Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: paintbrush who wrote (67893)	11/7/2010 9:14:08 PM
From: pogohere	1 Recommendation Respond to of 218074

Re Japan: "So far, with the notable exception of Greece, major advanced nations haven’t had too much trouble raising the money they need. Japan’s domestic investors have consistently bought its government bonds despite their low yield. Foreign investors have been snapping up U.S. Treasury bonds, which remain the world’s premier safe-haven investment." see: Global Deficits Will Create $4.5 Trillion in New Debt: Hedge Fund Manager (Kyle Bass) Bass said countries trap themselves by heading to a zero interest rate policy (ZIRP), due to avoidance of painful restructuring in the private and public sector, running double fiscal deficits, and piling on debt. "The only way out of that trap is painful restructuring down the road or stay in the trap the way Japan has for twenty years until demographics change, which is happening with them right now," Bass said. For that reason, he believes Japan will likely face debt crisis within two years. "Countries typically default if sovereign debt is 70 percent of their GDP," Bass said. The current public debt to GDP ratios are as follows: Japan 190 percent Greece 113 percent United States 53 percent cnbc.com and : The Case for a Sovereign Debt Default in Japan - Kyle Bass Bass describes the case against Japan in the video clip posted below. Here are some highlights: Japan’s weakening fiscal situation 1. 40 trillion yen in tax receipts is the same level from 1985 in nominal terms. 2. Expenses have increased 200% since 1985 to 97 trillion yen. 3. 1 quadrillion yen in total credit market debt = 190% of GDP (U.S. is at 113% of GDP). 4. By themselves, interest expense, debt service, and social security are greater than revenue. Japan will be forced to restructure within 1 to 2 years 1. Japan debt largely self-funded by corporate and personal savings generated from trade surplus. 2. Personal savings rate now zero and corporate savings rate has fallen to 4%. 3. Japanese population is now in secular decline, working age population peaked last year. 4. Without more people entering the system (“the Ponzi scheme”), Japan will be forced to look for external funding and pay 100-200 extra basis points. 5. Every 100 basis points costs Japan 25% of revenue for debt service. Bass notes that this all means Japan has reached the point of permanent structural deficit – debt grows exponentially, revenue growth stays linear, and servicing debt becomes impossible. The impact of a pop in Japanese sovereign debt will be quite dramatic. Japanese debt is the one place Japanese investors have never lost money. With real estate down 70% and the stock market down 75% (from their respective peaks?), everyone is crowded into Japanese debt. (more) seekingalpha.com

To: paintbrush who wrote (67893)	11/8/2010 12:35:51 AM
From: elmatador	Respond to of 218074

After Greece: China ‘Available’ to Help Portugal’s Crisis Efforts, Hu Says November 07, 2010, 7:15 PM EST Nov. 8 (Bloomberg) -- China said it’s “available” to support Portugal’s efforts to come through the economic crisis that has prompted its borrowing costs to spiral this year. “We are available to support, through concrete measures, Portuguese efforts to face the impacts caused by the international financial crisis, and deepen and broaden our economic and commercial cooperation,” Chinese President Hu Jintao said in Lisbon yesterday. He didn’t specify what such measures might be. The Chinese president yesterday ended a two-day visit to Portugal and did not mention Portuguese bonds or debt in public comments. The extra yield investors demand to hold Portuguese debt rather than German bunds widened last week even after the minority government on Nov. 3 passed a budget plan that features wage and spending reductions to trim the euro region’s fourth- largest deficit from 9.3 percent of 2009 gross domestic product. China “has always given positive and favorable consideration” to bond purchases when making state visits, Vice Foreign Minister Fu Ying said on Oct. 28. Portuguese Economy Minister Jose Vieira da Silva on Nov. 6 said that the existence of institutions and countries that are interested in diversifying their portfolio with Portugal’s bonds is “a positive factor.” “If we are able to place that debt with a logic of greater diversification and greater equilibrium among the various financial agents, that is a factor of greater security not only for the placement of that debt, but also for its management,” Vieira da Silva said. Bond Sales Portugal plans to sell as much as 1.25 billion euros ($1.75 billion) of bonds due 2016 and 2020 on Nov. 10. The yield at a Nov. 3 auction of 1.03 billion euros of three- and 12-month bills climbed and demand declined for the securities. Portugal paid 3.26 percent for the 12-month debt, up from 2.886 percent on Oct. 6. The spread on Portugal’s 10-year bonds over German bunds was at 410 basis points on Nov. 5. The spread soared to a euro- era record of 441 basis points on Sept. 28. German calls for bondholders to share the burden of any future debt restructuring have also made investors wary of lending to Europe’s most- indebted nations. Portugal’s planned spending cuts for next year are set to be the biggest since at least 1978, according to EU statistics office Eurostat, as the government tries to convince investors it can narrow its budget deficit and curb debt. The austerity measures may hurt Portugal’s economic growth, which has averaged less than 1 percent a year in the past decade. Exports The government is counting on exports such as paper and wood products to support growth. The budget forecasts economic growth of 0.2 percent next year, slower than this year’s estimated 1.3 percent pace. “The Chinese government encourages competitive companies to invest and operate in Portugal, and we welcome Portuguese companies to participate energetically in the competition in the Chinese market,” Hu said yesterday. “We will do everything so that trade between China and Portugal can double by 2015.” Portugal’s budget gap last year was the highest in the euro region after Ireland, Greece and Spain. It aims to lower the shortfall to 7.3 percent this year, 4.6 percent in 2011 and meet the EU’s 3 percent limit in 2012. The Finance Ministry forecasts Portugal’s public debt as percentage of GDP will increase to 86.6 percent in 2011 from about 82.1 percent this year. Finance Minister Fernando Teixeira dos Santos said on Oct. 16 that he expects the ratio to “stabilize” in 2012 and to start declining in 2013. Portugal’s budget plan calls for lowering the wage bill 5 percent for public-sector workers earning more than 1,500 euros a month, freezing public hiring and raising the value-added tax by 2 percentage points to 23 percent. The governing Socialists have agreed to reconsider some public-works projects including public-private partnerships to overcome the opposition of the Social Democratic Party to the budget.