- Italian worries not justified - Perception problem
================================

The worries about Italy are mostly the investors vote of no confidence toward Europe.
European inability to deal with the Sovereign debt problem of the peripherals Economies in a decisive manner is bringing indiscriminate fear into the markets.
There is a need for decisive and immediate action to contain the debt crisis.
The Italian deficit plan is appropriate and should be soon by voted by the Parliament. Most of the Italian debt is held internally so any comparison with the situation in Greece or Ireland (and even Spain) is not justified;

- A Default would be a big mistake
I still maintain that any type of default or credit event on Greek debt would impact investor confidence toward all European debt. As declared by Trichet I think that the solution should be in the form of "“No credit event, no selective default, no default�. The perception and market reaction to any form of default or credit event can be catastrophic.

- Italian banks not under "stress"
As many of the Italian retail banks have already increased their capital requirements I do not expect big negative surprises: on the contrary I expect the Italian banks to pass the tests with good margins.

- European Rating
I think that a European Rating agencies would be beneficial to create diversity in a market clearly dominated by three players. Additionally, rating agencies should suspend their rating on these countries that received international aid (e.g. Portugal and Greece) and given them enough time to implement reforms. Europe should create their rating agency and bring more diversity to the market.

- Gold Protection
As I previously recommended holding Gold will help investors portfolio and provide a good degree of protection.

- Swiss and European Equities still interesting
Swiss equities, now down on the light of the negative market trend generated in Europe, are a good buying opportunity. Similarly many European companies, especially in Italy, have a solid balance sheet and are now trading at heavy discounts.

In short
Strategy: Perception is not reality
====================================

- Many of the worries about Italy are largely overstated. Negative perception and speculation play a strong role.
- Europe has to avoid a situation where perception becomes reality by acting quickly and decisively to contain the crisis without triggering a default or credit event;
- European banks stress tests to be largely positive;
- Swiss and European Equities, particularly blue chips with a strong brand and a presence in emerging markets, are a good buying opportunity. I recommend allocating part of the portfolio to Gold and Commodities as a hedging strategy.