• some of which is excellent:

• some of which isn’t so excellent;

• a lot of which simplistic; and,

• some of which seems to be written from ‘vested interest perspectives’.

This commentary includes views you may want to consider carefully if you participate directly or indirectly in the physical gold or gold stocks markets either as investor or trader.

Gold Companies and Gold Companies

Some commentators talk and write about ‘gold mining stocks’ as if they ‘are all the same thing’, and all fall into one broad category.   That is overly simplistic.  It is important when reflecting on ‘gold stocks to carefully distinguish between companies that:

• are exploring for gold, which companies can properly be described as gold exploration companies, but not ‘gold mining companies’.  Broadly speaking, gold exploration companies are speculative investments/trades, where the degree of speculation is based at any given point in time on whether a given company has:
• yet to find what may prove to be commercially viable deposits (at the most speculative end of the ‘speculation curve’), or
• Has found what are believe to be possible commercially viable deposits and are about to begin the ‘development phase’ (the least speculative end of the ‘speculation curve’).

Subject to prevailing and prospective financial market conditions, it is arguable that the best of the gold exploration companies represent what can turn out to be very high return investments/trades;

• have found commercially viable gold deposits and have entered the ‘development stage’ with respect to their project(s), but again are not as yet ‘gold mining companies’.  These companies can best be described as gold exploration/development companies.  Gold exploration/development companies arguably may be somewhat less speculative than gold exploration companies.  That said, investors and traders ought to be knowledgeable of at least:

• the prospects of reserve and resource quantity enhancements during the development period, and after production starts,

• increasing ‘Country Risk’ in some jurisdictions – and what may be further increased ‘Country Risk’ going forward in those and other jurisdictions,

• developer ‘timing to production’ – and what might happen to the gold and by-product (copper, nickel, silver, etc.) prices, net cash on hand, and resultant potential shareholder dilution issues that may arise from required new capital raisings through the development period,

• the escalating operating and environmental costs that may affect facilities construction costs, equipment costs, and prospective year/year operating cost increases per ounce of production – and hence may affect the ultimate economics of the project(s) under development, and

• Importantly, how ‘locked-in’ a particular company’s Board and Management is to developing their project(s) through to production, as contrasted with pursuing a ‘sell to strategic purchaser’ strategy.  Arguably investors and traders face greater share price risk in a ‘develop to production’ scenario – particularly if financial markets are more than less volatile and risky during the development period; and,

• producing gold, and hence can legitimately be called ‘gold mining companies’.

Underlying Financial Market Assumptions and Issues

Commentators talking and writing about ‘gold mining stocks’ often seem to base their views on unstated underlying assumptions that:

• the financial markets are properly reading the current macro-economic climate, and

• the current financial markets at least will maintain a ‘status quo’ equilibrium going forward.  That is, that world financial markets will not at some near-term or longer-term date experience a financial crisis that is in scope less than, equal to, or greater than, the one experienced in 2008.

Commentators also frequently seem to base their views with respect to ‘gold stocks’ to a greater degree than perhaps they should on historic financial market experience – this having regard to the:

• extent of economic globalization that has occurred after 1999,

• extent of trading volumes currently being executed pursuant to high-frequency algorithmic trading methodologies,

• extent of hedge fund and derivatives activity that currently exists, and

• Levels of volatility and risk related to sovereign debt leverage and other factors that ultimately must bear on the world financial markets.

For the foregoing and other reasons the current financial markets arguably are quite different in many important respects from the pre-2000 financial markets, and to some degree different from the pre-2008 financial markets.

Finally, some commentators in the current financial markets environment also seem to have forgotten, or now discount, what happened in the fall of 2008 when many investors and traders had to sell out positions based on margin calls and ‘flight to investment/trading safety’ reasons.

It is important to always remember that rising tides raise all boats, and falling tides drop them, often leaving some ‘high and dry’.  Gold exploration, development, and mining stocks are unlikely to be exceptions to that rule.

Consider carefully whether the Financial Markets ‘May Be Right’ in their Current Gold Mining Share Pricing

With that background, consider that gold mining company share prices (read ‘shares of companies that actually produce gold) are not simply ‘derivatives’ of gold (as suggested by at least one commentator), nor are ‘gold’s fortune’s’ the ‘only real long-term fundamental’ of gold stocks (as recently suggested by a second commentator).  That said, it is correct to say that at any given point in time the prices of gold mining stocks (and gold exploration and gold development company stocks) are influenced by the then gold price and then expected gold ‘trend price’.  In turn, it currently seems that the price of physical gold is being continuously influenced by a financial markets perception that the U.S.$ is itself a safe haven in turbulent economic times.

Following from the foregoing, the financial market ‘disconnect’ perceived by some may well simply be that the current prices of gold mining (producing) stocks are, aside from the physical gold price, result from strongly being influenced by important risk and operating cost issues, including:

• country specific risk issues;

• mine equipment and operating costs, which broadly seem to be escalating;

• skilled labour scarcity, where that currently is being broadly reported as an issue;

• environmental costs, which broadly speaking, seem to be escalating; and,

• the fact that, unlike non-resource businesses, gold mining (producing) companies at any point in time have a finite life – baring continued resource acquisition or deposit expansion.  As a consequence, analysts have great difficulty applying conventional discounted cash flow valuation methodologies to those companies.  As a result, analysts may be less comfortable with their analysis of gold producers in current markets than they are with their analysis of ‘more conventional’ companies.  If that indeed is the case ‘less comfort’ implies ‘greater risk’, and hence in both theory and typically in practice ‘lower share prices’ than might otherwise be the case.

Finally, gold producer stock prices may also currently be influenced (downward from what they otherwise might be) by the proliferation of ETF’s and other paper gold instruments.  Simply put, investors and traders currently have physical gold investment/trading alternatives that didn’t proliferate until after late 2004.  These alternate gold investments/safe haven holdings eliminate country risk and operating cost/environmental cost risks in the context of investor/speculator/trader buy/hold decisions.

It follows (or ought to follow) that for gold mining (producing) companies to be attractive going forward they will need to be able to demonstrate at least the following things:

• significant leverage on the gold price through clear and known scheduled growth in output over the course of their known mine lives; and,

• attendant internal cost controls per ounce of production, which costs are dependent on deposit type, deposit location, deposit grades, local labour costs, and a plethora of other things,

Thereby to some degree offsetting the business and operating risks implied by the foregoing.

So What Does All This Mean?

As a result of the foregoing, it can be argued that:

• absent a seriously increased gold price from current levels, the foregoing factors may lead to diminished world gold production, which in turn over time ought to be reflected in higher prospective physical gold prices.  However, that will not be a short-term phenomenon should it transpire; and,

• Under any circumstance, this may mean that share prices of lower grade, high cost gold producers operating in higher country risk jurisdictions will suffer going forward.

Moreover, these things may, in combination with what appears to be ever more worrisome world macro-economic issues, result in;

• a positive impact on both:
• the gold price over time, and
• the share prices of high grade, comparatively lower cost gold miners that operate in the safest (least country risk) mining jurisdictions; and,

• potential increased merger & acquisition activity among gold producers, explorer/developers, and explorers where:
• gold producers are able, through either merger or acquisition, add commercially viable gold reserves or prospective reserves to their property portfolios, and/or
• business combination ‘synergies’ can be achieved to reduce total cash costs per ounce.

That said, make no mistake, generalizations with respect to gold companies and their share prices – be they explorers, explorer/developers, or miners – are very dangerous, and broadly should be viewed with skepticism.  Gold companies at all levels are participants in a highly speculative, high risk industry where their revenues are driven by world prices they themselves do not control.  They can, of course, hedge to protect their revenues if they elect to do that – but based on existing accounting rules, hedging itself can be harmful to earnings per share in a ‘rising gold price’ environment.

Conclusions

In conclusion:

• Gold mining companies arguably are the least speculative of the three types of ‘gold companies.  That said, investors and traders ought to be aware of and understand all of the foregoing if they plan to own or trade gold mining company shares;

• As a generality, high potential returns ought to follow from high risk investment/trading.  That said, in order to balance those things, investors and traders ought:
• to both understand and have a well founded opinion of overall financial market risk at any given point in time based on an understanding of how financial markets work and what influences them – and a clear understanding that stock, bond, and other financial instruments are priced by the financial markets at any given specific point in time, and can change (sometimes dramatically) in short order,
• to have a well founded opinion of the ‘drivers’ that impact each individual gold mining company whose shares they invest in or trade.  In particular, while it is trite, investors and traders should focus at all times on the fact that all companies within any given corporate sector ‘are not created equal’, and
• to assess carefully whether the experience, the apparent common sense, apparent intelligence, apparent independence (or vested interest) of those who express opinions on specific corporate sectors or specific companies within those sectors, lend to or detract from ‘commentator credibility’ – and weight their commentaries accordingly.

We live in complex and difficult macro-economic times.  Ultimately, whatever happens in the world and in country specific economies will influence the financial markets.  A simple message:  ‘Do not be taken in by generalities, or by opinions that fail to provide the underlying significant assumptions (and logical support for those assumptions) that back up those opinions’.  There is a lot of unsupported opinion to be found on the Internet and elsewhere.

Going forward, specific gold exploration companies, gold exploration and development companies, and gold mining companies may prove to provide excellent risk/reward investments or trades.  That said, tread carefully, listen to and read much, be highly skeptical and cynical, and ‘think for yourself’ at all times – but particularly in the current economic and financial markets environment – before ‘jumping off the diving board into the pool’.

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

Spain’s problems add pressure on Europe’s leaders to accelerate crisis response

Overview:  Discusses ongoing Eurozone woes, contagion concerns
Source:  The Washington Post, Howard Schneider, May 29, 2012
Reading time:  4 minutes

The End Of The Euro: A Survivor’s Guide

Overview:  Discusses possibility of ‘the euro as we know it is gone’
Source:  The Baseline Scenario, Peter Boone and Simon Johnson, May 28, 2012
Reading time:  5 minutes

Abridged E-mail Commentary

A Speculation – Not an Opinion!

Why Read:  Because arguably what is going on the U.S. over the Facebook IPO paints a bleak picture of the ‘state of the U.S. financial markets’.

Commentary:  As undoubtedly you all know, class action lawsuits commenced last week immediately following the Initial Public Offering of Facebook shares.  Speculatively, this is happening for at least the following reasons:

• many, if not a large majority, of those who participated in the IPO likely thought that Facebook shares would jump upward from the initial offering price immediately after the IPO closed – much as Google shares did when Google went public – and that ….. (continue reading)

Commentary reading time 2 minutes.

Today’s Unabridged E-mail includes four other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• More on Spain;

• Eurozone inflation;

• Even more on Spain; and,
• Greek retail sales.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Gold Miner Requirement – U.S.$3,000 Gold Price Within 5 Years!
• Spain and Spanish Bank Dilemma!
• Sprott On Economic Fundamentals (and Gold)
• Gold, Interest Rates, Price Forecasts?
• Gold, Inflation, Other Factors!

Gold and Gold Miners is a post from: StockResearchPortal.com Blog

• Spain’s near-term and longer term economic future;

• the Eurozone; and,

• Pursuant to contagion, the rest of us.

Featured Article:  An article published late yesterday afternoon discusses a ‘new report’ (presumably released yesterday) that Spain may need to inject a further 30 billion euros into its banking system – over and above the 19 billion euros announced last Friday.  These further funds are said to be required as to:

• 10 billion euros for bank ‘balance sheet clean-up’; and,

• 20 billion euros to increase bank capital levels.

Concurrently, Spain’s equity markets fell yesterday, Bankia SA shares fell yesterday, and Spain announced April retail sales were almost 10% less than they had been in April, 2011.

Commentary:  This new ‘Spanish bank shortfall’ news continues to raise a rather dismal specter which no media ‘talking heads’, reporters, or commentators seem to picking up on in ‘the heat of the moment’.  Simply put, it seems as if the Spanish Government, regulators, economists, etc. have little idea of what Spain faces in euro quantum terms relative to the Spanish bank capitalizations and working capital requirements – and who knows what else.  Consider:

• It has been less than two weeks since the Bankia SA underfunding situation came forefront to the news.  Initially said to be a 15 billion euro problem, it rapidly became a 19 billion euro problem – and possibly counting, the way things are going; and,

• it is as if yesterday’s further possible negative Spanish bank funding requirement is a new idea; and,

• These announcements come at a time where Spain’s retail sales numbers are, not surprisingly given the unemployment levels in Spain, seeing a large latest month drop.

The important question in all of this is:  does anyone in Spain have a ‘good handle’ on what really is going on – and even more importantly what levels of funding, bank and otherwise, will be required in Spain as things continue to become known?

Too much seems to be happening too fast in Spain, as new Spanish financing requirements are announced almost daily.  Watch to see if this announcement trend continues.  While you do that, remember:

• Spain is the 12^th largest world economy, the 5^th largest European economy, and the 4^th largest Eurozone economy;

• Spain is too big to fail; and,

• negative things seem to be happening too fast – and the main and secondary medias are not picking up on that momentum speed change and what might prove to be:

• very negative implications for Spain, and

• By inference through contagion, the world economy and financial markets.

This Is The Report That Caused Spanish Markets To Collapse Today
Source:  Business Insider, Joe Weisenthal, May 28, 2012
Reading time:  2 minutes

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

Top Greek banks get fund injection

Overview:  Reports U.S.$22.6 billion Greek Government funding of 4 largest Greek banks, enabling them to re-access European Central Bank
Source:  The Financial Post, (from Reuters, Lefteris Papadimas and George Georgiopoulos), May 28, 2012
Reading time:  4 minutes

Crisis draws squatters to Spain’s empty buildings

Overview:  Reports on 32 evicted families squatting in empty new apartment building in Seville
Source:  The Financial Post, (from Reuters, Paul Day), May 28, 2012
Reading time:  2 minutes

Today’s ‘Speak For Themselves Country Risk’ World Headlines

Why Read These Headlines:  To Save Time and Stay Informed on Country Risk Issues

Zimbabwe puts squeeze on Zimplats’ banking

Overview:  Reports Zimbabwe Government has directed a company to ‘localise its offshore bank accounts’ and stopped ‘international transactions’
Source:  The Mining Journal, May 28, 2012
Reading time:  1 minute

Abridged E-mail Commentary

Must Read – Think For Yourself Article!

Why Read:  To be able to think hard about the beliefs of 37 year old Alexis Tsipras, who heads the leftist Syriza party, and who is considered by some a ‘rising star in Greek politics’.  Then, if you participate in the financial markets (or don’t, but simply want to reflect on what may lie ahead economically not only in Greece), think from 20,000 feet about what you have read and its possible implications.

Featured Article:  An article published yesterday in Spiegel Online International includes a recent interview with the aforementioned Mr. Tsipras.  After you read what Mr. Tsipras says, reflect on the possibility that he might ….. (continue reading)

Commentary reading time 2 minutes.
Referenced article(s) reading time 5 minutes.

Today’s Unabridged E-mail includes five other ‘ Speak For Themselves’ World Headlines dealing with the following topics:

• Japanese capital flight;

• Spanish retail sales;

• Bank of England euro preparations;

• Possible Greek/Swiss capital controls; and,

• Asian euro contagion.

Today’s ‘Speak For Themselves Country Risk’ World Headlines dealing with the following topics:

• Peruvian mine protest.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!

Spain – Significance of Apparent Lack of Knowledge? is a post from: StockResearchPortal.com Blog

Featured Article:  A short article purports to summarize what Christine Lagarde, IMF Managing Director, said when addressing Harvard University Kennedy School of Government graduates Wednesday at their convocation.  Ms. Largarde is reported as saying and referencing:

• “your generation is facing probably the worst economic insecurity in decades, possibly ever since the Great Depression”;

• “the inability of 75 million young people to find a decent job”;

• “rising inequalities that strains the compact holding our society together”; and,

• “a fear that the global economic engine will no longer deliver as it did in the past”.

Commentary:  Ms. Lagarde comes across as an intelligent, thoughtful, and balanced person who does her best to speak as objectively as she can from:

• what has to be an extremely responsible, and in the current economic environment difficult and frustrating office; and where,

• part of her task seems increasingly to be to attempt to persuade country leaders to follow a course of action that in her view (and presumably that of the IMF) will lead to world economic betterment.

That said, given her personal attributes, background, and day/day world economic communications at the most senior of levels, she is a person worth listening to – and in particular worth listening to as she adjusts her comments over time.  Previously France’s Finance Minister, from the time Ms. Lagarde accepted the position of IMF Managing Director (for a five year term) on July 5, 2011, she has spoken clearly and repetitively about how she thinks Governments ought to behave when facing the difficult economic times that continue to prevail.

Reading between the lines, it may well be that she is becoming increasingly frustrated with the manner in which the world economies are unfolding.  Certainly the message she conveyed to the Kennedy School graduates yesterday can’t be considered encouraging given that it came from one who has to be among the best ‘macro-economic informed’ people in the world.

IMF Chief: World Facing Most Economic Insecurity Since Great Depression

Source:  Wall Street Journal Real Time Economics Blog, Ian Talley, May 23, 2012
Reading time:  1 minute, thinking time longer

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

So much for ‘the Spanish dream’: Euro crisis turns suburbs into ghost towns

Overview:  Discusses Spain housing, Spain’s economy, and possible contagion

Source:  MSNBC World News, Ian Johnston, May 24, 2012
Reading time:  4 minutes

China’s Slowdown a Drag for East Asian Economies: World Bank

Overview:  Discusses World Bank Asian contagion concern related to China economic slowdown

Source:  Economy Watch, May 24, 2012
Reading time:  3 minutes

Abridged E-mail Commentary

Major Spanish Bank Trading Suspended Pending News!

Why Read:  To stay up to date on what could be important economy related news from Spain.

Featured Article:  An article this morning reports that shares in Spain’s fourth-biggest lender (Bankia SA) were suspended on the Madrid stock exchange today, ahead of an evening announcement when the bank is expected to ask the state for a rescue of more than 15 billion euros (U.S.$19 billion).  The article further ….. (continue reading)

Commentary reading time 3 minutes.

Referenced article(s) reading time 5 minutes.

Today’s Unabridged E-mail includes three other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• Canada residential mortgage debt;

• U.S. durable goods orders;

• Nordic bank credit downgrades;

• Europe economic slowdown; and,

• Spanish airport cut-backs.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!

World Economics in a Nutshell! is a post from: StockResearchPortal.com Blog

Featured Article:  An article reports that a recent Bank of Montreal survey reported that 51% of Canadians plan to retire prior to their home mortgages being paid out in full.  The article reports that Phil Soper, chief executive of Royal LePage Real Estate Services, a major Canadian realtor, has said that times have changed – and that he believes Canadians can handle the burden of post-retirement mortgage balances.  Mr. Soper is reported as having attributed this willingness to carry post-retirement mortgages to:

• the current generation being more sophisticated in its approach to personal finance than the previous generation;

• people living longer, working longer and making real estate plans longer or further into their lives; and,

• People moving into more expensive, upscale homes after retirement, which is said to be “not necessarily a dangerous trend”.

Commentary: In Canada residential mortgage interest incurred by homeowners is not deductible for personal income tax purposes, unlike residential mortgage interest that is deductible by homeowners in the United States.  For this and other reasons it follows that these survey results may be seen as highly surprising on a number of counts:

• Canadians, rightly or wrongly, generally have been perceived as being somewhat conservative.  Most Canadians very likely will be surprised by this survey result, in circumstances they would have believed most Canadian homeowners over 60 years of age had discharged their home mortgage obligations;

• the reasons given by Mr. Soper are curious, assuming his comments have been properly interpreted by those writing and editing the referenced article.  This is because:

• personal finance is not exactly the most complex of things.  One has a certain amount of expected income, and a certain amount of non-discretionary expense.  The only real trick to personal finance is managing discretionary expenses and not spending beyond one’s means.  To suggest the current generation of +50 year olds is more financially sophisticated than the last can be argued to imply the current generation broadly speaking has more common sense than did their parents.  That is very doubtful, particularly given as a generalization what appears to be the comparative state of their personal finances,

• There is no doubt Canadians, on average, are living longer.  That they will work longer as a practical matter may prove to be the case, but this almost certainly will occur at the expense of Canadian youth – and almost certainly will not be a good thing,

• Mr. Soper ought to be assumed to be right, given his position, that people are moving into upscale homes after retirement.  Assuming that to be the case, further definition is required.  It is one thing for a retired person to sell a high-priced house, and to buy another high-priced house in a different location.  It is quite another for a person who does not have a high priced house to sell to buy a high priced house close to retirement age, or after they have retired.  The latter seems highly unlikely – at least in any large numbers of transactions, and in circumstances where incremental dollars are spent on the replacement property, and

• For Mr. Soper to suggest that retirees moving into expensive, upscale homes after retirement to be “not necessarily a dangerous thing” may be a reasonable statement for those who are simply trading houses for like dollars for ‘location reasons’.  However, it is unlikely to be a reasonable statement if it includes near-retirees and retirees who are ‘moving up’ in their housing purchases;

• If the survey asked whether Canadians might or would consider executing a ‘reverse mortgage’ at or during their retirement years, that could (depending on individual circumstances) make financial sense.  A reverse mortgage is a financial instrument that as a practical matter results in a long-term sale of a person’s house while enabling the vendor to retain occupancy over what can be a long period of time; and,

• Importantly, if 51% of Canadians are planning to carry mortgages into retirement in an income tax environment where mortgage interest is not deductible, they can hardly be considered ‘financially sophisticated’.  This phenomenon may simply come down to Canadians enjoying a current life-style at the expense of their retirement life-style – much like their American ‘cousins’ who at least enjoy mortgage interest deductibility on their home mortgages every April 15 when they file their personal income tax returns.

In the end, if the reported survey is statistically valid, going forward the attitude toward home mortgages it conveys does not auger well for those Canadians who fall into the 51% who plan to carry house mortgages into their retirement years.  Hence, the survey results do not auger well for Canadians generally, since how the majority behaves has to impact the minority to some degree.

Half of Canadians plan to retire with mortgage: survey
Source:  The Financial Post, Garry Marr, May 16, 2012
Reading time:  4 minutes

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

EU urges Greece to remain in eurozone

Overview:  Discusses current Eurozone leader debates

Source:  The Financial Post, Claire Davenport and Luke Baker, May 23, 2012
Reading time:  4 minutes

Unemployed out of luck as Fed quibbles over jobless rate

Overview:  Discusses U.S. unemployment rate and prospective rate

Source:  The Financial Post, (from Bloomberg News, Jeff Kerarns), May 23, 2012
Reading time:  4 minutes

Today’s ‘Speak For Themselves Country Risk’ World Headlines

Why Read These Headlines:  To Save Time and Stay Informed on Country Risk Issues

Ore export approvals moving in Indonesia

Overview:  Discusses developments in Indonesia arising from implementation of select mineral export bans and related taxes

Source:  The International Resource Journal, May 23, 2012
Reading time:  1 minute

Abridged E-mail Commentary

Transparency – Real or Imagined?

Why Read:  To help raise your economic antenna a little more.

Featured Article:  An article today reports (indirectly via the Financial Times) that the European Central Bank secretly has approved a 100 billion euro advance to the Greek banking industry in so-called ‘emergency liquidity assistance’.

The article attributes the following statements to Belgium’s Central Bank Governor:

• “you don’t say when ….. (continue reading)

Commentary reading time 2 minutes.

Referenced article(s) reading time 1 minute.

Today’s Unabridged E-mail includes four other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• Weakening China economy;

• United Kingdom recession;

• Germany manufacturing drop; and,

• Eurozone private sector decline.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!

Canadians and Home Mortgages – A Surprising Statistic! is a post from: StockResearchPortal.com Blog

Featured Article:  Last November, twenty-nine of the world’s largest banks were identified by the Financial Stability Board (FSB) as ‘systemically important financial institutions’. The FSB, comprised largely of (over 20) Central Banks, coordinates the work of national financial authorities and international standard setting groups, and develops and promotes the implementation of regulatory, supervisory and other financial sector policies.  Centered in Basel, Switzerland, currently it is chaired by Mark Carney, Governor of the Bank of Canada.  The initial list of twenty-nine banks, all of which might loosely be described as those ‘too big to fail’ – at least by reference to the 2008 activity of the United States Government, includes Bank of America, Bank of China, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, and UBS.

On May 17, an article reported that Fitch has said the twenty-nine banks identified by the FSB currently have U.S.$566 billion less in equity than they will be required to have to meet what are known as Basel III Tier 1 common equity rules – which appear to be might better termed ‘common capital rules’, a combination of common share equity and reported reserves (and certain specific types of preferred shares).  The article reports that Fitch Ratings has said:

• this U.S.$566 billion represents a 23% increase over the amount the twenty-nine FSB segregated banks currently collectively hold to meet 2019 common equity requirements;

• that to meet the 2019 deadline, these banks are likely to:

• cut shareholder dividends,

• wind down exposures to risky assets,

• raise new capital, and

• negatively affect the profitability of these banks; and,

• this may lead to:

• increased borrowing costs (and presumably reciprocal increased interest rates to bank both commercial and retail bank customers),

• less availability of credit, and

• a shift of capital markets funding to less-regulated areas of the financial system, such as hedge funds and private equity.

Commentary:  Aside from being complex, a great deal of this is speculative and ‘off in the future’.  That said, it sounds ‘directionally right’ in concept.  However, at the same time it seems impractical, or at least very difficult to achieve, given the current and prospective world economic climate and lack of significant real growth in the developed economies.  U.S.$566 billion is not a trite amount of fiat currency – even in the current age when the word ‘trillion’ used in the context of U.S.$ and Euros has become commonplace, and at least one recent edition of the Monopoly board game gives players (including children and teenagers) a $2 million ‘salary’ for passing ‘Go’.

As an aside, consider the message being sent to those children and teenagers (and presumably some adults) when they receive $2 million for passing ‘Go’, instead of the $200 they received when playing previous versions of Monopoly.

In essence:

• regulation seems to be increasingly being substituted in what is a world fiat currency system for the stability that is forced on governments by a ‘monetary asset system’ such as the pre-August 1971 ‘form of gold standard’; and,

• regulation by individual countries or ‘groups of country representatives’ has to be more complicated and in the long run less likely to succeed than would be reversion to a much simpler, more understandable, and ‘less loophole friendly’ regulatory system.

Finally, you might want to consider the consequences to ‘required U.S.$ (or equivalent) new equity raises that might be necessary for those banks to meet the 2019 regulatory capital hurdles in circumstances where they may face larger asset write-downs than currently are contemplated if the world economy continues to go sideways or erodes further.

Fitch Warns Banks Must Raise $566 Billion in New Capital
Source: DealBook, Mark Scott, May 17, 2012
Reading time:  3 minutes, thinking time much longer

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

China Warns Australia to Choose “Godfather” – China or U.S.
Overview:  Discusses recent statement made by a former senior officer of China’s People’s Liberation Army
Source:  Oil Price Blog, John Daly, May 22, 2012
Reading time:  3 minutes

High Unemployment: Cyclical or Structural?
Overview:  Discusses U.S. employment – structural unemployment is worse than cyclical unemployment
Source:  Brookings, May 22, 2012
Reading time:  4 minutes
Source:  The Financial Post, Agence France-Presse, May 22, 2012
Reading time:  1 minute

Abridged E-mail Commentary

Francine McKenna On JP Morgan (and Goldman)

Why Read, Watch and Listen To:  For an overview of what may prove to be a larger JP Morgan problem than currently is generally being reported, and to learn of alleged possible Goldman Sachs issues.

Featured Video:  A video today sees an interview with Francine McKenna commenting on the current JP Morgan ‘hedge fund news’ and its possible implications as she sees things.  The interview includes reference ….. (continue reading)

Commentary reading time 2 minutes.
Referenced article(s) reading time 14 minutes.

Today’s Unabridged E-mail includes five other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• Youth unemployment;

• IMF on United Kingdom;

• Current gold price;

• Greek bailout payment; and,

• China growth rate revision.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Greek Eurozone Exit Consequences?
• Q1 2012 Europe and Eurozone GDP!

Fitch on Banks! is a post from: StockResearchPortal.com Blog

Featured Article:  A recent article reported that Aram Shishmanian, CEO of the World Gold Council has said that the physical gold price will need to reach U.S.$3,000 per ounce within five years “for the industry to stay profitable” – this in circumstances where gold miners ‘currently needed a gold price of U.S.$1,300 per ounce to survive”.  Mr. Shishmanian is also reported as saying this required gold price increase has to do not only with escalating costs, but also the:

• cost of dividends; and,
• host nation taxes.

He also is reported as saying “If this continues for the next five years the gold price needs to be at least $3,000 per ounce (for gold miners) just to stay in the business”.

Finally, Mr. Shishmanian is reported to have said he was optimistic sustained demand would drive prices higher over the long term as future demand would come from emerging markets, central banks and investors.  In particular he seems to believe “emerging markets are going to hold increasing amounts of gold reserves (as) holding billions of dollars doesn’t help them. The alternative potentially is gold”.

Commentary:  United Kingdom based World Gold Council, with operations in the Far East, India, and the United States, is a non-profit organization of twenty-two of the world’s leading gold mining companies.  Collectively those companies generate approximately 60% of the world’s corporate gold production.  Mr. Shishmanian is a former head of Accenture’s global financial markets practice.  Accenture is a global management consulting, technology services and outsourcing company.  Information summarized from Wikipedia.

Given the World Gold Council descriptor and Mr. Shishmanian’s background it seems implausible that Mr. Shishmanian:

• would make the comments attributed to him without the prior knowledge of the executives of the gold mining companies that both sit on the World Gold Council Board, and comprise its membership; and,

• does not have a deep understanding of, or as a minimum a strong, well-founded opinion with respect to, what (reading between the lines) he seems to see as a likely unhappy outcome (read one or more further financial crises) to the current world economic turmoil.

Stated more directly, in order for Mr. Shishmanian to make the statements attributed to him, he and the gold mining executives and companies he indirectly represents must be strongly of the mind that the price of physical gold will trend higher from current levels.  Otherwise:

• those executives, skilled workers, and labour who work for gold exploration companies, gold developer companies, and gold mining companies all ought to start looking for jobs; or,

• Mr. Shishmanian made the statements he did unilaterally, which seems unlikely.

Gold miners need $3 000/oz price in five years – gold council
Source: Mining Weekly (from Reuters), May 15, 2012

Reading time:  2 minutes, thinking time much longer

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

Special Report: The algorithmic arms race

Overview:  Discusses changes in high frequency algorithmic trading

Source:  Reuters, Tommy Wilkes and Laurence Fletcher, May 21, 2012
Reading time:  7 minutes

Latest data raises red flags likely to burst China’s bubble: economist
Overview:  Reports on views of UK economist Albert Edwards

Source:  The Globe and Mail, Brian Milner, May 20, 2012

Reading time:  3 minutes

Abridged E-mail Commentary

American’s Focus on Europe Crisis!

Why Read:  Because this commentary ought to focus you on how carefully you have to read things before reaching your own conclusions.

Featured Article:  A May 17 article published by the Pew Research Center suggests “the (American) public’s lack of interest in Europe’s (economic) woes is part of a broader indifference to international news”.  The article, headlined ‘Public Yawns at European Economic Woes’ reports ….. (continue reading)

Commentary reading time 4 minutes.

Referenced article(s) reading time 3 minutes.

Today’s Unabridged E-mail includes three other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• Eurozone debt crisis;

• China’s economic policies;

• Fitch Japan downgrade;

• U.S. structural unemployment; and,

• Fitch on Canadian banks.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Gold and Gold Miners
• Spain and Spanish Bank Dilemma!
• Sprott On Economic Fundamentals (and Gold)
• Gold, Interest Rates, Price Forecasts?
• Gold, Inflation, Other Factors!

Gold Miner Requirement – U.S.$3,000 Gold Price Within 5 Years! is a post from: StockResearchPortal.com Blog

Featured Article:  An important article with a 17 slide PowerPoint presentation was published recently by Business Insider.  Said to have been generated following review of “several months of research”, the following overviews conclusions set out in the presentation.  In summary, among other things, the presentation suggests that if Greece exits the Eurozone:

• Greece will pass exchange rate laws for a ‘new drachma’, and will prevent outflows of bank deposits.  In turn, it is suggested this would contribute to a “massive” black market for the “new drachma”;

• the “new drachma” would collapse in value against other fiat currencies;

• Greek political and societal unrest will proliferate;

• the European Central Bank would face contagion difficulties, as would Eurozone Country Central Banks, to the point the respective solvency of some could be threatened;

• Greece GDP could be drop by as much as 50%;

• contagion could result in large outflows of deposits from Italian and Spanish banks;

• the European Central Bank might adopt measures toward fiscal integration of the Eurozone;

• the European banking system might of necessity infuse more money into the Greek banking system;

• the Euro would likely devalue against other fiat currencies in the short term, but less so than the “new drachma”; and,

• Enhanced litigation between Greece and foreign lenders could ensue.

Commentary:  Whether you invest in the financial markets or not, you ought to:

• read the short overview that precedes the slide presentation;

• review the detail set out in that presentation;

• think very hard about what you read;

• consider contagion and collateral economic damage issues; and,

• Discuss your own conclusions arising out of that process with your financial advisor(s), and with your most financially astute friends and acquaintances.

Given what is going on in the Eurozone – particularly with reference to Greece and Spain – but also with reference to France, Italy, Portugal, and The Netherlands to name but four other Euro countries, things seem to be increasingly spinning out of control.  At least it seems that way as evidenced by the ever increasing number of daily media reports, and the content of those reports.

GET READY: This Is What Happens If Greece Exits The Euro

Source:  Business Insider, Simone Foxman, May 17, 2012

Reading time:  6 minutes, thinking time much longer

You might also want to read on the same topic:

Economists React: What if Greece Exits the Euro Zone?

Source:  Wall Street Journal, Real Time Economics, Katie Martin, May 18, 2012

Reading time:  4 minutes

What Will a Greek Default Mean for You?

Source: Financial Sense Blog, Jeff Rubin, May 17, 2012

Reading time:  3 minutes

Today’s ‘ Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 750 articles canvassing economic and resource news

Whales in the gold market

Overview:  Discusses investment in physical gold by pension funds

Source: The Daily Gold Blog, William Bancroft, May 19, 2012

Reading time:  4 minutes

No Guarantee

Overview:  Discusses possible risk of financial crisis in China

Source: Chovanec Blog, Patrick Chovanec, May 19, 2012

Reading time:  7 minutes, thinking time longer

Today’s Unabridged E-mail includes three other ‘ Speak For Themselves’ Headlines dealing with the following topics:

• U.S. recession possibility;

• This week’s upcoming economic news

• Canadian oil reserves summary;

• China’s prospective metals appetite; and,

• Algorithmic trading and Greece.

G8 Weekend Summit?

Why Read:  To once again focus on the importance of ‘real’ economic growth going forward to developed and developing economies.

Featured Article:  A May 19 article that appeared in the China.org Blog reported on a Friday meeting of U.S. President Obama and just elected French President Francois Hollande held in advance of the G8 Summit meeting held this past weekend.  The article quotes President Obama as saying ….. (continue reading)

Commentary reading time 4 minutes.

Referenced article(s) reading time 5 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Q1 2012 Europe and Eurozone GDP!

Greek Eurozone Exit Consequences? is a post from: StockResearchPortal.com Blog

Why Read:  Because in our fiat currency world continuing GDP growth is of huge importance.

Featured Article:  An article earlier this week reported GDP growth for both the 17 country Eurozone and the 27 country European Union was 0.0% in Q1 2012.  The European Union includes the 17 Eurozone countries.

An accompanying PDF breaks that GDP growth down by country.  That breakdown reports that in Q1 2012 five of the thirteen Eurozone countries for which data is available, and four of the seven non-Eurozone European Union countries for which data is available suffered negative growth, as shown in the following table.  The table also shows reported Q1 2012/Q1 2011 comparisons:

Q1 2012 GDP currently is unavailable for four of the seventeen Eurozone countries, and for three of the ten EU countries.

Commentary:  The negative growth numbers set out in the following table have to be significant.  Economic recover depends on real (inflation excluded) GDP growth.  The Q1 2012 reported GDP results are indicative of likely continuing near-term economic deterioration, particularly for those countries experiencing negative Q1 2012 GDP numbers.  A cynic might consider whether the overall Eurozone and EU Q1 0.0% GDP growth rates were somehow contrived, although one would like to think that is not so.

Eurozone and EU country specific GDP is something to follow closely in the coming weeks, months and quarters.

Eurozone GDP Growth: 0.0%

Source:  Business Insider, Joe Weisenthal, May 15, 2012

Reading time:  5 minutes, thinking time longer

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

Europe’s Car Industry: If Plants Close, Then What

Overview:  Discusses overcapacity in European car industry

Source:  The Fiscal Times, Jennifer Clark, May 16, 2012

Reading time:  1 minute

Why U.S. Economy is Heading Back into Recession

Overview:  Discusses prospective U.S. economy direction

Source:  MarketWatch, Lakshman Achuthan interview, May 9, 2012

Watching and listening time:  4.5 minutes

Today’s Unabridged E-mail includes six other ‘Speak For Themselves’ Headlines dealing with the following topics:

• U.S. housing starts;
• Moody’s Spanish bank downgrades;
• Fitch Greek credit downgrade;
• Spain bank crisis;
• Tungsten dependence and importance; and,
• Spanish bank bad loan escalation.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?

Q1 2012 Europe and Eurozone GDP! is a post from: StockResearchPortal.com Blog

Why Read:  Because Youth Unemployment has to be at or near the top of both near-term and long-term economic issues that must be addressed, or if they aren’t, bring the ‘edge of the economic and societal cliff’ ever closer.

Featured Article:  A May 14 article focuses on Europe’s youth unemployment numbers.  The article reports that not only do many European countries currently suffer from serious youth unemployment rates, but also points out that while this may be a somewhat exacerbated problem currently, it is not a new phenomenon in many European countries.  For example, the article reports that while youth unemployment rates have reached 51% in Greece and Spain, 36% in Italy, and 30% in Ireland, the average youth unemployment rate for the past 40 years has been:

• 30% in Italy, where Italy’s GDP grew at an annual rate of 2% during the 1994 – 2000 period and Italy’s youth unemployment averaged 33% in those growth years; and,
• 32% in Spain, where Spain’s GDP grew at an annual rate of 3.6% from 1995 – 2007 and Spain’s youth unemployment averaged 28% in those growth years.

The article claims that these historic European youth unemployment rates are the result of structural and educational problems – citing Germany’s current ‘just over’ 8% youth unemployment rate and better coordinated school system and industry apprentice programs.

Commentary:  That said, irrespective of Europe’s past youth unemployment rates, youth unemployment simply has to be a very large and looming societal and economic problem in developed countries.  The following table sets out the 2011 GDP, latest reported population, and 2007 and current reported youth unemployment rates for seven of the world’s current 10 largest developed economies (2007 statistics for Japan, Russia and Australia not found):

 Sources: Wikipedia, various, referenced Guardian article

These 2007 and 2012 youth unemployment rate statistics are set out in the following table: 

A second article reports on youth unemployment in OECD (Organization for Economic Co-operation and Development) countries.  That article, published in The Guardian yesterday, has a number of interesting charts and tables that include many other countries – all of which charts and tables tell the same general story as set out in the foregoing table and chart.

Finally, a March, 2012 article reported the International Monetary Fund as saying the “the average unemployment rate among workers ages 15 – 24 is nearly twenty percent”.

The solutions to youth unemployment in developed countries, once one gets past structural issues (meaning improper or inadequate training for available jobs, or jobs not available in proximity to possible employees), in essence are two in number, neither of which is likely to reverse in the next several years:

• generate real (not inflationary) economic growth in the countries with youth unemployment problems.  Given the current general economic malaise in many developed countries, this is an increasingly unlikely scenario; and/or,
• establish lower forced retirement ages, thereby making jobs available to youth that are now being filled by otherwise retirement age people who are working to retain their life styles as best they can.  That said, the trend in legislated retirement ages is tending upward, as elderly people live longer, and as governments then have extended pension time horizons they want to offset.

The consequences that may or will flow from prevalent and increasing youth unemployment include:

• a sense of failure on the part of both uneducated and educated youth looking for jobs, not finding them, and watching their ‘expected careers’ either being postponed as to starting date, or slipping away entirely;
• an increased reliance on parents, relatives and friends for moral and financial support;
• an increase in ‘youth frustration’ with both those that govern the countries in which the unemployed youth live, those who do have jobs – perhaps in some instances focused on the ‘otherwise retired people’ who take jobs that youth would otherwise fill, and the society they live in generally.  At some point that frustration may manifest itself in anti-social actions by those youth whose ‘smart-phones’ and social networks enable ready communication among them.

The seriousness of this issue cannot be overstated.  Unfortunately, like many things today driven by economics, there are no ready practical answers.  Once again, it is frustrating to:

• be able to readily see a problem;
• not be able to offer one or more practical suggestions as to how to fix that problem in an expedient way; and,
• observe most people apparently so focused on their own problems that they seem ‘not have time’ to take their heads out their own sandbox and consider what is going on around them.  Unfortunately the obvious problems people don’t see today may prove be the ones that tomorrow will hit them over the head from behind.

Europe’s perpetual ‘wasted youth’

Source:  Business Spectator, Marco Annuziata (VOX EU), May 14, 2012

Reading time:  4 minutes

Also read:  Youth unemployment across the OECD: how does the UK compare

Source:  The Guardian, Ami Sedghi, May 16, 2012

Reading time:  3 minutes

Also read:  Global Youth Unemployment Rate Staggeringly High: ‘Lost Generation’ Feared

Source:  International Business Times, March 16, 2012

Reading time:  3 minutes

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

Spain could be locked out of the markets, says Mariano Rajoy

Overview:  Spain’s Prime Minister on state television

Source:  The Telegraph, Louise Armitstead, May 16, 2012

Reading time:  4 minutes

Debt crisis: Greek euro exit looms closer as banks crumble

Overview:  Discusses Greek bank withdrawals

Source:  The Telegraph, Ambrose Evans-Pritchard, May 16, 2012

Reading time:  3 minutes

Today’s Unabridged E-mail includes five other ‘Speak For Themselves’ Headlines dealing with the following topics:

• JP Morgan – possible higher losses;
• China economy;
• China real estate;
• China direct foreign investment; and,
• United Kingdom unemployment.

JP Morgan – Aftermath?

Why Read:  Because this is something that you may not have focused on, but ought to – and for sure ought to discuss with your investment advisor(s) and every person you know who you think understands something about the financial markets.

Commentary:  By now everyone has heard or read about the approximate U.S.$2 billion in losses (now thought ….. (continue reading)   

Commentary reading time 3 minutes.

Referenced article(s) reading time 9 minutes, thinking time much longer.  Discussion with investment advisor(s) and ‘market-savvy’ friends recommended

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?

An Accident Waiting to Happen, or ‘Ever Closer To The Cliff’! is a post from: StockResearchPortal.com Blog

Why Read:  Because now that Spain’s economic woes are close to the center of world economic attention you need to focus on Italy – while still keeping Greece, Portugal, Spain and the Netherlands squarely on your ever more crowded radar screen.

Featured Article:  A May 15 article focuses on Italy’s current debt levels and debt yields, reporting on:

• Moody’s downgrade of 26 Italian banks on Monday evening, May 14;
• an increase in Italian bond yields to 5.86% on May 15 following a declaration by Italy’s ‘data agency’ that Italy’s GDP shrank 0.8% in Q1 2012;
• Italy being the only ‘major state’ to have fallen in real per capita income since 2000; and,
• a former Italian Premier saying that Italy, along with France and Spain, risks ‘instant contagion’ if Greece leaves the Eurozone, apparently saying “The whole house of cards will come down”.

Commentary:  Having suggested some months ago, when Spain seemed to be off most media radar screens when it seemed it should be on them all, it now seems Italy is moving ever closer to joining Greece and Spain as an important ‘center of attention’.  Consider that France may be several months behind, but given its recent non-austerity government mandate, is nonetheless ‘in the theatre’, perhaps edging toward ‘the wings’ and might yet tip-toe toward center stage.

Supplementary to the foregoing;

• Italy’s economy measured by nominal (inflation included) GDP is reported as having been in the order of U.S.$2.2 trillion in 2011, making Italy the eighth largest economy in the world, the fourth largest economy in Europe – after Germany (U.S.$3.6 trillion), France (U.S.$2.8 trillion) and the United Kingdom (U.S.$2.4 trillion), and the third largest economy in the Eurozone (after Germany and France);
• Italy’s inflation rate was last reported in March at 3.3%; and,
• Italy’s reported unemployment rate last reported in March was 9.8%.  Italy’s youth (ages 15 – 24) unemployment rate currently is reported to be about 36%.  Contrast this with Spain’s current comparative reported unemployment rates of about 24% and 51% respectively.  The Italian reported unemployment rates are up from one year ago by approximately 1.5% and 6% respectively.

Clearly, increased focus should be directed to Italy going forward.  Simply put, Spain may well prove to be ‘too big to fail’, at least for the time being.  If that is true, it has to be even more the case with Italy.  If concern is being voiced with respect to possible contagion issues related to Greece, imagine the escalated extent of contagion concern if Spain’s and Italy’s economies continue to deteriorate.

Importantly, watch for escalated discussion and concern over real and nominal GDP growth generally, and country specific real and nominal GDP growth.  Simply put, without real GDP growth economic trends in the developed and developing countries are virtually certain not to be positive.

That said, pay careful attention to media and other data on Italy going forward as you think about and plan your financial affairs.  Italy is definitely something to discuss with your investment advisor(s), and most astute financial friends.

Moody’s Downgrades Italian Banks

Source:  The Wall Street Journal, David Enrich, May 15, 2012

Reading time:  3 minutes

Italy’s banks shaken as economic slump deepens

Source:  The Telegraph, Ambrose Evans-Pritchard, May 15, 2012

Reading time:  4 minutes

List of countries by GDP (nominal)

Source:  Wikipedia

Reading time:  3 minutes

Italy Inflation Rate

Source:  Trading Economics

Reading time:  1 minute

Italy Unemployment Rate

Source:  Trading Economics

Reading time:  1 minute

Europe’s perpetual ‘wasted youth’

Source:  Business Spectator, Marco Annuziata, May 14, 2012

Reading time:  3 minutes

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news.

Another chart of the day: Greek bank deposits collapse

Overview:  Discusses Greek private sector deposits and possible Greek bank run

Source:  Credit Writedowns, Edward Harrison, May 16, 2012

Reading time: 2 minutes

Meet the Man Who Controls More Money than Ben Bernanke

Overview:  Discusses China Central Bank, Chinese inflation, and Chinese bad banking debts

Source:  Financial Sense, Dan Collins, May 15, 2012

Reading time: 3 minutes

Today’s Unabridged E-mail includes six other ‘Speak For Themselves’ Headlines dealing with the following topics:

• Greek default importance;
• Bank of England forecasts;
• Eurozone and financial markets;
• Greek bank run;
• Deepwater discoveries update; and,
• Eurozone industrial outputs.

Prospective Resource Prices?

Why Read:  Because the author of this article might be right, and it is always worth reading and thinking about an increasingly expressed view.

Featured Article:  A May 10 article says that as a result of what the author claims to be an expected Chinese economy ‘hard landing’, that China’s “intense demand” for commodities (other than agricultural commodities) is….. (continue reading) 

Commentary reading time 2 minutes.

Referenced article(s) reading time 8 minutes, thinking time much longer.  Discussion with investment advisor(s) recommended

President Obama – How Long Is The Straw?

Why Read:  Because what is said here is something to think seriously about.

Commentary:  Consider the following:

• how badly the Republicans in September, 2008 must have wished for a post-election postponement of the Lehman Bros. bankruptcy, and a concurrent stable U.S. equities market until ….. (continue reading)      

Commentary reading time 2 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!
• Greek Eurozone Exit Consequences?

After Spain, is Italy Next? is a post from: StockResearchPortal.com Blog

Why Read:  Because what is happening in Spain is happening quickly, may not be understood in a property valuation context, and may be a harbinger of things to come in other countries.

Featured Articles:  Two May 11 articles raise further issues with Spain’s announcement last week that some of its banks are undercapitalized and have not made sufficient property loan provisions:

• the first article reported Friday that rather than inject equity into the banks it believes requires more capital, Spain plans to lend those banks money at high interest rates; and,
• the second article reported on a further move by the Spanish Government to cause key Spanish banks:
• to raise their provisions against “toxic” property loans from 7% to 30%,
• to separate their real estate loans from the rest of their assets,
• to raise what appears from the article to be at least 30 billion euros of additional capital within 15 days to counter-balance falling Spanish property prices, and
• have the value of their property portfolios scrutinized by two separate auditing firms – who will determine the value of their property portfolios.

Commentary:  Follow this closely, and consider that:

• it is highly doubtful, unless these Spanish banks have been working on raising equity for some time, and simply haven’t completed the process, that they will succeed in raising new equity within 15 days (May 26);
• it is likely beyond highly doubtful that if the two auditing firms are just now beginning an audit of property values underlying the bank’s property loan portfolios, they will be able to reach meaningful property valuation conclusions within two weeks – simply because of the time-frame involved, and the likely complexity of their task;
• now valuation undertakings have been announced, it may be that any interested ‘new equity investors’ may wait until the completion of those valuations to make ‘equity injection’ decisions;
• property (or business) values are subjective enough, and difficult enough, to determine in normal markets.  They become ever more difficult to determine and subjective the more uncertain and volatile are the markets for said properties; and,
• where property values must be determined in poor markets, the valuation concept of ‘blockage’ has to be considered.  That is, it is one thing to put one property on a market where ‘normal market conditions’ prevail.  It is quite another thing to opine on the value of 500 or 5,000 (or more) properties where an abnormal market prevails, and where one has to take into account what would happen if all those properties were introduced to that abnormal market at the same time – with unusual downward pressure on price.

The last point is something that not all persons opining on property or business value necessarily focus on or input into their value conclusions.  This last point is also something that may have influenced the decisions made in Europe and America in 2008 – 2009 when mark-to-market accounting rules where changed.  Consider carefully that changes in reporting do not impact market reality at a point in time.

The two audit firms that have been appointed to opine on the Spanish bank property values have a very difficult job.  Potential arm’s length lenders or equity investors likewise will have very difficult decisions to make.

Stay tuned to this issue – it is very important both to the current Spanish economic dilemma, and also likely very important in the context of potential other country/financial markets contagion.

In the end, it may be that Spain will have to guarantee either loans or equity injections into its banks.  If that proves to be the case, that will only come at a cost to Spain and exacerbate its economic problems.

Also see a May 11 Press Release issued by the International Monetary Fund, which reports IMF Managing Director Christine Lagarde’s positive statements on last week’s moves by the Spanish Government.  Ms. Lagarde’s statements may be seen in coming weeks and months to be a theoretically sensible, but at the same time a practical non-starter from a Spain economic recovery prospective point of view.

Spain’s lack of cash in bank reforms falls short of investors’ expectations

Source:  The Financial Post, Julien Toyer and JesDus Aguada (from Reuters), May 11, 2012

Reading time: 3 minutes

Spanish banks given 15 days to plan how to raise 30 billions euros or face nationalism

Source:  The Telegraph, Louise Armitstead, May 11, 2012

Reading time: 3 minutes

Also read:  Spain imposes drastic reform to clean up banks

Source:  The Telegraph, May 11, 2012

Reading time: 2 minutes

IMF Managing Director Welcomes Spain’s Measures to Strengthen the Banking Sector

Source:  The International Monetary Fund, May 11, 2012

Reading time:  2 minutes

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

Wasted Youth

Overview:  Discusses European youth unemployment and its importance

Source:  VOX Blog, Marco Annuziata, May 13, 2012

Reading time: 2 minutes

India witnesses huge growth in FDI in steel industry

Overview:  Discusses growth in Foreign Direct Investment in India’s steel industry

Source:  Commodity Online, May 13, 2012

Reading time: 4 minutes

Today’s Unabridged E-mail includes four other ‘Speak For Themselves’ Headlines dealing with the following topics:

• Youth unemployment importance;
• Current German Government prospects;
• China’s prospective economic models; and,
• China’s and potential world deflation.

Excellent Gold Slideshow!

Why Read:  Because this 58 slide presentation is a very balanced overview of physical gold.

Featured Article:  On May 11 Business Insider published a lengthy presentation on the history of physical gold, its price drivers, what selected individuals think about it going forward, and what U.S. Federal Reserve Chairman Bernanke thinks of it.

Commentary:  If you own, or are contemplating owning ….. (continue reading)       

Commentary reading time 1 minute.

Referenced article(s) reading time 10 minutes, thinking time much longer.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Gold and Gold Miners
• Spain – Significance of Apparent Lack of Knowledge?
• World Economics in a Nutshell!
• Canadians and Home Mortgages – A Surprising Statistic!
• Fitch on Banks!

Spain and Spanish Bank Dilemma! is a post from: StockResearchPortal.com Blog

Why Read:  Because it is a good overview of some of the issues facing not just gold miners, but miners generally – all of which going forward will impact the share prices of those companies from what they otherwise might be.

Featured Article:  A May 9 article speaks to the following issues that are affecting the cost structure of gold (and other) miners:

• the article reports on PriceWaterhouseCoopers study that suggests that in 2011 cost inflation experienced by miners generally fell in a range of 10% – 15%, and for gold miners viewed in isolation was somewhat higher – being about 20%;
• included in those escalated costs are escalated labor costs, as labor demands its share of commodity price increases;
• increased costs related to shortages in skilled labor (see following);
• in the case of gold miners, average ore grades have declined by 30% after 1999, meaning that extraction costs per ounce have increased;
• further in the case of gold miners, for some the processes are becoming more complex and inputs such as acids and reagents are becoming more expensive;
• environmental costs are continuing to escalate;
• enhanced safety standards are resulting in increased costs;
• as corporate social responsibility issues come more to the fore, they add operating costs; and,
• governments in countries where miners operate are looking to extract more taxes, and are increasing permitting and licensing fees.

Commentary:  Aside from these issues, investors and traders should also address at least the following things:

• the issue of enhanced country risk (which is country specific) which may prove to impact required investment/trading rates of return, as contrasted with directly impacting operating costs;
• the impact on mining company costs related to implementation of the IFRS accounting standards; and,
• the flip side of all this, being that in the end escalated costs have to impact operating decisions.  At least in theory this in the end will result in reduced supply – which also in theory ought to underpin the price of gold and other resource commodities.

Importantly, with respect to available manpower and skilled labour, you ought to read an article titled Crisis in Mining, written by Richard Mills (Ahead of The Herd Blog – reading time 4 minutes).  That article discusses:

• retirements, emerging market labour demands, and skilled labour (geologists and engineers, for example); and,
• prospective migration of skilled labour to higher grade projects at the expense of lower grade projects.

Mr. Mills considers this labour issue second only to Country Risk (including Nationalism issues) as largest risk faced by the mining sector.

Should Investors be Discouraged by Cost Inflation

Source:  Gold Investing News, Dig Media, Michelle Smith, May 9, 2012

Reading time:  4 minutes, thinking time longer

Today’s ‘Speak For Themselves’ World Headlines

Why Read These Headlines:  Save Time and Stay Informed.  These Headlines have been personally filtered this morning from over 1,200 articles canvassing economic and resource news

Moody’s Issues Capital Warning to Global Banks

Overview:  Reports Moody’s warns of possible pending bank downgrades

Source:  CNBC, (from The Financial Times, Tracy Alloway and Tom Braithwaite), May 10, 2012

Reading time: 4 minutes

April 2012 Devastating for Retailers

Overview:  Reviews recent retail sales in France, Germany, Italy and U.S.

Source:  Profit Confidential Blog, Michael Lombardi, May 10, 2012

Reading time: 3 minutes

Today’s Unabridged E-mail includes four other ‘Speak For Themselves’ Headlines dealing with the following topics:

• Canada and U.S. March net trade results;
• Possible Greek Government leverage;
• Current gold price; and,
• Sovereign Debt importance.

Spain’s Banking – Important Update!

Why Read:  Because what was reported two days ago was significantly adjusted upward (negative direction) one day ago.

Featured Article:  A May 10 article reports that one day after Spain announced the takeover of Bankia SA, its fourth largest bank, when the then reported expectation was that Spanish banks collectively ….. (continue reading)     

Commentary reading time 3 minutes.

Referenced article(s) reading time 3 minutes.

How Important Will This Prove To Be?

Why Read:  Because this may prove to be the ongoing drop of ‘the next important snowflake that causes an economic avalanche’ in the U.S.

Featured Article:  A May 11 article reports that 230,000 more jobless Americans will lose their extended unemployment benefits ….. (continue reading)  

Commentary reading time 1 minutes.

Referenced article(s) reading time 3 minutes.

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Possibly Related Posts:

• Spain – Significance of Apparent Lack of Knowledge?
• Fitch on Banks!
• Greek Eurozone Exit Consequences?
• Sprott On Economic Fundamentals (and Gold)
• Commodity Production Cost Curves

Mining Cost Escalation – Impact? is a post from: StockResearchPortal.com Blog