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Generational Dynamics Web Log for 16-Feb-2011
16-Feb-11 News -- Tunisian refugees flood into Italy

Web Log - February, 2011

16-Feb-11 News -- Tunisian refugees flood into Italy

Commodity and import price increases signal lower corporate earnings

Tunisian refugees flood into Italy

Lampedusa Island

Lampedusa Island

Since the uprising began in Tunisia in mid-January, thousands of French-speaking Tunisians have taken advantage of the chaos to migrate to Italy through the Mediterranean island of Lampedusa, mostly for economic reasons, according to VOA. Lampedusa Island is part of Italy.

However, some of them may be seeking asylum, for having been part of the regime of Tunisia's former president Zine El Abidine Ben Ali, who was forced to flee the country after the uprising began.

Smugglers are making huge profits, charging Tunisians about $1,800 to get to Italy, according to the article. Migrants are packed into small boats for the trip from Tunisia to Lampedusa. There have been several drownings.

Once they reach Lampedusa, they're packed into overcrowded refugee camps. Then, under international law, Italy is obligated to fly migrants from Lampedusa to the Italian mainland as quickly as possible, according to the BBC.

Thus, the Italians are saying that the sudden wave of migrants is an EU problem, not just an Italy problem. Deutsche-Welle reports that the EU has offered to fast-track funds for Italy to help deal with the problem. "Emergency financial envelopes" from existing EU funds will be given to refugees. However, the German government has rejected a proposal that Tunisian refugees in Italy be automatically apportioned to other countries in the EU.

The increasing flow of Tunisian refugees is only part of the problem, according to Spiegel. Refugees are beginning to arrive from Egypt, and it's feared that with unrest spreading to other Mideast countries from Algeria to Bahrain, there will be a flood of tens of thousands of refugees attempting to reach Europe to find a job and a better life.

Commodity and import price increases signal lower corporate earnings

The Dept. of Labor announced on Wednesday that the cost of imported goods rose almost twice as much as expected, according to Bloomberg. Import prices increased 1.5% during the month of January, compared to December, while economists had expected only a 0.8% increase.

The biggest contributors to the price increases were imported commodities, including oil, food and building materials.

[[Update: A web site reader cleared up some confusion by posting in the Generational Dynamics forum an explanation of why we're importing building materials: "We import huge quantities of concrete from Mexico, much of our lumber comes from Canada, China is sending literally boat loads of plywood,sheetrock, steel etc.........not to mention wiring and other electrical components as well as plumbing components." (Paragraph added - 16-Feb)]]

According to the article, the jobless rate of 9% will mean that US companies will have limited ability to pass along the higher costs to consumers.

Higher commodity prices have already had significant effects on fourth quarter earnings, according to the Wall Street Journal (Access).

With limited ability to pass along price increases, many companies are being forced to report lower operating margins, with consequent effects on their stock prices. The article quotes a Citibank expert as saying, "I think this quarter was a wake-up call. We're seeing these stocks get hit on margins and sell off dramatically. It's definitely picking up steam and becoming much more on the tops of investors' minds, and it's only going to continue as we move through 2011."

According to the article, many analysts are not taking these lower margins into account, and they're overestimating future profits. This shouldn't be a surprise to anyone, since financial analysts almost always overestimate future earnings, in order to justify the fees and commissions that companies pay them.

As we've been saying repeatedly, most recently in "14-Feb-11 News -- Bangladesh stock market continues free fall, while Cairo's remains closed," the stock market is overpriced by a factor of almost 200%, and has been in a bubble that could explode in panic at any time.

Dhaka stock market, 15-Feb-11

Dhaka stock market, 15-Feb-11

By the way, the Dhaka stock market index rose 6% on Tuesday, after the Bangladesh government announced that four state-controlled commercial banks would provide support for the stock market by investing several hundred million dollars.

The Dhaka stock exchange is in the midst of a full scale stock market crash, after stock prices almost doubled last year, bring 3.5 investors into the market. It remains to be seen whether the government can stop the market from crashing further.

(Comments: For reader comments, questions and discussion, see the 16-Feb-11 News -- Tunisian refugees flood into Italy thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Feb-2011) Permanent Link
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Generational Dynamics Web Log for 16-Feb-2011 16-Feb-11 News -- Tunisian refugees flood into Italy

Tunisian refugees flood into Italy

Commodity and import price increases signal lower corporate earnings

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Generational Dynamics Web Log for 16-Feb-2011
16-Feb-11 News -- Tunisian refugees flood into Italy