Stocks Have Best Day In 2012 On Stress Tests Of US Banks But Bonds Plummet And The US Dollar Rose Establishing The Death Of Fiat Money

Financial Market Report Form March 13, 2012

Introduction ,,, US Stocks led world stocks higher as US Treasuries fell sharply lower as the yield curve steepened … Bonds overall plummeted as the US Dollar rose establishing the death of fiat money.

On the results of the US Fed stress test of US banks, and in response to US Treasuries trading strongly lower, US Stocks, VTI, SPY, DIA, QTEC, rose; being driven higher by JP Morgan, JPM, Goldman Sachs, GS, Morgan Stanley, Citigroup, C, Bank Of America, BAC. Jimmie Dimon of JP Morgan said a dividend increase is forthcoming.

Regional Banks, KRE, International Banks, IXG, Chinese Financials, CHIX, European Financials, EUFN, rose strongly taking India, INDY,  India Small Caps, SCIF, China, YAO, Brazil, EWZ, Russia, RSX, the Brics, EEB, and Emerging Markets EEM, higher. Yet Chinese Financials, CHIX, Braxil Financials, BRAF, and India Earnings, EPI, trade well below their recent highs.

Small Cap Value, RZV, Home Building ITB, US Infrastructure, PKB, Gaming BJK, Semiconductors, Software, IGV, Semiconductors, XSD, Copper Mining, COPX, Consumer Discretionary, IYC, Retail, XRT, Biotechnology, XBI, Leveraged Buyouts, PSP,  Dividend payers, DVY, traded higher.

Both the US Regional Banks, KRE, to S&P Materials, MXI, differential, and the Housing, ITB, to China Industrial, CHIX, differential is stunning, suggesting a final safe haven rally in arge cap stocks, JKE, away from the epicenter of sovereign debt contagion, that being Italy, EWI, and Greece, GREK. The monster of Neoauthoritarianism is rising out of these Mediterranean Sea countries, to rule in all of mankind’s seven institutions and ten world regions.

The 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened, forcing Bonds, BND, sharply lower, as US Treasuries, ZROZ, EDV, TLT, IEF, IEI, fell strongly lower, forcing longer duration corporate bonds, BLV, and corporate bonds, LQD, lower. Emerging Market Bonds, EMB, rose to a new high on safe haven buying. The Flattener ETF, FLAT, traded lower, and the Steepner ETF, STPP, traded higher.

The Interest Rate on the US The Year Note, ^TNX, rose to 2.1%, reflecting the bond vigilantes being able to call interest rates higher, as the seigniorage, that is the moneyness of the US Central Bank’s monetary policies, have failed. This with the strong trade lower in the Yen, FXY, and the nascent trade lower in the Australian Dollar, FXA, the Brazilian Real, BZF, the British Pound Sterling, FXB, and the Swedish Krona, FXS, documents the failure of world central banks’ monetary policies, and the death of fiat money, with confirmation coming from the rise in the US Dollar, $USD, UUP to 80.19.With the rise in US Treasury yields and the rise in the US Dollar, $USD, capitalism has died, and regional global governance will rise in its place.

The monetization of debt globally finally has resulted in a rise in sovereign and corporate interest rates globally, causing derisking out of stocks, and deleveraging out of commodities, on debt deflation, that is currency deflation.

With sovereign national governments failing, Bonds, BND, and currencies, such as the Emerging Market Currencies, CEW, the Brazilian Real, BZF, the Australian Dollar, FXA, the British Pound Sterling, FXB, the Swedish Krona, FXS, and the Euro, FXE, turning lower, both fiat money and credit have died.

Fiat wealth consisting of stocks and bonds, will now literally be sawn asunder, and fall ever lower, as currencies trade increasingly lower, on the exhaustion of the worlds’ central bank monetary authority, causing competitive currency devaluation.

Fate, through creative destruction, is passing the baton of sovereignty authority to new sovereigns, such as the EU ECB and IMF Troika, who are providing diktat as both money and credit. The fiat money system is history and the diktat money system is rising in its place. Sovereign insolvency and bank insolvency are the factors causing the seigniorage, that is the moneyness, of the global debt trade to fail. Soon the seigniorage of diktat, will arise to underwrite debt servitude for all. An inflection point in economic history has been reached as the monetization of debt is causing the destruction of currencies, leading all down the road to serfdom, into a global gulag of debt servitude and loss of national sovereignty.

With stocks, rising to previous highs, and bonds, and currencies trading lower on competitive currency devaluation, the fiat money system is history; and the diktat money system will rise to govern mankind in regional totalitarian collectivism and regional statism. Regionalization is the way forward in globalism.

Capitalism’s dynamos of growth and profit are exhausting on the failure of neo liberal credit and carry trade investing. New dynamos of regional security, stability and sustainability will establish the ten toed kingdom of regional global governance, terminating the Anglo American hegemony that began in the late 1700s, even though Oliver Knox reports Obama, Cameron reaffirm Afghan strategy; the two leaders say NATO is still committed to shifting to a support role in Afghanistan in 2013.

Gold, GLD, traded lower as Base Metals, DBB, and Timber, CUT, rose, taking commodities, DBC higher, but below their recent highs.

Stock bear market ETFs, such as TWM, and EEV, traded lower on falling volatility, VIXY; but bond bear market TBT rose.

Bloomberg reports Soaring Target2 Imbalances Stoke German Risk Angst. German angst is growing as an entry on the Bundesbank’s balance sheet swells to a sum worth about 20 percent of economic output, a sign of the extent to which Europe’s largest economy is funding the region’s laggards. The European Central Bank’s Target2 system, which calculates debts between the euro region’s central banks, shows the Bundesbank is owed 489 billion euros ($656 billion), up almost 65 percent from a year earlier. German central bank President Jens Weidmann wrote to ECB President Mario Draghi last month to warn about growing systemic risks, Frankfurter Allgemeine Zeitung newspaper reported Feb. 29. “The Germans are very much justified in their concern,” said John Whittaker, an economist at Lancaster University Management School, who drew attention to the growing imbalances in papers published last year. “The Target2 liabilities are just as risky and just as real as holding the government bonds of Greece and other peripherals.

Bloomberg reports Merkel Says Europe Is ‘Good Way’ Up Mountain, Not Over It. German Chancellor Angela Merkel said that European efforts to resolve the debt crisis are making progress, even as “imbalances” in euro-area economies show that the task is far from complete. “We’ve come a good way along the mountain path, but we’re not completely over the mountain,” Merkel told reporters in Rome late yesterday after talks with Italian Prime Minister Mario Monti. “I suspect that in the next few years there will continue to be new mountains — there won’t be a celebratory event in which we say we’re over the mountain and now we can sit among the trees and say that we’ve done it.” Merkel praised Monti’s “bold” efforts since taking office on Nov. 16 to overhaul Italy’s economy, which include 20 billion euros in austerity measures and steps to deregulate services amid surging Italian bond yields that threatened to rip apart the currency region. Aided by European Central Bank liquidity measures, Italian 10-year borrowing costs have fallen to 4.89 percent from a euro-era record of 7.26 percent on Nov. 25. Monti, a former European Union competition commissioner, said Italy has “arrested” the crisis though not yet overcome it. “Italy still has homework to do,” he said. Italy prefers to rely on its “own strengths” rather than seek any external aid during the worst moments of the crisis.

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