Financial Market Report for the week ending May 18, 2012; this is the seventh week of entry into the Second Great Depression
A bonfire ignited in the world’s banks this week on fears of sovereign insolvency and banking insolvency in the Euro zone and on fears of the awareness of a halt to credit growth and economic growth in China. European Financials, EUFN, -8%, Emerging Market Financials, EMFN, -10%, World Banks, IXG, -8%, The Too Big To Fail Banks, RWW, -7%, Regional Banks, KRE, -6%, Emerging Market Miner, EMT, -8%, Emerging Market Infrastructure PXR, EMIF, -7%, Mid Cap Growth, JKH, 7%, US Infrastructure, ITB, -8%, Steel, SLX, 12%, led stocks lower, ACWI, -5%, lower this week on the exhaustion of the world central banks’ monetary authority, specifically the death of credit, both sovereign and corporate, and the ending of global growth and global trade.
Spiegel reports Fears of Bank Runs Mount in Southern Europe: Following the downgrade of 16 Spanish banks by Moody’s, the focus in the euro crisis is back on the banking sector. Greeks are withdrawing hundreds of millions from their accounts, with reports that the same is happening in Spain. Experts are calling on the European Central Bank to step in and prevent full-scale bank runs.
Reuters reports Moody’s downgrades 16 Spanish banks. I comment that the Spanish banking system is insolvent. And given that this week the Spanish CDS rose to an all time high, I comment that Spain, EWP, is an insolvent nation. Countries that are insolvent are incapable of governing. Bible prophecy foretells both in the Old Testament ad in the New Testament foretells that soon, a One Euro Government, that is a Federal Government with unified political, monetary, economic, and fiscal authority will come to rule all of the Euro zone.
Reuters reports Cash pullout means more ECB reliance.
Tyler Durden writes LCH hikes margin requirements on Spanish bonds. A few days ago we suggested that this action by LCH.Clearnet was only a matter of time. Sure enough, as of minutes ago the bond clearer hiked margins on all Spanish bonds with a duration of more than 1.25 years. Net result: the Spanish Banks which by now are by far the largest single group holder of Spanish bonds, has to post even moire collateral beginning May 25. Only problem with that: it very well may not have the collateral.
The chart of S&P International Dividends, DWX, -7%, and the chart of the European Financials, EUFN, -8%, communicates the death of money in April 2011, as investors fled out of stocks on fears that a debt union had formed in the Euro zone, and now in April 2012, communicates the death of credit in April 2012, on the fears of sovereign insolvency and banking insolvency in Europe.
Nick Beams of WSWS reports Fears grow over European banks. Every day brings the bankruptcy of Greece and its exclusion from the Eurozone a step closer, with incalculable consequences for the European and global financial system.
Hearts sank this week as the WSJ reported reported that Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country’s next prime minister says he sees little chance Europe will cut off funding to the country but that if it does, Greece will stop paying its debts. I comment that policy making has clearly hit the wall in Greece, and thus making investors count the cost of the European Sovereign and Banking Debt Imbroglio.
The Telegraph reports Greece will run out of money soon. Greece’s deputy prime minister has said the country will run out of money in six weeks unless it honours its bitterly disputed EU bailout deal. Speaking exclusively to The Sunday Telegraph, Theodoros Pangalos said he was “very much afraid of what is going to happen” after Greek voters rejected the deal in elections last Sunday. “The majority of the people voted for a very strange mental construction,” he said. “We want to be in the EU and the euro, but we don’t want to pay anything for the past.”
The Irish Times reports Scale of reform task facing Greece is monumental
ABC News reports Flight of Euros accelerates, adding to Greece’s worries
Bloomberg reports “China’s four biggest banks reported almost zero net new lending in the two weeks ended May 13, Shanghai Securities News reported. Two of the four lenders increased outstanding loans by less than 20 billion yuan ($3.16bn), while the others posted drops as repayments exceeded new credit. Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. account for about half of the loans in China. Deposits at the four lenders fell by about 200 billion yuan in early May, according to the newspaper. Yuan deposits at all Chinese banks decreased by 808 billion yuan in April from a year earlier, while new lending was 681.8 billion yuan, down from 1.01 trillion yuan in March…”
Bloomberg reports “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%, the highest among 20 countries examined in yearlong study by Li’s team of borrowing by China’s government, corporations and individuals, Xinhua reported.”
Doug Noland writing in The jig is up relates Sam Jones, Tracy Alloway and Tom Braithwaite Financial Times report. “The unit at the centre of JPMorgan Chase’s $2bn trading loss has built up positions totalling more than $100bn in asset-backed securities and structured products – the complex, risky bonds at the centre of the financial crisis in 2008. These holdings are in addition to those in credit derivatives which led to the losses and have mired the bank in regulatory investigations and criticism. The unit, the chief investment office (CIO), has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralised loan obligations, CLO, in all markets for three years, more than a dozen senior traders and credit experts have told the Financial Times.” From what I’ve been able to discern, it’s all consistent with traders being incentivized by policymakers to take an aggressive “risk on” approach in the marketplace. Yet resulting highly speculative markets and an evolving debt crisis in Europe at times led to bouts of market worry that policymakers didn’t in fact have things under control. Both 2010 and 2011 had serious albeit brief bouts of “risk off,” where J.P. Morgan and other speculators were likely forced into partially hedging major “risk on” market exposures. Importantly, late-2011 LTRO and concerted global central bank liquidity operations then likely incited many to offset/hedge their risk hedges to ensure full profits (and big bonuses), from what was anticipated to be yet another bout of reflationary “risk on” policymaking. But when things then unexpectedly began unraveling in Europe in April, at least for J.P. Morgan, the whole thing seems to have become an unmanageable mess. The Jig is Up.
Fixed Income, DVY, DGS, REZ, FNIO, SPG, XLU, and High Dividend Payers seen in this Finviz Screener BTI, MO, LO, RAI, AMT, AMLP, AUSE, BRAF, KBWY, DWX, JNK, PGX, SEA, IST, traded lower on the death of credit. The chart of Junk Bonds, JNK, communicates the end of Neoliberalism, and its debt trade. The chart of Preferred Shares, PGX, communicates the failure of fiat wealth. The chart of Shipping stocks, SEA, communicates the failure of global growth and global trade. The chart of Brazil Financials, BRAF, communicates the end of banking.
Credit providers, MA, DFS, V, and AXP, traded lower this week.
The last of the neo liberal risk-on momentum investing sectors XBI, -4%, IBB, -5%, XRT, -5%, ITB, -8%, IYR, -8%, traded lower. Significant risk capital came out of Biotech companies, GILD, AMGN, REGN, BIIB, MDVN. Homebuilders, PHM, -13%, DHI, -7%, LEN, -8%, TOL, -6%, SPF, -12%, LL, -3%, and SHW, -5%, turned slower this week; of note Lumber Liquidators, with a PE of 27, has a significant short selling interest.
Growth momentum stocks, BEAV, DXPE, FAST, Vice momentum stocks, MGM, BYI, SHFL, Small Cap Value momentum stocks, LQDT, FUN, SIX, and US Infrastructure momentum stocks, EXP, MAS, MTRX, TBI, have all turned strongly lower. Neoliberalism’s risk-on trade has died on the death of credit; safe haven investing in US Stocks, VTI, is history.
Chemical Manufacturers, seen in this Finviz Screener, traded lower.
Transports, IYT, fell more than Manufacturers, IYJ.
International Technology, IPK, finally gave way this week, being led lower by FONE, SKYY, IGN, as Semiconductors, XSD, and Steel, SLX, continued lower.
Basic Materials, MXI, US Basic Materials, IYM, caved. Paper Producers, WOOD, fell on lower Timber, CUT, prices. Small Cap Energy Shares, PSCE, Energy Development, XOP, Energy Service, IEZ, fell lower on lower oil, USO, prices. Global Agriculture, PAGG, traded lower.
Large Cap Growth Shares, JKE, Universal Display, PANL, Tata Motors, TTM, Priceline, PCLN, finally broke loose and fell strongly lower. It was Technology Leader, AAPL, Business Services Leader, IBM, Energy Leader, XOM, Pharamecutical Leader, NVO, Beverage Leader, KO, Bitoch Leader, AMGN, Retail Leader, HD, that experienced the final infusion of neo liberal finance coming from LTRO1, and LTRO2. And then on April 1, investrors, took flight to the last safe haven investment away from Euro zone debt contagion and moved to US Treasuries, TLT, EDV, and, ZROZ, as well as to longer duration bonds such as BLV and LTPZ.
The ongoing two year Yahoo Finance Chart of Mid Caps, JKH, Large Cap Growth, JKE, Boeing, BA, and BE Aerospace, BEAV, communicates the end of neoliberal finace.
Exxon Mobil, XOM, with a PE of 9, and dividend yield of 2.8%, and practically no debt, would in any other era be considered a value stock worthy of investment. But it made a triple all time high of 85 and has turned lower; it is a commodity stocks and like copper stocks, COPX, is under selling pressre. Its turn lower is proof positive, that is clear, cogent and convincing evidence of the termination of fixed income investing.
Gold, GLD, and Silver, SLV, prices, rose on Thursday and Friday, bringing GDX, to a -2% loss and SIL to a -7% loss. The failure of fiat assets has created an investment demand for gold.
Commodities, DBC, stabilized on higher Precious Metal, JPP, and Agriculture, RJA, despite falling base metal, DBB, Copper, JJC, and Oil, USO, prices. It as thirteen months ago, beginning in April 2011, that investors sold out of stocks, commodities, and currencies, on fears that a debt union had formed in the EU. This ongoing one year chart of Commodities, DBC, Stocks, VT, and the Zeroes, ZROZ, shows the deleveraging out of commodities, and derisking out of stocks.
The failure of national sovereignty as well as the failure of banks in Greece, GREK and Argentina, ARGT, is the greatest factor in driving stocks, ACWI, lower.
Small Cap Country shares, VSS, fell more than their larger peers, VT, reflecting their being shut out of credit markets. This week saw Asia, EPP, get crushed on the failure of global growth and global trade as Indonesia, IDX, Malaysia, EWM, and Thailand, THD, Hong Kong, EWH, Singapore, EWS, and Shanghai, CAF traded lower. Small cap country shares trading lower included
SCIF, SCIN, -5, -4%,
Currency Nations traded lower.
YAO, FXI, -7%,
To highlight the great fall in World Stocks, VT, relative to US Stocks, VTI, Japan’s MTKAY, has fallen 17%, compared to ROLL, having falling 7%, SNA, 5%, and LECO 1%.
Total Bonds, BND, traded 0.2% higher.
The rise in the Flattner ETF, FLAT, on the fall lower in the US Ten Year Note to 1.70%, with the 10 30 US Sovereign Debt Yield curve trading near a weekly low, reveals Systemic Risk on the part of many investors. The Japanese 10 Year JGB yield trade lower to 0.825%.
The chart of the US Dollar, $USD, UUP, shows a close at 81.29, with a weekly gain of 1.2%; and the Yen FXY, gained 1.0%. Major Currencies, DBV, traded lower, and Emerging Market Currencies, CEW, traded -2.5, BZF, -3.5%, SZR, -3.4%, FSX, -2.8%, FXA, -2.1%, FXC, -1.9%, FXC, -1.9%, FXM -1.8%, FXB -1.%, FXE, -1.1%.
There have been diminishing returns; now there is no return from ZIRP, QE1, QE2, LTRO, and LTRO2. The limits of world central banks’ monetary authority have been reached; their policies have debased all the word’s currencies. Monetization of debt has caused disinvestment out of both commodities and stocks. Competitive currency devaluation, cannot stimulate growth. Tyler Durden writes Malinvestment and diminishing returns from intervention. We noted before the diminishing returns to government intervention. What is clear is that, as we have noted, that post the 1971 modified gold standard, over a long-period of time it has taken an ‘unsustainably’ increasing amount of government debt to create economic growth, with the post-2008 insanity that we need $2.50 to create $1 of economic growth. The two end with a discussion of the debt ceiling and deficit potential for a black swan event. I comment that the Milton Friedman Free To Choose floating currency regime known as Neoliberalism is history. And that the diktat regime of regional global governance known as Neoauthoritarianism is rising in its place.
Could it be that peak M2 Money is being achieved? Doug Noland relates M2 (narrow) “money” supply declined $1.7bn to $9.869 TN. “Narrow money” has expanded 6.6% annualized year-to-date and was up 9.3% from a year ago.
Financial Armageddon, that is a credit bust and global financial breakdown, is coming; it is foretold by John the Revelator in Revelation 13:3-4.
Some such as Graham Summers believe that the rise of nationalism will end the Euro before year’s end. But, out of the death of Capitalism and European Socialism, the Sovereign Lord God, Ephesians 3:1-21, has ordained the rise of 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, exactly as foretold in bible prophecy of Revelation 13:1-4.
EuObserver reports German Finance Minister Wolfgang Schäuble says 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. Also Christine Lagarde, Managing Director of the IMF, speaks from Aachen Germany relating The Legacy of Charlemagne,Wolfgang Schäuble and European Integration. “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.”
There is waiting in the wings of Europe’s stage, one individual who will rise to rule the Euro zone. Fate, Revelation 1:1, not any human action, will open the curtains, and into the limelight will step one of seemingly little authority, the little horn of Daniel 7:8, the king of fierce countenance of Daniel 8:23, the Prince of the people of Daniel 9:26, the willful king of Daniel of 11:36-45, the one who comes in his own name of John 5:43, the lawless one of 2 Thessalonians 2:3, because he works in regional framework schemes of Daniel 8:23, to change our laws and our times Daniel 7:25, abrogating constitutional and historical law.
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.
Your blog host lives near one of the least religious cities in America, Seattle. It is ranked 49 and Tampa, is ranked 50 on the Huffington Post Most And Least Religious Cities
Grant Jeffrey, speaker and writer on christian Zionism, passed away this week. In his book Signature of God, he wrote that Ezekiel prophesied the rebirth of Israel in 1948. I am not a christian Zionist, nor dispensationalist.
I am a John 3:16, reformed christian; I am a Calvinist and subscribe to Calvinism. I do not believe in the rapture theory of dispensationalism, nor do I belive that the Church and National Israel run parallel as vehicles for presenting the Gospel. According to Revelation 12, I believe God will provide a place of safety in a wilderness are , for three and one half years for a select group of saints, who will be raptured after the battle of Armageddon to come forth with the deceased saints to live in a thousand-year reign in rule with Christ over planet earth. Christ opened the first of the seven seals in May 2010 as EF Finance Ministers announced European economic governance and a bail out of Greece.
I believe along the some of the lines of doctrine of.
1) … Dave MacPherson, Rapture Ready, author of the book The Rapture Plot, and Sweet Lilberty article The Greatest Hoax, Cyrus Scofield, Who Was He? and Pro Libery Article A Little History Cyrus I Scofield.
2) … Texe Marrs, author of the book A Truth Tellers Compendium
3) … Walther Martin, author of the book Kingdom Of The Cults.
4) … Herb Peters, author of the book, Rise of The Beast from the Sea
5) … Deanna Spingola Timeline Of The Ruling Elite
6) … RC Sproul is author of the Reformed Study Bible and writes in Information Clearing House, Christian Zionism is the prodigy of Dispensationalism. Dispensationalism is one of the most influential theological systems within the universal church today. Largely unrecognised and subliminal, it has increasingly shaped the presuppositions of fundamentalist, evangelical, Pentecostal and charismatic thinking concerning Israel and Palestine over the past one hundred and fifty years.John Nelson Darby is regarded as the father of dispensationalism and its prodigy, Christian Zionism. It was Cyrus. I. Scofield and D. L. Moody, however, who brought Darby’s sectarian theology into mainstream evangelical circles. R. C. Sproul concedes that dispensationalism is now ‘a theological system that in all probability is the majority report among current American evangelicals.’ Today, virtually all the ‘televangelists’ such as Jerry Falwell, Jim Bakker, Paul Crouch, Pat Robertson, Jimmy Swaggart and Billy Graham are also dispensationalists. Probably the most significant Christian organisations to espouse dispensationalism have been the Moody Bible Institute, Dallas Theological Seminary and the International Christian Embassy, Jerusalem. Dispensationalists believe that God has two separate but parallel means of working, one through the Church, the other through Israel. Thus there is, and always will remain, a distinction, ‘between Israel, the Gentiles and the Church. Christian Zionist teaching, in my experience, springs from the “wild olive branch” viewpoint advocated by Paul, which emphasizes the gentile believer being grafted into God’s olive tree of Israel. (Israel here being the ongoing people of faith within God’s chosen people; not just those who are genetically Israel, but who may still be in rebellion against God) Within this olive tree, for now, the Jew and Gentile retain a separate identity but are one in God’s love and purposes.