Financial market report for December 14, 2011
1) … US Stocks, VTI, traded lower, as the Euro fell below 130.
,Basic Materials, IYM, PSCM, Energy, XOP, Wildcaters, WCAT, Small Cap Energy, PSCE, and Energy Production, IEZ, traded lower on falling US commodities, USCI, and Oil, USO. The credit dependent Russell 2000, IWM, traded lower. Homebuilders, XHB, ITB, Nasdaq 100, QTEC, Semiconductors, XSD, SMH, Nano Technology, PXN, Cloud Computing, SKYY, Smartfone, FONE, Networking, IGN, Software, SWH, IGV, traded lower as well.
Whirlpool, WHR, off 2.3% today; it has been a loss leader in the Morgan Stanley Cyclicals Index, $CYC, which traded 2% lower today, down 7% for the week. The Morningstar Mid Cap Growth, JKH, is down 6% and the Russell 2000 Growth, IWO, is down 6%. Strong fallers include VistaPrint, VPRT, and True Blue, TBI as printing services and manual labor services are going to be in less demand.
There was a strong trade up in bonds, BND, LAG, AGG, led by Municipal Bonds, MUB, California Municipal Bonds, CMF, Mortgage Backed Bonds, MBB, and the shorter duration 3 to 7 year US Treasuries, IEF, as seen in this Finviz Screener. Junk bonds, JNK, and Leveraged Buyouts, PSP, traded lower with stocks. Tyler Durden reports 30 Year $13 Billion Reopening Prices At Record Low Yield, Highest Bid To Cover In 11 Years. Market Watch reports 4 U.S. 10-year yields fall further under 2%.
The US Dollar, $USD, UUP, traded higher as major world currencies, DBV, emerging market currencies, CEW, and commodity currencies, CCX, traded lower. The Euro, FXE, fell to 129.34.
The chart of USD/JPY shows a rise above 77.9, causing JYN, to trade lower at 75.30. The breakout of the USDJPY and the fall lower in its inverse ETF, JYN, documents the failure of fiat money and the end to the Milton Friedman Free To Choose floating currency regime. Moneyness will no longer based upon debt and currencies. Moneyness will of necessity be based upon diktat.
World shares, VT, traded lower as Energy Service, OIH, Mining, MXI, Chinese Materials, CHIM, Copper Mining, COPX, Aluminum Producers, ALUM, Uranium Miners, URA, and Energy, XLE, traded lower on falling commodity, DBC, prices, particularly falling Oil, USO, Base Metal, DBB, Copper, JJC, Aluminum, JJU, Nickel, JJN, Tin, JJT, Lead, LD, prices. Solar, TAN, and Manufactured Housing, CVCO, were the loss leading sectors of the day. Stock Brokers, IAI, and Investment Banker, KCE, led financials, XLF, lower.
It is the world small cap shares, VSS, that are leading the world shares, VT, ACWI, down; this due to credit evaporation being more deleterious to the smaller shares than their larger peers. The exception is the Japanese small caps, JSC, which are falling less fast than their larger peers, EWJ, due to the fact that the larger ones are damaged more strongly than the smaller ones by a higher Yen, FXY. John Rubino writes Strong Yen Is Destroying Japanese Industry. The India Small Caps, SCIN, and SCIF, together with the German Small Caps, GERJ, and the Canadian Small Caps, CNDA, are the small cap loss leaders, stemming from the fall in the Rupe, ICN, the precarious nature of the Euro, FXE, and the deleveraging out of Canadian Energy, ENY, and Mining Shares.
The epicenters of deleveraging out of Neoliberalism are seen EZA, EWZ, EPOL, EIS, ECH, EWI, INP, TUR, ARGT, EWO, RSX, in this Finviz Screener. Italy and India are the poster nations of deb deflation, that is, currency deflation.
Poland, EPOL, is one of the Eastern European Countries, CEE, which Austria, EWO, provided Swiss Franc carry trade loans. Hungary’s sovereign debt has been written down to junk status and its currency has plummeted, making loan repayment impossible. In Bloomberg report Austrian Banks Facing Payback as Hungary’s $22 Billion Debt Slaves Revolt, Moody’s Investors Service last week said that Austrian banks’ exposure to the central and eastern European region is “the single biggest event risk for the sovereign.” Austrian banks are also the biggest lenders in the broader eastern European region. Standard & Poor’s said Dec. 5 it may downgrade Austria, one of the six remaining euro area countries rated AAA, because it may have to inject capital into its banks.
There was a slaughter in the commodity markets today as the inflation trade continued to unwind on an ongoing scramble for liquidity globally. Deleveraging and derisking sent commodities, DBC, seen in this Finviz Screener, strongly lower. The risk asset of the age of leverage, Silver, SLV, traded strongly lower, turning silver miners, SLV, SIL, HL, PAAS, CDE, SSRI, MVG. and Canadian Small Cap Stocks, CNDA, lower. Natural Gas, UNG, continued its strong fall lower. Gasoline, UGA, traded lower with oi. Gold miners, GDX, and GDXJ, continued lower on a falling price of Gold, GLD. Metal Manufacturing, XME, Coal, KOL, Rare Earth, REMX, and Steel, SLX, continued lower today. Coffee, JO, Cotton, BAL, Grains, GRU, Food, FUD, drove Agricultural Commodities, JJA, lower; which in turn forced agriculture shares, MOO, PAGG, AGCO, LNN, TSCO, lower.
A failure of growth is seen in Automobile Shares, VROM, CARZ, and stocks seen in this Finviz Screener, turning lower: TRW, AXL, JCI, DAN, TEN, MGA, TWI, LAD, TSLA, CLC, F, SMP, VC, MTOR, WBC, WPRT, PCAR, GM, CVGI, ALV, GPC, BWA. Imagine the destruction that is coming to new automobile sales when the financial industry is unable to provide financing for auto sales.
A failure of growth is seen in construction equipment manufacturers TEX and MTW, turning lower.
A failure of growth is seen in industrial equipment manufacturers ETN, ROK, AME, AOS, ENS, FELE, turning lower.
A failure of growth is seen in metal manufacturing firms, XME, NUE, STLD, RS, AKS, turning lower.
The failure of growth, and the down turn in bank shares turned a number of country shares, ACWX, lower. Currency deflation is one of the factors driving global financials, IXG, lower; these fell 1% today. The world’s leading banks are seen in this Finviz Screener lower. Brazil, EWZ, BRF, traded lower on falling banks BRAF, BBD, ITUB, BSBR, BBD. South Korea, EWY, SKOR, traded lower on falling bank shares, SHG. Argentina, ARGT, traded lower, on falling bank shares, GGAL, BMA, BBVA. Chile, ECH, traded lower on falling bank shares, SAN, BCH, BCA. The UK, EWW, traded lower on falling bank shares, BCS, HBC, LYG, RBS, Australia, EWA, KROO, traded lower on falling bank shares, WBK. Ireland, EIRL, traded lower on falling bank shares, IRE. Peru, EPU, traded lower on falling bank shares BAP. Canada, EWC, traded lower on falling bank shares, BMO, RY. Switzerland, EWL, fell lower falling bank shares, CS. European shares, VGK, traded lower on falling European Financial Shares, EUFN. Germany, EWG, GERJ, traded lower on falling bank shares, DB. Falling bank shares reflects the failure of the seigniorage of fiat currencies, which is the same as the failure of national sovereignty.
Global derisking continued to drive the Emerging Market Mining Shares, EMMT, lower. And derisking continued out of Emerging Market Banks, FGEM, EMFN, such as HDB, IBN, GGAL, BMA, SAN. Shangahi, CAF, continued trading lower. India, INDY, INP, SCIF, SCIN, EPI. HDB, IBN, and Brazil, EWZ, BRAF, BRF, BBD, led the Brics, EEB, lower. Chile, ECH, turned lower.
Infrastructure companies, electric utilities, energy companies such as Enbridge, ENB, and pipeline companies, DPM, KMP, EEP, EPD, MWE, RGP, TLLP, EEP, NGLS, OKS, WMB, MMP, E, PAA, TCLP, APL, seen in this Finviz Screener, will be overseen by stakeholders, as political capital manages the factors of production. Canadian energy shares, ENY, and CNDA, are going to be strong fallers.
In the age of deleveraging, a buy and hold strategy in stocks, such as the one by Barrons, that is Barron’s 10 Favorite Stocks For 2012, will be utter disaster: its falling on a knife. The only prevailing forms of wealth will be diktat and the physical possession of gold.
Bespoke Investment Group shows the chart of gold’s long rally, which began with the implementation of Quantitative Easing in March of 2009. Gold has been the very best inflation trade of Neoliberalism’s Free To Choose Floating Currency Regime. But as the US Dollar began to rise in September 2011, gold topped out and has fallen sharply lower. Gold rose as the US Dollar was debased by US Federal Reserve trading out of money good US Treasuries for toxic debt held by banks worldwide, as Econobrowser reported in its March 19, 2009 article Quantitative Easing. But now, as currencies started to sink in September 2009, after investors became aware that a debt union had formed in the EU and fled the stock market in July 2011, the US Dollar started to rise, and gold, being both a commodity and a currency turned lower in September. Gold for now is suffering, along with other commodities and currencies from destructionism. Guy M. Lerner of The Technical Take relates that gold is still in a bull market and presents the monthly chart of the gold showing it to be in an uptrend. Gene Arensberg of Got Gold presents the weekly chart of gold headed to support at $1,535. And Mitch Hammerstedt of Market-Foresight presents the daily chart of gold trading at $1,574 with support at $1,500. Gold Analysis from Shaza references the Arthur Hill presentation of the daily chart of $gold with support at 1,550. Trader Dan Norcini presents the daily chart of gold with double bottom at $1,535. The fall lower in gold reflects speculative exhaustion and presents a buying opportunity as investors seek safe haven from the diktat of sovereign regional leaders.
2) … A political solution to the European sovereign debt crisis will require a political and fiscal restructuring of the Eurozone.
Charles A.E. Goodhart and Dirk Schoenmaker write in Vox The Political Endgame For The Euro Crisis Requires Deeper Political Integration including an elected president of the European Commission and a two-chamber parliament representing EU citizens and EU member states.
Unfortunately, the Eurozone crisis has become so severe that no redemption can come through democracy. Choice is at the very heart of the crisis. Investment bankers both in the US and Europe took advantage of human nature and capitalized on the Latin’s political and human nature, as well as the excesses of socialism to create ponzi credit, in the form of excessive sovereign debt as well as ponzi financing of public private partnerships. Furthermore, tax evasion is so systemic in the Latin countries that no known fiat money can be sustained. Democratic sovereign authority cannot be sustained where there is rampant evasion of taxation; and traditional sovereign authority cannot be sustained where where credit institutions are hopelessly insolvent.
The meteoric of the US Dollar November 2011, and the downturn in Chinese, India, South Africa, Poland, Israel, Chile, Turkey, Argentina, Russia, stocks, seen in this Yahoo Finance Chart, documents the failure of fiat money, and the end to the Free To Choose floating currency regime, that was the creation of Milton Friedman.
Moneyness will no longer based upon sovereign debt, national currencies and bank lending. It’s true, moneyness can no longer be coined by countries, or created by financial institutions, as credit, that is faith, has been destroyed. Moneyness, will of necessity be based upon diktat, which will provide for regional security and stability.
A whole new regime, a ten toed kingdom of regional global governance, known as the Beast Regime of Neoauthoritarianism, is rising to replace Banker Regime of Neoliberalism. The seigniorage of diktat is rising to replace the seigniorage of fiat money.
The Guardian reports IMF Slashes Growth Forecast For Greece And Emphasises Need For Structural Reforms And Tax Collection. In talks with Evangelos Venizelos, the finance minister, international inspectors urged the authorities to streamline the bloated public sector by both closing state organisations and putting 30,000 civil servants into a special “labour reserve”. The report said IMF staff believed that the new Greek government, headed by Lucas Papademos, was committed to the austerity programme. “The authorities have taken steps to bring the fiscal programme back on track, taking meaningful measures to cut public wages, employment and pensions, and to broaden the tax base (prior actions).” “Still, risks to the programme remain large, both from external sources (the worsening outlook for the euro area), and internal sources (a relapse into weak implementation).” The Fund explained that there was a “growing risk” that the outcome for Greece would be even worse than envisaged, especially if structural reforms were delayed. “Accelerated private sector adjustment, on top of fiscal retrenchment, would likely lead to a downward spiral of fiscal austerity, falling disposable incomes and depressed sentiment. In effect, the economy would rapidly work off its external imbalance through deeper recession and wage-price corrections rather than through productivity enhancing structural reforms.” In its analysis, the IMF said Greece’s debts were still sustainable even with the gloomier economic backdrop, but only if the country’s private sector creditors accepted a writedown of 50% and Athens received financial support on favourable terms. “The previous 21 July financing package would not work. Public debt would peak at 187% of GDP in 2013 and fall to 152% of GDP by 2020. Net external debt would peak at 128% of GDP in 2012 and fall to 96% of GDP by 2020. These already weak downward trajectories would not be robust to shocks. “Further progress in reducing the deficit is going to be hard to achieve without underlying structural fiscal reforms. Greece will not be able to undertake, in a socially acceptable manner, the large fiscal consolidation that still lies ahead without a much stronger resolve to tackle the problem of tax evasion.”
FT reports Greek Tax Collectors Accused Over Bribes. Greek tax collectors routinely pocket 40 per cent of fines imposed in disputed tax cases in return for lowering the penalties paid by miscreants, a former senior Greek finance ministry official has revealed. Diomidis Spinellis said a standard scale is used at more than 250 tax offices across Greece to handle settlements with wealthy individuals, family-owned companies and self-employed professionals, seen as the country’s biggest tax evaders. The long-established practice is known as the “40-40-20 deal”, he said. The tax evader receives a discount of 40 per cent on the agreed fine, while the tax official takes another 40 per cent, effectively a bribe. The state receives only the remaining 20 per cent, he said. Greece loses revenues of €5bn-€6bn annually because of tax evasion, equivalent to 2.5 to 3 percentage points of gross domestic product, more than any other eurozone member, according to the Paris-based Organisation for Economic Co-operation and Development. Mr Spinellis made the disclosure at a public discussion on tax evasion organised by two Greek thinktanks, an Athens consultancy and a civil society group. He resigned in October as head of information systems at the finance ministry after senior tax officials failed to act on information revealed by new computer programmes that he had developed to detect tax evasion.
Gary of Between The Hedges communicates that the banks are insolvent and unable to fund themselves. The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is falling -4.6% to -147.0 bps, which is now back to Nov. 28th levels. The FRA-OIS Spread is surging +8.3% to 60.0 bps. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -29.8% since February 16th and -25.5% since Sept. 7th.
The Automatic Earth relates that systemic collapse is imminent as The Eurozone Is In A Death Spiral. The most toxic assets right now are the sovereign bonds of peripheral Eurozone countries, up to and including Italy. If the banks turn to their governments (taxpayers) to re-capitalize them, then the countries’ own funding needs will worsen as their debt yields go up, which also exacerbates the funding needs of the banks. Yalman Onaran describes this death spiral in his article on Bloomberg European Banks Taking Cash From Governments Seen Sparking Vicious Cycle. The size of potential losses at European banks has scared away short-term creditors, squeezing the region’s lenders. The European Central Bank has stepped in to replace funds being withdrawn, providing unlimited cash and lowering requirements on the quality of collateral it will accept. We’re in a death spiral, said Andy Brough, a fund manager at Schroders Plc in London. As the yields on the peripheral bonds increase, value of the bonds decreases and the amount of capital the bank has to raise increases. Basically, the amount of actual capital available for the pot continues to rapidly shrink, while the sizes of the outstanding bets and raises remain the same, a theme well known to readers of The Automatic Earth. The central banks are trying to hold back a tsunami of margin calls that will produce waves of potentially infinite height, and therefore there is no way they can hold them back for very much longer.
Bible prophecy foretells that out of sovereign armageddon, perhaps better said, Eurogeddon, a banking and financial system collapse, the most credible sovereign, Revelation 13:5-10, and his banking partner, Revelation 13:11-18, will rise to power to provide the seigniorage of diktat, where their word, will and way will provide a new moneyness. The people will be amazed by this and place their trust and faith in it, giving it their full allegiance, Revelation 13:3-4. Fiat currency will give way to electronic payments and fiscal dole in New Europe’s fiscal union where fiscal federalism rules. A Federal Europe will gladden the hearts of the founding fathers of European integration, and stir Garner Ted Armstrong, who envisioned a United States Of Europe, to rise from the dead.
Christopher Allessi, of The Council On Foreign Relations, CFR, writes A New Fiscal Union for Europe. At the same time, many observers see the newly agreed upon fiscal union,and Britain’s rejection of it, as a vital political step forward in the preservation of the single currency. The Financial Times’ Wolfgang Münchau argues that the split of the eurozone from the larger EU was inevitable and essential. The summit demonstrated that a “monetary union cannot coexist with a group of permanent non-members in a unified legal framework,” he writes. For the eurozone to survive, the greater EU must be reconstituted or destroyed, Münchau explains. Indeed, Britain’s decision not to take part in the fiscal union is paving the way for a new Europe unhindered by half-hearted British engagement, says Der Spiegel’s Roland Nelles. He contends that Europe is “on the path towards becoming a federal country.”
The road to serfdom will come as EU leaders meet yet again in summits and announce regional framework agreements which pass the baton of sovereignty from nation states to the Sovereign and the Seignior. God from eternity past Ephesians 1:1-11, has ordained that these two sovereigns, the EU ECB and IMF Troika, along with stakeholder groups from industry and government, as well as the ECB empowered as a bank, to have sovereign authority, yield fiscal sovereignty, and to provide credit to infrastructure and businesses that are key to Eurozone’s security. Sovereignty comes by appointment. New sovereigns are coming to replace the old ones, such as G-Pap and Berlusconi. Technocratic government is replacing democracy. A Germanized Europe Is Not For Citizens, it is for residents of a region of global goverance.
Banks will be nationalized and integrated into the goverment and be known as the government banks or gov banks for short. Totalitarian collectivism, and state corporatism, that is statism, are the EU’s future. Repayment of carry trade loans and and other loans will be make debt servitude de rigueur. Julie Hyland of WSWS reports European Workers Face Austerity And Dictatorship. And Ante Dotto of WSWS reports New Croatian Government To Implement Big Business Measures. The newly elected Social Democratic led coalition in Croatia will step up the austerity measures. Libertarian concepts, such as Freedom and Free Enterprise, are dead on arrival in the New Europe that is forming. And choice, a concept promoted by crony capitalists under the Milton Friedman Banker regime, will be relegated to the dustbin of history. Libertarianism is a ghost out of humanity’s past, a spectre, an apparition, that is unable to provide any direction.
In the Neoauthoritarian world, there are no sovereign individuals, there are only sovereign leaders. Being sent by fate, these are to be considered to be and should be called, dignitaries. Austrian Economist Robert Wenzel relates The State Of The PIIGS Here’s the one chart that explains the eurozone crisis. Market participants are requiring higher and higher interest rates to hold debt issued by the PIIGS. The higher interest rates make it more and more difficult for the PIIGS governments to bring their budgets under control. (The chart communicates that the profligate countries have lost their debt sovereignty, and are bankrupt, that is insolvent.) The only sound solution is for the PIIGS to go bankrupt and stick the hurt on those who were willing to hold the PIIGS paper in the first place, mostly the banksters. Instead, the PIIGS, with the banksters in the shadows, are imposing austerity, read: higher taxes, which smothers the PIIGS economies even more. Thus, the European Central Bank will eventually step in to prop up the sovereign debt by money printing, which will result in huge price inflation in the EZ.
Who is to say that the ECB will step in and print money; they may or they may not. The sovereigns of Europe may issue script or some limited dole for the fiscal spending needs of the Latin nations as a replacement for today’s fiat money, that is the Euro. Money and credit will not be created through traditional ways by Mortgage REITS such as Annaly Capital Management, NLY, or Investment Banks, such as Goldman Sachs, GS, but by diktat.
As countries loose their debt sovereignty, the hand of God, Ephesians, 1:1-11, is passing the baton of sovereignty from former sovereign nations to sovereign leaders who will yield fiscal sovereignty; a case in point is the EU ECB IMF providing seigniorage dole to Greece. The global monetary, credit, investment, banking, and political tectonic plates have shifted, and the 1974 Clarion Call of the Club for regional global governance is being heard and heeded more and more.
God has purposed throughout history that mankind be subjected to kings and kingdoms. God’s progression of kingdoms is seen in the interpretation of Nebuchadnezzar’s Dream in Daniel 2: 31-43 which foretold that great leaders would arise as history unfolds. These have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, and George Bush, The Decider, ruling America with Unilateral Authority. Soon ten kings will come to rule, each in his own regional power base.
The coming President of the EU will be one knowledgeable with regional framework agreements. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout, and as who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’.