KISS News

1.Italian bond yields continue to climb to new euro-era records, with bonds sold within the past few days going at 7.89 percent — a level at which Greece, Ireland and Portugal were all forced to seek bailouts. Italy has a stronger financial position and more domestic capital than the eurozone’s three bailout states, but there is still an upper limit to what Rome can afford and the markets are pushing Italy ever closer to a break point. FACT: Italy's debt is 120% of GDP. Its unserviceable. Simply put, for every 100 lira of goods and services produced, it costs 120 Lira of debt to produce it. Italian debt is growing at 20%p.a. more than Italy produces per annum.


COMMENT: Despite the latest co-ordinated move from Central banks, Europe is not out of the water yet. In fact, the latest central bank moves indicate how dire the situation might really be.


2. A year ago Egypt's foreign currency reserves stood at $35 billion. In January of 2012 they are expected to be $15 billion of which $5 billion are earmarked for foreign debt payments. These reserves are used mainly to purchase food (mainly wheat and corn), weapons and other commodities on world markets. A major income earner for the Egyptians is tourism, so don't look for improvements in the balance sheet any time soon. P.S. What happened to the billions in aid Obama and Hillary announced in May?


COMMENT: The Islamic Spring doesn't seem to be working for them, elections and all. Expect the Egyptian pound to be devalued sooner rather than later.


3.FT: China began serious easing last Wednesday as fears of a slowdown forced it to cut its reserve requirement ratios (RRRs) for all banks by 50 basis points. However Fitch, the ratings agency, argues that such a small cut will have no meaningful impact on credit expansion. Even more worryingly, Fitch raises serious concerns about Chinese banks’ liquidity levels and says their ability to weather a coming storm of asset deterioration really isn’t what it should be. As such a ratings revision could be on the cards. 


COMMENT:The Shanghai market index peaked at 5900 in 2007 and is now trading at 2325. Thats quite a fall. If you ask me, the slowdown in China is far more significant than the European crisis.


4.Economic growth in Brazil slowed to zero in the third quarter of 2011 from the second quarter, according to the country’s statistics institute. Compared with the third quarter of 2010, the economy grew by 2.1 per cent. Even more significantly, In the third quarter of 2010, the economy was growing at 6.9 per cent year on year. 


COMMENT: So now we have a slowdown in both China and Brazil


5.Syria struck out at Turkey in response to Turkish sanctions by imposing 30% tariffs on Turkish imports. This will bring trade to a standstill between the two countries that had expanded their trade to well over 2 billion dollars a year. The Syrian Pound has lost 25% of its value since March.


COMMENT: Expect the same from other currencies affected by the Islamic Spring. This might look like springtime for the countries involved, but financially they are on the verge of implosion.


6. When Warren Buffett talks, investors listen. And today's revelation that Berkshire Hathaway  subsidiary MidAmerican Energy Holdings is buying the 550 MW solar power plant being built by First Solar should have every energy investor's ears perking up. The project will cost over $2 billion, no chump change even for Buffett, and adds to MidAmerican's large portfolio of wind generation assets. 


COMMENT: The huge oversupply of solar panels, compounded by cheaper Chinese prices has led to a big selloff in the shares prices (40%-60%) of these companies. So when the stress peaks and the risk appears to be high, guess who turns up for the long-term investment. Say what you want about this guy, he deserves to belong to the one percent. 


MARKETS: The Dow is trading quietly at the top of the 10000-12200 range. No jump in volumes to indicate a breakthrough (yet). The USD, Gold, oil and Dr copper are all in their trading ranges, so nothing much to report. So despite all of the above, its all quiet on the western front. Others might describe it as the quiet before the storm.


You cannot help men permanently by doing for them what they could and should be do for themselves - Abraham Lincoln