12/20/11 In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on four major decisions that could have impact on markets this week:
Around our financial planning services and wealth management firm this week we are watching these four issues:
1. First, key data points for the week. On Tuesday, the Commerce Department reports on November housing starts. Wednesday has more of an “international flavor,” with Bank of Japan officials concluding a policy meeting and a second-stage of parliamentary elections on tap for Egypt. On Thursday, the U.S. issues its final reading of third-quarter gross domestic product and posts numbers on jobless claims for the latest week. Ending the week, the government reports on durable-goods orders, new home sales and personal spending.
2. Possible oil embargo pressure is “stepping up” on Iran. The Obama administration, its European allies and key Arab states are intensifying discussions on how to maintain stability in the global energy markets in a possible precursor to a formal embargo of Iran’s oil exports and its central bank. Representatives from 11 countries involved in the “financial war” against Tehran will meet on Tuesday in Rome to begin discussing options brought about by escalating fears of Iran’s nuclear program. Iran last year was the second-largest exporter among OPEC nations, selling about 2.6 million barrels of crude o
il each day. Projections are that an embargo would cut off about half of Tehran’s total oil exports and force “discount selling” to those nations that would continue to purchase it, mainly China. The key question is: “Can the remainder of OPEC make up the capacity difference on a consistent basis?”
3. In a troubling sign for European banks, investors in Greece, Portugal and Italy are asking bankers and lawyers for ways to protect their money in the case of a failure of euro-zone banks or a breakup of the euro itself. Southern European investors, fearful of the health of their banks and the future of the euro, are increasingly stashing their wealth in currencies, real estate and investment products outside the euro zone. As one of many examples, bankers say Italians are converting their euros into Swiss francs and depositing them in Switzerland for safekeeping. Safe-deposit boxes are virtually sold out. One Naples-based lawyer specializing in trusts has been busy helping clients deposit their wealth in new trusts established in Singapore, the Bahamas and the Island of Jersey in the English Channel.
4. And speaking of Europe, governments are devising unorthodox ways to prop up their banks in an effort to blunt the cost and embarrassment of fresh taxpayer-funded bailouts. In Italy, the government is encouraging banks to buy public properties that the banks then can use to borrow money. As part of a broader deficit-reduction program in Portugal, the government essentially is borrowing money from bank pension funds and could use some of the funds to help state-owned companies repay bank loans. Governments in Germany and Spain also are using unorthodox measures to support their ailing banks. Most of these “back door” maneuvers are limited in scope and simply do not address the broader bank recapitalization issue.
Please call or email me if you have any questions or concerns about these issues. Myself or anyone on our team would be delighted to talk with you.
Senior Vice President
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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