Is Greece Headed To Default Exit And Devaluation, Or Will A Federal Europe, Led By Germany Form In The Euro Zone?

Financial Market Report for February 28, 2012

1) … Dow closes above 13,000 as investors rotate into large cap and discretionary shares.
Reuters reports Dow, S&P hit milestones on confidence, lower oil. The Dow closed above 13,000 for the first time since May 2008 on Tuesday, and the S&P 500 also hit a milestone, as buoyant U.S. consumer confidence data and a sharp drop in oil prices nudged the nearly. Consumer Discretionary, VCR, rose to new rally high, on rising shares of consumer stocks such as Nike, NKE.

Large cap shares, JKE, were responsible for taking the Dow, DIA, higher; these include global infrastructure stock, IP, Express Scripts, ESRX, Apple, AAPL, Eaton, ETN, and Master Card, MA.

2) … The safe haven rally in US stocks is starting to break down, as a Greek Default becomes a foregone conclusion.  
Reuters reports ECB puts Greek banks on emergency aid after downgrade. The National Bank of Greece, NBG, led Greek Shares, GREK, lower today.

Transports, IYT, Utilities, XLU, continued lower.

The US Infrastructure Rally has ended with Design Build Shares, PKB, trading 1% lower. The design build shares have been an important component of a former safe haven rally out of Euros and into North American stocks, VTI, of all types. Other former safe haven rally were small cap pure value, shares, RZV. small cap industrial PSCI, biotechnology, XBI.  Housing, ITB. Charts show these to have rounded tops which are turning over.  

The design, build, and construct stocks can be followed by using this Finviz Screener; stocks trading lower include URS, NX, MHK, HOFT, EXP, NCS, DY.

Small cap value stocks can be followed by using this Finviz Screener; these include MOH, NTSP, FHCO, PSEC, POOL.      

Nearly every one of the small cap industrial shares seen in this Finviz Screener is now trading lower; largely on the exhaustion of neo liberal credit, failure of carry trade investing, and growing fears of the failure of growth; these include HEES, WCC, DXPE, SXI, PNR.

Master Limited Partnerships, MLPs, have been a yet another safe haven rally. The chart of AMJ shows one of the most fantastic ascending wedge stock patterns of all time, and today it finally broke, trading 0.8% lower; component OKS, fell 4.6%.

The trade lower education companies, APOL, DV, ESI, BPI, STRA, LOPE, evidences a failure of neo liberal credit. We are witnessing the beginning of the end of credit, and the beginning of the age of deleveraging, where the diktat monetary system, will provide diktat for both money and credit.

The trade lower in Residential REITS, REZ, Industrial Office REITS, FNIO, and REITS, RWR, illustrates the end of the current investment cycle.

Precious Metal Mining stocks rose, SSRI, SIL, GDX, GDXJ, as Bloomberg reports Gold Gains in New York on US Dollar Weakness. Gold advanced to a three-month high and silver posted its biggest gain in eight weeks as investors bought precious metals as an alternative to a weakening dollar. Platinum and palladium also rose. (Hat Tip to Between The Hedges).

Precious metals, JPP, are rising on an investment demand for gold on fears of Greek Sovereign Default.  The rise in gold also came with a rise in the Euro, FXE, on its short selling covering, and on a broad rise in major currencies, DBV, and emerging market currencies CEW. The Euro FXE, rose near to its recent high. The US Dollar, $USD, UUP, traded lower into a region of strong support.

The end of the business super cycle comes by the exhaustion of neo liberal credit and failure of carry trade investing. Bloomberg reports U.S. Durable Goods Orders Slump Most in 3 Years. Orders for U.S. durable goods fell in January by the most in three years, led by a slowdown in demand for commercial aircraft and business equipment. Bookings (DGNOCHNG) for goods meant to last at least three years slumped 4 percent, more than forecast, after a revised 3.2 percent gain the prior month, data from the Commerce Department showed today in Washington. Economists projected a 1 percent decline, according to the median forecast.  And Bloomberg reports IBM Cuts More Than 1,000 Workers, Group Says International Business Machines Corp, the world’s largest computer-services provider, fired more than 1,000 workers in North America this week, according to an employee advocacy group.  And Reuters reports Brazil Lending Falls for First Time in Three Years. Bank lending in Brazil contracted in January for the first time in almost three years while more consumers and companies fell behind on their loan installments, in another sign of the abrupt slowdown afflicting Latin America’s largest economy. Outstanding loans in Brazil’s banking system fell 0.2 percent in January from December, the first month-on-month drop since the 0.02 percent decline recorded in February 2009, the central bank said.  (Hat Tip to Between The News)

The global debt trade, and the global carry trade, are ending, with disinvestment coming out of country stocks such as EPHE, VNM, and EIS with the latter falling lower on fears of a Global Eurasia War. Vietnam received the LTRO carry trade juice and now it is falling lower.  One can follow country share trading by using this Finviz Screener.

It was a good day to dollar cost average a buy into volatility shares, seen in this Finviz Screener, TVIX, VIXY, VIXM, seen in this combined chart, as in a bull market one buys into dips, and in a bear market one sells into strength.  The greatest bear market is about to commence as total stock VT, seen in this weekly chart and ACWX, seen in this weekly chart, are peaking in an Elliott Wave 2 Up, and are going to enter an Elliott Wave 3 Down.

Retail, XRT, and US Consumer services, IYC, traded higher today, on report of consumer confidence and use of credit. Retail shares can be followed using this Finviz Screener. But as motioned above, small cap value shares, RZV, and design build, PKB, biotechnology, XBI, small cap industrials, PSCI, are trading lower. The combined chart of IYC, RZV, PKB, XBI, PSCI illustrates ongoing moneyness in consumer services, but the failure of moneyness in neo liberal credit. One can follow an overall view of the stock market with this Finviz Screener of a broad spectrum of shares.  

Great Depression 2 commenced with the Second Greek Bailout, will be commencing soon on exhaustion of neo liberal finance, and failure of carry trade investing, as seen will be seen in the combined chart of the most leveraged stocks falling the fastest, as will be seen in the combined chart of RZV, PKB, XBI, PSCI, ITB, SLX, SCIF, EWZS, PSP, the fast fallers can be followed with this Finviz Screener.   

The expansion of neo liberal credit is seen in the chart of MA,V, AXP, DFS, NICK, NNI, COF. peak credit is coming soon.

3) … Junk bonds traded higher today on rising currencies: the world is attaining peak credit, as peak value of fiat money is being achieved.
Total Bonds, BND, traded unchanged, but non US Treasury credit instruments seen in this Finviz Screener rose today, on higher world major currencies, DBV, and emerging market currencies, CEW. Junk Bonds, JNK, rose to a new rally high,

4) … Is Greece headed to default, exit and devaluation; or will a Federal Europe led by Germany form in the Euro Zone?   
John Mauldin provides the PDF document A Primer on the Euro Breakup: Default, Exit and Devaluation As The Optimal Solution.

Yet, fate is relentlessly moving towards a greater credit and investment crisis, which will eventually result in European leaders meeting in more summits and waiving sovereignty, or perhaps said pooling sovereignty, and announcing regional framework agreements to establish a Federal Europe.

Angels gave the apostle John a vision of today’s events, of which he described as those things which must shortly come to pass, Revelation 1:1, meaning that events are falling like lined up dominoes fatefully toppling upon one other, picking up increasing speed toward a common destiny. All things are of God, 2 Corinthians 5:17-18, there is no human action. The fore ordained plan of God was foretold in bible prophecy, that being regional global governance, Revelation 2:31-33.
Tyler Durden writes of the creation of Federal Europe’s first client state. Greek Colonization 102: Europe Calls For Reconstruction Commissioner In Athens. First they force now officially defaulted Greece to bailout European banks courtesy of a Greek funded Escrow package, then they make Greek pays for the privilege of having a job, then they send in German tax collectors, and finally they prepare to pilfer the gold. And simply because nobody is home, the colonization continues, with the formal take over of the country by a “Kommisar”. Die Welt reports Junker calls for reconstruction commissioner for Athens. Since not even this colonial escalation will do much if anything to stir the locals, we can’t even imagine what the next annexation steps will be … I comment that reconstruction commissioners will part of monetary commissioners employed by the EU ECB IMF Troika, to work in the diktat monetary system for the security, stability and sustainability needs of the region.  

Tim Price, Director of Investment at PFP Wealth Management, courtesy of Sovereign Man writes in Zero Hedge, The Existential Financial Problem Of Our Time  The modern, debt-based economy requires constant economic expansion if only to service all that debt. So what happens when the modern economy goes ex-growth and stops expanding? Iceland already found out. Greece is in the process of discovering. But we will all get a chance to participate in this lesson. Runaway fiscal and monetary stimulus throughout the western economies is in the process of destroying the concept of creditworthiness at the centre of the modern monetary system.  Private investors, we suspect, have little or no conception of the extent to which the state is now the predominant player in the financial markets. Central banks control the money supply and interest rates. Central banking and commercial banking interests have essentially become fused. The ECB’s long-term refinancing operations are banking bailouts by the back door. Central banks are now also the swing players in government bond markets which directly influences the price for corporate credit. Central bank monetary stimulus also directly influences equity market direction and confidence. Be careful, be very careful about the sort of government debt you hold. You may well end up being paid in whole; but in such depreciated terms that being “kept whole” will be meaningless in real terms. … I comment that the current fiat monetary system is failing and the diktat monetary system is rising in its place, where the regional global govenance will provide diktat as both money and credit. It is the fear of sovereign failure that is creating a renewed investment demand for gold.  

Bloomberg reports Ireland to Hold Vote on EU Fiscal Compact. Ireland will hold a referendum to ratify the European fiscal compact, after government ministers said such a vote would effectively amount to a show of commitment to the euro.

Bloomberg reports JPMorgan Says Credit, Swaps Lead Trading-Revenue Sources in Rare Breakdown. JPMorgan Chase & Co. (JPM) said interest rate swaps and credit are among the biggest sources of revenue in its trading businesses, as it broke with most U.S. rivals by releasing a breakdown typically kept secret. JPMorgan generates $375 million from credit trading in a “typical quarter” and $350 million each from interest-rate swaps and foreign-exchange spot and futures trading, the New York-based bank said today in a presentation to investors. Cash equities produces about $325 million, while the bank gets $300 million a quarter from asset-backed securities (Hat Tip to Between The Hedges) I comment that the investment bankers came by these interest rate swaps as “consideration paid” for being primary dealers and carrying out POMO activities for the US Federal Reserve.

5) … In today’s news
Invesco PowerShares Capital Management LLC, a leading global provider of exchange-traded funds (ETFs), today announced the anticipated listing of two new ETFs that will provide investors with access to high-beta strategies covering emerging and international developed markets, EEHB, PowerShares S&P Emerging Markets High Beta Portfolio, and IDHB, PowerShares S&P International Developed High Beta Portfolio. I expect EEHB to be a fast faller in the Age of Deleveraging.


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