Financial Market Report for May 17, 2012
Fears of European sovereign insolvency and banking insolvency recreated the investment demand for gold today May 17, 2012. Prices of precious metals, JPP, rose, taking Silver, SLV, +3%, and Gold, GLD, +2% as well as the Silver Miners, SIL, and Gold Miners, GDX, GDXJ, higher. Silver Miners rose, PAAS, 8%, SLW, 5%, HL, 4%, CDE 2%. Gold Miners rose, NGD, 7%, GG, 7%, ABX, 7%, EGO 6%, IAG 5%, NEM 5%.
The WSJ reports Greek Leftist Leder Throws Down Gauntlet on Debt. The head of Greece’s radical left party says there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts, throwing down a gauntlet that could increase tensions between Greece’s recalcitrant politicians and frustrated European creditors. (Hat Tip to Gary of Between The Hedges).
The Telegraph reports Fitch Warns of Mass Eurozone Downgrades. Ratings agency Fitch warns that all eurozone countries face a greater than 50pc chance of a downgrade if a stable, pro-bail-out government is not formed following Greece’s second round of elections. (Hat Tip to Gary of Between The Hedges).
Open Europe reports Pierre Moscouici appointed Finance Minister of France.
Emerging Market Banks, EMFN, and European Financials, EUFN, led World Stocks, VT, lower today. Chile Banks, SAN, BCH, Korea Banks, KB, WF, Argentina Banks, BFR, GGAL, BMA, BBVA, Australia Banks, WBK, Brazil Banks, ITUB, BSBR, BBD, India Banks, HDB, IBN, and the UK Banks, RBS, BCS, HBC,LYG, traded strongly lower today.
Bloomberg reports European Stocks Drop as ECB Pauses Greek Bank Lending. European stocks, VGK, declined for a fourth day as the region’s central bank paused lending to some Greek banks and speculation mounted that Spanish banks may have their credit ratings cut at Moody’s Investors Service. Bankia SA (BKIA) sank 14 percent after a report that depositors withdrew 1 billion euros ($1.27 billion) in the past week. Cookson Group Plc (CKSN) rose the most in six weeks after saying it’s considering a separation of its main divisions. (Hat Tip to Gary of Between The Hedges).
Soon there will be a banking holiday, and a government holiday, in Greece, GREK, and Argentina, ARGT. Banks will be closed, as there will be no money in the National Bank of Greece, NBR, as well as in Argentina banks BFR, GGAL, BMA, and BBVA. The major issue facing the people who live in these countries is that they have no money good. Capital controls are coming soon, and the only money gold will be personal possession and ownership in gold and silver bullion. I recommend that one “dollar cost average” into possession of gold coins, and silver bullion, as well as open up an Internet Bank account at Bullion Vault and Gold Is Money.
The stocks which had seen risk-on momentum investing, traded sharply lower, as the spigot of neoliberal finance has been turned off; these included ITB, XBI, XRT, XTL, GRID, PKB, RZV, FNIO, RWR, WOOD, PSCD, PSCI, PSCT. The best example of the failure of risk on momentum investing is seen in the trade lower in the chart of Liquidity Services, LQDT, after having risen parabolically on Federal Reserve policies of ZIRP and Quantitative Easing, as well as on funding from the ECB’s LTRO1 and LTRO2.
Risk appetitie is history; risk avoidance caused disinvestment out of the following:
Home builders ….. LEN, SPF, KBH, RYL, MDC, DHI,
Biotech seen in this Finviz Screener ….. GILD, ARIA
Retailers seen in this Finviz Screener ….. ORLY, SBH, ZUMZ, FL, PETM, TJX, PIR, ANF, LIZ, LULU, DKS, MNRO, ARO, EXPR, ULTA, LTD, HIBB, HOT,
Telecom ….. EQIX, SBAC,
US Infrastructure ….. USG, BELN, CTAS, TSCO, EXP, NX, NC, URI, LII, SPW, OC, AX, MAS, MTRX, APOG, THR, MHK, ARG, LZB, FBHS, SCSC, AWX
Small Cap Value ….. BID, GCA, WTW, MCRS, AVD, AFAM, ABM, POOL, CCO
Vice Stocks ….. SHFL, BYI, MGM, WYN
Industrial Office REITS ….. EXR, BXP
Retail REITS ….. RPT, PEI, SPG,
Hotel REIT …. SHO, FCH
Paper Producers ….. LPX, PATK, VFPI
Auto Dealerships, LAD, PAG,
Small Cap Consumer Discretionary ….. IMAX, FUN, SIX, POOL,
Small Cap Industrial ….. ROLL, FAST, AOS, SPA, SNA, LECO, DXPE
Small Cap Technolgy ….. ALLT, PKT, TRMB, OYOG, TIBX, RTLX, DDD, ROP, ENS, SMTX, ALOG, ULTI, RHT
The Transports, IYT, such as TRN, GBX, and Airlines, FAA, such as ALK, SAVE, LCC, fell more strongly than the Industrials, IYJ, such as IR, TREX, CMI, which includes Auto Parts Manufacturers, such as WPRT, TWI, GPC, seen in this Finviz Screener, Electrical Equipment Manufacturers, such as BCG, ROK, ETN, AIMC, and Chemical Manufacturers such as GRA, HUN, seen in this Finviz Screener
Debt laden firms such as IP, and MTW fell strongly.
The Flattnr ETF, FLAT, rose on a flattening 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as some investors took a perceived flight to save haven investment in longer duration US Govrenment Debt, ZROZ, and EDV, as well as longer muturity corporation bonds, BLV, and longer duration TIPS, such as LTPZ. The ongoing 3 month chart of LTPZ shows it to be a successful investment for capital protection since stocks turned down in March.
The Interest Rate on the US Ten Year Note, $TNX, traded lower, to 1.70%, causing the 10 Year US Government Note, TLT, to rise parabolically higher today.
Bonds, BND, traded basically unchanged, as Junk Bonds, JNK, traded lower.
The end of credit has commenced. Credit tighting around the world precludes a stock market bounce, and raises the risk of a sudden global financial market crash.
Credit providers AXP and DFS traded strongly lower today.
WSJ reports Fall In Chinese Loans Poses Economic Threat. Banks narrow range of firms they are willing to assist, while companies are wary of borrowing amid unsure prospects.
Bloomberg reports Dollar Funding Costs Jump As Debt Sales Scrapped. The cost to borrow in dollars is rising at the fastest pace in five months as Europe’s debt crisis leads investors to seek shelter in U.S. assets, spurring companies from China to Brazil to cancel bond sales.
Bloomberg reports Chinese Company Debt Is At Alarming Levels. Chinese companies have accumulated “alarming levels” of debt and will have difficulty with payments in an economic downturn, Xinhua News Agency said, citing Li Yang, vice president of the Chinese Academy of Social Sciences. The debt-to-asset ratio of Chinese companies is about 105.4 percent, the highest among 20 countries examined in yearlong study by Li’s team of borrowing by China’s government, corporations and individuals, Xinhua reported. Chinese companies tend to borrow from banks instead of raising funds in capital markets, Li said, as cited by Xinhua
The fall in BRICS shares, EEB, that is the fall in Brazil, EWZ, Russia, RSX, India, INP, China, GXC, and the US to BRICS stock ratio VTI:EEB, as well as the strong sell off in Argentina shares, ARGT, reflects the failure of the world central banks’ monetary authority to stimulate global growth and global trade. The tremendous rise in US Government debt, ZROZ EDV, TLT, IEF, reflects a presumed flight to safety.
The fall in Italy, EWI, Spain, EWP, and Sweden, EWP, reflects the failure of growth as well as the failure of sovereign authority and failure of banking, EUFN, in Europe.
Systemic risk is rising. Risk assets, that is emerging market infrastructure, PXR, energy, PSCE, IEZ, and material stocks, COPX, have been beaten down together with the growth stocks Steel, SLX, and Semiconductors, XSD. The failure of the world economy to grow, precludes not only their rise, but together with the lack of credit and willingness of companies to go into debt precludes a market bounce, and presents the risk of a sudden market crash.
The potential for the bonfire in world financial stocks, IXG, to explode is quite high; these traded strongly lower again today; and would have fallen sharply had it not been for a rally in Japanese banks, SMFG, MFG, MTU, NMR, on a rising Yen, FXY and a rising Australian Dollar, FXA, which caused the US Dollar, $USD, UUP to trade lower.
The stock to commodity ratio, VT:DBC, communicates how grossly overvalued stocks are.
AIG is foolishly investing in Mortgage Backed Bonds, MBB, by buying at a market top. Bloomberg reports AIG Wagers on Subprime Betting Second Time Different. American International Group Inc., the insurer that needed a $182.3 billion bailout from the U.S. government in 2008 after failed mortgage investments, is betting this time it’s different. Chief Executive Officer Robert Benmosche has increased non-government-guaranteed residential and commercial-mortgage backed securities holdings by $11.1 billion since 2010 to $28.4 billion at the end of March, according to regulatory filings. The New York-based insurer has acquired debt sold by the Federal Reserve that the central bank acquired from AIG when the company was rescued, including $600 million of CMBS last month. AIG, which is also bolstering its unit that insures home loans with low down payments, is wagering that a more than 35 percent plunge in property values, cheaper prices for the securities and fewer competitors justify returning to investments that four years ago required the government to step in when it was unable to meet margin calls to banks. The chart of AIG shows a 5% fall today.
The end of credit means the end of financialization of mortgage debt by Mortgage REITS, REM, such as Annaly Capital Management, NLY.
Chris Mardsen calls in WSWS for a United Socialist States of Europe. Global financial institutions have a $536 billion exposure to Greek debt, but the Institute of International Finance estimates the true global cost of a Greek exit to be closer to $1.2 trillion, entailing “killer losses”. Wirtschaft Woche magazine says an exit would cost euro zone governments alone $300 billion and would push the continent into a 1930s style depression.
There will be no United Socialist States of Europe, rather the Sovereign Lord God, Ephesians 3:1-21, has ordained a One Euro Government, as part of a Ten Toed Kingdom of regional global government, Daniel 2:30-31, where the Beast regime of totalitarian rule governs in all of mankind’s seven institutions, and the world’s ten regions, this monster is rising up out of the Mediterranean nation state of Greece, GREK, exactly as foretold in bible prophecy of Revelation 13:1-4.
Tyler Durden in Zero Hedge asks Who Blinks First? Greece’s Syriza has bet the farm that the cost from a Greek fallout is just too big to Europe and the terms of the hated “Memorandum” will be adjusted, while to Europe, on the other hand, the outcome to Greece, at least according to Europe and the IIF’s Dallara will be “between catastrophic and armageddon.” So… Who blinks first?
EuObserver reports German Finance Minister Wolfgang Schäuble yesterday said that Europe’s long-term response to the economic crisis must be further political and economic integration, arguing, “I would be for the further development of the European Commission into a government. I am for the election of a European President.” And FT reports Schäuble calls for closer EU integration. Wolfgang Schäuble, Germany’s finance minister, called on Thursday for the EU to move decisively towards a political union in the face of the eurozone crisis, with a directly elected president in Brussels.In a passionately pro-European speech delivered in Aachen, where he was awarded the annual Charlemagne prize, Mr Schäuble said the economic and financial crisis made it clear that closer European integration was needed.
“We must create a political union now,” he said. But he said that would not mean the creation of a European superstate, or a “United States of Europe”.
A debate was needed on precisely what responsibilities should be transferred to European level, on the principle that whatever tasks could best be done locally, regionally or nationally should not be changed.
One answer would be to give a face to European political union with a directly elected EU president in Brussels.
Mr Schäuble, who is regarded as the most pro-European member of the German government, said the EU urgently needed to improve its negotiating capacity on the world stage, with a more effective common foreign policy, and international treaties signed by all member states together.
“We must have the ambition to do more than simply protect the status quo,” he said.
Christine Lagarde, Managing Director of the IMF, speaks from Aachen Germany. The Legacy of Charlemagne,Wolfgang Schäuble and European Integration. Good evening. It is a great pleasure to be here to honor Wolfgang Schäuble, who will soon be awarded the most prestigious Charlemagne Prize. Charlemagne is often referred to as the Pater Europae, the leader who forged a cohesive unity out of a divided western Europe, and unleashed an intellectual and cultural revival. He is also famous for his economic reforms—he harmonized and unified a complex array of currencies, introducing a new currency standard, the livre, based on silver. Today, nobody has done more than my dear friend Wolfgang Schäuble to further the cause of European integration, and the destiny of a unified Germany within a united Europe. Nobody is more worthy of the mantle of Charlemagne or more deserving of the Charlemagne Prize.
Euroland will be a totalitarian collective characterized by statism and debt servitude. People living there will no longer be able to call themselves sovereign individuals, as all will be residents living in a region of Global Governance. Greeks, cannot be Germans, but bible prophecy reveals that both will be one, living under the word, will and way of the Sovereign, Revelation 13:5-10, and his banking partner, the Seignior, Revelation 13:11-18.
I am going to visit my payday lender, Ace Cash Express, where I have a $35 loan payment coming due June 1st, and relate and ask: “A global financial collapse is coming, am I still responsible for repaying?” I know what the answer is, “We have collateralized your loan via your debit card”.
A big thank you goes to Finviz for their free charting service.