Financial Market Report For February 29, 2012
Bubbles are readily seen in all fiat asset classes, that is stocks, bonds, and commodities, as credit liquidity policies of the world wide central banks have stimulated inflationism. The world major currencies, DBV, and emerging market currencies, CEW, have reinflated since the 2011 summer sell-off when investors feared, with justification, that a debt union had formed in the EU, with the result that world stocks, VT, and junk bonds, JNK, have risen over the last eight months.
Yet the bubble money machines have reached the end of sustainable bubble making capability. The chart of total bonds, BND, and the charts of credit providers, such as Master Card, MA, seen in this Finviz Screener, suggests that peak credit is being achieved. Countries now turning lower include Argentina, ARGT, on a downturn in its banks, and Israel, EIS, on fears of a global Eurasia war.
Global Materials, MXI, manifested bearish engulfing today, suggesting a possible turn lower, in the mining shares, seen in this Finviz Screener. And World Financial Institutions, IXG, seen in this Finviz Screener traded lower turned lower as well, producing a spinning top doji in the S&P, SPY, at the top of an ascending wedge.
Please consider that today could be the topping out of an Elliott Wave 2 Up in the S&P, as seen in this monthly chart and the beginning of an Elliott Wave 3 Down. The 3rd Wave Down is the most destructive of all economic waves, as it for all practical purposes destroys all wealth created on the prior waves up.
Fiat money has expanded to its full potential. Soon, the global debt trade will exhaust, and competitive currency devaluation, will turn risk appetite to risk avoidance, with the result being derisking out of stocks, and deleveraging out of commodities.
Monetary anarchy will eventually cause price inflation in countries outside of the US as they increasingly have to sell more and more of their currencies to buy commodities which are denominated in the US Dollar, $USD, UUP, which manifested bullish engulfing today. In testimony before Congress, Ben Bernanke warned on jobs. Soon real inflation will come to those without employment — having no income, the price of everything will seem really high.
Wealth can only be preserved by dollar cost averaging into, and taking possession of, and safely storing, gold bullion. In a world of failing sovereign, gold will be the premier form of sovereign wealth.
The dynamos of growth and profit that governed capitalism are losing their power through failure of the debt trade, specifically the failure of neo liberal credit and the failure of fiat money on the loss of confidence in central bank monetary policies. The dynamos of regional security, stability, and sustainability are powering up regional global governance.
The free monetary system as envisioned by Hayek, Rothbard, and Mises is simply a mirage on the Neoauthoritarian Desert of the Real. The diktat monetary system will provide diktat for both the money and credit needs for each of the world’s ten regions.
First A Deflatinary Credit Collapse Then Monetary Anarchy
Greece, and Portugal, are at the forefront of nations state that are losing their fiscal sovereignty as regional sovereign leaders and sovereign bodies dictate monetary policy, fiscal policy, and economic policy. The fiat monetary system is being replaced by the diktat money system, which will come to rule in each of the world‘s ten regions.
Regionalization is the new direction in globalism, as the ECB’s Sovereign Bond Action, and two regional framework agreements, the Fiscal Compact with its debt brake, and the Second Greek Bailout Agreement, have established a totalitarian collective in the Euro zone, where monetary cardinals under the monetary pope, Mario Draghi, will proceed with new economic and monetary policy, and budget commissioners will proceed with fiscal austerity and structural reforms. A monetary union, a fiscal union, and a structural union is forming to complement the Euro currency: a Federal Europe is now emerging. Tyler Durden writes “We suspect … CDS is pricing in the longer-term subordination and termed out insolvency risk much more clearly than the illiquid bond market does”. This communicates that the ECB is now the sovereign monetary authority, having usurped the monetary authority of EU nation states. Also the ECB with its LTRO 1 and LTRO 2, has effectively regionalized European Financials into a One Euro Bank. Thus the ECB has effected a monetary coup d etat, and now has sovereign authority in the monetary affairs of Europe. Along these lines, Euro Intelligence reports Jean-Claude Juncker says he wants a EU Commissioner with the special task of co-ordinating the Greek reconstruction efforts. In an interview with Die Welt, Jean Claude Juncker revived the German idea of a Kommissar for Greece, but with some important modifications. He said the eurozone would have to strengthen the Greek infrastructure through a much better use of structural funds. The same applied to improvements in competitiveness. This job requires political coordination, and should be entrusted to a European Commissioner, with a specific responsibility for the reconstruction of the Greek economy. Juncker make clear he does not want a commissioner to enforce savings, but to aid in reconstruction. It was insufficient that finance ministers deal with this matter on a monthly basis.
The failure of the debt trade in Greek sovereign debt has pushed the European Central Bank to print Euros with its LTRO 1 and LTRO 2, and has caused political capital to rise to replace investment capital, with the three memoranda of 38 reforms, as well as with the February 9, 2012, memorandum of understanding, the Fiscal Compact with its country specific debt brakes, with the result that capitalism has died and regional global governance is rising to replace it.
Greek Socialism is a relic of the bygone era of Neoliberalism which featured a Banker regime. The world is transitioning into Neoauthoritarianism which features a Beast regime that occupies in all of mankind’s seven institutions and in all of the world’s ten regions. The Beast regime is rising out of the most profligate Eurozone state, that being Greece, which was a political machine that opposed any meritocracy and competition, and which provided pork based upon patronage. Greece was the most non competitive and socialistic nation in the EU, and as a result has been in a recession for the last four years. Greece was a country where tax enforcement policy was subject to bribery and where flaunting of tax authority is considered patriotic. The major industry, shipping, is run by Greek shipping magnates who have transferred their wealth into banks in Switzerland and the City of London, and into Caribbean Island Pirate Coves. Greece is now a client state of a Federal Europe.
Regional statism will likely be the next step forward in the New Europe, where monetary cardinals, that is regional stakeholders exercise economic oversight over resources and manufacturing, as well as provide credit, as financial armageddon, that is a credit bust and financial collapse, is being held in abeyance, but cannot be avoided. Lacking any money good, diktat will be de rigueur, and used for both money and credit.
The massive Second Greece Bailout Agreement, the defacto regionalization of banks creating a One Euro Bank, and LTRO 2, marks a turning point in mankind’s history as regional global governance is rising to replace capitalism.
Major world currencies, DBV, and emerging market currencies, CEW, will soon be turning lower, when it becomes apparent that Greece is an insolvent nation, and that its sovereign debt is unsustainable, as Open Europe writes Take III: Don’t bore me with the details. Felix Salmon writes The Improbable Greece Plan. Greece’s debt dynamics get even worse. But of course even with well-below-market interest rates, Greece is still never going to pay that money back. The cost of this plan is €130 billion right now, and €170 billion over three years, through the end of 2014; it just continues going up from there, with no end in sight. Remember that total Greek GDP, right now, is only about €220 billion and falling.
King World News relates Fears of debt contagion. These, as well as fears of decreased growth, will cause disinvestment out of stocks and delveraging out of commodities, as fiat money dies globally on competitive currency devaluation.
Future EU Leader’s framework agreements will serve as the constitution for the New Europe, and usher in the ten toed kingdom of regional global governance, where the Beast Regime of Neoauthoritarianism, will be replacing the Banker Regime of Neoliberalism.
Soon a New Charlemagne will rise to rule the Euro zone, where Germany will be preeminent, as a type of revived Roman Empire that governs the European continent.
Bob Janjuah writes in Zero Hedge, Monetary Anarchy. The ECB by declaring on its own and without judicial or parliamentary review, a swapping out of their Greek debt for new Greek debt, that is not subject to any collective action clause, is as Mark Grant writes, Opens Pandora’s Box. Ambrose Evans Pritchard describes the ECB’s actions as legerdemain, saying the European Central Bank has taken action to insure that it suffers no loss on its Greek holdings, automatically reducing other creditors to junior status; this sets a precedent for Ireland, Portugal. Spain, and Italy.
Out of the debt travails of the profligate Mediterranean Sea country of Greece, new sovereigns are rising to rule the Eurozone. Creative destruction is working to pass the baton of sovereignty from nation states to the EU ECB IMF Troika which is the ruling sovereign in the Euro zone.
Debt Sovereignty of the Eurozone nations has been suppressed by the ECB Greek Bond Swap. Reuters reports The ECB Greek Bond swap piles pressure on the EU. The European Central Bank’s decision to exempt itself from taking losses on its Greek bonds gives its senior status in the bond market and may push up borrowing costs of other debt-strained euro zone countries, Standard & Poor’s said on Friday. The ECB and the 17 euro zone central banks made cosmetic changes to the 62 billion euros worth of bonds they own this week to avoid being pulled into Greece’s debt reduction deal, which will see private investors lose well over half their money. S&P, which carried out a mass downgrade of nine euro zone states last month, said the ECB’s move was another blow for the bloc’s weaker countries, changing the ECB’s status at least in this instance “from implicit super-senior creditor to an explicit one.”
“We believe that this development (seniority of ECB) could further weaken the prospects of peripheral euro zone sovereigns currently receiving official funding to regain the ability to access the capital markets and could raise borrowing rates of those sovereigns still accessing the primary markets,” it said in a statement.
The ECB in announcing that it is swapping out their Greek debt for new Greek debt that is not subject to any collective action clause, establishes a Euro zone monetary union, to complement the debt union, that was established when EU leaders announced the first Greek bailout agreement in May 2010.
Regional trade imbalances is another catalyst for a EU Political Union, that is a Federal Europe. Germany exports products to the peripheral European countries, which run trade deficits. Greece has a trade deficit of about 10% of GDP. Greece must have a trade surplus if public debt as well as business credit and stock leverage is to be reduced. Until Greece runs a trade surplus, Greece cannot get their government and private budgets under control. Greece must cut its fiscal expenditures and/or raise taxes. As Greece does this, the Greek economy will continue to shrink, making it more difficult buy foreign goods. This leads to a deflationary spiral. And that same deflationary spiral will spin up to take in all of Europe.
These two catalysts, the loss of debt sovereignty and regional trade imbalances, will cause political leaders to meet in even more summits, waive even more national sovereignty, and establish a European federal political union, and establish the ECB, or the Bundesbank, as the Euro’s Bank, and a fiscal union, which by diktat will provide moneyness, that is seigniorage, and thus by defacto reasoning, define a debt union, where debt servitude will establish the EU as a totalitarian collective.
The ECB by declaring on its own and without judicial or parliamentary review, a swapping out of their Greek debt for new Greek debt that is not subject to any collective action clause, establishes Greece as a client state within a Euro zone region of global governance. Julia Amalia Heyer in Der Spiegel A Political Establishment In Freefall, Greece Lurches to Left Amid Radical Austerity, communicates that Greece is the Eurozone’s first colony.
Mark Grant of Out Of The Box writes in Zero Hedge For Greece Tomorrow Has Arrived. Greece will shortly be placed into “Default” by S&P and Fitch which will trigger default language in all kinds of securitizations including Greece’s $90Bn in derivatives and may cause disgorgement from accounts that are forbidden to hold defaulted bonds.
After the country has been placed into “Default” the banks will soon follow and once again there will be all kinds of consequences in interbank lending, collateral agreements, securitizations, et al from all of this. The CDS contracts for Greece may or may not function as they stand but, as I am quite certain will happen, not enough bond holders tender their bonds for the new debt so that Greece will pass the “Collective Action Clause” which will certainly trigger CDS in my opinion and if not will show the fallacy of that market. The structure of the deal puts the IMF/EU/ECB clearly in control of the finances of Greece so they have replaced some sort of Czar with the bureaucrats of the Troika and the country no longer will control its own finances as they traded away their sovereignty for cash. In fact, an escrow account will be set up for Greece which will be controlled by the Troika and Greece is being forced to change their Constitution pledging to pay their creditors before providing any money for the country. A quick study of the math reveals that Greece will get about 19 cents on the Dollar and the rest of the money is the sovereign nations of Europe paying back their banks with the money they have supposedly lent to Greece. Greece is now nothing more than a conduit for the nations of Europe to pay back their own financial institutions. Now we will see if the Parliaments in Europe will go along with this plan as many still have to approve it and a careful reading of the math involved here may be troubling for some governments especially Finland and the Netherlands. We will also see, with Greek elections looming, how the citizens react to all of this either in the polling booths or in the streets as an additional $4Bn of spending cuts have been mandated by the Troika and they state that the money will not be paid to Greece until they are implemented which must be by the end of February.
The total outstanding debt for Greece will now rise to $1.270Tn as new debt pays off old debt in a country with substantial negative growth so that the real situation, regardless of what we are told, worsens. In early May Greece faces its next bond payments so there may be a re-do for all of this in several months’ time. If Greece is actually going to get the next round of the bailout then the other side of the coin is the increased debt being taken on by the other countries in Europe which could cause more downgrades as the new debt to GDP numbers are assessed.
People’s lives are being reduced to a predetermined subordination of the dominant philosophical and political system, as regional global government unfolds as foretold in bible prophecy . A Eurodämmerung, a Götterdämmerung, that is a clash of the current sovereign authorities with investors, will destroy credit and money, as they have been known. Out of the ensuing chaos, fate is working through creative destruction, directing that regional global governance be established.
Daniel’s interpretation of Nebuchadnezzar’s dream presents the statue of the progressions of kingdoms, Daniel 2:31-45. Kings have ruled mankind throughout history; these have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, Angela Merkel ruling the EU, and George Bush, The Decider, ruling America with Unilateral Authority. Soon ten kings will come to rule, each in his own regional power base. Most recently two iron kingdoms, the combine of the UK and European rule, and the US Hegemony, have governed the world; their power is now flowing into a ten toed kingdom of regional global governance, Daniel 2:31-33.
God’s Sovereign Will, Ephesians 1:1-11, not any human action, will bring forth a revived Roman Empire, that is a German led Europe. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. God at the appropriate time will open the curtains, and onto the world’s stage will step the most credible of Europe’s political leaders, the Sovereign, Revelation 13:5-10. He will be accompanied by Europe’s banker, the Seignior, Revelation 13:11-18. These will have have EU wide sovereign authority. The Little Authority, Daniel 7:24-25, will work behind the scenes in regional framework agreements to change our times and laws. The people will be amazed by this, and place their faith and trust in the Sovereign; they will give their allegiance to his diktat, Revelation 13:3-4.
Certainly, the objective of a European economic government will continue throughout the coming years, especially as the economic crisis continues.
Life in Europe can now be characterized as a totalitarian collective. Totalitarian collectivism is the EU’s future. European Socialism will die in 2012. Diktat will provide seigniorage, that is moneyness, to replace the seigniorage of national treasury bonds. Diktat will become a currency, that is a payment used in the exchange of goods or services.
The seigniorage of fiat money is failing, and the seigniorage of diktat is rising in its place, as is seen in the rise of power of the EU ECB IMF Troika to appoint technocratic government in Greece and Italy as well as in the massive Second Greek Bailout Agreement. The fiat monetary system is being replaced by the diktat money system, which will eventually rule in each of the world‘s ten regions.
The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising to replace the Banker regime of Neoliberalism. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast regime is to replace the Banker regime of Neoliberalism, The Beast regime is coming like a terminator that can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until mankind is totally dominated and subdued.
The Second Greek Bailout marks a transition from the fiat monetary system of capitalism into the diktat monetary system, where regional global governance is rising to rule the Euro zone.
Regionalization is the new direction in globalism, as the ECB’s Sovereign Bond Action, and two regional framework agreements, the Fiscal Compact with its debt brake, and the Second Greek Bailout Agreement, have established a totalitarian collective in the Euro zone. Monetary cardinals under the monetary pope, Mario Draghi, will proceed with new economic policy and monetary policy, and budget commissioners will proceed with fiscal austerity and structural reforms. A monetary union, a fiscal union, and a structural union is forming to complement the Euro currency.
The failure of the debt trade in Greek sovereign debt has pushed the European Central Bank to print Euros with its LTRO 1 and LTRO facility, and has caused political capital to rise to replace investment capital, with the three memoranda of 38 reforms, as well as with the February 9, 2012, memorandum of understanding, with the result that capitalism has died and regional global governance is rising to replace it.
Greek Socialism is a relic of the bygone era of Neoliberalism which featured a Banker regime. The world is transitioning into Neoauthoritarianism which features a Beast regime that occupies in all of mankind’s seven institutions and in all of the world’s ten regions. The Beast regime is rising out of the most proliferate Eurozone state, that being Greece, which was a political machine that opposed any meritocracy and competition, and which provided pork based upon patronage. Greece is a country where tax enforcement policy was subject to bribery and where flaunting of tax authority is considered patriotic. The major industry, shipping, is run by Greek shipping magnates who have transferred their wealth into banks in Switzerland and the City of London, and into Caribbean Island Pirate Coves.
A Eurodämmerung, a Götterdämmerung, that is a clash of the current sovereign authorities with investors, will destroy credit and money, as they have been known. Out of the ensuing chaos, Fate is working through creative destruction, Revelation 6:1-2, directing that regional global governance be established.
The dynamos of growth and profit that governed capitalism are losing their power through failure of the debt trade, specifically the failure of neo liberal credit and the failure of fiat money. The dynamos of regional security, stability, and sustainability are powering up regional global governance. The free monetary system as envisioned by Hayek, Rothbard, and Mises is simply a mirage on the Neoauthoritarian Desert of the Real. The fiat monetary system provided by the Free to Choose script of Milton Friedman, is an anachronism of a bygone era. Lacking any money good, diktat will be de rigueur, and used for both money and credit, in all of the world’s ten regions. The diktat monetary system will soon rule all of mankind.
In today’s news
The Euro, FXE, European Financials, EUFN, and European Shares, VGK, traded lower, on news that LTRO 2 has been completed, with Zero Hedge relating The LTRO Outcome. From SocGen’s Lauren Rosborough, €529.53bio was allocated to 800 institutions (compared with €489.19bio allocated to 523 institutions in Dec). The net increase, according to our economists, is €311bio (adjusted for yesterday’s MRO reduction, 3m LTRO allotment this morning, and the roll-off of the 3m and 6m LTROs tomorrow). The allocation was above our and at the upper end of the market range of expectations.
Tyler Durden comments The LTRO outcome opens the way for further positive risk moves (high-beta, non-Japan Asia, lower DXY) but recent price action suggests to us that the rally is fatigued.” Net: this means that following settlement, European banks will park not €500 billion but up to €810 billion with the ECB, on which they will collect 25 bps (while paying 1%, aka inverse carry as described here first). It also means that in three years Europe’s bank will have to not only pay the ECB €1 trillion in case (assuming there is no perpetual rollover of the LTRO, which there will be), but also delever by another €2.5 billion, for net asset drop of €3.5 trillion. Good luck building up shareholder equity by the same amount to offset unchanging liabilities.
Mr Durden adds, ING Groep didn’t tap 3-Yr ECB Loans, spokesman says. We fully expect the “Long Non-LTRO bank, Short LTRO” bank pair trade to be the most profitable source of alpha for a long time. I comment that ING, traded off more today than the European Financials, EUFN,
Zero Hedge relates Crown Thomas reports A Busy Two Months for the New York Fed as it sells Maiden Lane II and mortgage backed securities back to the private sector. These assets are approximated in value by the Fidelity Capital And Income Fund, which invests in distressed securities. The chart of FAGIX shows that it has outperformed junk bonds over the last two years. It’s reasonable to believe that the Fed has made a profit on the assets being sold.
FT reports CDS payouts on Greek bond deal on agenda. A group of banks and investors in the credit derivatives market will meet on Thursday to determine whether Greece’s planned debt swap deal should trigger payments on its default insurance…The question facing the International Swaps and Derivatives Association is whether the deal constitutes a “credit event” because it creates two classes of bond holders – the European Central Bank, which is spared losses, and private investors, who are being forced to take losses of up to 75 per cent on their Greek bond holdings. Nature economist Elaine Meinel Supkis says “If this isn’t a ‘credit event’ then nothing is a credit event”.
US Stocks, VTI, were sustained today by a rising US Dollar, $USD, UUP. And World Stocks, ACWX, were sustained today by a synthetic carry trade, coming from a falling Yen, FXY, and rising World Currencies, DBV, and rising Emerging Market Currencies, CEW.
Recent US Infrastructure leading stocks, Small Cap Technology, PSCT, Semiconductors, XSD, Small Cap Pure Value, RZV, Steel, SLX, and Metal manufacturing, XME, traded lower today, joining other other investments that are now turning lower on the exhaustion of neo liberal credit.
Soon exhaustion of neo liberal credit, and competitive currency devaluation, coming from the failure of confidence in sovereign debt globally, and fears of Greek debt contagion, will be turning world stocks lower, beginning most intensely with EUFN, RZV, PKB, SLX, ITB, XBI, EWX, PSP, GREK, PFF as presented in this Finviz Screener.
This article has been posted on the Internet.