Report on European Financials For Tuesday December 13, 2011
Neoliberalism featured wildcat finance, a Doug Nolan term, where investment bankers and banks securitized and financialized all kinds of leveraged investments and ponzi credit. Now Neoliberalism’s inflationism has failed and destructionism is rising as investors delever out of carry trade investments and sell risk. Not only are the European financial institutions collapsing, but Bespoke Investment Group reports US banks, investment bankers and stock brokers are failing as well.
Neoauthoritarianism features wildcat governance, where leaders rip bite and tear one another as they impose austerity measures, debt servitude and fiscal sovereignty to deal with destructionism of falling currencies and budget deficits. The European Commission is taking a view that the EU Leaders’ Fiscal Compact is legally inferior to existing treaty law and cannot be enforced through existing EU resources. EuroIntelligence reports Crumbling of Comprehensive Solution No. 4 . “It is surprising how long it took the markets to see through last week’s agreement to set up a separate treaty to reinforce the current one. As Frankfurter Allgemeine reports, the European Commission believes the whole thing is legally doubtful, and mostly irrelevant. In the Commission’s view there is hardly anything really new in the euro agreement and what is new is legally very doubtful, Frankfurter Allgemeine Zeitung reports, the main problem according to the Commission is that the agreement for quasi automatic sanctions would be part of an intergovernmental treaty and in international law that is of lesser legal value than a European treaty. As a consequence any country’s request to proceed according to the weaker deficit rules of the European treaty would mean that the stricter rules according to the intergovernmental treaty cannot be applied. Also the Commission points out that is doubtful that it and the European Court of Justice can legally be asked to perform surveillance duties on behalf of a subgroup of the EU.”
Open Europe reports Sarkozy: Europe must move towards more regulation. EU Economic and Monetary Affairs Commissioner Olli Rehn yesterday warned that if Cameron’s veto “was intended to prevent bankers and financial corporations of the City from being regulated, that’s not going to happen.” In an interview with Le Monde, French President Nicolas Sarkozy said, “The [UK’s] repeated affirmation of its opposition of any prospect of joining the euro cannot be without consequences. I would add that the demands on financial services were not acceptable. The crisis broke out because of financial deregulation…Europe must move towards more regulation.”
Open Europe’s Research Director Stephen Booth is quoted in the Express, saying “The threat of EU regulation on the City of London remains. The British Government must continue to push to prevent any further unnecessary and unwanted regulation from Brussels.” Open Europe’s Pieter Cleppe appeared on Belgian Radio 1 commenting on the outcome of last week’s EU summit. He argued, “What Cameron ultimately demanded was that the internal market wouldn’t be the victim of political fallout due the euro crisis.”
Open Europe’s report showing that the UK’s financial sector as a whole accounted for 11.2% of the Government’s total tax receipts for the 2009/10 tax year is quoted by the WSJ and Spanish business daily Cinco Días. Open Europe’s Director Mats Persson is quoted in FAZ arguing that the British government will try to look for “a third way” in terms of its relationship with the EU, “a position between full membership and exit.” The paper also reproduced a Open Europe graph illustrating the contribution of the financial services sector to the UK economy. Mats is also quoted in Le Figaro and appeared on RTE’s Drivetime programme yesterday, discussing Cameron’s veto.
Separately, the Times reports that senior government figures are concerned about the apparent failure of diplomatic and political intelligence that meant Britain was unable to foresee that Angela Merkel would refuse to side with Britain
European Financials, EUFN, Europe, VGK, World Financials, IXG, traded lower.
The currency demand curve, RZV:RZG, manifested bearish engulfing as world major currencies, DBV, and emerging market currencies, CEW, traded lower, and the US Dollar, $USD, UUP, has broken out. The currencies FXA, FXE, FXM, FXC, ICN, FXB, FXS, FXF, CYB, BZF, FXRU seen in this Finviz Screener traded lower.
Base metals, DBB, including copper, JJC, traded lower, causing copper miners, COPX, to trade lower. The risk asset silver, SLV, traded lower, turning silver miners, SIL, lower. And the currency gold, GLD, traded lower with falling currencies, turning Gold Miners, GDX, and Junior Gold Miners, GDXJ, lower. Bespoke Investment Group reports that gold failed to breakout and remains in downtrend.
Bespoke Investment Group reports that Amazon has gone from leader to goat, this has turned Internet Retailers, HHH, -3%.
Other fallers of the day included
Manufactured housing, CVCO, -6%
Housing, XHB, ITB, -4%
Metal Manufacturing, XME, -3.5%
Retail, XRT, -3%
Rare Earth, REMX, -3%
Uranium Miners, URA, -2.5%
Semiconductors, XSD, -2.5%
Copper Miners, COPX, -3%
Steel, SLX, -3%,
Airlines, FAA, -3%
Coal Miners, KOL, -2.5%