In this Week’s Issue: December 9, 2011
• 23 EU nations agreed to tighten their fiscal coordination; UK stays out
• Moscow’s RTS index lost 8.8% after civil protesters voice election concerns
• The ECB cut its key interest rate by a quarter percentage point to 1%
• Chinese inflation slowed more than expected to 4.2% in November from 5.5% in October
• Italian government announces a €30bn three-year budget deficit reduction plan
• Brazil’s economy was flat in Q3 but grew 2.1% compared with last year
• U.S. consumer sentiment rose to its highest level in six months in early December
• U.S. trade deficit in October was $43.5 billion, down from $44.2 billion in September
• Australia’s central bank decided to cut interest rate by 25 basis points to 4.25%
• S&P placed ratings of the entire Eurozone on “Creditwatch” with negative implications
While there are imminent signs of a global economic slow-down, there may yet be some bright spots on the horizon. U.S. equities have held up surprisingly well despite signs of trouble in Europe and in emerging markets. Please consider our weekly chart, courtesy of Political Calculations. Based on expected future dividends per share, the glass might just be more than half full in the coming year.
Corzine: I don’t KNOW, KNOW, KNOW
The collapse of MF Global may not mean much to the average investor. However, traders of financial futures and options considered this firm as one of the premier commodities and futures brokers not too long ago. Who is to blame for their collapse? No one it seems, certainly not the former CEO Jon Corzine who resigned just days after the firm declared bankruptcy. While the finger pointing is now in full swing, I wanted to bring up a “slight” accounting discrepancy which occurred earlier this summer. According to data from the CFTC, the Commodities Futures regulator, MF Global had Excess Net Capital of -$150M, i.e. a shortfall, in July of this year. They miraculously recovered in August but then no more reports were published since September and in October, the firm declared bankruptcy.
With an estimated $1.2bn in customer assets still missing, the clients of MF Global are obviously outraged. As the lawsuits against the firm and its regulators are starting to pile up, please consider this video of Jon Corzine’s testimony before a Congressional committee. Enjoy!
Here is a succinct summation of the devastating effects a Euro break-up might have. Please consider: The terrible consequences of a Eurozone collapse.
Good luck and good investing!
Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.Disclaimer
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