Financial Market Report for Monday, February 4, 2013
1) … On Monday February 4, 2013, political turmoil in Spain and Italy halted the seven month long global stock, VT, rally, and pivoted the world’s economic paradigm from Liberalism to Authoritarianism.
Sarah Jones of Bloomberg reports European Stocks Retreat Amid Political Turmoil in Spain And Italy. European stocks, VGK, tumbled the most in more than three months as Spanish and Italian banks retreated with the nations’ government bonds amid signs of returning political uncertainty in the region’s weakest economies. Banco Santander, SAN, Spain’s largest bank, sank the most in six months as Prime Minister Mariano Rajoy denied corruption allegations. UniCredit SpA, the biggest lender in Italy, posted the largest drop since June, as former premier Silvio Berlusconi gained in opinion polls before elections this month. “Spanish yields have blown up in the past hour to their highest levels since December as concerns about the Spanish government mount,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “In addition to the growing corruption scandal in Spanish politics, the Italian elections towards the end of the month are also a concern.”
Spain, EWP, Italy, EWI, Ireland, EIRL, Germany, EWG, and Greece, GREK, led Nation Investing, EFA, IFSM, and DLS, lower, with European Financial Institutions, EUFN, being the loss leader of the day, as the Euro, FXE, traded lower from its seven month rally high, commencing competitive currency devaluation, which is seen in the US Dollar, $USD, UUP, trading higher.
Currency traders sold the Euro Yen Carry Trade, EUR/JPY, and investors derisked out of World Stocks, VT, with Netherlands, EWN, Diversified Equipment Manufacturer, PHG, being the Euro Yen carry trade loss leader of the day.
Investor deleveraged out of Commodities, DBC, with Coffee, JO, Oil, USO, Unleaded Gasoline, UGA, Cotton, BAL, Timber, CUT, Lead, LD, and Tin, JJT, trading lower, on lower Commodity Currencies, CCX. Bloomberg reports Iron Ore Seen Poised For Bear Market. Iron ore may decline 35 percent by the year-end after advancing to $170 a ton in the first half as mines in China boost production, cutting import demand in the world’s largest buyer, according to Westpac Banking Corp
Stock Style loss leader of the day was Small Cap Pure Value, RZV, at 2.1%. The Currency Demand Curve, that is the ratio of the Small Cap Pure Value Shares, RZV, to the Small Cap Pure Growth Shares, RZG, RZV:RZG, confirms that competitive currency devaluation is underway. Small Cap Value loss leaders of the day included POOL and KAR.
Global Producer, FXR, loss leaders of the day included:
Netherlands, EWN, Diversified Equipment, PHG
Germany, EWG, Industrial Electrical Equipment, SI
Germany, EWG, Software, SAP
India, INP, Copper Mining, SLT
Ireland, EIRL, Cement, JHX
USA, Biotechnology, CELG, GILD
South Korea, EWY, Steel, PKX
Sector loss leaders of the day included:
Global Design and Build, FLM -3.3%
Wind Energy, FAN -2.6
Steel, SLX -2.1
Semiconductor, XSD -2.0
Small Cap Industrial, PSCI -1.9
IPOs, FPX -1.7
Copper Mining, COPX -1.7
Home Building, ITB -1.6
Gaming, BJK -1.5
Biotechnology, IBB -1.5
Consumer Services, IYC -1.5
World stocks traded as follows:
World Stocks, VT -1.5
Nation Investing, EFA -1.8
Small Cap Nation Investing, IFSM -1.5
Dividend Nation Investing, DLS -1.5
Nation Investment loss leaders of the day included
Netherlands, EWN -3.3
Poland, EPOL -2.4
Argentina, ARGT -2.2
Norway, NORW -2.0
Sweden, EWD -1.8
Italy, EWI -5.8
Spain, EWP -5.4
Germany, EWG -3.6
Ireland, EIRL -2.7
Greece, GREK -2.1
China, YAO -2.5
China Industrials, CHII -2.2
China Small Caps, ECNS -2.2
India, INP -1.8
Russia, RSX -1.6
Brazil, EWZ -1.5
US Infrastructure, PKB -1.5
Nasdaq 100, QTEC -1.5
Real Estate loss leaders of the day included:
China Real Estate, TAO -2.4
Global Real Estate, DRW -1.6
Financial loss leaders of the day included
European Financials, EUFN -4.1
Emerging Market Financials, EMFN -3.8
Chinese Financials, CHIX -2.7
Global Banks, IXG -1.9
Of note, Manufactured Housing, CVCO, traded sharply lower, falling 6%.
2) … In the news
Credit mania confirms a Credit Bubble in China as Bloomberg reports Chinese Firms Shrug at Rising Debt. Chen Qiang runs a Chinese shipbuilding company that expects to post a net loss for 2012 and whose $4.5 billion in debt is six times what it was three years ago. In the first half of last year it received only two new orders. Mr. Chen is unfazed. The chief executive of China Rongsheng Heavy Industries Group Holdings Ltd. 1101.HK -3.40% plans to maintain staffing levels and even start hiring globally as part of efforts to win orders for ships used in offshore energy drilling—a new business that he says could generate half of the company’s new ship orders within three to five years. As for its heavy debt load, Mr. Chen is confident the company’s state-run lenders are satisfied with the firm’s health. “The government supports us because they see a bright future,” he explains.
Scott Grannis writes Worst Economic Policy Decision Of The Year. When it comes to misguided economic policies, Argentina wins the prize more often than not. Today Fox News reports Government Of Argentina Announced A Two Month Price Freeze on all products sold at the nation’s largest supermarkets, representing about 70% of the Argentine market. It is apparently a voluntary freeze, worked out in a joint accord between the supermarket chains and the government. On its face, this is a blatant attempt to cool the inflationary fires that are slowly consuming the Argentine economy, and it comes on the heels of the IMF chastising Argentina for manipulating its inflation statistics. Now, not only does Argentina manipulate its inflation statistics, it also manipulates its prices. I relate Argentina is a true banana republic. Cristina Kirchner’s price controls will be unable to stop The Inflationary Tide, and will only lead to massive shortages and a black market. After that, huge inflation, or maybe even hyperinflation will follow. Look for tax revenues to decline, exasperating Argentina’s, ARGT, troubles.
Benton te writes I am reminded by the great Ludwig von Mises who wrote of the semantic maneuvering by officials and their apologists to redefine inflation to justify price controls. And that price controls function as mechanical responses by political authorities on inflation, again the Great Mises wrote. I expect such twin political reaction (inflation-price control) to become a global phenomenon.
AP reports Dell To Go Private In $24.4B Deal. Slumping personal computer maker Dell is selling itself for $24.4B to its founder and a group of investors that includes Microsoft in the largest deal of its kind since the Great Recession dried up financing for such maneuvers.
AP reports US Home Prices See Largest Gain In More Than 6 Years. Prices rose by 8.3% in December compared with a year earlier, spurred by low supply of available homes and rising demand. That’s the biggest annual increase since May 2006. Prices were up in 46 of 50 states.
3) … Commentary
RORO has returned. The Risk On Trade has been replace by Risk Off Trade, as the the twin spigots of Liberalism’s Finance, the Euro Yen Carry Trade, EUR/JPY, and other carry trades, as well as world central banks’ monetary policies, have not only turned off but are now running toxic. With the failure of national sovereignty and nation state bank monetary authority, the dynamos of corporate profitability and global growth are winding down Liberalism as a construct for economic and political activity.
Robert Wenzel of Economic Policy Journal reports This week the Obama Administration is holding separate meetings with progressive and labor leaders and also with business leaders.
Look for private private partnerships, such as Macquarie Infrastructure Company, MIC, to eventually emerge, to manage regional economic activity, as a Financial Apocalypse, that is a credit bust and global financial breakdown, is coming soon, whereby North American Continent political, labor and business leaders will meet in summits and workgroups to pool sovereignty regionally, to effect North American regional governance, for the regions’ security, stability and sustainability.
Peak Monetary and National Sovereignty has been achieved.
Liberalism’s sovereignty was based upon the national sovereignty of democratic states and the monetary authority of the world central banks. The bankers’ sovereignty, through credit, AGG, begat the seigniorage, that is the moneyness, of choice, producing fiat asset inflation, and prosperity for those with jobs as well as for those on government assistance, such as Social Security Disability. But ,Total Bonds, BND, traded lower in December 2012, as investors lost confidence in US Government Bonds, GOVT, and the World’s Sovereign Debt, BWX.
Jean Pisani-Ferry, Director of Bruegel, the Brussels based economic policy think tank asks in Project Syndicate article Is the Euro crisis over? Reason to worry is that there is limited consensus in Europe on what, exactly, is needed to make the monetary union resilient and prosperous again. Banking union is a positive development, but there is no agreement on additional reforms, such as the creation of a common fiscal capacity or a common treasury. I comment that the ECB’s LTRO1 and LTRO2, as well as the ECB’s OMT, were stopgap measures to prevent a dissolution of the EU, and provided shrew investors a carry trade bonanza. The European Sovereign Debt Crisis has been held in abeyance, but cannot be avoided. Insolvent sovereigns, and insolvent banks cannot provide seigniorage, that is moneyness.
A new sovereignty and a new seigniorage is coming, as the age of fiat asset inflation, pivots to the age of fiat asset deflation.
Authoritarianism’s sovereignty will be based upon regional framework agreements, which renounce national sovereignty, and appoint both regional monetary and fiscal popes to work in public private partnerships, to oversee regional economic production. These regional nannycrats, will impose the seigniorage of diktat, mandating debt servitude and austerity.
Jesus Christ is at the helm of the Economy of God, Ephesians, 1:10, pivoting the world from Liberalism’s Banker, Floating Currency, Free To Choose Investment, Democratic, Nation State, Regime … to Authoritarianism’s Beast, Competitive Currency Devaluation, Diktat, Totalitarian Collectivist, and Regional Governance Regime.
The great pivotal economic and political shift from the paradigm of Liberalism to Authoritarianism occurred on Monday February 4, 2013, as World Stocks, VT, traded lower as Sarah Jones of Bloomberg reports European Stocks Retreat Amid Political Turmoil in Spain And Italy.
Now, the Beast Regime, Revelation 13:1-4, will rule in all of the world’s ten regions, and in all of mankind’s seven regions. Liberalism’s fiat money system will be replaced by Authoritarianism’s diktat money system, where diktat serves as currency, credit and power.
Liberalism was characterized by wildcat finance, a Doug Noland term, where bankers of all types, sought to outdo one another with investment schemes. But Authoritarianism is characterized by wildcat governance, where government leaders, bite, rip and tear one another, in an effort to be the top dog. AP reports George Osborne to JPMorgan: The days Of being Too Big To Fail are over And Christoph Dreier, of WSWS relates Greek government threatens striking ferry workers with martial law. The Greek government has announced that it intends to ban a strike by ferry workers against wage cuts and sackings and place the workers under martial law. And Mike Mish Shedlock writes The ongoing political scandal in Spain is unfolding as expected, with a hell of a lot of mud slinging.