South America Boom Backfiring With Complacency From Commodities

Venture capitalist Arnon Kohavi arrived in Chile last year aiming to raise $40 million for technology startup investments. Six months later, the Israeli decamped to Singapore, saying the world’s largest copper producer was too addicted to its commodity wealth.

Kohavi’s tale may serve as a warning to the rest of South America, which has done little to reduce its dependence on raw materials during the past decade’s boom, said Colombia’s Mining Minister Mauricio Cardenas. The failure to boost productivity, and tackle longstanding gaps in education and infrastructure, make the region more vulnerable to a global slowdown should demand for its soy, copper and iron-ore exports decline.

“There’s no doubt that with the growth of China, we’ve seen a re-commoditization of Latin America,” said Cardenas, an economist who previously headed the Latin America program at the Brookings Institution in Washington. “Given the region’s track record managing past booms, it’s clear the pessimists have the upper hand in presuming the current one will be misspent.”

As raw-material prices nearly tripled from 2000 to 2010, Latin America’s share of global merchandise trade barely budged at 5.7 percent, and service exports -- a bellwether of economic development -- fell to 3.4 percent from 3.9 percent. It’s easier to do business in Pakistan or Albania than in Brazil, according to the World Bank’s 2012 competitiveness study, which ranked the region’s biggest economy No. 126 out of 183 countries. Across the region, productivity has advanced more slowly than in Asia.

Slipping Forecasts

Now forecasts for raw-material prices are slipping, which means the region’s economies aren’t likely to sustain the high growth seen during the past five years, said Guillermo Calvo, an economist at Columbia University in New York.

Deutsche Bank AG estimates copper prices will average $6,900 a metric ton in the first quarter, down 8.4 percent from the last three months of 2011, as gold declines 4.9 percent to $1,600 an ounce, silver dips 5.8 percent to $30 an ounce and aluminum drops 10 percent to $1,900 a ton. Frankfurt-based Deutsche Bank was the No. 2 precious-metals forecaster in the eight consecutive quarters ended on Dec. 31, 2011, according to Bloomberg Rankings.

‘Sell Into Strength’

http://www.bloomberg.com/news/2012-01-16/booming-south-america-backfires-as-chile-shows-complacency-on-commodities.html

Wall Street rises but off highs as Citi sinks

Stocks advanced on Tuesday, pushing the S&P 500 to its highest since early August, but sharply pared gains late in the session as Citigroup's steep drop in profit gave investors a reason to unload bank shares.

The financial sector, which has outperformed the broader market so far this year, took a hit on investors' disappointment with Citigroup Inc's (C.N)earnings.

Citigroup's stock slid 8.1 percent to $28.25 after it reported weaker-than-expected earnings. The KBW Banks Index lost 1.4 percent. Through Friday, the KBW Banks Index was up about 10 percent for the year, while the S&P 500 was about 2 percent higher.

The banks' sell-off poured cold water on a rally that drove the S&P 500 through 1,300 for the first time since August.

Stocks rallied about 1 percent across the board after data showed China's economic growth was better than expected, even though it expanded at the weakest pace in 2-1/2 years.

"The better numbers out of China this morning got the market off to a better start, but then there wasn't much follow-through, and you have had what looked to be from JPMorgan and Citigroup not very good-looking earnings," said Eric Kuby, chief investment officer of North Star Investment Management Corp., in Chicago.

http://www.reuters.com/article/2012/01/17/us-markets-stocks-idUSTRE7AO0B420120117

Disaster in Italy could send company stock through crucial chart points

[Note: Many thanks to Boot Camper Paul Ho for bringing this chart situation to my attenition.]

I am sure everyone is now familiar with the disaster off the coast of Italy by a Carnival ship — and the despicable safety procedures and possible malfeasance of the crew involved. The company will lose from this disaster — in terms of direct financial liability, bookings and reputation.

Interestingly, the charts for $CCL are also a potential disaster. The weekly chart displays a possible 2-year H&S top pattern. A close below 28.00 would complete this pattern and establish a target of 18.00. [Note: semi-log charts are used for perspective only.]

http://peterlbrandt.com/