Financial market report for the week ending April 27, 2012; the fourth weekly report of entrance into the Second Great Depression.
Capitalism, money and credit suffered a fatal blow this month as world stocks, VT, and Commodities, DBC, traded lower. All confidence in the financial solvency of Spain was lost this week. The fiscal spending of Spain is now funded entirely through the ECB or its proxies. The European Sovereign debt crisis has gone viral.
With its downgrade, Spain suffered a sovereign implosion this week. It is no longer a sovereign nation state; rather it is a vassal state, that is a client state; its people, like those in Greece are no longer citizens, rather they are residents living in a region of global of global governance. The Spanish and Greeks, are not and cannot be Germans, yet all reside in a regional gulag of debt servitude.
Wolf Richter of Testosterone Pit writes Collapse of the EU is a realistic scenario.
Ty Andros writes An underwater earthquake has occurred in Spain and is quite possibly occurring now in Italy. Killer waves are now headed directly at the central banks and financial systems throughout the developed world and at Europe in Particular. How long until they hit and do the financial equivalent of Japan’s recent tsunami? Socialist bureaucrats and progressives on both sides of the Atlantic are locked in death struggles with Mother Nature. They will lose.
Homebuilders, ITB, US Infrastructure, PKB, Pharmaceuticals, XPH, IHE, and Biotechnology, XBI, led US , VTI, European, VGK, and Asian, EPP shares higher this week.
Small Cap Pure Value, RZV, Large Cap Growth, JKE, European Financials, EUFN, Semiconductors, XSD, Steel, SLX, Retail, XRT, Small Cap Consumer Discretionary, PSCD, Residential REITS, REZ, Industrial Office REITS, FNIO, General REITS, RWR, Paper Manufacturers, WOOD, Networking, IGN, Consumer Services, IYC, Telecom, TGEM, Automobiles, VROM, Cars, CARZ, and Dividend Payers, DVY, rose strongly.
Countries rising strongly included, EPHE, GERJ, ENZL, and THD.
Money poured into the large cap stocks this week such as AAPL, AMGN, AMZN, BA, T, LEN, LOW, HD, TSM, and the creditors MA, V, DFS, and AXP. This surge of investment capital took large cap growth, JKE, and consumer discretionary, IYC, to new highs.
The dramatic rise in stock values this week is entirely due to the final tulip mania of a global speculative leveraged investment community underwritten by liquidity of neoliberal finance. This week’s rise reflects that the Institutional Investors and Hedge Funds have gone all in despite the news in Argentina, Brazil, and India, as well as the news in of Spain’s implosion, thus continuing the all in trend of the first quarter 2012.
The chart of Hecla Mining, HL, shows a rise of 6% this week; GDXJ, rose 6%, GDX, 4%, and SIL 4%.
The stock surge was so strong that it took, small cap pure value shares higher, RZV, which took major world currencies, DBV, and emerging market currencies, CEW, higher, and the US Dollar, $USD, UUP, lower.
Yet despite this week’s rise in currencies, debt deflation, that is currency is underway in the emerging market currencies stemming from a failure of the world central banks’ monetary authority to stimulate global growth and trade, as well an increased taxes in India, an over use of credit in Brazil, and an expropriation of an Spanish oil company in Argentina. Clearly the failure of neo liberal credit and finance has commenced competitive currency devaluation.
This week’s rise in Emerging Market Currencies, CEW, and Major Market Currencies, DBV, drove Total Bonds, BND, rose to a new high, which took the Steepner ETF, STPP, traded to a new low, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, traded lower. The Interest Rate on the US Ten Year Note, ^TNX, traded down to 1.93%.
The chart of Volatility, TVIX, shows that it fell to a new low. Nevertheless the fact that weekly charts show that World Stocks, VT, fell lower in April being led so by the Argentina, ARGT, the BRICS, EEB, the Emerging Markets, EEM, Global Materials and Mining, MXI, Coal, KOL, Copper, COPX, Aluminum, ALUM, Rare Earth, REMX, World Financials, IXG, India Earnings, EPI, Brazil Financials, BRAF, and most strongly by commodities, DBC, in March, documents that capitalism has died on the failure of seigniorage, that is the moneyness, of money and credit.
The fiat money system has died on the inability of the world central banks’ monetary authority to sustain economic growth and trade, as well as inability to sustain corporate profitability, and now the sovereign implosion of Spain.
Open Europe reports S&P downgrades Spain’s credit rating by two notches; IMF: Spanish banks may need more public money. Standard & Poor’s downgraded Spain’s credit rating by two notches yesterday, following data from the Spanish central bank, which showed that the country has entered recession. Meanwhile, the conclusions of a new IMF report due for publication in June have warned that “greater reliance on public funding may be needed” to complete the restructuring of Spanish banks. Meanwhile, Spain’s two largest banks, Santander and BBVA, have warned that they will have to slow down their purchases of Spanish bonds, as their exposure to Spanish debt has already attained considerable levels. EUobserver 2 Il Sole 24 Ore Repubblica Cinco Días Times FT FT 2 FT Alphaville CityAM WSJ WSJ 2 Guardian Le Monde Les Echos Bloomberg FT 3 CityAM 2 FT 4
Alejandro Lopez writes in WSWS Spanish Government Proceeds With The Destruction Of Health Care and Education.
(I comment that European Socialism, which came by the introduction of the Euro, died with the announcement by Spain of austerity cuts as well as restrictions of political dissent. Socialism in Europe could never had taken the course that it did if it were not for the regional currency. The rise in the value of the Euro and its associated rise in sovereign debt, regional debt, banking debt, Cajas debt, as well as speculation in housing, underwrote GDP, jobs, and public employment in Spain, such as the “temporary teacher” jobs the author wrote about. The austerity measures, that is the social and education cuts, as well as the political limitations on dissent being introduced, suggests that the socialist way in Spain is history, and that the nation is best described as a totalitarian collective and no longer a democratic nation, all on the failure of Neoliberalism to sustain sovereign debt.
With Spanish sovereign debt trading at 6%, and today’s downgrade of Spain’s sovereign debt; and the tremendous downfall in value of BBVA and STD, which are highly leveraged banks, government spending in Spain is fiscally unsustainable. Spain is an insolvent sovereign and its banks are insolvent financial institutions. The April 25, 25th WSWS report, communicates that Spain is no longer governing as a democracy. The marketplace is communicating that Spain’s banks are no longer safe financial institutions. Investors are no longer willing to underwrite Spanish government or Spanish banking activities. Spain has lost its debt sovereignty, and is no longer a sovereign nation state; whatever fiscal spending exists will be coming from the ECB and not from the global government Treasury market place.
Spain is a vassal state in a fiscal union established by debt brakes affirmed by EU leaders; and Spain is a vassal state in a regional monetary union where the ECB’s monetary policies have established itself as a regional sovereign authority. The only thing that remains is for Euro zone leaders to announce regional framework agreements to establish a Federal political union for a fully coordinated region of global governance to emerge. Consent of the people will not be required. Spain’s fiscal spending cannot continue even at the reduced levels called for by the government. It is reasonable to expect a bank holiday and government holiday in Spain when Financial Armageddon comes. There will be no Spanish Pesos, no German D Marks, no Greek Drachmas. The fiat money system is history. It is reasonable to believe from the WSWS report that the diktat money system is rising, where diktat will serve as both credit and money. The Austrian Economics dream of a free market economy, one based on a standard that cannot be easily manipulated, is not going to happen. The diktat economy with monetary cardinals acting under a monetary pope and a budget commissioner is the EU’s future. European financial institutions will be merged into the government and be known as the Government Bank or Gov Bank for short.)
Reuters reports Govt debt woes bigger pain for Italy’s banks than Spain’s
Mike Mish Shedlock Bernanke Calls Krugman “Reckless”. Paul Krugman is now so far into outer space with ridiculous economic proposals that even Helicopter Ben Bernanke recognizes Krugman’s proposals as “reckless”.
Mike Mish Shedlock report Eurozone retail sales plunge at strongest pace since late 2008.
Mike Mish Shedlock writes Greece to Seize Money From Suspected Tax Evaders’ Accounts, with Charges and Trials Later; More Capital Flight Coming Up
Mike Mish Shedlock reports Depression in Spain: Unemployment Rate Up .5 Percentage Points to 23.6%; Expect Much Higher Rates Later This Year; When is the Breaking Point?. Spanish politicians (for now) remain insanely committed to the Euro. How long the citizens remain committed to the Eurozone is another matter. When is the Breaking Point? Will the general population of Spain put up with an unemployment rate of 28%? 30%? I think not, but I do not know the precise breaking point. Whatever it is, Spain has little chance for growth prospects for a decade as long as it remains in the eurozone. Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected.
(I comment that indeed a breaking point is coming; it is called Financial Armageddon, where a credit bust and global financial breakdown, will rip asunder all current forms of national sovereignty and national governments and be the genesis event for regional global governance. This is seen in bible prophecy o Revelation 13:3-4 which communicates that the people will stand amazed of the power of the Beast Regime and follow after it giving it their full allegiance and support even to the degree that they worship it)
Mr Shedlock concludes his thoughts relating Spain will be better off as soon as that happens.
(I comment that God is not concerned about Spain being better off. The apostle John is given the honor of being named John The Revelator, for having written a dream given to him, that being The Revelation of Jesus Christ. God is no respecter of persons; he is sovereign over all time, space, events, nations and people, and is carrying out His plan of the destruction of all existing forms of political and economic life. This plan was conceived in eternity past, so that the Millennial Kingdom of Jesus Christ, can soon be established in Jerusalem. The apostle John begins his book by relating those things which “must shortly come to pass”, Revelation 1:1, meaning that once they start to occur, they fall rapidly in place, like line dominoes that topple one upon another, once the first falls. )
(I comment that it was the expansionary and interventionist policies of John Maynard Keynes that set the backdrop for other pernicious ideas beginning in the 1950s, that has created the Banker and Crony Capitalism Regime of Neoliberalism to be the terminal phase of capitalism.
The Beast Regime of Neoauthoritarianism is now rising as foretold in bible prophecy of Revelation 13:1-4, which is the same as the Ten Toed Kingdom Of Regional Global Governance seen in Daniel 2:31-33, to govern the world in totalitarian collectivism and statism.
The perniscious ideas have included the magical intervention of the mischievous feline to clean up the house a second before the mother returns in Dr. Seuss’ The Cat in The Hat, cultural pluralism, positivism particularly economic positivism, the Milton Friedman floating currency regime, the repeal of the Glass Steagall Act, the establishment of Philips Exeter Academy and Yale University, as so called learning institutions, the acceptance of derivatives of all types, as well as the growth of moral hazard through neoliberal finance to rise to underwrite crony capitalism and UK US Global Hegemony.)
Mark J. Grant, Author of Out of the Box writes in Zero Hedge Thirteen Years Later. There have been many grand experiments in social engineering during the past several centuries. We have witnessed the American Revolution, the French Revolution, the American Civil War, Communism and finally 1999 and the founding of the European Union.
It is an interesting exercise to consider the long view as I have wondered what the world looked like in 1789 which was thirteen years after the commencement of the American experiment.
It is also interesting to note, when comparing the two restructurings of society, that the new construct in the United States was founded upon assuming our own destiny and throwing off the yoke of the British Empire which was a common bond for the individual states which was not present and is not present, except in a curious twist, for the Europeans to cling to in times of significant decision.
(I comment that America never had its own destiny; it was destined by God to exist in global iron rule over the rule with the UK up until its power is greatly reduced by a global Eurasia War, the Ezekiel 38 war, and the soon coming Financial Armageddon seen in Revelation 13:3-4)
The “curious twist” is Germany which is seeking to dominate Europe through its economic prowess which would have been like Virginia or New York trying to dominate the United States in its infancy which was not possible due to the construct of a Senate and a Congress and a George Washington who rejected being the King.
(I comment that the regionalization of Europe will see Germany rise to be preeminent in every way, militarily, politically, economically, ruling over vassal states in a type of Revived Roman Empire. Destiny, Revelation 2:26-27, and 2 Corinthians 5:17-18, Revelation 6:1-2, not any human action, drives all the events of history. There is waiting in the wings of Europe’s stage, the most credible of sovereigns, one of seeming little authority, the Little Horn, Daniel 7:8, Revelation 13; 5-10. Soon fate will open the curtains, and he will step into the political and economic limelight. He will be accompanied in rise to power by a banker, Revelation 13:11-18. This sovereign will play the lead role in brokering a future middle east peace plan, Daniel 9:25-27, which comes after the global Eurasia War, the Ezekiel 38 War.)
Unfortunately, the Europeans did not have an Adams, Hamilton or Jefferson to help guide the process, this is my opinion, and so the paradigm for Europe is so flawed in structure that in times of stress, such as the current recession in most of Europe; the structure itself may defeat the cause. What we are witnessing now in Europe is then a serious pushback against Germany and its policies, the rise of Nationalism coupled with real anger against the German interventions and a German economy which will certainly go into decline as affected by its neighbors and trading partners which will exacerbate Germany’s internal issues I submit before the end of this year.
(I comment perhaps Herman van Rompuy or Olli Rehn will rise to guide the New Europe in regional global governance).
Tomorrow, April 28, commemorates the date of the Mutiny on the Bounty in 1789 which, curiously enough, was the British Navy throwing off the shackles of the absolute power of a Naval Captain and an event which ultimately changed the British laws at sea. The year 1789 was also earmarked with 25% of the people in Paris being without work and the date of July 14, 1789 which was the storming of the Bastille and the beginning of the French Revolution.
In America, thirteen years after our founding, George Washington was elected President and the first Congress and Senates began and the proposal for a “Bill of Rights” was approved. Finally, in 1789, American established our Judiciary which was another ground breaking act for our fledgling country. It seems then historically that thirteen years after America began we were in a process of formation and working towards national goals as a coalition of individual States while we find the European Union, thirteen years after its inception, following quite a different route. (I comment that the route for Europe is the 1972 to 1976 Club of Rome Clarion Call for regional global governance in documents such as Mankind At The Turning Point).
In times of great stress I have often noticed that ridiculous comments get made and the more the stress; the more delusionary the statements. Let us then examine a few comments made today.
“The EU fiscal pact cannot be re-negotiated.” German Chancellor Merkel
Who is kidding whom? Of course it can be renegotiated and any time enough nations decide to change it. The fiscal pact can be thrown out, amended, or burned at the stake when enough nations in Europe do not wish to pursue its goals and governance by German fiat is not yet operative except in the minds of the German politicians it appears.
“Mortgages get paid in good times and in bad. Anyone raising this problem as one of the issues
for the Spanish financial system is saying something stupid.” Banco Santander SA Chief Executive Officer Alfredo Saenz
This fellow is living way out beyond the edge in the land make-believe. America has just experienced this during the last four years and we know exactly what happens when in a financial crisis and when the reign of foolish money ends. It is my opinion but the Spanish proclamations of only a 3.00% mortgage delinquency rate in their country is nothing more than grand rush into the land of attacking windmills. It may well be that the banks do not wish to recognize the delinquent loans or that they have packaged them into massive securitizations and pledged them as collateral at the ECB who also does not wish to recognize any losses but with an unemployment rate at 24.4% now which will cause a further economic contraction, according to official figures, of $1.3 billion; the official mortgage delinquency rate is just a preposterous claim.
“Nobody has asked Spain, either officially or unofficially to turn to Europe’s bailout mechanisms. We don’t need it.” Spanish Finance Minister de Guindos
S&P just downgraded the country to BBB+; down two notches. It is not just the horrid unemployment numbers but the severe contraction in the economy and a Real Estate market that is down 25% and projected to head down another 20-25% that would make any rational person realize that Spain will soon be forced to seek outside help. A clear reading of Spain’s financials cannot lead to any other conclusion. They have come up with a plan to liquidate the banks’ Real Estate positions to outside, private companies. That much is fine except when they see what private companies wish to pay I predict that the retching will commence in Madrid. This exercise will also force the Spanish banks to take actual losses so that the balance sheets of the banks in Spain will begin to look like ground chorizo when/if this plan is implemented. In my view now; there is just no other way out except some sort of rebellion.
Reversals are curious things. Everything is just fine right up until the day when it is not. On October 9, 2007 the Dow Jones Index stood at 1464.53 and then it bottomed on March 9, 2009 at 6547.05 which was a 54% decline. On 10/9/07 CNN reported, “Stocks rallied Tuesday, sending the Dow and S&P 500 to all-time highs as investors breathed a sigh of relief that the minutes from the last Fed meeting supported hopes for another interest rate cut by the end of the year.” The decline began gradually enough and then strengthened with America’s economic contraction, the Bear Stearns buy-out and then the fall of Lehman Brothers. Any notion of what is going on in Europe will not affect America is just as silly as Germany supposing that they will be immune from the effects of the recession in Europe. That is not the way the world works and that will be proven again shortly. May 6 may mark the date when the sleeper finally awakens as Greece and France may both vote in such a manner as to significantly change the political landscape on the Continent. I submit that we are quickly coming to a major reversal in both equities and in credit/risk assets and that instead of being aggravated that it took so long that you should be thankful that you had the luxury of time to prepare for it.
“That was a memorable day to me, for it made great changes in me. But, it is the same with any life. Imagine one selected day struck out of it, and think how different its course would have been. Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day.” Charles Dickens, Great Expectations
Please consider bible prophecy of Revelation 6:1-2, which shows that Jesus Christ has opened the Book of the Seven Seals, and has unleashed the rider on the white horse, with a bow, but without any arrows, signifying a global political and economic coup d etat, where the baton of sovereignty is passing from sovereign nation states to sovereign leaders and sovereign bodies such as the ECB, in regions of global governance.
And please consider bible prophecy of Revelation 13:1-4, where the Beast Regime of Regional Global Governance is rising from the profligate Mediterranean nation states of Italy and Greece to replace the Capitalism Regime of Neoliberalism, as Financial Armageddon, that is a credit bust and financial system breakdown arises, Revelation 13:3-4, with diktat serving as regional monetary authority and regional fiscal authority — diktat will serve as both money and credit in a New Europe.