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Sunday, April 22, 2012

Belatedly I post Rita Wilson's Column on 'Greek' Easter in the Washington Post

Rita Wilson and husband, whatsisname.
Rita Wilson’s Big fat Greek Orthodox Easter
By Rita Wilson


Here are some of the things that non-Greeks may not know about Greek Easter: We don’t do bunnies. We don’t do chocolate. We don’t do pastels.

We do lamb, sweet cookies, and deep red. The lamb is roasted and not chocolate, the sweet cookies are called Koulorakia and are twisted like a braid, and our Easter eggs are dyed one color only: blood red. There is no Easter Egg hunt. There is a game in which you crack your red egg against someone else’s red egg hoping to have the strongest egg, which would indicate your getting a lot of good luck.

Holy Week, for a Greek Orthodox, means you clear your calendar, you don’t make plans for that week at all because you will be in church every day, and you fast. Last year, in addition to not eating red meat and dairy before communion, my family also gave up sodas for the 40-day Lenten period.

During one particularly stressful moment, there were many phone calls amongst our kids as to whether or not a canned drink called TING, made with grapefruit juice and carbonated water was, in fact, a soda and not a juice, which our then 10-year-old decided it was, so we had a Ting-less Lent.

No matter where I find my self in the world I never miss Easter, or as we call it, Pascha. I have celebrated in Paris, London, New York City, Los Angeles, and in Salinas, California at a small humble church that was pure and simple.

When we were kids, our parents would take us, and now as parents ourselves we take our children to many of the Holy Week services including the Good Friday service where you mourn the death of Jesus by walking up to the Epitaphio, which represents the dead body of Christ, make your cross, kiss the Epitaphio, and marvel at how it was decorated with a thousand glorious flowers, rose petals and smells like incense.

Some very pious people will crawl under the Epitaphio. I have always been so moved to see this. There is no self- consciousness in this utter act of faith. There is no embarrassment to show symbolic sorrow at the death of our Saviour.

Thursday, April 19, 2012

More info on Gold Demand in India

...provided by goldbug GoldCore, in his SEEKING ALPHA post, 'Central Banks Favour Gold As IMF Warns Of 'Collapse of Euro' And 'Full Blown Panic in Financial Markets'  (see first excerpt below), and from Christian Magoon, in his SEEKING ALPHA post, 'Will Gold Dodge These 2 Bullets?' (see second excerpt below).

BTW, the IMF warning which GoldCore headlines ? It's not prominent in the April 2012 IMF World Economic Outlook Report, but cited among 'Several trail risks' that 'are hard to quantify but merit attention'. For the skinny on the WEO Report, click here. For the full report, click here


* * *

GoldCore
India's central bank is further debasing the Indian rupee which will lead to further safe haven demand for gold, and is still the world's largest buyer of gold.
India has had its first rate cut in 3 years and was cut by a higher than expected 50 basis points to 8%.
This comes despite inflation being higher in March compared to last month surging to 9.47%.
The recent tax increase on gold was a futile attempt to curtail gold demand - as Indian policy makers realised accelerating inflation would lead to further gold demand.

Wedding season is at its peak in India now and Akshaya Tritiya, a large gold buying festival, happens later this month. There are forecasts of a 25% increase in demand during the Hindu festival next week after demand was curtailed during the gold jewelers strike (see Other News below).
Deepening negative real interest rates in India and the risk of an inflation spiral will see Indian demand remain robust and it may even accelerate if inflation deepens - contrary to suggestions that Indian gold demand will fall precipitously

* * *

Magoon

There are two nations that lead the world in gold consumption - India and China. Both countries have strong cultural ties to gold and heavily support the number one driver of gold demand: jewelry. However, now both countries are showing symptoms that could materially impact their consumption of gold thus firing a shot at gold prices. China has publicly revised its economic growth expectations downward. India is expected to do so as well after recent discouraging GDP data. These economies which were significant growth engines - even during the financial crisis - are slowing down. That will weaken gold demand and thus prices.

In addition, India has now targeted gold with a move to double the tax on imported gold. While a 21 day national jeweler's strike in reaction to increased gold taxation recently ended, it seems likely that the doubling of taxes on imported gold will occur. This is a negative influence on gold demand in the largest consumer of gold in the world as of the 2011 calendar year.

So can this demand bullet be dodged? The answer is yes. China's economic slowdown could occur in a soft enough way to minimize impact. In addition, its central bank could use weakened gold prices as an opportunity to purchase more reserves to back up its massive exposure to paper currency including the U.S. Dollar and Euro. India is trying to jumpstart its slowing economy by cutting interest rates and the cash reserve ratio for banks. This excess liquidity has the potential to boost economic growth and thus demand for gold. In addition it also has the potential to strengthen the rupee, a currency that has weakened due to repercussions from the EU debt crisis. A stronger rupee makes gold more affordable to the second most populated country on Earth.

The second bullet [threatening the price of Gold] is the strengthening of the U.S. Dollar. Gold is primarily denominated in U.S. Dollars so a stronger dollar means gold is worth less dollars. What's behind the threat of a stronger U.S. Dollar? Simple, the EU debt crisis. Recently Spain has elevated this threat, with France potentially right behind it. In late 2011 it was fueled by the flare up in Greece. Gold swooned versus the U.S. Dollar during that period as investors went "risk off" and jumped into greenbacks. (see chart near the end of the article) Now as Spain heats up and pivotal elections near in France, this bullet seems to have gained in size and velocity.

So can this bullet be dodged by gold? The answer is not entirely, or in other words no. Gold has already been impacted by drama in Spain, but substantial damage has not occurred yet. If Spain can be contained and bailed out by the EU establishment, the impact on gold could be similar or less to Greek crisis. Remember markets have been through this event not that long ago.

The big concern is not Spain but an implosion of France. The debt to GDP ratio in France officially is 86% - more than Spain or Britain. Unofficial calculations put that figure closer to 150%. Perhaps that's why the markets are making France pay almost twice the borrowing costs of EU partner Germany. Don't tell that to the Socialist party in France however, as they dislike austerity and instead want to spend their way out. (more on that below from the BBC) In addition, this party predictably has issues with Germany's austerity push within the EU community. President Sarkozy, under election pressure, has even begun to break with the Germans and the ECB.

Wednesday, April 18, 2012

Monday, April 16, 2012

U.S. not alone : France has an education crisis too

according to Geert De Clercq of REUTERS, whose dispiriting article, 'Young, French and desperate' is excerpted below.

* * *

Some 150,000 pupils leave France's ruthlessly selective education system every year with no diploma whatsoever. Many end up in bleak suburbs around the big cities, where youth unemployment is high and crime is rife.

Those who do have diplomas face the barrier of a rigid labor market that overprotects the older generation and offers young people an endless series of temporary contracts, forcing them to delay mortgage and marriage for years.

In December, Gallup International's annual survey of 51 countries found that France is the most pessimistic country in the world about the economic outlook, and the French are more downbeat than they have ever been in the past 30 years.

The only politician who has put youth front and centre of his platform is Socialist challenger Francois Hollande, running neck-and-neck with Sarkozy in voting intention polls for the first round, and leading him for the May 6 runoff.

"If I am elected president, I want to be judged against one and only one objective: whether young people will have a better life at the end of my mandate in 2017 than in 2012," Hollande said in a keynote speech in January.

This may be even harder than balancing the state budget, another of his campaign promises.
His first priority is to reform schools. France has a meritocratic tradition dating back to the creation of a uniform, free and secular public education system in the 1880s. Children are tested from primary school onwards, with the aim of selecting the best students and directing them to top schools.

Those who do best in exams go on to top high schools such as the Henri-IV and Louis-le-Grand Lycees in Paris, and continue via even more selective "prepa" classes to the "grandes ecoles" that train a few thousand elite students per year.

The very best vie for the Ecole Nationale d'Administration (ENA), which takes only about 100 students a year, who become top civil servants, ministers and CEOs of large companies. Hollande himself is an "enarque", as ENA graduates are called.

A system that guarantees success for so few produces failure for many, especially those whose parents do not have the means or the knowledge to help their children play the game.

In "La machine a trier" ("The Sorting Machine"), published last year, four researchers describe the French education system as one that continually classifies and eliminates, condemning the bottom part of every class to perpetual failure.

Olivier Galland, one of the authors, said that in a society with mass access to education, schools need a northern European focus on individual ability, teamwork and success for everyone.
"In a way, French school is a continuation of the Ancien Regime where the diploma replaces the nobility title," he said, referring to the period before the 1789 revolution.

All candidates in this year's election agree the education system is sick, but they prescribe different remedies.


Hollande says he will create 60,000 new jobs in education, pledges to halve the number of students who leave school without a diploma and plans to give every youngster between 16 and 18 some form of training or assistance.

Reversing a Sarkozy decision, Hollande also plans to add half a day to the school week - without adding subject matter - to give children more time to learn.

Thursday, April 12, 2012

Fed Up with BLS and its CPI BS ?


Like, say the Bureau of Labor Statistics' latest Consumer Price Index Summary ?
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, the U.S.  Bureau of Labor Statistics reported today. Over the last 12 months,  the all items index increased 2.9 percent before seasonal adjustment.
Then check out the American Institute for Economic Research (AIER), and its EPI (Everyday Price Index).
The Everyday Price Index increased 1.3 percent in January 2012 and another 1.1 percent in February. During 12 months ending in February, it increased 4.9 percent. This is somewhat slower than the increase over the same time last year. During 12 months ending in February 2011, the EPI increased 6 percent. All numbers are before seasonal adjustments.
The EPI, a new proprietary index developed by the American Institute for Economic Research, reflects prices of goods and services people tend to buy frequently such as food, utilities, and fuel. It stands in contrast to the more widely known Consumer Price Index, which is issued by the Bureau of Labor Statistics and includes a comprehensive set of prices of all consumer products and services, including big-ticket items such as cars, appliances, and housing.
The recent increase in the EPI is driven primarily by increases in the cost of motor fuel. Motor fuel prices increased 3.5 percent in January and another 4.8 percent in February.
Another category of goods that posted consistent and substantial increases is prescription drugs. Prices went up 0.9 percent in January and 1.1 percent in February.
At the opposite end of the spectrum, personal care products and services, which include items such as toothpaste and haircuts, hardy increased in price at all: 0.1 percent in January and no change in February.
For the AIER's more detailed analysis, 'The EPI Reflects Basic Economic Change', click here.

Wednesday, April 11, 2012

Is it time to re-invest in Japan ?

I don't think so, not after reading Bruce Kasting's piece in
Financial Sense, 'Betting on the Race to the Bottom',
excerpted below.

* * *

 As bad as Euroland appears, and as shaky as the USA looks, Japan looks like it might end up winning the race to the bottom.

There are two very big issues that Japan is confronting; energy and taxes. Both of these issues will come to a head over the next sixty days. I don’t see a soft landing.

Fourteen months ago Japan had 54 operating nukes. Today it has one. By the end of May, it will have none.

There are two significant consequences of the shutdowns: (A) soaring imports of expensive hydrocarbons (LNG, oil and coal), and (B) this summer, there will be as much as a 12% shortfall in electricity to to cool homes and run factories.

The shutdown of the nukes has already led to a major turnaround of Japan’s external trade position. In 2011 Japan reported its first annual trade deficit in over 30 years. The shortfall came to Y2.5T ($32B). In 2012 that number could be as large as $100B.

The shortage of “juice” this summer will cause cut backs in supply to big industry. As a result, industrial production will fall. Depending on the severity of the summer slump, Japan could face negative GDP growth for the full year. This will translate into more red ink in the national budget (already 10+% of GDP). More debt will have to be issued to cover the gap. Japan’s already insane Debt to GDP (230%) has nowhere to go but up.

Japan is leading the world into trouble as far as demographics go. The Social Security and medical costs of its aging population are exploding.

Unlike in the USA, most of the Japanese leaders have acknowledged that the country's position is un-sustainable.

Sunday, April 8, 2012

Chasing Yield from Floating Loan Funds ?


With interest rates on conventional bonds touching rock bottom, you wouldn't be the only investor searching for yield wherever it can be found, like, say, from floating rate loan or bank loan funds.

What are these vehicles, and what are the risks and rewards of investing in them ?

Glad you asked.

Check out the articles cited below.

BTW, both Fidelity and T Rowe Price have open-end mutual fund offerings in this area,  the respective ticker symbols being FFHRX and PRFRX.

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Investopedia - 'Floating-Rate Mutual Funds: Rewards And Risks'

Vanguard - 'Promise of bank-loan funds tempered by credit risk'

Vanguard - 'A Primer on Floating Rate Funds'

Wall Street Journal - 'Are 'Floating-Rate Loan' Funds Still a Smart Move?'

Wall Street Journal -'How Much Will 'Floating Rate' Funds Really Float ?'

Forbes - 'Are Floating Rate Funds The Wrong Answer To Rising Rates?'

FINRA News Release - 'FINRA Warns Investors About Chasing Returns in Structured Products, High-Yield Bonds and Floating-Rate Loan Funds'

FINRA - 'The Grass Isn’t Always Greener—Chasing Return in a Challenging Investment Environment'

Seeking Alpha - Russell Bailyn - 'Floating Rate Bank Loans: An Asset Class Suited to This Environment'

Seeking Alpha -Michael Terry - 'Loan-Based Closed-End Funds: Current Income And Inflation Protection'

Seeking Alpha - Steve Bavaria - 'After Proving Themselves in the Crash, Loans Now Seen as 'Third Asset Class''