn't fall victim to using 'a bad choice of words', for him to say "I hope I can rescue Italy from financial ruin by then (April 2013)" can't be thought of as trite. April 2013 is only 9 months away.
If Stephen Harper, Canada's Prime Minister, made such a statement, I would be immediately be 'in the market' for the best arable, secluded farmland I could find - preferably since it is August, with this year's edible crops well on the way to maturity.
Note: GDP source - Wikipedia
Topical Reference: Here's The Interview With The Italian Prime Minister That's Made The Rest Of Europe Livid, from Business Insider, Joe Weisenthal, August 6, 2012 - reading time 2 minutes; Italy sinks deeper into recession as Monti's problems swell, from The Globe and Mail, from Reuters, August 7, 2012 - reading time 2 minutes; and Debt crisis: As it happened - August 7, 2012, from The Telegraph, Matthew Sparkes, August 7, 2012 - reading time 1 minute.
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Why read: Because if you think about it, this can be argued to offer a suggestion (and a warning) of how much at risk the so-called 'systemic country economies' currently are.
Commentary: The International Monetary Fund has, in a report titled 2012 Spillover Report, attempted to quantify potential world effects that may arise from economic difficulties faced by China, the Eurozone, Japan, the United Kingdom and the United States. These countries are referred to as the five 'systemic economies'. I have taken 'systemic' to mean the 'most cross-linked', and hence those most susceptible to 'contagion' if one or more serious economic events or problems arises going forward.
The IMF seems to think that if the European Union authorities don't 'act in time', Eurozone growth will be negatively impacted by 5%, the U.S. growth by about 2%, and growth for the other three by between 0.5% - 2.5%. That leads, or so I think, to the following important questions: Intuitively, I suspect the IMF's conclusions are 'inadequate on the low side' if there ever proves to be serious contagion issues. I also think that politicians in the Eurozone and America have both 'left it too long', in circumstances where I believe more quantitative easing - if and when it comes - will be nothing more than a band-aid stuck on the wound created by a leg amputation.
You can link to the IMF 'spillover report' through the referenced article, and read it for yourself. Dated July 9, 2012, it is a 20 page report that strikes me as 'more than a little' academic in its approach to what has to be an extraordinarily difficult thing to analyze.
Topical Reference: How Bad Could EU Crisis Get? IMF Attempts an Answer, from The Wall Street Journal, Real Time Economics, Ian Talley, August 6, 2012 - reading time 2 minutes.
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Why Read: Because Mohamed El-Erian is, on the face of things, a very smart and experienced money manager who from my perspective writes in a quite balanced and timely way.
Commentary: You may recall that last week I said in so many words when discussing Fed Chairman Bernanke's remarks made last Wednesday at the close of a two day Federal Reserve Board meeting that it seemed to me he was 'keeping his powder dry' pending subsequent economic development in both the Eurozone and the United States.
You might want to read a short article written by Mohamed El-Erian, Pacific Investment Management Co.'s chief executive officer and co-chief investment officer, and the author of the book 'When Markets Collide'. Mr. El-Erian makes three important observations, saying: To put Mr. El-Erian's comments in proper context, I suggest you read the short referenced article.
Topical Reference: Central banks can't save the world this time: Mohamed El-Erian, from The Financial Post, from Bloomberg News, Mohamed El-Erian, August 6, 2012 - reading time 2 minutes.
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Brief Commentaries prompted by world headlines |
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I suggest you take the time to quickly scan the referenced article from Monday's Ekathimerini newspaper. Ekathimerini is Athens based. Hence its reporters generally are more 'feet on the street' when speaking of economic and other developments in Greece than are reporters from International media groups - or so I think.
Last week the Greek Government agreed on the 11.5 billion euro austerity program required pursuant to its previously agreed 130 billion euro 'bailout arrangement'. However, the 'proof of the pudding is in the eating'. Now comes the interesting part - resistance to austerity cuts by the public service and Greek populace.
This is something to watch carefully, as what happens in the next months in Greece is highly likely to be repeated in Spain and other Eurozone countries that will have to suffer austerity in what are in many cases already seriously distressed economies.
Topical Reference: Greece's new pledges will take epic battle to implement, from Ekathimerini, Dina Kyriakidou, August 6, 2012 - reading time 2 minutes.
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On Friday, August 3 Standard & Poor's downgraded the credit ratings of 15 Italian banks, citing a potentially longer and more prolonged recession than S&P had anticipated, and what S&P thinks is resultant Italian bank increased vulnerability to credit risk arising from: Is this by itself a big deal, probably not. It is one more event that points to further deterioration in the economy of the Eurozone's third largest economy - almost certainly.
Topical Reference: Mass downgrade: S&P Frowns on Italian Banks, from Fox Business, from Reuters, Philip Aldrick and Richard Blackden, August 3, 2012 - reading time 2 minutes.
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Brief Country Risk Commentaries prompted by world headlines |
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In an interesting 'about face' Guatemalan President Otto Perez Molina has withdrawn two proposed amendments to the Guatemalan constitution that would could have seen possible state ownership in mining projects of up to 40%.
While on the face of it, that is positive to any company with mining exploration, development or production interests in Guatamala, one ought to consider that what is 'changed today' might 'change back tomorrow' if political and economic conditions change in Guatamela or any other country.
Topical Reference: Guatemalan president withdraws proposed constitutional mining law reform, from Mineweb, August 6, 2012 - reading time 2 minutes.
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from Today's Commentaries
Snippet #1: Assuming Mr. Monti (the Italian Prime Minister) meant what he apparently said and he didn't fall victim to using 'a bad choice of word', for him to say "I hope I can rescue Italy from financial ruin by then (April 2013)" can't be thought of as trite. April 2013 is only 9 months away - read Commentary.
Snippet #2: I think that politicians in the Eurozone and America have both 'left it too long', in circumstances where I believe more quantitative easing - if and when it comes - will be nothing more than a band-aid stuck on the wound created by a leg amputation - read Commentary.
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Each morning we personally filter over 600 economic and resource articles published in the previous 24 hours. We select those we think to be particularly important, comment on their subject matter, and give you balanced views that save you time. Our objective is to help you keep up to date, generate new ideas, and make your own 'penny drop'.
Write to us at info@stockresearchportal.com.
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Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges.
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