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Food for thought

The following are the link a bit 'of articles I've read in the last week and that I consider interesting. Since the lyrics are not in Italian, I loved my brief summaries. The overall tone, as we shall see, is marked by a certain pessimism. In the field remains the most optimistic strategist of investment banks, the reliability of forecasts which, unfortunately, is not to be excessive illusions.

The strategist, but not too optimistic

The Blog Bespoke Investment Group reported in a table (see below) the latest updates from price target for the S & P index 500 indicated by the main strategist of investment banks. Compared to earlier this year, when the target average was 1,632 points by end 2008, optimism was a bit 'attenuated. The consensus forecast now stops points to 1519, representing an increase of 10% over current levels.

not because he thinks I take note that these price targets are useful references for investors. On the contrary, I expect to be able to return later this year in this post to take note of what they were unfounded.


The financial sector lost the leadership of the S & P 500

Reports an article Bloomberg that after a collapse of 31% the end of 2006 financial sector ceased last week to be the first to capitalization S & P 500 index . It 'was in fact passed by the technology sector . Both sectors account for just over 16% the market index. Third in importance, with just under 15%, the energy sector .

The financial sector had become the first U.S. market in late 1995, when they replaced the top consumer goods. They had been temporarily overcome by technology in the bubble years, but the Nasdaq had regained the leadership in 2002.

And 'round inflation

In an article titled Inflation's back, the 'Economist reported as two-thirds of the world will in the coming months to live with inflation in double digits. The immediate cause is the continual increases in the price of oil and raw food . But the problem has deeper roots that might create a crisis situation such as that of the '70s.

Anchoring the U.S. dollar of many developing countries forces them to imitate the expansionary monetary policy of the Federal Reserve . This combination of low cost of borrowing in the U.S. and rigid exchange rates in emerging markets is a dangerous cocktail.

At the global level - refers to the Economist - the real interest rates are now negative . Monetary policy has never been so expansive '70s. But if low interest rates may be justified for America, which is on the brink of a recession, not at all to the economies of many developing countries operating at the limit of their capacity and have long are overheating.

With inflation rising a bit 'everywhere, the danger is that they move upward from the expectations by striking vicious wage-price spirals . Then a hard landing, or a hard landing for the global economy would become difficult to avoid.

Recession in the U.S.? For Buffett will be long and deep

Around Europe in search of investment opportunities, Warren Buffett talks with Spiegel Online and declares that, in America, the recession "will be deeper and will last longer than many expect. " bankers, he says, had prepared a" poisoned potion, "of those who usually like to sell to others. But they found themselves having to drink themselves.

The collapse in house prices without end

In a speech in Vancouver on May 13 Janet Yellen, president of the Federal Reserve Bank of San Francisco , has torn apart the illusions of those who own plan a subsequent stabilization of the housing market American. "The indicators - he said - link to the downside."

Stocks of unsold homes are so high that can not hope for a quick recovery in construction activity. Despite the significant decline in prices (first chart below) - the main proceedings dell'impennata nella percentuale di mutui in sofferenza (secondo grafico qui sotto) – i contratti future e il rapporto ancora molto alto tra prezzi e affitti (terzo grafico qui sotto) inducono a pensare che la discesa delle quotazioni è destinata a durare a lungo, almeno fino al 2009 inoltrato.




(i grafici sono a cura della Federal Reserve di San Francisco)

Trichet ammonisce che gli shock economici non sono finiti

In un’intervista al Wall Street Journal , il presidente della ECB Jean-Claude Trichet argues that "the accumulation of shock" resulting from the credit crisis and rising oil prices and food commodity "is clearly not over."