Tuesday, October 18, 2011

interactive map depicting worldwide public debt ratios

click here for the interactive map

The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for all (or almost all) government debts in dollar terms.

Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week. Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis. So the higher the global government debt total, the greater the risk of fiscal crisis, and the bigger the economic impact such crises will have.

Deutsche Bank Warns France May Be Put On Downgrade Review Before Year End

First we have Credit Suisse saying 66 European banks will fail the 3rd stress test, and will need hundreds of billions in fresh capital, something the market ignored entirely last week but may want to reevaluate now that the idiocy appears to have subsided. And now, inexplicably, we have Deutsche Bank warning that France may well be put on downgrade review by year end. "We highlight in this note that the French corporate sector is already financially stretched, with poor profitability and large borrowing requirements. We consider that the deterioration in economic conditions is now creating a distinct risk that France could be put under “negative watch” by the rating agencies before the end of this year. We think that France has the wherewithal to react to such an outcome and could avoid an outright downgrade by taking corrective measures quickly, but this naturally would be a very sensitive political decision a few months before a major election." Why either Credit Suisse or Deutsche Bank would jeopardize their own existence by telling the truth, we have no idea. If either of these two banks believe they can survive a vigilante attack on French spreads, and the subsequent shift of contagion to none other than Germany, we wish them all the best. Yet that is precisely what will likely happen, especially now that the market can no longer pull the trick it did for the past two weeks, and stick its head deep in the sand of complete factual avoidance.

DB France

10 Essential Fiscal Charts Demonstrating America's Disastrous Condition

By now nobody should have any doubts as to just how disturbing America's fiscal debacle is. For those naive and innocent few who still think there is a Hollywood ending with a pot of gold awaiting everyone at the end of the rainbow, we present the following "10 essential fiscal charts" from the Pew Policy Institute. To be sure, these are all charts summarizing data that has appeared on Zero Hedge repeatedly over the years in some way shape or form. Pew does, however, have a flair for dramatic visual presentation. In Pew's own words: "Since April 2010, the Pew Fiscal Analysis Initiative has published several reports explaining the medium-and long-term fiscal challenges facing the federal government. With stagnating economic conditions and the passage of new legislation, especially the Budget Control Act of 2011, the outlook for the deficit and debt has changed considerably over the past six months. We have created 10 charts that illustrate how the choices made over the last 10 years contributed to our nation’s debt and the challenges currently facing the Joint Select Committee on Deficit Reduction." So without further ado...

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It's Time To Invest In Diamonds : BHP, HWD, RIO, TIF, ZLC

For investors looking for an alternative safe haven to gold, diamonds could be an interesting choice. Demand for these gemstones continues to grow and, like gold, diamonds have been considered a store of value for centuries. Overall, diamond consortium De Beers expects growth in the global demand for rough diamonds to reach a new record this year, based on robust demand from China, India and other Asian emerging markets. As populations in the Pacific Rim have moved up to middle class status and new wealth, the popularity of luxury goods has surged. This includes a new love affair for diamonds. De Beers expects China, India and the Middle East to account for 40% of global diamond demand by 2015. The firm also expects that strong performance in the key U.S. market will contribute to that growth.

Widely Used for Industrial Purposes
Similar to platinum and silver, diamonds also blur the line between industrial and precious mineral. The gem has the highest hardness and heat conductivity of any bulk material, and it is used in a variety of industrial processes. Diamonds can be found in an assortment of saws and construction equipment, as well as high-tech applications like lasers, surgical equipment and in computer chip production. More than 80% of diamonds are used for industrial purposes. As the world continues to build out its infrastructure and mine for materials, diamond-based drills and equipment will continue to be in demand.

As an investment, diamonds have not disappointed. In 2010, rough-cut diamonds provided an overall return of 20%, besting the S&P 500 gain of 12.78% for the year. Analysts at the Royal Bank of Canada (NYSE:RY) predict the upward trend of higher diamond prices will continue over the longer term. So far in 2011, prices for gemstones have risen almost 50%. (For more on emerging markets, see Re-evaluating Emerging Markets.)

Skip the Engagement Ring
For portfolios, diamonds offer an interesting investment and have been one of the best-performing commodities this year, with rough diamond prices boosted by a dearth of new mines and increasing demand. However, gaining access to the market can prove difficult. Currently there is no diamond ETF, and the few private equity funds dedicated to the gem require major investments. However, there are a few ways to play the growth.

Harry Winston Diamond Corp. (NYSE:HWD) allows investors to play both the mining side as well as the retailing side of diamonds. Partnering with Rio Tinto (NYSE:RIO), the company owns a 40% stake in Canada's largest diamond mine, the Diavik, and it recently earned roughly $134 per carat for its rough diamond production. The company benefits from being one of the premier global luxury jewelry retailers as well.

No talk about diamonds would complete without mentioning De Beers. The firm currently controls about 40% of the total diamond market. While 40% of the miner is owned by South Africa's Oppenheimer family and 15% by the government of Botswana, investors can tap the remaining 45% through mega miner Anglo American (OTCBB:AAUKY). In addition, junior diamond miner Mountain Province Diamonds (NYSE:MDM) has a 49% venture with De Beers' Kennedy Lake mine.

Finally, luxury jeweler Tiffany (NYSE:TIF) saw sales in the Asia-Pacific region rise more than 46% in the first half of 2011 and could be a great play on the growth of Asia's new middle class.

The Bottom Line
For investors looking for additional safe havens to place their money, diamonds could be an interesting bet. Benefiting from both industrial and precious status, the gemstone is seeing demand flourish on several fronts. Adding stakes in firms with diamond operations like BHP Billiton (NYSE:BHP) or Zale (NYSE:ZLC) could do a portfolio some good

James Turk: Insolvency of Banks to Cause Gold Explosion

from King World News:

With gold and silver continuing to consolidate, today King World News interviewed James Turk out of Spain to get his take on the ongoing financial crisis and where gold and silver are headed from here. When asked about the rising fear of bank failures, Turk responded, “What we are seeing is an increasing awareness of countrerparty risk. People are more clearly understanding the risks in the banking system and the insolvency of many major banks. As a consequence they are fleeing out of fiat money and this is a trend that will accelerate.”

James Turk continues: Read More @ KingWorldNews.com

Lindsey Williams : 2012 the beginning of the end

Lindsey Williams : 2012 the beginning of the end ....John McGowan Presents former Arco / Alaskan Oil Pipeline Chaplain Lindsey Williams. On the show, he covers what will be taking place between October 2011 and the end of 2012.Pastor Lindsey Williams is back after 3 months of silence with new fresh insights from his elite source , he talks with John McGowan ( 14 Oct 2011 ) about the elite's agenda for 2012 the devil's Messiah agenda some of the key points are : Massive deb intentionally created by the elite before the crash countries cities and banks will be bankrupt , they want every country to become like Greece , Greece will default and its bonds that the elite are buying will be used to control the country , All the paper assets will become worthless by 2012 , you must secure your assets with something other than paper , , The US will default on its national debt just as Greece and others will have to do , the elite want to bring New World Order but the last thing they want is Riots , social security medicare and food stamps will not be cut off for the time being until America defaults on its debt , if you own a farm or a house you must own enough gold and silver to pay for the taxes for 3 to 5 years otherwise they will reposes it , Gold is going to $3000/oz conservatively and Silver is going to $75/oz to $100/oz , the elite will use FEAR , because FEAR shuts down your brain in the airport they treat you like a common criminal , Planet X is a hoax a FEAR attack , do not be concerned about their 9/11 fear tactics , you can overcome the NWO , they have a Devils Messiah Agenda for 2012

Morgan Stanley: These New 'Nifty 50' Stocks Could Crush The Market For Years To Come

In a note out this morning, Morgan Stanley's European Strategy team argues that we're on the verge of seeing a new "Nifty Fifty" — a group of large cap stocks that outperform markets despite a slowdown in Europe.

From 1964 to 1972, a bundle of 50 "Nifty" stocks like Procter & Gamble, IBM, Walt Disney, McDonald's, General Electric, and Polaroid outperformed the S&P by 189%, even though that market moved generally sideways in a difficult macro environment.

With troubling signs from the eurozone and the U.S. and expectations that 80% of global GDP will come from emerging markets in 2012, Morgan Stanley analysts argue that we should be looking for a new lucky bundle once again.

Three components stand out, they say: Stocks with high exposure to emerging markets (specifically, at least 40% of revenues from EM and 17.5% from Brazil, India, and China), stocks with accelerating revenue growth, and reliable stocks with solid earnings and revenue growth.

Morgan Stanley's analysts expect this first, high EM exposure category to see several big winners — even if they've underperformed MSCI Europe overall in 2011.

#1 Essar Energy (ESSR)

#1 Essar Energy (ESSR)

Image: Essar Energy

Industry: Energy

Market Cap: $5,675 million

EM Exposure: 100%

Exposure to Brazil: 0%

Exposure to India: 0%

Exposure to China: 100%

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Talking Numbers: Bumpy Ride Ahead?

Katie Stockton, MKM Partners, discusses whether the charts point to a selling opportunity, and whether more volatility is ahead for markets.

One last sell-off for silver before we head back to $50?

After seven years of investing in precious metals you become something of an old-hand, not that this would impress the true veterans who recall the late 1970s. They are getting a bit old themselves now.

A sprightly 87-year old President Carter was on the BBC last night for a long interview, and sounded very impressive unless you are old enough to remember his abysmal presidency.

The man himself comes across as a bit of a 60s dreamer with flowers in his hair and peace and love stamped on his face. He is very genuine and has not made a cent out of being an ex-president. But he was a disaster, hopelessly out of his depth in Washington during a period when the world needed leadership.

Hunt Brothers

Goodness knows how much his goodly nature cost the world! He was also US president in the last silver boom. Inflation got completely out of control. The Hunt Brothers cornered the silver market and sent prices sky high. Only President Reagan and Fed chairman Paul Volcker saved the world from a hyper-inflation with their monetarist clampdown.

So where are we today for the tiny global silver market? We still seem to be in the early days of an inflation, and could even have another deflation of asset prices on our hands if the eurozone messes up its bailout package or a rapid inflation if they double-up on money printing as most seem to expect.

It is never that easy to judge is it? And markets are so confused they are not giving us much guidance. Technical analysis is only right until it it wrong as fundamentals tend to repeat but never exactly.

But the silver charts are predicting another backtracking in prices, according to the singularly precient CliveMaund.com. At a fundamental level that could come from another nasty twist in the eurozone saga sending markets into a dive and a flight to the US dollar and out of silver and gold: 2008 revisited!

However, trying to market time anything these days is very difficult. The good news about silver is that when this sell-down is complete the next target is very obviously the April high of $50, also the 1980 high for the metal.

1980 all-time high

One of the most remarkable things about silver and the biggest and undeniable truth about its undervaluation is that 1980 price. What else in the entire world costs as much as it did when Jimmy Carter was in Washington making America a laughing stock?

If you wanted a surefire bet the idea that any commodity could stay below its 1980 all-time high forever just has to be a nonsense. Reason then to hold your silver just in case the market turns up without this expected sell-off, and it did just that a year ago. Perhaps the eurozone officials have it sussed after all. Then again even dear old Jimmy Carter could manage to up inflation.

So if the chance to buy some silver on the cheap around $25-28 an ounce comes do seize the opportunity as CliveMaund.com suggests. But be weary of trying to trade volatility in such a capricious performer as silver where physical sales and spot-prices already point to an imminent price break out (click here).

To capture all the upside in the coming price boom you are more than likely going to do much better by staying fully invested or you might miss one or two of the best phases.

Where should silver prices be and how high will they go? Who knows, silver might be worth more than gold (click here) but prices will be very, very much higher. But taking a series of leveraged punts on silver is far more likely to leave you penniless than rich as your timing will be wrong more than it is right.