Archive for August, 2010

Gold, Silver, US Treasuries, And Thailand Soar On Higher Yen As Stocks Resisted Going Of The Brink Into The Abyss

August 31, 2010

Financial market report on August 31, 2010

The safe-haven investments Gold, Silver, Bonds, and Thailand soared as currency traders massively sold a number of yen carry trades.

Stocks, ACWI, resisted falling from a ledge of support today, the last trading day of the month. Oil, USO, being in abundant supply, fell 3.3% on the lower on the major currencies yen carry trade, DBV:FXY. The more resilient emerging market currencies, CEW:FXY, supported a 2.0% rise in Thailand, THD.  Energy service companies, OIH, fell lower with the falling price of oil. The 200% of gold, DGP, rose 1.9%

The rise in CEW relative to DBV, CEW:DBV, accounts for the Bespoke Investment Group report that the major emerging market ETF, EEM, actually outperformed most developed countries with an August decline of 3.24%.  Small cap pure value, RZV, was a major loss leader during August 2010; as was small cap consumer discretionary stocks, XLYS. Utilities, XLU, and diversified utilities, were a safe haven investment during August.  The country of Spain, EWP, was a major monthly loss leader, while Thailand, THD, was a safe-haven. Natural Gas, UNG, due to an abundance of supply, lost 22.8%.  

Banks, KBE, the Too-Big-Too-Fail Banks, RWW, and the Russell 2000, IWM, are all examples of the stocks that managed to hold on today; Bank of America, BAC, being a case in point rising 1.1%.  This as BusinessInsider presents the chart of the day: Number Of “Problem” Banks Hits Brand-New High. When the stock market does fall the 300% inverse of the financials, FAZ, will be a major winner for investors.

Japan, EWJ, could not withstand the higher, Yen, FXY, and fell 1.0%.

The currency traders took the Swiss Franc, FXF, above a recent high, and the yen, FXY, back near its recent high.  And they took a number of currencies lower, including the Mexico Peso, FXM, the British Pound Sterling, FXB, the Candian Dollar, FXC.

Mexico, EWW, withstood the assault on its currency, and rose 0.7%. Mexico shares are very damaged; and have a wave structure much like the Russell 2000, IWM, which fell 0.2%, which justifies being 200 short with SJH.  The chart of the Mexico Peso, FXM, reads terrifically bearish, and may manifest as three black crows tomorrow, September 1, 2010, justifying an investment in the 200% inverse of Mexico, SMK. The 200% inverse of the Russell 2000 Value Shares, SJH, is ready and waiting to reward investors when the fall comes. 

The UK, EWU, rose 0.4% to its 20 day moving average.

Canada, EWC, fell 0.4% to its 20 day moving average.

The Euro, was stable, rising 0.03%, enabling European shares, FEZ, to rise 0.4%. European Financials, EUFN rose 0.8%, Spain, EWP, 1.2%, and Ireland, EIRL, 2.4%, in spite of a lower, EUR/JPY as seen in the chart of FXE:FXY. When the stocks do fall those invested 200% short the European shares with EPV will gain quite well.

European Financials, EUFN, rose 0.8%

Yes, Ireland, EIRL, rose 2.4% even though Bloomberg reports that Irish Government, Banks Debt Risk Rises, Default Swaps Show. The cost of insuring against default on Irish government and bank debt rose, according to data provider CMA. Marshall Auerback wrote insightfully in SeekingAlpha article Ireland in Decline, Or, What Austerity Looks Like, relating that there will be massive casualties among the poor and disadvantaged; Ireland is exhibit A. And Economic Policy Journal covers The Expected Future Deterioration In Ireland.  

Australia, EWA, rose 0.2% even though the AUD/JPY fell sharply lower as is seen in the chart of FXA:FXY. BHP Billiton, BHP, traded unchanged.

The Swiss Franc Australian Dollar carry trade went into the stratosphere rising 1.0%, as seen in the chart of FXF:FXA; and the Swiss Franc Euro Dollar carry trade did so as well rising 1.0% as seen in the chart of FXF:FXE

The US Dollar, $USD, closed unchanged at its 20 day moving average. 

While world stocks, VT, resisted the strong sell off of currencies, with a 0.1% gain, base metals, DBB, fell 1.0% lower on the lower carry trades falling, taking the copper miners, COPX, 0.9% lower. Tin, JJT, fell 4.0%.    

Sweden, EWD, (whose currency Swiss Franc, FXS, was not reported today), rose 1.0%. The fact EWD is heavily weighted with telecom manufacturer, Ericsson Telephone, ERIC, Financial Institution, Nordea Bank, NDBAY.PK, and vehicle manufacturer, Volvo Corporation, VOLVY.PK, does not auger well for the future of EWD. 

Semiconductors, SMH, could not hold on; it fell 1.5%; with Intel, INTC, falling 1.6%. The 300% inverse of semiconductors, SOXS, rose 5.6%. The 200% inverse of semiconductors,  SSG, rose 3.6%

Gold mining stocks, GDX, rose 0.9%, and the junior gold mining shares, GDXJ, rose 1.4, on support from rising US Treasury shares, that is the US Ten Year Note, IEF, +0.45%, the US Government Bonds, TLT, +1.10%, and the Zeroes, ZROZ, +1.80%.

The ratio of the HUI precious metal shares, relative to US Treasuries, $HUI:$USB, shows trading at the apex of a consolidation triangle, that is a broadening top pattern suggesting that a top is being make in both the gold mining shares, GDX, and the junior gold mining shares, GDXJ.  The chart of gold relative to the junior gold mining shares, GDXJ:GLD, suggests that gold is now outperforming the mining shares, and that when either the stock market turns lower, or the US Treasuries turn lower, gold mining shares will fall lower as well. The chart of the 100% inverse of the Canadian gold mining shares, HIG.TO, shows what is likely turning into a spiked bottom representing a buying opportunity.

One could call today “a rush to a perceived safe haven of lower interest rates”, as the interest rate on the 20 to 30 Year US Government Bonds, $TYX, fell; and the rate on the US Ten Year Note, TNX, fell, as well.  

Given that the market failed to break today, and given the rush into US Treasuries, we are a historic point of systemic risk. 

The chart of 30-10 Yield Curve, $TYX:$TNX, steepened somewhat, showing tht investors embraced the risk of bond default, as a better choice than the risk of being invested in stocks, being that investors rushed into the 20 to 30 Year US Government Bonds, TLT, and even the extremely volatile Zeroes, ZROZ.

The monthly chart of the 30-10 Yield Curve, $TYX:$TNX, shows the deadly rushing embrace of US sovereign debt that has come with a steepening yield curve. When debt deflation comes to bonds, that is when capital takes flight from bonds, the United States is going to be ground zero for austerity. Perhaps the social turmoil and disruption will be so great that a deployment of global peacekeeping troops will be announced by the President making the statement of Henry Kissinger as reported by ThinkExist a reality:  Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful! This is especially true if they were told there was an outside threat from beyond whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will pledge with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well-being granted to them by their world government.” – Henry Kissinger in an address to the Bilderberger meeting at Evian, France, May 21, 1992. (In an address to the Bilderberger organization meeting at Evian, France, on May 21, 1991. As transcribed from a tape recording made by one of the Swiss delegates. )” 

Bonds, BND, rose to a new high of 82.89; its monthly chart goes beyond three white soldiers to show four of these – warning of an impending and fast reversal in trend. 

Sometime soon, the 300% inverse of the 30 Year US Treasury Bond, TMV, will be a major winner for investors; as will the 200% inverse of the 30 Year US Treasury Bond, TBT.

Emerging market bonds, EMB, are no safe haven investment, as they traded lower, and then managed to crawl back up to support today; all I can say about emerging market bonds is “look out below”.  Their small turn lower is a preamble and precursor to the even more dramatic fall that is coming to US Sovereign Debt.   

Gold, GLD, blasted 1.0% higher on the risk of stocks falling lower from the lower carry trades.

Silver, SLV, being manic, and now confirmed as a currency, in addition to being a base metal, jumped higher 1.6% today, continuing its breakout of a consolidation triangle on August 25, 2010, sending the its 200% ETF, AGQ, soaring.

I personally am invested in gold bullion, $GOLD, as I see a liquidity crisis coming soon; but I provide a courtesy chart site suggesting 20 ETFs to sell short and 12 ETFs to buy long for a debt deflationary bear market

Google Finance chart shows monthly ETF losers were Small Cap Pure Value, RZV, 11% Semiconductors, SMH, 11%,  Small Cap Consumer Discretionary, XLYS, 11%, Ireland, EIRL, 10%, Sweden, EWD, 7%, Spain, EWP, 7%.

 Google Finance chart shows monthly 200% inverse ETF gainers were Semiconductors, SSG, 25%, Small Cap Pure Value, SJH, 15%, Mexico SMK, 11% and Europe EPV, 8%.

 Google Finance chart shows monthly 200% ETF gainers were DGP, 11%, and Silver, AGQ, 14%.

In today’s news

Mark Jewell, of the Associated Press reports that Morgan Chase & Co. is shutting down its proprietary trading desks and eliminating around 80 jobs to comply with new restrictions on investment banks.

Bloomberg reports Corporate Default Swaps Head for Biggest Monthly Rise Since May in Europe. The cost of insuring against losses on European corporate bonds rose, posting the biggest monthly increase since May, on concern a slowdown in the U.S. recovery will trigger a global double-dip recession.

Bloomberg reports that Some At Fed Saw That August Decision To Buy Mortgage Backed Securities Would Send Wrong Signal. Some Federal Reserve officials were concerned last month that a decision to stop their securities holdings from shrinking would send the wrong signal that the central bank was ready to resume large-scale asset purchases, minutes of the Aug. 10 meeting showed.

The US and China trade war escalated as Bloomberg reports that Chinese Aluminum Goods to Face Higher U.S. Tariffs After Subsidies Ruling. Chinese exporters of aluminum products used in window and door frames will face higher U.S. tariffs after the Commerce Department ruled that they receive unfair government subsidies. In a preliminary decision released today, the department said the additional tariff would be as much as 138 percent in a case brought by the United Steelworkers union and closely held aluminum manufacturers in nine U.S. states.

Ben Feller of the Associated Press reports that President Obama says US Combat In Iraq Over, Time To Turn Page.

Investors Are Now Concerned About The Return Of Their Investment And Not The Return On Their Investment

August 31, 2010

Tiho, in TIPS Signal Economic Melt Approaching writes that investors are now concerned now about the return of their investment not the return on their investment.

He write of warning signals on Treasury Inflation Protected Securities, also known as TIPS, traded by TIP: ” We can see from the table of figures above that on 10th of August 2010, the US 5 Year Note was offering real negative yields for the first time in a long time. Real negative yields… lets think about that for a second.

Accepting a negative real yield is irrational by definition. Just think about it. Getting a return of 0% is actually better than accepting a 5 year yield. So what is the deal? Economist Scott Granis with his explanation:

You can think of real yields on 5-yr TIPS as a good proxy for the market’s expectation for real GDP growth, mainly because there should be some reasonable connection between the risk-free real yield an investor can earn on TIPS over the next 5 years and the real yield on cash flows tied to the economy’s performance via generic equity exposure.

In my view, the negative TIPS yield is saying something about the the new normal which is full of volatility. My answer is: scared investors want return of their capital, not just return on their capital.

Irish 10 Year Bond Rate Soar Higher And Ireland Stock Values Fall

August 31, 2010

Tiho in article Eurozone Crisis 2.0 presents a chart of German 10Yr Bunds Vs Greek & Irish 10 Yr Bonds which to me points out that investors in October 2010, sold out of the Irish bonds and started going short these, as concerns arose over the nationalization of banks, which are basically insolvent because of reckless commercial and residential lending. The dramatic rate of rise and now high level of Irish interest rates makes an inquiring mind ask: did banking officials not only turn a blind eye in their lending, but did they receive payment from property developers under the table. The extent of Irish bank lending was global and included strip malls and luxury condos here in the US. There are many residential villages in Ireland that came via bank lending and are now ghost towns, where no one lives, as people cannot afford the mortgages and there is no work to be found for miles and miles. It’s tragic there is no justice for such grevious lending, only increasing austerity on the people of Ireland.     

In my article The European Bond, Currency And Stock Crisis Is Returning, I write that the ongoing Finviz chart of Ireland, EIRL, and the MSN Finance chart of Ireland, EIRL, from May 10, 2010 to August 26, 2010 shows Ireland’s Ireland’s loss of stock market value.

Estonia is the model and poster country for Milton Friedman neoliberal economic policies. Portugal, Ireland, EIRL, Greece and Spain, EWP, are collectively known as PIGS, and use the Euro, FXE.

The chart of Germany, EWG, Sweden, EWD, Belgium, EWK, Ireland, EIRL, and Spain, EWP that is, EWG, EWD, EWK, EIRL, EWP, from May 10, 2010 to August 26, 2010 is provided for one’s analysis. The generous and tax progressive nations have market outperformed the neoliberal and non generous and non tax progressive nations.

Ireland, and Thailand are Polar Opposites. Thailand, THD, has been rising; its opposite, Ireland, EIRL, has been falling lower. Thailand is the libertarians utopia; while Ireland and Natural Gas, GAZ, have a lot in common. Ireland has an excess of toxic debt mortgage and real estate development debt and Natural Gas has an excess of supply; and both have been stock market place depreciated.

There is a coming crisis in Ireland, if it is not here already. Credit will tighten, bank lending will cease. Because Ireland shares the Euro currency, the lifeline for Ireland will be the ECB which will accept all kinds of debt. With the higher rates, Ireland has lost its sovereign debt seigniorage and has lost its lending seigniorage, so it has turn to turn to  Mr. Trichet to meet its money and liquidity needs.

Ireland’s case is no exception. Many other nations in the Euro currency area have similar liquidity issues; Spain is another prime example.

I envision that in Europe, a continuing fall in the EUR/JPY from 107.50, will result in further stock deflation, seen in the ETF, FEZ, falling below 32.50.

Then a liquidity crisis will emerge, where there will not be enough buyers for sellers of stocks as well as bonds, causing small business failures and banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone credit seignior” and provider of liquidity to Europe.

I also believe that “framework agreements” will be announced in Europe providing for fiscal federalism, giving a whole new meaning to the term European Economic Governance.

Yes, I foresee a greater fiscal union in Europe.

Fiscal federalism will result in the Eurozone evolving into a region of global governance where national sovereignty will be a concept of a bygone era; and state corporatism will be recognized as sovereign; and austerity as a way of life.

The Economist Magazine in article Happy Go Lucky Christina, features Christina Fernandez de Kirchener. I consider her to be Argentina’s credit seignior.

Are You Looking For A Home In San Francisco?

August 30, 2010

Perhaps you are looking for a home in San Francisco; well if that be the case, then perhaps realtor David Corbell can be of help to you as he relates that Glenn Park homes sell for $851,000.

Refin reports that homes in the area currently list for $847,000. The home at 292 Whitney St San Francisco, CA 94131 lists for $799,000 which is $715/sq foot.

Or perhaps the home at 140 Panorama Dr, San Francisco, California 94131, listed for $795,000 is more for your liking; its MLS number is 368927.

Yen Surges And Euro Falls Lower Causing Sell Off In Stocks

August 30, 2010

Introduction

The stock market turned bearish 8/11/10 with semiconductors leading the way down; and US Treasuries, TLT, turned bearish 8/27/2010.

The 30-10 yield curve, $TYX:$TNX,  began flattening on August 11, 2010, on the Federal Reserve Chairman’s announcement of August 10, 2010 of the purchase of mortgage-backed securities. Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt; this caused the bond rally in US Treasuries, TLT, that began April 6, 2010 to fail, sending bond prices lower and interest rates higher.

The trend, will be now be lower both for both stocks AND bonds.

Systemic risk is quite high. Liquidity evaporation could happen quite easily, resulting in a liquidity crisis, where there may not be enough buyers of investment securities to meet sellers demand. Because of this risk I am invested in Gold bullion, GOLD.  I believe that out of the soon coming liquidity crisis, American Express, AXP, will be integrated with the US Treasury, through a Presidential Executive Order, or will become reconstituted as a bank, and be integrated with the Federal Reserve. Then what little lending occurs, will take place through this state-corporate combine, overseen by a Credit Seignior, that is a lending boss.

Those interested in short selling may want to consider the Proshares 200% inverse ETFs, TBT, as well as SSG, SMK, SJH, and EPV

Also Direxion offers the 300% inverse ETFs, TMV, as well SOXS and FAZ

Financial market report for August 30, 2010

The Euro, FXE, traded lower to 125.16; the Yen, FXY, surged up to 117.11

The chart of the EUR/JPY shows trading at 107.23; this is reflected in a falling FXE:FXY, causing European stocks FEZ to fall lower. The 200% inverse of the Euro, EUO, traded up.

Japanese shares, EWJ, fell 0.32% to trade at 9.49; the Bank of Japan’s loan efforts have failed to raise the market share value of EWJ.

The AUD/JPY traded lower at 75.41 this is reflected in a falling FXA:FXY causing Billiton, BHP, to trade slightly lower to 66.50.

The Mexico Peso Japanese yen carry trade, FXM:FXY, traded lower, causing Mexico, EWW, to trade lower; it is perched on a ledge of support and could easily fall rapidly lower.

Currency traders reentered their short of the Swedish Krona-Japanese Yen carry trade, causing Sweden, EWD, to fall 3.1% lower.  The direction of the FXS:FXY carry trade is down, taking Sweden’s shares lower. 

With the Yen, FXY, falling from 117.63, to today’s 117.11; the world has entered competitive currency deflation. Currencies will all be tumbling lower together, albeit a different rates over time.

World stocks, ACWI, fell lower to 39.27.

Bonds, BND, today up to 82.75. But a high in Total Bonds was likely achieved August 24, 2010 when, when BND rose to 82.80. 

Semiconductors, SMH, fell strongly.  Just as there is a yield curve, which has been flattening since August 11, 2010, i.e. the 30-10 yield curve, $TYX:$TNX, going flatter, I perceive the personal computing curve which has been steepening since March of 2010, will be flattening as semiconductors falls relative to hard drives, SMH:STX.

Chart of the 30-10 Yield Curve

Chart of SMH relative to STX

I am expecting semiconductors to be a stock market loss leader; I see the bottom falling out of semiconductors, SMH. These started to fall heavily on August 19, 2010, and went ex-dividend on August 22, 2010. At that time they accelerated their loss compared to compared to the Russell, 2000, IWM, Banks, KBE, Basic Materials, XLB which is seen in the chart of  SMH, IWM, KBE, and XLB.

The chart of semiconductors, SMH, shows a recent bearish engulfing candlestick; then a one rally on August 27, 2010, that came by yen carry trade investing, and a sell off today to close at 24.63.

Pablo Gorondi, of the  Associated Press writes that oil, $WTIC, falls below $75, on crude demand uncertainty and after retracing some of Friday August 27, 2010 meteoric carry trade based rise; USO fell 0.94% to 33.10.

US Government Bonds, TLT, are  up 1.91%, to close at 107.37, recovering some of their terrific loss of August 27, 2010, when the yield curve flattened on the Federal Reserve Chairman’s announcement of a likely purchase of even more mortgage-backed securities, which sent bond prices sharply lower and interest rates higher.

I believe the trend now will be both stocks AND bonds lower, with semiconductors leading stocks down; and the longer out Treasuries, TLT, experiencing more loss than the US Ten Year Note, IEF.  I believe the 30 Year to 10 Year Yield curve, $TYX:$TNX, will be flattening even more, decimating those invested in long-term US Government bond funds such as PIMCO Long-Term US Government B, PFGBX.

Systemic risk is quite high. Liquidity evaporation could happen quite easily, resulting in a liquidity crisis, where there may not be enough buyers of investment securities to meet sellers demand. Because of this risk I am invested in Gold bullion, GOLD.  I believe that out of the soon coming liquidity crisis, American Express, AXP, will be integrated with the US Treasury, through a Presidential Executive Order, or will become reconstituted as a bank, and be integrated with the Federal Reserve, and that what little lending occurs, will take place through this state corporate combine overseen by a Credit Seignior, that is a lending boss.

Those interested in short selling may want to consider TBT as well as SSG, SMK, SJH, and EPV as seen in this combined Yahoo Finance Chart, and TMV as well SOXS and FAZ as seen in this combined Yahoo Finance Chart. I recommend a portfolio loaded 65% short debt; and 35% short stocks.

It was the Russell 2000 Volatility, ^RVX, that produced the 4.5% gain in SJH today, as seen in the chart of SJH, IWN, and ^RVX

Perhaps one might enjoy my chart site: 19 ETFs to sell short and 11 ETFs to buy long for a debt deflationary bear market.

Most are gold stock bulls. I am a gold stock bear. The HUI precious metal mining shares, $HUI, usually make market turns lower with US Treasury Bonds, $USB. The chart of $HUI:$USB, turned lower today as the gold mining stocks turned lower today August 30, 2010, and the US Treasuries turned lower on August 27, 2010. One could short the junior gold mining stocks, GDXJ, which closed lower today at 29.24, but better results will be achieved with TBT and/or TMV.

$HUI:$USB,

GDXJ,

 TMV

The $US Dollar, $USD, closed at 83.17; UUP closed at 24.14.  I provide the weekly chart of the $US Dollar for one’s reference

The ratio of the emerging market currencies, CEW, relative to major currencies, DBV, CEW:DBV, rose back near its recent high.

Currency traders took the Swiss Franc, FXF, higher again today; in so doing, continuing to profit from their the Swiss Franc to Australian Dollar carry trade as seen in chart of FXF:FXA. The onset of the European Sovereign Debt Crisis, brough a tide of money flowing into Swiss Banks, and the currency traders played this like a fiddle by going long the Swiss Franc and short the Australian dollar to great financial reward.

Confirming that the world has entered into Kondratieff Winter, the once world leading stock Exxon Mobil, XOM, fell below 60 on August 19, 2010 to trade at 59.00. It has a PE of 11.50 and a dividend of 3.0%.

Ben Levisohn in WSJ article The Decline Of The PE writes: The stock market’s average price/earnings ratio is in free fall, having plunged about 36% during the past year, the largest 12-month decline since 2003. It now stands at about 14.9, compared with 23.1 last September, based on trailing 12-month earnings results. Based on profit expectations over the next 12 months, the P/E ratio has fallen to 12.2 from about 14.5 in May.

Tyler Durden of Zero Hedge relates the Jim Quinn’s comments from The Burning Platform that Today’s Robber Barons Head The Age of Mammon:  Today’s the robber barons that represent the Age of Mammon : As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West. These are the robber barons that represent the Age of Mammon.

Bill Van Auken of WSWS.org says Glenn Beck in Washington: Preaching The Gospel of Mammon And Militarism. The Washington rally organized by right-wing Fox News TV personality Glenn Beck on Saturday offered a twisted mix of religion, potted history and the glorification of the military under the banner of “Restoring Honor” to the USA. (Images of the Restoring Honor Rally)  At the Lincoln Memorial, he came before the crowd as the nation’s preacher-in-chief, promoting a gospel of Mammon, Americanism and militarism. The word “Obama” did not cross Beck’s lips. Instead, he advanced the themes of “Faith, Hope and Charity.” Perhaps the most outrageous pretense of the event was that it somehow had “reclaimed the civil rights movement,” by presenting the idiotic and reactionary rant of Beck on the same site and 47 years to the day that Martin Luther King, Jr. delivered his “I have a dream” speech. In the months leading up the event, Beck used his radio and television broadcasts to suggest that the American right was somehow the legitimate heir of the civil rights movement of the 1960s, insinuating that it had arisen to counter similar adversities and oppression. The association of King with a rally glorifying militarism was perhaps the greatest obscenity. “What is it that America still believes in?” Beck asked in his opening remarks. “Our military.” A year before his assassination, King denounced the Vietnam war, accusing Washington, in terms that are fully applicable to the ongoing wars in Iraq and Afghanistan, of fighting “on the side of the wealthy and the secure while we create hell for the poor.” While Beck hailed King and the civil rights movement Saturday as “people of faith” who merely believed that “everybody deserves a shot,” earlier this year he used one of his broadcasts to denounce King as a “radical socialist” and question why a national holiday had been proclaimed in his honor. The day after the rally, Beck dismissed the demands raised at the 1963 march on Washington for jobs and decent housing as “racial politics” and said that the civil rights movement’s economic agenda was “a part of it that I don’t agree with.” Instead of policies, principles and action steps, Beck offered reactionary bromides, telling the crowd, “The poorest among us are still some of the richest in the world … and yet we don’t recognize it.” “We all must realize how nice we have it here, in spite of our problems,” added Beck, who resides in a $4.5 million dollar mansion in New Canaan, Connecticut. He counseled the crowd that “charity begins at home first.” (There is no)  genuine alternative to the policies pursued by both big business parties and allows demagogues on the right to exploit the crisis for their own purposes. 

Tyler Durden presents The Findings Of The Working Group On Extreme American Inequality document the pyramid ow wealth.

Symbols used in this report: AUD/JPY, EUR/JPY, yen carry trade, yield curve, Russell 2000 Volatility

FXE, FXY, FXS, FXA, UUP, FEZ, EUO, BHP, EWW, ACWI, SMH, STX, XLB, USO, TLT, IEF, AXP, TBT, SSG, SMK, SJH, EPV, TMV, SOXS, FAZ, GDX, GDXJ, CEW, DBV, XOM, IWN,

Semiconductors Are Leading The Stock Market Lower

August 30, 2010

Market report for the morning of August 30, 2010

With one hour into today’s trading, currency traders are selling the EURJPY and the AUDJPY causing debt deflation in stocks.

US Government Bonds, TLT, are  up 1.1%, recovering some of their terrific loss of August 27, 2010 when the yield curve flattened on the Federal Reserve Chairman’s announcement of a likely purchase of even more mortgage-backed securities which sent bond prices sharply lower and interest rates higher.

I believe the trend now will be both stocks AND bonds lower, with semiconductors leading stocks down; and the longer out Treasuries, TLT, experiencing more loss than the US Ten Year Note, IEF.  I believe the 30 Year to 10 Year Yield curve will be flattening, decimating those invested in long-term US Government bond funds  such as PIMCO Long-Term US Government B, PFGBX.

Pablo Gorondi, of the  Associated Press writes that oil, $WTIC, falls below $75, on crude demand uncertainty and after retracing some of Friday August 27, 2010 meteoric carry trade based rise; USO fell 094%.

Currency traders have reentered their short of the Swedish Krona-Japanese Yen carry trade, causing Sweden, EWD, to fall 2.0%. The direction in the FXS:FXY carry trade is down, taking Sweden’s shares lower.  

Semiconductors, SMH, is off strongly this morning.  Just as there is a yield curve, which has been flattening since August 11, 2010, i.e. the 30-10 yield curve, $TYX:$TNX, I perceive the personal computing curve which has been steepening since March of 2010 will be flattening as semiconductors falls relative to hard drives, SMH:STX. 

I am expecting semiconductors to be a stock market loss leader; I see the bottom falling out of semiconductors, SMH. These started to fall heavily on August 19, 2010, and went ex-dividend on August 22, 2010. At that time they accelerated their loss compared to compared to the Russell, 2000, IWM, Banks, KBE, Basic Materials, XLB which is seen in the chart of  SMH. IWM, KBE, XLB.

The chart of semiconductors, SMH, shows a recent bearish engulfing candlestick; then a one rally on August 27, 2010, that came by yen carry trade investing and a sell off today.

Japanese shares, EWJ, are up only 0.1%; the Bank of Japan’s loan efforts have failed to raise the market share value of EWJ.

The chart of the EUR/JPY shows trade lower at 107.53; this is reflected in a falling FXE:FXY, causing European stocks FEZ to fall lower. The Euro, FXE, is trading lower at 126.48; the Yen, FXY, is up at 116.79. The 200% inverse of the Euro, EUO, is trading up.

The AUD/JPY is trading lower at 76.02; this is reflected in a falling FXA:FXY causing BHP to trade slightly lower.

With the Yen, FXY, falling from 117, the world has entered competitive currency deflation. Currencies will all be tumbling lower together, albeit a different rates over time. 

World stocks, ACWI, are falling lower.

Systemic risk is quite high. Liquidity evaporation could happen quite easily, resulting in a liquidity crisis, where there may not be enough buyers of investment securities to meet sellers demand. Because of this risk I am invested in Gold bullion.  I believe that out of the soon coming liquidity crisis, American Express, AXP, will be integrated with the US Treasury, through a Presidential Executive Order, or will become reconstituted as a bank, and be integrated with the Federal Reserve, and that what little lending occurs, will take place through this state corporate combine overseen by a Credit Seignior.      

Samantha Bomkamp and Geir Moulson of the Associated Press write that Intel Corp, INTC, is buying the wireless communications unit of Germany’s Infineon Technologies AG for $1.4 billion in cash, the second deal in as many weeks that allows the chipmaker to expand beyond the struggling personal computer market. Intel has tried with limited success to get its chips into cell phones. It is hoping to change that by buying Infineon’s wireless business, which makes chips for smart phones such as Apple Inc.’s iPhone. It’s a problem Intel is urgently trying to fix because the smart phone market is too lucrative for Intel to remain a bit player. Intel’s chips are criticized as being too power-hungry for today’s smart phones. The Infineon deal would give Intel technical know-how to make chips for small devices that don’t drain batteries as quickly. That expertise is particularly needed for chips built around the low-power ARM architecture, which is widely used in cell phones. The deal, which still requires regulatory approval, is expected to close in the first quarter of 2011.

For Arabs In Israel, A house Is Not A Home

August 30, 2010

EdwardPlatt in the NewStatesman writes: Three representatives of Hamas have been forced to seek sanctuary at the Red Cross compound in East Jerusalem — charged not with terrorism, but with “disloyalty” to the state. Edward Platt on a strange case of exile inside Israel.

Day 33 of the sit-in at the Red Cross compound in East Jerusalem began much like those that preceded it. The three Hamas parliamentarians who have been charged with disloyalty to a state whose jurisdiction they do not recognise awoke at 6am in the meeting room on the second floor of the white stone building in the Sheikh Jarrah area. Ahmad Atoun, who was an imam before he began his brief political career, led the first prayers of the day. The men washed in a bucket, ate breakfast and at ten o’clock came down to the L-shaped courtyard that has become the site of their protest. The plain white walls of the courtyard are decorated with posters that explain their case: “Jerusalem Is An Occupied City.” “We Will Stay Here For Ever.” “We Will Not Leave Our Homes.”

Photographs of the three bearded men, and a fourth colleague who is in prison, were superimposed on an image of the gold-plated Dome of the Rock – the holiest site in the city in which they were born, and from which the Israeli authorities are attempting to expel them.

When I arrived five minutes later, a television crew was setting up outside the green metal gates at the entrance to the courtyard, and one of the teenage boys who attends to the men and their guests was updating the sign that keeps a tally of the length of their confinement. As the numerals changed from 32 to 33, Mohammed Totah, Khaled Abu Arafeh and Ahmad Atoun took their seats beneath the canopy where they would spend the day receiving guests. The chairs lined up against the walls in the traditional Arab manner are constantly in use, and sometimes the courtyard is full to overflowing: on Friday lunchtimes, an awning is erected in the street, and an imam says prayers to the assembled crowd. According to Red Cross officials, most of East Jerusalem society has passed through the courtyard. Three British peers – Jenny Tonge, Nazir Ahmed and Raymond Hylton – have been among the guests.

Despite the uncomfortable conditions in which they live, the three men at the centre of the protest were smartly dressed in pressed shirts and dark trousers. Until 2006, Moham­med Totah taught business administration at al-Quds University and Abu Arafeh was an engineer, while the preacher, Ahmad Atoun, worked for various Islamic charities. Yet their lack of experience did not prevent them from standing as candidates for the “Change and Reform” movement, as Hamas was called in the legislative elections held in the Palestinian territories in January 2006; if anything, it was an advantage, because the endemic corruption of the Palestinian Authority, which was dominated by Yasser Arafat’s Fatah party, had turned the voters against the political elite. “People knew we were good Muslims and they trusted us,” said Mohammed Totah, a tall and well-mannered man with thinning hair and a neatly trimmed beard.

Hamas, which was set up in the Gaza Strip in 1988, is known in the west for the crude, anti-Semitic rhetoric of its founding charter and for its terrorist activities. Its paramilitary wing has killed several hundred Israeli citizens, through the use of suicide bombers and other means, yet it also runs a network of charitable organisations in the Palestinian territories, and is respected for the even-handed way in which it distributes resources. In 2006, it won 44 per cent of the vote; Mohammed Totah and Ahmad Atoun won two of the 74 seats that gave it a majority in the 132-seat parliament, the Palestinian Legislative Council, and Abu Arafeh became minister for Jerusalem affairs.

“The world witnessed that we were democratically elected,” Abu Arafeh said through his colleague Mohammed Totah, who speaks the best English of the three. But the men had little chance to implement their mandate. “The European Union said there must be democratic elections, and we must accept the results,” says Mohammed Totah. “But afterwards, they said, ‘No, we will not accept Hamas.’”

Four months after the election, the then Israeli minister of the interior revoked the men’s rights to residency in Jerusalem and ordered them to leave Jerusalem and Israel “permanently”. Events prevented the order being carried out: before the 30-day limit had expired, the Israeli soldier Gilad Shalit was kidnapped by Hamas militants in Gaza, and Israel began arresting officials and representatives of the movement. The three men, together with their colleague Sheikh Mohammed Abu Teir (who is distinguished in the many posters by his bright red beard, which he dyes in honour of a tradition supposedly established by the Prophet Muham­mad), spent the next three and a half years in Israeli prisons.

That none of them has been accused of terrorist offences is irrelevant as far as Israel is concerned – it regards Hamas’s paramilitary, political and charitable activities as inextric-ably linked and mutually reinforcing, and the men’s attitudes to Hamas’s use of violence would do little to persuade it that it is wrong. If they could “secure their rights” by peaceful means, Mohammed Totah said, then they would do so, but negotiations have led nowhere, and under international law they have the right to use all available means to resist the occupation. “It isn’t violence,” he insisted repeatedly, “it’s resistance – and even if you don’t want to resist, the occupation will give you no choice. It will come to your house, it will kill your children, it will take your land, it will put you in prison.”

The four men were released at the end of May, and the Israeli authorities promptly “unfroze” the 30-day order that had been issued in 2006. Mohammed Abu Teir – the eldest of the four, and the most experienced politician, who has spent a total of 30 years in Israeli prisons – was told to leave Jerusalem by 19 June. The others were told to leave by 3 July.

The concern their case provoked was sufficient to overcome the bitter factional dispute between Fatah and Hamas. All four men went to see Mahmoud Abbas, president of the Palestinian Authority, at his office in Ramallah on two occasions during the 30-day period. He told the men that the deportations were “a red line” and they couldn’t be permitted to proceed. In public, he described the decision to deport them as a “grave act”, and yet he was unable to do anything to prevent it.

Mohammed Abu Teir said that he would not leave the country where his family has lived for 500 years, or renounce his membership of a parliament to which he was democratically elected, and he was arrested and imprisoned “for staying in Israel illegally”. The other three knew their time would come, and sought sanctuary at the Red Cross compound on 1 July. The aim of their protest is simple, says Mohammed Totah: “We want our rights – nothing more – and we will stay here until the international community recognises the justice of our case.”

It is not the first time that Israel has attempted to deport Hamas representatives: on 17 December 1992, it responded to the killing of a border police officer by deporting 415 of the organi­sation’s leading figures to Lebanon. The tactic was meant to destroy Hamas, but instead it provoked a wave of international condemnation that enhanced its status. “Everyone wanted to meet with them, Hamas became stronger, and, in the end, Israel was forced to bring them back,” said Abu Arafeh.

On 18 December 1992, the UN Security Council unanimously adopted Resolution 799, which expressed “its firm opposition” to the measure, and reaffirmed that the “deportation of civilians constitutes a contravention” of Israel’s obligations under the Fourth Geneva Convention, which applies “to all the Palestinian territories occupied by Israel since 1967, including Jerusalem”. Eighteen years later, the men’s lawyers have urged the Security Council to hold Israel accountable by Resolution 799, though Israel is unlikely to comply, simply because it does not recognise East Jerusalem as occupied territory. The international community regards Israel’s decision to annex the areas of East Jerusalem that it captured during the Six Day War of 1967 as illegal, but the Israelis insist that Jerusalem is the “eternal and indivisible capital” of the Jewish people.

Since 1967, they have built settlements for 250,000 people on occupied land and devised various policies to combat demographic trends which indicate that the Jewish proportion of the city’s population could fall to no more than 50 per cent by 2035. One-off measures, such as the decision to exclude almost a third of the Arab-Palestinian population from the city’s first census, and the construction of the “separation wall” along a route designed to “remove 50,000 Arabs from East Jerusalem”, as one official put it, are complemented by a long-term policy of revoking and restricting Palestinian residency rights. There are said to be at least 10,000 unregistered children in East Jerusalem; a child who has only one parent with residency rights does not receive a Jerusalem ID, and a person without residency rights cannot win them by marriage – though a person with them may well lose them. Residency rights can be revoked if a resident of East Jerusalem cannot fulfil stringent bureaucratic requirements to prove that the city is their “centre of life”, or if they are said to have “severed their connection” to the city.

Israel revoked the residency rights of 8,558 Palestinians between 1967 and 2007, yet this is the first time that it has attempted to do so on the grounds of “disloyalty”. Whether rumours that Israel has drawn up a list of 315 people who are next in line for revocation of residency status are true or not, the vagueness of the charge concerns the parliamentarians’ lawyer, Hassan Jabareen, general director of the human rights organisation Adalah. “If this decision is final,” he told me, “the conclusion is that residency can be revoked from any Palestinian engaging in public political activity. Today it’s a Hamas member; tomorrow they’ll revoke the residency of a Fatah member, or a senior PA adviser. Or a Palestinian journalist.”

The protest tent at the Red Cross compound is just one of several that have been set up across Jerusalem in the past two years. There is another in the village of Silwan, where a group of settlers that controls the archaeological site and visitor attraction known as the “City of David” is attempting to expand the Jewish presence, and another on the far side of Sheikh Jarrah, where settlers have displaced two Palestinian families from their homes.

Sheikh Jarrah is a typically run-down district of East Jerusalem, though also home to many of the city’s embassies, hotels and international NGOs. On my way back to the Red Cross compound later in the afternoon, I watched an Orthodox Jew in tailcoat and ringlets emerge from the turning to the contested houses – 300 metres beyond the hotel where Tony Blair maintains lavish headquarters on his rare visits to the Middle East – and walk past a patch of derelict land where a group of Palestinian kids were playing. Such sights are increasingly common in East Jerusalem.

Mahmoud Abbas insists that Israel must stop building settlements as a precondition for starting peace talks, but President Barack Obama’s administration has failed to force Israel to comply. Last November, Binyamin Netanyahu’s right-wing administration agreed to a ten-month, partial freeze on settlement-building in the West Bank, but it insisted that Jerusalem was exempt. And in March, the interior minister, Eliyahu Yishai, precipitated the most severe breach in US-Israeli relations in years when he announced, during a visit by the US vice-president, Joe Biden, the construction of 1,600 new housing units in East Jerusalem.

The previous day, George Mitchell, the US peace envoy to the Middle East, had announced that the Israelis and Palestinians had agreed to hold four months of indirect peace talks – the first since December 2008, when Israel began the three-week assault on Gaza that it called Operation Cast Lead. Biden had begun the day by asserting America’s “absolute, total, unvarnished commitment to Israel’s security”, but finished it by condemning “the substance and timing of the announcement”.

Abbas, whose democratic mandate has expired, and whose credibility with the Palestinian electorate has been severely weakened, had little choice but to pull out of the talks. When they eventually began in May, they made no progress, and yet the Americans pressured both parties to move to face-to-face negotiations.
On 20 August, the US secretary of state, Hillary Clinton, announced that Netanyahu and Abbas will meet in Washington, DC on 2 September. It is highly unlikely that these new talks will lead to a successful conclusion: unless the Israelis renew their moratorium on settlement development, which expires in September, there will be only the briefest opportunity for engagement on the possibility of creating a circumscribed Palestinian state on the West Bank. And in any case, the other final status issues – the right of return for Palestinian refugees and the future of Jerusalem – are likely to prove insurmountable.

The parliamentarians’ fate would form no more than an insignificant footnote in any negotiation, and yet it is indicative of the deadlock over the city’s status. When I arrived at the compound, I was told that the Palestinian Authority’s chief negotiator, Saeb Erekat, had been to see them earlier in the day. It had been a busy afternoon.

At three o’clock, the men had retired upstairs to pray and sleep, and at five they had handed out school leaving certificates to four coachloads of students. In the evening, the men’s families arrived to see them. Each man has at least four children, and by eight o’clock, as the call to prayer from a nearby mosque drifted through the evening air, there were as many as 50 people in the courtyard. The men and women formed separate lines facing the wall of the building, their discarded shoes heaped beside the carpets that served as prayer mats, as Ahmad Atoun intoned prayers in a rich baritone.

Afterwards, the guests sat on the chairs beneath the awnings, or remained seated on the mats as a boy distributed bitter coffee in plastic cups and a girl in a blue headscarf passed round an ice-cream tub filled with home-made fig rolls. Children ran in and out of the gates, or darted through the open doors of the Red Cross building. Mohammed Totah gestured towards a girl in a dark dress. “I have an eight-year-old daughter, and she says to me that families all over the world live under one roof – why aren’t you allowed to come home?”

The men say the attempt to deport them will prove as counterproductive as the mass deportation of 1992: they see it as another step on the long road to Palestinian liberation. Yet such optimism seems at odds with the precariousness of their situation. The Red Cross does not enjoy diplomatic immunity, and the main police station in East Jerusalem is no more than a hundred metres up the hill.

Israel has recently begun inquiries into the deaths of nine Turkish activists on the Mavi Marmara, the ship that was attacked by Israeli forces as it attempted to carry aid to Gaza in May. Mohammed Totah believes it is only the disastrous consequences of that raid that have prevented their rearrest. “There are no red lines for the occupation, but after they killed nine people on the ship, they don’t want to add another crime to their account. They don’t want to do it now, but they will come, sooner or later – maybe after a few days, maybe less.”
 

The role of Hamas – considered a terrorist organisation by the EU and US – divides broadly into two main spheres of operation: social programmes such as building infrastructure, and the militant operations carried out by the underground Izz ad-Din al-Qassam.
Given its beginnings as a guerrilla movement, Hamas retains a degree of secrecy about its power structures. Gaza is led by the disputed prime minister Ismail Haniyeh (who was dismissed in 2007 by President Mahmoud Abbas but ignored the decree). However, most of the day-to-day decisions are made by the political bureau, chaired by Khaled Meshal and made up of about ten members, many of whom live in exile in Syria.
Major policy decisions are made by the Shura Council, an internal parliament consisting of roughly 50 members inside and outside the Palestinian territories. It cannot meet often, because some of its members are unable to travel into Gaza or the West Bank for fear of assassination.

Meshal’s political bureau in Syria is the main fundraising arm of Hamas, and manages relations with Arab and Muslim countries. Some argue that this makes the bureau more pragmatic than the leadership within the territories. However, there is a question mark over how much control Meshal, though the group’s leader, has in this uncohesive organisation.

Japan Central Bank Eases Monetary Policy By Expanding Loan Program As Recovery Falters

August 29, 2010
Tomoko A. Hosaka, Associated Press Writer, reports that Japan’s central bank further eased monetary policy Monday in response to a strong yen and growing political pressure to take action on a faltering economic recovery.

The 8-1 decision came during an emergency board meeting called by Bank of Japan Gov. Masaaki Shirakawa. The board voted unanimously to keep the bank’s key interest rate at a super-low 0.1 percent.

To boost liquidity, the central bank unveiled a new six-month low-interest loan program to financial institutions. Combined with an existing three-month funds-supplying operation worth 20 trillion yen ($236.4 billion), banks will now have access to a total of 30 trillion yen ($355 billion).

“With this, the bank will encourage a decline in market interest rates and further enhance easy monetary conditions,” it said in a statement.

Japan’s export-driven economy faces growing uncertainty due to the strong yen and slowing global growth. The Japanese currency hit a fresh 15-year high versus the dollar last week.

Sustained strength the yen is toxic to vital exporters such as Toyota Motor Corp. and Sony Corp. because it erodes their international profits and makes their goods less competitive abroad. In the April-June quarter, Japan lost its place to China as the world’s No. 2 economy after posting annualized growth of just 0.4 percent.

The central bank cited mounting worries about the U.S. economy and volatility in foreign exchange and stock markets for its latest steps.

“The bank believes that the monetary easing measure, together with the government’s efforts, will be effective in further ensuring Japan’s economy recovery,” it said.

The loan expansion comes as Prime Minister Naoto Kan prepares a new set of economic stimulus measures. He is expected to meet with Shirakawa before announcing a stimulus framework later Monday.

News of the extraordinary meeting sent Japanese stocks up sharply. The Nikkei 225 stock average advanced 2 percent to 9,172.13 in the afternoon. The dollar rose to 85.43 yen from 85.21 yen late Friday.

Economists, who predicted the central bank’s decision, say there may be more to come.

“If the economic outlook and market conditions get worse, the BOJ will likely announce some additional easing measures,” said Masaaki Kanno, chief economist at JPMorgan Securities Japan, in a note to clients.

The central bank’s next scheduled board meeting begins Sept. 6.

The Yield Curve Flattens On The Federal Reserve Chairman’s Announcement Of Purchase Of Mortgage Backed Securities Sending Bond Prices Lower And Interest Rates Higher

August 29, 2010

Introduction

The yield curve began flattening on August 11, 2010, on the Federal Reserve Chairman’s announcement of August 10, 2010 of the purchase of mortgage-backed securities. Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt; this caused the bond rally in US Treasuries, TLT, that began April 6, 2010 to fail, sending bond prices lower and interest rates higher.

I … Bonds fell and stocks rose as the Fed Chairman said that the Central Bank might purchase debt if the economy falters.

The August 27, 2010 ticker-tape chart of AXP, KBE, IWM, FEZ, TLT,  shows American Express traded up early in the day as the world awaited “word of hope” from the US Federal Reserve Chairman Ben Bernanke from the Wyoming conference of international banking, financial and credit leaders meeting at the Kansas City Federal Reserve Bank’s annual symposium.

Then early in the morning, Federal Reserve Chairman Ben Bernanke said the central bank might make another big purchase of securities if the economy were to falter significantly.

Bond investors, reacted negatively to more news of economic contraction as well as news of potential monetization of debt and pulled money out of  the Zeroes, ZROS, the 20 to 30 Year US Treasuries,  TLT, and the US Ten Year Note, IEF, which turned Bonds, BND, lower. This caused stocks to rise, and the euro yen carry trade supported the market moving higher, as is seen in the combined chart of FXE and FXY, FXE:FXY, as the Euro, FXY, rose some but then fell to finish basically unchanged. The Yen, FXY, traded lower to 116. With the fall of the Yen, FXY, lower today from 117 to 116, competitive currency deflation has commenced. Currency traders also took the Australian Dollar, FXA, and the Swiss Franc, FXS, higher as well as can be seen in the chart of FXY, FXE, FXA, FXS.

II … The yield curve, $TYX:$TNX, continued its process of flattening on Friday August 27, 2010, a process that had begun on August 11, 2010, as the interest rate on the 30 US Government Bond, $TYX, rose less than the rate on the 10 Year Note $TNX. 

The chart of $TYX:$TNX shows a fall of 1.31%, as $TYX rose 4.73%, and $TNX rose 6.12%.

The 30 Year US Bond, TLT, fell 2.83% and the Ten Year Note, IEF, fell 1.15%; and the Zeroes, ZROZ, fell 4.95%

The yield curve flattened Friday August 27, 2010 rewarding those invested in TMV, more than those invested in TYO.

The 300% inverse of the 30 Year Bond, TMV, rose 8.96%; and the 300% inverse of the Ten Year Note, TYO rose 3.87%.

The last place one wants to be invested, is in a long-term Government Bond Fund such as PIMCO Long-Term US Government B, PFGBX. which fell 2.12%; in contrast, the Intermediate Government Bond Fund, Goldman Sachs US Mortgages A, GSUAX, fell only 0.10%.

The chart of the yield curve, $TYX:$TNX, shows a massive lollipop hanging man candlestick on August 11, 2010; this as significant disinvestment from stocks commenced August 10, 2010, with world stocks, VT, falling to 43.27, when as the Economist reported the US Federal Reserve announced its decision to reinvest the proceeds of maturing mortgage-backed securities in its portfolio into Treasury bonds. Then on August 11, 2010, the yield curve began flattening, which continued through August 27, 2010. The weekly chart of the yield curve, $TYX:$TNX, shows two weeks of being parabolically lower.  

III … The  “end of credit” has likely commenced. 

It’s reasonable to expect significant bond deflation to commence. Municipal Bonds, MUB, -0.01%, California Municipal Bonds, CMF, -0.14%, Corporate Bonds LQD, -0.90%,  Junk Bonds JNK, +0.62% (rose on the higher EUR/JPY), and Emerging Market Bonds, EMB, -0.29%. are all viable short selling opportunities.

Credit deflation will make Ford Motor Credit FCZ, +0.17%, (rose on the higher EUR/JPY), Financial Preferred PGF, +0.34%, good short selling opportunities as well.

IV … I personally am invested in bullion gold as I am concerned that soon there will be a liquidity evaporation, and a liquidity crisis where there may not be enough buyers to meet seller demands in the stock and bond markets. In this scenario, those invested in gold and silver will find their investment in great demand.

Symbols used in this report: yieldcurve, TLT,TMV,

Bank Of Japan To Hold Emergency Policy Meeting

August 29, 2010
The Associated Press, on Sunday August 29, 2010, 6:55 pm reports that the Bank of Japan said it will hold an emergency meeting on Monday as political pressure mounts for the central bank to ease monetary policy in the face of a surging yen.

In a statement on its website, the bank said the meeting is scheduled for 9 a.m. in Tokyo (00:00 GMT; 8 p.m. EDT Sunday). The bank had been expected to convene Sept. 6 at a scheduled two-day policy board meeting.

The Japanese government has not intervened in foreign exchange markets since 2004, but Japan’s export-driven economy faces growing uncertainty due to a strong yen and slowing global growth. The yen hit a 15-year high versus the dollar last week. A spike in the yen is toxic to vital exporters such as Toyota Motor Corp. and Samsung Electronics because it erodes their international profits and makes their goods less competitive abroad — which could undermine the country’s shaky recovery. In the April-June quarter, Japan lost its place to China as the world’s No. 2 economy after posting annualized growth of just 0.4 percent.

Japanese Prime Minister Naoto Kan on Friday made his strongest comments so far on the yen’s recent spike. He told reporters that Japan would take “decisive action” when necessary against excessive foreign exchange volatility. He is meeting with Bank of Japan Gov. Masaaki Shirakawa this week. Kan’s staff is working on new stimulus measures, and an outline will be decided Tuesday.

Expectations have been growing that Japan’s monetary authorities will do something to stem the yen’s rise, particularly after new government data last week showed that the country’s export growth lost momentum in July. Japanese leaders held an emergency meeting but emerged with few hints of an immediate response.

Analysts have said the central bank will most likely decide to boost liquidity by expanding a short-term low-interest loan program for financial institutions.

As of 4:40 PM Pacific time, the continuous chart of the EUR/JPY reads at 108.71.

Chart of the Yen, FXY shows a close on August 27, 2010 at 115.99. 

The Nekkei 225 closed at 8,991.06 on August 27, 2010.


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