KISS News

1.Fitch Ratings Tuesday said Italy is the euro-zone member that poses the greatest threat to the future of the currency bloc, as the lack of a region-wide plan to prevent the sovereign-debt crisis from spreading has been coupled with the country's large debt burden and high borrowing costs. David Riley, head of global sovereign ratings at Fitch, speaking at a conference in London. "Italy is the front line of this crisis," Mr. Riley said, adding the country's elevated government bond yields have "marked a profound intensification of the crisis." Italy's 10-year government bond was yielding 7.13% Tuesday.


COMMENT: For every $100 produced in Italy, $120 of credit is required. This credit is now compounding at 7% p.a.


2.Turkey Gas and Oil:  Petar Shkrbina told SETimes. "Erdogan knows that Europe needs Turkey and not the other way around. The main networks of gas and oil pipelines will go through Turkey." Analysts are unanimous that the pan-European corridor No. 10, which will connect the Balkan countries with the rest of Europe, will command the economic attention of Turkey. The corridor's left wing will secure a transportation connection between Turkey and the Balkans, and Turkey and the EU. 


3.Russia’s total capital outflows in 2011 were $84bn as political uncertainty in the fourth quarter caused volumes to rise sharply. Most of the total was recorded in the fourth quarter, following the news at the end of September that Vladimir Putin, the prime minister, would be returning as president in this year’s elections. Following that announcement, $37.8 bn in assets were transferred abroad.


COMMENT: This is not an instant crisis. Russia has a consistent source of foreign currency from oil and raw material exports. It is, however, an indicator of an unstable political situation in that country.


4.James Dines has been around a long time. He was the "Original Gold Bug", the "Original Rare Earth Bug" and is a guru on technical analysis of markets. .  He also wrote a book about "Mass Psychology" where he discusses the "Mass mind". He compares the new geopolitical markets to the Mass Mind and coined the word "murmurations". With this word he creates an analogy to a flock of birds flying in unison, or a school of fish all darting in perfect formation. Its amazing how these formations, sometimes miles across, manage a perfect parallel movement. These murmurations are leaderless and remind Dines of todays markets.


5.These leaderless murmurations also have a political analogy. Think Islamic Spring, Occupy Wall Street and The Tea Party. These movements appeared out of nowhere and presently have merged into the landscape.


6.It has been almost non-stop political turbulence for Egypt since the revolution which ousted Hosni Mubarak as president last year. Tourism receipts have declined from $12.5bn in 2010 to $8.8bn last year. The majority of tourists are from Russia, Britain and Germany. It looks like Egypt's loss is Dubai's gain as tourism to that country is increasing.


COMMENT: What's surprising is that they have any tourism at all. Prices have fallen, so follow the money....


7.The United Arab Emirates has become the latest country with which China has signed a currency swap agreement, worth 35bn yuan ($5.5bn), aimed at promoting bilateral trade and that could boost the renminbi’s role in the Middle East. Bilateral trade surged nearly 40 per cent last year to $32bn with Chinese exports to the UAE amounting to $24bn. Since 2008, China has made currency swap agreements, amongst others, with Pakistan, Japan, Indonesia, Thailand and Turkey. In all 14 countries and counting. The idea behind these swaps is to provide “seed money” for China’s trade partners so that trade can be conducted in an alternative currency – read: renminbi – instead of the US dollar. 


COMMENT: Think "murmurations", think of Iran's problem with payments for oil in USD. Make the connection.


MARKETS: The Dow seems to be waiting for a real test. Volume is in the low to average range. This market is making me nervous. GOLD seems to have stabilized and is looking for a reason to rise. The USD is strong at the top of its range, more because of a weak Euro than a strong Dollar. DR COPPER is steady, as is OIL. All this steadiness is an invitation to a murmuration.


The problem with socialism is that you eventually run out of other people’s money -  Margaret Thatcher