Financial Market Report for the week ending May 11, 2012; the fifth weekly report of entrance into the Second Great Depression.
This five-day ongoing Yahoo Finance Chart shows that a surprise trading loss at Morgan Stanley, turned the World Financial Institutions, IXG, the World Stocks, VT, the World Small Cap Stocks, VSS, and the Emerging Market Small Cap Stocks, EWX, lower today; the New York Times reported today that JPMorgan discloses $2 billion in surprise trading losses.
Gold miners, GDX, GG, ABX, NEM, traded lower as is seen in this ongoing Yahoo Finance Chart as Gold, GLD, and Silver, SLV, traded lower. Small Cap Energy, PSCE, traded lower on lower Oil, USO. Steel Production, SLX, and Copper Mining, COPX, traded lower on lower Base Metals, DBB. Commodities overall, DBC, traded lower.
The individual investment charts of these two dozen world’s banks are leading the way forward into Financial Armageddon. These include in Greece, NBG, in Argentina, BMA, GGAL, BFR, BBVA, in Brazil, ITUB, BSBR, BBD, in Ireland, IRE, in Spain, STD, in India, IBN, in Switzerland, CS, UBS, in Japan, NMR, MTU, SMFG, MFG, in the United Kingdom, BCS, RBS, LYG, in China, CHIX, in Germany, DB, and in South Korea, KB.
Biotechnology, XBI, rose 4%, the two North American Telecom Giants, T and VZ, rose 2%, Simon Property Group, and other Retail Shopping Center REITS, rose 1%. Next Era Energy, NEE, and a number of dividend paying electric utilities, such as CNL, WEC, CMS, and DTE, led Utilities, XLU, to a new high. This YTD Google Finance of XLU, together with DVY, RZV, JKE, XRT. and ZROZ, shows that a flight to save haven in the longer duration bonds, ZROZ, beginning in April helped sustain dividend stocks, DVY, drive Utility Stocks, XLU, as deleveraging commodity prices, DBC, caused derisking out of the Small Cap Pure Value Shares, RZV, the Large Cap Shares, JKE and most recently the retail shares, XRT. The Utility Shares, XLU, rose to a new high on a flattening 30 10 US Sovereign Debt Yield Curve, $TNX:$TYX, where as all other shares fell lower on the exhaustion of the world central banks’ monetary authority. The rise in the Telecom Giants, the Utilities and the Retail REITS marks the end to roro, momentum-investing. Risk-on has turned to risk-off, as risk appetite has failed on the failure of neo liberal finance, as well on the death of money and the death of credit. Money died in April 2011, as the US Dollar, $USD, started to rise, and world currencies, seen in this ongoing Google Finance chart of the 200% Dollar ETF, UUP, and currency ETFs, started to trade lower. Credit died on February 1, 2012, as Education Stocks, and Energy Service Company Stocks, IEZ, Small Cap Energy Stocks, PSCE, North American Energy Stocks, XOP, and India Infrastructure, INXX, traded lower on the exhaustion of the world central banks’ monetary authority to sustain global growth and global trade.
The Flattner ETF, FLAT, rose to a new high and the Steepner ETF, STPP, fell to a new low this week as the Interest Rate on The 10 Year US Note fell to 1.841%. The utility shares, such as NEE, are the final momentum trade and final safe have trade of the Age of Leverage.
With falling commodity prices, coming through monetization of debt, particularly debt deflation, competitive currency deflation is underway, causing strong delveraging out of commodities, and derisking out of interest bearing investments such the following, with weekly losses presented, Leveraged Buyouts, PSP, -3.1%, Energy Partnerships, AMLP, -2.9%, both of which pay a very high rate of interest.
Seigniorage, that is moneyness of fiat investment, is failing, as investors lose confidence that the world central banks’ monetary policies are able to sustain growth and are ineffective in dealing with sovereign insolvency and banking insolvency in Greece and Spain. Seigniorage, that is coinage, of investments has failed to maintain its value, as the global government finance bubble, BWX, has burst. World stocks, VT, and commodities, DBC, are now in downturn, as the debt trade and the global growth, and global export trade, have failed on the exhaustion of the world central banks’ monetary authority. Neoliberal finance of all type has failed. The spigot of carry trade investing has failed.
Also falling lower this week on fundamentals were
Uranium Mining, -7.2%.
Aluminum Production, ALUM, -6.8%
Rare Earth Mining, REMX, -6.2%
Copper Mining, COPX -6.1%
Gold Mining, GDX, -3.7%
Silver Mining, SIL, -7.2%
Silver Standard Resources Inc, SSRI, a once red-hot carry trade investment, -9.6%; yet Hecla Mining, HL, a proven producing company with a PE of 8, rose this week.
Steel, SLX, -3.1%
Networking , IGN, -3.7%,
Cloud Computing, SKYY -3.7%
Mining, MXI, -3.7%
World Financial Institutions, IXG, -2.1%.
Bonds traded as follows
International Corporate Bonds, PICB, -1.1% on falling major world currencies, DBV, -0.8%
Emerging Market Bonds, EMB, -1.0% on falling emerging market currencies, CEW, -1.4%
World Government Bonds, BWX, -0.7% on falling major world currencies, DBV, –0.8%, and on rising US Dollar, $USD, 1%.
Junk Bonds, JNK -0.1%, Junk bonds have been sustained in value by their high dividend yield even though momentum investing has ceased.
Zeroes, ZROZ +1.7%
30 Year US Government Bonds, EDV, +2.1%
10 Year US Government Notes, TLT, +1.1%
Build America Bonds, BAB, +0.4%.
World stocks, VT, -1.6% and Commodities, DBC, -2.1%, RJA, -3.5%, DBA, -2.0%, DBB, -2.2%, SLV, -4.5%, GLD, -3.7%, USO, -2.7%. The ratio of world stocks to commodities, VT:DBC, is at a current multi week rally high, sustained so by the cessation of, but not reversal of, momentum investing. The Proshares 200% inverse, that is bear market ETFs, rose this week, as follows, EEV 7%, TWM 0%, DUG 3%, SMN 4%, SSG 3%, BIS -8%, REW 4%, TLL 0%, SIJ 3%, FXP 12%.
The U.S. dollar, $USD, rose 1.0% this week. Most all of the worlds major currencies declined this week, the Canadian dollar, FXC, -0.5%, the British pound, FXB, -0.5%, the Mexico peso, FXM,-0.7, the Swiss franc, FXF, -1.3%, the euro, FXE -1.3%, the Australian dollar, FXA, -1.3%, the Brazilian real, BZF, -1.3%, the Swedish krona, FXS, -1.7%, the Mexican peso, and the South African rand, SZR, -2.8%.
Competitive currency devaluation has been ongoing since April 2011, that is for 13 months now, as investors sold out of stocks at that time, in fears that a debt union had formed in the Euro zone. Wikipedia, as it writes of the European Debt Crisis, correctly uses the words debt union. In the summer of 2011, Angela Merkel and Nicolas Sarkozy issued a joint communique, calling for “true European economic government”, in other words a political union. Since that time a monetary union has formed in the EU as the ECB has subordinated all debt to itself with LTRO1 and LTRO2.
There only remains for a political union and banking union to form, and these will do so, as political leaders meet in summits, waive national sovereignty, and pool regional sovereignty, as part of regionalization envisioned by the 300 elite of the Club of Rome in 1972 to 1976, through such publications as Mankind At The Turning Point, to provide regional security, stability and sustainability, as investors delever out of commodity positions and derisk out of stock positions. Germany will rise as preeminent over peripheral client nation states of Portugal, Italy, Ireland, Greece and Spain, in a type of revived roman empire as totalitarian collectivism and statism comes to rule Europe, and sovereign authority comes to reside in leadership in Brussels, Paris and Berlin.
Money and credit have died. The fiat money system is going to be replaced by the diktat money system, as the dynamos of capitalism, that being growth and profit, are winding down, and the dynamos of regional global governance, that being regional security, stability and sustainability are winding up. Prosperity is the epitaph on tombstone of the Age of Leverage. Austerity and debt servitude are de rigueur in the Age of Deleveraging.
With the death of money and credit the safe have trade in US Stock is history, the ratio of US Stocks, relative to India stocks, VTI:INP, will start to shrink.
Having reached the end of the debt supercyle, capitalism will fall to regional global governance.
In the New Europe, diktat will replace both money and credit. After the soon coming Financial Armageddon, that is a credit bust and financial system breakdown, the Wall Of Refinance, that is the Tsunami of Refinance, cannot and will not be met, and will wash over and wipe out business life as it has been known. The massive amount of corporate refinancing coming due, simply will not be met, as credit will not be available.
Monetary cardinals, appointed from government, banking and industry, working under the monetary pope, will provide credit via public private partnerships so that industrial production necessary to the region’s stability, security and sustainability are met. These monetary over-lords will establish structural reforms that abolish national wage contracts. And a budget commissioner, will provide austerity measures enforcing fiscal rules across the region.
When zero interest was instituted by the Fed, savers fled to the gold market. Then last year as commodities started to fall, with falling currencies, so did gold; then this year when commodities fell again, as investors became aware of no QE3, gold fell once again; this being seen in this Google Finance Chart of DBC and GLD.
Soon the only money good will be diktat as well as the possession of gold bullion for long term wealth preservation and silver bullion for bartering. I recommend that beginning immediately, one dollar cost average into having only personal ownership of physical gold coins and silver bullion, as well as ownership of gold bullion stored in trading vaults on the Internet such as Bullion Vault. And that one have this ownership in four locations London, the United States, Panama and Singapore.
Bullion Vault relates Dollar strength “making it difficult” for gold prices to rally
I recommend that one start dollar cost averaging into physical possession of gold even while the price of gold is falling as capital controls are coming globally and regionally which means that one may not be able to transfer fiat investments into hard assets in the very near future; and if one waits to buy gold and silver when it is rising one may be restricted from doing so.
Your blog author has no financial wealth of any kind, no savings, no money market account, no gold and no silver. I’ve lived in poverty for twelve years; I have ongoing bills of rent, dental insurance, gym membership, and Internet service. I have a line of credit at the pay-day loan provider which I use occasionally for unexpected expenses; I repay the loans over a three-month schedule. Needless to say, the interest rate is exorbitant. My spirit6ual thought of the day is that according to 2 Peter 1:1-10, I live in organic union with God, am part of the Lord’s recovery, and am established in the present truth. 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 nature of God, and to receive the exceedingly great 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 news and commentary
The WSJ reports China industrial output growth slows sharply in April.
AFP reports Indian industrial output shrinks unexpectedly.
Matt Taibbi of Rolling Stone reports How Wall Street killed financial reform: It’s bad enough that the banks strangled the Dodd-Frank law. Even worse is the way they did it – with a big assist from Congress and the White House.
Financial Sense relates Europe’s voters say ‘no’ to economic reality
BBC relates JPMorgan’s loss may cost all banks
Zero Hedge reports The world’s greatest prop trading desk just went bust
The UK Bubble Economy relates Europe’s worst nightmare. Say hello to Alexis Tsipras, president of the Greek Synaspismos political party and head of Coalition of the Radical Left (SYRIZA) parliamentary; and 57 percent of investors think a euro-exit is inevitable.
Reserve Bank of India relates measures to stimulate the demand for credit for export businesses. On a review of developments in the global financial markets and current macro-economic conditions, the Reserve Bank has taken the following measures to ease foreign currency flows as also to enhance the availability of export credit in foreign currency: Interest rate ceiling on Foreign Currency Non-Resident [FCNR (B)] deposits of banks has been raised from 125 basis points (bps) above the corresponding LIBOR/Swap rates to 200 bps for maturity period of 1 year to less than 3 years, and to 300 bps for maturity period of 3 to 5 years. The ceiling rate on export credit in foreign currency which was constraining the availability of credit to exporters in foreign currency has been deregulated by allowing banks to freely determine their interest rates on such credit. The above measures are aimed at augmenting foreign currency inflows to banks which in turn would facilitate their foreign currency loans to exporters. These measures will come into effect from May 5, 2012. The detailed guidelines are being issued separately
Doug Noland writes in Risk off gains a foothold, The issue of “Target2” (Trans-European Automated Real-time Gross Settlement Express Transfer System) balances now garners considerable attention in the German media. Recall that “Target 2” refers to the eurozone’s inter-central bank payment system used for settling cross-border trade and financial flows. This system has not functioned as designed (trades have not fully settled) since the eruption of the financial crisis back in 2007. Instead of financial flows counterbalancing trade imbalances (the settlement of cross-border obligations), these days trade imbalances and financial outflows from the periphery combine to create enormous and mounting IOUs from periphery central banks to the German Bundesbank. With euro stability now a serious issue and capital flight out of even “core” banking systems a definite possibility, the Target2 drama is poised to create only greater intrigue.
Stock pundits, economic writers, and stock chartists, each have their own perspective, which comes from a fiat identity, such as commentator, austrian economist, or investor. These are all in agreement that Greece will default on its debt, and will exit the Eurozone.
This view is contrary to God’s foreordained plan to establish regional global governance in all of the world’s ten regions, each area to be ruled by a king, Revelation 17:17; these will give their allegiance to a global ruler, Revelation 13:5-10, who will institute a one world government, Daniel 7:7, and who with a global banker, Revelation 13:11-18, will provide global seigniorage, that is global moneyness, via a one world currency and credit system, Revelation 13:17-18.
I have spiritual identity of the elect of God, and being of the like precious faith of Jesus Christ, I live in the present truth, as described in 2 Peter 1:1-21.
There is the past truth, such as the saints of old, who lived in an old testament, that is an old will of the nation of Israel, the prophets, and the law.
But the present truth is one of a new testament of grace and truth, and of the Revelation of Jesus Christ, which heralds those things which “must shortly come to pass”. Revelation 1:1, as the sovereign authority of Jesus Christ, Revelation 2:26-27, closes the current political cycle of UK and US global hegemony, and introduces the ten toed kingdom of regional global governance, as foretold in Daniel 2:31-33.
To assure regional global governance, Jesus Christ is shifting the global political and economic tectonic plates, by bringing forth the Beast Regime of Neoauthoritarianism, out of the profligate Mediterranean nation state of Greece, as foretold in Revelation 13:1-4, to replace the Banker Regime of Neoliberalism; and by releasing the first horseman of the Apocalypse to effect investment, political and economic coup d etat in the Eurozone, Revelation 6:1; and by releasing the other horsemen of the Apocalypse to cause bloodshed, illness, famine and death, via a tsunami in Japan. This is just the beginning of global economic and personal woes.
Zero Hedge relates the UBS report Steps forward for Greece. In the event of a Greek Lehman. Contagion could follow quickly, through two channels: the banking sector, and the fear of other countries defaulting on their debt. As recent data show, adjustment in Portugal is proving difficult, particularly due to weak growth. Ireland could also be affected, especially in the context of today’s slower global growth environment. Contagion would imply that Italian and Spanish yields, already under pressure, could rise further.The event of a disorderly default, the euro area would be expected to proceed with forceful policy actions. We believe the euro area would need to use all policy tools at its disposal. Given the contagion risks to large countries, the piecemeal approach with limited commitment would have to be replaced by the “full bazooka.”
- The ECB could cut rates to 0.50%, and renew its liquidity provisions (most likely in the form of another 3-year LTRO); The ECB would probably have to commit to buy unlimited amounts of Spanish and Italian government debt to stop contagion to these countries. This commitment would have to be supported by all remaining euro area countries to be credible and require a renouncement of the ECB’s effective senior creditor status.
- Major central banks could open currency swap lines to avoid funding problems in major currencies, as during 2008/09, but possibly at lower costs.
- Banks would have to be ring-fenced, via deposit guarantees and capital injections, over and above the ECB’s liquidity support described above. This would possibly entail state injection of capital (even if only in the form of promissory notes), ie, nationalization, or European money (euroization). The deposit guarantee would have to be backed jointly by euro area governments to be credible.
- A European funded bank recapitalization, a European deposit insurance scheme, as well as the ECB’s purchases of government bonds would require further surrendering of fiscal power to the European Commission.
- Capital controls would potentially need to be introduced between the euro area and the rest of the world. Such controls are allowed under special circumstances that could threaten stability, and the scenario under consideration clearly qualifies.
- Going forward, the fiscal stance as well as other economic policies (such as industrial policy) would have to be redesigned at the euro area level to ensure growth could kick-start as quickly as possible.