Gotterdammerung Of The Rating Agencies Versus National Leaders Commences A Sovereign Debt, Banking And Investment Collapse

1) … The seigniorage of Neolilberalism that has come with QE 1 and 2 has succumbed to  Quantitative Easing Exhaustion, Job Growth Failure and Inflation Destruction turning world stocks, ACWI and  VT, and world small cap stock VSS and  EWX lower. The failure of seigniorage is seen in the following:

The collapse of the European Financials, EUFN, as Greece and now Portugal have lost their debt sovereignty.

The break out of FactorShares 2X Gold/ Short S&P, FSG, in an Elliott Wave 3 Up beginning on April 1, 2011.

The 30-10 US Sovereign Debt Leverage Curve Daily, $TYX:$TNX, obtaining a Elliott Wave 5 high in November 2010 and entering an Elliott Wave 3 Down in June 2011, as the interest rate on the US 10 Year Government Note, $TNX, entered an Elliott Wave 3 up in June, 2011.

The ratio of BLV relative to LQD, BLV:LQD, and the Flattner ETF, FLAT, turning lower in June 2011

US Stocks Relative To The US 10 Year Government Note,  VTI:TLT, and World Stocks relative to World Government Bonds, VT:BWX, turning parabolically lower once again.

US Treasuries, IEF, TLT, EDV, ZROZ, Intermediate Bond Mutual Fund, PIMCO GNMA, PDMIX, Mortgage Backed Bonds, MBB, turning lower in June 2011.

Distress Investments, FAGIX, and Junk Bonds, JNK, topping out and turning lower in June 2011

Morgan Stanley Cyclicals Index, $CYC, entering an  Elliott Wave 3 Down today July 8, 2011

The Gold Mining Shares relative to Gold, GDX:GLD, and the Gold Mining Shares relative to US Government Bonds, GDX:TLT, turning lower beginning in April 2011.

Stocks relative to Commodities, VT:DJP, topping out and turning lower today July 8, 2011.

Airlines, FAA and Shipping, SEA, turning lower on the announcement of Quantitative Easing in November 2011.

The topping out of Education stocks, such as Devry, DV. Here in Bellingham Washington, the wealthy and wise have placed their children in private schools such as St Paul’s Academy which will have a new building ready for this fall.

Yahoo Finance reports Jobs stall, setting back recovery hopes

2) … Today July 8, 2011, the world entered in Kondratieff Winter, the final economic season, and Gotterdammerung, an investment clash of national leaders, such as Mrs Merkel, and the rating agencies, such as Standard and Poors, Moodys and Fitch.  This investment flameout has accelerated a European banking and sovereign debt collapse.

3) …In April 2011, the world passed from the age of Neoliberalism, characterised by The Free To Choose Floating Currency Regime, whose fathers are Milton Friedman, Alan Greenspan, Ben Bernanke, and the Bank of Japan, which was characterized by financial deregulation, moral hazard, leverage, credit liquidity, prosperity, economic growth and expansion, that came by securitization of education debt, municipal debt, sovereign debt and GSE debt  …  and into the age of Neofeudalism, characterised by the Club of Rome’s Ten Regions Of Global Governance, where there are many kings, oligarchs and emergency financial managers whose authority comes from regional framework agreements, where Leaders waive national sovereignty, and is characterized by regulatory capture, deleveraging, credit contraction, austerity, economic contraction, and sovereign debt and banking crisis, resulting in debt servitude as well as social wilding as seen in rioting and violent crime where love will grow cold.

The topping out of Annaly Capital Management, NLY, exemplifies the end of the securitizaion of debt. The company stands as a white washed tomb to the prior age of prosperity.

4) … Simply by announcement a Banker, a Seignior, and a Chancellor, a Sovereign, rise to power in Europe as dissent is stiffled in Pakistan.   
The Board of Directors of the European Central Bank in suspending minimum credit rating threshold for collateral eligibility for Portugal, has effected a bloodless coup d etat instituting the ECB as Europe’s Seignior. Those living in Europe are no longer citizens of sovereign nation states but rater residents living in a region of global economic and fiscal governance.

And Jean Claude Trichet hardened the ECB’s line against a private-sector participation thus instituting universal debt servitude for all living in Europe. This Sovereign’s vision is one for all and all for one.

Warning of social wilding, Giulio Tremonti warned of a breakdown of civil society in Italy saying “If we don’t get the budget into balance, there will be a disaster”.  

New York Times reports U.S. Admiral Ties Pakistan to Killing of Journalist. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said Thursday that he believed that the government of Pakistan had “sanctioned” the killing of a Pakistani journalist who had written scathing reports about the infiltration of Islamic militants into the country’s security services

5) …Open Europe relates that The Telegraph reports Clegg calls for bigger UK role in eurozone crisis. In a speech in Paris today, Nick Clegg will call for the UK to stop “watching from the wings” in the eurozone crisis, which the Independent sees as contrasting with Cameron’s calls yesterday to use the crisis as an opportunity to renegotiate the UK’s relationship with the EU. Clegg will say, “A successful eurozone is essential for a prosperous UK. So there is no room for Schadenfreude here, no place for wagging fingers. Countries like the UK should not see ourselves as spectators, watching from the wings, triumphalist, complacent, as if Europe’s economic woes are a eurozone problem, rather than a problem for all of us. As if it is enough to put your own house in order, but then stand by and let the neighbourhood crumble.”  In a swipe at Labour MP Jack Straw, he will say, “On the one hand, some people, including senior members of the previous UK government, are predicting collapse and doing so with short-sighted relish, given it would do lasting damage to the UK economy. On the other hand, some people are now arguing that only complete fiscal union can work. It’s not my role, or the role of the British government, to predict the future of a currency union we’re not a part of.” He then goes on to predict, “I expect – as is usually the case – things will end up somewhere in between these extremes.”

6) … Open Europe provides Eurozone comment round-up.
In Greek daily Kathimerini, columnist Nick Malkoutzis writes that the second Greek bailout and the conditions potentially attached to it are “like a Hollywood sequel … likely to make us want to look away in horror.”
German economists Thorsten Polleit, Ulrich van Suntum and Anton Wiegers write in FT Deutschland: “Let’s face it: Greece is insolvent. It will never manage to get back to normal on its own. And other eurozone countries will find themselves in a similar situation soon …The solution [to the Greek crisis] seems to be too simple to be true. Greece’s debt will be reduced solely by the losses of private investors.”
In an interview with BBC Hardtalk, Economist Kenneth Rogoff argues, “I don’t think there is any question that if you look at it narrowly from Greece’s point of view, it would be better to default now, clean it up and move on.”
Meanwhile, in the WSJ Alen Mattich looks at the ECB’s decision to raise interest rates and notes: “Once this policy is seen to be precipitating an existential crisis for the euro as peripheral countries give up the ghost, the ECB is likely to abandon its commitment to price stability and go for inflation. Of course, by the time it does, it could well be too late.”
In the FT, Gavyn Davies writes: “The ECB is gradually being drawn into the ‘socialisation’ of peripheral country debt, in ways which are completely outside the control of the central bank, and which could yet end in crisis.”
Economist  Economist 2  El Pais: Editorial FT: Dervis FT: Davies FT: Spiegel WSJ: Mattich WSJ Real Time Brussels blog WSJ: Lochery Le Figaro: Bébéar & Bonnevay Kathimerini: Malkoutzis FTD

7) …Financial Times reports European Companies’ Debt Costs Rise After Downgrade. Borrowing costs for some of Europe’s biggest companies have risen sharply this week as the region’s sovereign debt crisis has intensified.
The multi-notch debt downgrade of Portugal to “junk” by Moody’s led to a deterioration in sentiment in sectors including financials and telecoms. Portuguese bank Banco Espirito and Portugal Telecom were two companies whose corporate debt yields, which move inversely to prices, rose as confidence crumbled. Outside Portugal, Telecom Italia and Santander, Spain’s biggest bank, have also seen their bond yields rise this week. In the US, investors have backed away from US commercial paper issued by foreign banks, according to the latest weekly data released on Thursday by the Federal Reserve

8) … The Telegraph reports ECB Tightens Noose on Southern Europe. The European Central Bank has raised interest rates a quarter point to 1.5pc to curb inflation and signalled more to come, despite faltering growth in southern Europe and acute stress in peripheral bond markets. Jean-Claude Trichet, the ECB’s president, brushed aside warnings that tightening at this delicate juncture might push Spain and Italy into the danger zone, insisting that every eurozone country stands to lose if the ECB fails to anchor price stability. “The debt problems are contained in Spain and Italy for now but the eurozone is dealing with finer and finer margins,” said Simon Derrick, currency chief at the BNY Mellon. “The situation is magnitudes worse than where we were a few months ago and the global outlook is following the pattern of mid-2008 before the Lehman crisis, so people are getting nervous,” he said. Hans Redeker, currency chief at Morgan Stanley, said the danger for the eurozone is that long-term investment inflows have dried up. They have been replaced by a growing reliance on hot money funds, attracted by Europe’s higher rates. “This money is fickle. It will move out on the slightest sign of trouble. Europe’s capital flows are sounding alarms,” he said. By raising rates, the ECB may have made matters worse. The ECB’s monetary tightening has asymmetric effects, with greater impact on heavily-indebted and rate-sensitive economies in Spain and Ireland than on core Europe. Over 90pc of Spanish mortgages are priced off the floating 1-year Euribor rate, which has risen 66 basis points to 2.19pc this year. Only 20pc of German loans are on floating rates. Rate rises are ratcheting up the pressure as each month a fresh cohort of Spanish households sees a sharp upward adjustment in their mortgage payments. There is a hangover of 680,000 unsold properties on the market, according to government figures. “There is no sign of recovery,” said Raj Badiani from IHS Global Insight. “House sales are falling again at double-digit rates and if this spills over into 2012, the pressure on the Spanish banking system could become unbearable,” he said.
(Hat Tip to Between the Hedges)

9) … Stocks turned parabolically lower today.



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