Stock Market News & Stocks to Watch from StraightStocks » Finland

Demand for green fuel and government policies driving Finland’s Biofuels market

Dawn Van Zant — Tue, 17 Nov 2009 13:00:00 +0000

Biofuels Market - covers one of the industries expected to grow dynamically. Government initiatives and the large demand for green fuel are expected to attract investments in the sector. In order to meet renewable energy targets, implementation of certain policies have been forecasted. This is expected to boost the market.

AGCO’s Outlook Remains Weak – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 22:27:58 +0000

Last week, AGCO Corp. (AGCO) reported third-quarter results. The company posted earnings of 13 cents per share, compared $1.01 per share in the prior-year quarter. The significant decline in quarterly earnings was driven by lower sales volumes, weaker product mix and the negative impact of currency translation.

Net sales in the quarter were $1,403.7 million, down 32.7% compared to the third quarter of 2008. AGCO is experiencing soft demand conditions in most of its markets. Lower commodity prices, along with expectations of decreased farm income, are hampering investments in farm equipment around the world. AGCO is aggressively cutting production in order to reduce its own and dealer’s inventories.

Sales in North America were down 31.9% on a constant currency basis due to weaker sales of low horsepower tractors and hay products, as well as reduction in dealer inventory. Unit retail sales of lower horsepower tractors were down due to weakness in the landscaping, residential construction and dairy sectors. This weakness is expected to continue for the remainder of the year.

In the EAME region, quarterly sales were down 30.3%, excluding the impact of foreign currency translation, due to lower volumes in Eastern Europe, Russia, France, Germany, Finland and Scandinavia. The company experienced major demand weakness from the diary and livestock sectors.

Sales from the South American region were down 20.5% (excluding foreign currency exchange impact) due to due to dry weather conditions and the impact of tightened credit on planted acreage and car production. The company saw improved demand conditions in Brazil during the quarter as the Brazilian government’s special financing plan for small farms continued to stimulate sales of lower horsepower tractors.

AGCO expects full year revenue in the range of $6.4 - $6.6 billion, compared to $8.4 billion in 2008. The revenue forecast includes unfavorable currency translation impacts of approximately $500 - $600 million. The company anticipates full-year EPS in the range of $1.30 - $1.50. We concur with the company that the demand for farm equipment is not expected to recover in the near-term.

We maintain an Underperform rating on the stock.
Read the full analyst report on "AGCO"
Zacks Investment Research

The Rise of the Rest

Trading School — Thu, 29 Oct 2009 10:46:12 +0000

One great thing about my position here as Director of Marketing is my extensive contact list. I say that because I have access to thousands of excellent traders, investors, and economists at my finger tips! So when things around the world catch my attention, I can quickly find someone who can give me the skinny [...]

Energy Blast – Oct 26, 2009

Robert Amsterdam — Mon, 26 Oct 2009 09:30:30 +0000

Russia 'counts on a controlling stake' in the three small hydropower plants it is building in Tajikistan and 'hope[s] for the Tajik side's understanding' in the matter. The United Nations nuclear watchdog is in the process of inspecting Iran's uranium...

Today in Russian Business – Oct 26, 2009

Robert Amsterdam — Mon, 26 Oct 2009 09:22:26 +0000

The ever-positive Vladimir Putin is forecasting 8% inflation for the coming year, which would be a 'post-Soviet low'. The government will sell tons of its gold stockpile this year to cover its budget deficit and help it fund other supporting...

Time for New Stock Market Leadership?

Frank Holmes — Mon, 26 Oct 2009 05:00:00 +0000

This analysis is from John Derrick, U.S. Global Investors Director of Research. The market has rallied dramatically since the March 9 low, with the biggest beneficiary of this rally being low-quality companies. This intuitively makes sense, given that companies with the most troubled outlooks are the ones most likely to have a strong recovery when the dire outcomes predicted at the bottom of the crisis failed to transpire. Quality may have different meanings to different investors, but in a recent research piece, Citigroup ranked performance based on multiple definitions of quality. Samp;P earnings quality ranking, debt-to-capitalization ratio and return on equity were used as proxies for quality. The research universe was the small-cap Russell 2000 Index, but I believe broader market conclusions can be drawn as well. Based on Samp;P earnings quality rankings, companies with C or D (the two lowest categories) ratings returned about 55 percent over the past six months, while the highest-rated stocks returned about 11 percent. As a whole, the Russell 2000 universe returned 30 percent over that time period. This trend is also broadly true for the other measures of quality. Generally speaking, companies with higher debt burdens outperformed companies carrying low debt, and companies with negative return on equity outperformed the broader market as well as the companies with the highest return on equity. Morgan Stanley also recently released a research report that looked at low-priced stocks as a proxy for low-quality and found that Samp;P 500 stocks trading below $5 dramatically outperformed. The same analysis was conducted on the MSCI Europe Index with very similar results, indicating a broad-based global phenomenon. Morgan Stanley highlighted that the recovery so far has been driven by multiple expansion ndash; the valuation that investors are willing to pay has increased, but that has not been supported by an increase in earnings in the current period. But we are now potentially at an inflection point at which the junk rally has more or less run its course and the market is beginning to focus on earnings growth. The business cycle plays a significant role in market valuations in the sense that the market anticipates a recovery and pays up for the anticipated earnings stream. Once the recovery takes hold, however, investors focus on actual earnings power as the primary driver of valuations. One persuasive indicator that the recovery has indeed taken hold can be seen in the ISM Manufacturing Index, which moved above 50 about six weeks ago, indicating that the economy is expanding. What has worked so far in this stock market recovery will not likely carry us into 2010 and beyond, so the time could be right to reposition for the next leg of the recovery. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Russell 2000 Index is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000. The Russell 3000 Index consists of the 3,000 largest U.S. companies as determined by total market capitalization. The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of September 2002, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The Samp;P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. #09-734

RA’s Daily Russian News Blast – October 12, 2009

Robert Amsterdam — Mon, 12 Oct 2009 08:20:56 +0000

TODAY: United Russia sweep polls at regional elections; accusation of vote-rigging fly. Mitvol receives unusual delivery. Medvedev had no time for Yushchenko at CIS summit; positive on Obama's peace prize; Ecuador looking for weapons deals?; Russia bids to host World...

Rahaxi, Inc. (RHXI.OB) Announces Agreement with Largest Jeweller Group in Scandinavia

QualityStocks — Thu, 08 Oct 2009 13:59:55 +0000

Rahaxi, Inc., an international card payments processor and technology company, today told investors that its subsidiary Rahaxi Processing Oy and jeweller chain giant Kultajousi Oy have entered into an agreement to supply its OTI solution to over 60 different stores in 27 different cities in Finland. Kultajousi is owned by Golden Heights Group which has [...]

U.S. Ousted as Most Competitive Economy

Frank Holmes — Wed, 09 Sep 2009 05:00:00 +0000

The global recession claims another victim - the United States is no longer the worlds most competitive economy. Switzerland, a beacon of relative stability during the past 18 months of worldwide economic turmoil, toppled the topsy-turvy U.S. from the No. 1 spot in the latest update of quot;The Global Competitiveness Reportquot; from the World Economic Forum. The WEF uses a wide range of metrics to measure competitiveness, which it defines as quot;the set of institutions, policies and factors that determine the level of productivity of a countryquot; as a means to produce prosperity for its citizens. The U.S. was panned in the report for too-close relationships between government regulators and the private sector, and for quot;the perception that the government spends its resources wastefully.quot; Specifically mentioned were the massive additions to the federal deficit made by the Bush and Obama administrations, used to finance the Iraq war and economic stimulus. Singapore ranked third, with Sweden, Denmark, Finland, Germany, Japan, Canada and The Netherlands rounding out the top 10. At the other end of the list, corruption- and inflation-plagued Zimbabwe - a prime example of how not to run an economic or political system - somehow managed to move up one spot from the bottom. It was replaced by Burundi at No. 133. The WEF said in its report that the three largest BRIC countries - Brazil, India and China - are among the few countries likely to improve their global competitiveness as a result of the recession. Some of the reasons: focus shift from export to domestic markets, greater efficiency by thinning out non-competitive producers, and more emphasis on improving education and other foundational issues. Each of these three also have challenges. For China (ranked 29th in the WEF report), they include lack of technology and rigid labor markets. India (49th) has to deal with huge prosperity gaps between its thriving cities and its rural areas. Brazil (56th) also has inequality issues, along with upgrading its public and private institutions. Russia, the fourth BRIC, is seen as one of the economies most likely to see negative ramifications from the recession. Its dependence on oil and natural gas exports expose it to more economic risk than the other BRIC components, which are far more diversified and have better financial markets. Weak property rights and government favoritism issues also hurt Russia (63rd, down 12 spots from a year earlier) in the rankings. Emerging Europe on the whole saw its competitiveness fall as a result of the financial crisis after years of booming consumption paid for by borrowing from foreign banks. All 492 pages of quot;The Global Competitiveness Reportquot; for 2009-10 are available *here. *This link goes to the World Economic Forum Web site. U.S. Global Investors does not endorse any information supplied by this website and is not responsible for any of its content. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

U.S. Ousted as Most Competitive EconomyU.S. Ousted as Most Competitive Economy

Frank Holmes — Wed, 09 Sep 2009 05:00:00 +0000

Energy Blast – September 2, 2009

Robert Amsterdam — Wed, 02 Sep 2009 09:09:35 +0000

Russia may raise electricity prices more than the 5% planned following the Sayano-Shushenskaya power station disaster, says Reuters. Ukrainian Prime Minister Yulia Tymoshenko has stated that the country's gas problems with Russia have been almost entirely resolved. According to the...

New CEO for Nokia Siemens – Analyst Blog

Zacks Market Commentaries — Tue, 01 Sep 2009 18:28:09 +0000

Nokia Siemens Networks, the telecom-equipment joint venture of Nokia Corp. (NOK) and Siemens AG (SI) appointed Rajeev Suri as its new CEO, replacing Simon Beresford-Wylie from Oct 1. Beresford-Wylie who decided to step down will support Suri during a transition period through Nov 1. The new CEO will be based at Nokia Siemens Network’s headquarters in Espoo, Finland.

Suri who is leading the Services business of Nokia Siemens Networks brings 20 years of experience in the telecommunications industry to the role of CEO. Previous positions have included leading the Asia-Pacific region during a time of significant growth in both product and service sales; overseeing teams for important customers such as Hutchison; and managing products, such as the early cellular transmission portfolio of Nokia. In previous roles, he was based in various locations including India, Finland, the United Kingdom, West Africa and Singapore.

Beresford-Wylie joined Nokia in 1998 and held several positions in Asia and Europe before his appointment to head Nokia’s infrastructure business group in February 2005. He was one of the leading drivers behind the creation of Nokia Siemens Networks and assumed the position of CEO of the company when it commenced operations on April 1, 2007. He has been a member of the Nokia Group Executive Board since 2005.

With 60,000 people in more than 150 countries and 600 account teams serving as many operator customers globally, Nokia Siemens Networks is one of the world’s largest telecommunications infrastructure companies. The company provides a complete portfolio of mobile, fixed and converged network technology, as well as professional services including consultancy and systems integration, deployment, maintenance and managed services.

We currently have Neutral recommendations on Siemens and Nokia.
Read the full analyst report on "NOK"
Read the full analyst report on "SI"
Zacks Investment Research

PennyOmega.com Stock Report! 8/28/09, EMCF, SMWF, MNTR, SUNV, CVC, ELON

PennyOmega.com — Fri, 28 Aug 2009 19:30:52 +0000

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Beacon Equity Research Featured Company: Royal Gold, Inc. (RGLD)

QualityStocks — Wed, 19 Aug 2009 15:10:30 +0000

Royal Gold, Inc. acquires and operates precious metals royalties, most of which contain gold and silver deposits. Royal Gold stands out from others in the industry due to its ownership of large portfolios of active, developing and exploration style royalties, located in some of the world’s most prolific gold regions. The company owns royalty interests [...]

“Advances in Development Reverse Fertility Declines” – Science or Hocus Pocus?

Edward Hugh — Sun, 09 Aug 2009 08:28:00 +0000

by Edward Hugh: : L'Escala de Empordàbr /br /According to a once-upon-a-time post on the Economist's a href="http://www.economist.com/blogs/certainideasofeurope/2007/07/a_fistful_of_reply.cfm#list-comments"Certain Ideas of Europe Blog/a Edward Hugh “was very cross” about some of the journalism they were serving up over at that prestigious journal. Well, not to worry, since this time he is hopping mad. And the issue which lies behind his wrath is essentially the same one, how to interpret and understand the demographic processes which are currently so evidently affecting our societies. In what is simply the latest episode in a long and sorry saga (if you want documentation, please see the comments Claus Vistesen and I nailed to their "Wall" in the above linked post) this week's print issue contains a href="http://www.economist.com/sciencetechnology/displaystory.cfm?story_id=14164483"a research review from their science and technology correspondent/a who is evidently not backward in coming forward with headline grabbing claims. According to the said corresponedent the demographic transition (a process which has been ongoing for over two hundred years now) has finally and definitively gone into reverse gear:br /blockquote"One of the paradoxes of human biology is that the rich world has fewer children than the poor world. In most species, improved circumstances are expected to increase reproductive effort, not reduce it, yet as economic development gets going, country after country has experienced what is known as the demographic transition: fertility (defined as the number of children borne by a woman over her lifetime) drops from around eight to near one and a half. That number is so small that even with the reduced child mortality which usually accompanies development it cannot possibly sustain the population.br /br /If Mikko Myrskyla of the University of Pennsylvania and his colleagues are correct, though, things might not be quite as bad as that. A study they have just published in Nature suggests that as development continues, the demographic transition goes into reverse."/blockquotebr /br /Well quite a strong claim is being made here. The idea that a group of researchers have come up with a finding that shows the "rule....that people have fewer children as their countries get richer...no longer holds true" is certainly not one to be sniffed at. Such a strong claim needs some very heavy backing you would think, given all the research that has gone into the topic in recent years.br /br /In fact, the research makes no such direct claim, since Myrskylä et al simply find statistically significant evidence for a reversal in the relationship between the human development index (HDI)br /and the total fertility rate (Tfr) at HDI levels around 0.85–0.9. The rest is only interpretation. As we will see, to move from a simple statististical correlation to formulating a hypothesis you need an explanatory framework, and you need to be able to make falsifiable predictions. The Nature letter from Myrskylä et al is far from being at this stage of development. They have simply found an interesting correlation, and the rest is in the eye of the observer.br /br /blockquote"Back in 1975, a graph plotting fertility rate against the Human Development Index fell as the Human Development Index rose. By 2005, though, the line had a kink in it. Above an HDI of 0.9 or so, it turned up, producing what is known in the jargon as a “J-shaped” curve (even though it is the mirror image of a letter J). As the chart shows, in many countries with really high levels of development (around 0.95) fertility rates are now approaching two children per woman. There are exceptions, notably Canada and Japan, but the trend is clear."/blockquotebr /br /However, according to the Economist the trend is clear. But is it? Edward has been doing some digging.br /br /In fact the problem goes beyond the Economist, since the source behind the article is a letter published in Nature. Below a href="http://www.nature.com/nature/journal/v460/n7256/full/nature08230.html"you can read that letter/a.br /br /blockquote"During the twentieth century, the global population has gone through unprecedented increases in economic and social development that coincided with substantial declines in human fertility and population growth rates. The negative association of fertility with economic and social development has therefore become one of the most solidly established and generally accepted empirical regularities in the social sciences. As a result of this close connection between development and fertility decline, more than half of the global population now lives in regions with below-replacement fertility (less than 2.1 children per woman. In many highly developed countries, the trend towards low fertility has also been deemed irreversible. Rapid population ageing, and in some cases the prospect of significant population decline, have therefore become a central socioeconomic concern and policy challenge10. Here we show, using new cross-sectional and longitudinal analyses of the total fertility rate and the human development index (HDI), a fundamental change in the well-established negative relationship between fertility and development as the global population entered the twenty-first century. Although development continues to promote fertility decline at low and medium HDI levels, our analyses show that at advanced HDI levels, further development can reverse the declining trend in fertility. The previously negative development–fertility relationship has become J-shaped, with the HDI being positively associated with fertility among highly developed countries. This reversal of fertility decline as a result of continued economic and social development has the potential to slow the rates of population ageing, thereby ameliorating the social and economic problems that have been associated with the emergence and persistence of very low fertility."/blockquotebr /br /br /Here is the chart (reproduce from Nature data) which the Economist presents to illustrate the 'J curve' relationship.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Sn1c5QH2KJI/AAAAAAAAOw8/9EElMH7Rg3w/s1600-h/Nature+Chart.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 252px; DISPLAY: block; HEIGHT: 277px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367548469545674898" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sn1c5QH2KJI/AAAAAAAAOw8/9EElMH7Rg3w/s400/Nature+Chart.png" //abr /br /Nice, isn't it? Nature even go to the lengths of a putting up a special "event" podcast featuring an interview with Hans Peter Kohler (a href="http://www.nature.com/nature/podcast/"click here for link/a) as if to underline the importance of the "finding") But does any of this have any compelling validity?br /br /Methinks not as much as the authors of the letter, or those who are covering it in the media, are trying to make out. There are many issues which are raised here, but I would just like to mention three.br /br /The first is the decision of the research team to work with a period based fertility measure which is known to be very unreliable for "tempo" reasons (the Total Fertility Rate- Tfr) as the basis for a longitudinal study. And let us remember, the authors only really claim to have found a correlation between HDI levels in the 0.85–0.9 range and movements in the Tfr, and there could be many explanations for this. Indeed the authors themselves even offer one of them in their supplementary information - "countries at development levels near the critical level HDI = 0.86 might have a more rapid postponement of childbearing than more advanced countries.. " - a possibility which, in fairness to the authors, they try to test for.br /br /And you don't have to rely on me for the suggestion that the Tfr is hardly the most desireable measure for what they want to do, since the authors themselves point this very fact out in the supplementary information (and the only thing which surprises me is that nobody else who has reviewed the research seems to have twigged the implications of this). So the very title of the Letter is totally misleading, they have not found that "Advances in Development Reverse Fertility Declines" -since in the first place the direction of causality is not adequately determined (it might be that reverses in fertility decline advance development, as I try to show in a piece referenced below) and in any event the research only shows movements in the HDI correlate with movements in the Tfr (and not with "fertility").br /br /blockquoteThe recent literature on low fertility in developed countries has pointed to the important role of delayed childbearing, that is, the ongoing postponement of childbearing to increasingly later ages. In the context of this paper, delayed childbearing is potentially important because the postponement of childbearing can distort the total fertility rate as a measure of the quantum (or long-term level) of fertility. “Tempo effects”, or the reductions in the total fertility rate resulting from a postponement of childbearing, have been shown to partially explain the very low fertility rates observed in some European countries./blockquotebr /br /So this is the first issue. Due to the phenomenon of birth postponement, the Tfr is a hopelessly unreliable indicator, and what is often called "the birth recovery" is in fact a statistical issue produced by the fact that the Tfr first sinks to very low levels (the birth dearth) and then recovers as women reach the new (higher) childbearing age. Since all of this is simply so obvious, I am absolutely astounded that two such well known and highly respected demographers - Hans-Peter Kohler and Francesco Billari - have placed their name on a piece of research that could almost be described as a publicity stunt. I am even more astounded by the way Nature appear to have been hoodwinked.br /br /Basically, I don't think that there can be any doubt that if they used a more comprehensive measure of fertility - say completed cohort fertility - they wouldn't get the correlation they claim to have found, since CFRs never fell so low, and have not bounced back in the same way. This is essentially because this indicator removes the temporal component found in the TFR (older first birth ages among women in developed societies) and only focuses on quantity. True, they did carry out a robustness test using an adjusted Tfr, but the results are much weaker, and the sample far from satisfactory (at least for the claims being made), and the authors well know this (see below).br /br /In their longitudinal study the authors look at Tfrs for a number of countries over the period 1975 to 2005 and compare these to the lowest Tfr reading observed while a country's HDI was within the 0.85–0.9 window. For all countries considered, the HDI in 2005 was found to be higher than the HDI in the reference year. For 18 of the 26 countries that attained a HDI 0.9 by 2005, the Tfr in 2005 was found to be higher than the TFR in the reference year. As I say, this is hardly surprising, given the tempo impact on Tfrs. The "2005 18" are Norway, the Netherlands, the United States, Denmark, Germany, Spain, Belgium, Luxembourg, Finland, Israel, Italy, Sweden, France, Iceland, the United Kingdom, New Zealand, Greece and Ireland.br /br /Perhaps it is more surprising (and interesting) to learn that they found six countries where the HDI was over 0.9 but where the Tfrs didn't pick up: Japan, Austria, Australia, Switzerland, Canada and South Korea. Clearly the absence of "rebound" in even the Tfrs is something of a cause for preoccupation in these countries, and examining the background to what is happening in these countries could at the end of the day turn this research into something quite interesting. That is to say, if for their level of development we might have expected the tempo effect to be more or less over, why do some countries continue to have very low fertility levels?br /br /Basically, to shoot a hole straight through their hypothesis (falsify it that is, surely in science things should be falsifiable), I would say it is only necessary to find a significant number of countries in the first group where fertility as measured by a better indicator didn't rise. Unfortunately we don't have a really good time series for such an indicator, but Eurostat have published statistical estimates for Completed Cohort Fertility Rates (Cfrs) for EU countries up to the 1989 cohort. That is, estimates of what fertility is likely to be for women who were 30 in 2009. Looking at this data, the following countries would appear to offer no evidence whatever for a rebound in cohort fertility in what we know to dat: Norway, Netherlands, Denmark, Germany, Italy, Finland, Sweden, France, Iceland, the UK, Greece and Ireland. That is to say, as far as I am concerned, the whole hypothesis falls till at least subsequent data confirm it.br /br /I haven't been able to check foir the US (but the Cfr is probably up) Israel (also) or New Zealand. Belgium has little available data. So the only two European countries which you could say with some degree of security actually could confirm the hypothesis would be Luxembourg and Spain - but if you just look at the increases in Spain - from 1.34 to 1.35 - and think about the fact that 5 million new migrants arrived (mainly in childbearing ages) between 2000 and 2009, then the result is hardly dramatic, and if you look what just happened to the economy, it is more than likely that GDP per capita is plummeting, and and household income (which has a weighting of more than one third in the HDI) with it. Which brings me to the second question, the reference year. But before I move on to that, as I say above, the authors are perfectly well aware of the issue with using Tfrs.br /blockquoteIn particular, one could speculate that tempo effects might be—at least partially—responsible for the observed change in the development–fertility association. For example, countries at development levels near the critical level HDIcrit = 0.86 might have a more rapid postponement of childbearing than more advanced countries. If this were the case, tempo effects would reduce the TFR more strongly at intermediate than at advanced HDI levels, and the positive association between HDI and TFR in Figures 1–2 could be partially explained by differences in the pace of fertility postponement, rather than by variation in levels among advanced countries./blockquotebr /br /The authors therefore carry out a robustness test which effectively amounts to a cross-sectional study (cross-sectional note, not longitudinal) of the relationship between the total fertility rate with and without adjustment for tempo effects, and the human development index in 1975 and 2005. Tempo adjusted TFRs are not available over the period in question so they simply took data for 2005 (for those countries for which it is available from the ’European Demographic Data Sheet 2008’ (published by the Vienna Institute of Demography, Vienna, Austria) and from McDonald P, Kippen R. The Intrinsic Total Fertility Rate: A New Approach to the Measurement of Fertility (Population Association of America Annual Meeting 2007, New York, 2007). What they can then show is that the HDI–TFR relationship at persists at advanced development stages persists even after adjusting the total fertility rate for tempo effects. But, as I say, this is cross sectional, not longitudional. What does this jargon mean? It means there is no clear causal relationship, since equally it could be better HDIs which is driving better fertility, and hence you can use the HDI to explain differences between countries if you wish, but not the evolution of fertility in individual countries. The 2005 result is show as a black line in the chart below, where you can see that as HDI goes up, Tfr also seems to be higher.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sn1xBKpJlQI/AAAAAAAAOxE/GnOAvjVfEW4/s1600-h/cross+section.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 371px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367570595746256130" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sn1xBKpJlQI/AAAAAAAAOxE/GnOAvjVfEW4/s400/cross+section.png" //abr /br /Which is very much to the point, and brings me to my second issue, since in my blog post "Taking Solow Seriously - Does Neoclassical Steady State Growth Really Exist?" (a href="http://edwardhughtoo.blogspot.com/2009/06/taking-solow-seriously-does.html"which you can find here/a) - I demonstrate using a few simple charts that the evolution in GDP per capita (which accounts remember for one third of the HDI) may well be a function of underlying population dynamics, since three countries with stronger population growth and higher fertility (the US, the UK and France) evidently perform much better than three will low-to-negative population growth and very low fertility (Italy, Japan and Germany).br /br /Also, it should be remembered, as I mention, we need to think about base years. 2005 was the mid point of a massive and unsustainable asset and construction boom. I think there is little doubt that if we took 2010 or 2011, the results would be rather different.br /br /Finally, the piece in the Economist article that I personallyfind most interesting is the following:br /br /"Dr Myrskyla’s data, however, suggest the ultimate outcome of development may not be a collapsing population at all but, rather, the environmentalist’s nirvana of uncoerced zero population growth."br /br /I want to stress, I certainly think this stationary population idea is certainly one possibility in the more highly developed nations - but if we move to stationary populations, with higher and higher proportions of the population in the older age groups the result is - as we know - a rising median population age. It is the economic impact of the abrupt rise in median age that I personally am focused on, and how just this rise, and the resulting fall in living standards for many young people, might feedback in a negative way on fertility and thus produce ever more rising median ages. In recent days, some have been asking why people like myself are so focused on what is going on in Latvia, which is after all, a pretty small country. Well, I think here in the issues raised by the Nature letter we have just one more reason why that country is important, since in a sense it is conducting a "live" experiment.br /br /Finally, I want to say, none of the above should be read as suggesting that there isn't a great deal of interest and material to talk about in the study the authors have carried out. Nor would I hold them entirely responsible for the way in which others have used and abused their work. I just the reserach doesn't demonstrate what they want it to demonstrate, and that the study doesn't deserve the kind of high media profile it has been receiving, since it is going to mislead the general public more than it will enlighten them, given the important methodological issue which are still to be clarified.br /br /The heart of the problem is twofold. The excessive reliance on a rather problematic indicator (the Tfr) and the causality issue when it comes to GDP per capita and higher fertility (which way does the arrow point?). In fairness the authors do attempt to construct their own combined time series based on a mixture of tempo-adjusted Tfrs and Tfrs, a procedure which seems at the very least to be somewhat problematic if you want to reverse fifty years of academic consensus. And they do get the same sort of result, but the outcome is much weaker and is based on a much smaller sample of only 25 countries. But even this result is at the very least odd, since, as I argue above, cohort fertility hasn't really increased in most of thecountries concerned. So I think we really all need to see more details of how the authors actually constructed the time series to be able to form a better judgement.br /br /But all this being said, and whatever the original intentions of the authors, serious scientific debate does seem to have been turned here into something of a media circus. Wasn't it blogs that were supposed to do that?br /br /strongAppendix/strongbr /br /Below I offer a series of charts showing estimated completed cohort fertility rates based on data compiled by Eurostat using the distribution of births by parity (first and second or higher order births) and mean age of mothers at respective parities to carry out the calculations. Evidently, the most recent data for hard data on completed cohort fertility comes for the 1960 - 1965 cohort. These charts should not be treated as hard data, but a rule-of-thumb type quick visual inspection suggests that it is hard to accept the case for a substantial fertility rebound in many European countries.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Sn3PO8BEe7I/AAAAAAAAOx8/9eOvojQ9XYQ/s1600-h/Switzerland+and+Slovenia.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367674186431232946" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sn3PO8BEe7I/AAAAAAAAOx8/9eOvojQ9XYQ/s400/Switzerland+and+Slovenia.png" //abr /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sn3PJ0CFCQI/AAAAAAAAOx0/yu_FnUR5KkM/s1600-h/norway+and+denmark.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367674098388633858" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sn3PJ0CFCQI/AAAAAAAAOx0/yu_FnUR5KkM/s400/norway+and+denmark.png" //abr /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Sn3PGVm-g8I/AAAAAAAAOxs/1jEqYkUYjqE/s1600-h/netherlands+and+Italy.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 201px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367674038682289090" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sn3PGVm-g8I/AAAAAAAAOxs/1jEqYkUYjqE/s400/netherlands+and+Italy.png" //abr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sn3PCbmMTYI/AAAAAAAAOxk/6BPfKQPDsIc/s1600-h/luxembourg+and+spain.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367673971570134402" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sn3PCbmMTYI/AAAAAAAAOxk/6BPfKQPDsIc/s400/luxembourg+and+spain.png" //abr /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Sn3O-cYGe_I/AAAAAAAAOxc/ktZadAXfAaU/s1600-h/ireland+and+Greece.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 204px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367673903059991538" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sn3O-cYGe_I/AAAAAAAAOxc/ktZadAXfAaU/s400/ireland+and+Greece.png" //abr /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sn3O6b_brlI/AAAAAAAAOxU/eGWratutFCw/s1600-h/Iceland+and+Sweden.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 201px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367673834237046354" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sn3O6b_brlI/AAAAAAAAOxU/eGWratutFCw/s400/Iceland+and+Sweden.png" //abr /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sn3O2NEgbvI/AAAAAAAAOxM/sfcSNnQpjQc/s1600-h/finland+and+germany.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 202px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5367673761512320754" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sn3O2NEgbvI/AAAAAAAAOxM/sfcSNnQpjQc/s400/finland+and+germany.png" //adiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/8991369883287712098-4815330640925891745?l=globaleconomydoesmatter.blogspot.com'//div

Amdocs Remains a Buy – Analyst Blog

Zacks Market Commentaries — Mon, 27 Jul 2009 21:02:40 +0000

Amdocs Limited (DOX), the global leader in customer management and billing software for the communications industry, has declared third quarter of fiscal 2009 financial results, well above our estimates. The company continues to benefit from the telecom carrier industry’s long-term trend towards network consolidation & convergence.

Third quarter revenue of $690.3 million was down 15.9% from the year-ago quarter and down 2.9% sequentially. But this was above our expectation of $680 million and at the high-end of the company’s guidance. Adjusted diluted EPS (excluding special items) during the third quarter was $0.52 compared to $0.53 in the prior-year quarter and $0.48 in the previous quarter. This was also better than our estimate of $0.44.

Gross margin (excluding stock-based compensation expenses) in the third quarter 2009 was 36.8% compared to 36.2% in the prior-year quarter and 36.5% in the previous quarter. After a big reduction of operational cash flow in the previous quarter, Amdocs again generated a solid cash flow of $113.9 million during the third quarter.

As a result, free cash flow (cash flow from operations less capital expenditures) during the quarter was $96.2 million, compared to $83.2 million in the year-ago quarter and $62.7 million in the previous quarter. Net cash balance (cash & marketable securities less total debt) at the end of the third quarter 2009 was $4.81 per diluted share, an improvement of 44.4% year-over-year as well as 14.5% sequentially.

The Telecommunications Software Management System market is highly competitive. More than 100 vendors provide customer management & billing system solutions throughout the world. Besides Amdocs, other major players include Convergys (CVG), CSG Systems (CSGS), Oracle (ORCL) and Comverse (CMVT).

Despite competition, Amdocs has the largest customer base and the broadest product line in the industry. The company’s Customer Experience Systems portfolio (CES 7.5) provides a single platform capable of supporting complex requirements of traditional and next-generation "triple-play" voice, video and data services as it focuses on addressing emerging market trends in the communications industry.

Recently, two major European telecom carriers, Elisa Corporation of Finland and T-Mobile UK, entered into a six year and four year managed services contract with Amdocs, respectively. The company already has a seven year managed services contract with AT&T (T) and another five year contract with Sprint-Nextel (S). Other major customers of Amdocs’ managed service include Clearwire, Rogers Telecom, Metro PCs, J:COM, and Telenor Sweden. All these contracts resulted in a total order backlog of $2.37 billion at the end of the third quarter of fiscal 2009.

Amdocs has industry-leading technology integration products for large-scale transformational projects and managed services. The company is currently generating more than 70% of its revenue from managed services and other recurring sources.

According to our view, implementation of integrated customer management systems is essential to preventing customer churn at carriers. We thus reiterate Buy for Amdocs.
Read the full analyst report on "DOX"
Read the full analyst report on "CVG"
Read the full analyst report on "CSGS"
Read the full analyst report on "ORCL"
Read the full analyst report on "CMVT"
Read the full analyst report on "T"
Read the full analyst report on "S"
Zacks Investment Research

These 6 Large Cap Commodity Based Companies are in the News

Lorimer Wilson — Tue, 14 Jul 2009 22:54:50 +0000

Most people think of warrants as being associated primarily with micro/nano cap i.e. junior gold and silver mining companies but that is not entirely the case. Of the 35 companies offering warrants of 24 or more months duration (of which there are 47 in total) 6 are large-cap commodity based companies (2 gold mining companies; [...]

To The Finland Station And Back Again

Edward Hugh — Tue, 14 Jul 2009 19:27:00 +0000

by Edward Hugh: Barcelonabr /br /This post accompanies my recent piece on Sweden. I have been scratching my head and trying to see what could be learnt from making a comparison between Finland and Sweden. Some of the differences are obvious - one is in the euro, and the other isn't, once can adjust monetary policy and currency values, and the other can't. Others are less so. Finland's goods trade surplus has been declining steadily since joining EMU while Sweden's has remained relatively constant. And Swedish males live on average three years longer than their Finnish counterparts. So what is important here, and why? And if convergence theory has anything positive to be said for it, shouldn't we be able to observe so sort of convergence going on here.br /br /br /First, and just to remind ourselves, here is the chart from Claus Vistesen which shows what the relation between population ageing and current account balance might look like. The key point is that as populations age beyond a certain point, a tendency to run a current account surplus emerges, as domestic demand steadily weakens, and becomes insufficient to drive growth. Evidence for this phenomenon can be found in Germany, Japan and Sweden.br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SlMSCXRnOaI/AAAAAAAAOhs/0ENVvdtHpMA/s1600-h/claus+model.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 190px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5355644213690579362" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SlMSCXRnOaI/AAAAAAAAOhs/0ENVvdtHpMA/s400/claus+model.png" //abr /br /The idea is that as median population age rises the current account dynamics of a country change. The last ageing phase shown to the right of the diagram is purely speculative at this point, although theory suggests that if the underlying momentum of ageing is left unaddressed it may well be what happens. But it is a development which is to be strongly avoided since although we do not yet know what happens when a society starts to dis-save at an advanced median age, the longer we can put off finding out, the better. p/ppWhich is why looking at Finland is important, since unlike the three aforementioned "ideal type" agers, Finland has in fact seen a deterioration in its external position over the last decade, and even though it has, up to now, remained a surplus country, the trend is certainly towards deficit, and this trend needs to be halted and reversed. Indeed this is the most pressing policy problem facing the Finnish authorities during the current recession.br /br /br /Now, as in Finland, Sweden's external position underwent a structural shift in the mid 1990s, just as Claus's model predicts. First positive balance - the submarine breaks water - in 1994, meadian age 38.4 (quite young in international comparisons so interesting). So so far so good.br /br //ppa href="http://1.bp.blogspot.com/_ngczZkrw340/SlMTH16o8xI/AAAAAAAAOh0/t_tPM89ZNeU/s1600-h/sweden+CA+balance.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 232px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5355645407326696210" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SlMTH16o8xI/AAAAAAAAOh0/t_tPM89ZNeU/s400/sweden+CA+balance.png" //abr /br /So Sweden is a sort of normal case, now let's look at Finland. Once more the mid 1990s "transition" is clear. Finland moves from deficit to surplus. But unlike the Swedish case the surplus peaks around the turn of the century, and since then has been steadily weakening.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SleFZf-Qf8I/AAAAAAAAOj8/s3uL4qSA1NA/s1600-h/finland+CA+balance.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 202px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356896954906345410" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SleFZf-Qf8I/AAAAAAAAOj8/s3uL4qSA1NA/s400/finland+CA+balance.png" //abr /br /There can be a number of explanations for this. The pattern of ageing could, for example, be different in Finland. Or the euro might be a factor, with the loss of control over monetary policy leading to a steady deterioration in the level of international competitiveness. As we will see below, some part of the explanation may be provided by each of these, but first, lets take a look as some of the empirical aspects of Finland's present recession, since it is evident that Finland, like many other countries, has entered a strong recession on the current back the global crisis. br /br /strongStrong Decline In Finland's GDP/strongbr /br /In the first three months of this year GDP was down by 2.7% when compared with the last three months of last year (an 11.2% annualised rate of contraction).br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SleRyBM2YqI/AAAAAAAAOkM/_-6npDRFPUU/s1600-h/finland+GDP+2.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356910570282312354" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SleRyBM2YqI/AAAAAAAAOkM/_-6npDRFPUU/s400/finland+GDP+2.png" //a And it was down by 7.5% when compared with the first quarter of 2008 (Eurostat data).br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SleRrNlzMFI/AAAAAAAAOkE/GbzBEZebYiI/s1600-h/finland+gdp+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356910453349101650" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SleRrNlzMFI/AAAAAAAAOkE/GbzBEZebYiI/s400/finland+gdp+one.png" //abr /br /br /One significant difference which can already be noted between Sweden and Finland is that while the last three months of 2008 were definitely much worse than the first three months of 2009 in Swedan, in Finland, as in many other Eurozone economies, Q1 2009 was definitely much worse than Q4 2008. And indeed, while Sweden's economy shows some definite signs of small green shoots in Q2 2009, as far as we can see, Finland's economy still remains deeply mired in recession. Finland does not have a local variant of the ubiquitous Purchasing Managers Surveys, but the statistics office does maintain a monthly gross domestic product (GDP) indicator. Now, while the methodology is very different (the PMI composites are survey based and qualitative, and much more reliable) for what it is worth Finland's GDP indicator fell 9.2 percent in April in comparison with April 2008, that is to say, the year on year contraction was greater than in the first quarter, but it is difficult to draw any definitive conclusion from this, since there are many statistical factors at work here.br /br /According to Statistics Finland building and manufacturing industry were the hardest hit.br /br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SleSGLHN4lI/AAAAAAAAOkU/iqk_UXBLuOQ/s1600-h/finland+GDP+indicator.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 220px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356910916540424786" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SleSGLHN4lI/AAAAAAAAOkU/iqk_UXBLuOQ/s400/finland+GDP+indicator.png" //abr /br /The April data showed production in construction and manufacturing - both key contributors to the Finnish economy - down around 17 percent year-on-year. Production in April was down 0.6 percent from March. Output in agriculture and forestry showed slight growth on an annual basis of just below two percent, while services fell six percent.br /br /And the outlook for the rest of this year does not look much brighter. The OECD forecasts growth in the Finnish economy will fall by 4.7 percent in 2009 with a return to 0.8 percent growth next year. Significantly the OECD also stressed that uncertainty in the evolution of international trade poses the greatest risk in the outlook for the Finnish economy.br /br /The IMF currently expects the economy to shrink by 5.2 percent this year and again by 1.2 percent next year, while the latest finance ministry forecast is for a 6.0 percent shrinkage this year followed by 0.3 percent growth next year. All the 2009 forecasts seem to be subject to downside risk, while the 2010 ones are no better than guesses, since the level of uncertainty is so high, and Finland is so dependent on external trade, but further contraction seems more probable than growth at this point./ppbr /strongShort Term Indicators/strongbr /br /Industrial output fell again in May (year on year) for the seventh consecutive month, and was down by 23.2 percent over May 2008. This follows a revised fall of 21.3 in April.br /br /br /br //ppa href="http://4.bp.blogspot.com/_ngczZkrw340/Slej6XoJ9QI/AAAAAAAAOlk/rB4_suQB6EM/s1600-h/finland+IP+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 233px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356930504950674690" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Slej6XoJ9QI/AAAAAAAAOlk/rB4_suQB6EM/s400/finland+IP+one.png" //abr /br /Month-on-month, industrial production also fell - by 2.2 percent from April when it fell by 3.8 percent over March. So the industrial situation is deteriorating, not improving at this point. Output fell in all main sectors, with metal industry reporting the biggest decline around 28 percent, while the paper industry production also shrank by nearly 28 percent year-on-year.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SlekAuJTFcI/AAAAAAAAOls/QFbpolPVU9g/s1600-h/finland+IP+two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356930614074480066" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SlekAuJTFcI/AAAAAAAAOls/QFbpolPVU9g/s400/finland+IP+two.png" //abr /br /Over the January to May period, industrial output decreased by close on 22 per cent from the corresponding period in the previous year. And there seems to be little improvement on the horizon. According to Statistics Finland, the value of new orders in manufacturing was 39.6 per cent lower in May 2009 than in May 2008, slightly above the January to May average decrease of 38.9 per cent year-on-year.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SlhIYF5xH3I/AAAAAAAAOmM/gwv9TvECAPY/s1600-h/finland+new+orders.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 223px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5357111335495737202" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SlhIYF5xH3I/AAAAAAAAOmM/gwv9TvECAPY/s400/finland+new+orders.png" //abr /br /As in earlier months, the decline in new orders was strongest in the metal industry (47.5 per cent). In the chemical industry new orders fell by 30.7 per cent, in the textile industry by 28.5 per cent and in the manufacture of paper, and paper and board products by 19.4 per cent.br /br /Construction activity is also well down, falling by 14.4% year on year in March (the latest detailed data we have), and by around 17% in April according to the GDP indicator.br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SleXNKdAa-I/AAAAAAAAOkc/OjHPFOr1FSc/s1600-h/finland+construction+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 232px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356916534180604898" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SleXNKdAa-I/AAAAAAAAOkc/OjHPFOr1FSc/s400/finland+construction+one.png" //abr /br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SleXUucI7yI/AAAAAAAAOkk/vJWxuqPZrRs/s1600-h/finland+construction+two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356916664099729186" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SleXUucI7yI/AAAAAAAAOkk/vJWxuqPZrRs/s400/finland+construction+two.png" //abr /br /Finland did not have a massive construction boom. The construction of new dwellings shows no obvious surge in the first decade of the century.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SlhToOeCtjI/AAAAAAAAOmU/iLNXI3GyOOU/s1600-h/finland+completed+dwellings.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5357123707301180978" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SlhToOeCtjI/AAAAAAAAOmU/iLNXI3GyOOU/s400/finland+completed+dwellings.png" //abr /br /On the other hand rate of household indebtedness is up, with the ratio of debt to disposable income rising to 101.4 percent in 2007, from 70.3 percent in 2002. Significantly, the rate of indebtedness among households composed of persons in the key 25 to 34 age range reached 189 percent in 2007. House prices seem to be a story of one long steady march upwards since 1995, but prices did start to fall in 2008, and this trend now seems set to continue.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SlhlgK9MxLI/AAAAAAAAOmc/BbpjfpDqrns/s1600-h/finland+falt+prices.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 201px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5357143360128468146" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SlhlgK9MxLI/AAAAAAAAOmc/BbpjfpDqrns/s400/finland+falt+prices.png" //abr /br /Retail sales, which give us a measure of domestic demand, are also falling, if still only moderately. According to Eurostat, retail trade sales fell by 2.99 percent year on year in April. According to the Finnish Statistics Office, sales between January-April were down by 1.6 percent over a year earlier. During the same time period, motor vehicle trade sales were down 31.8 percent and wholesale trade sales down 17.5 percent.br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SlemDngqsOI/AAAAAAAAOl8/7C0oGNnYqFk/s1600-h/finland+retail+sales+two.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 229px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356932862856311010" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SlemDngqsOI/AAAAAAAAOl8/7C0oGNnYqFk/s400/finland+retail+sales+two.png" //abr /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SlelzyUj7PI/AAAAAAAAOl0/SlBmc_ie5O4/s1600-h/finland+retail+sales+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356932590880419058" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SlelzyUj7PI/AAAAAAAAOl0/SlBmc_ie5O4/s400/finland+retail+sales+one.png" //abr /br /Finland's unemployment rate continues to rise, and at an accelerating pace. The increase in those unemployed from April to May alone was greater than that in the whole of last autumn, according to Statistics Finland. From January to May the seasonally adjusted jobless rate was up by two percent and there were more than 300,000 people recorded as without work in May, 60,000 more than in May 2008, taking the national unemployment rate as measured by Finland Statistics to 10.9 percent.br /br /Using the EU (ILO compatible) methodology, Eurostat report the May unemployment rate as 8.1 percent. The OECD expect unemployment to continue to rise in Finland, and forecast an unemployment rate of 8.7 percent this year, rising to 10.8 percent next year (ILO methodology).br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SlenmfBj7zI/AAAAAAAAOmE/yMRmZ6ZW-vo/s1600-h/finland+unemployment+rate.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 232px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356934561385410354" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SlenmfBj7zI/AAAAAAAAOmE/yMRmZ6ZW-vo/s400/finland+unemployment+rate.png" //abr /br /br /The OECD is also worried about employment in Finland in the longer term, and point out that while the country has taken important steps to remove the barriers to employment of older workers (see a href="http://www.oecd.org/document/9/0,3343,en_2649_34747_28023113_1_1_1_1,00.html"the OECD publication Ageing and Employment Policies in Finland/a) more needs to be done. Since the early 1990s, Finland has introduced programmes to support the employment of older workers, notably the National Programme on Ageing Workers. It has also recently undertaken a major reform of the old-age pension system and will phase out early retirement schemes.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SleYcpAUieI/AAAAAAAAOk8/NG9R-FRUCsc/s1600-h/finland+median+age.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356917899591453154" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SleYcpAUieI/AAAAAAAAOk8/NG9R-FRUCsc/s400/finland+median+age.png" //abr /br /However, Finland’s median age is rising steadily (see chart above) and the old-age dependency ratio (population aged 65 and over as a proportion of the population aged 20-64) is projected to increase from 25% in 2000 to 43% in 2025 compared with an OECD average of 22% in 2000 and 33% in 2025. This is a very steep rise, and raising employment rates among the older population is going to be the key to meeting the challenges presented by the need to find export lead growth.br /br /According to the OECD, only around 30% of people aged 61 are currently working – a drop of more than 50 percentage points compared with 51 year olds. This steep drop in employment rates can primarily be explained by the fact that Finland has too many pathways to early retirement, notably unemployment benefits, unemployment pension, disability pension and individual early retirement pension. Already at the age of 50, 18% of individuals are receiving either unemployment or disability benefits, increasing to more than 46% by the age of 60. Moreover, in the age group 60-64 most unemployed persons transfer to the unemployment pension with a further 20% relying on disability benefits and about 10% rely on the individual early retirement pension.br /br /br /strongDeflation dynamics/strongbr /br /br /Like Sweden, the inflation data also throws into the limelight the disparity between the EU HICP measure (which does not include housing interest) and the national CPI (which does). Year-on-year inflation, calculated by Statistics Finland dropped to 0.0 per cent in May, while in April it was still 0.8 per cent. According to Statistics Finland the drop was primarily due a fall in food prices and interest rates. Between April and May, consumer prices fell by 0.2 per cent. On the EU HICP index, however, year on year inflation is currently running at 1.5 percent. Thus, in a time of falling house prices and lowered interest rates, the HICP totally underestimates the deflation danger.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SleeGZNLsrI/AAAAAAAAOlc/aq-vhpTdqUI/s1600-h/finland+CPI.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356924114463077042" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SleeGZNLsrI/AAAAAAAAOlc/aq-vhpTdqUI/s400/finland+CPI.png" //abr /br /It is important to remember here that two-thirds of Finland’s housing stock consists of owner-occupied homes, and home ownership is widespread in all forms of housing, including apartments as well as detached houses and row houses. Normally falling interest rates would produce rising house values, due to the affordability effect, but under current conditions we are observing the opposite. I can't help feeling that European monetary policymakers need to think more about this type of thing.br /br /br /More evidence for deflationary headwinds is offered by producer prices for manufactured products, which fell by 8.1 per cent year on year in May. Export prices were down 9.8 per cent and import prices fell by 11.7 per cent. The year-on-year change in the wholesale price index was -8.9 per cent.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SledXbFfrVI/AAAAAAAAOlU/4OlIOIVaSfc/s1600-h/finland+ppi+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 232px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356923307513851218" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SledXbFfrVI/AAAAAAAAOlU/4OlIOIVaSfc/s400/finland+ppi+one.png" //abr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SledR64EbDI/AAAAAAAAOlM/ZtxRqmJARKI/s1600-h/finland+ppi+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 232px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356923212968258610" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SledR64EbDI/AAAAAAAAOlM/ZtxRqmJARKI/s400/finland+ppi+one.png" //abr /br /strongSo Where Are We?/strongbr /br /br /Finland's economy faces important challanges in both the short and long terms. Finland's state debt is low at the present time, which gives the capacity for short term stimulus and bank bailouts. But it is rising, and reached a record high of 70.6 billion euros by the end of the first quarter of 2009. General government debt, calculated according to Eurostat methodology, grew by 7.5 billion euros in January-March, and reached 38 percent of 2008 gross domestic product (GDP). Still, there is plenty of stimulus ammunition left, the important thing is to use it wisely, and try to engineer an economic transition.br /br /br /br /The severe contraction in the Finnish economy is also likely to take its toll on bank credit fundamentals, according to the credit rating agency Moody's. The agency recently reaffirmed its negative outlook for the Finnish banking system. Up until now the Finnish banking sector - lead by Pohjola Bank and local branches of Nordea and Danske Bank - appear to have been weathering the storm without undue difficulty due to minimal exposure to toxic assets and a focus on traditional banking activities, according to Moody's. However:br /br /br /"Given that the crisis on financial markets has now spread extensively into the real economy, Moody's expects Finnish banks to be adversely affected," according to the latest report. Moody's said an increase in bankruptcies was indicative of the weakened credit environment.br /br /Corporate bankruptcies increased 33 percent in January-May from a year ago, according to Statistics Finland.br /br /br /The Finnish government has already approved one supplementary budget for 2009 including a special stimulus package. The overall impact is estimated at around €2 billion (although new spending is estimated at only €1.2 billion), and includes about €140 million in transport infrastructure projects. The government has committed itself to implementing a guaranteed pension from the beginning of March 2011. This will cost around €111 million a year, and will raise the lowest pensions by about €100 a month - affecting about 120,000 people.br /br /There have also been a number of measures aimed directly at helping corporate finance. The government now offers banks operating in Finland both deposit guarantees and capital, and will also invest its pension funds in corporate bonds, offer companies financial support through the specialised state-owned finance company, Finnvera, and provide partial financing for the construction of thousands of new homes through the state-owned credit institution Kuntarahoitus (Municipal Finance).br /br /Overall, the government has pledged about €60 billion in guarantees, loans and investments, and is expecting a boost of €45 billion in corporate financing. Prime Minister Vanhanen described the decisions as ‘massive, even gigantic’. The largest sums of money are in the bank support package, which aims to secure the continuity of corporate credit. In fact, the Finnish parliament has already approved guarantees of €40 billion to help banks to raise capital.br /br /br /But in the longer term the issues raised at the start of this post need to be addressed. Competitiveness needs to be restored to the Finnish economy, and exports boosted, as illustrated by the REER chart below. In particular the situation pre 2007 needs to be restored. The change is not massive (maybe only 5% or so), so it is doable, and it needs to be done, especially since the Swedish Krona has been significantly devalued.br /br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SleYhK9j5yI/AAAAAAAAOlE/ABWBRXo1X2w/s1600-h/finland+REER.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 203px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356917977426159394" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SleYhK9j5yI/AAAAAAAAOlE/ABWBRXo1X2w/s400/finland+REER.png" //abr /br /As mentioned previously, the goods trade balance has been deteriorating, and the earlier positive balance now needs to be restored.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SleYT6YC0NI/AAAAAAAAOks/DIqtYsokRx8/s1600-h/finland+goods+balance.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 233px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356917749635535058" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SleYT6YC0NI/AAAAAAAAOks/DIqtYsokRx8/s400/finland+goods+balance.png" //abr /br /One of the things that stands out is Finland's differential preformance vis a vis Sweden. Using data prepared by Eurostat which shows the volume indexes of strongGDP per capita/strong as expressed in Purchasing Power Standards (PPS) (with the European Union - EU-27 - average set at 100) it is apparent that a gap exists (see below) and that it is not being closed. In fact, after 1998 the two lines move tantalisingly in tandem, but with Finnish per capital GDP stuck just short of the Swedish level. Any reading on these indexes of over 100 implies that the country's level of GDP per head is higher than the EU average and vice versa, and relative movements in the indexes imply that the rates of change in GDP per capita are either improving more or less rapidly than the EU average. The basic data behind the charts is expressed in PPS which effectively become a common currency eliminating differences in price levels between countries making possible meaningful volume comparisons of relative GDP per capita. Since the index is calculated using PPS figures and expressed with respect to EU27 = 100, it is only valid for cross-country comparison purposes and not for individual country inter-temporal comparisons, nonetheless charts based on such data are extraordinarily revealing.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Sli5_RB6ZOI/AAAAAAAAOoI/5-x-QudwTg8/s1600-h/finland+gdp+per+capita.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 202px;" src="http://2.bp.blogspot.com/_ngczZkrw340/Sli5_RB6ZOI/AAAAAAAAOoI/5-x-QudwTg8/s400/finland+gdp+per+capita.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5357236253311526114" //abr /br /So the real reason is why (given some sort of loose convergence expectation) this gap is not being closed. There can be several explanations. One may be differences in institutional quality (education systems, for example), another might be the impact of euro membership: it could be, for example, that, as OECD economists Jorgen Elmeskov and Romain Duval argued in a suggestive paper (a href="http://www.ecb.int/events/pdf/conferences/emu/sessionIV_Elmeskov_Duval_Handout.pdf"Structural reforms in product and labour markets/a) presented at the 2005 ECB conference "What effects is EMU having on the euro area and its member countries?", that membership has up to now slowed down rather than accelerating the reform process. Thirdly, the issue could be differential demographics. Few economists seem willing to investigate this possibility in any depth, despite mounting evidence that it may be important. /ppOne demographic indicator that springs to mind immediately when I think about these two countries is the differential in life expectancy. Swedish males live on average around 3 years longer than Finnish males (see below). Now this may be important, although no one has started to calibrate this effect yet. The economic intuition for the importance would be, think of investment in a machine (physical capital), then obviously the value of the investment is greater (other things being equal) if the machine keeps running five years longer. br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SljmWSWJ5tI/AAAAAAAAOoY/W3cxkKuwyjQ/s1600-h/finaland+exit+from+labour+force.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 205px;" src="http://1.bp.blogspot.com/_ngczZkrw340/SljmWSWJ5tI/AAAAAAAAOoY/W3cxkKuwyjQ/s400/finaland+exit+from+labour+force.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5357285027313477330" //abr /br /Things cannot be that much different with human capital. The education and on the job training costs are similar, but the person is able to work three years less. Is it mere coincidence that labour market exit at 61 is so typical if the health outlook is worse? Here are the relative labour force participation rates for me between 55 and 65. It is my contention that this alone accounts for a substantial part of the GDP per capita difference between the two countries. br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Sli_SXbm9PI/AAAAAAAAOoQ/xHW5qWedioE/s1600-h/finland+55+participation+rate.png"img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 203px;" src="http://2.bp.blogspot.com/_ngczZkrw340/Sli_SXbm9PI/AAAAAAAAOoQ/xHW5qWedioE/s400/finland+55+participation+rate.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5357242079005570290" //abr /br /But the solution to this problem is not an easy one, and the OECD and others really need to think much more seriously about this phenomenon when they indisciminately propose raising higher-age participation rates across the board as a solution to the declining workforces problem./ppWhat is involved here is a complex mix of health provision, lifestyle and genetic differences, and any response needs to take account of all of these. br /br //pa href="http://3.bp.blogspot.com/_ngczZkrw340/SleYXq0bsEI/AAAAAAAAOk0/8GejKUSpKc8/s1600-h/finland+life+expectancy.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 202px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5356917814179115074" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SleYXq0bsEI/AAAAAAAAOk0/8GejKUSpKc8/s400/finland+life+expectancy.png" //abr /br /Raising the health and life expectancy of the Finnish population would be one sure way to raising GDP per capita, another way (in the longer term) would be raising fertility back up to replacement levels, and a third path would be extending the younger labour force by encouraging immigration (which interestingly has been a href="http://www.helsinkitimes.fi/htimes/domestic-news/general/7019-immigration-to-finland-at-record-levels.html"on the rise in the Helsinki area in recent months/a, although if many of the newcomers simply arrive from equally affected Estonia this is nothing more than moving the deckchairs around). Whichever way you look at it though, in both the short and longer term the deterioration in Finland's trade surplus needs to be addressed. If it isn't the outcome will not be a pleasant sight.div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/8991369883287712098-6253074658246427134?l=globaleconomydoesmatter.blogspot.com'//div

Amdocs Up with Managed Services – Analyst Blog

Zacks Market Commentaries — Thu, 09 Jul 2009 15:45:05 +0000

Amdocs Ltd. (DOX), the global leader in customer experience system and billing software for communications service providers, continues to benefit from the telecom carrier industry’s long-term trend towards network consolidation and convergence. Amdocs is currently generating more than 70% of its revenue from managed services and other recurring sources.

Communication service providers implement billing and customer care systems to enable quick responses to customer requests, ensure proper billing for services, validate network users and optimize sales and marketing operations.

The Telecommunications Software Management System (TSMS) market is highly competitive. More than 100 vendors provide customer management and billing system solutions throughout the world. In addition to Amdocs, other major players include Convergys (CVG), CSG System (CSGS), Oracle (ORCL), and Comverse (CMVT).

Despite competition, Amdocs has the largest customer base and broadest product line in the industry. The company’s Customer Experience Systems portfolio (CES 7.5) provides a single platform capable of supporting complex requirements of traditional and next-generation triple-play voice, video and data services as it focuses on addressing emerging market trends in the communications industry. This solution facilitates carriers to effectively monetize their assets, deliver superior services and gain improved operating performance.

Recently, the two major European telecom carriers, Elisa Corp. of Finland and T-Mobile UK entered into six-year and four-year managed services contracts with Amdocs, respectively. The company already has a seven year managed services contract with AT&T (T) and another five year contract with Sprint-Nextel (S).

Other major customers of the company’s managed service include Clearwire, Rogers Telecom, Metro PCs, and J:COM. In our view, implementation of integrated customer management systems is essential to prevent customer churn at carriers. We thus remain bullish on the TSMS segment and maintain our Buy recommendation for Amdocs.

Read the full analyst report on "DOX"
Read the full analyst report on "CVG"
Read the full analyst report on "CSGS"
Read the full analyst report on "ORCL"
Read the full analyst report on "CMVT"
Read the full analyst report on "S"
Read the full analyst report on "T"
Zacks Investment Research

Russian Dissident’s House Attacked

Robert Amsterdam — Wed, 17 Jun 2009 10:31:57 +0000

Andrei Nekrasov is a Russian documentary filmmaker whose work has often taken a sharply critical approach to the current government in Russia (including a Cannes-award winning doc on the Litvinenko case). He's been published several times on this blog, is...

Grigory Pasko: Pitching Nord Stream to the Finns

Robert Amsterdam — Thu, 04 Jun 2009 21:36:43 +0000

On the eve of the recent visit of Vladimir Putin to Helsinki, a presentation of my film about the Nord Stream gas pipeline took place there in the parliament of Finland. The crowd wasn't very large - maybe 30 people. ...

Energy Blast – June 4, 2009

Robert Amsterdam — Thu, 04 Jun 2009 09:27:39 +0000

According to President Medvedev, the current value of Urals at $60-70 a barrel is 'a fairly just price'. Finnish Prime Minister Matti Vanhanen has said the government will need more time to decide upon whether or not to approve...

RA’s Daily Russian News Blast – June 4, 2009

Robert Amsterdam — Thu, 04 Jun 2009 08:26:02 +0000

TODAY: NATO ministerial level meeting to take place in Corfu; deputies suggests nationalization of troubled Pikalyovo factory; gay rights activist to sue Moscow mayor; blacklisting practice; bribery affecting the poor'We have always had quite good relations with the Korean leadership...

Ensuring the Dignity of the President

Robert Amsterdam — Wed, 03 Jun 2009 18:23:42 +0000

When are these reactionary regional leaders ever going to learn that the best way to "protect the integrity of the president" is not to freak out over every small protest or publication of criticism? One would assume that not even...

Energy Blast – June 3, 2009

Robert Amsterdam — Wed, 03 Jun 2009 08:56:47 +0000

The vice-president of the State Oil Co. of Azerbaijan has said that European energy firms must forget their rivalries if they wish to prevent Gazprom from buying up excess natural gas from the western Caspian area. President Obama hopes to...

Grigory Pasko: Among the Asylum Seekers in Finland

Robert Amsterdam — Tue, 02 Jun 2009 20:46:01 +0000

It's no mystery that Russian journalists are an endangered species. Beyond the headlines grabbed by the famous cases of Paul Klebnikov and Anna Politkovskaya, there are so many more who are threatened, beaten, harassed, and forced out of work, home,...

Maglevannaya Seeks Asylum in Finland

Robert Amsterdam — Tue, 02 Jun 2009 15:56:32 +0000

A few weeks back we reported on the case of reporter Yelena Maglevannaya (Grigory Pasko also interviewed her), and this week it looks like she is seeking political asylum in Finland. Whenever you have journalists who are fleeing the country...

RA’s Daily Russian News Blast – June 2, 2009

Robert Amsterdam — Tue, 02 Jun 2009 08:27:03 +0000

TODAY: EU critical of South Ossetia elections; Israeli foreign minister in Moscow; START talks underway in Geneva; court rules against Khodorkovsky appeal; journalist seeks asylum in Finland; order of parental glory ceremonyThe EU has joined Georgia in claiming that the...

Obama Stimulus May End Up Hurting the Economy it Was Supposed to Have Helped

Martin Hutchinson — Fri, 29 May 2009 20:19:16 +0000

[Editor's Note:When the journalistic sleuths at Slate magazine recently set out to identify the stock-market guru who correctly predicted how far U.S. stocks would fall because of the global financial crisis, the respected "e-zine" concluded it was Martin Hutchinson who "called" the market bottom. That discovery was no surprise to the readers of Money Morning - [...]

Kasparov: Hitler Used Tanks, Putin Uses Banks

Robert Amsterdam — Fri, 29 May 2009 19:36:35 +0000

It's been an interesting week here in Helsinki, where I have been attending the Finnish-Russian Civic Forum. In addition to showing my short documentary film on the Nord Stream project (which produced a spirited debate), I had the opportunity to...

Energy Blast – May 29, 2009

Robert Amsterdam — Fri, 29 May 2009 08:33:33 +0000

Oil prices have reached a six-month high, surging to $65 a barrel. The Russian Natural Resources and Environment Ministry has drawn up a proposal to create a reserve of lucrative oil fields. An analysis conducted by the US Geological Survey...

Words from the (investment) wise for the week that was (May 11 – 17, 2009)

Prieur du Plessis — Sun, 17 May 2009 08:32:46 +0000

A long-awaited reversal in the monumental global stock market rally since early March finally arrived last week. “Less bad” economic reports provided investors with little comfort, sparking a reassessment of their risk appetite and leading to profit-taking on most bourses. On the other hand, safe-haven assets attracted buying. Read all about this and the implications for financial markets in the weekly “Words from the Wise” review.

PetroAlgae’s (PALG.OB) Letter to Shareholders

QualityStocks — Thu, 14 May 2009 14:31:05 +0000

PetroAlgae, an emerging renewable energy company, today issued a Special Letter to Shareholders. The letter updates the investment community on the current status of the company and its future growth outlook. The entire letter is posted below: “Dear Fellow Shareholder, As an investor in PetroAlgae Inc. (OTCBB: PALG), you have joined a select group of [...]

Listening to Medvedev

Robert Amsterdam — Thu, 30 Apr 2009 12:02:54 +0000

European Voice has an editorial about the importance of continuing the dialogue that Dmitry Medvedev opened during his last visit to Finland - namely that proposals to draft a new Energy Charter Treaty and to put the energy trade into...

Moskalenko: Confront Medvedev on Human Rights

Robert Amsterdam — Tue, 28 Apr 2009 16:05:24 +0000

Karinna Moskalenko believes that foreign leaders have a moral duty ask the Russian president difficult questions, regardless of the inconvenience. We agree. From the Helsingin Sanomat: A day after the visit to Finland of Russian President Dmitri Medvedev, a Russian...

Energy Blast – April 21, 2009

Robert Amsterdam — Tue, 21 Apr 2009 08:35:41 +0000

President Medvedev did not receive the wholehearted backing he had hoped for from Finnish countepart Tarja Halonen over the Nord Stream gas pipeline; the Finns feel that 'an ecological question' remains. Nonetheless Finland apparently hopes to have these environmental concerns...

RA’s Daily Russian News Blast – April 21, 2009

Robert Amsterdam — Tue, 21 Apr 2009 07:33:48 +0000

TODAY: Medvedev tentative regarding US nuclear deal; Russia to boycott forthcoming NATO meeting?; early voting takes place in Sochi; ombudsman says human rights situation in Russia is staticPresident Medvedev has expressed caution regarding Obama's plans for nuclear disarmament, saying that...

RA’s Daily Russian News Blast – April 21, 2009

Robert Amsterdam — Tue, 21 Apr 2009 07:33:48 +0000

Record U.S. Job Losses in March, Unemployment Highs In Europe

Money Morning — Wed, 01 Apr 2009 16:13:57 +0000

By Mike Caggeso Associate Editor Money Morning The U.S. private sector cut a record 742,000 jobs in March, higher than analysts’ expectations and a leap from the upwardly revised... Money Morning is here to help investors profit handsome...

Devaluation, Euro Membership And Loan Defaults – Some Thoughts For My Critics

Edward Hugh — Wed, 18 Mar 2009 14:59:00 +0000

by Edward Hugh: Barcelonabr /br /blockquoteJoke - How do you know when a country is in crisis? Well, on the buses on the way to work, and in the bars and cafes during the mid morning break, everyone is reading the economy rather than the sports section in the local newspaper./blockquoteSeveral pieces of news out over the last week are relevant to the whole debate we are having about how to drag the Estonian economy (kicking and screaming it would seem) out of its current slump. In the first place the Estonian parliament passed a supplementary 2009 budget at the start of the week, in an attempt to address the ongoing crisis in the economy and the dramatic decline in revenues. The cuts were approved by 61 votes to 35 against in what was also an effective vote of confidence in the present government. So at least it is clear that the majority of Estonia's politicians back the present course, and the degree of public support for the current path is greater than it would seem to be in, say, Latvia. That is, naturally a very positive point.br /br /The supplementary budget lowers the amount of revenues in the annual budget by EUR 615.5 mln and of expenditure by EUR 419.9 mln. According to the revised budget, state revenue this year is now anticipated to be EUR 5,635 mln and expenditures EUR 5,871 mln. Both these numbers are of course conditional on the economic contraction for 2009 only being the forecast one (on which the budget is based) of 9.5%.br /br /The second piece of news is that the Estonian Finance Mininistry have sent an official loan application today to the European Investment Bank, with a request to borrow Eur 550 million for 5 years. And this point is important, since obviously, as I will argue below, Estonia's private sector (households and companies) is now basically very overleveraged (in too much debt) and the government is being forced to step in and assume greater responsibility for the collective debt as the correction continues.br /br /The third relevant piece of news is that the number of unemployed registered with the Estonian Labour Board was up again last week, and reached 50,527, which means 2418 more people signed on with the board during the week, following the 3,019 who joined the list in the previous week. Meanwhile the Estonian Parliament has been having a debate about what kind of labour market reforms the country needs to handle the present crisis. Since one witty soul appropriately baptised me in my most recent post the "excel economist" I would just like to add-in my own little chart-based contribution. People are leaving Estonia. How do I know that, well just take a look at the spike at the end of the time series shown in the grphic below, the volume of income transfers to Estonia (largely worker remittances) has been on the increase ever since the crisis started in 2007, and during the last quarter of 2008 they really spiked up, just (coincidentally?) as the economy spiked sharply downwards.br /br /pa href="http://2.bp.blogspot.com/_ngczZkrw340/Sb6NiNp1gzI/AAAAAAAANFs/iMfXHUF0QqY/s1600-h/estonia+remittances.png"img id="BLOGGER_PHOTO_ID_5313840229263967026" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 241px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Sb6NiNp1gzI/AAAAAAAANFs/iMfXHUF0QqY/s400/estonia+remittances.png" border="0" //abr /We don't know too much about the murky topic of out-migration in the Baltics, since no one seems to consider it a particularly pressing issue. In fact, migrant labour flows could be considered to be a leading indicator for a modern (open) economy (in both directions), but surprisingly little attention is paid to the matter. We do have an old "estimate" that around a href="http://www.epl.ee/?artikkel=260683"one third of those working abroad are working in Finland/a, and now somewhat dated reports of a href="http://www.ap3.ee/Default2.aspx?PaperArticle=1amp;code=3655/uud_uudidx_365506"young people working in Finland repairing motorway crash barriers for 150 kroon an hour/a, but that's all we seem to have, anecdotal evidence. Maybe one of the reforms all those very busy parliamentarians could think about agreeing to would be the introduction of a question in the labour force survey about whether or not the interviewee currently has (or has had in the recent past) a family member working abroad. /ppThe sudden apparent deterioration in labour market condidtions is all the more worrying since up to now, and despite the fact that growth in the Estonian economy started to slow early 2007, the labour market did not show signs of any severe impact until Q3 2008. On the contrary, according to official statistics, unemployment continued to decrease and bottomed out at 4.0% in the second quarter of 2008. Since then the unemployment rate has jumped to 6.2% in Q3 followed by 7.6% Q4. Thus we now have the highest rate effective rate since the middle of 2005, and things are only getting started. /ppAccording to the statistics office, nearly half of those signing on have become unemployed due to layoffs, closures or bankruptcies. On the other hand total employment has so far help up reasonably well, with the total number of employed persons in the 3rd quarter running at 652,600, only 0.2% less than in the same period a year earlier (656,500).br /br /Lastly, statistics Estonia reported last week that in January 2009 there was a year on year drop of 29% for exports and 37% for import 37%, meaning that the current account deficit is closing (more on this below). But first let me try to address some of the questions that have come up in the debate about devaluation.br /br /strongIn The Event Of Devaluation What Happpens To Euro Denominated Debts?/strongbr //ppBasically this seems to be the big theme in the forefront of everybody's minds, but there seems to be some kind of large misunderstanding here. Essentially we are only talking about two different forms of devaluation (one internal via deflation, and the other external, by changing the exchange rate of the kroon with the euro). I think everyone is agreed that the Estonian economy - due to severe overheating, a massive housing bubble, and rampant inflation, all of which were the effect of faulty monetary and fiscal policy inside Estonia - is now hopelessly uncompetitive by international standards, hence a substantial downward correction in prices is agreed by all parties to be essential./pSo the impact of this price downward price adjustment (which should be equal in either case) will be the same on the relative cost of maintaining non kroon loans. Let me put it this way, if you are one of the people in the unfortunate position of having such a loan it will make little difference to you whether your salary is reduced in kroon by 20% and your mortgage payment stays unchanged, or whether your salary in kroon remains unchanged and the currency drops 20% against the euro. Thus most of the argumentation about this topic seems to be highly emotional.br /br /Of course, in both cases there will be loan defaults, but much more than the 20% drop in real salary (since it is unit hourly labour costs that matter here) will be the fall in earnings as the economy enters deep recession and people lose overtime, bonuses, or even their jobs themselves. This is what puts the default rate up, and prolonging the length of the slump long enough for people savings to run out, and for the normal unemployment benefit (of one year's duration) to run out, and people to be forced to try and live on the 59 euros a month social security allowance.br /br /This, in my view, is the strongest argument in favour of the "short sharp shock" of the devaluation route (the so called V shaped recovery), rather than the more protracted "U shaped" one of internal deflation. On the second path you will almost certainly have more unemployment for longer, and with this the risk of loan default will increase. To counterbalance against that is the Estonian's national pride in their currency board, and their desire not to be seen to fail. But sometimes it is a good policy to stand and hold your ground, and others it is the more intelligent policy to retreat, and live to fight another day. All withdrawal is not an act of cowardice, nor is renegotiation a sign of unreliability. To make mistakes is to be human, and I doubt that the word of the United States has been put especially in doubt by the sub prime mortgage fiasco. In market economies "stuff happens", and when it happens normally it is better to take the corrective measures and put the issue behind you.br /br /br /br /pOf course, there are no guarantees here, and success or failure with devaluation (as with any measure) depends on the rest of the policy mix you put together to accompany the move. I don't think that there is any doubt that Estonia's position is very difficult, so there is no panacea, or easy way out of all this. It would have been better not to get into the mess, but it is a bit late for that now./ppWhat I do think is that devaluation gives you a chance to fight back, and in any even you should feel better fighting, than simply waiting, and sitting and taking it on the cheek. With a current account deficit to reduce and falling government tax revenue there is little the government can do in the way of economic stimulus. Devaluation gives you a kind of indirect stimulus, that is the strongest argument in favour of it. It also places future output on a higher level and thus (arguably) reduces the unemployment and default risk./ppBasically 2 years sitting around at home waiting can be very demoralising for anyone, and especially if you are trying to live for the second year on 59 euros a month. I am saying categorically and absolutely clearly here that I see no possibility of any kind of recovery in 2010 (especially given the global environment), and much less so if you just there and wait for it all to happen./ppNow, if you devalue, you recover monetary policy, and you then need to keep a tight reign on inflation, but frankly, and again if we look at Hungary, they have devalued 25% and they still only have 3% inflation (and falling) so this may not be such a massive problem. The thing is you need a better monetary policy once the recovery starts, so you don't simply get the inflation again./ppBut basically, you should be able to foster domestic industries as an alternative to exporst in some things - I know, Estonia is so small it is hard to see how to do this, you obviously need to be very open as an economy, and practice good old Ricardian comparative advantage.So you need to specialise to some extent in new activities, and this is really up to the ministry of industry, or whatever, to formulate projects. Then you need to sell Estonia to some new investors. Price is only part of this, but it is part. Remember, with the present crisis there are plenty of people offering, and few people wanting to invest in new productive activities, but potential investors do exist, and you have to find them. That is the job your politicians should be up to now./pIf you have the structure is right, and you can provide a base for some sort of exporting activity, then so much the better when it comes to persuading people to come. So devalution is just a kind of stimulus, it is like a large subsidy to exporters, socialising the costs. It isn't perfect, nothing in this world is, but it is better than nothing. You can keep more people in work this way, and those people create wealth, rather than simply consuming government benefits.br /br /br /But going back to the loans and the default problem, what about the banks. Well my main point in this regard is that the last thing in the world the banks want to do is to start becoming estate agents, so they are in fact reasonably reluctant to start mass reposessions of property. It is that old story, if you owe them a little money and you can't pay, then you have a problem. But if you owe a lot of money, and you can't pay, they THEY have a problem, and normally they are going to be quite reasonable and down to earth when it comes to finding solutions, which they need as much as you do.br /br /Banks basically prefer to stay in the business of banking, which is what they know about, in the same way that governments really don't want to nationalise banks, even though from time to time they may have to. Governments really don't know that much about running banks, any more than banks know about being estate agents, and holding a lot of property in a country in deep recession is hardly a plus for them, or their international credit rating.br /br /When just a few householders have to throw in the towel and hand their home over to the bank, then banks may try to practise a "hold to maturity" rather than "mark to market" policy, and and profit from any hypothetical rise in property values in the future. But this credit and housing crisis isn't like previous ones in recent history. House prices in boom/bust economies like the Estonian one are unlikely to recover for many many years, and bank balance sheets simply won't let them hold on to dubious assets for such an extended period of time.br /br /Banks want to manage mortgages, not houses, since mortgages pay a stream of income, while houses are only non performing loans, with no income.The same thing has been happening in Spain since the bubble burst, but now banks are swifty moving towards "fire sales" as they can hold out no longer, but even selling at rock bottom prices they are having trouble finding buyers. So what they would really prefer is to keep people in their homes.br /br /This process will also happen in the Baltics, and the best policy for the banks will be to recognise reality, accept their share of the loses, and negotiate with householders while they are still in their homes and still in work, and with the government.Thus I think that those who have the most immediate interest in debt restructuring and devaluation - even though they don't seem to realise it going by their pronouncements - are those very Nordic banks who have been pressing to avoid it. As I say, 100,000 houses with people living in them and working and paying something are worth a lot more than 100,000 empty houses whose owners have long gone to work in Finland (or wherever) and which have been left to rot.br /br /br /strongJoining The Eurozone/strongbr /br /Now at this point I would like to be clear, I am not arguing for a unilateral devaluation by the Estonian authorities, but rather an acceptance of that as an objective on their part, and a negotiation of such devaluation with the EU authorities (the EU Commission and te ECB). Actually, what is rather to be lamented in this regard is that they themselves are not doing the reposible thing and taking the initiative here.br /br /In fact the Estonian Finance Ministry has estimated that Estonia may well comply with the Maastricht criteria before the end of this year. Prime Minister Andrus Ansip is reported to be considering following the 2006 Lithuanian example and formally requesting an assesment of the fitness of Estonia for Eurozone membership: "We are entitled to request from the European Commission and from the European Central Bank that they would assess the compliance with the Maastricht criteria outside the regular approximation reports cycle," with the Finance Ministry adding that "Although thus far all the countries have adopted the Euro in the beginning of a year, the dates of the transition to the single currency is not so strictly regulated,".br /br /Prime Minister Ansip estimates that Estonia may well comply with the inflation criterion by October, and that an evaluation at that point could lead to Eurozone membership as early as July 2010. Yet one more time I beg to differ.br /br /I differ basically not because I doubt the assertion that Estonia's inflation rate will meet Eurozone criteria later this year, but becuase I doubt the interpretation of how such an application would be considered. You see, complying with the minimal criteria is only a first step in the process, the EU institutions then have to make an evaluation of the sustainability of the path your economy is on, and of the realism of the exchange rate at which you seek to enter, and since Estonia's economy, far from being clearly settled on a sustainable path is right in the middle of a boom-bust correction, and there is widespread agreement that your currency is, as of the present time, pretty overvalued. In have gone into all of this on an earlier occasion in the case of a href="http://fistfulofeuros.net/afoe/economics-and-demography/slovakias-euro-membership-bid/"the review of the Slovakian situation/a, but it is clear that they will be unlikely to be sympathetic to any special pleading about your crisis in Estonia (all of Eastern Europe is in crisis), and (especially over at the ECB) will more than likely take the view that while financial support should be offered the best approach is to let you work out your own "imbalances" before you enter, since experience with those countries who entered in Southern Europe has not exactly been positive, and they may even already be having second thoughts as to whether they made the right decision a href="http://fistfulofeuros.net/afoe/economics-and-demography/sovenias-economy-falls-off-the-roof-while-slovakia-slides-into-recession/"in giving the go ahead to Slovakia and Slovenia/a.br /br /My own view, which is pretty much the same as that held by Wolfgang Munchau, is that the countries of the East are playing a self defeating game at the present time, and that a href="http://www.ft.com/cms/s/0/9261b13c-1187-11de-87b1-0000779fd2ac.html"Collective Action On The Crisis Is Our Best Hope/a. What would be a better idea would be for you all to emphasise what you have in common at this point, rather than clinging to what differentiates you one from the other.br /br /Paul Krugman, a href="http://www.nytimes.com/2009/03/16/opinion/16krugman.html?_r=1amp;blamp;ex=1237348800amp;en=7a630fdbc88be4e6amp;ei=5087%0A"writing in the New York Times from Madrid /a(where he was meeting with Prime Minister Zapatero today) had this to say:br /br /blockquoteIn the past, Spain would have sought improved competitiveness by devaluing its currency. But now it’s on the euro — and the only way forward seems to be a grinding process of wage cuts. This process would have been difficult in the best of times; it will be almost inconceivably painful if, as seems all too likely, the European economy as a whole is depressed and tending toward deflation for years to come. Does all this mean that Europe was wrong to let itself become so tightly integrated? Does it mean, in particular, that the creation of the euro was a mistake? Maybe. But Europe can still prove the skeptics wrong, if its politicians start showing more leadership. Will they? /blockquotestrongCurrent Account Deficit/strongbr /br /Well, now let's take a brief look at the current account deficit issue. The first problem Estonia has is that she has been running one.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb7IVGqYxgI/AAAAAAAANF0/yNib7WNl0ZM/s1600-h/estonia+ca+deficit.png"img id="BLOGGER_PHOTO_ID_5313904875234969090" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 251px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb7IVGqYxgI/AAAAAAAANF0/yNib7WNl0ZM/s400/estonia+ca+deficit.png" border="0" //abr /br /And the second problem is that now that the capital flows which were supporting it have dried up, you need to get rid of it. Which isn't as easy as it sounds. The ideal way to straighten out a current account balance is to increase exports and reduce imports at one and the same time. p/pNow, if we look at the deficit over the last few years (see chart below), we can see that only a part is produced by the goods and services trade deficit.br /br /br /pa href="http://1.bp.blogspot.com/_ngczZkrw340/Sb7MEivOOrI/AAAAAAAANF8/J5d6y492EP0/s1600-h/estonia+ca1.png"img id="BLOGGER_PHOTO_ID_5313908988760177330" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 207px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb7MEivOOrI/AAAAAAAANF8/J5d6y492EP0/s400/estonia+ca1.png" border="0" //a That is because another part (structurally) of the deficit comes from the negative impact of income flows (these are basically composed of interest on loans and dividends on equities).br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb7MUL0QjRI/AAAAAAAANGE/nJMGF7I22jo/s1600-h/estonia+CA2.png"img id="BLOGGER_PHOTO_ID_5313909257485192466" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 240px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb7MUL0QjRI/AAAAAAAANGE/nJMGF7I22jo/s400/estonia+CA2.png" border="0" //abr /br /And why does Estonia have these negative income flows, well in part as a result of all those bank flows which paid for the loans that so many Estonians were contracting, and in part they are produced by income earned on Foreign Direct Investment. The point is FDI is good, but if you are a borrowing economy, rather than a saving one, then you accumulate over time an imbalance between the investments you make in other countries and the investments others make in your country. The upshot of this is that you accumulate a structural deficit under the income account of your Balance of Payments current account, and this is exactly what has happened to Estonia (see chart below).br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Sb7NwolQzkI/AAAAAAAANGM/ZVK6boXfUsE/s1600-h/estonia+FDI.png"img id="BLOGGER_PHOTO_ID_5313910845754887746" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 241px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sb7NwolQzkI/AAAAAAAANGM/ZVK6boXfUsE/s400/estonia+FDI.png" border="0" //abr /br /So basically, not only does Estonia need to start exporting to create economic growth, it also needs to do more exporting to pay down the debt (hence addressing the structural weakness in the account) and to start accumulating a greater external FDI stock, which among other things can generate income to help you pay for your old age. One of the features of generalised economic corrections like the ones we are suffering from is that we tend to suffer from what Keynes called the Paradox of Thrift. Paul Krugman puts the situation like this (in a US setting, but Estonia'ssituation is not that different, structurally speaking) blockquoteI don’t know who else has made this point, but it’s quite clear that we’re in serious paradox of thrift territory here. Or perhaps more accurately, we’re in a paradox of debt. p/ppConsumers are pulling back because they’ve realized that they’re too far in debt. The economy is shrinking in large part because consumers are pulling back. And the result, almost surely, is to leave household balance sheets worse than ever. I can’t do this accurately until the Federal Reserve’s a href="http://www.federalreserve.gov/releases/z1/default.htm"flow of funds data/a have been updated, but almost without question the ratio of household debt to personal income has been rising, not falling, as consumers try to save more./p/blockquoteAnd guess what, while I don't have the data to hand, I bet you all the tea there is in China that the ratio of household debt to personal income will also have been rising as the economy contracts, even as Estonian consumers try to save rather than borrow. That is, the faster you try to save, the less you really do manage to save as your income contracts, and here is just another reason why you need exports. a href="http://www.baltic-course.com/eng/analytics/?doc=11201"I'm afraid that those who say/a "speculations about devaluing of the kroon are irresponsible as no one in Estonia would gain anything from such a move", simply don't understand what they are talking about. (Well that makes a href="http://www.politika.lv/blogi/index.php?id=61228"two Baltic central bank governors who don't agree with me/a).br /br /One of the reasons, of course, that it seems so difficult for people to contemplate increasing exports as a way out of this crisis is that the economy has been completely distorted by the construction, financial services and real estate boom. Just one indication of this can be found in the share of construction activity in the whole economy (see chart below). As we can see in the chart, the construction share in Estonian GDP climbed steadily after 2005. This share now needs to drop back again towards its historic average. This correction has started, but there is still a long way to go, and meanwhile the economy contracts and contracts.br /br /br /br /p/pblockquote/blockquotepa href="http://4.bp.blogspot.com/_ngczZkrw340/Sb7SzwD87eI/AAAAAAAANGU/Eo1KHuBTBbw/s1600-h/estonia+construction.png"img id="BLOGGER_PHOTO_ID_5313916396860403170" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 216px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sb7SzwD87eI/AAAAAAAANGU/Eo1KHuBTBbw/s400/estonia+construction.png" border="0" //a So, summing up, and a href="http://www.imf.org/external/np/sec/pn/2009/pn0933.htm"in the words of the IMF/a: blockquoteThe recession is sharply reducing Estonia’s imbalances. The external currentbr /account deficit nearly halved between 2007 and 2008, stronglargely due to abr /demand-driven compression of imports/strong but also helped by a drop in incomebr /outflows, reflecting the fall in profits to foreign-owned companies and banks.br /Exports continued to grow modestly despite an appreciation of the real exchangebr /rate, owing to an improvement in terms of trade and a recovery of oil transitbr /trade with Russia. (my emphasis).br //blockquotepbr /strongQ4 2008 GDP/strongbr /br /So what is happening to the Estonian Economy? Well lets look at the latest GDP data. Now, according to the preliminary estimates from Statistics Estonia output in the Estonian economy dropped by 9.4 percent during the 4th quarter of 2008 (on a year on year basis). This is a huge drop, unprecedented in Estonia since the upheavals of the very early nineties, during the transition from a planned to a market economy. This, however, is not that surprising, since the recession in all highly developed economies is currently more serious than anything seen since the 1930s, and the Baltic correction is one of the most dramatic among these. Compared to the third quarter, the seasonally and working-day adjusted GDP was down by 4.3%, while fourth quarter GDP was even below Q3 at current prices for the first time since 1995 (down by 4.7% - that is GDP was down in what we economists call nominal, as well as real terms. this is quite a significant development to which we will return in the coming months and quarters).br /br //pa href="http://3.bp.blogspot.com/_ngczZkrw340/Sb9Z2slXSfI/AAAAAAAANGs/79CIZ8sBvg8/s1600-h/estonia+GDP+two.png"img id="BLOGGER_PHOTO_ID_5314064881536158194" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 230px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sb9Z2slXSfI/AAAAAAAANGs/79CIZ8sBvg8/s400/estonia+GDP+two.png" border="0" //abr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb9Zr38A5UI/AAAAAAAANGc/9J6ZxG0XLAo/s1600-h/estonia+GDP+one.png"img id="BLOGGER_PHOTO_ID_5314064695605388610" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 228px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb9Zr38A5UI/AAAAAAAANGc/9J6ZxG0XLAo/s400/estonia+GDP+one.png" border="0" //abr /br /So, following year on year real GDP growth rates which were fluctuating in the 11-12 percent range for six consecutive quarters between mid 2005 and the end of 2006, we now have a strong and sustained contraction (which has now, according to Eurostat seasonally corrected quarterly data lasted for 5 quarters, with no end to the pain in sight). This is why we refer to a boom-bust process, since the normal (garden-variety) recession lasts only 2 quarters.br /br /In 1997, when Estonia went through its last comparable cycle, overheating driven growth lasted for around 5 quarters, and was then followed by several quarters of negative growth, starting in Q4 1998. GDP hit a low point with a 1.6 percent decrease in GDP in Q3 1999, and growth was positive again in Q4 1999, and by Q1 2000 was up at an annual 8.4% rate.br /br /Today nobody is expecting such a rapid recovery as the two crises are very different. In the first place, while during the 1997/98 crisis the downturn only really involved emerging markets, and especially in the Estonian context Russia, the current crisis is more of a depression than a recession and is a global one. West European countries, which were the main export markets for Estonian products by the late nineties, contributed to Estonia's rapid recovery with their own momentum. This year few expect Europe's economies to expand this year, and large question marks still hang over 2010. Further, the Estonian economy had a lot more in the way of sector transition driven easily achievable catch up growth in front of it, now this element will be much less favourable, since Estonia will really need to find substantial productivity and competitiveness improvements in existing activities, and even from abandoning some parts of the higher value sectors (like construction and real estate) which had been fuelling the earlier growth. So nothing here is going to be easy, and certainly nothing like as easy in 1999. The two moments just do not bear serious comparison.br /br /If we look at the Q4 data, the fall in GDP was largely produced by a drop in domestic demand (which fell year on year by 14.8%).br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Sb-CxXdf3OI/AAAAAAAANG0/9XiIJZ7e7YY/s1600-h/estonia+total+dpmestic.png"img id="BLOGGER_PHOTO_ID_5314109869943413986" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 214px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Sb-CxXdf3OI/AAAAAAAANG0/9XiIJZ7e7YY/s400/estonia+total+dpmestic.png" border="0" //abr /Domestic demand is basically composed of three elements, households’ final consumption expenditures (HFCE), gross fixed capital formation (GFCF) and government spending. HFCE was down year on year by 10.4% in Q4.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb-KkN-nFkI/AAAAAAAANHM/8LGtqJh3DUA/s1600-h/estonia+household+consumption.png"img id="BLOGGER_PHOTO_ID_5314118440152667714" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 215px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb-KkN-nFkI/AAAAAAAANHM/8LGtqJh3DUA/s400/estonia+household+consumption.png" border="0" //abr /Total government consumption expenditure (including transfers) was up 3.5%.br /br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Sb-GzAxUtjI/AAAAAAAANG8/KZt9HOmtghk/s1600-h/estonia+govt+spending.png"img id="BLOGGER_PHOTO_ID_5314114296258803250" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 231px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Sb-GzAxUtjI/AAAAAAAANG8/KZt9HOmtghk/s400/estonia+govt+spending.png" border="0" //abr /br /And GCFC (which basically means investment in one form or another) was down by 24% year on year.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sb-KNRatlxI/AAAAAAAANHE/9Lwp3jdIxDE/s1600-h/estonia+GCFC.png"img id="BLOGGER_PHOTO_ID_5314118045938849554" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 214px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sb-KNRatlxI/AAAAAAAANHE/9Lwp3jdIxDE/s400/estonia+GCFC.png" border="0" //abr /So apart from the increase in government spending, the only bright spot in Q4 GDP came from the net trade effect, since this was a by product of the fact that imports fell (11.9%) by more than exorts (3.2%). The drop in imports was driven by a fall in machinery, equipment and motor vehicle imports. Which means simply that both investment and private consumption (or living standards) are falling.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb-PaGVbQMI/AAAAAAAANHU/2LS1GupoUoE/s1600-h/estonia+exports.png"img id="BLOGGER_PHOTO_ID_5314123763860324546" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 214px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb-PaGVbQMI/AAAAAAAANHU/2LS1GupoUoE/s400/estonia+exports.png" border="0" //abr /strongThe Credit Driven Expansion Is Overbr //strongbr /br /During boom times the main supports for Estonia's extremely distorted economic growth were the excessively low interest rates available on euro denominated loans (which effectively fuelled the housing bubble) and strong capital inflows, which made possible the rapid increase in the volume of home loans and loans to building developers. During the current downturn as financial regulation is tightened, what Estonia can expect are higher interest rates, an end to real estate as a GDP growth driver and a decline in borrowing.br /br /During the boom time, the inflow of foreign capital, largely through foreign owners of local banks, seemed never ending. Bank liabilities to non-residents (as a share of total assets) rose from the 31-34% range in 2000-2003 to over 50% by 2007/08. Bank liabilities to Estonian residents as a % of GDP increased from 40% at the start of the century to over 60% in 2007/08, while liabilities to non-residents shot up from 20% to 70% of GDP over the same period.br /br /The share of locally owned banks in Estonia is marginal. Only the Baltic Investments Trust is locally owned and this accounts for under 1% of the total market. As of June 2008, 72% of Estonian banking assets were owned by two Swedish banks, Swedbank and SEB, with Swedbank alone holding a more than a 50% share. The ratio of total bank assets to GDP increased from 60 percent to more than 130 percent in the period of 2000-2008, while the share of loans in these assets increased from 58 percent to 76 percent over the same period. On a quick calculation basis, this means that the banks have an exposure to lonas of about 97% of GDP (and rising as GDP contracts, this is the paradox of thrift point, and especially as nominal GDP falls - as Estonia enters negative price deflation this percentage is set to shoot up, as nominal GDP falls more quickly than real GDP - this is yet one more reason why devaluation is a better option - you take some of the sting out of the growing burden of debt).br /br /Home loans and loans to the real estate sector made up 59 per cent of the total loan portfolio of the banks at the end of 2007, compared to 25 percent in 2000, which shows the enormous increase in Swedish bank exposire to Estonian real estate. Net savings (deposits less loans) of private individuals to GDP changed from around a positive 8 percent in 2000 to minus 26 percent in 2008, i.e. households moved from being net savers to becoming net borrowers, and they are now about to go all the way back upstream again, which is why .... well, you know, exports are about to become so vital.br /br /As can be seen from all the above, the Estonian economy is now heavily dependent on the standing and good will of the Nordic banks. The IMF, the Estonian Central Bank, the EU and other stakeholders arguethat the financial standing of the Nordic banks operating in Estonia should be strong enough to cope with both the global financial crisis and the risks related to Estonia's contracting economy. This may, or may not, prove to be the case. If their only exposure was to Estonia then probably they would be right, but what is happening in Estonia forms part of a broader regional picture, and needs to be seen in that light.br /br /But, anyway, this is beside the point. Even were the banks to view favourably future loan applications from Estonian citizens, those very same citizens would be unlikely to be seeking the loans in the first place. As we are seeing, Estonians will be more inclined to save than to borrow in the coming years, and especially given that the Estonian property market has now decisively turned, which means there will be no more juicy increases in house prices to continually tempt them back to the lending counter, nor rising home equity from which to extract that "something extra" with which to buy that nice new car.br /br /br /strongFinally, The Impact Of The Property Crash./strongbr /br /Before closing I would like to return to one rather contested (and possibly ill advised) point I made in my previous post. At the start of the post I said:br /br /blockquote"At the same time it is estimated that nearly 250,000 Estonians are currently living in homes whose market value is insufficient to cover the outstanding mortgage loans which their owners have taken out, making "exposure risk" a growing problem for the country's banks. During the boom, house sale transactions were commonly financed with a 90% loan to value (LtV) ratio. This is a very dubious practice at the best of time, but in the face of a sharp fall in both house values and wages it becomes well nigh disastrous." /blockquotebr /Now, I do say here "it is estimated" and indeed the estimated came from an Estonian journalist (writing in the newspaper Postimees on 27/02) even if the methodology used to make the "estimate" - calculating that between 2006-2008 there were 100 000 households who bought real estate, and then multiplying by the average household size of 2,5 persons, to get a grand toal of 250 000 Estonians). The truth of the matter is that no one really knows how many Estonians have negative equity in their homes at this point in time, other than the fact that the number is large and rising.br /br /What we do know is that property prices in Estonia’s residential real estate market continued to sfall in 2008 (and especially in Talinn and Parnu), after starting to fall in the last quarter of 2007. In fact, i Tallinn the average price of 2-room apartments was down by 17.2% at the end of Q3 2008 from a year earlier. Taking inflation into account, the average price drop was more like 25.3% in real terms. In a broader context, Estonia's 2008 price falls were among the highest seen globally, and were in sharp contrast to the enormous annual price increases we were seeing in the not very distant past, when annual rates peak at an annual price increase of 77.5% in Q1 2006. Record breakers on the way up, and on the way down. Is this, I ask you, a nice way to live?br /br /br /pa href="http://3.bp.blogspot.com/_ngczZkrw340/Sb1oeZzGQmI/AAAAAAAANFM/HPeBicK2ABE/s1600-h/estonia+3.png"img id="BLOGGER_PHOTO_ID_5313518006897623650" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 239px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sb1oeZzGQmI/AAAAAAAANFM/HPeBicK2ABE/s400/estonia+3.png" border="0" //a Demand for properties in Tallinn, for example, reached an all time high in 2006, with the average price of 2 room flats rising by an average of 27% annually from 2001 to 2005 with the rate peaking in 2006, when prices rose by more than 50% year on year.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sb1oPllrVTI/AAAAAAAANFE/uClXj5V3Pxk/s1600-h/estonia+2.png"img id="BLOGGER_PHOTO_ID_5313517752364520754" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 239px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sb1oPllrVTI/AAAAAAAANFE/uClXj5V3Pxk/s400/estonia+2.png" border="0" //abr /br /The average price of a 3-room apartment in Tallinn was down 11.5% - to EKK20,800 (€1,328) per sq. m. - during the year to end-Q3 2008, and down 18.4% from the peak level of EEK25,500 (€1,629) per sq. m. in Q2 2007. In Parnu average prices plunged by around 30% to end-Q3 2008 from a year earlier.br /br /br /The volume of real estate transactions also continues to fall, after reaching EEK39.8 billion in 2008, down from EEK57.6 billion in 2007 and EEK73.8 billion in 2006. The number of transactions in 2008 was 50,528, up slightly compared with 49,464 transactions in 2007 but well down on the 60,208 transactions registered in 2006.br /br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sb1ort--tYI/AAAAAAAANFU/ml3poN6zCsY/s1600-h/estonia+4.png"img id="BLOGGER_PHOTO_ID_5313518235654468994" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 239px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sb1ort--tYI/AAAAAAAANFU/ml3poN6zCsY/s400/estonia+4.png" border="0" //abr /br /And along with the decline in notarial contracts the number of building permits has also fallen. Permits for only 4,301 dwellings were filed in the first three quarters of 2008, significantly down compared with the 7,795 permits issued in 2007.br /br /So really we have seen a huge bubble here with the average price of 2-room flats in Tallinn up by 448.7% from 2000 to 2007, in Tartu by 431.5% and in Parnu by 440%. And almost the entire population is affected, since owner-occupancy rates have risen strongly, and are up from 85% in 2002, to 96% in 2004. Estonia's rental market shrank from 12% of households (with 9% privately renting and 3% in social rents) in 2002, to just 4% in 2004.br /br /br /And the house price boom was supported by a massive expansion of the mortgage market, with an average rate of annual increase of 62% yearly between 2002 and 2006. Outstanding housing loans grew from EEK4.5 billion (€286 million) in 2000 to EEK88 (€5.6) billion in 2007 and EEK 97 (€6.2) billion in 2008; or if you prefer from 4.7% of GDP in 2000, to 37% in 2007. Even more to the point, at the peak of the boom, banks were willing to provide loans with a maximum lending period of 30 years on a loan-to-value ratio of 100%. /ppstrongMonetary Policy Always Flawedbr //strongbr /One cause of Estonia's inflated boom has undoubtedly come from the pronounced tendency of the Estonian people to favour the pegging of the kroon, first to the deutschemark in 1992 and then to the euro in 2001. Initially the peg lead to lower inflation and lower interest rates. Mortgage interest rates fell from over 10% during the late-1990s, to below 4% between 2004 and 2006, while inflation fell from 89% in 1992 to 8.2% in 1998. Between 2002 and 2006, inflation was permanently below the 5% mark (with an annual average of 3.3%).br /br /However pegging is always a problematic strategy, and so it has been in the Estonian case. Follwoing the decision to peg to the euro, interest rates in Estonia have basically followed the key policy rate set by the ECB. Hence when the ECB began to raise key rates in mid-2005, mortgage rates also increased in Estonia. ECB base rates were gradually raised in 25 basis point steps, from 2% in October 2005 to 4% in May 2007, and again to 4.25% in July 2008.br /br /Clearly these rates were lower than warranted by Estonia’s inflation. Yet Estonia's monetary authorities remained relatively powerless because the kroon’s peg to the euro means the central bank could not raise interest rates further, and even if they did, this would only accelerate the preference for euro loans, with the majority of those borrowing sublimely unaware of the risks they were assuming in taking out unhedged foreign currency loans./ppI say that Estonia's monetary authorities remained relatively powerless, but relatively here does not mean completely, since more could surely have been done on both the fiscal and the monetary side to avert the present tragedy. The fiscal authorities could have paid more heed to the warnings from the IMF and the credit ratings agencies that a higher level of budget surplus was urgently needed to drain all the excess demand which was violently overheating the system. The central bank (you know those people who now blithely say that "speculations about devaluing of the kroon are irresponsible as no one in Estonia would gain anything from such a move") could have issued very strict instructions to the banks about the income multipliers on loans, loan to value percentages, and documentation needed, and this, as we saw later, would surely have has an effect. And above all, both the central bank and the fiscal authorities could have taken a much less tolerant attitude to the sharp wage inflation which broke out in the second half of 2006. It is not so much a matter of having no policy remedies available, as a lack of the necessary will to look for the tools and find them. All of this is far more reminiscent of what we are unfortunately all too accustomed to seeing in country's with "currency corridors" like Ukraine or even Russia itself than it is of the sort of modern new dynamic and free market economic model we were all lead to believe Estonia had firmly set its path on./ppbr /strongHousing Oversupply And Declining Construction Activity/strongbr /br /So what we have before us is a huge housing overhang, a seriously endebted population, and an economy which was dependent on construction and real estate which will now need to "reinvent" itself. It wasn't always like this. Following the break-up of the Soviet Union in 1991, housing construction entered dramatic deceleration and between 1996 and 2001 less than 1,000 dwellings were added to the dwelling stock annually - not even enough to meet "normal" demand. After 2001, housing construction really took off, and in 2007, around 7,200 units were added to the dwelling stock, up from the 5,100 units built in 2006. /ppThis massive increase in dwelling completions has now transformed a housing shortage situation to substantial oversupply one, pushing house prices down in the process. Another 4,282 new dwelling units were completed within the first three quarters of 2008. Although less than the 4,911 completions which were registered in the same period in 2007, these, in a market which is already "oversold" have only added more pressure on an already bloated 645,400 dwelling stock. Maybe it is worth someone remebering at this point that Estonia's population is actually falling. So, as buildings output drops by 25% year on year in Q4 (see chart below) maybe the time has come to ask when will the level of output ever start to rise again? And in the meantime, what will Estonia live from in the meantime? Anyone ready now to have second thoughts about exports?br /br //pa href="http://4.bp.blogspot.com/_ngczZkrw340/Sb1oAhD2R2I/AAAAAAAANE8/z4BUn3YdMAs/s1600-h/estonia+construction.png"img id="BLOGGER_PHOTO_ID_5313517493450852194" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 243px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sb1oAhD2R2I/AAAAAAAANE8/z4BUn3YdMAs/s400/estonia+construction.png" border="0" //adiv class="blogger-post-footer"img width='1' height='1' src='http://res1.blogblog.com/tracker/8991369883287712098-4821694980746956465?l=globaleconomydoesmatter.blogspot.com'//div

NOK Sheds 1,700 Jobs – Zacks Tale of the Tape

Zacks Market Commentaries — Tue, 17 Mar 2009 18:12:26 +0000

Nokia Corp. (NOK) declared today that it would shed 1,700 jobs globally over the next few months, as part of its cost-cutting plans. Nokia remains worried about the rapid decline in consumer demand owing to the soft economy.

The company's latest actions will not only affect its Device and Media units but also it's Corporate Development Office and global support functions. Nokia presently has an employee strength of approximately 130,000.

Earlier in January, the Finland-based company announced that it aims to lower operating expenses by around EUR700 million during this year, after its fourth-quarter results saw a 70% drop in net profit.

In the previous month, Nokia announced the closure of R&D facilities in Finland. It had also declared a global voluntary resignation program for part of its staff.

NOK is a Zacks #3 Rank ("Hold") stock.

"NOK" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Will All Be Well, And End Well, In Estonia?

Edward Hugh — Tue, 13 Jan 2009 15:54:00 +0000

by Edward Hugh: Barcelonabr /br /Well, there doesn't seem to much room for doubt at this point does there, the Baltic Economies are in the van of the European economic slowdown for 2009, just as they were leading the charge up in 2007, and all that debate about whether we were going to get a hard landing or a soft one seems now so out of date and and old hat as we watch how Estonia's economy contracts almost faster than the body of the incredible shrinking man (by an annual 3.5% in the third quarter of 2008), while Latvia's seems to be rivalling Harry Houdini in the expert art of staged disappearance (dropping as it did by an annual 4.6% in Q3). Even Lithuania's economy - which like a half drunken man still manages to stagger forward before it finally gets to fall over - is now expected by IMF regional representative Christoph Rosenberg to be set to contract an annual 2% in 2009. As a href="http://www.baltic-course.com/eng/analytics/?doc=8577"Rosenberg so pointedly says/a "Latvia had the highest growth rate in the EU for several years, but it was a bubble."br /br /br /pa href="http://3.bp.blogspot.com/_ngczZkrw340/SR1UddzuMSI/AAAAAAAALec/p4Z1cFiFgJc/s1600-h/estonia+qoq.png"img id="BLOGGER_PHOTO_ID_5268460004287852834" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 184px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SR1UddzuMSI/AAAAAAAALec/p4Z1cFiFgJc/s320/estonia+qoq.png" border="0" //abr /br /br /The only slightly worrying thing about all the belated acceptance that the Baltics are going to have one of the hardest landings in the global economy this time round is the apparent collective failure to do the ritual "soul searching", and address the tricky issue of just what it was in the original analyses which lead so many to place such trust in the good intentions of the Nordic Banks and in the consequent probability of a soft landing, since the danger is now that we simply get misplaced policy piled upon well-meaning but misplaced policy in an attempt to address problems whose roots (which I am convinced are located to some extent at least in the regions rather peculiar demography) are quite simply left untackled. That is, we remain stuck on the currency pegs, we continue to count on the goodwill of the Nordic Banks, we expect wages and prices to exhibit a downward flexibility not seen, for example, a href="http://eurowatch.blogspot.com/2009/01/portugal-sustains.html"in a comparable country like Portugal/a, whilst over at Eesti Pank (the Estonian National Bank) they a href="http://www.eestipank.info/pub/en/dokumendid/publikatsioonid/seeriad/ylevaade/_2008_02/_3_208.pdf"still expect the recovery to begin in 2010/a (in rather stark contrast to the much more realistic assessment for the US economy from the Congressional Budget Office - who don't expect the US recovery to really get underway till 2012, and don't see trend growth being reached till 2015). If they were serious about seeing through the correction in terms of allowing a long and painful downward adjustment in living standards to take place as the favoured alternative to devaluation, then they would realise that this process would really only be getting itself going in 2010, let alone be over - so why, oh why, I ask myself, do people in the Baltics insist on trying to view things through such rosy tinted spectacles? The main ones hurt by all this at the end of the day are those very people we are all, I am sure, trying so hard to help. blockquoteThe Estonian economy should start to recover by 2010, according to the nation's central bank.Although Eesti Pank expects the country's gross domestic product to fall by 4.48 per cent in 2009, growth could be experienced in as little as 12 months, reports Baltic Business News./blockquotebr /strongThe Future is In Exports/strongbr /br /Basically the future outlook for the Estonian economy lies in exports. This simple point should not be so hard to grasp, since it can be easily deduced from one fundamental structural aspect of the Estonian economy: the presence of a fairly large current account deficit (which admittedly is not as large as the Latvian one, but the fact that others are even worse off is somehow cold comfort here) which now needs correcting. In fact, as we can see in the chart below, the correction has already started.br /br /br /br /pa href="http://2.bp.blogspot.com/_ngczZkrw340/SWipdi4p56I/AAAAAAAAMGs/tR8QaZvCLv0/s1600-h/estonia+current+account.png"img id="BLOGGER_PHOTO_ID_5289664087392380834" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 202px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SWipdi4p56I/AAAAAAAAMGs/tR8QaZvCLv0/s320/estonia+current+account.png" border="0" //abr /br /But what the correction means is that domestic demand will have to contract - to make space for the export oriented activity - since it has basically been the excess of domestic demand in relation to the economy's capacity to meet it which has been at the heart of the process which has produced the deficit. Effectively Estonian's need to consume less, or pay for more of what they consume by exporting, there really is no third alternative here, and the reality is that the way to "correct" the current account imbalance problem is more than likely going to be by a combination of these two paths, Estonians are going to consume less and they are going to export more, as the latest economic forecast from Eesti Pank timidly admits:/pblockquoteA new upward cycle highly depends on the reallocation of labour to sectors with stronger productivity growth...........Possibly, the new cycle will require part of the workforce currently serving domestic demand to be reallocated to export oriented sectors. Otherwise Estonia’s economy might be facing a long period of slow growth. It should also be said that in some cases a new job may entail smaller wages, although households are not really prepared for that./blockquotepI think it is possible to be a bit more specific and explicit than Eesti Pank on all of this: the new cycle strongwill /strong(certainly, definitely) require part of the workforce currently serving domestic demand to be reallocated to export oriented sectors, and in strongalmost all/strong cases a new job strongwill/strong entail smaller wages (and indeed existing jobs will have to accept wage reductions), since this is quite simply what maintaining the krona-euro peg entails - if you don't devalue, then you need to reduce wages and prices to achieve the same result. Of course, as the bank notes, "households are not really prepared for that"./ppBasically Estonia (and most other CEE economies) have been running large CA deficits due to the insufficiency of domestic savings to meet the principal lending and borrowing needs, so the first thing Estonians are going to need to do (and not for one year, or two years, for several years, I hardly see the structural position of the Estonian economy being better than the US one at this point, so we are talking about a correction which can run all the way through to 2015, and while we may have some sort of idea what US trend growth may be in 2015 - the famous 2% - we have no idea at all what trend growth could be in Estonia at that point, but certainly a lower than many imagine)./ppAnother reason Estonians need to save can be seen in the chart blow, and that is the divergence between the evolution of the trade balance (which is improving) and the income balance, which continues to deteriorate. Basically the income balance reflects the difference in interest paid on loans (and dividends paid on equities) between outsiders investing in Estonia, and Estonians investing externally. This balance is deteriorating, and this steady deterioration needs to be arrested, since otherwise the achievement of a simple goods and services trade surplus will be of no avail, if all the proceeds are simply sucked out in a negative income stream.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SWj-lv8g3fI/AAAAAAAAMHE/Lq3sL72Qe4o/s1600-h/estonia+BoP.png"img id="BLOGGER_PHOTO_ID_5289757686825541106" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 174px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWj-lv8g3fI/AAAAAAAAMHE/Lq3sL72Qe4o/s320/estonia+BoP.png" border="0" //abr /This ongoing correction in the CA deficit is, of course, easily visible in household consumption, which is now year on year negative (see chart), where it will remain as far ahead as the eye can see (this is a simple deduction which comes from the need to save)./ppa href="http://3.bp.blogspot.com/_ngczZkrw340/SWimTdLD9lI/AAAAAAAAMGk/8oYxsNt6yNs/s1600-h/estonai+household+consumption.png"img id="BLOGGER_PHOTO_ID_5289660615525398098" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 170px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SWimTdLD9lI/AAAAAAAAMGk/8oYxsNt6yNs/s320/estonai+household+consumption.png" border="0" //aAt the same time the trade balance is going to have to be turned round, and exports begin to take a leading role, something that they were conspicuously unable to do for many, many quarters, although there is a little evidence from Q3 2008 that the position may have begun to improve. However, as Eesti Panki themselves note, with the worsening external environment this improvement is going to be hard to maintain in the short term. /ppbr //ppa href="http://3.bp.blogspot.com/_ngczZkrw340/SWimDfQ7hwI/AAAAAAAAMGc/WF37eREsM1k/s1600-h/estonia+exports.png"img id="BLOGGER_PHOTO_ID_5289660341208975106" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 172px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SWimDfQ7hwI/AAAAAAAAMGc/WF37eREsM1k/s320/estonia+exports.png" border="0" //a But I really do think it is important not to fall into fatalism on the export question at this point. Simply because doing anything is hard is not a good reason for sitting there with folded arms and doing nothing. The first step towards recovery will come not from the exports themselves, but from the fixed capital investment (machinery, plant and equipment) which will be undertaken in order to make exports subsequently possible. But to attract the FDI you need to get relative wages and prices competitive, you need to convince would be investors that you are a better destination than your rivals. Sorry, but capitalism is just like that, this is how it runs, and you can't take one part (the bit you like), and ignore the other (the bit you definitely don't like). There is, for better or for worse, a competitive process at the heart of all our economies, and not every situation can be straightforwardly win-win (would that!). So basically, if there do have to be winners and losers here, are you happy for your country and your economy to stay in the second group, and wait and see if eventually a rising tide can lift all boats./ppAt the present time, as we can see in the chart below, Estonian fixed capital formation is also running at a pretty constant year on year negative, and this is the part Estonia needs to turn round, since without this turnaround the economy will simply not get that productivity boost which again almost everyone agrees forms part of the solution recipe./ppbr //ppa href="http://1.bp.blogspot.com/_ngczZkrw340/SWil3I7ShoI/AAAAAAAAMGU/DoAImM3JpfY/s1600-h/estonia+GFCF.png"img id="BLOGGER_PHOTO_ID_5289660129054197378" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 171px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWil3I7ShoI/AAAAAAAAMGU/DoAImM3JpfY/s320/estonia+GFCF.png" border="0" //a So with private consumption falling and investment falling, it isn't hard to understand that even the small increase in govenment spending that Estonia can permit itself is insufficient to stop total domestic demand from falling./ppbr //ppa href="http://1.bp.blogspot.com/_ngczZkrw340/SWiloqjY6OI/AAAAAAAAMGM/T7oOFZUC-LQ/s1600-h/estonia+total+domestic+demand.png"img id="BLOGGER_PHOTO_ID_5289659880382720226" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 184px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWiloqjY6OI/AAAAAAAAMGM/T7oOFZUC-LQ/s320/estonia+total+domestic+demand.png" border="0" //abr //ppstrongIndustrial Output Plummets In November/strong/ppbr /All of this "macro" level data is of course also reflected in the day-to-day data releases we are seeing, and as might only be expected Estonia’s industrial production fell the most in at least 14 years in November. Output fell 21.7 percent, the most since at least 1995 when the Tallinn-based statistics office started compiling data in this series. This compared with a revised 11.7 percent drop in October. /pa href="http://1.bp.blogspot.com/_ngczZkrw340/SWeCY_VktFI/AAAAAAAAMFc/Jh1e1T97RPY/s1600-h/estonai+output+year+on+year.png"img id="BLOGGER_PHOTO_ID_5289339653200327762" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 187px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWeCY_VktFI/AAAAAAAAMFc/Jh1e1T97RPY/s320/estonai+output+year+on+year.png" border="0" //abr /br /blockquote“The real crisis in its real extent is starting to arrive,” according to Rutabr /Eier, an economist with SEB AB in Tallinn. “The slump in demand has beenbr /enormous and is continuing. Such a big fall probably means that export ordersbr /also declined a lot.” Gross domestic product will decline “significantly more”br /than the 3.5 percent fall in the third quarter. /blockquotepbr /Output adjusted for working days was down by an annual 17.7 percent, while manufacturing industry, which is the second-biggest contributor to GDP (second only to the property sector and construction industry) fell a working-day adjusted 25.5 percent, led by a 40 percent fall in the output of building materials and a 30 percent decline in textiles’ production.br /br /Forty-nine percent of Estonias industrial companies said they are planning job cuts in the next three months, according to a recent survey by the Eesti Konjunktuuriinstituut research institute. Company order books were down to 3.4 months of future output in December compared with historic average of 5 months. Capacity usage was down to 67 percent, compared with an 81 percent-average for the European Union as a whole. As we can see in the chart below, it isn't only the year on year readings in recent months which indicate deterioration, the output index peaked around the start of 2008, and is now heading sharply down even below the levels of early 2006.br /br /br //ppa href="http://3.bp.blogspot.com/_ngczZkrw340/SWeCh_L6hJI/AAAAAAAAMFk/dfmruG943eY/s1600-h/estonia+ip+index.png"img id="BLOGGER_PHOTO_ID_5289339807778636946" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 187px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SWeCh_L6hJI/AAAAAAAAMFk/dfmruG943eY/s320/estonia+ip+index.png" border="0" //abr /br /Companies like seatbelt manufacturer the Swedish subsidiary AS Norma (who have announced plans to cut 52 jobs, or about 6 percent of the workforce) or Dutch office equipment manufacturer Atlanta Office Products BV, a Dutch office supplies maker (who planto close their factory in Kohila, northern Estonia, with the loss of more than 200 jobs) are steadily reducing jobs, possibly the numbers seem small, but do remember strongEstonia really is/strong a small open economy.br /br /As a result Estonia’s seasonally adjusted unemployment rate rose to 8.3 percent in November from 4.1 percent a year ago, the second- biggest jump in the EU following Spain, according to the latest data release from the EU statistics office, Eurostat. The unemployment rate may rise to 10 percent by next year, according to a worst-case scenario proposed by The Estonian Finance Ministry in November, but it now seem that even that level may now be a significant underestimate, although it really does depend on whether we are referring to the unemployment rate as measured by the Estonia Labour Board methodology or the one the Estonian statistics office supply to Eurostat using the EU harmonised methodology (the Estonian Labour Board number is significantly lower).br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SWnNjdixKEI/AAAAAAAAMHM/Ed1oPP8OB5w/s1600-h/estonai+unemployment+rate.png"img id="BLOGGER_PHOTO_ID_5289985246432929858" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 175px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SWnNjdixKEI/AAAAAAAAMHM/Ed1oPP8OB5w/s320/estonai+unemployment+rate.png" border="0" //abr /br /br /strongInflation Falling/strongbr /br /At the same time Estonia’s inflation rate is falling (if still far to slowly) and hit its lowest level in 16 months in December - 7 percent, the lowest since August 2007 down from 8 percent in November.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SWeGE2yWpfI/AAAAAAAAMF0/_UW3UDYGTGw/s1600-h/estonia+cpi+yoy.png"img id="BLOGGER_PHOTO_ID_5289343705354249714" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 202px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SWeGE2yWpfI/AAAAAAAAMF0/_UW3UDYGTGw/s320/estonia+cpi+yoy.png" border="0" //abr /br /So inflation is falling quite fast and is likely to significantly undershoot the central bank forecast of 3.7 percent in 2009. In fact prices fell on the month by 0.2 percent from November. This was largely the result of a sharp fall in fuel prices - down 8.1 percent from the previous month - but food (up 0.5 percent) and administered prices still continue to rise. However, as we can see in the chart below, the general index has now been more or less stable since the summer.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/SWeFq7HiTwI/AAAAAAAAMFs/VcxAc9TKwSo/s1600-h/estonia+cpi.png"img id="BLOGGER_PHOTO_ID_5289343259840237314" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 200px; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/SWeFq7HiTwI/AAAAAAAAMFs/VcxAc9TKwSo/s320/estonia+cpi.png" border="0" //abr /strongRetail Sales Also Falling Sharplybr //strongbr /Estonian retail sales also posted a record decline in November - dropping by an annual 9 percent (the most since the start of the present time series in 1994, following a revised 7 percent drop in October. This drop includes an annual fall in car sales of nearly 50%, while the value of food sales is already falling in prices not adjusted for inflation.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SWITUF543aI/AAAAAAAAL_k/RwlIL0R_OsM/s1600-h/estonia+retail+yoy.png"img id="BLOGGER_PHOTO_ID_5287810148389674402" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 201px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWITUF543aI/AAAAAAAAL_k/RwlIL0R_OsM/s320/estonia+retail+yoy.png" border="0" //abr /The constant price sales index also peaked at the start of 2008, and it will be a very very long time before we see domestic retail sales hitting this sort of level again, which is another good reason why employment needs to be steadily displaced out of the domestic sector and into the export one.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/SWISa0UioTI/AAAAAAAAL_c/RNfafvbP68Q/s1600-h/estonia+retail+sales+index.png"img id="BLOGGER_PHOTO_ID_5287809164417081650" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 174px; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/SWISa0UioTI/AAAAAAAAL_c/RNfafvbP68Q/s320/estonia+retail+sales+index.png" border="0" //abr /br /br /strongExports Still Holding Up In Octoberbr //strong/ppAccording to the latest data we have from Statistics Estonia, October goods exports were up by 13% year on year while imports declined by 3%. Goods to the value of 13.2 billion kroons were exported, 1.5 billion kroons more than in October 2007 - however the growth in exports was largely caused by the increase in the re-exports of fuels - up by nearly one billion kroons.br //ppImported were down to 15.7 billion kroons - 0.4 billion kroons less than in October 2007. The decline was the result of a decrease in domestic demand with the biggest falls being in the transport equipment and in machinery and equipment sections. As a result of the increase in exports and the decrease in imports the Estonian foreign trade deficit fell to 2.5 billion kroons - 1.9 billion kroons less than in October 2007. If we take account of the increase in re-exports it is evident that the reduction in imports for the domestic market was much sharper than the aggregate 3%.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/SWIWXtBWkgI/AAAAAAAAL_s/NJtEvyeZ4gM/s1600-h/estonia+exports.png"img id="BLOGGER_PHOTO_ID_5287813508964454914" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 167px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/SWIWXtBWkgI/AAAAAAAAL_s/NJtEvyeZ4gM/s320/estonia+exports.png" border="0" //abr /br /br /63% of October exports went to the EU and 17% to CIS countries accounted for 17% of the total exports. The main destination countries were Finland, Russia and Sweden.br /br /br /br /strongThe Outlook On The IMF View/strongbr /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/SWfT0bdRQRI/AAAAAAAAMGE/W0VEc7-rGDQ/s1600-h/estonia+confidence+index.png"img id="BLOGGER_PHOTO_ID_5289429185047118098" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 188px; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/SWfT0bdRQRI/AAAAAAAAMGE/W0VEc7-rGDQ/s320/estonia+confidence+index.png" border="0" //abr /br //pblockquote"The major policy challenge is the budget. The 2009 budget incorporates a welcome adjustment that required difficult decisions. However, given the deteriorating global outlook, our assessment is that the deficit will likely exceed 3 percent of GDP in 2009 and beyond. This does not present a near-term financing risk given the prudent accumulation of fiscal reserves via surpluses in recent years. But the current fiscal posture is not sustainable going forward. Moreover, it risks breaching the Maastricht fiscal threshold just when inflation is receding. This could delay euro entry, which the authorities rightly consider to be their highest priority. What is needed now is early action to achieve fiscal consolidation.br /IMF Staff Mission Statement, December 2008/blockquotepThis is the IMF conclusion as to the short term outlook for Estonia, and the view was confirmed only last week by IMF representative Christophe Rosenberg who said a href="http://www.bloomberg.com/apps/news?pid=newsarchiveamp;sid=aWeB6GSOFbBM"in a Bloomberg interview/a last week that “Estonia is the least vulnerable of the Baltics because it has big buffers, it’s been running a budget surplus for a number of years now and so there are fiscal assets.” /ppThis view is not entirely confirmed by the latest EU economic sentiment index reading (see chart above) which shows Lithuania still in an apparently better position than Latvia or Estonia, but Christoph's reasoning here is based on his assessment that Lithuania’s economy is about to “decline sharply” and I am hardly in any position to dispute his view here (nor would I wish to, I simply have not been following Lithuania closely enough). In fact the IMF forecasts that Lithuania's economy may well contract by “at least” 2 percent in 2009, even though Lithuania's central bank’s suggested an expansion of 1.2 percent in their October outlook. But on the one had we all know that the economic outlook in the CEE economies has deteriorated significantly since October - as domestic demand has waned and banks have tightened lending - while "at least" means simply that, the number could well be a lot worse. /pblockquote“Lithuania is in a more difficult position as GDP growth is predicted to declinebr /sharply this year and this may create fiscal problems,” Rosenberg said in anbr /interview conducted on Tuesday in Warsaw. /blockquotepWhat the IMF is referring to basically is the fiscal reserve which Estonia has, there is no accumumulated national debt, and indeed the government as net assets to the tune of something like 5% of GDP, so there is a certain leeway to use this money to soften the impact of the correction, although it is important that the country's savings are spent on facilitating the necessary correction and not on postponing it./ppAs Christoph Rosenberg points out the Baltic problems were created by a soaring wages and a credit boom which saw funds channeled into non-tradable sectors like real estate, retail and banking. As a result these economies became structurally distorted and they didn't diversify enough since insufficient was done to curtail rapid credit growth and to use counter-cyclical fiscal policies to cool the economy off before it was much too late. The danger is that if in the downturn we get the same inability to translate sound economic sense into practical economic policy that we saw during the upcycle, then problems can become worse, a lot worse, without getting any better. That is Estonia's challenge, and if it isn't grasped fully and with both hands then it can just as easily turn into Estonia's tragedy. 12 years from now (ie come 2020) Estonia's population will be much older, and the elderly dependency ratio will be much higher, than it is now. It is also to be imagined that the potential annual GDP growth rate will be comparatively lower, even as the needs for social spending rise and rise. So while Estonia still has a window of opportunity, it is not an indefinite one, and once it closes it won't come back. I think Estonia's citizens would do well to dwell on this point./p

Trade Barriers Could Deepen Global Economic Crisis

Contrarian Profits — Thu, 08 Jan 2009 12:16:30 +0000

pThe breakdown of international trade is key threat to the global economy in 2009, says stronga href="http://www.contrarianprofits.com/articles/author/chris-mayer/" class="alinks_links"Chris Mayer/a/strong. Several countries have already taken action to protect domestic industries, including the US with its auto bailout. If this trend continues, Chris says the global downturn could become even deeper than imagined.This from The a href="http://www.dailyreckoning.com" class="alinks_links"Daily Reckoning/a:/p blockquotepWhere trade flourishes, business is good. But trade does not always flourish. The linked forces of globalization move in fits and starts./p pThe authors of Power and Plenty, a new book on trade over the last thousand years, tell us as much. #8220;If anything,#8221; they write, #8220;history suggests that globalization is a fragile and easily reversible process.#8221;/p pOne of the looming threats in 2009 is the reversal in trade flows#8230;/p/blockquote

A Cheap Luxury for a Dreary Economy (SBUX)

Lynn Carpenter — Fri, 19 Dec 2008 14:33:58 +0000

pEconomists say this recession will last till June 2009 at least. Conventional wisdom says it’s time to buy defensive stocks—utilities, consumer staples, booze, healthy banks, drug companies, and defense contractors./p pI’ve been walking around with my eyes open, and I don’t think so./p pLast week, Andy and I went to the bank then stopped at Starbucks. There were no lines in the bank. We had to wait 10 minutes to get to the counter in Starbucks (a href="http://finance.google.com/finance?q=SBUX"SBUX/a). /p pThe legendary Howard Schultz is back, and so is Starbucks. /p pSchultz was the person who convinced the original coffee-roasting partners to expand in the 1980s when he visited them to find out why they were buying so many of the Hammerplast Swedish drip coffee makers#8230;/p

Iceland Gets $11 Billion Bailout

Contrarian Profits — Fri, 21 Nov 2008 12:36:19 +0000

Iceland today (Thursday) secured nearly $11 billion in loans from the International Monetary Fund (IMF) and other nations. The bailout will help the island nation stabilize its currency and recapitalize its banks, but it will also saddle its tiny population with a huge debt burden.

The IMF will lend Iceland $2.1 billion, and Finland, Sweden, Norway and Denmark will loan $2.5 billion to help the country re-float its currency and shore up its banking sector.

The Icelandic krona, or crown, has lost about 70% of its value since the nation’s financial crisis first began. The government put restrictions on currency trade as it wrestled with the crisis, however one of the stipulations of the IMF loan is that Reykjavik once again float…

Swiss National Bank Cut Rates 100 BPS!

Contrarian Profits — Thu, 20 Nov 2008 17:17:19 +0000

Trading Theme returns… Automakers’ bailout vote today… Not using all your arrows… Housing Starts go back to 1959! And Now… Today’s Pfennig!

OK… Whew! What an awful day yesterday for the currencies… In the morning, they ere in rally mode with the euro gaining ground to well within the 1.27 handle. But then the Trading Theme set in, and those gains were wiped out. The Trading Theme was set off by the awful Housing data, which reminded everyone of the deep, dark , dangerous days ahead… I bought some euros, and watched them rise, and went off to do something else… When I returned, they had fallen… UGH! The Japanese yen, however, rallied, as is the case with the Trading Theme……

Auto-Loan Companies (ACF, UPFC, CPSS) Stare Into The Abyss

Andrew Snyder — Wed, 29 Oct 2008 19:14:50 +0000

It’s becoming clear that subprime lending wasn’t limited to the housing market. Companies in the auto-loan business are battling hard to keep their heads above water. Andrew Snyder says small firms like AmeriCredit (NYSE:ACF), United PanAm (NASDAQ:UPFC) and Consumer Portfolio Services (NASDAQ:CPSS) will struggle to survive.

This from Today’s Financial News:

If you thought lending in the home-mortgage lending industry was tight, you will be shocked by the woes in the auto-lending world. This subprime debacle is destroying one company after the other.

Just this morning, GMAC (NYSE:GJM) announced it has stopped issuing car loans in seven European countries. October 31 will be the last day for folks from Finland, Norway, Greece, the Czech Republic, Portugal, Spain, and Slovakia to get loans from General Motor’s (NYSE:GM)…

Auto-Loan Companies (ACF, UPFC, CPSS) Stare Into The Abyss

Andrew Snyder — Wed, 29 Oct 2008 19:14:50 +0000

This from Today’s Financial News:

If you thought lending in the home-mortgage lending industry was tight, you will be shocked by the woes in the auto-lending world. This subprime debacle is destroying one company after the other.

Just this morning, GMAC (NYSE:GJM) announced it has stopped issuing car loans in seven European countries. October 31 will be the last day for folks from Finland, Norway, Greece, the Czech Republic, Portugal, Spain, and Slovakia to get loans from General Motor’s (NYSE:GM)…

French Nuclear Giant Areva Links Up With Northrop

Contrarian Profits — Fri, 24 Oct 2008 14:23:04 +0000

In a sign that the planned construction of new nuclear reactors in the U.S. market could jump-start the nation’s moribund manufacturing sector, France’s Areva SA and defense-industry giant Northrop Grumman Corp. (NOC) have formed a joint venture to make nuclear reactor vessels, steam generators and other related components at Northrop’s Newport News shipyard in Virginia.

The venture – Areva Newport News LLC – will emanate from a $360 million investment, and will lead to the construction of a 300,000-square-foot production-and-engineering facility, the two companies said yesterday (Thursday). It will employ 500 workers when completed in 2011, according to an MSNMoneycentral report.

Mike Petters, president of Northrop Grumman Shipbuilding, the unit that has signed on to work with Areva, told The Wall Street Journal that “we’ve…

A Selective Investment in Scandinavia

ETF Innovators — Sun, 19 Oct 2008 18:28:00 +0000

A Selective Investment in Scandinavia As evidence of commercial interest in developing an ETF for the Nordic region, Global X Management has recently filed for such a product, based on the FTSE Nordic 30 Index. The Global X filing specifies that, "The underlying index tracks the performance of the 30 largest [...]

Gene Marcial’s Stock Picks in 10/27 Business Week

CEO Blogger — Sat, 18 Oct 2008 21:58:21 +0000

Track Gene Marcial’s picks at: http://trackthepros.com/stocks/category/404 A HOT TICKET IN LOTTERIES In recessionary times, lotteries are catching the fancy not only of people wanting to become instant millionaires but also of state governments eager to close their budget gaps. Scientific Games (SGMS) is reaping a bonanza from the mushrooming of lotteries—from Florida, Georgia, and Texas to China, Finland, [...]

FreeStar Technology Corp. (FSRT.OB) Sales Soar To Record High

QualityStocks — Fri, 17 Oct 2008 18:41:43 +0000

FreeStar Technology Corp. (FSRT.OB), a global payment processing and technology company headquartered in the Dominican Republic, announced today that the company has achieved record sales for the fiscal year ending June 30, 2008. Sales skyrocketed 66% to over $6 million. Perhaps more remarkable is the fact that the company’s most significant projects are still in [...]

Global Investing Roundups Friday, October 17th, 2008

Contrarian Profits — Fri, 17 Oct 2008 15:01:44 +0000

Google Doesn’t Disappoint; Jobless Claims Drop but Remain High; Peabody’s Third Quarter Lights Out; Nucor Profit Doubles; Nokia’s Profit Dip; AMD Narrows Loss; Hershey’s Sweet Surprise; Citi’s Consumer Credit Woes

Google Inc. (GOOG) said yesterday (Thursday) that profit climbed 26% to $1.35 billion, or $4.24 per share in the third quarter, up from $1.07 billion, or $3.38 per share, at the same time last year. Revenue soared 31% to $5.54 billion.

Initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000 the Labor Department reported yesterday (Thursday). However, the four-week average, which is less volatile, increased slightly to 483,250 – a seven-year high. The number of people continuing to receive jobless benefits rose 40,000 to 3.7 million.

Peabody Energy…

News from the Blogosphere

Declan Fallon — Tue, 14 Oct 2008 10:50:00 +0000

a href="http://bigpicture.typepad.com/comments/2008/10/an-obama-rally.html"An Obama rally?/a Barry Ritholtz gives his 2 cents. br /br /Latest a href="http://marketprognosticator.blogspot.com/2008/10/investing-carnival-17.html"Investing Carnival/a has a host of links on what mattress to hid your money under.br /br /Negativity still a feature with Monday's a href="http://feeds.investorplaceblogs.com/~r/InvestorPlaceBlogs/~3/FaGy9gYsqQY/throw_the_dog_a_bone.php"gains/a, but a href="http://cobrasmarketview.blogspot.com/2008_10_12_archive.html#582748378974610963"optimism/a apparent. The a href="http://adamsoptions.blogspot.com/2008/10/fishing-for-clues.html"wait-and-see/a approach may be best. a href="http://www.investmentpostcards.com/2008/10/14/jeremy-grantahm-still-holding-back/"Jeremy Grantham/a is going softly softly. TraderMike calls it a href="http://tradermike.net/2008/10/october_13_2008_recap_from_panic_selling_to_panic_buying/"Panic Buying/a.br /br /CXO's a href="http://www.cxoadvisory.com/blog/"Top-10 Guru excuses/abr /br /a href="http://www.bloomberg.com/apps/news?pid=20601087sid=a5q9KWDZwFyg"Finland/a basking in the sun?br /br /Japan is the new a href="http://biz.yahoo.com/ap/081014/as_japan_bailout.html"shining knight in armour/a.br /br /span class="fullpost"(Via a href="http://abnormalreturns.com/"Abnormal Returns/a). The end of the yellow a href="http://www.portfolio.com/views/blogs/market-movers/2008/10/12/the-end-of-the-bric-trade"BRIC/a road. br /br /a href="http://club.ino.com/trading/2008/10/fear-is-not-an-option-for-successful-traders/"Fear is not an option/a - time to roll up the sleeves and get to work.br /br /a href="http://www.tradersnarrative.com/why-the-price-dividend-ratio-is-better-than-pe-ratio-1947.html"Price dividend ratio/a over the Price earnings ratio br /br /span style="font-size:80%; color:#cccccc;"Dr. Declan Fallon, Senior Market Technician, a href="http://www.zignals.com"Zignals.com/a the free stock alerts, market alerts, and stock charts website /span/span

Iceland Gets Left Out in the Cold

Robert Amsterdam — Tue, 07 Oct 2008 18:31:22 +0000

One of the biggest problems with the United States becoming a debtor nation instead of a creditor is that we really lose any ability to help out our valued friends in times of trouble. As such, the banking crisis in Iceland has forced the government to turn to Russia - who is happy to throw some of its excess liquidity toward the relatively stable instruments of the country in the form of a $5.4 billion loan. Reykjavik is really not all that happy about it, and seems to display some awareness that this is exactly the kind of deal that can end up outsourcing your Ministry of Foreign Affairs to Kremlin oversight just like Finland. Prime Minister Geir Haarde tells the Financial Times, "We have not received the kind of support that we were requesting from our friends. So in a situation like that one has to look for new friends. (...) In a situation like this it’s turning out that it’s every man for himself, every country for itself, everybody’s taking care of their best interest and that’s what we are doing." Chris Weafer tells the FT that this loan is much more than an ordinary transaction, as it symbolizes both a clear statement that Russia still has extra cash and will look forward to enjoying support from Iceland on future territorial claims in the Arctic. James Beadle of Pilgrim Asset Management tells the New York Times that "It’s a P.R. stunt to reassert Russia’s position in the global economy of the 21st century." I believe that this loan demonstrates that Russia continues to have a very good understanding of what Walter Russell Mead would call "sticky power," and it would do Washington very well to remember how much this financial crisis is costing the United States in terms of its relationships with key allies.

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! – Nouriel Roubini

John Lee — Wed, 01 Oct 2008 18:10:57 +0000

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks

Continue reading

Slovenia’s 2008 Parliamentary Election

Edward Hugh — Sun, 21 Sep 2008 00:00:00 +0000

by Manuel Alvarez-Rivera, Puerto Rico

Voters in Slovenia, which held a presidential election last year, return to the polls on Sunday to choose members of the lower house of Parliament, the 90-seat National Assembly. Slovenia's National Electoral Commission will have 2008 parliamentary election results in Slovene as well as English.

This posting deals exclusively with the upcoming parliamentary election; Slovenia's 2007 presidential election has an overview of developments prior to 2008 in the former Yugoslav republic.

Save for two mandates set aside for Italian and Hungarian ethnic minorities, National Assembly seats are filled at the nationwide level by the largest average method of proportional representation (the d'Hondt rule) among parties polling at least four percent of the national vote. Voters may choose a party list or an individual candidate, and a complex procedure provides for the subsequent allocation of seats among eight multi-member constituencies (each comprising eleven seats, which are initially allocated by the Droop quota) and 88 single-member districts; nonetheless, due to the proportional nature of Slovenia's electoral system, some single-member districts end up with more than one deputy, while others get none.

The two deputies representing the Italian and Hungarian minorities are chosen by simple majority preferential vote (the Borda count method); however, voters belonging to either minority group may also take part in the election for the remaining 88 seats.

Slovenia has a Western European-style multi-party system, and coalition governments have ruled the country since the attainment of independence in 1991. Since the 2004 parliamentary election, a center-right coalition government headed by Prime Minister Janez Janša of the Slovenian Democratic Party (SDS), in alliance with the Democratic Pensioners' Party of Slovenia (DeSUS), the Slovenian People’s Party (SLS) and New Slovenia (NSi) has held office.

Opinion polls indicate SDS is likely to remain Slovenia's largest party, narrowly ahead of the left-wing, opposition Social Democrats (SD), led by Borut Pahor. The Social Democrats had finished in third place in the 2004 election, well behind SDS and the left-of-center Liberal Democracy of Slovenia (LDS), which ruled the country almost uninterruptedly from 1992 to 2004. However, LDS suffered a damaging split in 2007, when several of its deputies left the party to establish Zares (For Real). In addition, a number of leading LDS figures jumped ship to join SD, which appears poised to emerge as the main left-of-center party, well ahead of Zares and a much-diminished LDS. Although the Social Democrats were originally a post-Communist party, they favor the sale of state-owned enterprises, albeit in a more limited fashion and at a slower pace than SDS.

Meanwhile, the nationalist Slovenian National Party (SNS), which stands to the right of the government, expects to build upon its strong showing in last year's presidential election. However, SNS could lose support to Lipa, a breakaway populist party established by earlier this year by three former SNS deputies.

Although inflation has been at times the highest in the Euro zone - Slovenia adopted the Euro as its currency in 2007 - the country's economy has otherwise performed well under Janša's tenure, registering solid growth, the lowest unemployment rate since independence and a budget surplus. However, the election campaign has been dominated since the beginning of this month by allegations that Finnish weapons manufacturer Patria bribed Janša to secure a contract to supply armored personnel carriers to the Slovenian army in 2006. Janša has denied any wrongdoing, but Finnish investigators are probing the allegations, which were originally reported by Finland's state broadcaster YLE.

The scandal has soured relations between Slovenia and Finland (which owns a majority stake in Patria), but it does not appear to have had an impact on the election race back in Slovenia, at least according to the last polls published a week before the event (polls may not be released during the last week of campaigning). However, SDS is unlikely to secure an overall majority, and some polls suggest that two of Janša's allies, SLS and NSi may fall below the four percent threshold and lose all their seats in the National Assembly, which would further complicate the premier's re-election prospects. At least six parties - SDS, SD, Zares, DeSUS, LDS and SNS - are expected to win parliamentary representation in Sunday's vote, and it remains unclear what kind of government would emerge should the center-right parties lose their overall majority.

Kasparov: The Demands of Dictatorial Power

Robert Amsterdam — Fri, 19 Sep 2008 14:43:16 +0000

Garry Kasparov tees off in the Wall Street Journal on Russia's economic crisis:

Dictatorial power demands to expand into every available space. Establishing effective penalties will require great political will, especially in Europe. There Mr. Putin has defenders like Silvio Berlusconi, who boasted last week about how he prevented the EU from levying sanctions against Russia over its actions in Georgia. The Kremlin also has many influential employees, including former EU leaders Gerhardt Schroeder of Germany and Paavo Lipponen of Finland, who both took plum positions with the Russian energy giant Gazprom immediately after leaving office. With their reliable business partners in the West, the Kremlin has opened up a lucrative market for what could be called democracy offsets. In exchange for oil and gas from Russia, they provide democratic credentials and pretend Mr. Putin and Mr. Medvedev are elected officials rather than mafia bosses. Until Russia has a government that is accountable to its citizens, no company or individual will be safe here. The silver lining of the meltdown will be the weeding out of so many of the foreign and domestic profiteers who greedily abetted Mr. Putin's drive to turn Russia into a dictatorship. But there are still many who hope that all will be back to business as usual once the dust settles. Apparently they think the show must go on, even though many of the lead actors have left the stage -- and the theater itself is ablaze.

A Semi-Active Scandinavian ETF Proposal

Mike Havrilla — Sun, 14 Sep 2008 09:58:00 +0000

Top 10 Rated Nordic Companies Nordic Region: Stats for All 116 & Top 40 Companies Nordic Region: Breakdown by Country As evidence of commercial interest in developing an ETF for the Nordic region, Global X Management has recently filed for such a product, based on the FTSE Nordic 30 Index. The Global X filing [...]

North American Palladium Ltd. (PAL) – Mining Their Own Business

QualityStocks — Tue, 09 Sep 2008 11:53:10 +0000

Headquartered in Toronto, Ontario, North American Palladium Ltd. (PAL) is a Canadian producer of palladium. Trading on the American Stock Exchange (AMEX), the company is part of the Industrial Metals and Minerals industry. Their core palladium business is supported by a major contribution from nickel, platinum, gold, and copper byproducts metals. Palladium is one of [...]

Sunday Morning Coffee

Roger Nusbaum — Sun, 24 Aug 2008 12:07:00 +0000

A few stray items.

This week's interview in Barron's was with Byron Wien. There were several interesting nuggets including this comment; ...whenever a category in the Standard & Poor's 500 gets to be more than 20%, you should probably pay attention, because a reversal is probably in store.

This is something I have harped on many times before, not that I claim any originality.

It makes sense to pay attention to sector weightings and pay heed to distortions from the norm. The crew at Bespoke usually has good info on this sort of thing. A sector becoming 30% is a clear warning (energy in the early 80's and tech at the start of this decade) but 20% might be a little less clear. Financials historically have been in the mid teens but had been hovering around 20% for several years before the crisis started.

Looking forward with this, energy seems to be one to watch. It has come up quite a bit this decade as you might imagine. I saw it top out around 16% but now is at 13.75%. If it does get to 20% or so I would be inclined to be underweight no matter what I thought of the fundies.

Another item from Barron's is that apparently the Bank of Japan, as in the central bank, is a public company. Barron's said the ticker in Japan is 8301. I found BNJAF for the five letter designator for US trading but it is not clear that it does actually trade. Both the Yahoo Finance and PinkSheets.com pages for the stock give the impression that there has been no trading for months.

Also the Barron's article says the Japanese government owns 55%, and you need its permission to own the shares. I'm not exactly sure what that means. Additionally the dividend is minuscule and the bank doesn't report earnings.

I am in no way advocating that anyone try to buy the central bank in Japan but I find the existence of shares to be fascinating. Central banks are meant to be independent so why not publicly traded? Central banks can fail. I was recently reminded that the current Federal Reserve is actually the third incarnation of a US central bank.

Buying shares in some central bank that presides over some monster surplus and a wealth fund is intriguing on some level.

One thing about ETFs that I did not get to in the video was that IndexUniverse is reporting that there is a Nordic ETF in the works that will mimic the FTSE Nordic 30 Index. The countries represented will be Sweden, Norway, Finland and Denmark. I might expect a lot of banks and a heavy weight in Vestas Wind (VWDRY).

Banks and Vestas is either right or wrong but all four countries have interesting companies and the effect of owning these countries might get blended away depending on what the fund ultimately looks like.

The picture is from the east end of Molokai near what I believe is mile marker 20. We hung out at a beach right across the street from this house.

The Underwater Lobbyist

Robert Amsterdam — Mon, 18 Aug 2008 15:28:25 +0000

Former Prime Minister of Finland Paavo Lipponen is now an official employee of the Russian government. In my previous post on Gerhard Schroeder and the war, I briefly mentioned Gazprom's hiring of Finland’s former Prime Minister Paavo Lipponen as a "consultant" to Nord Stream (see previous blog post here). Today Kommersant has an interesting article elaborating exactly what Mr. Lipponen will be working on: the underwater environmental permits for the Nord Stream pipeline to pass through Finnish waters. As Grigory Pasko has reported, this is quite a dicey project, and a response from the Nord Stream PR department to this blog can be read here.

Rent-a-Chancellor Stumps the War for Russia

Robert Amsterdam — Mon, 18 Aug 2008 14:46:12 +0000

Given how much we've blogged about Russia's most highly paid lobbyist, the rent-a-chancellor Gerhard Schroeder, it should come as no surprise that he has been one of the most vocal defenders of the Russian invasion of Georgia (though I do wonder if Gazprom's brand new hire of the former prime minister of Finland will be put to work soon). What is frustrating about this is that the Russians have an important position that needs to be expressed, one that I am not without sympathy for, given the disproportionately aggressive demonizing of the country in the American press. Although carelessly executed with zero subtlety or diplomacy and unfortunate violence (and perhaps with the aim of creating a useful enmity for greater domestic powers), what Russia is pursuing in the Caucasus is squarely within their national interests - and that's what countries do when they have power, pursue interests. But the Kremlin has failed to argue this position with any conviction, and in fact appears to doubt its own legitimacy. And that's where Schroeder steps into the mix, ruining whatever chance Moscow had to win over the swing opinion. Like one of those radically annoying liberal grassroots groups, Schroeder excels in the unique of art of repelling even those who agree with him. His stumping of the war is clearly exacerbating the deep, deep rift in the German government (which of course paralyzes the united international response to Russia's action) and puts the credibility of the SPD and Frank-Walter Steinmeier into troubled waters. So far, the reactions to Schroeder's intervention on the invasion issue have been quite sharp:

Schroeder has been adamant in his insistence that Georgia was at fault and the chief protagonist in its recent conflict with Russia. In light of these comments, however, Schroeder, who developed close ties with Moscow during his seven years in office, has come under fire himself, with observers insisting he has a vested interest in EU-Russia relations.

Creating a Seamless Global Portfolio

Richard Shaw — Mon, 30 Jul 2007 16:38:13 +0000

We were asked how a U.S domiciled investor can cover the world on a country basis with no-load, low expense ratio, index funds without creating gaps or unintended overlapping country holdings. That is probably something a lot of people would like to know. This article provides the options. We added the requirement that the [...]