Great Depression 2 Commences As European Financials And Formerly Export Driven Brazil And India Lead Stocks Lower

Financial Market Report for Monday April 10, 2012

1) … Failure of the ECB’s LTRO Facility sank Italy shares, and exhaustion of the US Fed’s monetary authority weighed on banks, infrastructure, mining and steel producers in export driven Brazil  and India.

The failure of the seigniorage, that  is the moneyness the ECB’s policies to fix European banking and sovereign debt problems, and of the US Federal Reserve’s policies, are now translating into an inability to sustain and stimulate global growth and trade.  The energy shares,  OIH, IEZ, WCAT, XLE, ENY, XOP, IEO, XES, and PSCE, that have been leading the world shares, VT, lower.

Credit and money is failing, and as a result capitalism, particularly Neoliberalism that has governed the world economics for the last forty years is history. Today’s trading reflects that the Euro zones profligate nations Portugal, Italy, Greece and Spain, the PIGS, have lost their debt sovereignty; these are insolvent sovereigns and as such have also lost their national sovereignty and will soon be seen as incapable of traditional government.

Neoauthoritarianism will rise out of a soon coming Financial Armageddon, that is a credit bust and financial collapse.

Political capital will replace investment capital as leaders meet in summits and waive national sovereignty and announce regional framework agreements that provide for new sovereigns, that is new leaders, and sovereign bodies, such as the EU ECB and IMF Troika to replace sovereign nations.

A new seigniorage is coming, the seigniorage of diktat is coming to replace the seigniorage of the world central banks. The diktat money system will replace the fiat money system: diktat will serve as both money and credit.  Bible prophecy of Revelation 13:3-4 foretells that after the soon coming global economic collapse, people will be amazed by regional global governance and give allegiance to the diktat of regional leaders.  The Bible is clear that a beast regime, which will be primarily European, will have such authority, that the entire world will marvel at this monster of statism, totalitarian collectivism, and regional global government rules the world, as God’s Word states, “And I saw one of his heads as if it had been mortally wounded, and his deadly wound was healed. And all the world marveled and followed the beast. So they worshiped the dragon who gave authority to the beast; and they worshiped the beast, saying, “Who is like the beast? Who is able to make war with him?”

Today’s trading reflects concern over banking insolvency and sovereign insolvency, as the European Financials, EUFN, Italy, EWI, an Spain, EWP, traded lower, forcing Europe, VGK, lower.  Insolvent banks and insolvent sovereigns cannot sustain economic growth and profit. Regionalization, as seen in the Club of Rome’s Clarion Call for regional economic governance, will develop regional trading blocs to provide regional stability, security,  and sustainability; such was foretold in prophecy of Daniel 2:31-33, where a ten toed kingdom, rises out of iron legs of  UK and US Hegemony, that has ruled the world since the late 1700s.

Tyler Durden writes Italy’s Index Slides Italian bank shares are down over 8.5% in the last two trading days as all the majors (Intesa SanPaolo, Unicredit, Banco Popolare -7.14%, UBI Banca, Banca Pop Milano -6.3%) are still HALTED. As 10Y BTP spreads break above 400bps for the first time in over two months, it seems the marginal buyer of last resort has left the building and with little if any performing collateral left, credit spreads (and LTRO Stigma most notably) is breaking to close to record wides.

The Irish Times reports Warning lights blink as banks in Spain and Italy load up on sovereign debt. And The Guardian reports Portugal’s domestic banks tap ECB for record amounts of funding.

IB Times reports Euro zone breakup fears causing deposit flight from PIIGS nations.

Emerging Market Mining, EMMT, Brazil Banks, BRAF, and India Banks, EPI, led Brazil, EWZ, India, INP, and Emerging Markets, EEM, lower.

Sweden, EWD, which depends upon exports to Europe, VGK, traded strongly lower evidencing the failure of global growth and global trade. Confirmation of the failure of the world’s central banks monetary authority comes from the strong fall lower in Thailand, THD, and Malaysia, EWM.

Small Pure Value, RZV, Small Cap Consumer Discretionary, PSCD, Small Cap Industrials, PSCI, Small Cap Energy, PSCE, and Retail XRT, seen in this Finviz Screener, traded lower.

Automobile Car Dealerships, such as LAD, SNA, KMX, seen in this Finviz Screener, Vehicle Part Manufacturers, such as TRW, WNC, TWI, CVGI, AXL, DAN, TEN, JCI, SMP, VC, seen in this Finviz Screener, Automobile Manufacturers, VROM , GM, and F, lower, and Farm Equipment Manufacturers, such as DE, and AGCO, seen in this Finviz Screener, traded strongly lower.

C, and BAC led RWW, lower.


LEN led ITB lower.

NP and IP led WOOD lower.

EXP, PRIM and USG led PKB lower.

Failure of the world central banks’ monetary authority to sustain and stimulate growth is reflected in Steel, SLX, Copper Mining, COPX, Aluminum Production, ALUM, Rare Earth Mining, REMX, Energy Service, IEZ, OIH, and Semiconductors, XBI, trading lower.

A trade lower in Housing, ITB, the Russell 2000, IWM, US Infrastructure, PKB, communicates that the safe haven trade in US Stocks, VTI, is over.

Dividend paying stocks, DVY, broke sharply lower.

Copper, JJC, led Commodities, DBC, lower.

Great Depression 2, that is the Second Great Depression, is now well underway.

The 10 Year US Treasury Yield, $TNX, fell to 2.0%, as the US 10 Year Notes, TLT, 30 Year US Government Bonds, EDV, and Zeroes, ZROZ, rose.  The Steepner ETF, STPP, fell as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, flattened massively.

Fiat wealth will literally be sawn asunder as Stocks, ACWI, and then Bonds, BND, fall ever lower in a death spiral lower together.

In conclusion, writing on how QE works, John Hussman asks Is the Fed Promoting Recovery or Desperation?   The process stops when all speculative assets are finally priced so richly and precariously that the people holding the cash have no further incentive to chase the speculative assets, and are simply willing to hold idle, zero-interest cash balances. The end of QE means the end of speculative investing, and the beginning of debt servitude. Under Neoauthoritarianism, as inflationism turns to destructionism and investors derisk out of speculative investments, the debts of Neoliberalism are increasing placed upon the people, those that cannot be written off will be applied to every man, woman and child on planet earth.  

 2) … In today’s news

Bloomberg reports Shadow Banks on Trial as China’s Rich Sister Faces Death. Operating outside the banking system or government regulation, the informal networks provide an important source of economic growth, capital for private companies and return for investors seeking to beat inflation. Premier Wen Jiabao, in an unusual move, weighed in on the case at a March 14 news conference. His comments highlighted a public debate over the importance of shadow banking to the Chinese economy, government efforts to bring it under control — and whether capital punishment is an effective means to do so. “Chinese companies, especially small ones, need access to funds,” Wen said when asked about Wu’s case. “Banks have yet to be able to meet those companies’ needs, and there is a massive amount of idle private capital. We need to bring private finance out into the open.” (Hat Tip to Between The Hedges)

Barron’s reports Sony, SNE, Drops 8%: Deeper FY12 Loss Seen On Tax Adjustment. Shares of Sony (SNE) are down $1.58, almost 8%, at $18.53 after the company this morning warned its fiscal year ended in March will come in lower than expected because of a ¥300 billion non-cash charge to reflect the adjustment of certain assets. The expected net loss of ¥520 billion, or U.S. $6.4 billion, is worse than the ¥220 billion the company had forecast on February 2nd, and worse than the $2.7 billion loss the Street has been expecting. (Hat Tip to Between The Hedges)

FT reports Banks Test CDOs For Trade Finance. Some of the world’s biggest banks are trying to extend the principles of securitization to the plain-vanilla world of trade finance – a market worth an estimated $10tn a year – as concern mounts that regulatory changes could constrain a key lubricant of the global economy

Open Europe reports on social justice that the Telegraph and Sunday Telegraph relate the European Commission and Swedish local authorities have earmarked nearly £10m to subsidise Facebook – a company currently valued at around $100bn (£63bn) – for plans to build giant server halls in Northern Sweden. Open Europe’s Pieter Cleppe is quoted saying, “It’s telling that EU funds meant to improve the life of Europe’s poorest citizens are being used to support a thriving American company in one of Europe’s richer member states.”

3) … Gold is at a critical juncture.

Casa Rido asks Is Gold Returning as a Safe-Haven Investment?  The chart of the gold ETF, GLD, shows that it is at the apex of a consolidation triangle; it always breaks out or breaks down from such patterns; it could easily fall lower, before it moves massively higher as investors seek safe haven from falling fiat asset investments. Soon a strong investment demand for gold will arise as it becomes the world’s sole source of sovereign wealth and only “money good”.

4) … The elect were chosen by God from eternity past to live the virtuous life; whereas fiat people live in sin (that is doubt); which includes the self-righteous life, (a lifestyle of observance to a law, any law), a life of values (a Republican lifestyle),  a life of psychological happiness,  an ethical life (a life of ethical observance); the list goes on and on; their life comes from a fiat identity, whereas as the elect have faith in the identity of Christ.  Only the elect live a moral life, since they be in the like precious faith of Jesus Christ and live out of virtue, that is things know to be morally excellent.

To the Christians dispersed among the nations Peter writes that believers were chosen by Him to be His people. “But you are a chosen generation, a royal priesthood, a holy nation, His own special people, that you may proclaim the praises of Him who called you out of darkness into His marvelous light; who once were not a people but are now the people of God, who had not obtained mercy but now have obtained mercy” (1 Peter 2:9,10).

God’s selection as to who he would save was made before the creation of the world. “Blessed be the God and Father of our Lord Jesus Christ, who has blessed us with every spiritual blessing in the heavenly places in Christ, just as He chose us in Him before the foundation of the world, that we should be holy and without blame before Him in love, having predestined us to adoption as sons by Jesus Christ to Himself, according to the good pleasure of His will, to the praise of the glory of His grace, by which He has made us accepted in the Beloved” (Ephesians 1:3-6).

As Peter relates in the salutation of his first letter, the choice of those to be in Christ was based on the foreknowledge of God.  “Peter, an apostle of Jesus Christ, To the pilgrims of the Dispersion in Pontus, Galatia, Cappadocia, Asia, and Bithynia, elect according to the foreknowledge of God the Father, in sanctification of the Spirit, for obedience and sprinkling of the blood of Jesus Christ: Grace to you and peace be multiplied” (1 Peter 1:1,2).


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