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Italy Or USA - Where Would You Put Your Money?

Tyler Durden's picture


While at a glance this may seem like a straightforward question with a simple and obvious answer, troubled Italian bank UniCredit has released a ponderous article comparing and contrasting the two heavily indebted, politically challenged, and growth-retarded nations. Comparing debt-to-GDP ratios and trajectories, GDP growth, and unemployment (as well as funding needs), the answer actually becomes a little less obvious and boils down to the central bank (as does every trading decision in the world currently).

From UniCredit: Italy or the United States: Where would you put your money?

Obviously Italian interest rates are being driven by the systemic concerns in the Eurozone. What UCG considers - is the spread differential justified by fundamentals? As the super-committee grapples with the reality of the budget and Berlusconi's new boy faces austerity, IMF estimate for gross debt-to-GDP actually converge by 2016:


After discussing unemployment outlooks and growth, they find that indeed, the fundamentals (from an economic outlook) favor the US over Italy but their view is that the market's perception of the difference is misplaced.

Because at the end of the day investors are not concerned about GDP growth rates themselves, but about the implications of the economic performance for the health of the public finances. And while stronger growth rates undoubtedly help, they are no guarantee for lowering the debt. That is unequivocally shown by the latest IMF projections. While the fund expects the US to grow faster than Italy, it at the same time projects much higher deficits for the US. In five years time, the US is even likely to have a larger debt-to-GDP ratio, but right now the Italian government has to pay seven times as much for a 5-year bond than the US Treasury. How comes?

They summarize (and the full report is below) that the difference:

seemingly all boils down to the second explanation, which is of course the behavior of the central banks. While both the Federal Reserve and the ECB have been buying government bonds in recent months, it is obvious that the ECB has been much more reluctant to do so. In the (currently unlikely) event that the US Treasury will have problems to rollover maturing debt in the market at reasonable rates, it is probable that the Federal Reserve would step in again and buy even more government bonds. In combination with the direct demand effect, that implicit insurance puts downward pressure on Treasury yields, as investors are demanding only a very low risk premium. The situation in Europe is very different, and we simply do not know how many more government bonds the ECB is willing to buy. The reasoning behind the ECB’s more cautious attitude has repeatedly been articulated loud and clear: While additional bond purchases could help in the short-term, they might come at long-term costs, such as high inflation rates or a less stable EUR.


Leaving readers with an interesting question (and one we prefer not to have to answer, chooisng c) none of the above):

if you were a medium-term investor, where would you put your money: In a country that hopes things will miraculously improve on its own, or in a country that has realized that reforms are needed and that has shown the willingness to take the painful steps in the right direction?





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Fri, 11/11/2011 - 14:15 | 1870398 DarkAgeAhead
DarkAgeAhead's picture

c).  This bank's report is no different than your $2 wh@re on the corner.  Invest with me and I love you long time!

Fri, 11/11/2011 - 14:28 | 1870444 slewie the pi-rat
slewie the pi-rat's picture

<==== c) none of the above

<==== d) what money?

Fri, 11/11/2011 - 14:34 | 1870473 espirit
espirit's picture

Correcto slewie - what money?

On this coast, mine fell out of the boat in the Atlantic.

Fri, 11/11/2011 - 14:47 | 1870518 Pladizow
Pladizow's picture

Country of origin is irrelevent when making my gold purchases!

Fri, 11/11/2011 - 15:09 | 1870567 sqz
sqz's picture

At least with all that debt, the US is able to generate more than 1% GDP per year (excluding financial).

In addition, if the value of fiat currency is the ability to collect tax revenue, then with it's table-topping 4x military spending compared to the next country down, I'm betting the US can convincingly coax a lot more tax out of its poor subjects!

Being a European, I know where I'd put my money and its not in the land of olive oil, fruity wine, fast cars and hot brunette women (unfortunately)!

Fri, 11/11/2011 - 15:36 | 1870664 Lord Koos
Lord Koos's picture

If push comes to shove, Italy has a lot of gold, probably more than the USA as a percentage of GDP & population.

Fri, 11/11/2011 - 16:34 | 1870806 Hugh_Jorgan
Hugh_Jorgan's picture

Those charts would look significantly more alike if the US were being held to the same standards as Italy. Without the Bernank and the World's reserve currency, the economic sins of our ruling class become much more serious in the eyes of the world.

Jus' sayin'...

Fri, 11/11/2011 - 18:26 | 1871111 trav7777
trav7777's picture

yeah, the 75% of world debt denominated in dollars is an infection that must be fed with exponentially increasing demand.

Fri, 11/11/2011 - 16:43 | 1870846 Desert Irish
Desert Irish's picture

Small problem...their total gold holdings are worth $60 odd billion their debt is $1.9 trillion. Work the percentages and their gold holdings wouldn't even qualify them for a housing loan (post-subprime). Italy came out of WWII shattered - no way in hell is any European technocrat getting even close to their gold hoard. Now the flip side if gold hits $10,000 ounce we'll be on our knees begging them for economic aid.

Fri, 11/11/2011 - 15:34 | 1870657 Gief Gold Plox
Gief Gold Plox's picture

I'd choose "c" if only selling shiny bars wasn't so depressing. Oh, wait.... nevermind.  *buys more gold*

Fri, 11/11/2011 - 14:30 | 1870452 spiral_eyes
Fri, 11/11/2011 - 14:36 | 1870480 goldfish1
goldfish1's picture

c.) physical bitchez

Fri, 11/11/2011 - 16:28 | 1870801 Long-John-Silver
Long-John-Silver's picture

physical bitchez


This is the only correct answer. Italy and the USA are headed for the same outcome.

Load up on Beans, Bullets, and Bullion.

Fri, 11/11/2011 - 14:16 | 1870402 FaithEqualsZero
FaithEqualsZero's picture

Gov Paper = aaannnd its gone..poof

Fri, 11/11/2011 - 14:45 | 1870495 Gene Parmesan
Gene Parmesan's picture

The disparity between the yields reflects the sentiments of where each country is going to stand once everything shakes out. The kneejerk view is that Italy is doomed and the US is (relatively) untouchable. Time will tell, but "fundamentals" have nothing to do with it at this point.

Fri, 11/11/2011 - 14:17 | 1870403 MarkTwainsMustache
MarkTwainsMustache's picture

The report smacks of desperation...Italy is on the gold standard (i.e. they can't print more euros themselves) That is the major reason why rates are staying behaved in the U.S. whilst getting destroyed in Italy

Fri, 11/11/2011 - 14:18 | 1870406 drink or die
drink or die's picture

USA will always be AAA in my book, despite what any credit agency rates it at.

Fri, 11/11/2011 - 14:28 | 1870445 JenkinsLane
JenkinsLane's picture

Good luck with that

Fri, 11/11/2011 - 14:29 | 1870449 Raymond Reason
Raymond Reason's picture

Sean, you're a great American.

Fri, 11/11/2011 - 14:35 | 1870477 drink or die
drink or die's picture

It's a paraphrase of Obama's speech after the downgrade, but Hannity says equally stupid buillshit in the same vein.

Fri, 11/11/2011 - 14:38 | 1870484 Raymond Reason
Raymond Reason's picture

Haha.  Knew i heard that somewhere.

Fri, 11/11/2011 - 14:47 | 1870520 LoneStarHog
LoneStarHog's picture

Put down your glass of booze (avatar) and go buy some municipal bonds, too.

Fri, 11/11/2011 - 16:15 | 1870770 jpalm
jpalm's picture

Nothing valuable to add, just wanted to say it's nice to see a fellow Oath Keeper on the boards

Fri, 11/11/2011 - 15:14 | 1870614 tmosley
Fri, 11/11/2011 - 15:21 | 1870631 Logans_Run
Logans_Run's picture

Why? You got gold tucked away somewhere in the USA?

Fri, 11/11/2011 - 14:19 | 1870409 billhilly
billhilly's picture

Money?  What money?  You mean PAPER? HAHAHAHA.

Sorry, no paper here, physical only.  IT INVESTS ITSELF !!!!!

Fri, 11/11/2011 - 14:31 | 1870456 Raymond Reason
Raymond Reason's picture


Fri, 11/11/2011 - 14:19 | 1870410 BlueStreet
BlueStreet's picture

Based on market action today I'd put money in both because everything appears to be fixed.  Even putting on the stupid hat to trade this market is not enough, you need a full body stupid suit.







Fri, 11/11/2011 - 14:29 | 1870448 LawsofPhysics
LawsofPhysics's picture

+100 for the "full body stupid suit" comment.

Fri, 11/11/2011 - 14:29 | 1870450 fuu
fuu's picture

And a schmart helmet.

Fri, 11/11/2011 - 14:19 | 1870411 junkyardjack
junkyardjack's picture

Italy's interest rate won't be enough to cover the 50% haircut, America Fuck Yea

Fri, 11/11/2011 - 14:19 | 1870412 GeneMarchbanks
GeneMarchbanks's picture

Red line = Peripheral Empire

Grey line = Core Empire


Fri, 11/11/2011 - 14:49 | 1870526 JPG101
JPG101's picture

I guess go with the one with the more aircraft carriers makes sense?

If the grey line dumps the red line will another line (Euro or Chinese) come in and save the red line?

I like the aircraft carrier line better medium term but the red line might do very well short term if rescued by another creditor or printer. Then again the red line has just to much risk in it for me.

Fri, 11/11/2011 - 14:20 | 1870416 citrine
citrine's picture

Speaking of Italy. FT just published breaking news:

Italy to ban naked short-selling on whole regulated stock market from midnight December 1.


Fri, 11/11/2011 - 14:21 | 1870418 oddjob
oddjob's picture

I'd rather burn my money, thanks.

Fri, 11/11/2011 - 14:21 | 1870420 jomama
jomama's picture


Fri, 11/11/2011 - 14:23 | 1870424 Bam_Man
Bam_Man's picture

Obviously the shorting opportunity of a lifetime is shaping up in 10- and 30-year US Treasuries.

Timing the entry will be anything but easy though and ruin those who jump the gun.


Fri, 11/11/2011 - 14:25 | 1870431 Deadpool
Deadpool's picture

I'm sure a lot of broke ass Japanese investors said the same thing 20 yaers ago. "The market can stay irrational longer than you can stay solvent". "the right idea a year too early is the wrong idea", "In the long run we're all dead".

Fri, 11/11/2011 - 14:33 | 1870467 Raymond Reason
Raymond Reason's picture

"Give a man a fish, feed him for a day.  Teach a man to fish, and he'll stay drunk all day in a boat."

Fri, 11/11/2011 - 16:45 | 1870852 Desert Irish
Desert Irish's picture

+ 1,000 your obviously married also

Fri, 11/11/2011 - 14:25 | 1870432 docmac324
docmac324's picture

What money?  You mean savings?  PMs at my house only.

Fri, 11/11/2011 - 14:37 | 1870483 espirit
espirit's picture

...and your IP address is___________?

Fri, 11/11/2011 - 14:26 | 1870433 Segestan
Segestan's picture

What these clown socialist forget it's not a CB that should be looked at but rather which nation is looking forward by securing manufacturing and profitable business. Typical socialist crap.

Fri, 11/11/2011 - 14:26 | 1870435 lolmao500
lolmao500's picture

Nowhere. Gold bitchez!

Fri, 11/11/2011 - 14:26 | 1870437 midgetrannyporn
midgetrannyporn's picture

The usa has a technology called a printing press which assures that I will get my nominal clownbux back. Italy does not.

Fri, 11/11/2011 - 14:27 | 1870441 ZeroPoint
ZeroPoint's picture

Can I get gold & silver instead?

Fri, 11/11/2011 - 14:28 | 1870443 fuu
fuu's picture

d) Gold & Silver bitchez!

Fri, 11/11/2011 - 14:28 | 1870447 Michael Victory
Fri, 11/11/2011 - 14:30 | 1870454 Stuck on Zero
Stuck on Zero's picture

It's a good thing Bank of America changed its name from "Bank of Italy."

Fri, 11/11/2011 - 14:31 | 1870457 alien-IQ
alien-IQ's picture

That question is the economic equivalent of Sofie's Choice.

Fri, 11/11/2011 - 14:33 | 1870466 Mr. Lucky
Mr. Lucky's picture

The article assumes the US$ will be the world's reserve currency in five years.

Fri, 11/11/2011 - 14:42 | 1870500 Dr. Richard Head
Dr. Richard Head's picture

This article also confuses currency as being money.  All money is currency, but not all currency is money.

Fri, 11/11/2011 - 14:34 | 1870470 Tao 4 the Show
Tao 4 the Show's picture

Italy has loads of serious problems like corruption, criminality, etc, etc, and doing anything with money there is tricky. But if you look around in Italy to see where people are working and how many factories there are, and then do the same in the U.S., you might think twice about the question posed. Same with many other countries in Europe. The productive base has not been eviscerated as severely in Europe as it has in the U.S.

Fri, 11/11/2011 - 14:35 | 1870476 the 300000000th...
the 300000000th percent's picture

I spent most of my money on guns, wiskey, and women, the rest of it i just wasted


Fri, 11/11/2011 - 14:35 | 1870478 hunglow
hunglow's picture

Smart money just sits there.

Fri, 11/11/2011 - 14:36 | 1870482 Hansel
Hansel's picture

Nickels and pre-1982 pennies, bitches!

Fri, 11/11/2011 - 14:42 | 1870496 The trend is yo...
The trend is your friend's picture

c) Silver, seeds, and brass

Fri, 11/11/2011 - 14:45 | 1870507 redguard
redguard's picture

Isn't this how Corzine lost all that money, betting on Greece?

Fri, 11/11/2011 - 14:46 | 1870513 Flyairman
Flyairman's picture

f'ing hilaroius the 30000000th... +1

Fri, 11/11/2011 - 14:57 | 1870556 AnarchoCapitalist
AnarchoCapitalist's picture

The IMF debt/GDP projections are worthless now that Italian bond yields have blown out. Physical.

Fri, 11/11/2011 - 15:01 | 1870570 Hayabusa
Hayabusa's picture

Look, anyone with 1/2 a brain can extrapolate the outcome. 

1.  Wait until ALL the world, not some of it is deep debt (doodoo).  During this time, people, banksters, politicians, etc., will steal the public blind at alarming rates - this will accelerate and not be moderated

or prosecuted.

2.  When everyone is on the same sinking ship, and nothing is left to steal, then present the "rats" with a "life raft" that will "save them."

3.  The "life raft" will benefit the rich/elite of course, not the 99% and will be quite distasteful for the majority... it's foundation will be built on FEAR as usual.

4.  The masses will go along with whatever they're told "is good for them" because if they don't their precious 401Ks, etc., will be worthless - they will lose everything (at least this will be the message

the mainstream news will saturate the airwaves with) - the ol scare em into compliance strategy that ALWAYS works.  Sheer the stupid sheeple until you burn the skin... then skin em if you can

get away with it.

5.  In the end, no hopium will be left to smoke... people will capitulate and resign themselves with whatever scraps the government "gives" them.

6.  Those who have hoarded gold, etc., will buy up assets on the cheap and will be able to hire cheap labor (again).  The cycle will begin anew and history repeats itself... this time with a local labor force

with labor rates "competitive" with the rest of the manufacturing world, minus shipping/handling costs.

7.  The rich will once again be able to employ the minions for mere scraps of food - just like in the good ol days.  The discrepancy between the 1% and the 99% will reach new heights - as planned all along.

8.  Some of the smarter individuals in society will figure out this whole scenario was planned from the beginning by the game-masters who are masters at presenting it as anything other than what it

actually is, or is propogandized to be.  If those individuals open their mouths... they will be dealt with aggressively - count on it.



Fri, 11/11/2011 - 17:15 | 1870939 SamAdams1234
SamAdams1234's picture

Sharpen the Guillotines ... Allez-y citoens!

Fri, 11/11/2011 - 17:25 | 1870958 Mary Wilbur
Mary Wilbur's picture

@Hayabusa   There will be some states which will secede. I won't stay here and pay taxes to keep this corrupt govt afloat.

Fri, 11/11/2011 - 20:17 | 1871304 trav7777
trav7777's picture

yeah, um...oil peaked this time.  This shit isn't planned.  You tools with your potent directors fallacies just amaze me.

The system of growth is unwinding.

Fri, 11/11/2011 - 15:08 | 1870592 Dick Darlington
Dick Darlington's picture

country that has realized that reforms are needed and that has shown the willingness to take the painful steps in the right direction?

Aahahahahahahaahahahaa (breathe) ahahahahahaaa (breathe) ahahahahaaa. I know these guys are desperate to make these fantasy stories so that the reality gets blurred behind the smokescreen but seriously that's too rich. How's those 19 new armoured maseratis in Ministry of Defense going?


And here's some more:

Fri, 11/11/2011 - 16:22 | 1870787 downtownshuter
downtownshuter's picture

I love that second graph. Yes, I am SURE Italy's debt/GDP level will smoothly and gently slide back down to 100% and just hang out there indefinitely.


I think we saw a smiliar graph about unemployment before the stimulus package

Fri, 11/11/2011 - 16:33 | 1870811 quasimodo
quasimodo's picture



US a......shit-wrong forum-sorry!


Fri, 11/11/2011 - 17:54 | 1871032 Dr. Gonzo
Dr. Gonzo's picture

I don't understand the question. Which color line represents the one with all the nuclear weapons, air craft carriers, and predator drones, and spy networks and assasins? Probably bet on that color line if I only have the 2 choices here. Why isn't their a choice to pick gold or oil on this test? This is hard. I hate school. 

Fri, 11/11/2011 - 17:55 | 1871034 FranSix
FranSix's picture

You want to know where all the money is going into in the market?  TLT volume alone is 2.5 million units on the day, of a unit price of ~$115.65 U.S., meaning almost $3b. of dollars flowing into one issue.  The market cap is ~$3b.

If I didn't know any better, I would say the trade is sell everything, buy TLT.

Fri, 11/11/2011 - 18:33 | 1871133 Arkadaba
Arkadaba's picture

That made me laugh - holy shit - I don't know.

Sat, 11/12/2011 - 02:08 | 1871749 Nobody For President
Nobody For President's picture

Oh shit - the ZH crowd is in very fine fettle tonight, despite, or maybe because of, the low volume melt up today.

All those pluses on SO many comments - you guys are great tonight - everybody been drinkin' for a buddy on this veterans day? 

Me too.


Anyhow, I have 47years of my own money in the market, mostly a fundamental kind of investor, and have done OK for a poor boy, but this shit has become totally out of hand - between all the derivitive crap and the HFT shit, markets are dead and Congress is hopelessly fucked, and the corrupest mfers win. Balance, social justice, equaminity, compromise - all in the shitter.

Between Nam, Iraq, and Afganistan = 65-70K dead for fucking what?

I'm beyond pissed and incredibly sad and shamed for what my country has become. I get the occupy kids - more power to them.


I vote C - looks like the old ZH "Gold bitcheez", or some varient, is the only long run way to 'invest' these days.

Sorry my generation left you guys with this pile of shit.


Sat, 11/12/2011 - 13:37 | 1872204 Mark123
Mark123's picture

I think for the analysis to make sense you must consider the relative value of currencies.  What is the point of a lower rate on US debt if the currency will be debased?  We all await to see if the ECB goes turbo on the printing press....

Sat, 11/12/2011 - 15:14 | 1872321 RazorForex
RazorForex's picture

It looks like the trend for the Yen may be at a crossroads. The Eur/Jpy and Gbp/Jpy are shwoing sings of a reversal. They Eur/Jpy touched a 10 year support zone with a huge reaction. Watch out fellas, things may be changing. So if you are looking for place to put money might be one of those currencies.


Tue, 12/06/2011 - 00:18 | 1949731 Alex11
Alex11's picture

Great information about money market.

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