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GREETINGS!

These are traditionally the days when you spread the full year forecast of the future.

Who has had the patience to follow this year by reading the notes, more or less regularly, I would expect a forecast released (or Outlook, using as said) on what could be expected by working in the financial markets during the coming months .

I do not mind astrology.

I firmly convinced that the forecasts, especially in finance, serving mainly to confirm the assumptions made a priori and the consequent expectations that this entails the risk of distancing from what is our objective to build an investment strategy that can to generate a return, despite the limitations of the risk profile that we can tolerate, in line with changes in the prevailing economic environment.

In this enlightening as I believe written by Thich Nhat Hanh, so not an economist but a 'simple' monaco Vietnamese Buddhist:

"the best way to prepare for the future is worrying of this, since we know that this is a consequence of the past, then the future will be a result of this. All that we can be responsible is the present moment, which is the only one who can change. Take care of this means taking care of the future. "


Following a few brief thoughts on what, in my opinion, is this: MACROECONOMIC CONTEXT



We lived (are living?) Without a doubt the deepest recession crossed by the global economy after World War II so that several economists have adopted the term 'Great Depression'.
Giungono these positive signs to be considered that, although it is premature to talk of recovery, the worst is over and the hypothesis of relapse has been averted, GDP growth turned positive almost everywhere and, in some industrialized countries, we are also seeing a recovery in employment (Australia , Japan, Germany).

The recovery of Germany is an opportunity for the Italian economy, in itself unable to create the conditions for ending the crisis as more than a quarter of our GDP is from exports of which Germany is the main recipient.

The financial system is still extremely fragile and exposed to international shocks, such as the recent crisis Dubai has shown us: This inefficiency is reflected in the ability to access credit crisis that is putting not only businesses but families that are forced to drastically reduce consumption.

aspects to be monitored over the next few months are the high default rate that is attributable to more than 40% of U.S. subprime mortgages and about 15% first mortgage (that is granted to borrowers with good ability to repay loans received ) and the high unemployment rate, which could create an explosive mix for the world economy. BOND MARKET



The past year has seen drastically reduced the yields of government bonds is both corporate bonds, the spread between yields on government bonds and corporate bond yields, which was abnormally enlarged in 2008 on fears of potential failures, it was gradually reduced in step with the prices of credit default Swap (ie insurance against the risk of bond issuers default).

While this reduction is to be viewed positively as a gradual normalization of conditions in the bond market and reduced risk of failure, the other presents evidence of a market devoid of attractive proposals in terms of remuneration due to yield almost cleared of short-term and the next lows for longer maturities.

The biggest concern in its government securities by those European countries that may be adversely affected by the impact of anti-crisis measures on its public debt with potential negative repercussions on the euro.

STOCK MARKET

In 2009, the MSCI World Index in local currency, rose by 30%.
However, during the first months of the year we saw a sudden drop in prices followed by an equally strong recovery.

The uptrend is formally still in place despite some signs of weakening, was first powered by the assessments reached some interesting markets during the months of minimum from March to April and then supported by technical and financial phenomena (unattractiveness of bond yields that has encouraged the gradual return to class Assett risky carry trade).

Unfortunately we have not evidence that there are changes in this scenario: the market valuations are reasonable in terms of prospective profits (that is yet to be realized), while in terms of operating earnings valuations are definitely out of the norm.

The main concern is precisely the concerns that accompany the sustainability of growth of corporate profits: so far we have seen results above analysts' expectations achieved through heavy staff cuts and restructuring costs, tax policies implemented by governments. If we also finally see a recovery in sales and sales could also remove the last reserves that lead us to an approach to equity markets positive but cautious.

RAW MATERIALS

The recovery in industrial output, especially in Southeast Asia, said the recovery in prices of energy raw materials (oil went from $ 36 per barrel to $ 73) and industrial (+147% increase in the copper), the rise has been facilitated not only by the recovery in demand but also by a certain lack in the offer caused by a slowdown in mining.
in recent sessions has also taken the sustained rise in gold prices, as repeatedly stressed, not only by the dynamics of industrial (urgent increase in demand for the production of jewelry and luxury goods which does not meet a mining in decline since 2000) but also by requirement of foreign exchange as demonstrated by the frenetic activity of various central banks to increase the diversification of its gold reserves are accumulating large quantities.

That said, I can only express my most sincere congratulations.

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range expected for the month of December

Although with some delay, this is the range within which I expect will fluctuate the prices of major stock indices during the month of December:

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Financial crisis in Greece, what is the outlook?

After the crisis of Dubai, which is still far from being resolved The spotlight has been 'claimed' by both countries in the Euro: Greece and Spain have suffered a 'downgrading' (derating) the creditworthiness of the now infamous by rating agencies. If

for Spain it was just a credit watch negative (ie a kind of 'special observation') caused by the fear that the economic crisis persists more long as in other European countries, Greece has been a real drop in ratings from A-to BBB by Fitch reasoned with the worrying situation of the Hellenic Public Debt which is approximately 12% of GDP .

Greece and Spain, along with Italy and Portugal, since the beginning of the economic crisis have been brought together in so-called PIGS countries, wanting to show us the even the acronym and the European Union, whose financial position is the worst quality than the rich countries of the euro.

To see how financial markets interpret the current economic situation in these four countries have decided to compare the performance prices of government issues with what is regarded in Europe, the risk-free investment: the German Bund. To do this I chose five bonds as fairly homogeneous coupon (between 4.25 and 4.75) and a deadline (June-August 2014).

is the trend of the reference.

Germany 2014, coupon 4.25%, 2.23% yield



As you can see the price of the German bund is located at the maximum period after falling by about one percentage point over the month of October.

quite similar trend for the Italian BTP albeit with a more marked deterioration starting in December:

Italy in 2014, 4.25% coupon, yield 2.71%



Slightly different trends in government issues in Portugal and Spain where prices after fluctuated within a fairly wide range (0.75 bps) showed a rather sudden drop in recent sessions, indicating a growing nervousness among investors.

Portugal 2014, 4.375% coupon, yield 2.77%



Spain 2014, coupon 4.75%, 2.58% yield



However, yields on three titles are the same sign that the market 'perceived' level of risk similar to Italy, Portugal and Spain.

different matter with regard to Greece: The performance of the stock (with the simultaneous increase in yields) clearly indicates that the market considers it possible, in practical terms, the existence of a default risk of the country

Greece 2014 , 4.5% coupon, yield 4.36%



The problem is to assess, beyond the critical situation of public finances, since the default risk is real or not because it would lead to the insolvency a state of weakness and uncertainty in all markets in the Eurozone with special financial and economic consequences that could result in a period of weakness in the single currency, as indeed, is beginning to be reported by the strengthening of the dollar:



Although we can not exclude the possibility of default regardless of a sovereign state to believe that Greece is unlikely to repeat what happened in Russia in 1998 and Argentina in 2001.

the European Union can hardly tolerate a further escalation of the crisis that would preclude scenarios already seen in 1992 when financial speculation led to the devaluation exit of the pound and the lira from the EMS for the simple reason that there is, by regulations, the possibility of leaving the euro: it follows that, were to drag on the state of Greece's difficulties, you may ultimately own the 'EU to acknowledge, albeit informal, of the solvency of the Hellenic Republic.

as a result we could see a stage, even prolonged weakness of the euro would encourage investment in other currencies.

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diamonds are girls best friends, but also the gold ...

In terms of duration, that gold is the 'bubble' longest history in every civilization in human history gold has been assigned the role of representative par excellence of wealth, only after World War II, central banks, forced by events more by other considerations, have abandoned the so-called 'gold-bearing equal'.

in industry does not hold any gold, or however poor, benefit.
an alien who arrives on Earth, completely unaware of our customs and traditions, would be at least puzzled to see the effort that is claimed to extract a metal, all things considered of little use, from underground to store it in others 'holes' (the vault) in other places the same underground.

these paradoxes despite the demand for physical gold has increased so much so that in Germany it comes to install vending machines of ingots.
during the past few weeks, India has bought 200 tons of gold (half of what is put on sale) from the International Monetary Fund in order to diversify its foreign exchange reserves.

therefore inevitable that the surge in prices that peaked in absolute terms:



but not in real terms



we can formulate two hypotheses to explain this movement.

in the first case we consider that gold is the ultimate safe haven and a safe haven for many investors frightened by the fragility international economic and financial system, while the gold is, as always, excellent coverage to protect the purchasing power erosion of inflation.
but it is clear that at this time the rise in inflation is not a concern for markets: just see how the inflation rate achieved by comparing the implied yield spread between T-notes (fixed rate government bonds) and the TIPS (inflation-linked government bonds) of equal duration is perfectly aligned with the trend of recent years:




this apparent schizophrenia of the market (growth of a safe haven with no apparent Fears of rising inflation) may be explained by the expansion of a middle class sufficiently wealthy in emerging markets, causing a steady increase in demand for luxury goods, especially jewelry, which does not meet an adequate increase in productivity , because the world production, after reaching its peak at the beginning of the 2000s then began a slow but steady decline:



in conclusion, if the hypothesis that the increase in gold prices is caused by a rush to safe assets, then the recent top would be only temporary and intended to deflate the bubble in the near future.
unlike the dynamics of growing demand and contraction would certainly offer to attend a new high.