Back in vogue: gold.
We’ve known it was coming. We’ve seen the writing on the wall for a long time. We’ve told you to buy gold for years in Inside Investing Daily.
Gold is the only real currency left. The euro is on its way to oblivion… the greenback has lost 98% of its value since 1913, and the yen’s value can hardly be slashed anymore.
And world governments are taking note, buying up five times more gold in 2011 than in 2010.
And now gold prices have climbed 15% in just a few weeks.
Ratings agency Fitch just cut the credit rating of five euro-area countries:
Fitch Ratings cut the credit ratings of Italy, Spain and three other euro-area countries, saying they lack financing flexibility in the face of the regional debt crisis.
Italy, the euro area’s third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-. Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained.
Fitch says, “These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve-currency status.”
One begins to wonder how long the euro will retain its reserve-currency status…
The World Economic Forum dropped a bombshell in its recent Global Risk 2012 report:
Dystopia, the opposite of a utopia, describes a place where life is full of hardship and devoid of hope. Analysis of linkages across various global risks reveals a constellation of fiscal, demographic and societal risks signalling a dystopian future for much of humanity. The interplay among these risks could result in a world where a large youth population contends with chronic, high levels of unemployment, while concurrently, the largest population of retirees in history becomes dependent upon already heavily indebted governments. Both young and old could face an income gap, as well as a skills gap so wide as to threaten social and political stability.
Read the full report here, and maybe build a bomb shelter, or stash some cash somewhere safe.
Any takers?
Portugal’s state-owned power-grid operator REN is selling 40% of itself to the private sector. Two suitors have already stepped up to the plate with significant offers: China wants to buy 25% of the company and Oman wants to buy 15%.
Both countries have put in bids with big premiums relative to yesterday’s closing price. China’s bid includes a 40% premium, while Oman’s bid is 30% higher than the previous closing price.
This is huge. Read More
Production at factories, utilities and mines fell 5.1 percent from a year earlier in October, the government reported today. The slide exceeded the median of 24 estimates in a Bloomberg News survey for a 0.7 percent drop. Output was down 3.3 percent from September, the third decline in four months.
The slump reflects deepening fallout from Europe’s two-year sovereign-debt crisis, which has led policy makers across Asia to cut or hold borrowing costs in an attempt to protect their economies. Chinese export growth was the weakest since 2009 in November, giving officials at a work conference in Beijing this week more reason to shift policy focus toward boosting expansion next year, from curtailing inflation.
Big news for an economy that’s been humming hotter than China. We’ll keep an eye on this one.
“God helps those who help themselves.” Lots of folks think this phrase comes from the bible, but it doesn’t.
That doesn’t make it any less true – especially when “God” is the International Monetary Fund (IMF). The IMF was established to foster global monetary cooperation and greater fiscal stability. It makes loans to countries caught between a rock and a hard place.
And Europe’s been looking for some help from this organization.
But the IMF’s funds come from country contributions.in the form of something like “membership dues,” except these dues are measured according to the size of the country’s economy. Bigger economy equals larger “dues.” Read More
France and Germany ready to pare down the European Union… From Bloomberg:
“We want it to be impossible for the deregulation that led to the euro zone’s current situation to recurr any case, we want a new treaty,” Sarkozy said in Paris. “Our preference is for a treaty of 27 but we’re perfectly ready to have a treaty of 17.”
Who will make the cut and who won’t? Almost surely Greece won’t be in the group of 17, while Italy more than likely will. It’s too big an economy to leave out, and it has a lot of connections to energy-rich nations (read, Libya). Read More
If a tree falls in China, does it make a sound?
That’s what investors need to figure out… and fast. The news out of China should be enough to make most investors worried, if they’ve even been paying attention. From MarketWatch.com:
The bad news coming out of China’s economy in recent days has been more a series of thuds than a trickle. …
Following the move last week to ease the reserve ratio requirements (RRR) for twenty rural co-operative banks 50 basis points to 16%, expectations are growing this is the forerunner of a more general easing. Read More
MF Global CEO Jon Corzine resigns… From Reuters:
In a statement, Corzine said his “difficult” decision was voluntary, and was best for the company and its stakeholders.
“I feel great sadness for what has transpired at MF Global and the impact it has had on the firm’s clients, employees and many others,” Corzine said. “I intend to continue to assist the company and its board in their efforts to respond to regulatory inquiries and issues related to the disposition of the firm’s assets.”
Corzine is not seeking severance, the company said. He had been entitled to a $9 million payout if he were let go without cause, a July regulatory filing shows.
There’s still more than $600 million missing, and regulators are still investigating. This “not seeking severance” business might not look so galant when all is said and done.
From Justice Litle at Inside Investing Daily:
With Greece threatening to torpedo the latest rescue deal, Europe’s real issue is democracy.
“They must be crazy… this is no way to run a country.”
– Senior executive at a large Greek firm
For stock market bulls, the eurozone fix didn’t have to be long term. It just had to hold through Christmas (or at least Thanksgiving). The agreement to write down 50% of Greek debt seemed to accomplish that.
But then a funny thing happened: Greece threw a monkey wrench into the works.
In a surprise move this week, Greek Prime Minister George Papandreou called for a referendum (popular vote) on whether to accept the eurozone bailout, stunning France and Germany. The Greek government then revolted against Mr. Papandreou, calling for a no-confidence vote.
The net result: Total chaos. Will the rescue deal go through? Will the Greek government collapse? Will Greece be forced to exit the eurozone?
