Gold And Silver Prices Hold Firm As Stocks Tumble And Commodities Plummet

Financial Market Report for the week ending May 4, 2012; the fourth weekly report of entrance into the Second Great Depression.

Gold, GLD, and Silver, SLV, prices held firm today as World Stocks, VT, traded sharply lower, and Commodities, DBC, plummeted on fading hopes of global trade and global export growth and fears of sovereign and banking failure in the EU. The daily chart of World Stocks, VT, shows a fractal brake lower, falling through a strong upward sloping line of support

Fears over Ireland’s vote on Euro zone debt brakes, disinvestment out of formerly hot money flow banks, fears of contagion from the European Sovereign Debt crisis, and falling Manufacturing PMI’s worldwide, drove Ireland’s IRE, India’s IBN and HDB, Brazil’s ITUB, and America’s BAC, as well as all of the Global Banks, IXG, lower.

Canada, EWC, Australia, EWA, the BRICS, EEB, EWZ, RSX, INP, and YAO, as well as US Shares, VTI, lead world shares, VT, lower. Reuters reports India’s Sensex Dips Below 17,000 After Four Months. Falling for the third session in a row, the BSE benchmark Sensex on Friday closed 320 points down, slipping below the psychologically important 17,000 levels amid heavy selling by foreign funds due to fresh concerns over the Mauritius tax treaty review and a weak rupee. The 30-share Sensex, PIN, which had lost 168 points in last two trading sessions, plunged further by 320.11 points, or 1.87 per cent to 16,831.08, its lowest level since January 30, 2012.  (Hat Tip to Between The Hedges)

Shares trading lower today included PSCE, XLE, XSD, XOP, IEZ, OIH, XES, SLX, MXI, COPX, RZV, XBI, KRE, IWM, PKB, SKYY, IGN, IHF, XSD, XRT, BJK, JKE.

Deleveraging out of Commodities, DBC, and derisking out of Small Cap Growth Stocks, IWO, and Small Cap Value Shares, IWN, means an end to momentum investing, that is a continual “risk on” and no “risk off” investing in high beta, high PE stocks, known to be correlated with world central bank monetary stimulus, world growth and world trade. This ongoing Yahoo Finance Chart of the Russell 2000 Growth shares, IWO, ROLL, BEAV, PX, LECO, and this ongoing Yahoo Finance Chart of the Russell 2000 Value shares, IWN, SAVE, FUN, IMAX, CENT, reflects that risk appetite has turned to risk avoidance, as investors sold out of highly profitable positions, garnered through momentum investing; momentum sectors falling strongly today included

Vice Stocks, BJK, such as MGM, SHFL,

Networking, IGN, such as CSCO, RHT, VMW, FFIV,

Cloud Computing, SKYY, such as CRM.

Medical Devices, such as ISRG, ALGN,

Scientific Instruments, such as ROP,

Rental Services, such as URI,

Auto Dealerships, such as ABG,

Health Care Providers, IHF, such as ESRX, HCSC, ATHN,

US Infrastructure, PKB, such as TSCO, CTAS, TBI, FISV, HPY, FMC, MTRX, USG, TREX, DY, EXP,

Nanotechnology, PXN, such as FEIC,

Regional Banks, KRE, such as CRBC, RF, SNV,

Semiconductors XSD, such as INTC, and TSM,

Retail, XRT, such as COH, TGT, ORLY, TJX, FL,

Large Cap Growth, JKE, such as QCOM, EL

Real Estate, IYR, such as SPG,

Paper Producers, WOOD, such as IP, NP,

Credit Providers, such as DFS, GCA, ADS, NICK

Home Improvement, ITB, such as HD, LOW, PIR,

Biotechnology, XBI, such as AMGN,

Nasdaq, QQQ

The consensus is that the debt trade, that is the ongoing expansion underwritten by faith in credit, as seen in this monthly chart of Total Bonds, BND, has come to an end with the exhaustion of world central banks’ monetary policy to stimulate ongoing global trade and economic expansion, and the ability of the ECB to stabilize an insolvent Spain, EWP, and its insolvent banks, such as Banco Santander, STD .

The safe haven trade in US stocks, VTI, is over on the failure of neo liberal finance, as well as the end of the business, economic and investment super cycle. The Russell 2000, IWM, has been leveraged up on bank credit, KRE, and business credit, DFS, AXP. Another word for credit is trust. Trust in the ability of capitalism is waning; and trust in regional global governance will rise once the smoldering fire in the world financial institutions, IXG, and the European Financial Institutions, EUFN, as well the too big to fail banks, RWW, turns into a bonfire, and Financial Armageddon, that is a credit buts and global financial breakdown occurs, over the failure of sovereign debt, BWX.

This ongoing Yahoo Finance Chart shows Europe, VGK, now negative for the year, and the Russell 2000, IWM, US Infrastructure, PKB, and Large Cap Growth, JKE, now turning lower; the latter recieved investment stimulus from LTRO 1 and LTRO2; at the end of the Age Of Leverage, investors rotated into the Large Cap Growth Shares such as Amgen, AMGN, and Exxon Mobil, XOM. But now, there is no safe haven fiat stock investment, and all stocks are being led lower by Small Cap Value Shares, RZV, seen in this Finviz Screener, such as World Fuel Services, INT, and Cardtronics, CARD.

Market Watch reports Treasury 10-year yields fall under 1.90%; the Yahoo Finance chart of the Interest Rate on the 10 Year US Government Note, ^TNX, closed at 1.88%.l

The US Dollar, $USD, rose 1.0%, as Major World Currencies, DBV, fell 2.5% lower; hese included the Australia Dollar, FXA, -2.6%, Canadian Dollar, FXC, -1.5, traded, Brazilian Real, BZV, -2.1%, Russian Ruble, FXRU, -1.6%, Indian Rupe, ICN, -1.5%, and the Swedish Krona,  FXS,-1.%%. Emerging Market Currencies, CEW, fell 1.0%. Clearly competitive currency devaluation is once again underway.

Commodities, DBC, plummeted 3.8%.

This the first week of May, 2012, just like the first week of April, 2012, marks an inflection point lower in world economics and stock investing. The world is pivoting from the Age of Leverage and Speculative Investing and into the Age of Deleveraging and Debt Servitude as investors derisk out of momentum trades as the global government finance bubble has finally burst. The ability of the world central banks’ and investment bankers to stimulate global growth and trade is history as evidenced by this week’s strong fall lower in  the risk and growth stocks.  

Copper Mining, COPX -7.0%

Steel Production, SLX – 6.0%

Small Cap Pure Value, RZV -6.0%

Gold Mining, GDX -5.9%

Networking, IGN -5.7

Silver Mining, SIL. -5.5%

Rare Earth Mining, REMX -5.4

Semiconductors XSD, 5.0%

Global Materials, MXI -4.5%

Uranium Mining, URA -4.5%

Small Cap Industrial, PSCI -4.5%

US Home Building, PKB -4.2%

Russell 2000, IWM -4.0%

Smart Phone, FONE -4.0%

Cloud Computing, SKYY -4.0%

Small Cap Technology, PSCT -3.9%

Health Care, IHF -3.9%

Telecom XTl.  -3.9%

Nasdaq 100, QTEC -3.7%

World Stocks, VT, fell 2.8% this week; countries falling lower this week included

EWI -6.8%

EWP -5.4%

VGK -3.5%

ARGT 6.0%

EWD -3.5%

EWA -3.5%

EWJ -3.2%

VTI -2.6%

EEM -2.2%

EEB -3.5%

RSX -7.4%

INDY -5.2

EWZ -3.6%

YAO -1.6%

Energy shares falling lower this week included

PSCE -5.4%

XOP -6.0%

IEZ -5.0%

OIH. -4.6%

Banks falling lower this week included

EPI -5.5%

KCE -4.2%

EUFN -4.2%

EMFN -4.0%

IXG -3.6%

KRE -3.5%

RWW -3.3%

This week’s 3.8% fall in commodities, DBC, and the 3.6% fall in the world’s leading banks, IXG, are the accelerants of deleveraging and derisking that have ignited the great bonfire of the world financial institutions, that will soon lead to Financial Armageddon, that is a credit bust and financial system breakdown.

Libertarians perceive themselves to be sovereign individuals.  Charles Hugh Smith writes in Of Two Minds, We Are Not Powerless: Resisting Financial Feudalism.

Soon political capital will replace investment captial. In the New Europe, new sovereign leaders and sovereign bodies will be announced, via regional framework ageements, by leaders meeting in summits, who will renounce national sovereignty and pool regional sovereignty. Monetary cardinals, working under a momentary pope, will provide credit and infrastructure structure management, as they implment monetary policy featuring structural reforms such a  revoking the constitutional right to state employment in Greece, as well as doing away with national wage laws through out the EU.  And a budget commissioner will over a fiscal union establishing fiscal austerity. Public private partnerships such as Macquarire Infrastructure, MIC, and Maximus, MHS, will oversee economic activity, as they work to stabilize and sustain regional manufacturing and resource production.    

Bible prophecy reveals that the outcome of the European Sovereign Debt Crisis is going to be regional global governance. fJesus Christ has opened the first of the seven seals, Revelation 6:1-2, and has unleashed the first horseman of the Apocalypse, the rider on the white horse who has a bow, without any arrows, to effect global economic and political coup d etat. The world is pivoting from the age of choice, leverage and speculative investment, and into the age of diktat, deleveraging, and  regionalization. The dynamos of global growth, export and profit that empowered capitalism are winding down, and the dynamos of  security, stability and sustainability that power regional global governance are winding up.

Concepts as Freedom, Free Enterprise, and a Free Money System, one where money is based upon an objective standard, are simply dreams of the fiat mind of Libertarianism; such things are  mirages on the Neoauthoritarian Desert of the Real. Diktat will serve as both money and credit under Neoauthoritarianism. And as for choice, it is an epitath on a tombstone of the bygone era of Neoliberalism. Neoauthoritarianism features a global gulag of debt servitude functioning in ten regions of statism and totalitarian collectivism.         

I perceive there is only a Sovereign Lord God, Ephesians 1:1-23, and that he has a Sovereign Will, 2 Corinthians 5:17-18, by which He directs all things, and that His Word of prophecy reveals that out of the soon coming collapse of the world’s institution of finance, commerce, trade and investment, the diktat money system of the Beast Regime of totalitarian collectivism and statism, will rise to provide diktat as credit and money, and that the people will marvel at its authority, and follow after it, giving it worship, Revelation 13:3-4.

The prophet Daniel reveals in Daniel 2:31-33, that the iron power of UK and US global hegemony will soon collapse and that a ten toed kingdom of regional global governance, where toes of iron diktat and clay democracy, will occupy in all of the world’s ten regions.   

Furthermore, scripture reveals that a leader,  the Sovereign, Revelation 13:5-10, and a banker, the Seignior, Revelation 13:11-18, will rise to rule the Euro zone, and eventually the world.  The word, will and way of these two will change our times and our laws, their diktat will be the authoritative law of the land replacing constitutional and national law, Daniel 7:25.

An inquiring mind asks might the coming Seignior, meaning top dog banker who takes a cut, be Jens Weidmann?   Dow Jones reports  “Jens Weidmann, chief of the German central bank who carries considerable weight among European Central Bank rate-setters, stepped up his defense of fiscal rectitude. His comments come amid a raging debate in Europe about whether governments should continue to pursue strict budget discipline amid signs that cutbacks are impeding economic growth.  ‘Precisely in times of uncertainty it is important that policy remains credible and sticks to that which it has committed itself,’ he tells the German weekly Die Zeit.   ‘A forceful budget restructuring and decisive structural reforms are the best growth policy, because through this confidence is created and the capacity of the economy is strengthened.’”

Global economics and investing has only a passing interest for me; I’ve lived in poverty for twelve years now, have no investment account, and have not benefited from financial deregulation; such things are part of the fiat realm.

Living in organic union with God, being part of the Lord’s recovery, and being established in the present truth, according to 2 Peter 2:1-10, is what my heart desires.  Being of the like precious faith of Jesus Christ, and having identity as the elect of God, I pray consistently for a good conscience, and endeavor to practice the additive process of building upon virtue, knowledge, self-control, perseverance, and practice godliness, brother kindness, and love, so as to partake of the divine nature and experience the divine promises of God, that I might attain to the person of Christ; and in so doing maintain His word, and live under His authority daily.

In today’s news

UK House Bubble relates Romney wins over Wall Street The “Restore our Future” organisation is a political action committee associated with Mitt Romney.

Huffington Post The end of growth

Monterey Herald Capital One to lay off 850 employees in Salinas

WRBC JeffCo to eliminate 710 jobs by May 5

Gold Seek Swiss gold stored at “decentralised locations”

Yahoo Finance Gold miner ETF falls to new 52-week low – Yahoo! Finance

Forbes Gold price drops three straight months for first time since 2001

Between The Hedges reports The Citi Eurozone Economic Surprise Index Is Falling Another -6.9 Points Today To -34.7, which is the lowest since mid-November of last year. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades over the coming weeks.

Open Europe reports UK Could Be Outvoted On EU Bank Capital Rules. Süddeutsche: UK is on the right side, since it wants to protect the taxpayers. EU finance ministers will meet again on 15 May in an attempt to agree on new bank capital rules, following the UK’s refusal to endorse the latest compromise proposal. City AM reports that EU Internal Market Commissioner Michel Barnier and the Danish EU Presidency have both hinted that the UK could be outvoted on the proposal, with a Presidency spokesman saying, “There is a supporting qualified majority, but we would like to widen this support even further. I hope that we can reach an agreement.”

Meanwhile, Handelsblatt quotes Gerhard Hofmann, from German banking association BVR, saying, “In the future, the UK will determine the capital requirement rules for large parts of Europe.” He argues, “Apparently, European politicians don’t want to risk another clash with London, following the UK’s absence from the fiscal treaty.”

In a comment piece entitled “Protect the taxpayers”, Süddeutsche economic correspondent Alexander Hagelücken writes that the UK is on the right side in the debate over bank capital rules, and argues, “If the EU only tentatively stabilises its banks, the US will also act laxly, as they are nowhere near ready to implement the Basel-III standards on which the capital requirements are based. If Europe does not lead the way, the next crisis will again be an expensive one for taxpayers.” Open Europe research FT City AM WSJ Reuters Telegraph FT: Alphaville Handelsblatt

Doug Noland writes in Revenge Of Risk Off, From my study of Credit inflations, it is clear that unfettered Credit growth attains a propensity for exponential expansion throughout the upside phase of the Credit cycle. Pro-cyclical policymaking, especially in our age of unconstrained global finance, fundamentally exacerbates Credit boom and bust cyclicality.  The current interplay of global Credit cycles is extraordinary:  Europe’s Credit Bubble is bursting, China’s (and the developing world’s) is booming, and ours is somewhere in between.

Importantly, in the late phase of Credit excess, in what I refer to as the “terminal phase,” things tend to go haywire.  First, the amount of new Credit balloons uncontrollably, while the resulting heightened risk of a bust invariably ensures aggressive pro-Bubble policy interventions.  Second, as the quality of the new Credit deteriorates, the overall increase in system Credit risk turns parabolic, imperiling highly exposed (leveraged) financial sectors.  Third, this bulge of risky new finance tends to be distributed haphazardly throughout the real economy.  In short, well-entrenched Monetary Processes responsible for huge amounts of risky finance foster malinvestment, economic fragility, wealth-redistributions, and destabilizing speculation.  “Activist” inflationary policymaking exacerbates these deleterious processes, and the inflationists completely disregard ample global evidence of this harsh reality.

Alex Lantier and Johannes Stern in WSWS report that the supposed Socialist Hollande is more to the right than his opponent Sarkozy, Sarkozy, Hollande Outline Right-wing Policies In French Presidential Debate.  Conservative President Nicolas Sarkozy and Socialist Party (PS) challenger François Hollande faced off last night in the lone TV debate before the May 6 run-off election. Some 20 million people reportedly watched the event.

In a confused and argumentative debate, Hollande and Sarkozy both sought to win support from the financial elite on a program of social cuts, anti-immigrant racism, and continuing imperialist wars. Hollande in particular delivered a right-wing, anti-Muslim rant, apparently aiming to appeal to voters for the neo-fascist National Front (FN)—which received 18 percent of the vote in the April 22 first round.

This followed FN leader Marine Le Pen’s decision yesterday not to endorse Sarkozy, announcing that she would cast a blank ballot on Sunday. Le Pen’s call weakened Sarkozy, who trails Hollande with roughly 45 percent of the vote in most polls.

Hollande stressed his commitment to repaying France’s debts to the banks and respecting the European stability pact, which imposes strict limits on European countries’ budget deficits. He called for €90 billion (US$118 billion) in yearly budget cuts, and indexing wage increases not on inflation but on France’s very low economic growth—a policy that would eat away workers’ purchasing power through inflation.

He also proposed various investment and subsidy measures for businesses, claiming that “things were changing” thanks to growing agreement on economic policies with European Central Bank (ECB) chief Mario Monti, and Spain’s right-wing government.

Harvey Organ writes According to the IMF European Banks are leveraged 26 to 1, and this data point is based on reported loans,  the real leverage levels are likely much, much higher. These are a Lehman Brothers leverage levels. Furthermore, The European Banking system is over $46 trillion in size (nearly 3X total EU GDP). The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).  So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.


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