EUCOM Economic Analysis - Part I

[davidbfpo]

Firn you referred and I cite in part:

His story has been repeated in recent times all over the developed world, where immigrants support their relatives living still in developing countries.

This economic aspect of 'kith & kin' has pooped up before; there is a thread on the population and political aspects of 'kith & kin' on:http://council.smallwarsjournal.com/...ead.php?t=8829

In the latest issue of the RUSI Journal Dr. Jonathan Eyal, a political analyst, has an article 'The EU's Alternative Futures' amidst the generally grim prose was this surprise:

..the better educated from the poor EU states will migrate outside Europe altogether; the flow has already started from Spain to Latin America and from Portugal to its former colonies of Brazil, Angola and Mozambique.

The Portuguese aspect puzzled me, having visited a 'new town' built after 1974 in northern Portugal to accommodate the refugees from Angola and Mozambique. Given the manner in which those refugees left, it is noteworthy others are now prepared to return.

[Firn]

Davidfpo: Thanks for the information. Diversity is the norm even when it comes to other Indoeuropean languages, it is a bit sad that the software can not handle that.

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The kith & kin aspect is very interesting indeed. I might add that the article stated that the foreign outflow per capita is higher in the poor South then in the richer North. At first this seems surprising but perhaps it might be a sign that many in the North set up roots and family, deciding to stay while those working in the South (agriculture etc) just sleep and work there planning to set up their family elsewhere.

[Surferbeetle]

Hollande steals poll march on Sarkozy, By Tom Burgis, Hugh Carnegy and James Boxell in Paris and Scheherazade Daneshkhu in Tulle, April 22, 2012 8:11 pm, Financial Times, www.ft.com

Following a bitter campaign marked by opposing visions of how to steer France’s debt-laden economy through the eurozone crisis, the Socialist challenger won 27.5 per cent of the votes, according to a projection based on partial results published by the interior ministry on Sunday evening.

The centre-right Mr Sarkozy, who is seeking to avoid adding his name to the string of European incumbents swept aside since the start of the sovereign debt crisis, secured 26.6 per cent support.

But the shock of the night was a record 19.9 per cent performance by the National Front’s Marine Le Pen, who outdid pollsters’ predictions after capitalising on widespread French discontent with the mainstream poilitical elite.

Ms Le Pen has already drawn Mr Sarkozy to the right with her broadsides against immigration. Like her counterpart on the far left, she has also tapped a lack of enthusiasm for the two leading contenders, whom she dubbed “Siamese twins”.

She comfortably saw off a challenge for third place from Jean-Luc Mélenchon of the Left Front. His oratory and anger drew impassioned crowds to his rallies. His 11.7 per cent was lower than many of his supporters had expected but they will still hope he can pull the less radical Mr Hollande to the left in exchange for second-round support.

The 8.5 per cent garnered by François Bayrou, a centrist, could yet make him the kingmaker.

Runoff election is May 6th. The CAC 40 will be of interest tomorrow...meanwhile, in Spain...

Spain's Lost Generation Looks Abroad, By Ben Sills on March 29, 2012, Bloomberg Businessweek

Artells worked part-time to support herself through her undergraduate degree and finished her doctoral thesis last July. Her options in Spain consisted of a job as a lab technician or a sales representative for a drug or chemical producer, she says. Instead, she got the university post in southern France studying the toxicity of nano-size particles of titanium and cerium. She earns more than she would for a similar position in Spain, if she could even find one. “I don’t know what happened,” Artells says. “I worked. I went to university. I studied. And now if you want a job, you have to take something totally unrelated to your qualifications, or you have to go abroad. For what have they trained us so much?”

Spain’s mistake, says Rafael Doménech, chief economist for developed countries at BBVA Research and a former adviser to Zapatero, was to encourage the training of researchers before the economy was ready to put them to work. “That strategy was not well designed,” he says. Spain’s economy has less capacity to employ the most-skilled because of its continued high proportion of small companies, despite the rise of a few giants like Telefónica (TEF) and Banco Santander (STD). About 28 percent of jobs in Spain were at companies with fewer than 20 workers in 2006, according to BBVA. These companies generally operate in lower-tech industries. For Greece and Portugal, the same figure was more than 30 percent. For Germany it was only 14 percent. Spain impeded the growth of its companies with rigid labor rules and costly regulation during the boom years. The country ranks 44th on the World Bank’s ease of doing business index, between Puerto Rico and Rwanda.

Prime Minister Rajoy has little time to get the economy moving with his plan to make labor more flexible, overhaul the public sector, and turn Spain into a viable member of the euro zone, says Megan Greene, head of European economics at Roubini Global Economics. “You don’t really get a second shot,” she says. “It’s a long road. It’s questionable whether Spain can do it.” One bright spot: Exports have risen 12 percent since the crisis began in 2008.

El Rey pide perdón por su viaje de caza en Botsuana: 'Lo siento mucho. No volverá a ocurrir', Ana Romero | Agencias | Madrid, Actualizado miércoles 18/04/2012 13:55 horas, El Mundo

"Agradezco al equipo médico y a la clínica cómo me ha tratado. Estoy deseando retomar mis obligaciones. Lo siento mucho. Me he equivocado y no volverá a ocurrir. Gracias a todos vosotros por haber estado aquí durante tanto tiempo", ha dicho un apesadumbrado Rey ante la cámara que grababa su salida de la habitación.

Se había especulado mucho sobre si el Rey haría alguna declaración o no, a tenor de las críticas recibidas y que han ido en aumento. De hecho, la portavoz del PSOE en el Congreso, Soraya Rodríguez, reclamó ayer directamente al Rey que hiciera alguna declaración pública sobre su polémico viaje a Botsuana, dado que está al tanto del "malestar, la incomprensión y la indignación" que ha generado en una parte de la sociedad española, en una semana muy delicada para España desde el punto de vista económico.

[Firn]

Terrible economic news from Spain

En trminos anuales, el PIB ya est en terreno negativo (-0,5%). Segn los servicios de estudios privados, esa comparacin anual llegar a superar el -2% a lo largo de 2012. Es la segunda recesin que sufre la economa espaola en poco ms de tres aos, aunque en 2009, despus del colapso internacional, la cada fue ms pronunciada (-3,7%).

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Spain needs all but more austerity and is as a state completely different case from Greece as the former was always fiscally very conserative and had a very low public debt (although high private one).

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By the way, I managed to buy stock in Repsol a bit over a week ago only to open up the homepage of El Pais with dear Kirchner trumpeting out the nationalicaton of YPF. Arguably the best timing ever, even if the stock price already had in my view priced in that state robbery.

La battalla que Argentina s gan

Clearly I did not expect this man,Axel Kiciloff to have such an influence on Kirchner which ironically profited personally along with her former husband by the privatisation of YPF. Then again I should not have invested with such exposure to persons cooking the books.

Good luck with foreign investment after things like that

El documento describe con detalle los momentos de tensión que rodearon la toma de control de la compañía por parte de las autoridades argentinas, el pasado lunes. “Mientras estaba todavía hablando la presidenta [Fernández de] Kirchner, presentando la Ley de Utilidad Pública, el ministro [Julio] de Vido, el viceministro [Axel] Kicillof y otras personalidades acompañadas de agentes de seguridad armados, penetraron por la fuerza en la sede bonaerense de YPF y expulsaron, con violencia física y amenazas, a los 15 ejecutivos españoles presentes, tras concederles solamente cinco minutos para recoger sus pertenencias personales”

Antes del asalto, agrega la nota, “las fuerzas de seguridad había cortado todas las comunicaciones de la sede de YPF por teléfono, móviles o Internet. Posteriormente, algunos de los expulsados fueron buscados por las fuerzas de seguridad y duramente interrogados en el intento de encontrar argumentos contra Repsol. Los españoles y sus familias, visiblemente conmocionados y asustados, se refugiaron en la residencia del director de Repsol para Argentina hasta su repatriación”..

Not only they carry not the biggest stick, they even speak loudly and insult. This is of course not going down well in Spain but neither in the US or the EU. I just can not believe the sheer chutzpah under the personal lead of a minister and a vice-minister...

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A very interesting piece:

Fed watch

All of this is one more reason to prefer the NGDP path target promoted by Scott Sumner and his merry Market Monetarists. It might prove difficult in practice to target inflation without paying some especial attention to wage growth. But a central bank can target the path of aggregate expenditure without playing favorites about who pays what to whom. Simple neutrality by the central bank in the contest between capital and labor would be a huge improvement over the status quo.

Note that even if the central bank is no longer playing "favorites", monetary policy would still have a distributional impact. For example, reverting to the pre-recession path of nominal spending would likely entail a temporarily higher rate of inflation than currently expected. And higher than expected inflation will indeed create some winners and losers:

However, the biggest losers are creditors who are almost by definition wealthy, since people owe them money. If a creditor has lent out $100 million at 2 percent interest (e.g. buying a 10-year U.S. or German government bond) and the inflation rate rises from 2 percent to 4 percent, this creditor has lost an amount equal to 100 percent of his expected income or 2 percent of his wealth. This is a far larger loss than any worker could experience as a result of this increase in the inflation rate.

Who would be the winners?

Also, most workers are debtors to some extent. They are likely to have mortgage debt, credit care debt, student loan debt and or car debt. A higher rate of inflation means that they can repay this debt in money that is worth less than the money they borrowed.

And once again, we get to the same place - changing monetary policy at this juncture would likely have significant impacts on the distribution of income and wealth. And an unwillingness to alter this current distribution is likely another reason we would not expect the Federal Reserve to change their basic policy framework away from the current 2 percent inflation target regime.

[Surferbeetle]

Firn,

We will have to keep on eye on how the nationalization of Respol plays out. Have you run a pre-nationalization analysis that you would be willing to share?

I have been looking at the Euro financial sector....low, low prices...but for a reason

Speaking of banks, here is some interesting work on the globalization and interconnectedness of finance:

Bloomberg: “Money, Power & Wall Street” “Takes No Prisoners”, April 23, 2012, 1:45 pm ET by Azmat Khan

FRONTLINE’s four-hour epic on the global financial crisis — the first two hours of which air tomorrow evening — goes inside the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities and the unprecedented and uneasy partnership between government leaders and titans of finance.

“Money, Power and Wall Street is demanding — this isn’t Finance for Dummies,” Evans writes in the review. “But it’s a compact and thorough lesson.”

Episode 1 and Episode 2 are posted at the PBS Frontline Money, Power, and Wall Street website

[Firn]

Firn,

We will have to keep on eye on how the nationalization of Respol plays out. Have you run a pre-nationalization analysis that you would be willing to share?

I do this stuff with small notes and mental number crunching, however I made four key prediction about YPF which all were dead wrong:

1) I believed that Kirchner&Co had learned from the poor performance of their nationalized Aerolneas Argentinas. If not:

2) Price controls and the weak peso created their negative energy balance, by reducing the incentives to invest and making imports more expensive, not Repsol per se. If not:

3) I assumed that they would pay for the shares like they did with Aerolinas. If not:

4) At least it would be only roughly 25% of YPF gone. It never crossed my mind that they would just take the shares from Repsol, leaving the other shareholders unharmed.

So it pretty much went perfectly wrong and the safety margin has completely gone

[Surferbeetle]

...is pretty tough. The market rewards and punishes and i have been on both sides of this type of education

I do this stuff with small notes and mental number crunching, however I made four key prediction about YPF which all were dead wrong:

1) I believed that Kirchner&Co had learned from the poor performance of their nationalized Aerolneas Argentinas. If not:

2) Price controls and the weak peso created their negative energy balance, by reducing the incentives to invest and making imports more expensive, not Repsol per se. If not:

3) I assumed that they would pay for the shares like they did with Aerolinas. If not:

4) At least it would be only roughly 25% of YPF gone. It never crossed my mind that they would just take the shares from Repsol, leaving the other shareholders unharmed.

So it pretty much went perfectly wrong and the safety margin has completely gone

Thanks for sharing your investment thesis, good learning/practice for how to develop investment them.

The Spanish company Repsol YPF SA (company website) is familiar to me via my travels and through their sponsorship of "Doctor" Valentino Rossi (while puttering around on my motorcycles i dream ) and I am aware that Repsol took over Argentina's YPF in 1999; so let's see if we can add some background to your thesis via a quick (free time is tight) internet drive-by?

Oil Overview

There are apparently eight oil refineries in Argentina with a capacity of 625,165 barrels per day. With today's FT's report of Brent at $119.83 USD, and wrongly assuming 100% operational output, that works out to potential daily sales of $74,913.521.95 USD before labor, material, equipment, overhead, and profit costs. Repsol-YPF owns three of these refineries (La Plata, Luja'n de Cuyo, and Plaza Huincul - startup date 1919) with the potential for 331,690 barrels per day and potential daily sales (not including costs) of $39,746.412.70 USD. 'Proved' Argentinian oil reserves are estimated at 2.5 billion barrels in size, while shale oil reserves are estimated at an additional 150 million barrels and there is a report of a discovery called Vaca Muerta, which may hold 927 million barrels. This information is of interest when attempting to forecast future YPF revenues due to oil. With the 100 day moving average currently at $116.40, and the 200 day moving average at $113.60, Javier Blas of the FT forecasts that between seasonal maintenance of refineries, price differences between crude oil grades, and futures contracts any falls in oil prices will be short lived.

• Wikipedia - Argentina's Refineries http://en.wikipedia.org/wiki/List_of...ries#Argentina

• EIA - Argentina Country Study http://205.254.135.7/countries/cab.cfm?fips=AR

• Oil & Gas Journal (OGJ) - http://www.ogj.com/index.html

• FT Commodities - http://www.ft.com/intl/markets/commodities

• Support for oil prices weakens – for now, By Javier Blas, Commodities Editor, April 20, 2012 10:29 am, Financial Times, www.ft.com

Natural Gas Overview

Argentina's substantial natural gas reserves are estimated at 13.4 trillion cubic feet (Tcf) and 774 Tcf of shale gas. YPF competes with Total Austral, CNOOC-affiliate Pan American Energy, Petrobras (Brazil), Pluspetrol (Argentina), Tecpetrol (Argentina), and Apache Energy (U.S.) for natural gas.

• EIA - Argentina Country Study http://205.254.135.7/countries/cab.cfm?fips=AR

Political Risk Overview

Ms Fernandez' appears to be interested in achieving national self-sufficiency in oil and gas production, and it was claimed that Repsol YPF SA did not reinvest enough of its YPF profits to boost Argentinian production. By circumventing rule of law issues via nationalization she invites an international backlash...whose scope, breadth, and composition remains to be seen and which could potentially harm a weak nation still recovering from a financial meltdown in 2003.

The Expropriation Law will apparently be used to determine how to compensate Repsol for the loss of it's 51% stake in YPF.

• Argentina risk: Alert - YPF's expropriation fuels investor concerns, April 18th 2012, Economist Intelligence Unit, www.eiu.com

• Repsol weighs strategy after loss of YPF, By Tracy Rucinski, Fri, Apr 27 06:25 AM EDT, Reuters

• Wikipedia - Argentine economic crisis (1999–2002) http://en.wikipedia.org/wiki/Argenti...sis_(1999–2002)

Technical Overview

Repsol [ REP.MC (Madrid), REP.BA (Buenos Aires) ] stock data in Euro (and as of 27 April 2012) includes a 52 week high of 24.23, 52 week low of 13.92, April 27th 2012 close at 14.70, a tangible book value of 12.90, a 7.5% dividend paid on January 10th 2012, and a beta of 0.9876 as compared to the IBEX 35 Composite Index.

I usually download stock data via google and interrogate the heck out of it via excel...however, no joy with google (i can only find data for the ADR) and i am presently unaware of how to ask the FT interactive chart to reveal the 15 day, 50 day, 100 day, 200 day, and 252 day moving average for share price and volumes....hints would be appreciated.

• Repsol, Home > Shareholders and investors > Financial information > Repsol on the stock exchange > Interactive chart, http://www.repsol.com/es_en/corporac...o/default.aspx

[Surferbeetle]

Oil Overview

There are apparently eight oil refineries in Argentina with a capacity of 625,165 barrels per day. With today's FT's report of Brent at $119.83 USD, and wrongly assuming 100% operational output, that works out to potential daily sales of $74,913.521.95 USD before labor, material, equipment, overhead, and profit costs. Repsol-YPF owns three of these refineries (La Plata, Luja'n de Cuyo, and Plaza Huincul - startup date 1919) with the potential for 331,690 barrels per day and potential daily sales (not including costs) of $39,746.412.70 USD. 'Proved' Argentinian oil reserves are estimated at 2.5 billion barrels in size, while shale oil reserves are estimated at an additional 150 million barrels and there is a report of a discovery called Vaca Muerta, which may hold 927 million barrels. This information is of interest when attempting to forecast future YPF revenues due to oil. With the 100 day moving average currently at $116.40, and the 200 day moving average at $113.60, Javier Blas of the FT forecasts that between seasonal maintenance of refineries, price differences between crude oil grades, and futures contracts any falls in oil prices will be short lived.

• Wikipedia - Argentina's Refineries http://en.wikipedia.org/wiki/List_of...ries#Argentina

• EIA - Argentina Country Study http://205.254.135.7/countries/cab.cfm?fips=AR

• Oil & Gas Journal (OGJ) - http://www.ogj.com/index.html

• FT Commodities - http://www.ft.com/intl/markets/commodities

• Support for oil prices weakens – for now, By Javier Blas, Commodities Editor, April 20, 2012 10:29 am, Financial Times, www.ft.com

Ok...the value of information is what one pays for it, i suppose.

Was not as clear as i could have been and i have made a number of mistakes on my rough order of magnitude cost estimate. By not explicitly accounting for the value/benefits of refined products versus the costs of labor, material, equipment, overhead, and profit my estimated values may be substantially off and my shortcut may not be valid.

• Oil sells for $119.83 USD per barrel of Brent, unrefined. Argentina produces Escalante, Medanito, and Rincon grades which will vary in price from Brent.

• Refining a barrel of oil produces a number of products which ascend the value chain and are higher in price than oil. With 42 gallons of oil in a 'barrel of oil' (and depending upon the grade), a barrel of oil will yield ~19 gallons of gasoline, ~10 gallons of diesel, ~ 4 gallons of jet fuel/kerosene, etc.

References

• Wikipedia - List of crude oil products, http://en.wikipedia.org/wiki/List_of_crude_oil_products

• How Many Gallons of Gasoline in a Barrel of Oil?, Thursday, February 08, 2007, Fat Knowledge For Your Fat Brain, http://fatknowledge.blogspot.com/200...in-barrel.html

• What Fuels Are Made From Crude Oil? EIA, http://www.eia.gov/kids/energy.cfm?p...efining-basics

• Cost Estimates (Rough Order of Magnitude vs Detailed), UT-Austin, http://www.utexas.edu/pmcs/services/cost.html

[Surferbeetle]

Platts Methodology and Specifications Guide, Crude Oil (latest update: April 2012)

http://www.platts.com/IM.Platts.Cont...deoilspecs.pdf

Platts assesses latin american crude grades and publishes the differentials to their benchmark. Most transactions are concluded on a differential to Wti.

The rollover of the Wti benchmark is done on the first day after the 25th day of every month. Platts uses Wti 2nd line for all latin crude assessments.

All latin crude oil assessments reflect market-on-close (mOc) values at 3:15 Pm eastern time. An explanation of the mOc methodology can be found elsewhere in this document. Please check the table of contents (also see related specifications document titled “americas crude oil specifications guidelines”).

Price assessments for latin crudes are basis FOB the loading terminal, and do not include top-off charges. The minimum cargo volume is 350,000 bbl. The assessment window for all latin american crudes is 15-45 days forward from date of publication.

State of plays: Argentina, Repsol & the rise of energy nationalism, Featuring Richard Swann, Robert Perkins, and William Powell, April 27, 2012 09:30:00 EST (14:27 mins), Platts, http://www.platts.com/videos/2012/apr/argentinarepsol

The Argetinian goverment's decision to re-nationalize the Repsol-owned YPF has exposed the ongoing battle between private and national oil & gas companies.Richard Swann and Robert Perkins and William Powell discuss the significance of the "Dead Cow" shale formation in the forced takeover; the questions raised over global investment opportunities for IOCs; China's ongoing acquisition of foreign energy assets; & the global trends in energy nationalisation.

[Surferbeetle]

En un masivo acto, Cristina reivindic el rol del Estado y agradeci a la oposicin por el apoyo a YPF, En el Estadio de Vlez, Informe de Pablo Jimnez, Viernes 27 de Abril de 2012, Ambito.com (Argentina)

Ante un estadio repleto de militantes, Cristina de Kirchner realiz un fuerte llamado a la unidad, celebr la llegada de los jvenes a la poltica y agradeci a las fuerzas de la oposicin por acompaar el proyecto de ley sobre la expropiacin de YPF. De esta manera, reivindic el rol del Estado y argument que la nacionalizacin de la petrolera "es recuperar la direccin nacional".

Durante los 40 minutos de micrfono, donde se permiti algunos guios a los jvenes, Cristina realiz un repaso por los logros de gestin desde que el kirchnerismo lleg al poder en 2003 realzando el rol del Estado. Al mismo tiempo asegur que exigir nuevas formas de intervencin, nuevas formas de participacin del Estado junto al sector privado. "El Estado no puede declinar las responsabilidades polticas, sociales, econmicas e institucionales en la conduccin de un pas", dijo.

A maior parte da populao argentina apoia estatizao da YPF, O Globo | ltima atualizao: 6 dias atrs (Brazil)

Seis em cada dez argentinos apoiam a estatizao da YPF anunciado pelo governo, de acordo com a ltima pesquisa nacional Poliarquia realizada por consultores para o jornal portenho La Nacion. O estudo mostra, no entanto, que o consenso sobre a medida acompanhada por uma forte crtica da poltica energtica argentina: 44% dos inquiridos considerou que a presidente Cristina Kirchner a principal responsvel pelo declnio da produo hidrocarbonetos, outros 36% culpam o setor privado.

A anlise detalhada dos dados revela tambm uma elevada correspondncia entre a opinio dos entrevistados sobre a expropriao e identificao poltica: quase nove em cada dez argentinos, que reconheceu ter votado para Cristina Kirchner nas eleies concordou com a iniciativa do governo. Entre aqueles com uma imagem positiva da presidente, a adeso foi maior: 92%. Leitura reversa revela um aviso aos lderes adversrios que nos ltimos dias foram a favor a expropriao: metade dos entrevistados que votaram neles em 2011 por rejeitar esse tipo de medida.

Expropriao da YPF mais um retrato das duas Amricas Latinas, O Globo | ltima atualizao: 19/04/2012 08h46

RIO A proposta de expropriao da petrolfera espanhola Repsol-YPF pelo governo da Argentina mostra-se cada vez mais uma tentativa derradeira da presidente Cristina Kirchner de abafar a avalanche de denncias contra seu governo e ofuscar as crescentes dificuldades econmicas do pas. Mas a iniciativa que, segundo a Reuters, deve ser a maior nacionalizao na rea de recursos naturais desde o episdio da russa Yukos, uma dcada atrs segue tambm uma tendncia de resgate do nacionalismo em pases latino-americanos cujas economias so baseadas em commodities e conduzidas por populistas como Hugo Chvez, na Venezuela, e Evo Morales, na Bolvia, ambos aliados prximos de Cristina.

Lamenta Caldern expropiacin de YPF e insta a Argentina a rectificar, NEGOCIOS 16 ABRIL 2012 - 6:58PM SILVIA ARELLANO, ENVIADA, Milenio (Mexico)

El presidente Felipe Caldern lament la decisin de su homloga de Argentina, Cristina Fernndez, de expropiar YPF, filial de Repsol, nadie en sus cinco sentidos invierte en un pas que expropia las inversiones.

Indic que aunque desconoce los detalles, ley una nota en donde el argumento de Fernndez es que Repsol estaba produciendo menos petrleo, pero aclar: en un mundo con los precios de petrleo que tenemos, s t obligas a una empresa a poner precios ms bajos de los del mercado, pues estas matando los incentivos para que esa empresa produzca ms, entonces no hay que ir muy lejos por entender que esta pasando con esas inversiones va a ser una medida que le va hacer mucho dao a Argentina desgraciadamente, y lo lamento muchsimo.

[Surferbeetle]

Let's kick around the Repsol YPF SA Estimates a bit more, and see if we can tighten the shot group regarding how much profit YPF generates for Repsol-YPF.

• Platt's estimates that YPF generates 25% of Respsol YPF SA's Operating Income.

• I will make the bold assumption that this translates directly to 25% of Respsol YPF SA's Profit

• The EUR:USD exchange rate is given as 1.323 by the FT today

• The Repsol YPF SA Income Statement ending Dec 31 2011 reports Net Income for the year as 2,193,000,000 Euro. Multiplying by 1.323 EUR:USD, this works out to $2,901,339,000 USD

• 25% of $2,901,339,000 USD results in a yearly profit of $725,334,750 or a daily profit of $1,987,218

• The 25% figure used was taken from statement given at 1:42 minutes in - State of plays: Argentina, Repsol & the rise of energy nationalism, Featuring Richard Swann, Robert Perkins, and William Powell, April 27, 2012 09:30:00 EST (14:27 mins), Platts, http://www.platts.com/videos/2012/apr/argentinarepsol

• Repsol YPF SA Net Income can be found here - Home > Shareholders and investors > Financial information > Financial reports, http://www.repsol.com/es_en/corporac...s_financieros/

• My previously given rough order of magnitude estimate for YPF's Daily Operating Revenue was $39,746.413 USD

• If 7% is retained as profit this works out to a yearly profit of $1,015,520,844 or a daily profit of $2,782,249

• The Economist estimates YPF's yearly profit at $1,300,000,000, and this works out to a daily profit of $3,561,644

• Argentina’s energy industry Fill ’er up, Apr 21st 2012 | BUENOS AIRES | from the print edition, The Economist, http://www.economist.com/node/21553070

So, having happily traveled around Robin-Hood's Barn to estimate the profits attributable to YPF can I at least confidently say that there is a tried and true relationship between profits and share price? Nope...

• Profit expectations and investment, By Seamus Mac Gorain of the Bank’s Monetary Instruments and Markets Division and Jamie Thompson of the Bank’s Structural Economic Analysis Division, Bank of England, http://www.bankofengland.co.uk/publi...n/qb020404.pdf

• This article examines the relationship between expectations of future profits and companies’ physical investment. Theory suggests that increased profit expectations should raise share prices as well as investment. But this correlation between investment and share prices may be rather weak if investors’ opinions of companies’ prospects differ from those of the companies’ managers. Using a simple aggregate investment equation, the article illustrates that measures of profit expectations based on current profits and analysts’ earnings forecasts appear to be more informative for investment than stock prices themselves. This result is consistent with recent research at the Bank using company data.

• I'll start doing pushups for taking you guys through this

[Surferbeetle]

99% vs 1%? Growth vs Austerity?

EU to Show Flexibility on Budget-Deficit Rules, Rehn Says, By Jones Hayden - May 5, 2012 1:29 PM MT, Bloomberg News

European Union Economic and Monetary Affairs Commissioner Olli Rehn indicated the EU would show flexibility in enforcing the bloc’s deficit rules as nations across the region struggle to spur growth as they cut debt.

Hollande supporters confident of victory, By Ben Hall and Hugh Carnegy in Paris, Last updated: May 6, 2012 6:52 pm, Financial Times, www.ft.com

Exuberant crowds anticipating victory for François Hollande in France’s presidential election gathered outside socialist party headquarters in Paris, confident that he had defeated President Nicolas Sarkozy’s in Sunday’s run-off vote.
The Hollande camp had already begun making preparations for a celebration in the Place de la Bastille in eastern Paris.

Hollande zum neuen Präsidenten Frankreichs gewählt, EILMELDUNG: Politik: 6. Mai 2012, 19:59, NZZ

Linksrutsch in Frankreich: Erstmals seit 17 Jahren zieht mit François Hollande wieder ein Sozialist in den Elysée-Palast ein. Der 57-Jährige Herausforderer gewann klar die Stichwahl um das höchste Staatsamt. Amtsinhaber Nicolas Sarkozy musste sich geschlagen geben.

Hollande führt in den Umfragen, 06.05.2012, WirtschaftsWoche

Der Sozialist François Hollande hat im Rennen um den Élysée-Palast laut ersten Wählernachfragen die Nase klar vor Amtsinhaber Nicolas Sarkozy: In Erhebungen von drei großen Instituten, über die der belgische Rundfunk RTBF am frühen Nachmittag auf seiner Internetseite berichtete, lag Hollande bei 52,5 bis 53 Prozent und damit fünf bis sechs Punkte in Führung.

Greek Exit Poll Casts Doubt on New Democracy, Pasok Majority, By Maria Petrakis and Natalie Weeks - May 6, 2012 11:55 AM MT, Bloomberg News

Greek voters flocked to anti-bailout parties, an exit poll showed, throwing doubt on whether the two main parties, New Democracy and Pasok, can form a coalition to implement spending cuts to ensure the flow of bailout funds.

New Democracy led in the election today, receiving between 19 percent and 20.5 percent of the vote, an exit poll by Alco for state broadcaster NET TV forecast. Anti-bailout party Syriza got between 15.5 percent and 17 percent, according to the exit poll. Pro-bailout socialist Pasok got between 13 percent and 14 percent. Independent Greeks, a new anti-bailout party, could get as much as 11 percent of the vote.

“Greece needed this election like it needed a hole in the head,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mailed note. “The exit polls confirm what has been patently clear for some time: there’s no political consensus for the kind of reforms that Greece must implement if it wants to remain in the euro zone.”

Corriere della Sera > Politica > Elezioni Amministrative

So will Monsieur Francois Hollande follow his hero Francois Mitterrand's playbook and nationalize the banks? We will see...

Loi de nationalisation du 13 février 1982, by Wikipedia

Les entreprises concernées sont indemnisées à hauteur de 39 milliards de francs. La loi concerne les secteurs et entreprises suivantes

[Fuchs]

I did two quick and dirty looks at economic statistics this evening.

Conspicuous rise in capital income share (of total national income) after the Schröder administration's "Agenda 2010" reforms (supposedly a social-democratic / green cabinet):
http://www.scribd.com/doc/92618435/Agenda-2010


During 2003-2007 capital income rose from 29% to 37%, an unprecedented increase.
The range for capital income % for 1991-2011 was 28 to 37% (now 33%)
The same range was in 1970-1990 in the West Germany only: 26 to 34%

-------------------------------------

For Americans with a desire for depressions:
http://www.scribd.com/doc/92622874/Quick-Look
Judging by this quick&dirty calculation, your economy does not justify 70+ % of your goods consumption.

[M-A Lagrange]

So will Monsieur Francois Hollande follow his hero Francois Mitterrand's playbook and nationalize the banks? We will see...

I think you do not really understand the meaning of that election. It is rather like the US with Obama after Bush.

Time will tell the rest

[J Wolfsberger]

I think you do not really understand the meaning of that election. It is rather like the US with Obama after Bush.

Time will tell the rest

Some of us understood that.

It's why we're worried.

As you say, time will tell.

[Surferbeetle]

Fuchs said:

I did two quick and dirty looks at economic statistics this evening.

Appreciate the time spent...and your questions are interesting. Let's start off with the observation that 'all models are wrong, but some are useful'.

• GDP=C+I+G+(X-M), where Gross Domestic Product is (GDP), Consumption is (C), Investment is (I), Government Spending is (G) and Net Exports is (X – M)

Using a small open economy model with perfect capital mobility

• Net Exports can be examined via NX = S - I, where Net Exports is (NX), Savings is (S), and Investment is (I)

• Savings depends on fiscal policy

• Investment depends upon the real interest rate

• Fiscal policy which reduces national saving can lead to trade deficits

Economic performance cannot be evaluated from trade balances alone however.

• South Korea in the 70's is an example of an economy which financed investment (I) with foreign borrowing, resulting in large trade deficits and yet it's economy developed as opposed to stagnated.

• The US ran large trade deficits in the 90's even though national saving (S) increased during this period. The information tech boom during this period may have caused this atypical model response.

Marc said:

I think you do not really understand the meaning of that election. It is rather like the US with Obama after Bush.

I appreciate the insight and would like you to know that there is no disrespect to France intended.

For what it is worth, I have 'skin in the game' with respect to trading & investing in Europe, and have not changed my positions pre or post election as I believe that Mr. Market will help France to remain on 'the path'. Economic History has some hints:

The Economic Consequences of President Mitterrand, Jeffrey Sachs, Charles Wyplosz, Willem Buiter, Gerhard Fels and Georges de Menil, Economic Policy, Vol. 1, No. 2 (Apr., 1986), pp. 261-322

While French economic performance has not conformed to the enthusiastic promises of early 1981, this paper argues that the widely held view that it has been an unmitigated failure is unwarranted. First, the general deterioration can largely be dated back to the early seventies. Second, the early and unfortunate attempt at a demand-led expansion was both moderate in size and quickly reversed. Finally, the post-1983 anti-inflationary policies have been successful so that, overall, the disappointing French performance has been on a par with, and in some ways better than, the rest of Europe. But the main theme of the paper is the emphasis on the supply side. The analysis is organized around the NAIRU, the threshold rate of unemployment below which inflation rises. In an attempt to explain the factors which have led to a continuous rise of the NAIRU since 1973, the paper focuses on labour costs, particularly on the 'wedge' between the costs borne by employers and net take-home pay. To achieve and sustain a significantly lower level of unemployment, labour taxes must be cut, thus reducing the wedge and the NAIRU, and there must be a corresponding demand stimulus so that actual unemployment can fall to this level.

Nonetheless, 'trust but verify' have always been words of wisdom in my book.

The Greek crisis will fast expose Mr Hollande, By Gideon Rachman, May 7, 2012 6:54 pm, Financial Times, www.ft.com

In rural France on Sunday night, the newly-elected French president took to the stage and announced that he would lead the battle in Europe against austerity. On the other side of the continent, Greek voters were calling his bluff. By overwhelmingly opting for parties that want to either repudiate or renegotiate Greece’s bailout deal, they have handed François Hollande a painful dilemma. Will he stand with the Greek people against austerity? Or will he stand with the German government and the International Monetary Fund, in insisting that the Greek bailout cannot be renegotiated?

The choice Mr Hollande makes will be fateful, for France and Europe. Potentially, France’s new president could position himself as the head of Europe’s southern rebels. There is no doubt that the Spanish and Italian governments – even if nominally from different political families – have been cheering on the French socialist. They, like the Greeks, desperately want to see a challenge to German austerity orthodoxy.

John W said:

It's why we're worried.

Yes indeed

[M-A Lagrange]

Steve,

I understand the worries but I believe it is misplaced. For many French, Sarkozi presidency has been synonymous with getting poorer and getting less basic social services while the State is spending more money for personal expenses and and handful of rich people got richer. Also, and that is something Mr market does not care of but is important, Mr Sarkozi regularly literally insulted the French people.
This is why people choose to change. (In addition to the fact he increased the popularity of extrem right wing which is even worst than the hardcore extrem left wing Melenchon, especially in terms of economical orientations)

Concerning Mr Market, he should be aware that most of the contracts announced by Sarkozi government were never finalized. Look at the contracts in India, Brazil, DRC… All a big announces effect but nothing signed in the end.

The Hollande economical program is very balanced and non “socialist” in the communist meaning this has in the US. Hollande is from the same line than DSK, the form IMF executive. Therefore, I believe the worries about nationalizations and all the “communisation” of economy is not grounded.
Here is a revue (in French) of Hollande economical and social program by a right wing news paper which is quite balance:
http://www.lepoint.fr/economie/docum...1424142_28.php

And yes, he wants to tax the banks for making money with our money. I do not see the bad thing in it. Now what will do the trick is how it is implemented.

That said, we can debate endlessly on the idea that growth has to generate employment and that austerity is just helping several rich people to get richer when nearly 70% of the employees get poorer. I believe my position is already clear on that.

What for me looks like a good point and a guaranty that things wont get amok is that Hollande salary will double by becoming president. Therefore we have a president who knows the common people worries. Also, he is quiet, calm, takes the time to think, analyse and finally wants the State apparatus to work as a State apparatus and not as a zaibatsu.

That is why people like me do support him for the moment. And also because I want my children to have access to the same quality school and medical care that I did and not a worst one; that Justice remains neutral and in favor of the victims and not a predatory tool for companies; that the principles of the French Republic and its constitution are respected in the letter but first of all in the Spirit…

Let’s give time to time. But I really think that it would have been worst, even for the banks, with Sarkozi due to the inconsistency of his work and governance during the past 5 years.

[slapout9]

I understand the worries but I believe it is misplaced. For many French, Sarkozi presidency has been synonymous with getting poorer and getting less basic social services while the State is spending more money for personal expenses and and handful of rich people got richer. Also, and that is something Mr market does not care of but is important, Mr Sarkozi regularly literally insulted the French people.

You could say the same thing about America.... except we don't have any good candidates from either party. The Banks own both sides Maybe France and America should merge

[Fuchs]

Surferbeetle, the U.S. combines positive population growth with insufficient growth of national capital stock. This is very much unliek South Korea, which built up its capital stock. They were financing their capacity expansion with foreign money, the U.S. is financing its goods consumption with it.
This will blow up (again).

The primary problem is that the public doesn't understand how much it's living beyond its means at all.

[Fuchs]

Surferbeetle, the U.S. combines positive population growth with insufficient growth of national capital stock. This is very much unliek South Korea, which built up its capital stock. They were financing their capacity expansion with foreign money, the U.S. is financing its goods consumption with it.
This will blow up (again).

The primary problem is that the public doesn't understand how much it's living beyond its means at all.

(Have a bit more time now.)
Recently,the U.S. had less capital investment than depreciation, which means that its capital stock was shrinking instead of keeping pace with population growth. That may have been a crisis-related effect, of course.
Nevertheless, the U.S. is well-known for its near-zero savings rate and its trade balance deficit was much worse pre-crisis (and is growing again to pre-crisis levels). The economic recovery (=actually a stagnation at reduced level due to the population growth) is a return to the even more imbalanced economy of the pre-crisis years.

More "recovery" of this sort = more drive towards the next huge crash

The U.S. needs to
- invest more in professional training/education for manufacturing jobs
- save more, consume less
- waste less resources (hint: low energy costs, high military expenditures)
- stop allowing non-manufacturing sectors to draw so much talent with exaggerated pay (hint: financial sector)
- stop discussing "small government vs. big government" and finally make a serious effort for "good government"
- have more public capital investments (infrastructure) again

Some necessary corrections such as more private capital investment and less consumption goods imports would follow.


The still biggest economy of the world is in a horrible state, and this will cuase trouble (again) too all who are much connected to it.

Think: Greece's unsustainability x 30, and it's going to blow up soon.