Financial Market Report for the week ending Friday July 20, 2012, this is the sixteenth week of entry into the Second Great Depression.
1) … Bonds, BND, rose higher this week as World Stocks, VT, traded unchanged, and Commodities, DBC, rose from being oversold, as Spain’s sovereign debt yield soars above 7% establishing Spain as an insolvent nation
On Wednesday July 18, 2012, the industrial shares, XLI, rose 2%, to resistance; Rockwell Automation, ROK rose 6%, and Emerson Electric, EMR, seen in this 3 month ongoing Yahoo Finance Chart, rose 4%. SWKS, gapped open higher leading Semiconductors, XSD, Cloud Computing, SKYY, and Networking, IGN, higher. Pharmaceuticals, IHE, rose to a new high. Verizon, VZ, and AT&T, rose to a new high. And Biotechnology, XBI, rose to a new high.
On Thursday July 19, 2012, the Risk On ETN, ONN, rose higher on parabolically rising Agricultural Commodities, JJA; these drove Agriculture, PAGG, 2.5% higher on the week. Airlines, FAA, fell all week for a total loss of 6.5%, largely on a parabolically rising price of oil, USO. .
In contrast, on Friday July 20, 2012, Brendan Conway of Barrons relates Spain, Italy Slump For the Same Reasons. “After an unusually peaceful few weeks in European markets, Spain and Italy are falling out of bed again on Friday. Spain, EWP, slumped 7% in late-morning trading and Italy EWI is down 5% as Spanish bond yields have surged above 7.1%. The regional government in Valencia admitting it has a liquidity crisis and needs a bailout is one reason for the sour tone. Oh, and the government’s budget minister warned that Spain is running out of money to pay its bills. All this on the day that Europe’s finance ministers released about $37 billion of the bailout package for the heavily indebted nation’s banks. No wonder Italy is seeing a knock-on effect:” Austra, EWO, fell 4%.
Calculated Risk reports Eurozone approves Spanish bank bailout, yields increase.
Of Two Minds relates Sorry, bucko, Europe is still in a death spiral.
Bloomberg relates Spain bonds slide as Valencia aid request deepens crisis. Spain’s bonds fell, sending five and 30-year yields to euro-era records, as the region of Valencia prepared to seek a rescue, deepening concern policy makers are failing to find solutions to the debt crisis. The nation’s 10-year bonds fell for a seventh day, increasing the extra yield investors demand to hold the securities instead of German bunds to the most on record, as Spain also cut its growth forecast. The Italian-German yield gap reached the most since January and Germany’s two-year yields fell to a record. Belgian and French 10-year bond yields declined to all-time lows as investors sought higher-yielding alternatives to benchmark German debt. “Valencia’s request for assistance underlines fears as to the central government’s ability to bring wayward regions to heel,” said Richard McGuire, senior fixed-income strategist at Rabobank International in London. “That puts Spain under a considerable degree of pressure.” Spanish five-year yields jumped 47 basis points, or 0.47 percentage point, to 6.88 percent at 5:21 p.m. London time, after touching 6.903, the most since the euro started in 1999. The 4.25 percent note due in October 2016 dropped 1.595, or 15.95 euros per 1,000-euro ($1,216) face amount, to 90.535. The euro fell to its lowest level since 2000 versus the yen and reached a two-year low against the dollar. The 10-year yield rose 26 basis points to 7.27 percent, having jumped 61 basis points this week. Spain faces a “death spiral” as higher yields push up borrowing costs, and that adds to concern the nation won’t be able to services its debt, McGuire said (Hat Tip to Gary of Between The Hedges).
Banco Santander, STD, Deutsche Bank, DB, and Swiss Banks, UBS, and CS, led European Financials, EUFN, World Banks, IXG, and Europe, VGK, lower.
Japanese Banks, MFG, MTU, SMFG, led Japan, EWJ, lower as Fitch slashes credit ratings of Japan’s biggest banks. Fitch has cut the credit rating of three of Japan’s biggest banks over concerns about Tokyo’s ability to support the financial sector, after the nation’s sovereign debt rating was also cut
Argentina Bank, BBVA, led Emerging Market Financials, EMFN, lower.
Small Cap Revenue Shares, RWJ, such as HPY, CGA, led World Small Caps, VSS, lower.
China Small Caps, HAO, China Infrastructure, CHXX, China Consumer, CHIQ, led China, YAO, lower; and China Real Estate, TAO, fell from a double high.
Steel, SLX, Semiconductors, XSD, Automobiles, CARZ, Airlines, FAA, led World Stocks, VT, lower.
Chiptole Mexican Grill, CMG, TXRH, EAT, FRGI, led Restaurants and Special Eateries, such as DNKN, SBUX, PNRA, lower.
Universal Display, PANL, led Computer Peripherals lower.
International Utilities, IPU, and Global Telecom Shares, IST, plummeted.
Copper Miners, COPX, trade lower as Copper tumbles over 2 pct on Spanish fears, China.
Acacia Research Corporation, ACTG, fell strongly; Yahoo Finance reports that through its subsidiaries, acquires, develops, licenses, and enforces patented technologies in the United States. It assists patent owners with the prosecution and development of their patent portfolios; protection of their patented inventions from unauthorized use; generation of licensing revenue from users of their patented technologies; and enforcement against unauthorized users of their patented technologies. The company owns or controls the rights to approximately 200 patent portfolios, which include the United States patents and foreign counterparts covering technologies used in various industries. Acacia Research Corporation was founded in 1992 and is based in Newport Beach, California.
Biotechnology, XBI, led by Diagnostic Substances, such as IDXX, and Drug Manufacturers, such as VVUS, INFI, LXRX, SPPI, AUXL, ARNA, AGN, THLD, SPPI, traded lower.
Transports, IYT, fell more than Industrials, IYJ, confirming a bear market is underway again, despite, Energy Services IEZ, and OIH, such as TLLP, WFT, LUFK, and BHI, rising strongly, largely due to a rising price of oil, USO; and despite, Utilities, XLU, rising to a new high. Railroads, CNI, NSC, CSX, GWR, UNP, all traded lower.
Kimberly Clark, KMB, which has been rising strongly, traded lower.
Bonds, BND, rose as Zeroes, ZROS, 30 Year US Government Bonds, EDV, and 10 Year US Government Notes, TLT, Build America Bonds, BAB, Longer Duration Corporate Bonds, BLV, and Highly Margined Bonds, BOND, rose strongly as a safe haven investment, as the Interest rate on the 10 Year US Government Note, TNX, traded lower to 1.46%, which stimulated Mortgage Backed Bonds, MBB, to move higher. The flight to safety has increased the ultra safe SHY, from 84.37 to 84.54 this month.
Zero Hedge relates Peak Complacency And Peak Leverage.
Commodities, DBC, rose as Oil, USO, BNO, Natural Gas, UNG, and Grains, GRU, Corn, CORN, led Agricultural Commodities, JJA, higher.this week.
The US Dollar, $USD, UUP, rose as the chart of the Euro, FXE, shows a trade lower, nearing 120.
2) … Spain and its banks have collapsed. Spain has lost its debt sovereignty and its banks are failed financial institutions; the ideologies of both capitalism and European Socialism are history. God’s word communicates that EU leaders will meet in summits, announce regional framework agreements that waive national sovereignty and pool sovereignty regionally to establish regional economic and political governance.
Ambrose Evans Pritchard writes Spanish debt crisis returns. Yields on five-year bonds jumped to a fresh crisis peak of 6.46pc at a closely-watched auction as hopes fade for fresh stimulus from the European Central Bank and direct recapitalisation of Spanish banks by the EU bailout fund, the European Stability Mechanism (ESM).
“Demand for Spanish paper is collapsing, even for shorter-dated debt which is very worrying and raises the spectre of Spain losing market access,” said Nicholas Spiro from Spiro Sovereign Strategy.
Marchel Alexandrovich from Jefferies Fixed Income said the markets are already bracing for second bigger rescue of around €400bn. “A few more weeks like this and Madrid is going to decide to it has nothing more to lose and call for a full sovereign bail-out,” he said. “Then we will find out if there really is any money in the EU kitty.
“If the ECB goes on holiday without doing anything more, this is going to snowball. We’re way past point where any country can deliver fiscal measures on its own. People are not going to buy Spanish and Italian debt right now whatever ever they do. There has to be a circuit breaker.” The failure to win back investors is a bitter blow for Spanish premier Mariano Rajoy as the country pushes through the harshest retrenchment in modern history, with cuts in public salaries of up to 7pc, lower dole payments, and a three-point rise in VAT to 21pc.
There will be no circuit breaker; the ideologies of Neoliberalism, specifically democracy, capitalism, and European Socialism have utterly failed on the collapse of Spain’s sovereign authority. The only ideology that will be implemented now is the twofold biblical dispensation, Ephesians 1:10, of regionalization, Daniel 2:30-33, and totalitarianism, Revelation 13:1-4. God in eternity past ordained that a ten toed kingdom of regional blocs form where diktat serve as both money and credit.
Mike Mish Shedlock, writes from the Austrian Economist perspective in article Expect Strikes and Protests to Spread to Italy; Another Look at Why Italy Will Exit the Eurozone Before Spain. “The net difference between those who think the euro is a good thing minus those who think it is a bad things is -4 percentage points in Spain, but -14 points in Italy. That is the biggest negative spread in the Eurozone.”
He continues: “The collapse of the Spanish bond market and the rise of protests in Spain are both very serious matters. There is every reason to believe those reactions will spread to Italy. And with elections pending, the rise of anti-euro sentiment in Italy is extremely important. Monti may even be ousted before 2013 via failed vote-of-confidence. Every day that passes, the more strength the Five-Star Movement will gain. The irony is that it would be in the best interest of the eurocrats to hold elections now rather than later, before the anti-euro movement becomes politically unstoppable.”
Unstoppable? I ask … Hardly. God’s word reveals that the paradigm of global growth and global trade, as well as sovereign democracies, which was based upon a banker regime, which financialized a global debt trade, will be replaced by a paradigm of regional governance, Daniel 2:30-33, which will be founded upon a beast regime of totalitarian collectivism., Revelation 13:1-4, that will impose debt servitude, and be established through regional framework agreements. Italians cannot be Germans, likewise Greeks cannot be Germans, yet all will be one, as the dispensation of God, that is what Witness Lee calls the economy of God, Ephesians, 1:10, will terminate all existing economic and political life so that the Kingdom of His Son will be established on planet earth, Revelation 2:26-27.
Mr. Pritchard continues “Madrid had thought the EU bailout terms would be “light” and that the ESM would inject money directly into Spain’s banks in order to break the dangerous nexus between banks and sovereign states, as sketched out at the summit deal in late June. It has obtained neither. The terms are draconian, with sweeping intervention across the gamut of fiscal policy as well as demands for a `bad bank’ and the closure of crippled lenders. The legislation passed by the Bundestag today made it clear that the government is entirely responsible for the cost of the bank package. “Spain made the request. The Spanish state will guarantee the money,” said finance minister Wolfgang Schäuble. While the ESM is supposed to take over the burden once an EU banking supervisor is in place, this part of the summit deal seems to have withered and died in Berlin. “There will be no direct recapitalisation of Spain’s banks, at least not with us,” said Social Democrat (SPD) leader Frank-Walter Steinmeier.”
“My parliamentary group is not at all convinced we are doing the right thing.. We’re only voting for this because the damage would be catastrophic if Germany refused aid,” he said. Twenty-two of Chancellor Angela Merkel’s own coalition voted against the Spanish package, forcing her to rely on opposition support. Bond markets are deeply confused by the loan terms for Spain. Investors are taking their lead from the International Monetary Fund, which has already added the €100bn rescue costs to its estimate of Spanish public debt. The total has risen from 68pc to 90pc of GDP in a single year, underscoring the dramatic worsening in public finances.
“The IMF said in its yearly report on the eurozone that the deepening crisis raises concerns about the “viability of the monetary union itself”. It warned that the “adverse links between sovereigns, banks, and the real economy are stronger than ever.” The report said EMU is “unsustainable” as constructed and called for a radical shift in policy, including a monetary blitz by the ECB, a banking union, and debt pooling.”
“The plea seems starkly at odds with the mood in the Bundestag. Bail-out fatigue has reached exhaustion. “We create red lines, only to cross them. We can’t go on like this,” said Mr Steinmeier. “It’s a bottomless pit,” said Free-Democrat (FDP) spokesman Frank Schäffler. Most of the German people would agree.”
Bespoke Investment Group reports breadth is not confirming this week’s rally in the S&P, SPY. I comment that with the rise in Spain’s Sovereign Debt Yield, we are witnessing a failure of neoliberal finance and with the trade lower in China and Japan, we are witnessing a failure of global growth and global trade.
European 2 Year yield core and semi core yield converge to zero, as seen in this Joe Weisenthal’s chart of the day, as seen in this Morgan Stanley chart, Spreads are blowing out today in Spain, Italy, and so forth. But there’s another sovereign debt story in Europe, and that is the collapse of yields in core and semi-core countries. Morgan Stanley’s Anton Heese has a great report on the European “steamroller”, ie the flattening of curves and spreads throughout the Eurozone. This chart is incredibly vivid. 2-year yields in Germany, France, Austria, The Netherlands, Finland, and Belgium are all zooming to 0%. Belgium’s move, from borrowing at nearly 5% last year, to borrowing at around 0% right now is incredibly impressive.
Open Europe reports Bundestag votes to approve Spanish bailout; Former East German dissident compares Bundestag to parliament of the DDR. The German parliament yesterday voted to approve the €100bn bailout package for Spain with 473 of the 583 MPs who attended the extraordinary session voting in favour, 97 voting against, and 13 abstaining. 23 coalition MPs either voted against or abstained, meaning that Angela Merkel lost out on the symbolically important Chancellor’s majority – an absolute parliamentary majority based only on government MPs. During the debate, the SPD’s parliamentary leader Frank-Walter Steinmeier – whose party voted in favour – warned that the SPD would not continue to support bailouts for banks unless creditor involvement was agreed. Open Europe’s coverage of the vote was cited by the Guardian’s live blog. Bild’s headline is “Adios Milliardos! Will we ever see our money again Mrs. Merkel?” Meanwhile, commenting on the bailouts, former East German dissident and CDU MP Vera Lengsfeld told Handelsblatt that “If MPs allow the government to withhold information but still vote with the government, even after repeated reminders, the Bundestag is abdicating its control function and increasingly resembling the ‘People’s Chamber’ of the DDR.” FT WSJ WSJ 2 IHT BBC Irish Times Irish Independent Telegraph Guardian: Live Blog Bild Welt Welt 2 Spiegel FAZ FAZ: Göbel Süddeutsche Handelsblatt
Open Europe reports Speaking in Washington yesterday, French Finance Minister Pierre Moscovici reiterated his calls for faster integration in the eurozone, first with a banking union only later moving to a political union. WSJ WSJ Brussels Beat FT: Phelps
Euro Intelligence reports Claus Hulverscheidt says the programme is not going to work, as Spain is likely to require another programme; In a comment in Suddeutsche Zeitung, Claus Hulverscheidt writes that market participants had misjudged the agreement of the summit, as Germany’s remains unrelenting on the notion that Spain, not the banks themselves, are responsible for the loans. He says there will be no effective relief for Spain as a result of this programme. He writes that it is possible that the Bundestag may have to re-assemble for another emergency session in August to vote on a package for the country as whole, this time much larger.
Euro Intelligence reports Angela Wefers argues that Bundestag insisted on tough conditions and controls. Börsenzeitung’s Angela Wefers concludes that the Bundestag has sent a strong signal that liability and conditions for the government in Madrid, a reform program for the banking sector and the solution of non-viable banks with aid restrictions during their restructuring constitute clear preconditions for future aid. “The granting of direct aid for banks from the euro rescue funds will not be possible as long as there is no functioning cross border bank supervision in the Eurozone and the EU”, Wefers argues. “When this is the case, will be the Bundestag’s decision. The margin of manoeuvre of government and chancellor Angela Merkel is therefore shrinking. But this also reinforces her against all attempts to get draw Germany into a debt community without control.”
Gary of Between The Hedges relates The Citi Eurozone Economic Surprise Index is at -64.0 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades
3) …. I observe that I am a lightening rod for the poneros.
I am a steward of the Good News, and am responsible for presenting the character of God in all genuineness and gentleness. I am neither being paranoid, nor melodramatic, when I relate that I am a lightening rod for the poneros, of which for the recent past two weeks have all been women.
I was out shopping at the downtown market, and while examining the produce, a woman ame up and asked me for change. I looked at her; she had stained pants and shoes, had black fingernails, and I had the impression was that she was a woman with an antisocial disorder; I gave her two dollars. …. Then, the same day, on the way to the major grocery store, I came across another woman, with a girly girl way, on the sidewalk offering flowers, picked from neighborhood, on a donation basis; I gave her two dollars. Later in the week, I saw her sitting in a provocative way directly underneath an ATM machine. … While using the exercise machines at the fitness club, I was the only one, yet a woman came and started to work out next to me. As I started to finish, she started to stop her routine as well, and asked me, are there sanitary wipes for the exercise machines? And I pointed to a bottle and towel immediately to her left. I then used my personal towel from home to wipe down my machine and quickly left for the men’s locker room. … When visiting a church, one of the women greeters asked me where I live, and when I told her, she broke out in a rage, saying that her mother retired there, and when the Federal laws changed to provide that the property be for all low income, the mother felt frightened, and she had to move the mother out. I feel literally terrified, but cannot move out, as I have no money to do so. Inasmuch as the church greeter was completely undone emotionally, I took the bulletin and then went to the auditorium; then left the church never to return. … Finally, just yesterday, I was on the bus to the mall, and a woman came onto the bus, with headphone music playing. I wondered if she was going to turn it down. The bus started down the road, then the driver asked whoever had the music playing to turn it off; but no response; so he pulled the bus to the side of the road, and stood up and walked to the middle of the bus, and asked whoever was paying the music to turn it off; finally the music ended, and the ride resumed.
Poneros contrasts with moral goodness, which is the virtue of respect and honor, (with affection to the saints, meaning that one one lives the one another lifestyle with other sons of God), together with the pursuit of peace to all men. Moral goodness always does the right thing. But the poneros place evil for good, because they must rule over others in all unrighteousness. Joy in life comes from confronting others others and from taking charge over others within a territory, whether, that be a business, a neighborhood, an interpersonal relationship, or simply the physical area surrounding themselves All of the women mentioned above, are poneros, including the greeter at the church.
4) … Inasmuch as Financial Armageddon, a credit bust and global financial collapse, as well as the Ezekiel 38 War, centered in Syria and iran, as well as Turkey, is imminent, I am nearing a stopping point in blogging.