Future Wealth

Facebook is planning to drop its long-awaited IPO filing on Wednesday, the WSJ reports.

Morgan Stanley is “close” to becoming the underwriter. Goldman Sach will also play a “major role.”

The filing will disclose lots of long held secrets about Facebook’s financials.

After the filing drops, there will be months of waiting until Facebook actually goes public sometime in the spring.

Facebook’s IPO valuation is expected to be somewhere between $75 billion and $100 billion.

Facebook’s 2011 revenues – ads, mostly – came in around $4 billion, according to reports.

When the springtime IPO happens, Facebook COO Sheryl Sandberg will become one of the world’s wealthiest self-made women. The company will also create 1,000+ millionaires. 

Click here to see how Facebook’s millionaires plan to spend their money >>

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See Also:

• REPORT: Facebook To Halt Share Trades On Secondary Markets This Week
• Now You Can Use A Fake Name On Google+
• Sheryl Sandberg Used To Be An Aerobics Instructor

Fitch just cut the long-term issuer ratings of 5 EU countries:

Belgium: AA+ to AA

Spain: AA- to A

Italy: A+ to A-

Cyprus: BBB to BBB-

Slovenia: AA- to A

It affirmed Ireland’s BBB+ rating with a negative outlook.

Markets haven’t moved much on the news.

While Fitch says that it supports EU leaders actions to address the crisis so far, a lot more has to happen before these countries are out of trouble:

In Fitch’s opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery. It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration.

In particular, Fitch suggested that large-scale purchases of sovereign bonds by domestic banks after the European Central Bank conducted its first LTRO in December has not helped matters:

Rising “home bias” in the allocation of capital, the divergence in monetary and credit conditions across the eurozone, and near-term economic outlook highlight the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments.

Here’s the full release:

—

Fitch Takes Rating Actions on Six Eurozone Sovereigns   Ratings   Endorsement Policy 
27 Jan 2012 12:58 PM (EST)

Fitch Ratings-London-27 January 2012: Fitch Ratings has today concluded its review of the six eurozone sovereigns it placed on Rating Watch Negative (RWN) on 16 December 2011.

The rating actions on the long-term (LT) and short-term (ST) Issuer Default Ratings (IDRs) are as follows:

-Belgium LT IDR downgraded to ‘AA’ from ‘AA+’; Negative Outlook; ST IDR affirmed at ‘F1+’ 
-Cyprus LT IDR downgraded to ‘BBB-’ from ‘BBB’; Negative Outlook; ST IDR affirmed at ‘F3′ 
-Ireland LT IDR affirmed at ‘BBB+’; Negative Outlook; ST IDR affirmed at ‘F2′ 
-Italy LT IDR downgraded to ‘A-’ from ‘A+’; Negative Outlook; ST IDR downgraded to ‘F2′ from ‘F1′
-Slovenia LT IDR downgraded to ‘A’ from ‘AA-’; Negative Outlook; ST IDR downgraded to ‘F1′ from ‘F1+’
-Spain LT IDR downgraded ‘A’ from ‘AA-’; Negative Outlook; ST IDR downgraded to ‘F1′ from ‘F1+’

All the ratings have been removed from RWN, with the Negative Outlook on all six countries indicating a slightly greater than 50% chance of a downgrade over a two-year time horizon. The eurozone ‘AAA’ country ceiling has been affirmed for all six sovereigns. All senior unsecured issues of the six countries are affirmed in line with the new rating levels above. The ratings of guaranteed issuance by National Asset Management Ltd. are affirmed at ‘BBB+’ and ‘F2′ in line with the Irish IDRs.

As outlined in its rating review press release of 16 December 2011, Fitch has now considered both systemic and country-specific factors for these six sovereigns. As a result, the agency has reduced the score it assigns to capture financing flexibility in its assessment of the credit profiles of eurozone sovereigns that have large fiscal financing needs and significant financial/economic imbalances.

Moreover, rising “home bias” in the allocation of capital, the divergence in monetary and credit conditions across the eurozone, and near-term economic outlook highlight the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments. Consequently, these sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve currency status. The net impact of this revision under Fitch’s sovereign rating methodology is to lower the long-term ratings of the affected sovereigns by one notch.

This one-notch revision was applied to Belgium, Italy, Slovenia and Spain, but not to Cyprus and Ireland, where their loss of market access had already been demonstrated by their need for official/bilateral support and is already reflected in their low investment-grade ratings. The downgrade for Cyprus, and the additional one-notch cuts for Italy, Spain and Slovenia (ie a total of two notches for each) reflect country-specific concerns primarily related to the banking sector in Cyprus and Slovenia; an adverse shift in the interest-rate growth differential and hence public debt dynamics in Italy; and a significantly worsened fiscal and economic outlook in Spain. A more detailed rating rationale can be found in six separate country specific press releases also being published shortly.

Overall, today’s rating actions balance the marked deterioration in the economic outlook with both the substantive policy initiatives at the national level to address macro-financial and fiscal imbalances, and the initial success of the ECB’s three-year Long-Term Refinancing Operation in easing near-term sovereign and bank funding pressures. Nonetheless, the intensification of the eurozone crisis in the latter half of last year undermined the effectiveness of ECB monetary policy and highlighted the financing risks faced by eurozone sovereign governments in the absence of a credible financial firewall against contagion and self-fulfilling liquidity crises.

Fitch recognises the significant commitments made at the 9-10 December and previous EU Summits to enhance economic policy coordination so as to prevent a recurrence of the severe macro-financial imbalances that arose in the euro’s first decade, as well as efforts to create a long-term framework for fiscal stability over the medium to long term. Fitch also anticipates that European leaders will make good on these commitments in the forthcoming 30 January summit. In addition, the decision to bring forward the creation of the European Stability Mechanism and increase the resources of the IMF, if implemented effectively, is a step towards enhancing the capacity of the eurozone to absorb adverse shocks, such as a disorderly Greek default, although such a shock is not the agency’s expectation.

In Fitch’s opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery. It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration.

As previously noted, in the absence of greater clarity on the ultimate structure of a fundamentally reformed eurozone, the gradualist approach adopted by politicians to systemic reform will continue to be punctuated by episodes of severe financial volatility, entailing a significant economic and financial cost that erodes sovereign creditworthiness. It also means that a ‘break-up’ of the eurozone cannot be wholly discounted, although in Fitch’s opinion the risk of such an outcome remains small. Fitch will continue to adopt a balanced and incremental approach to the rating of eurozone sovereign governments in recognition of the unprecedented nature of the systemic crisis and heightened uncertainty over the economic outlook for the region.

The Negative Outlooks on eight eurozone countries (the six sovereigns in this review along with ‘AAA’-rated France and ‘BB+’-rated Portugal) primarily reflect the risk that the crisis could intensify further. A deeper and more prolonged economic recession than currently anticipated would undermine political support for, and public acceptance of, fiscal austerity and structural reform. It would also have the potential to weaken the commitment of the economically and fiscally strongest eurozone countries, and the ECB, to providing necessary support to eurozone peers.

Fitch currently views that the sovereign credit profiles of the remaining eurozone sovereign governments (with the exception of ‘CCC’-rated Greece, which has no Outlook assigned) continue to warrant Stable Outlooks, though each will be subject to active review through the course of the year. Fitch will consider on a country-by-country basis the extent to which the risks associated with the crisis, as well as the limitations on monetary and financial flexibility within the eurozone revealed by the crisis, may impact their long-term sovereign credit profiles.

CREDIT SUISSE: These Are The 25 Riskiest Countries In The World > 

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See Also:

• Is This Really An About-Face In The Euro Crisis?
• REPORT: Eurozone Fin Mins REJECT Greek Debt Deal
• 6 TOP ECONOMISTS ANSWER: Is The Euro Crisis Over? And If Not, What’s Next?

NY Fed president Bill Dudley says Q4 2011 GDP growth was due to temporary factors and would be unlikely to continue into the first half of 2012.

In remarks released today, Dudley said last summer’s supply chain disruptions caused by the Japanese tsunami and earthquake had created a mini auto-sales bubble at the end of the year.

He also noted that a stimulus-related tax provision, called Section 179, that allowed business to deduct up to $500,000 of expenses expired at the end of 2011. “Some purchases were no doubt timed to occur before that expiration,” he said.

Finally, he argued that there is  “significant excess slack” in the economy, which manifested in a 59% employment rate would continue to dampen inflation.

He concluded his remarks on this bearish note:

“At the national level, the pace of recovery remains sluggish by historical standards and is likely to slow somewhat in early 2012. Thus, unemployment, both nationally and locally, is likely to remain unacceptably high for some time. Also, inflation is likely to be below our objective for several years. Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability.”

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See Also:

• Get Ready For The Q4 GDP Report That Will Show If The Economy Really Is On The Rebound
• CHART OF THE DAY: ‘Core Economic Growth Slowed Sharply In Q4′
• 2011 GDP: 1.7%

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week’s -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).

Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television’s Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its entirely. I’ve retained this link in my commentary since my December 9th weekly update because ECRI continues to feature it as the lead on its website, which I take as an affirmation of their recession call.

Obviously, ECRI’s recession call remains quite controversial in financial circles. The perma-bears are generally supportive of the forecast, while the predominantly bullish mainstream financial view ranges from highly skeptical to dismissive.

For a fascinating analysis of the ECRI WLI, see these fascinating articles by Dwaine van Vuuren, CEO of PowerStocks Investment Research:

• US Recession – An Opposing View (January 3)
• Using the ECRI WLI to Flag Recessions (January 10)
• Further Improving the Use of the ECRI WLI (January 17, with coauthored with Georg Vrba)

Last week Dwaine sent me the chart below, which should be studied in the context of his January 17 article: 

For another perspective on Dwaine’s indicator research, see the latest commentary from John Hussman in Dwelling In Uncertainty (January 16).

Background

On September 30th, ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st. Here is an excerpt from the announcement:

Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off. 

ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down — before the Arab Spring and Japanese earthquake — to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.” (Read the report here.)

For a close look at this movement of this index in recent months, here’s a snapshot of the data since 2000. 

Click for a larger image

Now let’s step back and examine the complete series available to the public, which dates from 1967. ECRI’s WLI growth metric has had a respectable record for forecasting recessions and rebounds there from. The next chart shows the correlation between the WLI, GDP and recessions.

Click for a larger image

A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

Three other three negatives were deeper declines. The Crash of 1987 took the Index negative for 34 weeks with a trough of -6.8. The Financial Crisis of 1998, which included the collapse of Long Term Capital Management, took the Index negative for 23 weeks with a trough of -4.5.

The third significant negative came near the bottom of the bear market of 2000-2002, about nine months after the brief recession of 2001. At the time, the WLI seemed to be signaling a double-dip recession, but the economy and market accelerated in tandem in the spring of 2003, and a recession was avoided.

The question had been whether the WLI decline that began in Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. ECRI’s managing director correctly predicted that we would avoid a double dip. The nine quarters of positive GDP since the end of the last recession supports ECRI’s stance.

The Certainty and Dramatic Language of ECRI’s New Recession Call

What is particularly striking about ECRI’s current recession call is the fervor and certainty of the language in the public press release:

Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.

I continue to be astonished at the complete absence of wiggle room in the announcement, nor have there been any public communications from ECRI to qualify or soften its recession call. ECRI has put its credibility on the line. As I’ve said before, if the U.S. avoids a recession, ECRI’s reputation will be permanently damaged.

A Look at the Underlying index

With the Growth Index showing so little change over the past several weeks, let’s take a moment to look at the underlying Weekly Leading Index from which the Growth Index is calculated. The first chart below shows the index level.

Click for a larger image

For a better understanding of the relationship of the WLI level to recessions, the next chart shows the data series in terms of the percent of the previous peak. In other words, a new weekly high registers at 100%, with subsequent declines plotted accordingly.

Click for a larger image

As the chart above illustrates, only once has a recession occurred without the index level achieving a new high — the two recessions, commonly referred to as a “double-dip,” in the early 1980s. Our current level is 12.8% off the most recent high, which was set 4.6 years ago. The longest stretch between highs was about 5.2 years from February 1973 to April 1978. But in index level rose steadily from the trough at the end of the 1973-1975 recession to reach its new high in 1978. The pattern we’re now witnessing is quite different.

But What About the 2.8 Q4 GDP?

Earlier today the BEA posted an Advance Estimate of 2.8 for Q4 GDP, a level that was somewhat below the consensus estimates, which ranged from 3.1 to 3.5, but definitely above the conventional view of the economy on the threshold of a recession. ECRI itself did not offer a specific date for the start of the forecast recession. A general view is that ECRI’s headlights shine about six months into the future, which would make Q1 2012 GDP the critical number for evaluating ECRI’s stance.

The U.S. has had eleven recessions since the earliest quarterly GDP calculations, which began in 1948. In the month declared by the National Bureau of Economic Research (NBER) as the beginning of the recession, quarterly GDP for that month has only been negative four times. In fact, four of the six positive GDP recession starts were at GDP levels higher than the 2.8 of Q4 2011.

ECRI doesn’t provide the general public with the analytical details behind its calls, but the Hoisington Investment Management Q4 Report also makes a 2012 recession call accompanied by an extended economic analysis that includes several key topics:

• soaring debt-to-GDP
• contractionary fiscal and monetary policies
• anticipated decline in exports
• a weakened consumer
• capital spending cutbacks

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See Also:

• ECRI’s Recession Call Just Got A Little Weaker
• WEEKEND’S OVER: Here’s What’s Coming In The Week Ahead
• The Federal Reserve’s New Communication Policy Will Bring More Confusion Than Clarity

I got a call from the New York Times recently in response to a Redfin study looking at the best time to list a house. Their conclusion seemed to be different than my experience in the NYC metro area, Washington, DC, Baltimore and Miami, all housing markets I have analyzed extensively so I dug deeper. I was inspired by the challenge and looked to Long Island for answers.

I think it really came down to the way Redfin used “winter” in the study since I came up with March as the best time to list using the extensive data over at the MLSLI (16,664 signed contracts from 12/10 to 11/11).

The Redfin report concluded that when you list in the Winter, you have less competition.  However, you also have a lot less buyers so that benefit would be an offset by lower demand.  This point is illustrated by the fact that the highest number of listings actually enter the market in March which is the month that results in the fastest marketing time.

When I drilled down to the day of the week, I caveated to the reporter (and was pointed out by the brokers in the article) that I think it really depends on the date of the broker tour day(the day brokers view new listings that came on the market). When I lived in Chicago, my town tour day was on a Friday and in my hometown in Connecticut, our broker tour day is on Tuesday. I would bet that Friday is a more common day for broker tours (to view all new listings that entered the market that week) which makes the findings somewhat contrarian since I would think Thursday would have been the best day to list (it was a close third best) because the property has time to get distributed before the tour day.

Of course this doesn’t suggest that a seller who decides they want to sell their home and it happens to be June, must wait until the following March.

Whatever the reasons or issues that are raised, we looked at over 16,000 contracts in a one year period marketed through the MLS of Long Island, excluding the Hamptons/North Fork. I was only measuring the time to market a property, not whether the highest price was achieved. I’ve got metrics on that but I want to crunch the numbers over a longer period to get more comfortable with them. I plan to do this in other markets I cover with MLS data.

Listing on a Wednesday, on average, results in the fastest marketing time.

Conclusion to the question: “When is the best time to list your property?”

• In March

• On a Wednesday

These are mutually exclusive results but based on the data resulted in the fastest marketing time – days on market from original listing date to contract date.

Here other some other findings:

More listings enter the market on a Monday.

The most signed contracts occur in June.

This post originally appeared on Miller Samuel Inc.

Now read about 10 cheap home improvements to dramatically increase your home’s sale price >

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See Also:

• See How 3 Homeowners Managed To Fight Down Their Property Tax Bills
• 7 Things To Know Before Closing A Deal On A Court-Confirmed Probate Sale
• 8 Things To Consider Before You Snatch Up That Rental Property

It was a risk, but it’s paying off.

Bank of America was the underwriter of Italian bank UniCredit’s rights offering (ending today), and these days, putting the words ‘Italian’ and ‘bank’ in the same sentence sounds risky enough without adding the word ‘underwriter’ to it.

For Bank of America to make money from the rights offering, shareholders had to buy UniCredit stock at a discounted price in this special sale. For that to happen, UniCredit’s regular stock price had to look attractive.

Luckily for Bank of America, that’s what it did all through the month of January, when the stock rose 64%, according to the NYT. This victory means Bank of America isn’t out $960.15 million.

At first the sale looked dicey. On day one (January 9th), the offerings price fell 47 cents, but according to insiders, hedge funders in America and Europe started to buy throughout the month.

From the NYT:

“There was selling pressure from a lot of very stretched foundations that needed to raise funds,” said an investment banker at another firm in Europe, who also spoke on condition of anonymity because he was not authorized to talk publicly. “But after the forced sellers left the market, there was some opportunistic buying by other investors who believe UniCredit will pull through the crisis.”

Hats off to all the Euro bank believers, not just UniCredit’s, because European banks have been rallying all around:

Shares in Deutsche Bank of Germany, for example, have risen almost 27 percent since Jan. 9, while the stock value in BNP Paribas of France has increased by 28 percent over the same period. The Continent’s financial sector had come under increased pressure last year, as regulators pushed them to raise a combined 115 billion euros by June to meet new capital requirements.

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• Moynihan Is Going To Have To Tell Us Everything He Knows About The Merrill Lynch Deal Again
• Moynihan Says Bank Of America Could Save Up To $3 Billion Annually Cutting Costs
• Dick Bove: Bank Of America Has To Prove It Can Actually Make Money

We’ve written quite a bit here about how mind-numbingly stupid the idea of austerity is.  My reasoning is simple: government spending is a component of the GDP equation (which is C+I+(X-M)+G).  This equation has been around a long time, and is a basic component of macro-economics.  Under the basic concepts of math, if you lower a value in an equation that involves addition, you wind up with a lower total number on the other side of the equals sign.

In addition, we have a ton of data from the existing attempts to use this idea that it really doesn’t work.  Here’s a post I wrote a little bit ago titled, “this is not what socialism looks like.”  In the US, government spending at the state level has been contracting for 6 of the last 8 quarters.  Guess what?  It’s subtracting from overall US growth.  We’re not the only country to experience this first hand: we’ve also see it happen in the Baltic Statesand Ireland.  And of course, China spent massively to avoid the effects of the recession and their economy has grown at a very strong pace, proving the point from the opposite side of the argument.  Then of course, there was the US experience during the Great Depression when we saw growth rates of around 10% for three years straight and then 5% the following year thanks to government spending.  And, as I’ve noted in my history projects, Korean War spending shifted the US economy into overdrive in the early 1950s (see here, here andhere).

Now we have more data that shows how stupid austerity is, this time coming from England.  First, this outcome was projected to happen, as reported by Bloomberg on July 13, 2010:

U.K. Prime Minister David Cameron’splanned budget cuts increases the chance the economy will slipback into recession, said Geoffrey Dicks, who heads economicforecasting at Britain’s new fiscal watchdog. 

Responding to questions during a parliamentary hearing inLondon today, Dicks said measures proposed in the June 22 budgetled his office to shave 0.5 percentage points from its growthforecast in the “near term.” His Office for BudgetResponsibility predicts an expansion of 1.2 percent in 2010. 

“There are some budget measures which will have reduceddemand,” Dicks told the Treasury Committee, which scrutinizeseconomic policy. “The near-term outlook for GDP is not as goodas it was before the budget. I still don’t think that will meana double dip, but logically the chances of that happening haveincreased.”

Someone in the British government knows their macro and someone doesn’t.  Guess who?  From Professor Brad DeLong:

Yep. This many months after the start of the Great Depression, the British economy was rapidly converging back to its pre-depression level of production under Chancellor of the Exchequer Neville Chamberlain’s policy of using stimulative policies to restore the price level to its pre-Great Depression trajectory.

By contrast, the Cameron-Osborne policies of expansion-through-austerity have produced a flatline for real GDP, and the odds are high that British real GDP is headed down again.

In less than a year, if current forecasts come true, the Cameron-Osborne Depression will not be the worst depression in Britain since the Great Depression, but the worst depression in Britain… probably ever.

That is quite an accomplishment.

Reality continues to intrude rudely and sharply into the proposals of the austerity crowd. Yet, despite the overwhelming amount of data that disproves their central thesis, they continue to cry for austerity.  Obviously, facts, data and logic are meaningless now, as, despite the fact that that we have an overwhelming amount of data, we continue to hear from people who argue on the other side of them.  We are clearly through the looking glass in regards our public discourse.

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See Also:

• The US Has Already Lost These Eight Industries To China
• HSBC Chief Economist: Austerity ‘Does Not Deliver’
• 2011 GDP: 1.7%

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Ian Bremmer, Founder and President of the Eurasia Group, is one of the leading authorities in geopolitical risk.  He is also one of the many thought-leaders attending the World Economic Forum’s gathering in Davos, Switzerland.

But, it also seems that Bremmer can’t help but notice the political implications of everything he sees.

When he first checked into his hotel room in Davos, he noticed two gift baskets.

One gift was a box of chocolates and a note from the CEO of Nestle.  Harmless and sweet.

The other wasn’t as much a gift as it was an information packet.  It was a bag full of DVDs, post cards and a statement courtesy of the Heydar Aliyev Foundation, which is run by Azerbaijan’s First Lady Mehriban Aliyeva.

Sounds harmless, right?

Not really.

Leave it to Bremmer, a political risk expert, to call the bag of freebies the “most politically controversial gift” he had ever received.  The bag included a statement regarding the Garabagh region between Azerbaijan and Armenia.  Bremmer described it as “delivered from a starkly one-sided point of view.“  Here’s an excerpt of what the statement said (h/t Ian Bremmer via  ForeignPolicy.com):

Unfortunately the conflict ignited as a result of unfair territorial claims brought against Azerbaijan. The occupation by Armenian invaders of Garabagh… [has] turned the bright representatives of the Mugham art into internally displaced people… grief, sorrow, and melancholy is being felt today in their performance.

And here’s Bremmer’s take:

The package was giftwrapped in cellophane, so it was sure to be missed by any personnel intent on keeping such subjective perspective out of the hotel rooms. You have to hand it to this Azeri organization for so craftily injecting their thoughts into the summit. The takeaway: Davos truly is the biggest annual global political event — and you can’t underestimate how far actors will go to get their message heard on the global stage.

Not many people are familiar with the history between Armenia and Azerbaijan.  So, it would actually make perfect sense that they are out trying to raise awareness.

Business Insider’s editor-in-chief Henry Blodget is at the World Economic Forum now.  Earlier this week, he published photos of Azerbaijan’s gift to the attendees.

Admittedly, we did not appreciate the full significance of the gift. Indeed, when our famished Henry first arrived in Davos, he tore through the gift to find a series of packages that resembled exotic boxes of chocolates, including one box with the word “fondu” on it.

Click Here For Our Pictures Of Azerbaijan’s Controversial Gift >

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See Also:

• This Is The Best Explanation Of Davos By The Numbers We’ve Seen
• Mike Mayo Totally Ripped Vikram Pandit’s Star Role At Davos With This Great Quote
• It Costs How Much To Go To Davos?!

In regards to this morning’s mediocre GDP report, Nomura cuts right to the chase in a note titled ‘Core Economic Growth Slowed Sharply’ in Q4.

Here’s their commentary:

Inventory building contributed 1.9 percentage points (pp) to growth in Q4 2011 after subtracting 1.4pp in Q3. The measure of final sales, which is a “core” view of the economy that removes the effect of inventories, grew at an annual rate of just 0.8% in Q4 compared with 3.2% in Q3. Under this perspective, the US economy slowed sharply in the final quarter of the year. The choppiness in quarterly growth in the back half of 2011 is partially due to the rebound following the dampening effect on economic growth stemming from the Japan earthquake and tsunami that hit on 11 March. The second half rebound was front-loaded into Q3. The same pattern can be seen when looking at the industrial production data, which also tracks the broad economy. In Q3, industrial production rebounded to an annual growth rate of 6.3% (following 0.6% in Q2) followed by slower growth of 3.1% in Q4. To smooth the effect of the rebound from temporary factors, economic growth in H2 2011 advanced at an average annual rate of 2.2% compared with 0.8% in H1.

And here’s the chart that demonstrates the point. The gray line is what Nomura calls ‘core’.

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See Also:

• Get Ready For The Q4 GDP Report That Will Show If The Economy Really Is On The Rebound
• NY Fed’s Dudley: The US Economy Has ‘Significant Excess Slack’
• CHART OF THE DAY: Why Is The Baltic Dry Index Getting Crushed?

Commodities markets saw a paltry $15 billion in new investments last year, compared with inflows of $140 billion in 2009-2010, according to a Barclays Capital report quoted by Reuters. This is the weakest level in nine-years, and represent’s a nearly 78% year-over-year drop in 2011. 

Investors steered clear from the volatility in markets cause by the European debt crisis and fears of a Chinese hard-landing. 

Barclays’ analysts expects investment into commodities to climb again in 2012, but doesn’t expect it to reach 2009 – 2010 levels. They also think the correlation between commodities and other asset classes like stocks which showed up next year, because of macro concerns, will ease in 2012.

Don’t Miss: Morgan Stanley’s Commodity Predictions For 2012 >

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See Also:

• Oil Prices Top $100 And Natural Gas Falls 5%
• The Best Investment Ideas From Barron’s 2012 Roundtable
• 16 Expert Observations That Will Have You Rethinking Your Investment Strategy