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July 10, 2014

Today's Commentaries on Economic & Resource News by Ian R. Campbell FCPA FCA FCBV

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Important Highlights from Today's Commentaries

 

Commentaries

For more evidence of China's ever increasing world economic influence, look no further than reports published yesterday and today.

The first discusses results from German Chancellor Merkel's ongoing visit to China where she is accompanied by two dozen German executives. The messaging in the article is that Ms. Merkel and her group are accomplishing much, but China is dictating the pace of negotiations and opening of China's economy to Germany. See German dreams, Chinese reality.

The second discusses China's promotion of a new strategic partnership with Africa - something I have previously mentioned in these commentaries. See Beijing promotes new strategic partnership with Africa.

Recall my summary of the book The Chinese Century: China was economically embarrassed by the West in prior centuries. The Chinese are favored with the attributes of long memories and patience.

German dreams, Chinese reality (Deutsche Welle, reading time 4 minutes). Beijing promotes new strategic partnership with Africa (WantChinaTimes - reading time 2 minutes.

Eurozone updates!

It was reported this morning that in May France's industrial production fell 3.7% year/year, far worse than economist predictions of 1.0% - with surveys reported as suggesting there is no French industrial rebound in sight. Concurrently French consumer prices were reported as having increased by 0.5% in June, down from 0.7% in May where 0.7% apparently was the economist prediction.

Yesterday in Portugal Moody's downgraded that country's largest bank measured by capitalization to Caa2 from B2 - meaning Moody's thinks that bank (Banco Espirito Santo) is now vulnerable to default - when that bank announced delays in paying short-term debt to its parent company. There has been a lot of talk in the media recently of an economic recovery in Portugal. This (perhaps among other things) pushed the yield of Portuguese government debt up 13 basis points from Tuesday's close.

In Italy, May industrial production has been reported as having dropped by 1.2% month/month - as contrasted with the "economist expected" 0.2% gain.

Finally this morning, in Spain "Let's Gowex" - a large company that provides free WiFi for public spaces - filed for voluntary bankruptcy. The company's CEO resigned after telling the Board of Directors that the company's financial statements had been falsified for at least the past four years.  One can only wonder how much creative accounting is occurring in the world today - and just how good corporate governance is in many companies.

One can also only wonder at how poor economic reports in the eurozone may impact the U.S. economy recovery at some point.

Economists Are Running Out Of Ways To Describe How Bad It Is In France (Business Insider - reading time 2 minutes). A Troubled Portuguese Bank Has The Country's Interest Rates Surging (Business Insider - reading time 2 minutes). And Now, Italy's Economic Recovery Is In Doubt (Business Insider - reading time 1 minute). A Big Spanish Tech Company Was Accused Of Being A Fraud - 5 Days Later The Company Collapsed (The Compliance Exchange - reading time 1 minute).


Inflation - Are you jumping on board?

Last week an increase in U.S. core CPI was reported. This has led to a debate by media participants as to how the financial markets and the Federal Reserve ought to react - if at all. With what is going on in Iraq and the Middle East generally it seems likely - or so I think - that oil and gasoline prices are likely to increase in coming months.

However, with what is going on in the eurozone from an overall inflation/deflation perspective, unless the European Central Bank moves more aggressively than it has to date inflation seems not to be the concern - what appears to be the greater risk of deflation seems to be.

For inflation to become a larger concern in the U.S. it seems to me that U.S. wages have to rise to a much greater degree than they have.  After all, it has long been thought that about 70% of U.S. GDP can be attributed to the American consumer. The American consumer has to mean Main Street, not the 1% of the most wealthy Americans.

I suggest you take the time to read Fed Watch: Inflation Hysteria.

Fed Watch: Inflation Hysteria (Economist's View - reading time 8 minutes).

Social issues - and smartphones

A recent article reported that 47% of Americans who were surveyed said they could not last a single day without their smartphones. I have wondered for some time - America aside - what world youth would do with their time without the burgeoning use of cell-phones.  Without texting, what would all the unemployed young people (where youth unemployment in some developed countries continues to run at close to 60%, and is generally very high across the board) do with their time - or for that matter, what would employed young people do with their then free time.

Perhaps nothing productive.

Plugged In: Half of Americans Can't Go a Day Without Phone, Study Says (NBC News - reading time 2 minutes).

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.

News Category No. of Articles
Posted Today
Economic News 168
Financial Market News 20
Precious Metals News 8
Base Metals News 3
Other Minerals News 1
Oil & Gas News 14


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

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’.

About the Author

Ian R. Campbell

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

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