The Debt Doom Loop Closes In On Europe … A Financial Apocalypse Is Coming Soon

Financial Market Report for the week ending January 18, 2013

1) … The debt doom loop will be the basis for a soon coming Financial Apocalypse.
Mike Mish Shedlock writes the article Debt doom loop in Spain; Deficit target impossible once again; Bond rally masks European macro problems. No Credibility. There is no credibility and if there is any confidence, there shouldn’t be. Yields in Spain, Italy, and Portugal have crashed, but I wonder for how long. Italy and Spain are known basket cases. More importantly, France, the Hidden Zombie in Europe, is about to take a deep plunge. “Confidence” may be robust for now, but it’s all a mirage based on low rates that cannot last and the foolish notion that Europe has turned the corner just as Germany and France head down the sinkhole.

Mr. Shedlock’s conclusion of No Credibility is 100% right on target. Yet, Greece is even more of a basket case than Spain or Italy. Greece is an insolvent sovereign and its banks are insolvent financial institutions; at the bottom of all of this is the fact that it cannot make good on its Treasury debt which the bankers gleefully created with the advent of the Euro. Greek Socialism is the most extreme form of European Socialism. It cannot exist having huge numbers of employees on the public payroll, having no viable tax collection system, and having high levels of public corruption, and having immense legal barriers for private corporations to enter the economy.

The Telegraph reports Greek opposition warns bailouts are a ‘bottomless pit’. Greece’s left wing opposition leader has warned Germany that his country is a “bottomless pit” for European taxpayers and claimed Berlin’s austerity drive was “inhuman”.  It is no wonder that in Revelation 13:1, the Apostle John, saw the Beast Regime of Regionalism, Totalitarian Collectivism rising from the Mediterranean Sea. In other words, what the Economist Magazine calls Greek “pork and patronage” in its article What have we become, will be the springboard for the rise of Regionalism and Diktat to replace Crony Capitalism and European Socialism.

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 renounce national sovereignty and pool sovereign regionally 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 to deal with an impending Financial Apocalypse, that is a credit bust and financial system breakdown.

Please consider that there is no human action as perceived by Austrian economist and Libertarians. Just as there are no sovereign individuals. There is only a Sovereign God, who as revealed in Ephesians 1:10, has appointed His Son Jesus Christ to pivot the world from the prosperity and credit that came via Inflationism, into the austerity and debt servitude that is coming via Destructionism.

Matt Clinch of CNBC reports Investors return to Spain believing worst is over. The weekly chart of Spain, EWP, shows a parabolic rise in value since mid November 2012, and the three month ongoing chart of Spain, EWP, Greece, GREK, and Italy, EWI shows Spain outperforming its peers.

Referencing the Bloomberg article Bloomberg Draghi’s bond rally masks trapping Spain Debt Doom Loop, I relate that the ever growing load of Spanish Treasury Debt, cannot be sustained, nor can it be repaid.

Sarah Gordon of the Financial Times reports Spain remains shackled by corporate debt. New economic growth is likely to be tepid at best. In Europe, at least, there is still a widespread failure to recognise the need for further radical adjustment. Nothing epitomises this failure so well as Spain.  And Charles Penty of Bloomberg reports Bad loans as a proportion of total lending at Spanish banks jumped to a record 11.38% in November in a sign of the challenges still facing the country’s banks even as their shares and bonds rally. The proportion rose from 11.23% in October as 2 billion euros ($2.67bn) of credit soured in the month to take the total amount of defaulted loans in the banking system to 191.6 billion euros.   And Ben Sills and Angeline Benoit of Bloomberg report The bond rally that has sent Spanish borrowing costs to 10-month lows has distracted attention from the nation’s growing debt pile. Spain’s budget deficit probably exceeded 9% for a fourth year in 2012 as Europe’s highest unemployment rate, a third recession in four years and the cost of bailing out its banks offset almost all of the government’s 62 billion euros ($83bn) of spending cuts and tax increases, according to economists at Societe Generale SA, Lombard Street Research and the Madrid-based Applied Economic Research Foundation. Total debt will reach 97% of gross domestic product this year, the International Monetary Fund forecasts. ‘This is a classic example of the doom loop,’ Societe Generale’s  chief European economist, James Nixon, said ‘They just aren’t making any progress.’”

A stunning Financial Apocalypse, that is a credit bust and global economic system breakdown, is coming; this is foretold in bible prophecy of Revelation 13:3, where the economic head of the Beast Regime suffers what appears to be a mortal wound, yet recovers.

Katie Linsell of Bloomberg reports Speculation that banks will start repaying European Central Bank loans early prompted futures traders to step up bets that borrowing costs will rise as liquidity is drained from the system. The implied rate on Euribor futures expiring in December rose as much as 18 bps over the past two days to 0.54%, the highest since July 10, 2012. That’s the biggest jump since the yield started climbing in December, after a 29 basis-point drop in the preceding three months”

Liberalism’s debts, that is Aggregate Credit, AGG, consisting of World Treasury Debt, BWX, Municipal Bonds, MUB, Emerging Market Bonds, EMB, International Corporate Debt, PICB, Long Term Corporate Debt, BLV, Corporate Bonds, LQD, Junk Bonds, JNK, Leveraged Buyouts, PSP, Bank Loans, BKLN, and Distressed Investments, like those taken in under QE1, FAGIX, will be applied by nannycrats in all of the world’s ten regions to the world’s population, as Authoritarianism’s Beast Regime rises in Regionalism to replace the Banker Regime of Crony Capitalism and European Socialism.

The diktat money system is rising; and it will replace the fiat money system. Soon Diktat will serve to govern mankind’s economic activities just as Choice does today. Mandates of authoritarians will replace the Securities of bankers. Wildcat governance will be the order of the day, where only the most fierce of cats come to govern regionally; what a contrast it will be from what Doug Noland describes as today’s wildcat finance. Look for a Sovereign, Revelation 13:5-10 and a Seignior, Revelation 13:11-18, to come to rule in Euroland; the former will be the EU’s King, and the latter, it’s Monetary Pope.

2) … Trust is seen disappearing.
Dr Worden writes Mistrust in Business: A Nietzschean Critique.  This morning I ate at a Denny’s restaurant. To my surprise, the waitress put the bill on the table along with the food at the beginning rather than end of the meal. My immediate “gut instinct” reaction was that for some reason she did not trust me. It was not as though I had walked in wearing rags, but neither was I in a business suit. Seeing that another waitress waited until the end of the meal to deliver the bill to another table, I was curious enough to ask the manager. He explained that it is Denny’s policy at breakfast to drop the check at the outset of the meal “because there is no dessert.” That a customer might want to add an item during the breakfast suggests that the policy was at the very least not well thought out. Moreover, the logical inconsistency opens up the possible of an alternative, real reason behind the policy. The manager proffered a hint in prefacing that breakfast is particularly busy at Denny’s restaurants. Although the policy could thus merely be a time-saving devise for the wait-staff, the underlying reason could be that it is more difficult for the servers to keep tabs on their respective customers. With the manager’s problematic rationale and his near passive-aggressive dismissiveness of my objection (as well as his notable refusal to compensate me even in part) serving as a sort of confirmation, I came away with the sense that “leaving without paying” was at least in part the underlying fear behind the policy. Such distrust breeds distrust, as well as resentment. In spite of making this transparent to him by indicating that I would not be generous with the tip as a result, he did not seem to grasp the link or even that it is so avoidable. Instead, he clung to the path of least resistance for himself and his restaurant.

Why are some politicians all too willing to go back on their campaign promises when in office? The prime minister of Japan, Shinzo Abe, took only five days in office early in 2013 before reversing his campaign pledge to wean Japan off of nuclear power. Why do some religious leaders apparently not understand the value of trust in something as intimate as one’s spirituality? The Vatican’s initial reaction to the disclosure of priests sexually molesting children was to look the other way, as if the “trust issue” would somehow go away

In his commentary Trust use to be worth something, where he writes on the loss of trust in business, government and society, Michael Wolff, laments to decline of trust through what he calls “consumer history.” As trust can be maintained with little or no further cost once established, Wolff is perplexed as to why more business practitioners, politicians and even religious functionaries do not rush to fill the gap.

Why are some politicians all too willing to go back on their campaign promises when in office? The prime minister of Japan, Shinzo Abe, took only five days in office early in 2013 before reversing his campaign pledge to wean Japan off of nuclear power. Why do some religious leaders apparently not understand the value of trust in something as intimate as one’s spirituality? The Vatican’s initial reaction to the disclosure of priests sexually molesting children was to look the other way, as if the “trust issue” would somehow go away. Why don’t business managers invest more in authentic trust as distinguished from “brand management”? For example, the photos of food on the menus at Denny’s exaggerate the actual amount of food. The duplicity alone can eviscerate trust as well as cause considerable resentment.

Pointing to the hidden invasiveness of some businesses, Wolff asks his readers, “Would you trust Amazon? Do you trust any company whose main mission is to collect your data? You might acquiesce to it, but do you trust it—or anyone whose central activity is to keep tabs on you? Google, founded on a do-gooder credo, is now the leviathan of data collection and opacity.” Facebook is another such hegemon, whose Instagram announced “it was selling the pictures people had entrusted it with.” That is to say, a person’s own pictures of oneself, one’s friends, family and even home unknowingly put on the market and possibly purchased by marketers. If anything calls out for a constitutional right to privacy, such a practice surely does.

Wolff views the decline of trust in commerce and politics as either a threat to capitalism and democracy or an opportunity for a historical turn-around. In viewing information overload as salient in the crisis, he has absorbed too much of his information age. The problem is one of attitude rather than information. Might it be that people working in business no longer trust the general public and thus their own customers, and thus do not expect to be trusted in return. Why work to build up trust if one doesn’t think one will be trusted anyway? The mistrust of business managers, sales people, and customer service reps creates mistrust, which is directed back on them. The result is an overly tedious manner of “check and double check.”

For instance, when I make hotel reservations, I take extra time to ask whether I would be charged for a room safe whether I use it or not. I ask whether there are any other mandatory charges. In terms of “local calls,” I have even asked which area-codes are covered. On the other side, hotels and especially motels now regularly take deposits as much as $200 for a night’s stay in addition to the room charge. Customers with debit cards are especially mistrusted, as per the differential policy concerning deposits. It is apparently not enough to take down a customer’s driver’s license number. The hypocrisy in mislabeling customers as “hotel guests” only adds to a customer’s sense of duplicity and thus mistrust. At the very least, the practitioners come off as fake with respect to their use of language. What else might they be hiding? What hidden charges might one find at the end of one’s stay if one does not ask enough questions before reserving a room?

The social glue that lubricates the system of capitalism becomes sticky, and the social bonds even between strangers become increasingly frayed. A similar stickiness has seeped into Congress, also due to a decline in mutual trust. Even in religion, parishioners now take greater precautions regarding what exactly their kids will be doing with clergy. A parent keeping an eye on a priest is not likely to enter into a close spiritual connection with him.

Generally speaking, commercial transactions, representative democracy, and religion all become more difficult. If trust is as easy to muster and as valuable to have as Wolff suggests, the need for the difficulty is all the more inexplicable. For instance, a social media business model should pop up that stresses the privacy of user information. The problem is not too much information; rather, a certain attitude shirts trust as a potential asset. It is not only selfishness, greed and a lack of consideration (and respect) for others. One need only go to Miami to get loads of that sordid cocktail.
There has perhaps been a proliferation of cheating and thus taking advantage of others, while giving up on the value that trust could proffer. The rise of the great cities has substituted anonymity for knowing one’s customers and banker. Anonymity is fertile ground for mistrust as well as duplicity. Furthermore, as the modern business model has come to stress getting as much money as possible out of one’s customers, duplicity has come at the expense of trust.

For example, with the advent of so many differently-priced tiers of seats in coach alone on planes and the complex baggage-charge “regulations” has come greater uncertainty for the customer at the airport. The distrust concerns what one will actually have to pay even after having purchased a ticket. Similarly, a customer who pays for a reserved hotel room at the hotel with cash or a debit card may find herself stranded because a sizable, hitherto unmentioned deposit is also “required.” To subject travelers to possibly being stuck in another city is nothing short of cruel. When the pettiness has to do with secondary issues (i.e., a deposit rather than the room charge itself), the profit-motive is not the driving force behind the cruelty.

This is finally the core of the problem that eclipses trust: a desire to inflict passive aggression accompanied by the instinctual need to dominate others. Seen in this light, the inhabitants of the modern shopping mall on both sides of the counter are not as far removed from other species as one might think. The problem can be put more abstractly as the hypertrophy of the instincts of cowardly aggression and dominance. In fact, the combination may even be a subtle form of sadism that has been made socially acceptable by its sheer ubiquity in the public square.

As long as “control issues” and an overwhelming urge to inflict passive aggression set the contours for public interactions in business, government and society, nothing much will change concerning the dearth of trust. Amassing trust beyond the superficial sort from branding ads and management by “presentment” will be nearly impossible for businesses unless their managers and employees relax their grip on the pettiness at the expense of long-term profitability. Unwilling to face their underlying dominant instincts, business managers and employees will continue to conclude that customers are inherently untrustworthy, even abusive, rather than retaliatory as well.

Rather than being untrustworthy, customers subjected to close-minded yet supercilious pettiness are merely returning passive aggression for the passive aggression and resisting the unfairness in the arrogant dominance. To be sure, this does not account for every rude customer, but neither can a customer’s frustration be necessarily relegated so utterly conveniently as idiosyncratic. Power that presumes it can’t be wrong is naturally infuriating, especially if access to the supervisor is closed off as when customer “service” employees convenient “lose” calls while “transferring” them to a manager. Gate-keeping enforced on callers against their will is about as naked as passive aggression conjoined to a lust for power gets in today’s retail sector.

Even so, the ubiquity of passive aggression as a weapon and a fixation on dictating the terms in even the most banal transactions is still nearly invisible to managers, employees and customers. This makes the task of restoring trust all the more difficult, if not impossible. That is, the link between the excessive, albeit camouflaged, aggression and dominance and the resulting resentment is almost never revealed or made conscious on either side of the counter or telephone. This blockage is itself rather puzzling. Distrust is sensed and yet not connected to its roots. As a result, customers put up with much too many plays for control and acts of passive aggression in the name of “policy” while many managers and problematic employees oriented to “presentation” as though on a stage are simply out of touch with what is driving them.

As valuable as trust is, it will be thwarted as long as people choose, enable or react in kind to excessive passive aggression and dominance rather than confront them in themselves. Aggression and dominance are both causes and effects of mistrust. Wolff suggests that “nobody quite knows what trust is anymore. Hence, even people who think they are selling trust are so often selling phoniness or duplicity.” Sadly, such people come to view their fake demeanor as the epitome of professionalism. Actually, the fake smile is fueled by anger and an irresistible urge to dominate others. The masks are enabled by an approach to management that is oriented to appearances rather than attitude. Much too often, professionalism is a weapon of pride rather than a mark of maturity.

In the context of modernity, everyone is a professional in his or her own infallible yet purblind eyes. This is deemed so even without a college education. From this seemingly-solid basis, it is easy to assume a perch from which one presumes the right to dominate and inflict pain—indirectly of course given the underlying weakness.

As Nietzsche suggests, dislodging such a “new bird of prey” can be incredibly difficult, even for the strong. Those from among the weak who are nonetheless driven to dominate the rest of the herd and even the strong are not strong enough to dominate. Therefore, the new birds of prey inflict pain both out of their anguish for being too weak to lead and as a means of achieving the dominance they crave. In contrast, the self-confident strong have no need to be cruel. The weak have somehow been able to beguile the strong through guilt (modern morality) into accepting the artificial dominance. That is, the dominating birds from among the flock have somehow been able to foist their illusion of superiority on the strong, who thus unnecessarily submit even though they can fly higher. By the twenty-first century, corporate “branding” of trust, a dominating form of weakness claiming a share of social reality, had come to replace higher trust that is authentic. Even so, human beings in any age instinctively know authentic trust. We can sense strength (and weakness). This intuition comes out of strength, and yet it has been insufficient to dislodge the fake, one-sided trust that is so convenient to the petty.

Whereas Wolff looks to technology to prioritize information as a solution (as if the problem of trust were predominantly cognitive), I contend that attitude-change resides at the core of any possibility for a restoration of trust in commerce as well as politics and religion. Perhaps the solution is as simple as replacing the excess of pride, pettiness and especially passive aggression with even just a little heart-felt compassion that goes with serving others rather than contrived corporate scripts. As simple as this recipe may be, putting it into action would face considerable resistance from those culprits who presume they cannot be wrong or at fault and yet are in power. Such is the nature of weakness that seeks to dominate beyond its innate pith.

3)  … A Financial Apocalypse, that is a global credit bust and financial collapse, is coming soon.
Marc Jones of Reuters reports Chinese and US data push global shares to twenty-month high as currency traders push Yen lower ahead of BoJ meeting. World Stocks, VT, and The Carry Trade Republics, EFA, traded higher on a continuing sell of the Japanese Yen, FXY, ahead of next week’s Bank of Japan meeting.  Bloomberg reports Japan’s government and central bank have agreed to set 2% inflation as a new target next week, when the Bank of Japan will also consider making an open-ended commitment to buy assets until the target is in sight.

Charts show that Major World Currencies, DBV, and Emerging Market Currencies, CEW, are at what is likely their peak in the Milton Friedman inspired, Richard Nixon inaugurated and Global Banking loved, Floating Currency Regime; Peak Currencies, DBV, CEW, are being achieved.

Unknown to many is that a Financial Apocalypse, that is a global credit bust and financial system collapse, is coming soon out of competitive currency devaluation, with investors derisking out of stocks, ACWI, which this week entered a blow off top high, and deleveraging out of commodities, DBC, which have been falling from their September 14, 2012 high, to manifest a current broadening top chart pattern at strong resistance, portending a strong trade lower.  Foreknowledge of this fatal economic event was given by angels to the Apostle John in a dream, while in his 90s, living in exile on the Isle of Patmos, in the first century, and is presented in bible prophecy of Revelation 13:3, that one might know the future and come to trust in God for deliverance.

Liberalism’s twn spigots of credit liquidity, have been, first, the historic yen carry trade, and second, the world central banks’ Zero Interest Rate Program, ZIRP, featuring what has come to be unlimited quantitative easing.

Investors for the longest time would borrow Yen, FXY, for next to nothing, from the Bank of Japan and its agents, and go long the world’s major currencies, DBV, and emerging market currencies, CEW, as part of a risk-on, and then risk-off, global debt based, FAGIX, JNK, BKLN, PSP, Milton Friedman Free To Choose Floating Currency Regime scheme, to maximize corporate profits, expand global growth, and stir up wars for glory and power across the globe for control of natural resources GNR.

This week ending Friday January 16, 2013, may very well mark the week when the Jamie Damon Banker and Milton Friedman Floating Currency Regime peaks out and starts to fall apart, as competitive currency devaluation has already commenced, on a fall of the Japanese Yen, FXY.  Soon risk appetite will reverse and become risk aversion, as currency traders go short every Major Currency, DBV, including the currently strong Commodity Currency, CCX, the Australian Dollar, FXA, the Emerging Market Currencies, CEW, and the Chinese Yuan, CYB, which will cause the US Dollar, $USD, UUP, to rise for a while.

This week, the chart of the British Pound Sterling, FXB, shows a fall through strong support; the Swedish Krona, FXS, traded lower. The Canadian Dollar, FXC, fell lower in a consolidation triangle. While the Indian Rupe, ICN, rallied strongly. The Australian Dollar, FXA, is bumping up into resistance in an ascending triangle. The Brazilian Real, BZF, traded at strong resistance at 19.00  Doug Noland reports The U.S. dollar index gained 0.6% to 80.04 (up 0.3% y-t-d). For the week on the upside, the New Zealand dollar increased 0.1%. For the week on the downside, the Swiss franc declined 2.2%, the South African rand 1.8%, the British pound 1.6%, the Norwegian krone 1.3%, the Japanese yen 1.0%, the Swedish krona 0.8%, the Canadian dollar 0.7%, the Brazilian real 0.4%, the Australian dollar 0.2%, the South Korean won 0.2%, the Singapore dollar 0.2%, the Danish krone 0.2%, the euro 0.2%, and the Mexican peso 0.1%.

Ambrose Evans Pritchard relates Europe drawn into global currency wars.  The world is edging closer to all out currency conflict as Europe’s politicians join a chorus of policy-makers across the globe pushing for devaluations to fight for market share. And Andrey Ostroukh of Dow Jones reports The budgetary policies of the world’s central banks are leading to major global imbalances and could lead to currency wars, Russia’s central bank’s first deputy Chairman Alexei Ulyukayev said. ‘We are on the verge of very serious and confrontational actions in the sphere, which is, not to get too emotional, called ‘currency wars’,’ Mr. Ulyukayev said.  Mr. Ulyukayev cited the recently elected Japanese government’s stepped up efforts to stimulate Japan’s deflation-dogged economy and talk down the yen, which has sent the currency tumbling. Quantitative easing by leading central banks including the U.S. Federal Reserve is also pressuring other major currencies like the dollar. ‘This is not a way to unity of global macroeconomic regulations, but to separation, segregation, to a break-up into separate zones of influence, all the way to very strong competition, all the way to global trade and currency wars, which is indeed counterproductive.’

And Zero Hedge writes The currency wars: now US automakers are squealing

Excessive credit liquidity of all types, AGG, has passed the Rubicon of sound monetary practice, making “money good” investments, like US Government Debt, GOVT, bad.  Monetization of debt, that is debt debauchery, by Ben Bernanke, Mario Draghi, and Shinzo Abe, has made moral hazard come of age.  Forbes writes  US government debt monetization. Liberality of credit has killed the Golden Goose of Prosperity. Inflationism is pivoting to Destructionism, and the Beast of Authoritarianism is rising with diktat to impose austerity and debt servitude.

Bond Vigilantes, have been calling interest rates higher globally as is seen in World Treasury Bonds, BWX, and Emerging Market Bonds, EMB, trading lower in value. The world central banks’ monetary policies no longer stimulate global growth and corporate profitability.  Bespoke Investment Group reports S&P 500 and Sector P/E Ratio Charts, which presents a look at P/E ratio (trailing 12-month) charts for the S&P 500 and its ten sectors. P/E ratios for most sectors have also increased throughout this rally.  (I comment that the S&P ratio is at 14.80, which is below its September 2012 high, communicating that stocks are unable to continue in their ability to generate high levels of profit.)   Telecom has the highest P/E ratio at 21.98, followed by Consumer Discretionary and Consumer Staples.  (I comment that the weekly chart of S&P International Telecom, IST Weekly, traded 0.5% lower this week, after hitting resistance, and manifested the lollipop hanging man candlestick, portending a market turn lower. Thus we have the strongest S&P sector, starting to turn lower).

Bloomberg reports World Bank cuts growth forecasts as developed nations lose steam. Charts suggest that the rally in the Developed Nations, EFA, and the Global Producers, FXR, are finally peaking out.

The currency demand curve, that is the ratio of the Small Cap Pure Value Shares, RZV, relative to the Small Cap Pure Growth Shares, RZG, RZV:RZG, is now trading for the first time below 50 day support, communicating that competitive currency devaluation has commenced. Confirmation of such comes from the Proshares 200% Inverse ETF, YCS, falling parabolically lower.  Small Cap Value Shares, RZV, have been the crown and glory of the seven month long risk-on, global toxic debt, currency carry trade rally. Stocks such as VVI, BBSI, CNK, LOV, having been carry trade darlings, as is seen in their ongoing Yahoo Finance chart; these will soon be very fast fallers.

Peak Commodities was achieved September 14, 2012, And beginning in January, 2013, investors began derisking out of Base Metals, DBB, turning Commodities, DBC, lower, despite the rise in Timber, CUT, Natural Gas, UNG, Oil, USO,.Cotton, BAL, and Agricultural Commodities, RJA, JJA.  Of note the chart of both Natural Gas, UNG, and Base Metals, DBB, shows a broadening top pattern, and as Street Authority relates, when you see the broadening top, the market will eventually drop. Between the Hedges reports that China Iron Ore Spot 145.10 USD/Ton traded 6.3% lower this week.

Doug Noland relates the VIX Index (expectations for market volatility/risk) fell Friday to the lowest level since April 2007. Volatility, TVIX, fell to 5.28; and Volatility, VIXM, fell to 29.45. Zero Hedge reports NYSE short interest plunges to March 2012 levels

The world central banks’ monetary policies of quantitative easing and credit liquidity  have created Liberalism’s Peak Prosperity. The Morgan Stanley Cyclical Index, ^CYC, traded by Global Producers, FXR, closed at 1,112, up 1.9% … The S&P 500, $SPX, traded by the ETF, SPY, traded up 0.9% this week to a record high to close at 1485 … The Russell 2000, $RUT, traded by the ETF, IWM, traded up 1.4% this week to a record high. These are all Elliott Wave 5 highs. Peak Stock Wealth was achieved January 18, 2013.

Sectors trading up this week included:
World Shares, VT, 0.5%
Global Real Estate Excluding The US, DRW, 0.9%
Networking, IGN, 2.1%
Retail, XRT, 3.9%
US Infrastructure, PKB, 1.9%
Gaming, BJK, 0.9%
Automobile Manufactuers, CARZ, 0.9%
Paper, WOOD, 1.0%
Metal Manufacturing, XME, 0.5%
Semiconductors, XSD, 0.5%
Energy Partnerships, EMLP, 1.3%
Energy, XLE, 2.5%
Small Cap Energy, PSCE, 1.2%
Energy Service, OIH, 3.4%
Dow Energy Service, IEZ, 3.4%
Health Care Provider, IHF, 2.9%
Global Producers, FXR 1.9%
Airlines, FAA, 0.8%
Homebuilding, ITB, 2.3%; chart of Lennar, LEN, 2.6%, and PHM, 6.0%, show blow off market tops.
Shipping, SEA, 1.3%
Consumer Staples, KXI, 1.3%
Consumer Discretionary, RXI 1.4%

Tin, JJT

Top 100 Dividend Payers, DOO, 0.2%
Large Cap Value, VTV, 1.2%
Dividend Growth, VIG, 1.6%
Mortgage REITS, REM, 1.5%

Leveraged Buyouts, PSP,

Major World Banks, IXG, 0.3%
European Financials, EUFN, -0.4
The Too Big To Fail Banks, RWW, 0.6%
Regional Banks, KRE, 2.3%
China Financials, CHIX, 2.8%

Sectors trading lower this week included:
Solar, KWT, -6.2%
Clean Energy, ICLN, -1.4%
Wind Energy, FAN, -0.5%
Fertilizers, SOIL, -1.0%
Steel, SLX, unchanged
Miners, PICK, -1.5%
Copper Miners, COPX, -2.0
Telecom, IYZ, -1.1%
Biotechnology, IBB,  -0.5%
Internet Retail, FDN. -0.3%
Global Engineering, Design and Build, FLM, -0.3

Countries traded as follows
Carry Trade Nations, EFA, 1.9%
Emerging Markets, EEM,  0.7%

Greece, GREK, GREK, -2.3%, led lower by the National Bank of Greece,NBG, -10.8%
Spain, EWP, -0.3%
Ireland, EIRL, 0.3%
Italy, EWI, 0.1%
Germany, EWG, -0.8%
Europe, VGK, -0.1%

Turkey, TUR, 5.2%
New Zealand, ENZL, 1.6%
Philippines, EPHE, 1.3%
Thailand, THD, 2.9%
Peru, EPU, 0.8%
Australia, EWD, 0.5%
Finland, EFNL, 0.5%

Norway, NORW, 0.7%
Netherlands, EWN, 0.1%
Switzerland, EWL, 0.3%
Sweden, EWD, 0.3%
Austria, EWO, -0.1%

The UK, EWU, -0.6%

Brazil, EWZ, 0.8%

Russia, RSX, 2.8%

India, INDY, 4.1%

Mexico, EWW, 0.4%

Taiwan, EWT, -1.1%
South Korea, EWY. -1.0%

China Industrials, CHII, -1.8%
China Real Estate, TAO, 1.5%
China Small Caps, ECNS, 1.2%
China Shanghai, CAF, 7.2%
Japan, NKY, -0.4%

Alpha Stocks, FEMS, 0.9

Bespoke Investment Group reports Financial Sector at Key Inflection Point.  The S&P 500 Financial sector has been on a big run for more than a year now, and the sector is now finally back to its prior bull market highs that were reached back in April 2010 and February 2011.  This obviously leaves the Financial sector at a key inflection point, with big resistance in its way.  The sector just happens to be touching up against this big resistance as the major financial firms are reporting their quarterly earnings this week.  If the sector can take out this resistance over the next week or so, we’re likely at the beginning of the next stage of the rally for the Financial sector.  If it can’t take out this resistance, we’re looking at a pretty significant triple top. Financials weekly, XLF weekly, ended January 2013 at 17.05, and has risen 4.6%, this week to close at 17.15; the daily chart, XLF, shows a blow off market top.

Debt monetization has reached its limit in the UK. Monetary easing has had its full expansion effect as UK Banks, HDB, LYG, RBS, BCS, led the UK, EWU, 0.7% lower this week, as the British Pound Sterling, FXB, traded strongly lower as The Telegraph reports Britain has more debt than the eurozone, says Germany’s Schaeuble.  Loose monetary policies, coupled with excessive defecit spending in Britain has so grossly monetized the UK’s sovereign debt that its currency is finally starting to be successfully sold short by currency traders. Despite this, Scott Hamilton and Jennifer Ryan of Bloomberg report “Bank of England policy maker Ian McCafferty said officials must have an open mind about ways to help the recovery, signaling he may support new measures if needed to target specific weaknesses in the economy. ‘We need to be open to considering other unorthodox means to conduct monetary policy if they become necessary,’ McCafferty said”.   FT Advisor writes Too big to fail and too big to bail out: New report argues that the financial crisis [in the UK] has exposed the risks associated with a large financial sector.  And The Institute For Policy Research relates Don’t bank on it: The financialisation of the UK economy.

Outside of Citigroup, C, most of the Too Big To Fail Banks, RWW, and the World Banks, IXG, were able to beat profit expectations, after blasting 28 % higher last year, and leading a 13%, S&P 500, SPY, gain, they’ve returned 4%, and are the fourth best of the 10 S&P 500 sectors.

Ireland’s IRE, Germany’s DB, Spain’s, SAN,and Greece’s NBG, have taken the European Financials, EUFN, and Europe, VGK, higher this month; the Euro, FXE, has likely peaked and is now trading lower at 132.19.

India Bank, IBN, led India, INDY, and India Small Caps, SCIN, higher this week, as HDB, traded lower.
Peru’s, BAP, took Peru, EPU, higher.
Mexico’s BSMX, took Mexico, EWW, higher.
Chile’s BCA took Chile, ECH, higher.
Puerto Rico’s BPOP led the Emerging Market Financials, EMFN, higher. .
Regional Banks, KRE, led the Russell 2000, IWM, higher
Brazil’s ITUB, and BBD, led Brazil, EWZ, higher
Brazil’s CS and UBS, led Switzerland, EWL higher.
Japanese Banks, MTU, SMFG, NMR, traded lower, while SHG, and MFG, traded higher, taking the Nikkei, NKY, lower.
Regional Banks, KRE, lacking global seigniorage coming from a short of the Yen, and a long of Major World Currencies, DBV, and Emerging Market Currencies, have been mostly flat since the banks began reporting.

CNBC reports KBW analyst Fred Cannon relates “Share repurchases are a critical feature of capital management for most of these large institutions as their capital levels are strong and asset growth is weak,” Cannon said in a note. “However, achieving net share reduction is difficult for many because of Fed restriction and because they are issuing significant numbers of shares as part of compensation.”
Float, as it is called, indicates the numbers of shares available. A decrease in float is considered a positive sign for a stock based on supply-demand rules. Of those banks under Federal Reserve stress test jurisdiction, just five have decreased their shares available. Those banks include Goldman Sachs, GS, and Bank of New York Mellon, BK.  Four institutions, including Bank of America, BAC and Morgan Stanley, MS, have had the amount of shares surpass growth in assets.

The ratio of Transportation Stocks to Industrial Stocks, IYT:IYJ, has risen from its October 1, 2012, low to reach its 200 day moving average communicating that a Dow Theory inflection point has been achieved and that both will be trading lower.

Total Bonds, BND, traded, 0.1% higher, from strong support, as toxic debt rose: Leveraged Buyouts, PSP, 0.5%, Junk Bonds, JNK, 0.3%, BKLN, 0.4%, and Distressed Investments, FAGIX, 0.3%.
Other debt rising included Government Debt, GOVT, 0.1%, Emerging Market Bonds, EMB, 0.6%,
Other debt declining included Sovereign Debt, BWX, -0.6%, Int’l Corporate Debt, PICB, -0.5%,

After the soon coming Financial Apocalypse, that is a worldwide credit bust and global financial breakdown, the Beast Regime of Authoritarianism, Totalitarian Collectivism, and Regionalism, as presented by the Apostle John, in Revelation 13:1-4, will come to rule in regional governance in all of the world’s ten zones, and in each of mankind’s seven institutions, as regional leaders meet in summits, renounce national sovereignty, announce regional sovereignty, and appoint regional sovereigns and regional monetary popes, to implement policies for regional security, stability and sustainability.

The Peace of Liberalism came through the Milton Friedman Free To Choose paradigm that was based upon floating currencies and a falling US Dollar. The Peace of Authoritarianism comes through the   Mario Draghi Diktat paradigm is based upon regional rule, where diktat serves as currency, credit, and power.

The fiat money system featured choice of investments based upon credit. The diktat money system will feature mandates of debt servitude based upon tyrannical rule.

4) … This week’s news reports portend a market turn lower.
Bloomberg reports Abe stimulus risks fizzling as Citigroup sees Japan job gap. Japan’s 10.3 trillion yen ($117 billion) fiscal stimulus may add less than a quarter of the jobs the government predicts, casting doubt on Prime Minister Shinzo Abe engineering a sustained recovery. Even with more central bank easing, most of the impact of Abe’s spending won’t spread far beyond public works projects, Citigroup says. It estimates that 100,000 jobs will be created, compared with the government’s figure of 600,000. BNP Paribas SA says 150,000.

Bloomberg reports Singapore exports drop most in 14 months as recovery delayed. Singapore’s exports declined the most in 14 months in December as manufacturers shipped fewer electronics and pharmaceuticals, hurting economic recovery. Non-oil domestic exports slid 16.3 percent from a year earlier, after a revised 2.6 percent drop in November, the trade promotion agency said in a statement today. The median of 18 estimates in a Bloomberg News survey was for a 7.6 percent decline. The drop was the most since October 2011, based on previously reported data. Exports rose 0.5 percent in 2012, the worst performance in three years, according to Bloomberg calculations. “The ugly export reading raises the specter of recession once again,” Chua said. “There is a high likelihood that industrial production also contracted sharply in December. These are signs that Singapore’s manufacturing is facing hollowing out pressures, especially given the better trade data seen in Northeast Asia and Malaysia.” Singapore’s electronics shipments by companies such as Venture Corp. fell 19.1 percent in December from a year earlier, after slipping 16.5 percent the previous month

Boeing 787 Fleet grounded by US in first since 1979. U.S. regulators’ decision to temporarily ground Boeing’s 787 Dreamliner, their first move involving an entire model in 34 years, came five days after Transportation Secretary Ray LaHood proclaimed it safe. The Federal Aviation Administration, which certified the plane in 2011, ordered flights on the 787 halted until airlines can show the plane’s lithium-ion batteries “are safe and in compliance,” according to an agency statement yesterday. It didn’t say how they should accomplish that.

CNBC reports Fed Hawk Voices doubts over benefits of bond buying. A senior Federal Reserve official voiced skepticism on Wednesday about the benefits of additional asset purchases by the U.S. central bank, while a more dovish policy maker maintained his campaign for additional policy easing. Dallas Federal Reserve President Richard Fisher, in remarks that were mainly about the need to reorganize banks that were “too big to fail,” said the effectiveness of the Fed’s massive bond purchases in helping the economy was fading

CNBC reports Why Brazil’s once booming economy is losing its shine. “The last decade was very good for Brazil,” James Lockhart Smith, head of Latin America, Maplecroft, told CNBC. “Now, Brazil is having to compete with a lot of other countries and it has an Achilles heel in the cost of doing business, so it’s much more complicated to generate growth.”

Reuters reports Google snaps up junk bonds in desperate grab for yield. Corporate treasurers at companies like Google are being forced by the Federal Reserve’s low-rate policy to invest in ever-riskier credit products, including longer-dated investment-grade bonds, junk bonds and leveraged loans, according to buyside and sell-side sources. In an effort to get a return on their mountains of cash at hand, Google and others have purchased high-yield bonds and leveraged loans, while names like Microsoft and Apple are said to have dabbled in non-investment-grade securities. “Many of the companies with the largest levels of cash on hand have bought high-yield bonds and one of the big areas of interest this year is leveraged loans,” said a fund manager at one of the biggest US investment firms. “Some are also looking at emerging market local debt as a category,” he said, although far fewer than those going down the credit spectrum and into non-investment-grade loans and bonds.

Reuters reports Nearly $1 trillion of debt at risk of downgrade to junk in 2021 by S&P. The amount of sovereign and corporate credit on the cusp of being downgraded to junk status more than quadrupled in 2012, due primarily to an erosion in the credit quality of the world’s banking sector, S&P’s data showed on Wednesday. At the end of last year, S&P rated $984.8 billion worth of debt, from 52 separate issuers, one step away from speculative grade, also referred to as junk. At the end of 2011, the number of credits that were one downgrade away from junk status was 38, representing $227.4 billion. “Most of the downward pressure that affected potential ‘fallen angels’ was because of the European credit crisis,” Diane Vazza, credit analyst at S&P, told Reuters, referring to issuers whose ratings are close to being cut to junk.

The Telegraph reports Europe drawn into global currency wars as slump deepens. The world is edging closer to all out currency conflict as Europe’s politicians join a chorus of policy-makers across the globe pushing for devaluations to fight for market share

Elaine Meinel Supkis writes Sovereign wealthy Germany wants half its gold back from Federal Reserve vaults In NYC. Germany is demanding the Bank of NY which is a Federal Reserve entity, hand over half of the gold it has held for Germany since WWII.
Germany is, along with China, one of the few major countries with sovereign wealth and it is as of today, #1. Not Japan nor China, it is Germany. The Germans are still hitched to the euro but they fear it is doomed at this point in time so are quietly preparing the ground for the possibility their fellow sovereign wealth holders might switch suddenly to the gold standard which ruled international trade for hundreds of years, with one empire after another wearing the Gold Trade Crown and then giving it up through bankruptcy and war.
Europe doesn’t want a strong euro, their entire problem these days is, like with Japan, the weak dollar. Neither Europe nor Japan can buy up enough dollars to make their currencies weak enough to flood the US with their exports.
So, gold is meaningless unless there is a crisis. HAHAHA. All the people who pretended gold was some foolish thing of the past obviously don’t understand the basis of ‘money’ which has been, for the most part, gold. That is the gold standard for currencies which has been artfully abandoned recently but only so that countries ravaged by WWII and revolutions could recover via trade mainly with the US and mainly with the US running deficits with defeated nations or countries which flirted with no-currency of value lifestyles.
The Germans are getting nervous. They will keep some of their hoard in the US so they can use it as collateral to buy (GUESS WHAT???) dollars if there is some ‘currency problem’ which translates as ‘the euro is too STRONG and exports are a problem’ more than anything. Europe doesn’t want a strong euro, their entire problem these days is, like with Japan, the weak dollar. Neither Europe nor Japan can buy up enough dollars to make their currencies weak enough to flood the US with their exports

The currency demand curve, that is the ratio of the Small Cap Pure Value Shares, RZV, relative to the Small Cap Pure Growth Shares, RZG, RZV:RZG,  is now trading for the first time below 50 day support, communicating that competitive currency devaluation has commenced.  Confirmation of such comes from the Proshares 200% Inverse ETF, YCS, falling parabolically lower. The Yen, FXY, is now the first currency driven, lower the others will follow, weaker Major World Currencies, DBV, and fainter Emerging Market Currencies, CEW, will be coming simply as investors derisk out of national Sovereign Debt, BWX, Emerging Market Bonds, EMB, and International Corporate Bonds, BLV.

The seven month risk on rally, has come by seigniorage, that is moneyness, of the toxic debt held by the world central banks, such as Distressed Investment, FAGIX, which was taken in by the US Fed under QE1, Junk Bonds, JNK, Bank Loans, BKLN, and Leveraged Buyouts, PSP; and has been currency carry trade investing propelled, by the sell of the Yen, FXY, as is documented by the rise in the Small Cap Value Shares, RZV, rising more strongly than, their peers, the Small Cap Growth Shares, RZG, as is seen in the ongoing Finance chart of RZV, RZG, JKE, VTV,  IXG, and EFA.

Doug Noland relates How Crazy Equity fund inflows have commenced 2013 at the strongest pace in recent memory. The “equities always outperform over the long-run” crowd again play prominently on the airways. Market watchers will closely monitor developments to see if 2013 finds the retail investor jumping aboard the equities bandwagon. And while Treasury and MBS prices have been under modest pressure, there is no indication that the corporate debt Bubble is in jeopardy. Flows into the “bond” fund complex have remained strong. Debt issuance this week was super strong. Financial conditions? Couldn’t be looser.

I appreciated a Friday Forbes headline: “The World’s Bubble Economy Getting Bubblier.” An important part of my thesis holds that current Bubble manifestations increasingly permeate throughout the asset markets – financial and real. Evidence is mounting that select U.S. real estate markets have begun overheating. From Bloomberg, “San Francisco Bay Area Home Prices Surge Most Since at Least ’88,” with median prices up 32% year-over-year. From the Los Angeles Times: “December Home Prices Jump 19.6% in Southern California.” Eye-opening data are not limited the Golden State. From Bloomberg, “Brooklyn Home Prices Jump Most Since ’06 as Supply Drops.”
There’s clearly a “mix issue” at work, with a jump in upper-end transactions skewing median price data. Yet it’s also apparent that there are, not surprisingly, indications of mounting housing market excesses. Indeed, the Fed’s determination to reflate housing markets generally has reflated Bubbles particularly in “upper-end” markets across the country.
The monetary policy-induced housing recovery is at this stage poised to boost both the economy and the Credit system. At 954,000, December Housing Starts were much higher-than-expected (890k) and ended 2012 at the strongest level since June ’08. So long as financial conditions remain ultra-loose, 2013 should see the first increase in Total Mortgage Credit since 2008. “Fitch: Strong Starts a Sign That U.S. Housing Now Firing On Most Cylinders.”
I have argued against “New Normal” analysis. I have referred to deleveraging as largely a myth. I’ve theorized “Bubble, Bubble, and more Bubble” – and have seen confirmation and more confirmation of this thesis. It’s almost indisputable that the system is now deeply into a re-leveraging cycle. Five years of unprecedented reflationary policymaking have spurred rejuvenated “animal spirits” throughout the markets and, increasingly, in parts of the real economy

There’s a lot of disagreement about what role monetary policy plays in creating asset bubbles. It’s not a settled issue. There are some people who think that it’s an important source of asset bubbles, others who think it’s not. Our attitude is that we need to be open-minded about it and to pay close attention to what’s happening. And to the extent that we can identify problems… we need to address that. The Federal Reserve was created about 100 years ago now – in 1913. It was the law. Not a new monetary policy, but rather to address financial panics. And that’s what we did for us in 2008 and 2009. And it’s a difficult task. But I think going forward the Fed needs to think about financial stability and monetary economic stability as being in some sense the two key pillars of what the central bank tries to do. And so we will obviously be working very hard on our financial stability. We’ll be using our regulatory supervisory powers. We’ll be trying to strengthen the financial system. And if necessary, we’ll adjust monetary policy as well. But I don’t think that’s the first line of defense.”

Last week, I delved a little deeper into the thesis that the current Bubble phase is uniquely precarious, specifically because Bubble effects have turned so systemic and, ironically, also much less conspicuous. I was reminded by Bernanke’s comments that I had failed to address a key analytical point: the government finance Bubble these days inflates largely outside of the private lending markets – outside the purview of traditional bank supervision and regulation. And while I would contend that the Fed remains uninformed in the nature of Bubble Dynamics, it is also clear that when it comes to Bubbles the Fed is at best fighting the last war.
From my point of view, the Federal Reserve System has essentially made no progress on the Bubble issue. Largely absolving responsibility, the Fed explains the “housing Bubble” as predominantly a failure in mortgage lending supervision and regulation. There is no recognition that Fed monetary policy had a profound impact on the pricing and trading of mortgage-related debt instruments – and that accommodation of a securities market speculative Bubble was a prevailing force behind the mortgage finance Bubble episode. There has been no recognition of the profound role the Fed plays in distorting risk perceptions throughout the marketplace, in the process encouraging leveraged speculation. There is no appreciation for how “activist” monetary policy has so impacted incentives throughout the securities markets and financial industry overall.
Apparently, the Bernanke Fed fails to recognize that its policies to this day foment even greater market distortions and Bubble excesses. And, clearly, “supervision and regulation” have not – and will not – protect the system from market-based excesses, whether it be over-issuance of suspect marketable debt instruments, speculative excess or destabilizing financial leveraging. Where are the supervisory and regulatory frameworks working to restrain the unprecedented issuance of federal debt? How about the hedge fund industry or leveraged speculation more generally? In general, where is the apparatus today working to restrain excess throughout global risk markets? The answer should be sound and properly functioning market pricing systems – markets that would boost yields (lower demand/prices) for over-issued non-productive debt. Chiefly because of Fed and global monetary policies, the world’s securities market pricing systems have been rendered largely dysfunctional.
While Q4 data won’t be available for a couple months, I expect total U.S. non-financial debt to have expanded about $1.60 TN in 2012. This would be up from 2011’s $1.35 TN, the strongest Credit expansion since 2008’s $1.9 TN.

And considering what I suspect has been unfolding in the bowels of securities financing/leveraging, I can confidently posit the “System Re-leveraging” thesis. Recall that in responding to the 2008 crisis, policymakers enjoyed the capacity to aggressively reflate systems through the massive issue of government debt, aggressive use of government guarantees, and the unprecedented reliance on central bank monetization (“money printing”).
I contend that this Re-Leveraging/Bubble cycle poses extreme system risk. Importantly, fiscal and monetary excess are instrumental to the current Credit inflation (the boom cycle). This ensures that excesses are more systemic, while creating the potential for the scope of excesses to surpass those of previous Bubble periods. From my analytical perspective, this greatly increases the likelihood of a very problematic future bust and attendant crisis of confidence.

I comment, with the death of the Banker  Regime of Crony Capitalism and European Socialism, people will eventually come to trust in the Beast Regime of Totalitarian Collectivism and Regionalism.

Question to the Fed chairman at the University of Michigan: “…You came to your position with a real expertise as one of the world’s experts on the Great Depression and how policymakers should react in the midst of a crisis. Now that you have actually lived through a major global crisis, I wonder if you could tell us what surprised you most?”
Chairman Bernanke: “The crisis. I was very engaged, very interested in financial crises as an academic. I worked on the Great Depression. I did theoretical work on the role of financial crises in macroeconomy, and I was very interested when I came to the Fed in addressing issues related to potential crises. But obviously this was a very large and complex crisis that was more severe than I anticipated certainly… I think it would be fair to say that most people anticipated. But we did learn some things from history. And I think there’s a lot of value to studying history, particularly from our perspective economic history, because it helps you see what your predecessors did wrong and did right. Two things we learned from the Great Depression. One was not to let monetary policy get too tight. In the 30s, the Federal Reserve did not actively try to expand monetary policy accommodation. And as a result, there was a deflation of about 10% a year. Deflation, falling prices. Very damaging. The Fed also did not do very much in the 30s to try to stabilize the banking system, which about a third of all the banks in the country failed. So those were two lessons that we really tried to learn from. We of course have been discussing very aggressive on the monetary policy side, and we took strong actions to try to stabilize our financial system because we understood that if the financial system collapses then the economy is likely to collapse as well. So we took those actions learning from what had happened in the 30s. A couple of other things I think that were useful. During the 30s, in part because obviously the world was still recovering from World War I, there was a lot of international enmity. Cooperation among central banks, among governments was not very good. In fact, you may know – your audience may know – about the Smoot-Hawley tariff and the tariff wars and all the other things that happened during the 30s.”
Noland comment: “The current U.S. and global current backdrop is regrettably more late-1920’s than 1930’s. Repeatedly, policymakers’ ill-advised aggressive “post-Bubble” (“Keynesian”) policy measures have unwittingly worked to perpetuate history’s greatest Credit Bubble and financial mania. With the eventual bursting of today’s global Bubble, there will surely be ample “international enmity.” Cooperation and coordination will not be so abundant. In general, policy solutions and flexibility will be in depressingly short supply. Policy doctrine – actually, economic analysis in general – will be discredited. And today’s unfolding battle in support of free market capitalism will seem like a trivial little skirmish. But, once again, I get somewhat ahead of developments.”

Mr Noland reports Global central bank “international reserve assets” (excluding gold) – as tallied by Bloomberg – were up $748bn y-o-y, or 7.3%, to a record $10.933 TN. Over two years, reserves were $1.688 TN higher, for 18% growth.

And he relates M2 (narrow) “money” supply rose $8.8bn to a record $10.485 TN. “Narrow money” has expanded 7.4% ($727bn) over the past year

5) … A review of the Haller Lake neighborhood, North Seattle, 98133.
If I lived in Seattle, I would consider living in North Seattle, 98133. This is the Haller Lake neighborhood which is near the intersection of Aurora and North 130th Street, as there is a Fitness Evolution and a LA Fitness Club in the neighborhood. The high school for the area is Ingraham High School.  Puget Sound Christian Clinic provides health care to low-income uninsured people in King and Snohomish Counties. I would visit the North Seattle Alliance Church, to see if I could worship there.

6)  The Top Performing Metro Areas in 2012
Stacy Curtin of the Daily Ticker provides the Milken Institute Report The Best Performing Cities in 2012

Top 5 Large Performing Metros

  1. San Jose, CA
  2. Austin, TX
  3. Raleigh, NC
  4. Houston, TX
  5. Washington, D.C.

Top 5 Small Performing Metros

  1. Logan, UT
  2. Morgantown, WV
  3. Bismarck, ND
  4. Odessa, TX
  5. Fargo, ND

And Sohrab Ahmari, a Robert L Bartley Fellow, reports How Utah avoids the national funk.
Logan, Utah, sometimes looks as though it was preserved in a time capsule. The small city of 50,000, home to Utah State University, is surrounded by the towering, tree-dotted peaks of the Wasatch Range. “Downtown” is a single main street where you can find a movie theater, a bookstore, a few eateries and stores, and a Mormon tabernacle.
Beneath Utah’s Mountain West pastoral, preserved in places like Logan, roars an economic engine that—thanks to a combination of smart policy and local culture—continues to create jobs even as the national economy stagnates. As Ashok Khandkar, a material scientist who has launched successful medical-technology ventures in Utah, recently told me, “It’s a very lucrative place if you have the idea and the talent.”
I returned to Logan last month for my 10-year high-school reunion expecting a prosaic trip down memory lane. (I immigrated to Utah from Iran at age 13.) But Logan and much of the state had undergone great change. I was particularly struck by the number of new businesses and housing developments clustered in and around Logan and Ogden—the historic midway point on the First Transcontinental Railroad. The feel of economic vitality was unmistakable.
That anecdotal impression is backed by economic data. Utah’s official unemployment rate in July stood at 6%—more than two points below the national average. Between May 2011 and May 2012, the Beehive State added nearly 29,000 jobs, a 2.4% increase. Meanwhile, both the state’s total personal income ($96.6 billion in the last quarter of 2011) and average annual pay (almost $40,000 last year) are on the rise.
Economic growth has been accompanied by positive demographic shifts. Utah’s population grew by about half-a-million, or 23.8%, to 2.76 million over the past decade or so. And the state is becoming more ethnically and racially diverse. “In Utah, minorities are 17.4% of the adult population and nearly one-fourth of the youth,” noted a 2011 study by the University of Utah’s Bureau of Economic and Business Research (BEBR). That’s in stark contrast to a population that 12 years ago wast 90% white.
As the 2010 Census showed, Utah remains the country’s youngest state, with a median age of 29.2—eight years younger than the national median. “It’s because of the dominance of the Mormon culture [in the] region and the high value placed on having children,” BEBR economist Pamela Perlich told the Salt Lake Tribune last year. “We’re younger because we’re an in-migration state. . . . Those coming are young people, and young people have babies. And the people who are having babies are having them at higher rates than other states.”
Businesses are taking note of these trends and going West. Mining and natural resources are staple industries that continue to thrive. But now information technology, along with financial and professional services, are emerging as growth industries. New arrivals include Goldman Sachs—the firm has its second-largest Americas site in Salt Lake City—and tech heavyweights like Adobe, which is planning a 1,000-employee campus south of Salt Lake.
“The overriding factor working in our favor is that Utah is seen as an island of stability in a chaotic context,” says Jeff Edwards, head of the state’s Economic Development Corporation. Thanks to a conservative state legislature, Utah’s 5% corporate-tax rate has remained unchanged for 15 years. Compare that to, say, New Jersey, where the corporate-tax structure has been overhauled no fewer than four times since 2000—and where the top bracket pays a whopping 9%.
“The companies we talk to with money to invest are asking themselves where to go,” says Mr. Edwards. “If you invest in Utah, you know what you’re going to get.”
State business leaders echo these sentiments. “We’ve been fortunate to have a positive business climate here,” says Jeff Nelson, president and CEO of Nelson Laboratories, a family-owned pharmaceutical and medical-products testing company. “There aren’t a lot of policies that get in your way—not a lot of trouble from the government.”

Mr. Khandkar, the medical-technology entrepreneur, agrees. “The most important reason is an appropriate tax level,” he says, “and government that makes it easy to start companies.”
Utah’s flat, 5% corporate-tax rate is 1.6 points below the 50-state average, according to the Tax Foundation, and it is one of the lowest among states that levy corporate taxes. Barriers to business creation are minimal. No wonder Utah ranked fourth among states in the Pacific Research Institute’s last U.S. Economic Freedom Index (from 2008).
The Beehive State’s fiscal house is also in order. “We have eliminated all structural imbalances in our budget,” says Spencer Eccles, executive director of the Governor’s Office of Economic Development, somewhat immodestly. “In the first two years of the downturn, we cut two billion dollars out of the budget. We did it by eliminating programs and cutting the size and staffing of government down to 2000 levels.”
State-agency budgets were trimmed by 19%, on average, during this period. “We did all of that,” Mr. Eccles boasts, “while virtually not increasing taxes, except for a small tobacco-tax increase.”
Then there are the quality and culture of the Utah workforce. “Our secret sauce is our ability to work together,” says Mr. Eccles.
“We’ve been able to find a quality workforce that’s sustainable,” explains Mr. Edwards. “It’s a young state with young people who want to stay here. So we know where our workers are coming from 20 years down the road.”
But what about Utah’s supposedly puritanical ethos and straight-laced cultural atmosphere? With the influx of out-of-state businesses, things are changing, says Mr. Daniels. Even so, he cautions, “Utah is not for everybody. If you’re looking for an intense urban lifestyle, Salt Lake may not be for you.”
Still, you’ll find transplants around from New York and San Francisco. And the easy proximity of dozens of marvelous outdoor sites—among them Bear Lake, Zion National Park and skiing destinations across northern Utah—has many new arrivals choosing to stay for the long haul. Says Mr. Nelson: “If that’s dull then I like that kind of dull.”

7) …. Precious Metals report from Dollar Collapse
1/18 The significance of $1650 – MineSet
1/18 Precious metals touch 1-month highs – BullionVault
1/18 “Gold will prove a haven from currency storms” – GoldCore
1/18 A new Gold Standard is being born – The Telegraph
1/18 U.S. Mint sold out of silver eagles again – GATA
1/18 Platinum market illustrates silver manipulation – The Telegraph
1/18 The Germans don’t trust Obama with their gold – and can you blame them? – The Telegraph
1/18 Gold … buy the dips! – Daily Reckoning
1/17 To recover a small part of Germany’s gold, Bundesbank will need 7 years – Casey Research
1/17 Mine closure a silver lining for platinum – The Australian

8) … Faith can be a great comfort in the coming Second Great Depression
To deal with the adversity I see coming, I desire to have an ever improving relationship with God, where I live in His Spirit and experience sound thought of His Word, so that I can have a vibrant spiritual resource within, virtues which reflect his character, ethics which uphold respect for others, and a conscience which reflects the peace of sacrifice provided for my sins.

One could believe the Reuters report Geithner says U.S. “in fourth quarter” of crisis recover, WSJ relates. The US economic recovery is entering the home straight, though unemployment is still very high and may only come down gradually, outgoing U.S. Treasury Secretary Timothy Geithner said.

Yet, the Business Cycle is complete and Kondratieff Winter is on the way, resulting in the Second Great Depression.

The three major causes of the First Great Depression were speculative investing, high levels of municipal debt, and loose credit. The Second Great Depression will be even greater than the First.

News of the leveraged speculative investment community comes from Whitney Kisling of Bloomberg who reports Hedge funds are borrowing more to buy equities just as loans by New York Stock Exchange brokers reach the highest in four years, signs of increasing confidence after professional investors trailed the market since 2008. Leverage among managers who speculate on rising and falling shares climbed to the highest level to start any year since at least 2004, according to Morgan Stanley. Margin debt at NYSE firms rose in November to the most since February 2008, data from NYSE Euronext show. The rising use of borrowed money shows that everyone from the biggest firms to individuals is willing to take more risks after missing the rewards of the bull market of  2009.

News of investment in municipal debt comes from Brian Chappatta of Bloomberg who reports Investors are pouring the most money since 2009 into U.S. municipal debt, putting the $3.7 trillion market on a pace for its longest rally versus Treasuries in three years.  Investors added $1.6 billion to muni mutual funds in the week ended Jan. 9, the most since October 2009. The renewed appetite has propelled city and state debt to a 0.7% gain this month, beating a 0.4% loss for Treasuries.

The ECB’s LTROs and OMT, has loosened credit in Europe. Abigail Moses of Bloomberg reports Ardagh Group, the packaging company buying Cie. de Saint-Gobain SA’s U.S. glass bottle unit, is selling the most high-yield bonds from a European issuer in two years as junk debt risk falls to an 18-month low. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings fell for a fifth day to the lowest since July 2011.

The US Federal Reserve’s QE4 establishes unlimited easing and effects unlimited money printing.   Sarah Mulholland of Bloomberg reports What’s old is new again on Wall Street as banks tap into soaring demand for commercial real estate debt by selling collateralized debt obligations, securities not seen since the last boom. Sales of CDOs linked to everything from hotels to offices and shopping malls are poised to climb to as much as $10 billion this year, about 10 times the level of 2012, according to Royal Bank of Scotland Group Plc.

Julia Leite of Bloomberg reports The market for corporate borrowing through commercial paper expanded for a 12th week as nonfinancial short-term IOUs rose to the highest level in four years. The seasonally adjusted amount of U.S. commercial paper advanced $27.8 billion to $1.133 trillion outstanding. That’s the longest stretch of increases since the period ended July 25, 2007, and the most since the market touched $1.147 trillion on Aug. 17, 2011.

Craig Torres of Bloomberg reports Federal Reserve officials are voicing increased concern that record-low interest rates are overheating markets for assets from farmland to junk bonds, which could heighten risks when they reverse their unprecedented bond purchases. Investors have been snapping up riskier assets since the Fed boosted its bond buying to reduce long-term borrowing costs after cutting its overnight rate target close to zero in December 2008. Enthusiasm for speculative-grade bonds is at unprecedented levels, driving a Credit Suisse index that tracks the yield on more than 1,500 issues to a record-low 5.9% last week. Now, as central bankers boost their stimulus with additional bond purchases, policy makers from Chairman Ben S. Bernanke to Kansas City Fed President Esther George are on the lookout for financial distortions that may reverse abruptly when the Fed stops adding to its portfolio and eventually shrinks it. ‘Prices of assets such as bonds, agricultural land, and high-yield and leveraged loans are at historically high levels,’ George said. ‘We must not ignore the possibility that the low-interest rate policy may be creating incentives that lead to future financial imbalances.’”

Aki Ito and Michael McKee of Bloomberg report Federal Reserve Bank of Dallas President Richard Fisher said the Fed needs to continually assess the costs and benefits of pushing forward with record accommodation. ‘We don’t want inflation to raise its ugly head,’ Fisher said adding he doesn’t ‘see that prospect right now.’ The Dallas Fed president said he is concerned that monthly Fed purchases of Treasury notes and mortgage-backed securities may create a price bubble in the bond market. ‘It’s something we need to constantly analyze.’”

The charts of Aggregate Credit, AGG, and Government Bonds, GOVT, and World Treasury Bonds, BWX, Emerging Market Bonds, EMB, show that the global bond bubble burst in 2012, and that it is only the most toxic of debt, such as FAGIX, JNK, BKLN, and PSP, that is trading higher. The ongoing Yahoo Finance chart of closed end equities, CSQ, relative to closed end debt PFL communicates that stocks began to be unable to leverage higher over debt in September 2012.

Investment Banker JPMorgan, JPM, has led its competitors, Goldman Sachs, GS, Morgan Stanley, MS, higher over the last two years, yet over the last six months, the other two have rallied more strongly as is seen in their ongoing Yahoo Finance chart.

Chris Rossini relates in Economic Policy Journal, Following the stock market crash of 1929, there was a short period of calm before the government and Fed would deliver a Great Depression. During that short period of calm, the establishment and authorities did their best to assure everyone that things were ok. I don’t doubt that they even believed what they were saying. Here are some examples of what was said during the calm period.

Nature Economist Elaine Meinel Supkis wrote in August 2008, What Lola Wants, Lola Gets…No More.  The liquidity crisis and the lending crisis are not due to technology nor is it caused by a shortage of money. It is due 100% to the inability of the West to take on much more debt because we are now at the point.  And she currently writes Fed Reserve Releases Highly Censored Minutes From 2007 Pre-crisis Meeting The Federal Reserve was engineered by JP Morgan himself and his buddies very secretively and it is secretly run and the participants belong to more than one secret organization all of whom pretend there are no secrets, no societies run by themselves in total secrecy and no collusion from rich owners of media here to hide all of this from us. End the secrecy! Stop the magical banking bosses and replace them with people who can accurately predict future events.

I comment Deja Vu, once again, the world cannot take on any more debt, as humanity passed through Peak Credit on December 6, 2012, when Total Bonds, BND, turned lower in value. Now investors will be deleveraging out of
1) Currency Carry Trade Darlings, EFA, seen in this Finviz Screener …

2)  Global Producers, FXR, seen in this Finviz Screener  …
ARMH, MAT, HAL, XOM, NOK, QCOM, MSI, FMX, IP, REGN, BHP, AA, SCCO, ABB, SAP, TEL, ITW, PHG, IR, ROP, FLS, EMC, DE, ITB, CAT, BA, ERIC, WHR, EXP, LYB, ARG, DIS, MKTAY, WOR, LPL, HNP, TSM, TTM, PPG, KUB, MHK, SYT, CELG, FBR, ASML, PFE, FWLT, E, MON, FXR,  … Of note, Neowin reports Nokia slashes another 1000 jobs in Finland

3)  Liberalisms’ Beloved Investment Sectors, in this Finviz Screener …

4)  the Speculative Bankers which underwrote Liberalism’s Final Risk Rally, seen in this Finviz Screener …
BAC, C, BCS, LYG, RBS, SAN, DB, IBN, HDB, NMR, MTU, UBS, WF, CS, GGAL, BFR, BMA, BPOP, IRE, CHIX, SMFG, MFG, BSMX, NBG, JPM … Of note The Telegraph reports Lloyds and RBS need billions more capital, BoE says.  Britain’s bailed-out banks need billions of pounds more capital to shore up their balance sheets and support the economy, senior Bank of England officials have warned.

With the deleveraging, Great Depression II will commence. Perhaps one might enjoy a reading in my blog EconomicReview Journal, where I present that bible prophecy of Daniel 2:25-45, and Revelation 13 is unfolding, with a result that a Ten Toed Kingdom of Regional Governance, as well as a Beast Regime of Totalitarian Collectivism and Regionalism, is rising out of the financial and banking insolvency of the Mediterranean nation states, specifically the PIGS, Portugal, Italy, Greece and Spain.
Perhaps, the week beginning Monday, January 20, 2013, will be the beginning of The Second Great Depression, as Mike Mish Shedlock writes Massive fraud in Spain threatens entire government of Prime Minister Rajoy. Eventually the lid off the pressure cooker in Spain is going to blow sky-high. Whether or not this story is the spark remains to be seen.

One should consider dollar cost averaging into a physical possession of gold, that is in gold bullion, as well as an investment in trading at BullionVault as the Telegraph reports A new Gold Standard is being born. The chart of the gold ETF, GLD, shows that it is entering into a consolidation triangle, from which it will break out higher very soon.

The short URL for this article The Debt Doom Loop Closes In On Europe … A Financial Apocalypse Is Coming Soon … is …


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