Financial Market Report for May 15, 2012
Falling Currencies Drive Banking, Mining, and Small Cap Shares Lower … Greece Is Going To Default Within The EU … The Failure Of Utility Stocks To Rise On Lower Interest Rates Means The End Of Profitable Fixed Income Investing
1) … Ongoing competitive currency devaluation, lifted the US Dollar, $USD, UUP, as the world’s currencies traded strongly lower.
The chart of the US Dollar, $USD, shows a parabolic rise higher to close at 81.22 as Swedish Krona, FXS, -2.3%, South African Rand, SZR, -1.3%, the Euro, FXE, -0.8%, the Swiss Franc, FXF, -0.8%, Emerging Market Currencies, CEW, -0.8%, British Pound Sterling, FXB,-0.6%, the Indian Rupe, ICN, -0.4%, the Brazilian Real, BZF, -0.4%, the Australian Dollar, FXA, -0.4%, and the Canadian Dollar, FXC, -0.4%.
2) … Stocks, VT, fell lower on falling currencies, DBC, CEW, and on falling oil, USO, gold, GLD, silver, SLV, and copper, JJC, prices.
Emerging Market Financials, EMFN, led by Chile Banks, SAN, BCA, and BCH, and Emerging Market Mining, EMMT, and Emerging Market Infrastructure, PXR, traded lower, as falling currencies, DBV, and CEW, forced World Small Cap Stocks, VSS, and World Stocks, VT, lower.
Country small cap shares experienced more debt deflation, that is currency deflation, than their larger peers today, which is coming as a result of accumulation of monetization of US Treasury debt, which took place as the US Dollar fell lower over the years up until April 2011; and World Treasury Debt, BWX, and Emerging Market Debt, EMB. Country small cap country shares falling lower today included ERUS, GUR, ESR, CEE, LATM, CNDA, KROO, EWZS, HAO, and GMF.
Investors derisked out of mining stocks, MXI, today, on the falling global currencies; these included KOL, REMX, CHIM, COPX, GDX, ALUM, SIL, and SOIL.
Utilities, XLU, such as NEE, and AEP, traded lower, as did International Utilities, IPU, on falling world World Government Bonds, BWX, and Emerging Market Bonds, EMB, as the US Dollar, $USD, UUP rose.
Energy Shares trading lower on falling oil, USO, included, XOP, PSCE, IEZ, IEO, and XES.
Airlines, FAA, fell strongly, despite the lower price of oil, USO.
International Utilities, IPU, fell strongly lower as is seen in this ongoing Yahoo Finance Chart of Intentional Utilities, IPU, Utilities, XLU, Global Infrastructure, PXR, World Stocks, VT, and the Risk On ETF, ONN. International Utilities up until April 2011, use to be a good fixed income investment, but with the fall in world currencies and emerging market currencies in 2011, as well as today, these are experiencing significant debt deflation. Emerging Market Infrastructure, PXR, especially in the BRICS, EEB, such as CHXX, INXX, BRXX, is leading the way down into the Second Great Depression. Nobody wants to be building infrastructure in the BRICS. The fall in global growth, ongoing competitive currency devaluation and the fall in commodities, is causing savage disinvestment in emerging market infrastructure; investment in structural investment things like power plants, roads, bridges, rail lines simply is not being done. Argentina, ARGT, fell strongly today as electrical utilities EDN, and PAM, fell strongly. Brazil’s SBS which is terrifically overvalued fell strongly.
Countries falling lower on falling bank shares included Argentina, ARGT, -4.8%, Italy, EWI, -3.5% Chile, ECH, -2.3%, as European Financials, EUFN, and the World Major Banks, IXG, traded lower as Bloomberg reported UniCredit, Intesa Among 26 Italian Banks Cut by Moody’s. UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) were among 26 Italian banks that had their credit ratings cut one to four levels by Moody’s Investors Service, which cited weakened earnings and the country’s economic outlook. UniCredit, Italy’s biggest bank, had its long-term debt rating lowered one step to A3, Moody’s said in a spreadsheet on its website yesterday. Milan-based Intesa, the nation’s second- largest lender, also was downgraded to A3 from A2. “Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access,” Moody’s said in a statement. “These risks are exacerbated by investor concerns over the sustainability of the Italian government’s debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.”
Commodities, DBC, are technically oversold; and are likely to hold steady soon. Yet stocks, relative to commodities, VT:DBC, are still grossly overvalued, and given the state of European sovereign insolvency, and banking insolvency, have a considerable amount of fall left.
Bonds, BND, traded unchanged, as World Government Bonds, BWX, International Corporate Bonds, PICB, Emerging Market Bonds, EMB, and Junk Bonds, JNK, traded lower, as US Governament Debt, IEF, TLT, EDV, ZROZ, as well as Long Duration Corporate Bonds, BLV, and TIPs, LTPZ, and TIP, traded higher.
Greece, GREK, fell strongly lower; it has a number of debt obligations coming due soon, one today on May 15, 2012, and others in June.
3) … Greece is going to default on its debts, within the EU.
The Daily Bell asks Mike Mish Shedlock, What’s the future for the EU? No currency union in history has ever survived without there being a fiscal union as well. Since there will not be a fiscal union, the Eurozone must break up. The ideal way would be for Germany and the Northern countries to exit. The painful way will be a piecemeal exit. I expect this to be long and painful.
I have great respect for Mr Shedlock; I find most of his analysis helpful, but is not a devotee of bible prophecy. When Greece defaults it will be absorbed as a client state of a regional global government, as leaders throughout Europe meet in summits, renounce national sovereignty, announce regional framework agreements, which appoint regional sovereign monetary, economic and fiscal leaders, as well as charter the Bundesbank as Europe’s Bank. Existing banks such as Germany’s DB, and Ireland’s IRE, will be nationalized, or perhaps better said, regionalized, and flow-charted into the Bundesbank..
There will be no Greek exit and reestablishment of the Drachma. Instead, after a soon coming Financial Armageddon, that is a global credit bust and worldwide financial system breakdown, foretold in bible prophecy of Revelation 13:3, diktat will come from monetary cardinals working under a monetary pope, mandating structural reforms in Greece doing away with the national wage law, constitutional right to a government job, and restrictions on privatization. Public private partnerships will issue credit and will oversee manufacturing and economic activity. Diktat will come from budget commissioners to enforce austerity, as communicated in Revelation 13:1-4, where a Beast Regime of Neoauthoritarianism, replaces the current Banker Regime of Neoliberalism.
The overall picture is that the dynamos of the global government debt trade, that is securitization of National Treasury debt, traded by the ETFs, BWX, and EMB, that have underwritten global growth, trade and profit of Neoliberalism’s Carry Trade Investing, Crony Capitalism and European Socialism, are winding down on the exhaustion of the world central banks’ monetary authority.
New dynamos of regional security, stability, and sustainability are powering up Regionalization and Regional Global Government, as foretold in Daniel 2:30-32.
Those living in Euroland will know a One Euro Government, with a unified and federal political, monetary, economic, fiscal, banking, and military authority.
Global competitive currency devaluation has been underway since April 2011, when investors became concerned that a debt union had formed in the EU, with the result that investors have been deleveraging out of commodities, DBC, particularly silver, SLV, and natural gas, UNG.
Since March 2012, investors have been derisking out of North American Energy Production, XOP, Energy Service, IEZ, Small Cap Energy, PSCE, as well as global mining stocks, MXI, such as COPX, REMX, URA, KOL, ALUM, and Steel, SLX, and global banks, IXG, particularly in Europe, EUFN, India, EPI, and Brazil, BRAF, with the result that India infrastructure, INXX, and Brazil Infrastructure, BRXX, as well as all of Argentina, ARGT, have been greatly devalued. Investors have dramatically fled Gold Mining, GDX, and Silver Mining, SIL, particularly Hecla Mining, HL.
And now, we are witnessing the failure of fixed income investing with the high paying dividend providers such as energy partnerships AMJ, leveraged buyouts, PSP, and shipping SEA, selling off strongly.
Just yesterday the shopping center REITS, SPG, the Industrial and Office REITS, FNIO, the Residential REITS, REZ, turned lower.
The failure of Utilities, XLU, such as NEE, SO, DTE, D, to rise on a lower US 10 Year Note Interest Rate, $TNX, establishes the end to fixed income investing and evidences the failure of the seigniorage, that is the coinage, of the US Federal Reserve as well as that of the ECB.
The failure of Neoliberalism’s seigniorage, that is moneyness, evidences the failure of national sovereignty and central bank monetary authority. New sovereigns and sovereign bodies will shortly be appearing in Europe.
With the down turn of fixed income investments, DVY, despite a flattening yield curve, seen in the Flattner ETF, FLAT, rising and the Steepner ETF, STPP, falling, value investing is history. In an era where money and credit is dying, deploying value investing, to buy stocks which seem to have competitive appeal, will only result in catching a falling knife.
Currently there is a bonfire of the world’s banks, IXG, burning quite badly, and it has the stench of death. Literally overnight, investment capital will fall to political capital, and the investment capital of those who have trusted in dividend stocks across the board is going to be literally vaporized, before one can say “boo”.
The fiat money system will be replaced by the diktat money system where diktat will serve as both money and credit.
Euroland will be a totalitarian collective characterized by statism and debt servitude. People living there will no longer be able to call themselves sovereign individuals, as all will be residents living in a region of Global Governance. Greeks, cannot be Germans, but both will be one, living under the authority of a type of revived Roman Empire, where the word, will and way of the Sovereign, Revelation 13:5-10, and his banking partner, the Seignior, Revelation 13:11-18, will rule all and everything.
4) … In today’s news
CNBC reports yesterday’s Asia Crush, it precedes the soon coming Asia Crash! Where Are the Investors? Turnover in Major Asian Markets Plunges. Trading, measured by the turnover in Hong Kong and Singapore equities, fell in the first four months of the year on concerns over Europe’s debt crisis and as investors seek alternative investments to stocks after recent corporate scandals and the 2008 global financial crisis.