Financial Market Report for August 27, 2012
Gary of Between The Hedges relates that Expansion reports Spain wants to use government-guaranteed bonds to pay banks selling assets to a so-called bad bank, citing people close to negotiations between government and the European Commission. Banks could use the bonds as collateral to raise financing from the ECB, according to the report.
Noah Barkin and Paul Carrel of Reuters reports Merkel tries to calm storms over Greece, ECB policy. Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year. The comments, from central bank chief Jens Weidmann and a senior figure in the Bavarian Christian Social Union (CSU), Alexander Dobrindt, point to mounting unease in Germany with the policies being used to combat the three-year old debt crisis.
“We are in a very decisive phase in combating the euro debt crisis,” Merkel told public broadcaster ARD in an interview. “My plea is that everyone weigh their words very carefully.” Dobrindt, whose party is preparing for a regional election in Bavaria and the federal vote next autumn, told top-selling German daily Bild he expected Greece to leave the euro zone in 2013. His comments drew a swift rebuke from Foreign Minister Guido Westerwelle who said “bullying” of euro members must stop.
But Weidmann, a former economic adviser to Merkel, said in a front-page interview in influential German magazine Der Spiegel that the bond buys could violate rules against the ECB providing outright financing to governments.(an action bordering on an unlawful act of debt monetization), “Such a policy is for me close to state financing via the printing press,” Weidmann told Spiegel. “In democracies, it is parliaments and not central banks that should decide on such a comprehensive pooling of risks. We should not underestimate the risk that central bank financing can become addictive like a drug,” Weidmann said. Dobrindt was more direct, saying Draghi risked passing into the history books as the “currency forger of Europe”.
The Automatic Earth writes Dear Angela, it’s time to do the right thing.
Mike Mish Shedlock, references the Melissa Eddy NY Times article which relates “I want Greece to stay in the euro zone and that’s what I’m working for” writes, Angela Merkel is the Teflon Chancellor. Merkel achieves the impossible dream for now: Merkel got away with promising Greece citizens help while doing nothing; Merkel got away with promising German citizens there will be no fiscal union until there is a political one, while simultaneity offering explicit support for the “Currency Forger of Europe”. Merkel is very adept at talking out of both sides of her mouth simultaneously, each saying a different thing, and getting away with it. Reagan may have been the Teflon president, but Merkel is the Teflon chancellor.
Regional economic and trading blocs will rise to replace sovereign nation states as leaders announce regional framework agreements to pool sovereignty regionally as capitalism and European socialism is dying on the failure of the world central banks to stimulate global growth and corporate profitability. Nick Beams writes Fed minutes point to a bankrupt economic order. The latest FOMC meeting amounted to an acknowledgement that while the financial system continues to operate on a day-to-day basis, in a longer-term, historical sense it has completely broken down.
All nations worldwide are starting to lose their sovereign authority and their debt sovereignty. Rainer Buergin of Bloomberg reports Germany, France Reconnect in a Push for Crisis Solutions. Germany and France agreed to drive ahead measures on closer European integration in a renewed show of unity by the region’s two biggest economies to fix the crisis in the euro zone. German Finance Minister Wolfgang Schaeuble, speaking after talks in Berlin today with his French counterpart, Pierre Moscovici, said the two countries will create a working group to advance European Union cooperation on banking union, fiscal union and the strengthening of monetary union.
We are witnessing bible prophecy of Revelation 6:1-2, being fulfilled, as the baton of sovereignty is being passed from sovereign nation states, such as the US, the UK, Spain, Italy, and Greece, to regional sovereign bodies and leaders. The economy of God, that is the administration plan of Christ, Ephesians 1:10, is at work to establish regional economic and political governance, as foretold in Daniel 2:30-33. The Beast Regime of Neoauthoritarianism is rising from the profligate Mediterranean Sea country of Greece, and the failed industrial nation of Italy, as foretold in bible prophecy of Revelation 13:1-4. New centralized monetary authority is coming in the EU, and with it, the diktat money system, which will replace the fiat money system. Diktat will serve as both money and credit.
Angela Merkel is a precursor, that is an antecedent, of one greater, that is the Sovereign, foretold in Revelation 13:1-4, and his partner, the Seignior, Revelation, 13:11-18. Angela Merkel is much like what John the Baptist was to Jesus Christ; one who comes before to herald one more powerful. Germany will rise to be preeminent over vassal peripheral client states in a type of revived Roman Empire. John the Revelator communicates that after Financial Armageddon, that is a global credit and economic collapse, that people will be place such trust in the Beast Regime of regional governance, that it will constitute worship, Revelation 13:3.
The steepening in the 10 30 US Sovereign Debt yield curve, $TNX:$TYX, as seen in the Steepner ETF, STPP, has been rising in August 2012, serving a warning signal to investors to get out of bonds, The steepening yield curve in the U.S. Treasury market should have investors worried, PIMCO’s CEO Mohamed El-Erian says in Advisor One article. Wealth can only be preserved by investing in, and taking possession of gold, either in bullion form, or in physical form, in Internet trading vaults, such as Money Is Gold, or Bullion Vault, as the chart of gold, GLD, communicates that an investment demand for gold commenced in August 2012. In the age of devolution, despotism, and asset deflation, gold is the only form of sovereign wealth. The chart of gold mining stocks relative to gold, GDX:GLD, communicates that gold stocks, GDX, GDXJ, GLDX, and Silver Mining Stocks, SIL, SSRI, HL, are liking peaking out.
Today, the most toxic of debt rose, the Fidelity Investmentsmutual fund FAGIX, which invests in companies in troubled or uncertain financial condition, rose to an all time high of 9.27, as is seen in this ongoing Yahoo Finance chart of FAGIX, BKLN, EMB, JNK, PICB, BWX, and MUB. One can establish and follow a portfolio of Bonds, BND, including ZROZ, EDV, and TLT, using this Finviz Screener.
The National Bank of Greece, NBG, Deutsche Bank, DB, and Banco Santander, SAN, led European financials, EUFN, and European Shares, VGK, higher. Apple, AAPL, led Nasdaq, QQQ, higher. Lender Discover Financial Services, DFS, Telecom Companies, EQIX, CALL, CBB, and Recreational Vehicle Manufacturers, PII, WGO, ACA, and Beverage Producer, BUD, led Consumer Services, IYC, higher.
Yet the financial markets are at a inflection point. Bespoke Investment Group reports A Low Volume Bull. Ever since the current bull market began in early 2009, the most oft-cited criticism is that volume has been weak. Even the most casual market observer has heard the complaint that rallies on light volume are unsustainable, and in effect, don’t count. The argument sounds good in theory, but followers of this logic would have essentially missed out on what is now the ninth strongest and longest bull market (and more) in the history of the S&P 500 … In order to illustrate the fallacy of this argument, the chart below shows the performance of the S&P 500 since the bull market began on March 9th, 2009 along with its performance if we take out all days where volume (as measured in SPY) was below its 50-day moving average. So far during this bull market, the S&P 500 is up 108.5% (blue line). If you back out all days (up and down) over the same period where volume was below average, however, you come up with a decline of 30.1%
All forms of fiat wealth, Bonds, BND, Stocks, ACWI, Commodities, DBC, are depreciating on competitive currency devaluation as Currencies, DBV, and CEW, are trading lower in value, on the failure of the world central banks’ monetary authority to stimulate global growth and trade, as fears of Eurozone sovereign and banking insolvency increase.
Homebuilders, ITB, turned lower, and US Infrastructure, PKB, turned lower as MIC, EXP, HD, LL, SHW, USG, GLDD, MDR, DY, MDR, FLR, MTZ, FWLT, GVA, CTAS, MHW, APOG, BECN, MDU, TREX, MAS, NX, NP, IP, OC, TBI, PX, ARG, APD, turned lower.
Metal Manufacturing, XME, turned lower as ATI, GTLS, CRS, STLD, NUE, and RS, turned lower and Chemicals, turned lower las ROC, FMC, DOW, DD, LYB, WLK, ASh , and GRA, turned lower.
Vietnam, VNM, fell strongly lower. China Infrastructure, CHXX, China Industrials, CHII, China Minerals, CHIM, China Financials, CHIX, China Consumer, CHIQ, China Small Caps, HAO, Brazil Financials, BRAF, Brazil Infrastructure, INXX, India Earnings, EPI, and India Small Caps, SCIF, led the BRICS, EEB, lower. Australia, EWA, and Argentina, ARGT, traded lower.
Commodities, DBC, and USCI, traded lower, as Major World Currencies, DBV, and Emerging Market Currencies, CEW, traded lower. The US Dollar, $USD, UUP, traded unchanged as Bloomberg reports Dollar Loses Hedge Fund Bulls as Risk Drops at G-10 Nations. Hedge funds and large speculators are abandoning bets on a stronger dollar at the fastest pace ever. Net bets that the world’s reserve currency will weaken against eight major peers increased to 131,512 contracts as of Aug. 21, data from the Commodity Futures Trading Commission show. That compares with about 311,000 contracts betting on an advance on June 5, the biggest reversal on record. (Hat Tip to Gary of Between The Hedges).