In This Issue Important Highlights Commentaries China: Slowing economy? China: Slowing economy? Eurozone: Austerity, Euro, France Eurozone: Austerity, Euro, France Financial Markets: What should investors do? Portugal: Public sector jobs, etc. Portugal: Public sector jobs, etc. Articles Posted today to StockResearchPortal Newsletter Methodology About the Author

Important Highlights from Today's Commentaries Highlight #1:  World 2013 GDP growth figures have to be becoming increasingly dependent on China's GDP growth. This is worrisome given ongoing Eurozone recession and what appears to be failure of the U.S. Federal Reserve easy money policies to ensure meaningful U.S. post-quantitative easing real economic growth. Highlight #2:  From my perspective, the probability of deterioration in France's economy going forward has increased. You might want to revisit France: The eurozone's biggest problem?, and France: Important update?, commentaries I wrote in this Newsletter on February 21 and April 10 respectively. Highlight #3:  The financial markets cannot disconnect from fundamentals forever, and in the end the financial markets will revert to the 'fundamentals'. This where the world is very binary, meaning it will either end well or very badly, without middle ground.  See commentary today titled Financial Markets: What should investors do?

Back to Top Δ Commentaries

China: Slowing economy?

China: Slowing economy?

Eurozone: Austerity, Euro, France

Eurozone: Austerity, Euro, France

• the 'end of the austerity dogma' is in sight in the eurozone;

• southern Europe, including France, will "be forced by their current misery to fight back against German hegemony sooner or later"; 

• "the (eurozone) economic situation is worsening from month to month, and unemployment has reached a level that puts democratic structures ever more in doubt"; and,

• "hopes that the creation of the euro would force rational economic behaviour on all sides were in vain".

• Eurozone crisis deepens as German 'sado-monetarists' refuse to back QE, from The Telegraph, Roger Bootle, May 5, 2013 - reading time 4 minutes; and,

• French Finance Minister: 'Austerity Is Over', from Business insider, Joe Weisenthal, May 5, 2013 - reading time 1 minute.

Financial Markets: What should investors do?

• today the majority of 'investor recommendations' are based on a view that 'stocks are cheaper than something else', not on 'fundamentals' - and that is "potentially very dangerous";

• Central Banks are forced to 'stay on their current trajectory' (by that I assume he means 'continued quantitative easing') and continue to 'work at' boosting confidence;

• eventually all 'waves break', and the question is does a surfer (read 'investor') 'walk off the board' or 'crash'.  Like any surfer, how each investor is 'positioned' will determine the extent of whether he/she 'suffers or not';

• there is more than 'one wave' out there beyond the wave created by the Central Banks that the Central Banks can't 'reach'.  Some of these, which include selected currencies and bonds, currently have 'genuine growth potential';

• past 'models' (I assume he means 'economic models') are broken, and new 'models' must be built;

• the financial markets cannot disconnect from fundamentals forever, and in the end the financial markets will revert to the 'fundamentals' - with the result being severe capital devastation;

• today the world is very binary, meaning it will either end well or very badly, without middle ground.  Keeping options open and maintaining liquidity are the keys to surviving and profiting in a world of likely 'extreme outcomes'; and,

• investors participating in today's financial markets need to mitigate risk pursuant to 'cost effective tail hedging'.  Unhedged investors will pay a very high price for assuming 'excessive risk' when the financial markets revert to 'the fundamentals'.

• past models are broken, and wonder if he shares my view that Central Bankers and many economists currently are relying on their 'book learned' beliefs that past economic events will repeat themselves in today's globalized world.  This in circumstances where as I see things, there are fundamental differences between the world economy today (different dependancies, different ideologies, altering world powers, communications changes, etc.) and the world economy as it was up to as late as 1999.  By analogy, would a baseball analyst predict the same average number of home runs hit in a season by all major league baseball players if a rule was introduced that all players had to hit with bats made of balsa wood.  The obvious answer is 'hardly likely', or if he/she did that their forecast would be ridiculed and disregarded.  I see a lot of economist 'hitting with balsa bats' these days;

• the financial markets currently have reverted from 'honoring fundamentals'.  I have said that a number of times, albeit slightly differently.  This is something to seriously think about and reach your own conclusion if you participate in those markets; and,

• the endgame is 'binary' with a likely outcome of 'one of two extremes'.  This is an extremely important thing for everyone to think about - whether they participate in the financial markets or don't.  It is definitely in my view something you should discuss with your investment advisor if you have one - and think hard about whether you do or don't have one.

• hedging is complicated, and for a great many investors requires external advice.  Hedging brings with it its own attendant risks;

• in his conclusion, Mr. El-Erian describes the two 'endgame extremes' (my words) as (1) a return to organic growth, and (2) economic disaster - but says "the problem is we really don't knwo which it will be".  I am surprised that Mr. El-Erian does express a firm opinion on which of the two extremes he believes most likely - although I have to believe he thinks the latter, if for no reason other than he seems to blame the 'market disconnects' on prevailing Central Bank policies; and,

• because many of Mr. El-Erian's views are consistent with my own (and hence for me 'easy to agree with'), I suggest you read Mohamed El-Erian: Putting It All Together and reach your own conclusions with respect to what he says.

Portugal: Public sector jobs, etc.

• cut 30,000 public sector jobs;

• increase the civil service workweek to 40 hours from 35; and,

• increase the retirement age by one year to 66.

Portugal: Public sector jobs, etc.

• cut 30,000 public sector jobs ..... Subscribe to read all commentaries

Back to Top Δ Articles Posted Today to Stock Research Portal

Today, supplementary to the articles discussed in this newsletter, filtered articles were posted to the Home Page of Stock Research Portal in the following categories.

For a quick review of filtered world news by category visit www.stockresearchportal.com

Back to Top Δ Newsletter Methodology and Objective

Each morning we personally filter (on average) over 750 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, gain new ideas, better trade and invest, better communicate with your investment advisor if you have one, and importantly make your own ‘penny drop’.

Back to Top Δ About the Author

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com. * Canadian Institute of Chartered Business Valuators ** through The Ian R. Campbell Research Initiative