1) … Financial market report for Tuesday December 18, 2012
On Monday December 17, 2012, the AP reported Stocks End Near Session Highs on Cliff Optimism. AP Stocks rose on Wall Street as investors were encouraged by signs of progress in budget talks in Washington. Just two weeks remain before tax increases and government spending cuts take effect if no deal is made. And the NYT reports President Delivers a New Offer on the Fiscal Crisis to Boehner. President Obama delivered Speaker John A. Boehner a new offer on Monday to resolve the pending fiscal crisis, and what may be close to a final deal, which would raise revenues by $1.2 trillion over the next decade but keep in place the
World Stocks, VT, rose to a new seven month high rally high on hopes of a deal to avoid the Fiscal Cliff, with Shanghai Shares, traded by CAF, jumping vertically higher for the second day, rising 4.3%. World Banks, IXG, blasted higher; while the National Bank of Greece, NBG, traded lower.
The biggest risk humanity face as a result of the Fed’s QE4, and the ECB’s OMT unprecedented experiment in quantitative easing, that has produced investor confidence and the decline of risk aversion, with World Stocks, VT, rising 12%, and World Small Cap Stocks, VSS, rising 15%, in a risk-on Major World Currency, DBV, and Emerging Market Currency, CEW, momentum rally, over the last seven months, is that monetary easing has crossed the rubicon of debt monetization, and that the world has passed through Peak Credit, with Bonds, BND, trading lower on the exhaustion of the world central banks’ monetary authority. It can be said “The Fed ceased to work December 18, 2012”, inasmuch as its monetary policies are now causing debt deflation, specifically deflation in bonds. Through a steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TX, deflation started in Aggregate Credit, AGG, in December 2012 as follows:
Closed End Michigan Bonds, MIW, -8.6%
Closed End Pennsylvania Bonds, EIP, -8.1%
California Municipal Bonds, CMF, -2.9%
High Yield Municipal Bond, HYMB, -2.7%
Municipal Bonds, MUB, -2.6%
The Zeroes, ZROZ, -7.5%, the chart shows a severe breakdown of value
30 Year US Government Bonds, EDV, -6.7%, the chart shows a strong fall through channel support
10 Year US Government Notes, TLT, -4.5%, the standard bearer of debt broke down 12-18-2012.
Build America Bonds, BABS, -1.9%
Long Duration Tips, LTPZ, -1.7%
Long Duration Corporate Bonds, BLV, -2.9%
Corporate Bonds, LQD, -0.7%
Total Bonds, BND, -0.7%
A see-saw destruction of fiat wealth is underway when the Steepner ETF, STPP, broke out on a steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, which drove Total Bonds,, BND, sharply lower today, while Junk Bonds, JNK, Leveraged Buyouts, PSP, and Senior Bank Loans, BKLN, as well as Distressed Investments like those taken in under QE1, and traded by Fidelity Mutual Fund, FAGIX, rose to new highs. Of note, the WSJ reports, U.S To Sell Bulk of TARP Banks. The Yahoo Finance Industry Center reports Closed End Debt Funds, traded lower for the fourth day, with the Closed End Municipal Debt Funds, such as Michigan Municipal Bonds, MIW, and Pennsylvania Municipal Bonds, EIP, traded strongly lower.
Bespoke Investment Group reports 10-Year Yield Crosses Above 200-Day Moving Average. The rise of the benchmark Ten Year Interest Rate, ^TNX, to 1.83% means that the bond vigilantes have gained control of the bond market. Ben Bernanke and Mario Draghi’s monetary policies have turned the springs of credit toxic, whereby bond are falling lower in value, and stocks are only marginally or selectively increasing in value. Charts show that the highest degree of loss of trust has come in global debt is centered in US Debt as reported above.
US Government Debt began falling in value in December 2012. US Treasuries have now entered their third week of falling, with 10 Year US Government Notes, TLT, -4.5%, and the 30 Year US Government Bonds, EDV, -6.7%, so far this month.
Reports herald that Japan also plans unprecedented monetary expansion.
Bloomberg reports LDP landslide win clears pipes for Japan fiscal spigo
Bloomberg asks Two-party Japan democracy undone in 39 months as DPJ falls
Mike Mish Shedlock writes Spotlight on Japan: return of ‘Abenomics.
Bloomberg reports Two-party Japan democracy undone in 39 months as DPJ crumbles. It took 54 years for Japan’s politics to produce a viable opposition party, and 39 months for it to self-destruct after winning power, splintering prospects for an enduring policy-driven two-party system. Stocks climbed in the weeks leading up to the election as investors bet that Abe will follow through on speeches calling for the central bank to step up monetary stimulus. The Nikkei, NKY, advanced seven percent in the past month. Yet Abe will inherit a recessionary economy, with electronics champions from Sharp to Sony. struggling to cope with the yen’s climb in the past half decade and intensified Korean competition. Public debt has grown by about a fifth since his last term in office, cut short by intestinal illness.
Ambrose Evans Pritchard reports Abe prepares to print money for the whole world. Japan’s incoming leader vows to ram through full-blown reflation policies.
John Rubino writes in Japan would be governable if only … The point of this series on Why we are ungovernable is that once a country’s debt exceeds a certain level the required interest payments become a headwind that makes growth impossible. Since growth is the key to political stability, excessive debt makes a society ungovernable. So for Japan, internal party politics or disagreements about US military bases are just symptoms of the underlying problem, which is its willingness to borrow insane amounts of money. In the aftermath of the stock/real estate bubble of the 1990s, Japan chose to prop up its failing banks and construction companies instead of letting them fail. It borrowed money for bailouts and public works programs that succeeded in staving off a collapse, but at the cost of ever-higher public debt. Today, no other major country’s government debt/GDP ratio is even close to Japan’s 200%. Now the problem is being compounded by the retirement of the baby boom generation, which will push government spending up to levels that even a debt-free country would have trouble managing. No political party can fix this, so whoever is in charge will fail and be blamed for the failure. New people will be voted in, who will then see their high initial approval ratings evaporate. And so on, till the whole system implodes. So the question isn’t whether the next government will fix things. It can’t because there is no fix. The question is whether the next government will preside over more low-level turmoil or the final implosion of a non-viable system. This of course brings us back the US, which has chosen almost exactly the same path. Instead of liquidating three decades of malinvestment when we had the chance, we followed Japan’s lead by propping up the banking/real estate/local government sectors with borrowed money. Where Japan recently chose to increase stimulus spending and pay for it with newly-created yen and a doubled sales tax, we are increasing government spending and paying for it with newly-created dollars and higher income taxes. Yet for some reason we expect a different result.
Yahoo Finance chart shows that the investment benefit of world central bank monetary expansion has been Inflationism. World Stocks, VT, have through many vigorous stimulus initiatives have grown 2% in the last two years, and Bonds, BND, 5%. It has been the purchase of Distressed Investments, like those traded in Fidelity Mutual Fund FAGIX, and that were exchanged in QE1 for money good US Treasuries, such as US Ten Year Notes, TLT, which were for the most part returned to the Fed and now reside in Excess Reserves.
Chris Rossini in Economic Policy Journal relates Murray Rothbard also spoke frequently on the idea (of monetary inflation) “It is clear that prolonging the boom by ever larger doses of credit expansion will have only one result: to make the inevitably ensuing depression longer and more grueling. The way to prevent a depression, then, is simple: avoid starting a boom.”
In 1971, Milton Friedman, suggested the Banker Regime of floating currencies, which President Nixon embraced. The world abandoned a sound money system based upon the gold standard, carry trade loans were embraced, a global housing, sovereign and corporate debt trade emerged, America became a global economic and military empire, corporate profits soared, and global trade blossomed as fiat assets inflated in price on a global debt bubble. The NYT reports In Sign of Normalization, Pentagon to Reimburse Pakistan $688 Million. The Pentagon quietly notified Congress this month that it would reimburse Pakistan nearly $700 million for the cost of stationing 140,000 troops on the border with Afghanistan, an effort to normalize support for the Pakistani military after nearly two years of crises and mutual retaliation.
But economic lightning struck in May of 2010, with the emergence of the Greek Debt Crisis, and now in December 2012, with the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, is steepening, as evidenced by the Steepner ETF, STPP, rising, with the result that the global debt bubble seen in the ETFs, BND, and AGG, trading lower, has burst.
Inflationism is turning to Destructionism; and with that there is a change in economic paradigms.
The Beast Regime of Regionalism and Totalitarian Collectivism is rising up out of Mediterranean PIGS nations, as the world is passing through Peak Credit, Peak Capital, Peak Money, and Peak Wealth. With the exception of Junk Bonds, JNK, Leveraged Buyouts, PSP, Senior Bank Loans, BKLN, and Distressed Investments, FAGIX, Bonds, BND, have lost their seigniorage, that is their moneyness. Aggregate Credit, AGG, has been destroyed by excessive world central bank liberalism.
The Major World Currencies, DBV, turned lower this week, trading 0.08% lower, while Commodity Currencies, CCX, such as the Euro, FXE, and the Australian Dollar, FXA, and the Emerging Market Currencies, CEW, are topping out. Soon all currencies, like the Japanese Yen, FXY, will no longer be continuing to rise in value, but sinking in value, while the US Dollar, $USD, UUP, may actually rise for a brief period of time, before all currencies fall lower in value on competitive currency devaluation. The chart of the EUR/USD shows a close at 1.32.
Investors will be deleveraging out of Stocks, VT, VSS, as the world pivots from the Age of Fiat Asset Appreciation into the Age of Deflation. Bonds, BND, Currencies, DBV, CEW, and Stocks, VT, VSS, will be losing their seigniorage, that is their moneyness, on the exhaustion of the world central banks’ monetary authority. And investors will be deleveraging out of commodities, DBC, such as Base Metals, DBB. Bloomberg reports Copper, JJC, fell to a one-week low in New York as a jump in stockpiles monitored by the London Metal Exchange.
The Law of Diminishing Returns is at work. Steve Matthews of Bloomberg reports Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the economy will grow 2 percent next year and said The Fed’s Stepped Up Purchases Of Bonds Won’t Do Much To Spur Recovery. “It’s not clear that monetary policy, by itself, can bring about any material improvement in economic growth,” Lacker said today in a speech in Charlotte, North Carolina. “The supply of bank reserves is already large enough to support the economic recovery, and the benefits of further asset purchases are unlikely to be sizeable.” And Zero Hedge relates GE’s Jeff Immelt: We’ve Definitely Seen A Slowdown In The Fourth Quarter”. The ongoing Yahoo Finance chart of Large Cap Stocks, JKE, and General Electric, GE, illustrates that a rally in Major World Currencies, DBV, and Emerging Market Currencies, and the Chinese Yuan, CYB, took World Stocks, VT, Asian Stocks, EPP, such as South Korea, EWY, but not the Growth Socks, JKE, higher since September 14, 2012, US Infrastructure Stocks, PKB, which had been seen as a safe haven, rose strongly to a new rally high on optimistic Fiscal Cliff talks.
The Milton Friedman’s Banker Regime provided increasing prosperity for many based upon the choice of investments and use of credit. But the Mario Draghi’s Beast Regime provides austerity and debt servitude for all of mankind based upon diktat. The WSJ writes ECB Chief Defends Austerity Measures.
The bill for the Alan Greenspan, Ben Bernake and Mario Draghi financial moral hazard, that came through monetary inflationism is coming due. The WSJ relates Greek Debt Unsustainable Without Official Sector Losses, Moody’s Says.
The fiat money is dying on the exhaustion of neoliberal finance; and the diktat money system is rising based upon the mandates of regional leaders.
The word, will and way of regional sovereigns, who will rise to power based upon regional framework agreements, will provide seigniorage, that is moneyness.
The diktat money system features the diktat of authoritarians as credit, money, and wealth. Agence France Presse writes Italian President Giorgio Napolitano Urges Austerity As Election Looms.
TheEconomist relates Europe’s Worries About Italy. Italy’s latest mess has shocked European leaders. But their problems run even deeper.
The chart of Italy, EWI, shows a number of ups and downs, since September 14, 2012, when World Stocks, VT, traded lower, only to recover with the anticipation of QE4; Italy, unlike European Shares, VGK, has not been unable to rise to a new seven month rally high, that began in June of 2012.
The only money good will be the word of sovereign leaders and monetary popes, as well as the physical possession of gold either in bullion or in Internet trading vaults like Bullion Vault. The Street writes Gold A Long Term Winner As Currencies Collapse.
As fiat money starts to perish, diktat will increase in the world’s ten regions. A ten toed kingdom of regional governance will rise worldwide where diktat serves as credit, money and wealth. America is one of the two remaining iron kingdoms that has ruled the world since the late 1700s, the other was the UK. But soon, through Financial Armageddon, that is Financial Apocalypse, the global hegemony of the US will be greatly diminished.
Out of the soon coming economic and political chaos, a European Super State ruled by a Sovereign and a Seignior, will rise to great world power, and be the example of Totalitarian Collectivism and Regional Governance world wide as the Beast Regime of Diktat comes to replace the Banker Regime of Choice, and occupies all of the world’s ten zones, and seven institutions. Here is an interesting report, The NYT reports In Sign of Normalization, Pentagon to Reimburse Pakistan $688 Million. The Pentagon quietly notified Congress this month that it would reimburse Pakistan nearly $700 million for the cost of stationing 140,000 troops on the border with Afghanistan, an effort to normalize support for the Pakistani military after nearly two years of crises and mutual retaliation. (Hat Tip to Gary of Between The Hedges).
On Tuesday, World Stocks, VT, climbed yet higher as investors gained confidence in ‘fiscal cliff’ talks. Reuters reports Wall Street Rallies On Cliff Optimism. And Reuters reports World shares hit 17-month highs and the euro surged on Wednesday December 18, 2012, on hopes that U.S. politicians will reach a budget deal and that further monetary stimulus will come from Japan. Shares rising included:
Energy Shares, XOP, XLE, PSCE, OIH, and IEZ, on a rising price of Oil, USO.
Technology Shares, MTK, FONE, IGN, IGV, and XSD.
Homebuilding, ITB, and US Infrastructure, PKB.
Small Cap Value, RZV,
Leveraged Buyouts, PSP, Spin Offs, CSD; but Junk Bonds, JNK, trade unchanged.
S&P High Beta Stocks, SPHB.
Real Estate, IYR, and Asset Managers, such as Blackrock, BLK
World Banks, IXG, blasted higher. The Too Big To Fail Banks, RWW, rose strongly on rising BAC, C, BK, and JPM. Regional Banks, KRE, Investment Bankers, KCE, and Stockbrokers, IAI, rose strongly, taking the Russell 2000, IWM, higher. taking Vanguard Dividend Appreciating, VIG, higher.
Japanese Banks rising strongly included NMR, MTU, SMFG, MFG
Argentina Banks rising strongly included BMA, BBVA, GGAL
UK Banks rising strongly included RBS, BCS, LYG
Swiss Banks UBS, CS rose strongly
Germany’s DB, Spain’s SAN, and Ireland’s IRE, led European Financial, EUFN, higher.
BAP, BCH, and BPOP, led the Emerging Market Financials EMFN higher
India’s IBN, rose strongly.
Mining Stocks, PICK, rose parabolically higher.
Gold Mining, GDX, Silver Mining, SIL, Copper Mining, COPX, and Solar Energy, TAN, traded lower.
Asia Shares, EPP, fell parabolically lower as EWA, ENZL, EWT, THD, EPHE, and EWY, traded lower.
Commodities, DBC, traded unchanged as Timber, CUT, and Oil, USO, rose; but, Silver, SLV, and Gold, GLD, traded lower. Bullion Vault relates Gold Prices Fail To hold $1700
Volatility ETFs UVXY, VXX, VIXY, VIXM seen in this Finviz Screener traded lower.
The world has attained peak fiat wealth as evidenced by the trade lower in Preferred Financial Shares, PGF, and by closed end equity funds, such as CSQ, unable to leverage higher on closed end debt funds, such as PFL, as is seen in their combined Yahoo Finance chart, since September 14, 2012. Milton Friedman was the seignior of the age of debt based, currency carry trade global investing. With the exhaustion of the world central banks monetary authority, the world is pivoting from Inflationism to Destructionism. Mario Draghi is the seignior of the age of diktat based regional governance.
Since 1971, when the world went on the Milton Friedman Free To Choose Floating Currency Regime, until December 18, 2012, investors have prospered from investing in republics of carry trade investing, which were sustained by trust in a global debt trade; these include ARGT, EIRL, EIS, EPI, EPHE, EPOL, ECNS, EWO, EWW, EWY, EWG, GREK, SCIN, THD, TUR, EWA, EWN, NORW ,EWT, seen in this Finviz Screener. But with the arrival of Peak Credit, Peak Wealth, that comes from the World Major Currencies, DBV, and Emerging Market Currencies, CEW, and Commodity Currencies, CCX, topping out and trading lower, humanity will forced into austerity in the Mario Draghi Regime. in ten regional zones of totalitarian collectivism and debt servitude. This as the dynamos of Liberalism, that is corporate profit and global growth are winding down; and the dynamos of Authoritarianism, that is regional security, stability, and sustainability are winding up.
Neoliberalism was based upon legislation featuring credit liberalization, such as the repeal of the Glass Steagall Act. Neoauthoritarianism is based upon regional framework agreements featuring debt servitude, such as the Greek Bailout I, II, and III.
Under Capitalism and European Socialism, economic activity was driven by financial workers in the world’s 50 major world banks, IXG, seen in this Finviz Screener, where speculative credit ruled. But under Regionalism and Totalitarian Collectivism, economic activity is driven by regional overlords and monetary popes working in conjunction with business executives in public private partnerships, where diktat rules.
Since June 2012, that is for seven months, a risk on global carry trade rally has been sustained by anticipation of Ben Bernanke’s QE4 and by Mario Draghi’s LTRO 1, 2, and OMT, that produced stunning investment returns in twenty sectors PSP, IGN, CUT, IBB, KBWY, RZV, QQQX ,FAA, CARZ, BJK, CSD, TAN ,INCO, TAO, DRW, URTY, SPHB, CAF, XRT, ZIV seen in this Finviz Screener, and in twenty countries, ARGT, EIRL, EIS, EPI, EPHE, EPOL, ECNS, EWO, EWW, EWY, EWG, GREK, SCIN, THD, TUR, EWA, EWN, NORW, EWT, RZV, seen in this Finviz Screener.
Neoliberalism’s final risk on risk on momentum rally, which was a currency carry trade rally, as evidenced in the rise of the currency demand curve, that is the ratio of the Pure Small Cap Value Shares, RZV, to the Small Cap Pure Growth Shares, RZV:RZG, ran parallel with a rise in the Morgan Stanley Cyclical Index, ^CYC, as is seen in its Yahoo Finance chart together with the World Shares. Neoauthoritarianism’s first austerity imposition is just now occuring in Europe. Petar Pismestrovic of GreekCrisis relates two WSJ articles, Struggling Greeks Face Harsh Winter; and Aid to Ease Greece’s Strain, but Hard Year Looms.
Inasmuch as Peak Seigniorage was achieved on December 18, 2012, the Age of Deleveraging will see fast derisking out of the above forty investments; and will see a rise in these 200% inverse ETFs, EEV, BIS, FXP, SKF, SQQQ, REW, SSG, SRS, SRTY, EFU, SMK. seen in this Finviz Screener; as well as in these 300% inverse ETFs, DPK, EDZ, TZA, TECS, YANG, SOXS, FAZ, seen in this Finviz Screener, as well as a rise in these derivative ETFs, FSG, UGL, AGQ, NUGT seen in this Finviz Screener.
The Financial Sector, XLF, was key to the Age of Investing. But as the fiat money system is replaced by the diktat money system, the Banking and Finance will be relegated to the dustbin of history.
Inasmuch as the Business Cycle is moving into Kondratieff Winter, wealth cannot be sustained by investing in fiat assets; wealth can only be preserved by investing in and taking possession of physical gold, such as bullion coins, or by owning gold in an Internet Trading Vault such as BullionVault.
2) … In the news
Yahoo Finance Center reports that Dairy Products traded lower as AP reports NYC milk distributor closes, 150 jobs lost. One of New York City’s largest dairy distributors has closed its doors after losing its main milk distribution contract.
Huntington News relates Foreclosures starts drop 28% from a year ago to 71-month low
Bloomberg reports Bank deposits surge $2 trillion more than loans.
Macro Analytics writes Why things are falling apart.
Merk Funds relates Hidden Treasury risks?
NASDAQ reports The 11 nations with higher sovereign debt ratios than Greece
Mike Mish Shedlock relates Calpers seeks exemption from bankruptcy laws
AP reports Homebuilder Confidence At 6 1/2-Year High
AP reports Petraeus Mistress Won’t Face Charges. The Justice Dept. drops its probe into whether Paula Broadwell stalked a romantic rival online
BART relates Totalitarian Collectivism
The WSJ reports Aid to Ease Greece’s Strain, But Hard Year Looms. Greece is due to receive about €34 billion ($45 billion) in bailout aid this week that will ease strains on an economy that many pundits forecast would be forced out of the euro-zone this year, but a European Union report warned Monday that the country’s economic struggles are far from over. Finance ministers from the 17-nation currency bloc backed the aid payment at a meeting last week, their governments hoping that the move would lift the air of crisis that has surrounded the government’s finances almost continuously since its debt problems emerged three years ago. For Germany, Greece’s biggest government creditor, keeping a lid on the Greek crisis next year is critical to ensuring a turmoil-free run-up to elections next fall. But the report on Monday made clear that Greece will continue to battle under the burden of heavy debts, a tough economic-reform agenda and an economy, in recession since 2008, that will continue to shrink in 2013. A senior EU official who briefed reporters on the contents of the review of Greece’s economic performance said the economy could contract by more than the 4.2% officially forecast for 2013. Cuts in public spending have already resulted in shortages in basic medical supplies at public hospitals. More than half of those under the age of 24 seeking work can’t find any, and one-quarter of the entire workforce is jobless.
3) … A review of Broadband2go
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4) … The tiny URL for this document is http://tinyurl.com/cxb95hd
5) … Symbols and terms
VT, IXG, CAF, NKY, VSS, DBV, CEW, FXE, BND, AGG, MIW, EiP, CMF, HYMB, MUB, ZROZ, EDV, TLT, BABS, LTPZ, Blv, LQD, BND, RWW, STPP, PGP, JJJC, EPP, EWY, VGK, RZV, SPHB, EWO,
Mario Draghi, Beast Regime, Diktat Money System, Fiat mMoney System, Money Good, Peak Credit, Peak Fiat Wealth, Pek Seigniorage, Monetary Authority, Quantitative Easing Debt Monetization, Inflationism, Destructionism, Monetary Inflation, Beast Regime, European Super State, Carry Trade Investing, Business Cycle, Liberalism, Seigniorage, Age of Deleveraging, Diktat, Debt Servitjde, Regional Framework Agreements, Ten Toed Kingdom Regional Governance, Totalitarian Collectivism, Financial Armageddon, Financial Apocalypse.