Republics Of Carry Trade Investing Fall Lower From Seven Month Banking, Debt, And Currency Carry Trade Rally, Introducing The Age Of Regionalism, Authoritarianism And Totalitarian Collectivism

Financial Market Report for the week ending December 21, 2012

1) … Introduction
Of apocalyptic note, the fiat money system died, as the age of the Milton Friedman free to choose floating currency regime  and liberalism came to an end December 21, 2012, as republics of carry trade investing fell lower from a seven month banking, debt and currency carry trade rally, introducing the diktat money system and the regime of regionalism and authoritarianism.

Country leaders over the last month have been EIRL, EPHE, EPOL, EWO, EWW, SCIN, THD, TUR, HAO, ENZL, and EWY, seen in this Finviz Screener.  And ETF leaders over the last six months have been PSP, IGN, CUT, IBB, KBWY, RZV, QQQX, FAA, CARZ, BJK, CSD, TAN, FXR, TAO, DRW, URTY, SPHB, XRT, COPX, PSCI, VIG, WOOD, ZIV, seen in this Finviz Screener. These leaders make for excellent short selling opportunities.

Doug Noland reports M2 (narrow) “money” supply jumped $54.8bn to a record $10.356 TN. “Narrow money” has expanded 7.8% annualized year-to-date and was up 7.6% from a year ago. I believe that this will turn out to be Peak Money; that is the zenith of M2 Money. A new money is on the way, it is coming via the Beast Regime of Regime of Regionalism, Authoritarianism, and Totalitarian Collectivism, it is called Diktat.

2) … World stocks turned lower on the exhaustion of the world central banks’ monetary authority
VSS 1.2
EEM 1.1
VT 1.0
VTI 1.0
VGK 1.0
EPP 1.0

CAF 2.0
CHIX 1,8
CHIM 1.6
HAO 1.5
CHXX 1.2
FXI 1.3

ENZL 1.7
KROO 1.3
EWT 1.2
EWY 1.0
EWA 1.0
JSC 1.0
EPHE 0.5
THD 0.5

INXX 3.3
SCIN 2.7
INP 2.1

TUR 1.5

EIRL 1.5
EWO 0.7

EWU 1.1

EWZS  1.2
EWZ 1.1

ARGT 2.2
EPOL 1.8
EWW 1.6

RSX 1.4
ERUS 1.1

Sectors trading lower included
PICK 2.9
TAN 2.8
FXR 2.6, this is a proxy for the Morgan Stanley Cyclical Index, ^CYC.
IGN 2.6
RZV 2.4
PSP 2.4
PSCI 2.1
XRT 1.8
COPX 1.7
SPHB 1.6
URTY 1.3
KRE 1.6
SLX 1.6
PKB 1.6
XSD 1.6
ITB 1.5
XME 1.5
IXG 1.1
BJK 1.1, trades similar to VICEX,t.
CARZ 1.1
IYC 1.1
DRW 1.1 In the last six months Global Real Estate Excluding The US, was given strong seigniorage by QE4 anticipation; this coming in large part from Liberalism’s Zero Interest Rate Platform, ZIRP, and the sell off precious metals, such as Silver, SLV, which closed at support at 29, and Gold, GLD, which closed at 160.33, and whose support is lower at 157.75.
TAO 1.1
RWR 1.0
IHI 0.9
XBI 0.8 PBH, PRXL,
CSD 0.8 TVL, VAC, FAF, LMCA, HHC, MSG
VIG 0.7
WOOD 0.7
QQQX 0.3
CGW 0.4 CGW, CDZI, SJW, AWR, AWK
FAA 0.2
KBWY +0.2

OIH 1.8 SLB
IEZ 1.5
XLE 1.5 XOM

3) … Conclusion
Kondratieff Winter, the global bear market of all time, will prove to be far worse than the Great Depression, has commenced, as both the Industrial Stocks, IYJ, -0.7%, and Transportation Stocks, IYT, -0.3%, have turned lower together from their peak rally highs.

Inverse Volatility, ZIV traded lower and Volatility, UVXY, and VXX, traded higher

Anticipation of QE 4 quicked Inflationism in the last seven months, driving the World Banks, IXG, higher, which supported a risk on momentum trade in World Stocks, VT, VSS, VTI, EEM, VGK, EPP, as is seen in their combined Yahoo Finance Chart.  Bank leaders over the last six months have been UBS, HDB, IBN, DB, SAN, WBK, RBS, LYG, BCS, C, BAC, as is seen in their combined Yahoo Finance Chart.

It is reasonable to expect that Argentina, ARGT, Banks, GGAL, BFR, BMA, and BBVA, will sell off quickly from their recent rally, as well as Puerto Rico Bank, BPOP, causing as sharp drop in the Emerging Market Financials, EMFN. And it is reasonable to expect that the Japanese Banks NMR, MTU, SMFG, and MFG, will sell off quickly from this week’s rally. One can follow them via this Finviz Screener. The rise in the Japanese Banks, came as Toru Fujioka and Masahiro Hidaka of Bloomberg report, The Bank of Japan expanded its asset-purchase program for the third time in four months, and will reconsider its objectives for inflation as incoming Prime Minister Shinzo Abe urges more action to end price declines. The central bank increased the asset-purchase fund to 76 trillion yen ($906bn) from 66 trillion yen. Abe, whose party swept to victory in this week’s election, will have a chance to reshape the BOJ early next year when the terms of Governor Masaaki Shirakawa and his two deputies expire. He’s pressing for a 2% inflation target, compared with an existing 1% goal.

The WSJ reports Greece’s four largest banks need a capital boost of €27.4 billion ($36.29) to overcome the impact of the country’s sovereign debt write-down as they battle to stem growing losses in the rapidly shrinking domestic economy. A mammoth €200 billion debt restructuring completed by the country earlier this year wiped out the capital base of Greece’s top lenders—National Bank of Greece, Eurobank Ergasias, Alpha Bank and Piraeus Bank — forcing them to appeal to the government for help. On Friday, NBG said it requires a capital boost of €9.7 billion while Alpha needs a capital injection of €4.6 billion. This comes after Eurobank and Piraeus Bank said Thursday they need €5.8 billion and €7.3 billion respectively. “The total number seems to be at the high end of expectations,” said Panagiotis Kladis, an analyst at investment services company National P+K. “This is a lot of money and investor interest in these banks will be determined by economic conditions prevailing in coming months and the economy’s broader outlook.”

The National Bank of Greece, NBG, rose 2.2%, on December 21, 2012, while the 50 Major World Banks, IXG, seen in this Finviz Screener, traded 1.1% lower. The fifteen banks seen in this Finviz Screener, pose Global Systemic Risk, and are likely to be faster fallers than the National Bank of Greece, these include BAC, C, BCS, LYG, RBS, WBK, SAN, DB, IBN, HDB ,IBN ,NMR, MTU, SMFG, MFG; they make for excellent short selling opportunities.

Destructionism is underway as the dynamos of corporate profit and global growth that supported the Milton Friedman Banker Regime are winding down on the exhaustion of the world central banks monetary authority.

Doug Noland communicates in article Recalling John Law, that Destructionism is the outcome of the fiat money system by providing these quotes:
“There are good reasons to think that the nature of money is not yet rightly understood.” John Law, 1720, with the collapse of the Mississippi Bubble.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes, 1920.
“Since the time when President Richard Nixon broke the final tenuous link between the dollar and gold in 1971, no major currency, for the first time in history, has any connection to a commodity. Every currency is now a fiat currency.” Milton Friedman, 1991.

Chris Rossini write in Economic Policy Journal, 50 Reasons For The Separation of Money & State. Money must be completely severed from State control. Our economic lives literally depend on it.

Nature Economist Elaine Meinel Supkis writes Our Banking System Destroys Itself. Way back over a decade ago, I issued regular warnings about the historic dangers of asset and banking bubbles. History is utterly clear in this matter. Century after century, the same warnings are issued and the same stupid bubbles appear over and over again, too. They all pop. Nothing goes to infinity. Seeking ever more dangerous skiing leads to being killed. Infinity always zeroes out in death. And this, in a nutshell, is why we keep having screwed up economies due to reckless asset bubbles. They love doing this even though it can cause a century of agony afterwards or even the annihilation of the economic entity and the bankruptcy of their home state nations.

The dynamos of regional prosperity, security and sustainability, will be working to establish regional  monetary authority of the Mario Draghi Beast Regime, beginning first in Europe, and then in all of the world’s ten regions.  Europa rides the beast. The 2 Euro coin in Greece has a woman riding a beast on one side of it, this is prophetic economically ,as the ECB and its soon coming companion, a European Superstate, will be the leading economic model for the world wide Beast Regime of Regionalism, Authoritarianism, and Totalitarian Collectivism. It’s as Sweettina2 writes Guten Morgen Europa. There is a statue right outside EU headquarters in Brussels, Belgium; it is a statue of the pagan goddess Europa riding a bull. Most of the important decisions for the citizens of Europe will now be made by a small group of European elitists, many of them totally unelected. But for the global elite, the consolidation of the EU is just one step towards a larger goal. You see, the ultimate desire of these elitists is to merge regional alliances such as the EU into a world government. In fact, in symbols used on official European coins, posters and artwork, the elite have sent us a message telling us exactly what they are planning to do to all of humanity, if anyone out there is willing to listen.

One person who is totally disconnected from the growing reality of European Federalism is Catalan President Artur Mas as Emma Ross-Thomas of Bloomberg, writes Catalan President Artur Mas pledged to create the institutions needed for an independent state next year as he prepares for a referendum on secession from Spain. Catalonia’s government will create a tax agency and a public bank while transforming the regional police corps into a full force as part of preparations for the referendum, which he has pledged to be ready to hold as early as 2014. It will also draw up plans for social security, energy and justice, Mas told the regional parliament.

Crony Capitalism, European Socialism and Greek Socialism, provided the Seigniorage of Choice. The  Ten Toed Kingdom of Regional Governance, forming as regional governments in all of the world’s ten regions, will provide the Seigniorage of Diktat, where Diktat serves as credit, money and wealth.

The global debt bubble, BND, has burst. Monetization of debt by the US Central Bank has started debt deflation in US Government Bonds, as is seen in the Municipal Bonds, MUB, the High Yield Municipal Bonds, HYMB, the Mortgage Backed Bonds, MBB, the US Ten Year Notes, TLT, the 30 Year US Government Bonds, EDV, the Long Duration Tips, LTPZ, and the Build America Bond, BABZ, trading lower in value in December 2012, as is seen in thiir combined Yahoo Finance Chart, as the bond vigilantes have called the Interest Rate on the US Government Note, ^TNX, higher from 1.7% on December 14, 2012.  Under Liberalism the world central banks and carry traded investing have been the funding agents for global economic growth and for corporate profit, to a large extent even by leasing out their gold reserves. Their monetary easing, translated money printing, through Ben Bernanke’s QEs, and Mario Draghi’s LTROs, and OMT, have now turned money good investments into money bad black holes. As the world transitions from Liberalism into Authoritarianism, the only money good will be diktat and possession of gold, in gold bullion or in Internet Trading Vaults such as Bullion Vault.

Competivive Currency Devaluation is under way in the Worlds Major Currencies, DBV, the Commodity Currencies, CCX such as the Australian Dollar, FXA, and the Canadian Dollar, and the Euro, FXE, as well as in the Emerging Market Currencies, CEW, turning Aggregate Credit, AGG, lower.  The U.S. dollar, $USD, closed at 79.62, down 0.7% y-t-d.  I expect the US Dollar, traded by the ETF, UUP, to rise for a period of time as falling currencies, cause ongoing derisking out of Stocks, ACWI, as well as Commodities, DBC, especially base metals, DBB, which should cause a fast fall in Dig and Dirt Moving Stocks, such as MTW, which is particularly debt heavy. I expect Timber, CUT, to be a fast faller, stimulating a fast fall in debt ridden International Paper, IP.

The paradigm of global economics is transitioning into the new paradigm of regional economics. Credit Liquidity under Liberalism provided prosperity for many. But as moral hazard has come of age, all of humanity will be booked into Authoritarianisms’ California Hotel of austerity and debt servitude by country leaders, as they meet in summits to announce regional framework agreements, which provide sovereign authority for structural reforms, wage reductions, and the establishment of public private partnerships to manage regional economics, as well as to appoint both a regional political leader, and a regional banking, fiscal and monetary pope.

The Great Depression came through speculative investing and huge amounts of municipal debt. This time around, there is even a larger amount of Aggregate Debt, AGG, especially that which has come through Sovereign Debt, BWX, Spin Offs, CSD, Junk Bonds, JNK, Leveraged Buyouts, PSP, Senior Bank Loans, BKLN, Emerging Market Debt, PCY, and of the debt taken in under TARP, and other QE1 facilities, which are like the Distressed Investments traded by the Fidelity Mutual Fund FAGIX.

These taken as a whole, both Sovereign Debt, BWX, up 6% y-t-d, and the most toxic of debt, especially the Emerging Market Debt, PCY, up 20% y-t-d, have been the credit basis of Liberalism’s QE 4 Rally, whose most dramatic leverage came in this last of the seven months.

As is seen in their combined Yahoo Finance chart, the global debt bubble served to leverage up the most speculative of stocks, such as the vice stocks held in the Fidelity Mutual Fund VICEX, as well as Banks, such as BAC, Investment Bankers such as JPM, and Small Cap Value Shares, RZV, as is seen in their combined Yahoo Finance Chart.  Of note, the level of Corporate Debt, LQD, International Corporate Debt, PICB, and Long Duration Corporate Debt, stands near an all time high as is seen in their combined Yahoo Finance Chart.

Sarika Gangar of Bloomberg writes Corporate bond sales from the U.S to Europe and Asia surpassed 2009’s record to reach $3.89 trillion this year as borrowing costs plunged to the lowest ever. Global issuance is up from $3.29 trillion last year and $3.23 trillion in 2010.  With central banks holding down benchmark interest rates to prop up the global economy, investors funneled an unprecedented $455.7 billion into bond funds this year, according to EPFR.  Companies from the riskiest to the most creditworthy took advantage of yields that fell to 3.33% this month to lock in lower borrowing costs… The extra yield that investors demand to own corporate bonds rather than government debt is at 223 basis points, narrowing from 351 at the end of last year, according to Bank of America Merrill Lynch’s Global Corporate & High Yield index.  Global issuance nudged ahead of 2009’s all-time high, when sales were stoked by government guarantees intended to rebuild confidence.  Yields have declined to 3.34%, from 4.83% on Dec. 31 and after touching an unprecedented 3.33% on Dec. 6,2012.  Corporate bonds handed investors 11.5% this year, the most since they returned 20.5% in 2009 and following a 4.86% gain in 2011. In the U.S., issuance also reached a record, climbing to $1.45 trillion from $1.13 trillion in 2011 and exceeding the previous all-time high of $1.24 trillion in 2009

A tremendous beneficiary, not only of global ZRIP, but also a rising Chinese Yuan, CYB, has been Chinese Electric Utility HNP rising 79% y-t-d.

The coming Second Great Depression, will be a most difficult experience, not only because of its great deleveraging, but also because those with skill and experience will find decreasing rewards and a growing lack of meritocracy.

4) … In the News 
I use to live in Denver, CO. It has always had a strong and resilient housing market, because of the diversity of types of businesses, and because it is at the intersection of two major Interstate Highways, with one running north-south, and the other east-west, with the so called Mousetrap Intersection a nightmare. The Denver Post reports Denver has year-over-year home value increase of 10.8 percent. National home values continued an upward march in November with Denver showing a year-over-year home value increase of 10.8 percent, according to the November Zillow Real Estate Marketing Report released Wednesday. Denver experienced a monthly home value gain between October and November of 0.7 percent, according to the report. Home values in Denver were listed at $225,900. Zillow said November marks the 13th straight month of home value increases, the largest annual gain since 2006. Home values were up nationally 5.2 percent compared with last November, the largest gain since August 2006, when home values rose six percent year over year. Home values nationally stood at $156,200 in November 2012. The last time values stood at the level was May 2004, according to the data. Only nine cities showed home values higher than Denver, CO; these were San Francisco, CA; San Jose, CA; Los Angeles, CA; New York, NY; Washington, DC; Boston, MA; Seattle, WA; Portland, OR; and San Diego, CA.

Reuters reports CE’s NYSE swoop creates derivatives giant.  IntercontinentalExchange agreed as part of its $8.2 billion takeover of NYSE Euronext to pay the New York Stock Exchange operator a termination fee of $750 million if it fails to gain antitrust clearances.

Dallas Morning News Texas unemployment rate of 6.2% is lowest in four years.  The Texas unemployment rate fell to 6.2 percent in November from 6.6 percent in October, even as the state added fewer jobs. It was the state’s lowest jobless rate since December 2008 and well below the US.

24/7 Wall Street reports Only 3,300 people were unemployed in Odessa’s labor force of 83,500, amounting to an unemployment rate of just 3.9%, or just over half of the national rate of 7.9% for October. The region’s largest sector by headcount, mining, logging and construction, grew by 5.4%. The second largest sector, trade, transportation, and utilities, grew by 6.3%. Odessa has significantly benefited from a strong oil industry given its location near the Permian Basin. And no metropolitan area in the country experienced worse job loss in the past year than Norwich New London, RI.  The unemployment rate of 9% in October was up from 8.2% at the same time last year. In recent months, such companies as AT&T and Pfizer cut jobs in the area, as did smaller companies. The government sector, which employs the most people in the area, declined by 4% over the year. Both New London’s municipal government and school district cut headcount in recent months.

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