Fiat Wealth Dies As World Stocks, Bonds, And Currencies All Trade Lower As The US Ten Year Interest Rate Rises
Financial market report for Monday December 24, 29012
1) … Fiat wealth dies as world stocks, bonds and currencies all trade lower as the US Ten Year Interest Rate, rises.
On Monday December 24, 2012, Bloomberg reported The Yen declines after Abes says he may change BOJ law to purse unlimited easing. The Yen, FXY, declined after incoming Japanese prime minister Shinzo Abe said he will consider changing the law on the central bank unless it boosts its inflation target to 2 percent next month. Abe said on Japan’s Fuji Television yesterday that he will consider revising the law governing the Bank of Japan if it fails to increase its inflation target from 1 percent at its January meeting. He is poised to become prime minister after his Liberal Democratic Party’s coalition secured a majority in elections on December 16, 2012. Abe has called on the BOJ to pursue “unlimited easing” to help end deflation and revive growth. BOJ Governor Masaaki Shirakawa and his board last week refrained from doubling the central bank’s 1 percent inflation target, while expanding its asset purchase program by 10 trillion yen ($118 billion) to 76 trillion yen. And Bloomberg also reports BOJ holdings of JGBs exceed 100 Trillion Yen for first time. And also, Bloomberg Chart shows a steepening of the 10 30 Japanese Yield Curve in the last month; the 10 Year Japanese Government Bond Rate rose from 0.700% on December 10, to 0.766% today December 24, 2012.
World Stocks, VT, traded lower on the exhaustion of the world central banks’ monetary authority on Monday December 24, 2012.
A global bear market, the worst bear market that humanity will ever know, has commenced as the world has entered into Kondratieff Winter with Dow Theory confirmation coming from Transportation Stocks, IYT, and Industrial Stock, IYJ, both turning lower.
Liberal finance has turned toxic as investors no longer trust the world central banks capability to stimulate global growth and corporate profitability. Seigniorage, that is the moneyness, of the world’s sovereign nations is starting to fail. World stocks, ACWI, are no longer able to leverage higher on Aggregate Credit, AGG, as is seen in their ongoing Yahoo Finance chart.
The risk on momentum rally that came through a Global Zero Rate Interest Rate Program, ZIRP, is history, as is seen in the following sectors trading lower on today, Solar, TAN, Global Real Estate, DRW, Gaming, BJK, Steel, SLX, Global Water, CGG, and Chinese Real Estate, TAO. Country stocks trading lower included Egypt, EGPT, Russia, RSX, and Israel, EIS.
Mexico, EWW, Promotora y Operadora de Infraestructura SAB de CV, PINFRA.MX, is one of the Emerging Market Carry Trade, EWX, leaders, that has benefited from a North American Infrastructure, PKB, safe haven rally away from the European Sovereign Debt Crisis, EUFN, having risen 50%, on a Mexico Peso, MXN/USD, rising 8% over the last year.
Total Bonds, BND, traded strongly lower as well as Long Duration Corporate Bonds, BLV, Build America Bonds, BABS, International Corporate Bonds, PICB, Leverage Buyouts, PSP, and Junk Bonds, JNK traded lower. Thirty Year US Government Bonds, EDV, and Ten Year US Government Notes, TLT, have already traded lower, as have Municipal Bonds, MUB, High Yield Municipal Bonds, HYMB, and Mortgage Backed Bonds, MBB, on a steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as is seen in the Steepner ETF, STPP, rising beginning in early December 2012..
Competitive currency devaluation is underway on debt deflation as the global debt bubble, that is the global debt trade is history. The US Dollar, $USD, UUP, DYX, is trading higher from its December 20, 2012 low. The World Major Currencies, DBV, Japanese Yen, FXY, Australian Dollar, FXA, Indian Rupe, ICN, Canadian Dollar, FXC, Euro, FXE, Swiss Franc, FXF, Brazilian Real, BZF, and the Swedish Krona, FXS, as well as the Emerging Market Currencies CEW, are trading lower.
Monetary easing by the world central banks’ is tantamount to money printing, and finally financial moral hazard has come of age; through unlimited quantiative easing debt deflation is the order of the day, as bond vigilantes have called the Interest Rate on the US Debt, ^TNX, higher from its early December 2012 value of 1.61%, with the result that there is no more money good. Monetary inflation has made money bad.
The Currency Demand Curve, that is the ratio of the Small Cap Pure Value Shares, RZV, relative to the Small Cap Growth Shares, RZG, RZV:RZG, has turned lower, as is seen in their ongoing Yahoo Finance Chart and in their ongoing MSN Chart, communicates that investors are no longer using carry trade loans to buy revenue shares such as the Small Cap Consumer Discretionary, PSCD, the Discretionary, IYC, and the Small Cap Revenue Shares, RWJ, over the Small Cap Growth Shares, RZG, as is seen in their ongoing Yahoo Finance Chart. Investors are selling the world’s currencies and buying the US Dollar.
Liberalism is being replaced by Authoritarianism as Inflationism is turning to Destructionism, as the Milton Friedman paradigm of floating currencies, introduced in 1971, is failing. Regionalism and Totalitarian Collectivism is the new paradigm providing diktat as money.
Clearly the fiat money system is declining and the diktat money system is rising, as leaders meet in summits and announce technocratic regional governance, where diktat serves as money, credit, and weath.
The iron hegemony of Crony Capitalism and European Socialism, is crumbling, and it its place a Ten Toed Kingdom of Regionalism is rising, as the dynamos of global growth and corporate profit are winding down, and the dynamos of regional security, stability and sustainability are powering up.
Liberalism featured sovereign nation states. Authoritarianism features regional sovereign bodies, such as the ECB, and regional sovereign leaders such as Mario Draghi.
There is no human action, nor are there any sovereign individuals, as perceived by Libertarians. There is only fate, that is destiny, operating sovereignly, to replace the Banker Regime of Liberalism, with result that the Beast Regime of Authoritarianism, is rising up out of the profligate Mediterranean PIGS banking and sovereign debt crisis, which will metastasize, with the result that EU leaders will meet in even more summits, to waive national sovereignty and pool sovereignty regionally, to provide a Eurozone Super State, where leaders in Brussels and Berlin, manage the European economy through public private partnerships, consisting of leaders from industry and government.
Now, over the last four trading sessions, all of the Proshares 200% Inverse ETFs, EEV, BIS, FXP, SKF, SQQQ, REW, SSG, SRS, SRTY, EFU, SMK, are in positive territory, as are the Direxion 300% Inverse ETFs, DPK, EDZ, TZA, TECS, YANG, SOXS, FAZ, while the Metals Based ETFS, FSG, UGL, AGQ, NUGT, are rising.
2) … Commentary
Despite a rise in employment and a drop in unemployment according to official BLS data, after Detroit, I consider Toledo, OH, the second most miserable American city to live in. The Toledo Free Press reported in February 2011, that Forbes ranked Toledo, OH, number 12 of 20 U.S. cities on its “America’s Most Miserable Cities” list. And then in February 2012, the Toledo Blade reported Toledo is the eighth most miserable city in the nation, according to a new ranking by Forbes; the Glass City moved up four spots from 12th on the previous ranking. The reason for such a misery ranking being that its real estate is terrifically depressed, Kiplinger Magazine relates, One-year change in home prices: -2.7%; Median home price: $65,000; Change in price since peak: -55.9%. Toledo’s Attic reports Confidence was the city’s spirit in the 1920s. The automobile industry boomed and Toledo became known as “Little Detroit” for its increasing dependence on the sale of cars. Real estate developers mapped out enough lots to house a population of several million. Toledo banks competed for the prestige of building the highest edifice, Toledo Trust, succeeded in claiming second tallest in Ohio for a time-and-half a dozen large hotels opened for business downtown. Of course, all this changed quite suddenly between the spring of 1929 and the summer of 1931. First Willys Overland laid off thousands. Then real estate prices cooled and the building of subdivisions ended. The real shock came in the summer of 1931 when all major banks in Toledo shut their doors, freezing the savings of tens of thousands of people and pushing hundreds of businesses into bankruptcy. Soon the city itself was bankrupt and began paying public employees in I.O.U.’s, which local merchants honored at a fraction of their face value. The Toledo Blade reported in February 2011, The concentration of poor people living in Toledo’s poorest neighborhoods grew by more than 15 percent in the past decade, giving the metropolitan area the unenviable distinction of No. 1 among America’s largest metro areas. More than 46,000 people reside in neighborhoods with poverty rates of 40 percent or higher in the metro area, which includes Lucas, Fulton, Ottawa, and Wood countie, with all but one of the 22 poor neighborhoods located within the borders of Toledo, according to a Brookings Institution study of the 100 largest metropolitan areas in the country. Zip Atlas relates Toledo’s City Center, Zip Code 43604, has a poverty rate of 37.45%. Toledo is covered in my blog entry A comprehensive listing of the most miserable cities in America
Nature Economist Elaine Meinel Supkis writes The infantile inability to talk about money honestly isn’t accidental. It is most deliberate. People have discussed ‘what is money’ and ‘what is wealth’ for eons. Since ancient times, this topic has gone from quite sophisticated to varying levels of barbaric indifference to reality. We had intelligent discussions of gold, silver and capital back in 1890 but not today. Today, we have tons of wishful thinking from the top, middle and bottom while ignoring economic realities that are now hammering us. Thanks to the floating fiat currency scam, we simply print more money at zero interest rate and have zero capital financing in a deeply in debt culture and pretend this won’t have a bad ending.
First, the US cut the gold standard and instituted the infamous ‘floating currency’ regime. Since the US dollar was the coin of international trade, we began printing money like crazy. This caused real capital to vanish. The dollar has lost 90% of its pre-Nixon gold severance value. The penny today costs two pennies to mint which shows the inflationary destruction of capital quite clearly. Capital was replaced by derivatives. This way, banks could lend money with near zero capital. Which they merrily did until they crashed their own system! The entire derivatives contract market is fraud. It should be terminated, not protected. AIG was a capital-less con operation set up to act as if they had money to give to losers in the derivatives scheme games only they had nothing except other derivative paper entities, no ‘money’. Meanwhile, both Germany and especially China and incidentally, our ‘ally’ Japan built up huge capital holdings in their FOREX funds and buying bonds and have the greatest sovereign wealth whereas the US collectively has the least sovereign wealth which is actually a deficit, we have zero sovereign wealth while our trade partners have trillions in sovereign wealth. The loss of this capital for our entire nation is most dangerous and virtually no one talks about sovereign wealth. This is delusional.
Japan is collapsing, too. So the people there go from one inept party to another corrupt party. The Washington Post reports Abe’s election in Japan will affect America’s Asian pivo. The LDP victory was more a rebuke of the DPJ than a resounding endorsement of the LDP. Although voters see the LDP as more experienced and disciplined than the DPJ, they perceive that it has done little to reform itself since its defeat in 2009. For instance, all five contenders for the party presidency in October (Abe, Yoshimasa Hayashi, Shigeru Ishiba, Nobuteru Ishihara and Nobutaka Machimura) are the sons of LDP politicians, despite widespread criticism of the LDP’s perpetuation of inbred political dynasties. For the Obama administration, the good news is that Abe is staunchly pro-American and wants to strengthen the U.S.-Japan security relationship. The bad news is that his revisionist views of history and controversial views of Asia could lead him to speak and act in ways that exacerbate tensions with neighboring countries, especially China and South Korea. And it seems that all these people are determined to prevent us from understanding what money is and how it works as capital. I say, the US is running an ANTI-capitalist system and this is a very bad thing.
The Age of Deflation has commenced. Global GDP will be falling. The Morgan Stanley Index, ^CYC, is the market value of Global Economic Producers, and trades like the ETF, FXR; which declined in value; both of these are exemplified by global GDP producers in this Finviz Screener, which includes the following :
Transportation, R, UPS, FDX, JBHT, UNP, WAB,
Energy Service, SLB,
Energy Production, XOM,
Communications Equipment, NOK, ERIC, MSI,
Paper Production, IP,
Biotechnology, REGN, BIIB,
Mining, BHP, AA, SCCO,
Diversified Machinery, GE, PHG, IR, MTW, FLS,
Military Equipment, HON,
Tools, ITW, MKTAY
Scientific Equipment, ROP,
Appliances, LII, WHR,
Farm Equipment, DE
Construction Equipment, CAT, KUB
Inudstial Electrical Equipment, ETN,
Agriacultural and Specialty Chemicals, LYB, POT, SYT
Industrial Gasses, ARG,
Metal Manufacturing, WOR,
Electrical Utilities HNP,
Industrial Textiles, MHK,
3) … Soon an investment demand for gold, will arise, and take gold higher.
Wealth can only be preserved by investing in and taking possession of physical gold in the form of gold bullion or by possession in Internet trading vaults, such as Bullion Vault. Support for gold, GLD, is lower at 157.50, which translates into a spot price of gold, $GOLD, of $1,620.
4) … Terms and Symbols
Floating Currency Regime, Age of Deflation, Fiat Wealth, ZIRP, Monetary Inflation, Moral Hazard, Regionalism, Authoritarianism, Diktat, Fiat Money System, Diktat Money System, Money Good, Money Bad, Inflationism, Destructionism, Mario Draghi, Beast Regime, Seigniorage, Debt Trade, Money Printing, Sovereign Authority, Monetary Authority, Competivive Currency Devaluation, Regional Governance, Monetary Inflation, Debt Deflation, Money Good, Money Bad, Kondratieff Winter, Liberalism, Seigniorage, Monetary Easing, European Superstate, Ten Toed Kingdom,
EEV, BIS, FXP, SKF, SQQQ, REW, SSG, SRS, SRTY, EFU, SMK, DPK, EDZ, TZA, TECS, YANG, SOXS, FAZ, FSG, UGL, AGQ, NUGT, FXY, IYT, IYJ, AGG, DRW, TLT, DBV, CEW, VT, UUP, RV, FXR,