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By Jason Stipp | 11-17-2011 03:00 PM

Fall Guys

More than just leaves we're dropping this week, reports Morningstar markets editor Jeremy Glaser.

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to the Friday Five.

We're well into autumn and more than just the leaves were falling this week. Here with me to offer the details on that is Morningstar markets editor, Jeremy Glaser. Jeremy, thanks for joining me.

Jeremy Glaser: Jason, it's my pleasure.

Stipp: So, what do you have for the Friday Five this week?

Glaser: This week, we're going to talk about Italy, about jobless claims, inflation, Warren Buffett, and finally, Abercrombie & Fitch.

Stipp: So, one of the big stories in Italy is that confidence is dropping, and meanwhile, those yields sometimes are spiking above that 7% level that everyone is watching so closely. What's the story in Italy?

Glaser: Last week on the Friday Five, we didn't talk about Europe at all, so I thought that starting with Italy would be a good place to get back into the European sovereign debt crisis discussion, and I think that's because Italy really remains one of the big worries of investors, and one of the big worries of Europeans.

Now that Berlusconi has gotten the boot and been replaced by this technocratic government led by Mario Monti, the hope was that this would really soothe investors' fears, bond investors' fears, and that they would think that Italy would be on the right path. I think that theoretically there are a lot of good ideas that these technocrats and these academies can bring to the table, but we have to see if they're actually implemented and how that actually looks in reality.

This new government was a necessary but not a sufficient condition for Italy to really be on the right track. I think one of the major issues is that this is an unelected government. Certainly Monti has a lot of personal popularity in Italy, and I think that there will be a time when they'll have the ability to push through some reforms. They're going to need to be able to ensure investors that these reforms are going to continue on for years--that even after the next set of elections, they're going to stick to these paths of austerity. It's not like they can pass one bill, and all of a sudden the country is going to be incredibly solvent.

I think that's why we're seeing investors being a little bit skeptical, keeping those yields incredibly high, over that 7% level, and really putting this new government to task to make sure that they actually start implementing these reforms now and make sure that they're permanent.

Stipp: Over on this side of the pond, we got initial employment claims on Thursday, and those numbers look pretty good, again. This is a nice trend that we've been seeing, but will it persist?

Glaser: This is a weekly data point. It's something that we see a lot, and there's a lot of noise, where one week, initial claims will go up or will go down, based on any number of factors. But we've really seen a steady decline recently, and over the last few weeks, a pretty big decline below this 400,000 claims level, which is considered the level at which we're really adding jobs into the economy.

I think this is a good sign that the job recovery is still in progress. I think we had worried that it had stalled out at one point when we saw some very poor job growth over the summer, but this, I think, is a good sign. If it will continue indefinitely, I don't think we quite know the answer to that yet, but it shows that even as we have all these problems in Europe, there still are some good signs of economic data from the United States, and that the jobs market maybe will come back eventually to kind of normal unemployment rates.

Stipp: We also got economic data on inflation and prices. Although they might not be falling dramatically, they're certainly not rising very dramatically, either. What's the implication there?

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