Archive for July, 2010

Peak Credit Appears As European Stocks Fall On US GDP Report That Imports Are Slowing Economic Growth

July 31, 2010

I …  “Debt deflation”  took European stocks lower July 30, 2010 as the GDP Report shows imports slowed economic growth.

Currency traders sold the EUR/JPY before markets opening on news that the GDP report showed that imports slowed economic growth. The EUR/JPY, that is the euro yen carry trade, traded 1% lower at opening at 112.15 … Chart of EUR/JPY together with IWM, FEZ, AGG and DBV shows the today’s drama.

The growing rise in the Yen, FXY, during the last week, 1.1%, month, 1.3%,  three months, 8.6%, is not conducive to rising stocks. The high Yen will stimulate the currency traders to sell the Euro, FXE, and European stocks, FEZ, and World Stocks, VT, will turn down. 

At opening, the Euro, FXE, fell 0.5% and the Yen, FXY, rose 0.5%, causing world stocks, VT, to fall 1% early in the day; before closing unchanged for the day. 

The chart of EWP, EWO, EWI, EWQ and FEZ shows today’s fall lower in the European shares on the lower Euro, FXE which closed today at 129.88. The European shares, FEZ, closed lower at 35.20. 

Chart of RZV, RZG, GDX, GLD, and FEZ shows that gold stocks disconnected from the price of gold on June 29, 2010, and that the European shares, started to rise on July 7, 2010 on a higher Euro, FXE. which stared to rise on June 29, 2010 from 121.56.

Europe, FEZ, Asia, DNH, Japan, EWJ, and Developing Europe, GUR, all fell lower. 

Emerging markets, EEM, India, INP, Brazil, EWZ, the BRICs, EEB, all rose.

Chart of Japan, Asia, Europe and the Russell 2000 .. EWJ, DNH, FEZ and IWM shows the weak rise of Japanese shares and Asian shares this week. Over the last three months the small Japanese shares have performed better than their larger peers as a higher yen has injured the profits of the larger exporters.

Chart of Japan, Japan Small Shares and world shares  … EWJ, JSC, VT shows that the small Japanese shares closed unchanged for the week. Over the last year world Japanese stocks, EWJ, have fallen lower than the overall world shares on a rising yen, FXY. The Bank of Japan over decades has provided 0.50 and now 0.25% or less financing to currency traders world-wide and in so doing has destabilized the Japanese economy enforcing ongoing deflation. 

Yasuhiko Seki and Hiroko Komiya of Bloomberg report on July 26, 2010 report: “The yen may climb next month as tighter regulations force Japanese households controlling about $76 billion in daily exchange trading to unwind bets on higher-yielding currencies, analysts said.  The government will cap debt used to boost trading bets, or leverage, at 50 times committed cash from August 2010, down to 25 times in 2011 …  ‘If margin traders decide to discontinue highly leveraged transactions, it will put upward pressure on the yen as those positions are unwound,’ said Yuji Kameoka, senior economist … at Daiwa Institute of Research.”

Aki Ito of Bloomberg reports Japan’s unemployment rate unexpectedly rose to a seven-month high in June, adding to concern consumer spending will stall.

Base Metals, DBB, continued its rise of eleven days, largely on the rise of copper, JJC as seen in the chart below.

Oil USO rose to resistance.

Silver, SLV, manifested a questioning doji at 17.50, just above support at 17.00.

Jesse in chart article provides the chart of gold, $GOLD indicating a base of $1,155; it traded last at $1,180. 

Gold, GLD, rose to resistance at 115. Support is lower at 114, 113 and 112. It will either break out here, or at one of those lower levels as investors transfer out of bonds, AGG, and stocks, VT, fall lower, and as the yield curve, $TYX:$TNX, continues to STEEPEN. The dark cloud covering candlestick in the yield curve suggests that investment demand for the Ten Year note, relative to the Year Bond, is over. And that a top in the ten-year note, IEF, is now in.

And the yield curve $TYX:$TNX in manifesting a dark cloud covering candlestick, suggests that the yield curve will cool for a bit, before it continues on even higher, as debt deflation raves fiat investments.  

The lollipop hanging man candlestick, and the pop to the previous high, suggests that a high is now in for the US Government note IEF

Chart of IYR, IBB, XLI, IYM, XLV, XLU, XRT, XHB shows relative US market share performance.

Because stock deflation is entering the markets into Kondratieff Winter, the potential for further gains from biotechnology research appears limited, therefore IBB seems to be a good short selling opportunity. 

Semiconductors, SMH, led technology, MTK, fell lower. 

Solar stocks, TAN, fell hard documenting that stocks have recommenced into a bear market; because TAN was a recent stock market loss leader, its current elevated rise is a good thing to short selling into.

European Financials, EUFN, fell lower.

Emerging Market Financials, EMFN, fell lower.

Financials, XLF, and the Russell 2000, IWM, broke even. 

World currencies, DBV, turned lower July 27, 2010. The chart of world currencies, DBV, compared to, CEW, shows that currencies fell lower on July 27, 2010, documenting that the “currency deflation” that started April 26, 2010, has recommencedDBV compared CEW …  DBV:CEW.

The rise in world currencies, DBV, has turned down.

The rise of emerging market currencies, CEW, has been stopped out.

World stocks, VT, fell lower July 26, 2010, documenting that “stock deflation” has commenced.

World shares, VT, fell more than emerging market shares. EEM, recommencing a “stock deflation” trend that was established on April 26, 2010 … VT:EEM. 

The US Dollar Bull ETF, UUP, rose slightly.

II … “Peak credit” likely occurred July 30, 2010; and thus “credit deflation” that is “bond deflation” and “sovereign debt deflation” will commence beginning in August 2010 with interest rates going higher across the board.

Aggregate Bonds, AGG, jumped higher from its previous July 21, 2010 high, manifesting a black lollipop hanging man candlestick; US Government Notes, IEF, manifested a black lollipop as well;  and US Government Bonds, TLT, popped higher. The chart of AGG, TLT, IEF, CFT, CMF, HYD makes for a handy reference chart. The jump higher in bonds today suggests that peak credit is occurring …. and that …. “credit deflation” is coming soon.

Chart of aggregate bonds, AGG, shows the lollipop hanging man candlestick.

Chart of the US Government Ten Year Note, IEF  shows a topping out in the US Ten Year Note.

The fall in Anworth Asset Mortgage, ANH, confirms peak credit has occurred.

 

Corporate Bonds, CFT, rose to 106.06

High Yield Bonds, HYD, fell lower.

Junk Bonds, JNK, fell lower.

California Municipal Debt, CMF, fell lower.

Municipal Bonds, MUB, fell lower.

High yield municipal debt, HYD, fell lower. 

Mike Mish Shedlock writes California approaches “fiscal meltdown”; The chart of CMF Daily presented below shows its dramatic rise as investors have sought safe haven from stock debt deflation.

Investors have found significant reward by investing in California debt as seen in CMF weekly

BAB rose slightly above resistance.  Michael McDonald and Esme E. Deprez of Bloomberg report on July 30, 2010:  “New York City will sell $470 million of Build America Bonds next week with the amount of the federally subsidized securities issued on pace to total $165 billion by year-end, when the program is set to expire … Build America Bonds became the fastest-growing part of the $2.8 trillion municipal bond market after they were created last year in President Barack Obama’s economic-stimulus package. More than $124 billion of the securities have been sold so far …  The federal government pays 35% of the interest cost of Build Americas, saving states and cities money on public works projects … The subsidy helps issuers offer higher yields on the taxables than on tax-exempt debt, making them attractive to international investors and others who aren’t seeking tax shelters.”

The spike down, in the $TYX, that is the 10 Year Yield to 3.87 on July 1, 2010, and the rise in the Direxion 300% inverse of the 30 Year US Government Bond, TMV, suggests that interest rates are on their way up. And the US Dollar, $USD, also began its fall on July 1, 2010; so July likely marks the month for the tide turning for rising interest rates and a falling US Dollar.

The fall in the 300% inverse of US Government Bonds, TMV, represents a good entrance point for short sellers.

III … The EU Stress Tests errored on three counts. First, they missed an opportunity to fortify the banks. Second, they failed to mention the systemic risk poised by the plummeting liabilities in the shadow Landesbanken banking system. And Third, they failed to highlight the tight credit existing in Europe, specifically the continual contraction of interbank lending.   

1) Andrew MacAskill in Bloomberg article EU Stress Tests May Be `Missed Opportunity’ to Fortify Banks relates: Before the results were published, analysts at Nomura Holdings Inc. estimated the banks would have to raise 30 billion euros. Goldman Sachs Group Inc. predicted they would need 38 billion euros and Barclays Capital said they would require as much as 85 billion euros. Tests carried out in the U.S. last year found that 10 lenders, including Bank of America Corp. and Citigroup Inc., needed $74.6 billion.

“If we had at least one bank which the markets hadn’t really expected to fail, that would have given the stress tests more credibility,” said Lothar Mentel, chief investment officer at Octopus Investments Ltd. in London, whose team manages more than 600 million pounds ($926 million). “That hasn’t happened.”

The European tests ignored the majority of banks’ holdings of sovereign debt. Regulators don’t believe there will be a national default, European Central Bank Vice President Vitor Constancio said July 23. The evaluations took into account potential losses only on government bonds the banks trade, rather than those they are holding until maturity, CEBS said.

“The fact that they did not stress the bank book is going to be seen as a weakness,” said Robert Talbut, chief investment officer at Royal London Asset Management Ltd., which oversees about $52 billion. “I don’t think the results of the tests will resolve anything.”

Lenders hold about 90 percent of their Greek government bonds in their banking book and 10 percent in their trading book, according to a survey by Morgan Stanley. They have to write down the value of bonds in their banking book only if there is serious doubt about a state’s ability to repay in full or make interest payments.

Citigroup said that 85 banks provided breakdowns of their government-debt holdings when they published the stress test results. The six that didn’t are all German banks and include Deutsche Bank AG, the country’s biggest bank, Citigroup said.

2) There is very much a black swan leading to the  of depression will be Europe, FEZ, and the European Financials, EUFN, as the banking and lending institutions crack due to the plunging liabilities in the shadow banking system, primarily the Landesbanken, that is the German state-owned wholesale banking system, responsible for securitization of debt, and accounting for mortgage-backed securities, much like America’s Fannie Mae and Freddie Mac, as reported by Tyler Durden who references the report “Shadow Banking,” by  Zoltan Pozsar.

3) Credit tightening is seen in the LIBOR-OIS (USD SWAP) 3M Graph, provided courtesy of The USMicroeconomicsBlog  

IV … Analyst Doug Noland warns of Quantitative Easing Two

Doug Noland writes “I see risks altogether differently.  We are in the late-phase of a multi-decade historic Credit Bubble.  The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system.  The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost.  It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system.  The inflation rate is not the key issue.  And efforts to try to inflate our way out of structural debt problems are a lost cause.  We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”

“Most regrettably, Washington policymaking (fiscal and monetary) is on a trajectory that will inevitably destroy the creditworthiness of our nation’s vast liabilities. With ominous parallels to the mortgage/Wall Street finance Bubble, Federal Reserve policies have fostered Bubble dynamics throughout our Treasury, agency and debt markets, more generally.  Instead of market dynamics working to discipline Washington’s profligate debt expansion, Federal Reserve interventions ensure that a distorted marketplace again accommodates perilous Credit excess.  Our central bankers should heed Mr. Trichet’s warning.  Additional quantitative ease will only fuel the Bubble and risk calamity.”

Gary Dorsch writes on QE 2 relating: The Fed Flashes the Nuclear QE Trump Card

V … Many have noted that the markets seems to move in the opposite direction of Goldman Sachs advice … Goldman is currently recommending that one go long the Euro, FXE. 

Matthew Brown of Bloomberg reports on July 26, 2010:  “The combination of growing confidence in Europe’s economy and mounting evidence of a slowdown in the U.S. is driving euro bears into hiding… Goldman Sachs Group Inc. and Wells Fargo & Co. raised their estimates in the past two weeks, joining HSBC Holdings Plc and Deutsche Bank AG in predicting a stronger euro.”

VI … Inflation seen in Europe.

 Bloomberg (Simone Meier of Bloomberg reports on July 30, 2010:  “European inflation accelerated to the fastest pace in more than 1 1/2 years on rising energy costs and unemployment held at the highest in almost 12 years.  Euro-area consumer prices rose 1.7% from a year earlier in July… The jobless rate remained at 10% for a fourth month in June… That’s the highest since August 1998.”

VII … Bear Market ETFs rose some this week.

Gains for selected ProShares 200% inverse ETFs seen in this Finviz Screener are as follows

SDP 3.7%  … -2X of Utilities

SSG 3.6 … -2X of Semiconductors

RXD 0.3% … -2X of Health Care

EPV 2.2% … -2X of Europe

EWV 2.2% … -2X of Japan

BIS -2.7% … -2X of the Nasdaq biotechnology shares

SIJ 0.4% … -2X of Industrials

SJH 0.6% … -2X of the Russell 2000 Value

VIII… Symbols and keywords used in this report

yield curve, bond deflation, debt deflation, credit deflation, stock deflation, peak credit,  FXY, FXE, AGG, IEF, TLT, TMV, SDP, FEZ, EWJ, JSC, ANH, CFT, HYD, JNK, CMF, MUB, BAB, TMV, SSG, RXD, EPV, EWV, SIJ, SJH, BIS

A Just And Peaceful World Will Be Established Through The Millenium Rule And Reign Of Jesus Christ From Jerusalem Over Planet Earth

July 31, 2010

It is only when the Beast System of Revelation 13:1-4, the soon coming world’s Sovereign, Revelation 13:5-10, and the world’s Seignior, Revelation 13:11-18, are defeated at the battle of Armageddon, that a just and peaceful world will be established. The World’s Sovereign has an appointment: he will be on the plains of Megiddo for The Apocalypse, that is,  The Battle of Armageddon.

The word Armageddon appears only once in the New Testament that being in Revelation 16:16.  The word comes from Hebrew har məgiddô (הר מגידו), meaning “Mountain of Megiddo or “place surrounded by hills”.  Megiddo was the location of many decisive battles in ancient times. The King of kings comes forth to do battle with the Sovereign, Revelation 19:11-19; he and the false prophet are seized and defeated, Revelation 19:20-21.

The Just and Peaceful world is coming with the rule of Jesus Christ, which will last for a 1,000 years,  it is called the Millenium; and it is found in bible prophecy in Revelation 20:1-4.  This seventh day will complete the 7,000 years from Adam until the eternal kingdom; for as the Apostle Peter said in  2 Peter 3:8 But, beloved, do not forget this one thing, that with the Lord one day is as a thousand years, and a thousand years as one day. The Kingdom of Justice, Peace and Love begins with The Lord, The Prince of Peace, reigning from Jerusalem. Yes, the current global order will soon be replaced by a better global order, sound global governance is coming soon.

Republicans Reject Bill To Help Credit Starved Small Businesses As Peak Credit Is Attained

July 31, 2010

Obama Takes On Senate Republicans Over Stalled Bill To Help Credit Starved Small Businesses.

Associated Press reports that President Barack Obama is going after Senate Republicans who have stymied his proposal to create a $30 billion fund to help unfreeze lending for credit-starved small businesses.

His election-year push for additional job measures suffered a fresh setback this past week when the GOP blocked the small-business plan.

The president used his weekly radio and Internet address Saturday to accuse Republicans of “holding America’s small businesses hostage to politics.”

Further Stock Market Gains Cannot Be Achieved And Sustained

The chart of the Russell 2000 companies, IWM, presents the most credit dependent companies. These are the small capitalized American businesses that are critically dependent upon low-cost and liberally available credit from financial institutions to fund accounts payable, make payroll, buy inventory,  update to the newest and most profitable technology and roll over loans. Their value fluctuates with the value of the financial sector, IYF, which has been the most damaged sector since “stock deflation” commenced on April 26, 2010, with the sell of the world’s currencies, DBV, against the Yen, FXY, as concerns arose over the European sovereign debt crisis, and intra bank lending dried up amongst the European Financial Institutions, EUFN.  Debt deflation manifested as “stock deflation” commencing a world-wide bear stock market.

Debt deflation is the contraction and crisis that follows credit expansion.  One of the most famous quotations of Austrian economist Ludwig von Mises is from page 572 of Human Action: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”

Global Debt Deflation commenced on April 26, 2010, when the value shares failed to outperform the growth shares.

It was on April 26, 2010, the currency traders went long the yen and short the global currencies as is seen in this MSN Finance chart of FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, XRU, FXY causing the US Dollar to rise; as can be seen in this chart from April 26, 2010 to June 7, 2010.

Further gains cannot be achieved and sustained in the Russell 2000, IWM, as the Yen, FXY,  rose to 114.6 and the Euro, FXE, fell to 129.9. A high yen is not conducive with rising US stock values. And the Euro, FXE, has hit strong resistance and fallen.

It is likely that the currency traders will go short the euro yen carry trade causing disinvestment from the European shares, FEZ, world shares, VT, and the European Financials, EUFN, Spain, EWP, Italy, EWI, the Emerging Market Financials, EMFN, and the Financials, XLF,  and especially the credit sensitive Russell 2000, IWM.  Future gains in the Russell 2000 are capped by the  June 15, 2010 price of 66.77 and the July 26, 2010 price of 66.46. A broadening top pattern in the Russell 2000, started March 9, 2010 at 66.59; this is also strong resistance for the shares which closed on July 30, 2010 at 65.02.

Even the Brazil small caps, BRF, will fall; but probably not as quickly as the Russell 2000, IWM, as they are supported by a relatively strong Brazilian Real, BZF, and relatively strong emerging market sovereign debt, EMB.

I perceive an “order of debt toxicity”, first distressed securities, FAGIX, then high yield municipal bonds, HYD, then junk bonds, JNK, then mortgage-backed securities, GSUAX, then US Treasuries, TLT, emerging market bonds, EMB, then corporate bonds, CFT.  Chart of FAGIX, CFT, TLT, JNK, GSUAX, HYD and EMB  

Seeking a safe haven from falling stock values, investors flooded in bond funds of all types, which sent aggregate bonds, AGG, soaring. Popular investments were emerging market bond funds, EMB, high yield corporate debt, HYG, high yield municipal bonds, HYD, US Ten Year Notes, IEF, US Government Bonds, TLT and corporate bonds, CFT.  

Peak Credit Was Attained The Week Ending July 30, 2010

The daily chart of aggregate bonds, AGG, shows the lollipop hanging man candlestick, a reversal signal. Completion patterns are seen in all of the debt investments, evidencing that Peak Credit was achieved the week ending July 30, 2010.      

The weekly chart of aggregate bonds shows three white soldiers, a reversal signal, and then the lollipop hanging man candlestick. This chart will go down in the investment textbooks as one of the most bullish charts of all time.

Chart of IEF displays the lollipop hanging man candlestick as well

The double top in the chart of US Government Bonds, TLT, communicates that the rally in US Government sovereign Debt is finished

The monthly chart of CFT,  corporate bonds, shows a lollipop hanging man candlestick. And the daily chart of CFT, shows a parabolic rise, suggesting that corporate bonds are putting in a high, and that interest rates will be rising as the value of the corporate bonds falls. Soon “credit deflation”, that is “bond deflation” will commence, making loans to small businesses to expensive. Small business America will shutter and millions will be laid off, starting a depression here in the states.

The ongoing Google Finance chart of Aggregate Bonds, AGG, compared with US Government 10 Year Notes, IEF, Corporate Bonds, CFT, and Goldman Sachs Mortgage Bonds, GSUAX, AGG, IEF, CFT, GSUAX. shows that it is these latter three have pushed Aggregate Bonds to its lollipop hanging man candlestick; and thus its likely grand finale.

Another epicenter of depression will be Europe, FEZ, and the European Financials, EUFN, as the banking and lending institutions crack due to the plunging liabilities in the shadow banking system, primarily the Landesbanken, that is the German state-owned wholesale banking system, responsible for securitization of debt, and accounting for mortgage-backed securities, much like America’s Fannie Mae and Freddie Mac, as reported by Tyler Durden who references the report “Shadow Banking,” by  Zoltan Pozsar.

And as Europe Financial Institutions, have €30 trillion in liabilities, of which much needs to be refinanced in the next few years as reported by Ambrose Evans-Pritchard of the Telegraph according to a report by Standard & Poor’s.

And as European credit funding is the worst in a year. Tyler Durden writes in ZeroHedge article: “The EUR Libor is at 0.83063%, Euribor is at almost 0.9%, and top-tier European Commercial Paper are now at their worst levels since about a year ago. The stress test came and went, and the market couldn’t care less. And this is despite the ECB’s latest monetary operation, in which E23.2 billion was allotted in a 3-month long-term refinancing operation (LTRO): the intervention failed to prevent the ongoing EUR Libor surge. It is starting to get very troubling for Europe, where banks, knowing all too well that only the ECB is the indiscriminate lender of first and last resort, refuse to lend to anyone else as without the primacy example of some other private party taking the first loss risk tranches, there is no incentive to go out and lend. In other words, the longer the ECB remains entrenched in the money market, the worse it will get. All of Europe is now caught in a pan-continental liquidity Catch 22, in which more intervention will just make the central banks even more critical to the continued functioning of the financial sector.”

I see the day coming soon when both liquidity and credit will evaporate; and as a result the Government, possibly in conjunction with major credit institutions such as American Express, AXP, and Capital One Financial, COF, will become the credit seignior, the first, last and only provider of credit, with lending provided only to the companies that assist the government in its strategic needs. Yes, seigniorage for loans will come through the government, or perhaps a public private partnership of government and existing leading lending institutions.    

DistressedVolatility provides the Peter Schiff November 2006 Mortgage Bankers Association Speech courtesy of Tech Ticker July 2010,  in which everything he warned about came true with regards to the recession, housing crash and mortgage crash (financial crisis). The spike in Treasury Yields and dump in the US Dollar have yet to occur; but the spike down, in the $TYX, that is the 10 Year Yield to 3.87 on July 1, 2010, and the rise in the Direxion 300% inverse of the 30 Year US Government Bond, TMV, suggests that interest rates are on their way up. And the US Dollar, $USD, also began its fall on July 1, 2010; so the tide turned for rising interest rates and a falling US Dollar.

Keywords: black swans

Former Poor Performer Peru Now A Stellar Stock Market Superstar

July 30, 2010

Chris Prentice, Intern for Bloomberg News reports in article Shadow Economies On The Rise Around the World, that Peru is ranked number four and Thailand is ranked number seven in terms of Shadow Economies.

Peru’s industries: mining and refining of minerals, steel, metal fabrication, petroleum extraction and refining, natural gas, fishing and fish processing, textiles, clothing, food processing. Exports: copper, gold, zinc, crude petroleum and petroleum products, coffee, potatoes, asparagus, textiles, fishmeal.

Chart of EPU, ILF, CU, DBB, CEW, EMB shows that rising copper and base metal prices, as well as rising emerging market currencies and emerging market debt, have underwritten Peru in the last three months.

Chart of EUFN, EMFN, XLF shows that Peru has been supported by rising emerging market financials, and by the fact that it is the furthest thing from ill-liquid European Financials and capital distressed financials in the last three months.

Thailand’s industries: tourism, textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing such as jewelry and electric appliances, computers and parts, integrated circuits, furniture, plastics, automobiles and automotive parts, world’s second-largest tungsten producer and third-largest tin producer. Exports: textiles and footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliances.

Chart of THD and DNH shows Thailand’s strong performance relative to Asia.

Chart of THD and EPU shows that Thailand has outperformed Peru in the last three months

The” former bear market”,  was a subprime bear market that turned into a basic materials bear market. The basic material producing like Peru were run down quite heavily by the bears. The “current bear market” that commenced is a debt deflation bear market, that started April 26, 2010, with a sell off major currencies, DBV, against the yen, that has stimulated basic material emerging markets like Peru and Thailand to outperform because they are the farthest thing from sovereign debt and financial issues in Europe, FEZ, that came by the European Sovereign Debt Crisis. Two year chart of XLB, EPU, THD

And the emerging markets, EEM, have been stimulated by a carry trade in emerging market currencies, CEW, relative to the world currencies, DBV for the last three months. Three month chart of CEW and DBV.  

Shadow economies are an Austrian Economist’s and a Neoliberal’s economic heaven; because they are more free to be and more free to choose than here in the United States.

Perhaps those who peddle liberty on talk show programs and who offer alternative investments like numismatic gold coins might find Peru or Thailand better to their liking.

Debt Deflation In Spain Means Household Lending Deflation And A Stagnant Economy

July 30, 2010

Household borrowing has plummeted in Spain as its economy stagnates   

Edward Hugh writing in SeekingAlpha documents that Spain is experiencing “debt deflation” in the form of “household lending deflation” to the point where household borrowing is non existant. He warns that France is becoming structurally distorted much like Spain. And he warns that the austerity measure of labor cost reductions must be implemented in Spain to restore economic growth. He concludes by relating that “one thing is for sure though, some sort of solution or other needs to be found, and soon.”

“This is not a question of there simply being a credit crunch operative in Spain (which there is), but a different relative levels of indebtedness, since total household debt in Spain is 902 billion euros (or around 90% of GDP), while in France it is just a fraction under 1,000 billion euros (or just a tad over 50% of GDP). So French households have the capacity to leverage themselves more, while Spanish households are dangerously over-leveraged, and herein lies the danger for the ECB, with its single interest rate policy limitation. Not raising rates risks fuelling a sizeable consumer credit and construction boom in France, while in Spain raising them (given that in Spain around 90% of mortgages are with variable rates) means flooding the Spanish banking system with non performing loans.”

“In fact the situation in the construction industry is quite different between the two countries, In Spain construction seems (for the time being) to be in near terminal decline. While in France construction activity may not have revived, but then it never fell as dramatically as it did in Spain. Nor did industrial output fall as far or as fast, as it did in Spain. Retail sales reveal a rather similar picture. As do the respective sevices PMIs.” 

“If we come to look at the French goods trade balance (a sure early warning indicator of problems to come) we can see that the trade deficit is widening again, which basically means that French industry is once more losing competitiveness, and the economy becoming structurally distorted, just as happened to the Spanish economy in its day.”

“As far as I can see there are only two ways around this problem, either start increasing rates at the ECB, or press for a substantial internal devaluation (meaning labor cost reductions as set forth in “Much Ado About (Some Of) The Wrong Things“) to restore economic growth in Spain, but both of these routes pose serious issues for the stability of the Spanish banking system, since in the former case the burden of mortgage interest payments becomes excessive (and quickly – simply raising the refi rate from 1% to 2.5% would represent an almost 100% increase in mortgage service costs given the close attachment between Spanish mortgages and 1 year Euribor). One thing is for sure though, some sort of solution or other needs to be found, and soon.”

Black swans seen in Europe

Yes, “one thing is for sure though, some sort of solution or other needs to be found, and soon.” Yet, I see no solution to Spain’s economi stagnation. What I see is a number of black swans.

1) From the charts in Edward Hugh’s article, coupled with an intransigence toward any labor cost reductions or any other austerity measures, and from reports of 20% unemployment in Spain, and from reports of an ill-liquid and non lending Spanish banking system, I believe a deflationary vortex has enveloped Spain, and that the current stagnant economy will lead into a depression..

2) An ongoing plunging of liabilities in the shadow banking system, primarily the Landesbanken, that is the German state-owned wholesale banking system, responsible for securitization of debt, and accounting for mortgage-backed securities, much like America’s Fannie Mae and Freddie Mac.

3) Europe Financial Institutions having €30 trillion in liabilities, much of which needs to be refinanced in the next few years.

4) European Funding Is Worst In A Year Tyler Durden writes in ZeroHedge article: “The EUR Libor is at 0.83063%, Euribor is at almost 0.9%, and top-tier European Commercial Paper are now at their worst levels since about a year ago. The stress test came and went, and the market couldn’t care less. And this is despite the ECB’s latest monetary operation, in which E23.2 billion was allotted in a 3-month long-term refinancing operation (LTRO): the intervention failed to prevent the ongoing EUR Libor surge. It is starting to get very troubling for Europe, where banks, knowing all too well that only the ECB is the indiscriminate lender of first and last resort, refuse to lend to anyone else as without the primacy example of some other private party taking the first loss risk tranches, there is no incentive to go out and lend. In other words, the longer the ECB remains entrenched in the money market, the worse it will get. All of Europe is now caught in a pan-continental liquidity Catch 22, in which more intervention will just make the central banks even more critical to the continued functioning of the financial sector.”

It appears the Euro and European stocks and European financials are headed lower

Debt deflation manifested as “stock deflation” on April 26, 2010 …… But, then with the rally of the Euro, FXE, on June 8, 2010, European stocks, FEZ, and the European Financials, EUFN, also rallied ….. But, today, July 30, 2010, all three, the Euro, the European stocks, and the European Financials fell lower on the US GDP report that imports are slowing economic growth ….. I believe “currency deflation” and “stock deflation” has recommenced.

As credit contracts further and as bond deflate, then credit seigniorage and management will become a function of the central bank 

Debt deflation is manifesting as “credit contraction” in Europe forcing the ECB to be the First, Last, and Only Lender of resort for rolling over loans and means of capitalizing banks. Thus the lack of capital formation is forcing the ECB to become seignior and provider of credit. There is coming a day soon where Finance Ministers and State Leaders are going to have to go begging with their hat and cup to Mr. Trichet to request loans for their nations’ banks so that the strategic needs of the continent can be met. The ECBs 3-month long-term refinancing operation is federalizing the banking system of Europe, and creating a unitary banking, lending and credit authority in the President of the European Central Bank.

Here in the US, I envision, that out of a coming credit crisis, where there is no credit available, a Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve.

As an additional note, as credit deteriorates the value of excess reserves will rapidly decrease as well. Dr. Housing Bubble in article Japan Iwato And Heisei Stock And Housing Bubbles presents a chart of Excess Reserves totalling over $1 Trillion at the current time. These are largely the US Treasuries that the Federal Reserve swapped out to recapitalize the banks through its QE TARP Facility. The so-called excess reserves are residing at the US Treasury.  As the value of US government bonds, IEF, and TLT, and ZROZ, falls lower, the value of the excess reserves will shrink dramatically in value, as either the banks pull them and sell to stay capitalized or simply “rot on the vine” so as to speak.

Hopes Rise Again As Palestinians And Israelis Prepare For Direct Talks

July 30, 2010

I … Robert Bridge, RT writing in article Hopes Rise Again As Palestinians And Israelis Prepare For Direct Talks writes: Arab leaders on Thursday July 29, 2010  gave the Palestinian Authority approval for direct talks with Israel, but some analysts fear the two sides will fail to agree on the necessary concessions for peace.

For the Palestinians, it will be a case of entering the new round of talks expecting the worst, yet hoping that US President Barack Obama will apply enough pressure on Israeli Prime Minister Benjamin Netanyahu to agree to the minimal amount of concessions to produce peace.

Both sides have been engaged in indirect “proximity talks,” with George Mitchell, the US Special Envoy for Peace Talks in the Middle East, acting as mediator.

During his meeting with 13 Arab foreign ministers at the Arab League headquarters Thursday in Cairo, Palestinian President Mahmoud Abbas discussed the development of the proximity talks with Israel and the Palestinians.

After the meeting, Arab League Secretary-General Amr Moussa told a news conference that “we have entered into the final phase of those negotiations. … We are not ready to get again into [a] protracted process of negotiations that would allow procrastination.”

As things stand, Netanyahu has said he would not extend a September deadline on new Jewish settlement construction in East Jerusalem  — the very place where the Palestinians hope to lay the cornerstone of the capital of their new state, something that has eluded them since 1948.

Previously, Palestinian President Mahmoud Abbas had said he would not agree to direct talks with Netanyahu until Israel promised to permanently freeze all Jewish construction on contested land, as well as deliver back to the Palestinians all the land they were forced to surrender in the Six Day War (June 5-10, 1967).

Netanyahu’s office has called such demands “impossible,” and enough to bring down his government if attempted. Yet despite such an inauspicious start to the peace talks, the Israelis said they are still willing to sit down for yet another round of peace talks.

“In response to the decisions of the Arab League, PM Benjamin Netanyahu says that he is willing to commence direct and honest talks with the Palestinian Authority within the next few days,” the Israeli prime minister’s office said.

“Through direct negotiations, it will become possible to reach a peace agreement between the two nations quickly.”

But if Netanyahu has already made it clear that he will not extend a moratorium on settlement construction in East Jerusalem when it expires in September, nor will he seriously consider reverting back to the pre-1967 Israeli-Palestinian borders, why is Abbas agreeing to meet with the Israeli leader in the first place?

First, Abbas understands – just as the Israelis understand – that these are not the best of times for Israel’s veteran politician Benjamin Netanyahu. His government has been forced to contend with one international imbroglio after another, with one of them unfortunately involving Israel’s biggest ally, the United States.

In March, Israel’s Interior Minister, Eli Yishai, chose a very bad time to announce that Israel would build 1,600 new homes for its settlers in East Jerusalem since US Vice President Vice President Joe Biden was in Jerusalem the very day of the announcement, assuring Israel of America’s unconditional support and beseeching both sides to get back to the bargaining table.

Biden showed up for dinner at Netanyahu’s residence 90 minutes late, the ultimate in diplomatic effrontery. But the scandal did not end there, and despite public assurances that the Israeli-American relationship is “unbreakable,” behind the scene accounts tell a slightly different story.

Even worse, however, than the “superpower snub” heard around the world was Israel’s decision to engage a Turkish boat flotilla, laden with humanitarian aid on its way for Gaza, in international waters. The 1.5 million residents of the Gaza Strip had been deprived of basic goods since Israel imposed an embargo following Hamas’ seizing power in 2007.

The ensuing fight between pro-Palestinian supporters and Israeli commandos left nine dead and dozens injured. Israel was scorned in the international press for excessive use of force against unarmed humanitarian activists in international waters. Video of the incident showed crew members of the Turkish boat beating the Israel commandos with sticks as they attempted to rappel into the ship.

An internal investigation by Israeli authorities determined that the Israeli commandos behaved appropriately.

Since the incident, Israel has agreed to loosen its restrictions on many items that may enter the region, yet continues to be hounded by the incident.

Finally, Israel is looking to isolate Iran, which many Western nations believe is attempting to build a nuclear weapon under the guise of an energy program. In their very first meeting in May 2009, Netanyahu and Obama failed to agree on what should come first: Palestinian peace or thwarting Iran’s alleged nuclear ambitions.

Obama said it was in the interest of both goals to settle the Palestinian standoff before making any decisions on Iran, while Netanyahu clearly favored tackling the Tehran problem first.

But now that the United Nations has imposed another round of tough sanctions against Tehran, it looks like the Palestinians may have their best chance at finally achieving their new homeland.

At least we can have, to slightly paraphrase President Obama, the audacity to hope.

II …  Where things stand now, Israel’s policy is that Jerusalem is the capital of Israel; and Israel’s policy stand is thatit will always be an undevided captal. Meaning that East Jerusalem cannot be, and will not ever be the Palestinian capital.

III … The future of Jerusalem is an important topic of discussion. For me Jerusalem comes to light when I reflect on the question of a rapture for God’s people. My belief which is along the lines of the United Church of God whose doctrinal position is that part of the Church will suffer persecution at the same time that God protects others on earth in a place of refuge Revelation 12:4-6 and Revelation 12:14-17; which would be for the last 42 months, the last 3 and 1/2 years of the 7 year Tribulation.

If one assumes, and that is a broad assumption, that the Tribulation begins in 2013, then it would not be until 2017, that the place of divine intervention would be provided. 

Even then it is likely this would be limited to a relatively few people. Therefore endurance is required of the saints.  Wayne Blank provides the article The Last 42 Months Of Satan’s Kingdom relating how Jerusalem will be occupied by a world power, and that Two Men In Black will testify of God before Mankind, and that God will act supernaturally to provide a place of refuge, where no army can enter, and where His people will be sustained, and the World Leader will go out to persecute and destroy the majority of God’s Elect.  

Finally on the matter of Jerusalem I hold some Dispensational beliefs, one of which is that that Chapters 40-48 of Ezekiel, are to be taken literally, that their fulfilment will be in the millennial kingdom, that the temple will be rebuilt and animal sacrifices are again to be offered. 

And I believe, that soon, Jewish rabbis will begin ritual animal sacrifices in on The Temple Mount, in Jerusalem; a sticking point being here is that the property is occupied in large part by The Dome Of The Rock.

Perhaps one might enjoy reading my article The Claim To Jerusalem Is The Obstacle To Peace In The Middle East

Does Income Inequality Threaten Economic And Social Stability?

July 30, 2010

GovernanceFocus reports: Income inequality has increased significantly in the U.S. during the current recession, perhaps more than at any time in recent history, a trend that may have significant damaging effects on the economy and social fabric.

The BBC reported startling economic equality figures in a recent documentary: the top 200 wealthiest people in the world control more wealth than the bottom 4 billion. But what is more striking to many is a close look at the economic inequality in the homeland of the “American Dream.” The United States is the most economically stratified society in the western world. As The Wall Street Journal reported, a recent study found that the top .01% or 14,000 American families hold 22.2% of wealth, and the bottom 90%, or over 133 million families, just 4% of the nation’s wealth.

Commentary:

Do you believe that income inequality threatens economic and social stability? Do you favor ‘social justice” or “distributive justice” to “make things right”, that is to “make things more fair”.

I …..  I believe the concept that God has two Wills and two Vessels, and that we live in God’s Matrix, that is God’s Designed World, and that I have no right to change things one iota.

I believe the doctrines of Reformed Christianity which hold there is only one right: But as many as received him, to them gave he power to become the sons of God, even to them that believe on his name. 1 John 1:12

Right or Rights can only exist where there is power. Where the power is, there the right is.

1 John 1:12 means that one, after having received Christ, has the power to manifest as, or to develop as, the son of God. In other words, one having received Christ, can exercise his right and actuate as the progeny of God

Either one will manifest genuine concerning the faith of the Son of God or one will manifest reprobate concerning the Son of God. Manifesting faithful to the Word of God is the only Right there is.

II …… Income income equality came through globalization where our nation and others perished through bloodless coups which  established global governance, that is an international order; I provide only a short list of the globalization coups: 

The floating currency standard coup: Our nation died when Nixon followed Milton Friedman’s advise and took the US off the gold standard because France, Great Britain and others were demanding gold for dollars, and because Nixon wanted to fund global military expansion that could easily be financed from a freshly debased currency.

The mortgage GSE coup: Our nation died when Freddie Mac and Fannie Mae were chartered to underwrite housing loans. Banks divorced themselves of responsible lending and moral hazard was passed to the taxpayers for speculative housing development.

The credit coup: Our nation died when a credit bubble expanded creating debt that cannot be repaid. Alan Greenspan, as the czar of lending, eased credit which enabled mortgage refinancing to expand domestic spending for everything from boob jobs, to cosmetic surgery, to the purchase of recreational vehicles, to investment in second homes.  

The free trade coup: Our nation perished when neoliberal concepts took hold and free trade treaties such as NAFTA were signed.

The financial deregulation coup: Our nation perished when the Glass Steagall Act was repealed by Clinton and 92 Senators who voted for so-called financial deregulation, which issued in a new era of financial securitization and financialization.

The QE coup: Our nation died when Ben Bernanke announced the US Federal Reserve Facilities such as TARP which transferred out US Treasuries to banks, and accepted in toxic debt of every kind. 

The Constitutional coup: Our nation died when the nation responded to anthrax false flag event and passed the Patriot Act, and responded to the 911 false flag event, which started the building of an archipelago of military bases extending to Central Asia, Euro Asia, Diego Garcia, Romania and Bulgaria to establish a military power to oppose a military buildup in Iraq and Iran. There was no queer incident on September 11, 2001.  The world trade tower buildings did not fall down after being hit by large jets moving at a fast speed. Strong buildings do not fall down, even when hit by fast-moving objects. The twin towers were taken down by thermite cutting the steel support beams at the base of the buildings, and by demolition charges exploding on every single floor. Another large building nearby was destroyed by an incoming missile and yet another also by demolition charges. The twin tower buildings did not burn down, there were taken down.

The military coup: Our nation died when Command Authority replaced the traditional military chain of command. I refer to the October 2, 2002 NORHTCOM press release where Paul Wolfowitz announced the NORTHCOM Command Authority where the military of Canada and the United States was reorganized under common command.

The government employee payment coup where high paying and high pension funded jobs multiplied in municipal, state and federal government, as documented by MyBudget360.com

The national sovereignty coup. We no longer live in a sovereign nation. The evidence is clear, cogent and convincing that we live in a region of global governance, where the word, will and way of the leaders is the law of the land, and will soon be the law of the continent in accordance with the Announcement of the three leaders of the North American Continent on March 23, 2005, of the Security and Prosperity Partnership, the SPP, which called for a “home”, that is a homeland for the continent’s people. The Leader’s Announcement waived national sovereignty: one is no longer a citizen, rather one is a resident living in a region of global governance. President Obama communicated the concept of global citizenship when he recently spoke at West Point and announced an International Order and a vision for securing global peace and security.

The coups have destroyed both the rule of law and the rule of constitutional law.  I have no means to protect and save myself or others from internal or external dangers. Lacking a national identity, and seeing that the rulers are sovereign, I must have some other identity and a greater sovereignty. I need to protect myself against danger, I must turn away from propoganda found in churches, I simply do not attend any church.  I’ve given up reading the news issued by Newsweek, Time, US News And World Report and the Tea Party’s Glenn Beck, as each has an agenda and precepts I am thoroughly familiar with, and must turn away from.

My identity is that I am a Hebrew, meaning one from the other side.  My physical mother is not Jewish. My father, that is my starter, is Abraham, as he commenced those of like-minded faith, specifically those who have eyes of faith to see a city whose builder and maker is God. I am also a Reformed Christian, meaning that I believe in the doctrine of The Election of Grace  I live by the faith of the Son Of God, it’s not my faith it’s His Faith.

I do feel sad about the destruction of the concept of national citizenship, and it makes me sadder to know that the US is headed off very soon to WW III, as it carries out a military strike to take out the nuclear and missile capability of Iran, as part of a predetermined plan. 

Such a middle east war will cause Russia to come to protect its shipping and pipeline interests. And it will cause Syria, Hezbollah in Jordan, and Turkey to split with NATO and attack Israel. The response will be NATO troops coming in from Germany, with the support from missile defense batteries set up in Romania and Bulgaria.

III ….. The Apostle John, was exiled to the Isle Of Patmos, where in his 90s, he had a dream, that is a prophetic vision, of the last days, he saw globalization establishing an international order.  He saw a Beast System rising to rule mankind, that is a world-wide system of global governance, Revelation 13:1-4, consisting of ten regions as called for by the Club of Rome in 1974, rising from the sea of humanity; one of these regions is the Eurozone, another is the North American Continent, and another is the ASEAN trading group.

The world’s population response to the Beast System is found in verses 2, 3 and 4: “The beast which I saw was like unto a leopard, and his feet were as the feet of a bear, and his mouth as the mouth of a lion: and the dragon gave him his power, and his seat, and great authority. And I saw one of his heads as it were wounded to death; and his deadly wound was healed: and all the world wondered after the beast. And they worshipped the dragon which gave power unto the beast: and they worshipped the beast, saying, Who is like unto the beast? who is able to make war with him?”

The sea he referred to is the sea of humanity being tossed about in all of its economic, political and governmental activity, by the process of globalization. Mankind’s torment is just about to begin as the head of economic activity will suffer a mortal wound. That is there is coming a complete economic collapse, but somehow, economic activity will resume. And people will actually worship the one world government acknowledging its power and authority.

IV …. A Just World and Peaceful World will only come, when Christ returns and establishes his thousand-year rule and reign from Jerusalem.

UrekaAsia reports that Anwar Ibrahim, Head of the Opposition, Malaysian Parliament at the 15th Malaysian Law Conference 2010, Kuala Lumpur Convention Centre, 31 July 2010 said: “In Islam, the idea of social justice or al-Adala al-Ijtima’iyya enjoins upon the equitable distribution of wealth while protecting the higher objectives of the Shari’ah or al-Maqasid al-Shari’ah. Among these is the safeguarding and preservation of property, that is, protecting the wealth of the community from being pillaged and plundered by those in power. By extension, good economic governance is a moral imperative and any government which prides itself as being responsible to the people must be committed to a sound and balanced economic agenda.”

“This is why we have a reform agenda that aims at reducing the socio-economic inequities of the people while at the same promoting healthy economic growth. In this agenda, we welcome domestic and foreign private-sector investment initiatives, generate full employment opportunities, and ensure robust development that adds long-term value to the economy. But we will have no truck with the rent-seeking practices, crony capitalism or ostentatious and wasteful development of our predecessors. Sustainable development is not a mere numbers game. As an integral part of the notion of justice, development must proceed on an even keel with the other elements so as to enhance the quality of life and uplift the dignity of all. We are not saying that this can be achieved at the blink of an eye. Indeed, with Federal power still concentrated in the hands of an elite few the odds are heavily stacked against us. The path ahead is fraught with danger and obstacles. But despair not. Let us fortify our resolve to take justice seriously and fight for the future of our generations. For in the words of Anatole France: “We will win, because we are right, and because reason is on our side.”

It is only when the Beast System of Revelation 13:1-4, the soon coming world’s Sovereign, Revelation 13:5-10, and the world’s Seignior, Revelation 13:11-18, are defeated at the battle of Armageddon, that a just and peaceful world will be established. The World’s Sovereign has an appointment: he will be on the plains of Megiddo for The Apocalypse, that is,  The Battle of Armageddon.

The word Armageddon appears only once in the New Testament that being in Revelation 16:16.  The word comes from Hebrew har məgiddô (הר מגידו), meaning “Mountain of Megiddo or “place surrounded by hills”.  Megiddo was the location of many decisive battles in ancient times. The King of kings comes forth to do battle with the Sovereign, Revelation 19:11-19; he and the false prophet are seized and defeated, Revelation 19:20-21.

The Just and Peaceful world is coming with the rule of Jesus Christ, which will last for a 1,000 years,  it is called the Millenium; and it is found in bible prophecy in Revelation 20:1-4.  This seventh day will complete the 7,000 years from Adam until the eternal kingdom; for as the Apostle Peter said in  2 Peter 3:8 But, beloved, do not forget this one thing, that with the Lord one day is as a thousand years, and a thousand years as one day. The Kingdom of Justice, Peace and Love begins with The Lord, The Prince of Peace, reigning from Jerusalem.

V …. Keywords:  pyramidal society; pyramid, bible prophecy, global order, global governance.

Obama Official Led Soros Fund Supporting World Government

July 30, 2010

Bible Prophecy Today relates the Aaron Klein WorldNetDaily report that President Obama’s assistant secretary of state for population, refugees and migration, Eric P. Schwartz, previously served as the director of a George Soros-funded organization that promoted global governance.

Schwartz also coordinated meetings on behalf of Obama’s transition team with a group that advocates placing more blue United Nations helmets on U.S. troops and coercing the U.S. to join the U.N.’s International Criminal Court, which could prosecute American citizens and soldiers for “war crimes” and other offenses.

Prior to his appointment to the State Department last year, Schwartz served as executive director of the U.S. Connect Fund, a Soros-funded and affiliated organization. The group promotes global governance and states on its website its mission is to influence “policy through integrative collaborative grant making on human rights, non-proliferation, climate change and development, and effective foreign assistance.”

The Connect Fund provides grants to pro-U.N. groups such as Human Rights First, which states it used top military brass to secure U.S. politicians’ commitments against torture. Another grantee, the Center for Victims of Torture, produced a draft executive order against torture endorsed by prominent national security figures. Months later, a virtually identical executive order was issued by Obama.

Groups funded by Schwartz’s organization organized a January 2009 national conference call to promote a “Responsible U.S. Global Engagement” agenda for Obama’s new administration.

Schwartz himself has authored numerous op-eds in major national newspapers calling for more U.S. global engagement.

Schwartz previously worked under Bill Clinton’s national security adviser, Sandy Berger, in a position, he boasted on his Connect Fund website bio, that allowed him to initiate and manage “the White House review that resulted in U.S. signature of the Rome Statute of the International Criminal Court,” which would subject U.S. citizens to international prosecution for “war crimes.”

Later, President Bush’s U.N. ambassador, John Bolton, led the effort for the U.S. to pull out of the International Criminal Court, a victory Bolton touted as the “happiest moment” of his political career until that point.

Schwartz’s assistant at the Connect Fund, Heather B. Hamilton, who now serves as senior policy advocate at the fund, led the group’s efforts to lobby against Bush’s appointment of Bolton.

While Schwartz was serving Obama’s transition team as adviser on U.N. issues, he coordinated several meetings with the Washington Working Group on the International Criminal Court, which wants the U.S. to re-enter that agreement.

The Working Group is a project of the Citizens for Global Solutions, or CGS, a grassroots organization that envisions a “future in which nations work together to abolish war, protect our rights and freedoms and solve the problems facing humanity that no nation can solve alone.”

Hamilton, Schwartz’s deputy, served as executive vice president of CGS.

The CGS mission states it seeks, “More Blue (U.N.) Helmets on U.S. Troops.”

On a CGS blog post that has since been removed but was documented by Kincaid’s organization, the group says that in a meeting with Schwartz, it not only discussed more U.N. helmets on U.S. troops, but also asked of Obama:

  • Pay $1.6 billion to the U.N. for U.S. “arrears” to the U.N.
  • Lift the cap on payments to the U.N. for U.N. military operations.
  • Ensure “adequate resources” for and increase U.S. participation in U.N. military activities.
  • Restrict the use of the U.S. veto at the U.N. so U.N. involvement in international conflicts and situations can be increased.
  • Support expansion of U.N. departments.

 

Commentary on the coming global order:

The Apostle John, was exiled to the Isle Of Patmos, where in his 90s, he had a dream, that is a prophetic vision, of the last days, where an international order would arise.  He saw a Beast System rising to rule mankind, that is a world-wide system of global governance, Revelation 13:1-4, consisting of ten regions as called for by the Club of Rome in 1974, rising from the sea of humanity; one of these regions is the Eurozone, another is the North American Continent, and another is the ASEAN trading group. And a global governor, a Sovereign, rising to rule mankind, Revelation 13:5-10.  He will be complemented by a world religious leader who acts Seignior, Revelation 13:11-18,  to direct the 666 credit system,  Revelation 13:17-18 where one will be given the charagma, or mark, necessary to conduct commercial activity. Yes an unholy trinity, consisting of a beast system, a sovereign and a religious leader and seignior, are coming to rule mankind.

Culver City Homes Sell For $300 To $480 A Square Foot

July 30, 2010

According to Redfin, Culver City homes, sell for $484 a square foot

And specifically two bath homes sell for $474 a square foot 

But this 3 bedroom and 2 bath home at 4178 Center Street, Culver City, CA 90232 with 1918 square feet featured by Dr. Housing Bubble lists for $600,000.

Euro Yen Carry Trade Takes European And Asian Stocks Higher In Morning Trading But US Unemployment Report Weighs And Takes World Stocks Lower

July 29, 2010

I … Today’s financial market report 

The European shares, FEZ, rose strongly in early morning trading as currency traders took the Euro, FXE, up above its recent high to a little over 130. Austria, EWO, Spain, EWP, Italy, EWI, and France, EWQ, rose strongly. Chart of EWO, EWP, EWI, EWQ

The currency traders also took the Swiss Franc, FXF, the Australian Dollar, FXA, the South African Rand, SZR, the British Pound Sterling, FXB, and the Brazilian Real, BZF higher at opening. The Yen, FXY, rose strongly to 114, near its former high as stocks fell during the day. 

Today’s “euro and asian currency infusion” re-balanced the lucrative Swiss Franc Australian Dollar carry trade, FXF:FXA, to its 200 day moving average and re-established Asia, DNH, Russia, RSX, Sweden, EWD, Hong Kong, EWH, Australia, EWA, Singapore, EWS, United Kingdom, EWU, and South Africa, EZA, stocks to their former levels.  

The chart of dividend paying Exxon Mobil, XOM, shows that it has fallen out of favor with investors; it has been underperforming the stock market for the last year, in spite of the fact it pays a 2.9% dividend.  

Carry trade investment flowed into base metal, DBB, and oil, USO, causing a break-out or perhaps better said, a burst-out in base metals. The rise in base metals is led by copper, JJC, on reports of continuing decreases in copper stockpiles.   

The US Dollar, ETF, UUP, fell near its 200 day moving average.

The chart of the emerging market currencies relative to world currencies, CEW:DBV, indicates that six days of “credit deflation”, seen in the chart of AGG, is wearing on the competitive advantage once held by the emerging market currencies.  This profit taking on carry trade investing in the emerging market countries, is reflected in the chart of the emerging market stocks, relative to the world stocks, EEM:VT closing at 0.974. The rally in the emerging markets is clearly seen as topping out, in the chart of EEM which shows today’s lollipop hanging man candlestick. The emerging market superstar, Columbia, GXG, turned down now for the second day displaying a massive lollipop hanging man candlestick on an ascending wedge.

Despite today’s rise in the currencies mentioned above, debt deflation is working to take world currencies, DBV, lower, which topped out July 23, 2010 at 22.93.

One new effect of debt deflation: in addition to “stock deflation”, is that “credit deflation” has commenced, as aggregate bonds, AGG, topped out July 21, 2010 at 107.72; AGG closed today at 107.67. Confirmation that “credit deflation” commenced on July 21, 2010, comes from the 300% inverse of the 30 year US Treasury Bond, TMV, which has been rising since July 21, 2010 from 39.70 to close today at 43.57  

The US 20 to 30 Year Government bonds, TLT, topped out July 21, 2010 at 102.03. The US Ten Year Note, IEF, topped out July 26, 2010 at 95.86 and closed today at 95.73. Today the US Ten Year Note rose strongly on falling US Stocks, causing the yield curve, $TYX:$TNX to rise strongly; the yield curve has been RISING ever since the onset of the European sovereign debt crisis on April 26, 2010, and May 1, 2010, when the currency traders sold the worlds currencies, DBV, against the Yen, FXY as is seen in the chart of DBV:FXY. The same action of selling the world currencies against the yen is now in effect with the rise in the Yen, FXY, today to 114. 

Risk aversion to stocks took corporate bonds, CFT, above its July 25, 2010 high, and risk aversion took short-term US Government bonds, SHY, to close just below its July 21, 2010. I believe the lollipop hanging man candlestick in CFT, at 105.57 communicates an end to the rally in corporate bonds. 

The effect of debt deflation is stock deflation as world stocks, VT,  topped out July 26, 2010 from 42.48; today world stocks rose back up to 42.31. Chart of world shares, VT, compared to European Shares, FEZ, and emerging market shares, EEM, and the Russell 2000, IWM,  shows the topping out of world stocks … Chart of VT, FEZ, EEM, IWM

Volatility has been rising from a bottom of 22.64 on Jul 27, 2010, indicating that the bear market that commenced April 26, 2010 has returned; Volatility closed today at 22.83. Confirmation of recommencement of a bear market comes from the rise in the ProShares bear market ETFs, SJH, and SDP, coupled with inability of the financials, XLF, to rise above resistance, as well as the spectacular pop in the European Financials, EUFN,  on July 27, 2010 to 22.34; EUFN closed today at 22.33.

Financials, IYF, topped out July 27, 2010, at 53.34; they closed today at 52.91. 

US Shares, VTI, fell, more than world shares, VT, as the US small caps, that is the Russell 2000, IWM, shares fell 0.26% as Stephen Bernard of the Associated Press reported that the investors took a dim view of the latest report on unemployment and warily waited for the government’s reading on second-quarter gross domestic product. Semiconductors, SMH, fell 1.57% to lead the technology, MTK, shares lower. 

This author sees an “order of future falling”: First the Russell 2000, IWM, critically dependent upon low-cost and highly available credit, will lead the way down, now that “credit deflation” has commenced, in addition to the recommencement of “stock deflation” that started on April 26, 2010. Secondly, the European shares, FEZ, will fall lower being crippled by debt issues surrounding the European Financials, EUFN. 

EuroIntelligence in its news summary of 29.07.2010 reports that Wolfgang Munchau in FT  Deutschland says the German banks are over reliant on hybrid capital, as boosting capital in banks is likely to emerge as the most important economic policy challenge of the decade. And in news detail reports that the German banks, the Landesbanken in particular, would have failed the stress tests, if the benchmark had been equity tier 1 – just equity capital and retained earnings. Munchau argues that the real weakness of the German banking sector is thus not fully captured by the stress tests. Worse still, unlike in Spain, there is no political priority to resolve the issue, as the German government is not going to meddle with the Landesbanken. A weak banking sector is thus likely to persist. 

HousingStory.Net reports that the aftermath of the global housing bubble chokes the world banking system.

Ambrose Evans-Pritchard of the Telegraph reports in article Europe’s €30 trillion headache that European banks have amassed €30 trillion in liabilities and face a serious funding threat over the next two years as authorities withdraw emergency support, according to a new report by Standard & Poor’s.

All percentages and figures in today’s report have come from Yahoo Finance.

II …. Tyler Durden shares a rumor.

Tyler Durden is the Jeff Rense of the financial world. Being today’s alarmist he writes: The GSEs and the FHA may be preparing to imminently launch an instant auto-refi program which would take millions of borrowers to current market rates overnight.

In the process $45 billion of consumer savings would be created. Welcome QE 1.999.

There are millions of American’s with rates much higher than market rates who can’t refi due to lack of equity or income needed to qualify for a new vintage loan.  Or, because after all of the new vintage loan level adjustments to the rate and fee structure for being less than perfect it makes the current 4.5% rate into a 6% rate taking away any benefit. We have discussed all of this ad nauseum over the past couple of years.
 
Their solution is to quickly identify all of the borrowers who are making payments on time and send them a one page refi form, which instantly takes their rate to current market. There would be a few other borrower hurdles but not many. The savings to the home owning consumer would be about $45bb per year, more than the cost of the recent extension to unemployment benefits.

III … Toxic assets from AIG gaining value, Fed says

Daniel Wagner of the Associated Press writes that the New York Fed says toxic assets it bought in bailouts of AIG, Bear Stearns are gaining value. The assets are now worth $69.1 billion — about $2 billion more than they were during the previous quarter.

I say they should have sold them, as there are a number of buyers in the market place. One includes the Fidelity Capital & Income mutual fund FAGIX.

IV.  Investment Application.

I am not a licensed investment professional. I am a blogger who perceives an investment demand for gold coming from a steepening yield curve, $TYX:$TNX, and debt deflation, and therefore I am invested in gold coins. Institutional accounts should consider trading the bear market ProShares 200% inverse ETFs seen here in this Finviz Screener of  SRS,  SJH, SSG, EEV, SMN, BZQ, SIJ, EPV, FXP, SCO,  JPX,  BOM, EWV, INDZ, BRIS, BIS, SDP, RXD … Chart of SJH rising from a head and shoulders pattern. Debt destruction is most likely going to fall fastest and hardest on the Russell 2000 companies so dependent upon properly functioning credit markets which they use to pay accounts payable, buy inventory and pay employees. Yes, small business America is going to be literally decimated very, very soon. Click on chart to enlarge.

And Institutional investors should consider the Morningstar report that The Profunds UKPSX, 200% short Japan, and the Direxion DXRSX, 200% Small Caps  have been a consistently good performing bear mutual funds. And the investment prospects look good for TMV, 300% inverse of the 30 Year US Government Bond as well. Those who have invested since its rise should consider taking profit soon. 

V … Conclusion

I … A debt deflationary vortex has formed creating the start of a bear market characterized not only by “stock deflation”, but also “competitive currency deflation” and now “credit deflation”, that is “bond market deflation”.

II … Five black swans are seen:

1) The plunging liabilities in the shadow banking system, primarily the Landesbanken, that is the German state-owned wholesale banking system, responsible for securitization of debt, and accounting for mortgage-backed securities, much like America’s Fannie Mae and Freddie Mac.

2)   Europe Financial Institutions, €30 trillion in liabilities, of which much needs to be refinanced in the next few years.

3)   The great reliance of America’s small capitalized companies, the Russell 2000, on easy access to low-cost loans.  

4)  A downgrade of America’s Aaa rating as Reuter reports that Moody’s says the US needs a debt plan to keep its rating.

5) The beginning of Discretionary Governance with steps towards imposition of the Dodd-Frank Financial Regulation, that is the  Wall Street Reform and Consumer Protection Act.

6) Exploding higher municipal bond interest rates. Currently the interest rates on municipal bonds have been decreasing, driving up the value of municipal bonds as investors have sought a safe haven investment from falling stock prices. For example the weekly chart of HYD, shows a rise from four, count them, four cup-and-handle breakouts, rising from 24 to 31 in only sixteen months which is about a 30% gain. The weekly chart of the National Municipal Bond Fund, MUB, shows strong gains as well rising from 95 to 105 in the same time frame. 

Soon investors will shy away from municipal bonds, and the interest rates will soar, causing HYD and other municipal bond investments to fall. At that time even with a budget in place, municipalities and states will not be able to attract investors, so in a desperate move these governments will have to yet further cut employees, expenses and possibly go bankrupt. The states where Alt-A and Option-Arms lending plus Illinois are for all practical purposes insolvent; these include California, Nevada, Arizona, Florida, and like I mention Illinois.  

Robert Wenzel of EconomicPolicy Journal reports California Declares State Of Emergency Over Finances. California Governor Arnold Schwarzenegger declared a state of emergency over the state’s finances on Wednesday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $19 billion shortfall, reports Reuters.

The deficit is 22 percent of the $85 billion general fund budget the governor signed last July for the fiscal year that ended in June.

In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state’s cash to pay its debt, and for essential services.

“Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown,” Schwarzenegger said in a statement.

Schwarzenegger’s declaration noted State Controller John Chiang has said he could be forced to issue IOUs as early as next month because of the budget impasse.

Keep in mind that they are pretty much just playing here. That’s the way it will be until muni-bond markets weaken and it becomes impossible to finance state debt even with a budget in place.

IV … Symbols used in this report AGG, FEZ, GXG, EEM, VT, CEW, DBV, FXE, FXF, FXA, SZR, FXB, SZR, FXY, DBB, USO, SMH, EWO, UUP, TLT, IEF, IWM, DNH, CFT, SHY, HYD, MUB.