Commodities Fell Strongly Lower … World Enters Peak Credit As Short Squeeze Sends US Treasuries And Bonds Higher … Europe Is Now A Default Union …Will Herman Van Rompuy Speak For Europe?

Financial Market report for August 3, 2011

1) … Commodities entered an Elliott Wave 3 Down today.
When looking at the Bespoke Investment Group chart article ISM Commodity Survey Drops For Third Straight Month, it is apparent that commodities have entered a multi-year Elliott Wave 3 of 3 Down. Commodities have entered Kondratieff Winter in addition to stocks..

Gasoline, UGA, traded 3% lower today, as the failure of the seigniorage of Neoliberalism came to those trading in petroleum products.

The charts of Brent Oil, BNO, Petroleum Products, DBC, and Oil, USO, all show the beginning of inflation created by QE2, and today’s exhaustion of quantitative easing.

Base Metals, DBB, also manifested exhaustion of quantitative easing, in its fall lower today.

The fall lower in commodities, DJP, illustrates demand destruction, that is inflation destruction, that has come following the inflationary QE2.

Today’s drop in metal manufacturing, XME, is a natural follow-on of inflation destruction, accompanying  the US Fed’s failed expansionary monetary policies.

Chile. ECH, which was one of the poster nations cited by the Friedmanites in their expansion under the Milton Friedman Free To Choose currency regime fell strong lower today.

Neoliberalism has been replace by neoauthoritarianism, the poster nation of which is Egypt, EGPT.  

The fall lower in the Smartphone ETF, FONE, illustrates the loss of seigniorage of the Apple Ecosystem.  And the fall lower in Networking Shares, IGN, and Cloud Computing, SKYY, evidences the failure of seigniorage of communications technology.

Ben Bernanke’s QE2 gave global seigniorage, that is moneyness, and final completion to basic material stocks of all types, including China Minerals, CHIM, the Hard Asset Producers, HAP, and precious metal mining stocks, GDX, the Junior Precious Metal Mining Stocks, GDXJ, uranium producers, URA, Aluminum Producers, ALUM, Small Cap Energy, PSCE, Coal Miners, KOL, and Copper Miners, COPX.  Ben’s seigniorage withered even more today as is seen in the chart of CHIM.  The failure of the seigniorage of neoliberalism is seen in the chart of the HUI Precious Metal Mining Stocks relative To US Treasuries, GDX:EDV, falling lower in April 2011, and in late July 2011, these always, yes always make market turns lower together; and suggests that US government bonds will now be going lower.   

Failure of the seigniorage of neoliberalism is seen in the fall of automobile stocks, CARZ, and the large growth design and build shares, FLM. And the failure of the regime of neoliberalism is seen in the collapse of the alternative energy shares, GEX.

Brazil Financials, BRAF, Brazil, EWZ, and Brazil Small Cap Stocks, BRF, fell lower today, manifesting debt deflation, that is currency deflation, as the Brazilian Real, BZF, is now starting to fall lower and Brazil’s Credit Expansion has reached its limit and is now turning toxic.

China, YAO, fell significantly lower today.

The failure of investment in shipping stocks, SEA, was a precursor, to the failure of the seigniorage of Neoliberalism.

The turn lower in Insurance Companies, KIE, such as Ace Limited, ACE, and American Equity Investment Life, AEL, illustrates the end of an age of insurable risk as there are no longer any more risk free investments that these companies can invest in. Small Cap Revenue Firm, RWJ, and Mortgage REIT, REM, Annaly Capital Management, NLY, rose 3.4% today, cresting up into an Elliott Wave 2 Up and getting ready to enter an Elliott Wave 3 Down as the life cycle of this company is coming to an end with the world entering into Peak Credit where profiting from GSE debt is coming to an end.  Intermediate Bond Mutual Fund: PIMCO GNMA Fund, PDMIX, soared even higher today.

2) … Peak Credit is being achieved as the chart of Bonds, BND, manifested a gravestone doji, at the top of an ascending wedge which shows three white soldiers. The same structure is seen in the chart of 300 % of the 20 Year US Treasury ETF, TMF. Other evidence of Peak Credit comes from the Flattner ETF, FLAT, having finished its parabolic rise,.on a flattening of the yield curves, such as the 10 30 US Treasury Curve, $TNX:$TYX.

The 30 10 US Sovereign Debt Leverage Curve, $TYX:$TNX, peaked out today. Peak debt leverage occurred today, as the Interest Rate On The Benchmark US 10 Year Note, $TNX, closed at 2.599% today, in what is a likely an Elliott Wave 2 Down, ready to spring up into a fatally destructive Elliott Wave 3 Up, as in fatally destructive to the world’s financial system.

Peak Credit is seen in the ratio of BLV relative to LQD, BLV:LQD, topping out.just as it did when QE2 was announced at Jackson Hole in August 2010 by Ben Bernanke. Both the long duration corporation bonds, BLV, and the corporate bonds, LQD, have clearly topped out. These were driven higher by a strong rise in the Zeroes, ZROZ, the 30 Year Treasuries, EDV, and the 10 Year US Government Bonds, TLT, on a short squeeze. Now the bond vigilantes will be driving US debt and world government bonds, BWX, lower as they call soveign debt interest rates higher globally. The chart of Junk Bonds, JNK, Municipal Bonds, MUB, Mortgage Backed Bonds, MBB, and International Corporate Bonds, PICB, suggests that these have topped out. And rising emerging market currencies, CEX, have caused a parabolic rise in Emerging Market Bonds, EMB.

The small cap revenue shares, RWJ, such as payday lender EZCORP, EZPW, did well under the financial deregulation that came with Neoliberalism. Yesterday, I paid off my first ever payday loan at Ace Cash Express; it was $230 for a $200 loan; and today, I took out a $100 loan, payable on September 1st, when the Social Security Check arrives. While exiting the store, t heard the next client ask, “is that bullet proof glass”. I sped up my exit, and can assure you, yes, yes, yes, it’s bullet proof glass. The primary reason I used the company is that I am under Austerity, as now I pay for dental insurance, that Washington State DSHS Medicaid, previously paid. So now I have to eliminate Stockcharts.com service, at $20 a month, and Bellingham Fitness Club at $30 a month, in order to continue to pay for dental insurance. I can assure you that most of my disabled peers have not, repeat not, taken out dental insurance, as I did at the beginning of the year.     

Gold, $Gold, hit a new high on the failure of neoliberalism and the fear of neoauthoritarianism; the chart of the gold ETF, GLD, shows a bearish harami at the top of an ascending wedge, a reversal signal and a likely temporary high; it will be going massively higher as it is in the middle of an Elliott Wave 3 Up.  

President Obama in speaking today that there will be no double dip recession, is simply doublespeak that George Orwell warned of. His statement is just another evidence that the world has passed from neoliberalism and into the spoof and diktat of neoauthoritarianism.

3) … Europe Is Now A Default Union … Will Herman Van Rompuy Speak For Europe?
Between The Hedges reports “The Italy sovereign cds has soared +149 bps in 9 days. The Spain, Italy and France sovereign cds are making new record highs again today. The German sovereign cds is hitting another multi-year high. The Eurozone Financial Sector CDS Index is very close to record highs, as well.” and relates that Reuters reports Sovereign Rot Hits Italian Banks. Italian banks’ reliance on the ECB has jumped to its highest since the beginning of the year as they struggle to access the bond market as a result of the sovereign crisis. “We are increasingly concerned about Italy and its banks being drawn into a vicious circle of shrinking market access, rising funding costs, deteriorating credit ratings and ultimately fundamentals,” said Georg Grodzki, head of credit research and Legal and General Investment Management.

Looking at the bond charts for both Italy, EWI, and Spain, EWP, as well as reading the Bespoke Investment Group article European Default Risk Spikes, I suggest that both countries have lost their debt sovereignty to the bond vigilantes, and are insolvent and will default.

In a soon coming Default Union, it is reasonable that the PIIGS fiscal authority will be sacrificed to emergency financial managers, specifically stakeholders appointed by powers at the core of Europe, that is in Brussels, France and Germany. It’s as Mike Mish Shedlock ominously writes  ECB will be the buyer of only resort and Italy banks having difficulty securing funding.

Euro Intelligence in their for fee newsletter relates: “Reuters, picking up on a story from Le Monde, reports this morning that Nicolas Sarkozy wants to give Herman Van Rompuy the role as coordinator and spokesman for the eurozone”

National sovereignty in Europe is a tombstone to the prior age of neoliberalism. The new age of neoauthoritarianism was foreseen by the call of the Club of Rome in 1974, which called for ten regions of global governance, where national sovereignty is sacrificed for the security and prosperity of a common purpose and vision. Out of today’s sovereign debt and European banking crisis, a European Chancellor, The Sovereign, will rise to rule like Charlemagne, in a type of revived Roman Empire, that is a One Euro Government. He will be accompanied by an adept banker, the Seignior. Where as the seigniorage of neoliberalism was based upon debt and people had liberty to pursue prosperity, the seigniorage of neoauthoritarianism will come from the word, will and way of sovereign leaders, who impose debt servitude. The debts of neoliberalism will not be forgiven. The Sovereign and the Seignior will apply them first to everyone in Europe, and then to every man, woman and child in the world.

4) … In today’s news Associated Press reports Unemployment rose in nearly all U.S. cities.and Business Insider reports “Sudden and Unexpected” Burst Of Downsizing Causes Layoffs to Explode Nearly 60% in July.

Wall Street Journal reports Europe’s Banks Retreat. Barclays Latest to Turn Defensive as Chief Executive Cites “Loss of Confidence”. Banks across Europe are retrenching in efforts to shield themselves from the continent’s financial crisis and an increasingly bleak international economic outlook. Some banks are scrambling to dump government bonds and cut credit lines in southern Europe’s economic laggards, while others are stockpiling cash. They are also firing thousands of workers and warning about a growing number of red flags they see among customers. With the crisis starting to infect Spain and Italy, where borrowing costs recently have skyrocketed, some banks appear to be accelerating their cleanup and fortification efforts. Barclays, which has suffered more than £1 billion in losses on corporate and commercial real-estate loans in Spain, said it was holding about £6.6 billion, or €7.6 billion ($10.8 billion), of such assets as of June 30. That is down sharply from the roughly €11.1 billion figure it reported as of Dec. 31 in the stress tests. “The size of the balance sheet in Spain is absolutely shrinking,” said John Winter, the head of the corporate-banking arm at Barclays. He said the bank is focusing, in particular, on reducing its portfolio of Spanish construction and property loans. A similar move is under way at HSBC Holdings PLC. Iain Mackay, the bank’s chief financial officer, said that HSBC has been limiting credit lines.

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