Stocks Trade Lower On Fears Of Eurozone Financial And Political Instability

Financial Market Report for Thursday February 7, 2013 and Friday February 8, 2013

1) … On Thursday, February 7, 2013, European Financials, EUFN, Chinese Financials, CHIX, and Emerging Market Financials, EMFN,  led the World Stocks, VT, VSS. lower.  
Brendan Conway of Forbes reports A political scandal in Spain, and electoral uncertainty and a bank probe in Italy, stimulated European Financials, EUFN, to trade lower, and in turned sparked investors to derisk out of Euro Yen Currency Carry Trade, EUR/JPY, investments in Global Producers, FXR, and in Nation Investment, EFA, IFSM.

Finviz Groups shows that the US Basic Material Shares, IYM, as well as Global Basic Material Shares, XLB, are the day’s loss leader and the week’s loss leader; and are leading Global Producers, FXR, and Nation Investment, EFA, and Small Cap Naion Investment, IFSM. lower. Mid Cap Growth was the style loss leader of the day. Decliners included the following:
Photographic Equipment Manufacturers,  CAJ
Office Equipment Manufacturers, KYO
Small Tool Manufacturers, MKTAY, SNA,
Construction Equipment Manufacturers, KUB, DE, CAT
Consumer Electronics Manufacturer, SNE
Appliance Manufacturers, WHR,
Cement Producers, EXP, CX, TXI, JHX
Building Material Manufacturers, USG, AMWD, MAS,
Semiconductor Manufacturers, INTC, TXN, MU, LSI, CRUS, MCHP, HIMX
Semiconductor Equipment Manufacturers, ASX, ASML, SPIL, UMC,
Industrial Electrical Equipment Manufacturer, ABB, ETN
Diversified Machinery Manufacturers, PHG, SI, IR, DHR, ITW, FLS, DRC, GDI,
Publishers, ENL
Energy Producer, E, TOT, SNP, RDS-B, BP, EC
Iron Ore Producer, CLF
Specialty and Agricultural Chemical Manufacturers, MON, GRA
Steel Producers, MT, MTL,
Biotechnology Companies, REGN, AMGN,
Internet Retailers, AMZN
Copper Miners, FCX, SLT, SCCO,
Pharmaceutical Manufactuers, SNY, PFE, AZN, NVO, AGN, RDY,
Communications Equipment Manufacturers, ALU, MITL, NOK, QCOM
Paper Producers, FBR, SPP, IP
Timber Producers, WY
Design Build Companies, FWLT,
Textile Producers, MHK,
Automobile Parts Manufacturers, DLPH, ALV, JCI, BWA, VC
Beverage Manufacturers, BUD, KOF
Consumer Goods Manufacturers, UN,
US Home Builders, ITB,
Major Chemical Producers, FMC
Industrial Metal Miners, TECK, GMO, HW, GSM, ZINC, SLCA
Metal Manufacturing Companies, WOR
Consumer Staples, BG

Asset Manager Blackstone, BX, traded lower today.
Retailers LTD, GPS, ANN, BKX, LUX, traded lower.
Leverage Buyouts, PSP, traded lower.
Transportation loss leaders of the day included, CPA, GOL, ASR. ODFL,

Sectors trading lower included
Semiconductors, XSD,
Biotechnology, IBB, XBI,
Copper Miners, COPX
Industrial Metal Miners PICK,
Internet Retail, FDN,
Steel, SLX
Pharmaceuticals, XPH,
Solar Energy, KWT
Coal Mining, KOL,
Uranium Mining, URA,
Metal Manufacturing, XME

Nation investment, EFA, Small Cap Nation investment, IFSM, and Emerging Markets, EEM, were led lower by the following:
Turkey, TUR,
Italy, EWI
Spain, EWP,
France, EWQ,
Switzerland, EWL
China, FXI, China Real Estate, TAO, China Industrials, CHII, China Small Caps, Shanghai, CAF
New Zealand, ENZL
Vietnam, VNM
Finland, EFNL
Netherlands, EWN
Thailand, THD,
Sweden, EWD
Mexico, EWW,
India, INP, SCIN.
Russia, RSX, ERUS,
Argentina, ARGT
The Nikkei, NKY, traded 1.1%, lower as is seen in this ongoing Yahoo Finance Chart of the Nikkei, NKY, together with Photographic Equipment Manufacturer, Canon, CAJ, and Office Equipment Manufacturer, Kyocera, KYO, Construction Equipment Manufacturer, KUB, Small Tool Manufacturer, MKTAY, Consumer Electronics Manufacturer, SNE.

2) … Natural Gas, UNG, Unleaded Gasoline, Oil, USO, Agricultural Commodities, JJA, and Base Metals, DBB, led US Commodities, USCI, and Commodities, DBC, lower.
The Proshares 200% Inverse Natural Gas ETF, KOLD, rose to 8% to resistance; yet will be going higher, as Natural Gas, UNG, will be a commodity loss leading sector once again.

Agricultural Commodities, JJA, are trading at strong support and will be going higher.

Base Metals, DBB, are at strong resistance, and will be going lower.

Timber, CUT, has maxed out.

Oil, USO, is at strong resistance and will be turning lower.

One can follow US Commodities, USCI, and Commodities, DBC, with the use of this Finviz Screener.

3) … The chart of the 200% Dollar ETF, UUP, shows a breakout, and the US Dollar, $USD, rose a strong 0.6%, to close at 80.19.

The Swedish Krona, FXS, The Euro, FXE, Ths Swiss Franc, FXF,   Rupe, ICN, the Australian Dollar, FXA, the Canadian Dollar, FXC,  and the Emerging Market Currencies, CEW, traded lower.  The Brazilian Real, BZF, rose to strong resistance.  The US Dollar is no longer sinking it is rising; currencies are no longer floating, they are sinking.  The US Dollar can no longer serve as the world’s reserve currency.

Derisking out of Nation investment, EFA, and Small Cap Nation Investment, IFSM, and deleveraging out of Commodities, DBC, on the exhaustion of the world central banks authority, has commenced competitive currency devaluation.  Monetization of debt by the US Fed, the ECB, and the Bof Japan, and the PBOC, has finally turned “money good” investments, bad.   Excessive credit liquidity has commenced the death of currencies.  The chart of Major World Currencies, DBV, and Emerging Market Currencies, CEW, both show a trade lower from recent seven month peak highs.  The chart of Commodity Currencies, CCX, shows a trade lower from an ascending wedge pattern.

Debt deflation, that is currency deflation, is causing the Milton Friedman Free To Choose Floating Currency System, that is the fiat money system, to start to die.

The twin spigots of Liberalism’s Finance, these being central banks monetary policies of credit liquidity, credit support, and quantitative easing, as well as currency carry trade investment based upon a falling Yen, have run dry and have turned toxic.

Liberalism’s Inflationism is turning into Authoritarianism’s Destructionism, with the result that the Age of Fiat Asset Inflation is ending, and the Age of Fiat Asset Deflation, is commencing.

The Mario Draghi Trade, that is the Euro Yen Currency Carry Trade, EUR/JPY, came to an end on February 7, 2012, as it closed lower at 125.50, as the Euro, FXE, closed 0.9% lower at 132.92, and the Yen, FXY, closed 0.1% lower at 104.71.  With a full debased Yen Currency Carry Trade, there is no more fuel to stimulate Global Producers, FXR, or Nation Investment, EFA, and  IFSM.  As the dynamos of corporate profit and global growth, continue to wind down, a debt deflation cycle of falling currencies, and rising interest rates will intensify, causing the destruction of fiat wealth.

The ongoing Yahoo Finance Chart of Global Natural Resources, GNR, Teck Resources, TCK, and 200% Short The Yen ETF, YCS, communicates the tremendous carry trade leverage that came to this Basic Material, XLB, stock, through Mario Draghi’s ECB, LTRO1, LTRO 2, and OMT, monetary policies, which drove the Euro, FXE, higher; and Shinzo Abe’s Unlimited Quantitative Easing, monetary policy, which drove the Japanese Yen, FXY, lower, in a tremendous Euro Yen Currency Carry Trade rally, and now unwinding. The only ones who profited from such central bank monetary inflation, and now monetary deflation, have been the astute stock market investors, who went long beginning in early June 2012, and short beginning in late January 2013.

With increasing interest rates, on a Steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TNY,as is seen in the Steepner ETF, STPP, steepening, Bonds, BND, will be continually trading lower.   And with the failure of Major World Currencies, DBV, and Emerging Market Currencies, CEW, and the derisking out of World Stocks, VT, VSS, and the deleveraging out of Commodities, DBC, a see saw destruction of fiat wealth has commenced.

A paradigm change is in the process of occuring. Liberalism’s democratic governance is pivoting to Authoritarianism’s regional governance.  Investment choice is transitioning  to leader diktat.

Liberalism’s prosperity, security, and sustainability is literally be sawn asunder by the failure of carry trade lending and the exhaustion of the world’s central banks’ monetary policies. And as a result Crony Capitalism, European Socialism, Greek Socialism, Chinese Communism, can no longer provide economic and political goverance.

Speaking at the European Parliament in early February 2013, President Francois Hollande of France berated the current fiat money system.  “The euro should not fluctuate according to the mood of the markets. A monetary zone must have an exchange rate policy. If not it will be subjected to an exchange rate that does not reflect the real state of the economy.” Hugh Carnegy and Alice Ross, “Hollande Warns on Euro Strength,” The Financial Times, February 5, 2013.

Please consider that Mr. Hollande is a career politician, specifically the poster politician for European Socialism, and one who is totally detached from the economic reality of nation investment, EFA, and small cap nation investment, IFSM, which is based upon the ECB’s and the BoJ’s monetary policies.

Mr. Hollande’s remarks paint him as being an engine of and expression of European Socialism; which is the very thing that got him elected, replacing the inherited rich Nicolas Sarkozy, as highlighted in Angelique Chrisafis’  recent Telegraph article.  Mr. Hollande’s uninsightful currency comments, are very much drawn out by the rise and now fall of France’s Total Petroleum, TOT, and Alcatel Lucent, ALU.  And his comments reflect that he lacks any understanding of the broken nature of the French economy as highlighted by numerous newsworthy reports such as those of the Economist, France and The Euro, The time bomb at the heart of Europe, and those of Bloomberg, Bemoaning Euro strength masks hollande export woes. Further evidence of French economic decline comes from The Telegraph report EU clears France to give temporary aid to Peugeot The European Commission has cleared France to temporarily rescue PSA Peugeot Citroen with a €1.2bn (£1bn) guarantee on condition the car maker delivers a restructuring plan within six months.  It’s unlikely that Francois Hollande will be able to compete in Authoritarianism’s wildcat governance, which is about to ensue producing only the most fierce of governors to rule the Eurozone.  The Hollande government, which seeks to tax and spend, is very much dislocated from Authoritarianism’s rising preeminence, to govern the Eurozone.

Nick Beams of WSWS writes Bank scandals and the case for public ownership Karl Marx noted that when capital experienced a crisis and profits rates fell “there appears swindling and a general promotion of swindling by recourse to frenzied ventures” for the sake of trying to overcome the crisis. But Marx was still pointing to somewhat exceptional circumstances. Now the exception has become the rule. The past 30 years, following the end of the post-war capitalist boom, have been characterized by the rise of financialization and the ever greater separation of the accumulation of profit from the actual processes of production. Under conditions where the valuation of financial assets is increasingly based on a series of complex mathematical models, and where changes in the underlying assumptions can bring major changes in the final outcome, transforming potential losses into profits, the way is open to manipulation and fraud. In fact, as the S&P case shows, the ever-present danger of being outstripped by one’s rivals compels such corruption as a matter of survival. The stench emanating from the financial system is a product of the decay of the entire profit system. That system must be replaced by a higher socio-economic order in which the vast wealth created by the collective labour of the world working class is deployed to meet human need

There will be no economic evolution to a higher order of things, rather, Jesus Christ is at the helm of the economy of God, Ephesians 1:10, pivoting the world into devolution.

Out of a soon coming Financial Apocalypse, that is a global credit breakdown and worldwide financial system breakdown, Regionalism, will rise to govern in the world’s ten regions, establishing regional governance, where the diktat money system will provide diktat for currency, power, debt servitude, austerity, and sovereign wealth.  Mankind’s social experience will be one of Totalitarian Collectivism, coming to rule in all of mankind’s seven institutions.  These experiences are simply a matter of destiny, Revelation 1:1, and are a fulfillment of bible prophecy of Daniel 2:25-45 and of Revelation 13:1-4.

4) … Bonds, BND, traded unchanged.

5) … Love will grow cold as Liberalism transitions to Authoritarianism
Robert Wenzel writes of The killers amongst us.  I comment that it is through childhood use of medication, and through parents who are incapable of educating their children in virtue, as well as in ethics, that is genuine right relationships with others, that many become psychopaths, before the age of 15. Then the military and the CIA, comes along and recruits them, and so they become trained killers. Once their lifespan, usually very short, is used up, they are discarded, and they come to live in the inner city, where I live.  These are neighborhoods presented by in Claritas Prizm as Big City Blues and Low Rise Living, which become residences where killers go to live when no employer will hire them, and they are granted Social Security Disability, for PTSD, or for antisocial behavior disorder.  It is in these neighborhoods that they manifest with preeminent and/or confrontational behavior, causing sensible people to flee from them, and live very reclusive and fearful lives hidden away in SROs and in small apartments, with a TV for friendship and companionship.

6) … On Friday, September 8, 2013, The Dow, DIA, and the S&P, SPY, rise to new highs, but World Stocks, VT, VSS, Nation Investment, EFA, Small Cap Nation Investment, IFSM, and Emerging Markets, EEM, remain below recent highs.
Airlines, FAA, Health Care Providers, IHF, Small Cap Energy, PSCE, Energy, XLE, Energy Production, XOP, Automobiles, CARZ, Toys, MAT, Retail, XRT, Transportation, XTN, and Business Services, seen in this Finviz Screener, traded higher, taking the Dow, DIA, and the S&P, SPY, as is seen in their ongoing Yahoo Finance Chart to new eight month rally highs.   The Russell 2000, IWM, rose to a new high on rising Regional Banks, KRE.  Dividend Appreciation, VIG, rose to a new high. The chart of Utilities, XLU, shows a spinning top rally high.

All of which took US Shares, VTI, to a new rally high, while the chart of World Stocks, VT, Asia, EPP, Europe, VGK, as well as Nation Investment, EFA, and Small Cap Nation Investment, IFSM, all show an evening star candlestick chart pattern, communicating that a global bear market has commenced.  Of note, the Emerging Markets, EEM, and Emerging Market Bonds, EMB, and the BRICS, EEB, have sold off since the beginning of the year, leaving the large cap US Indices, SPY, and DIA, as well as the Russell 2000, IWM, to rally to new eight month highs; their strong performance drew the world’s Large Cap Growth Shares, JKE,  up 0.8% this week, to their September 14, 2012 high.

Bloomberg reports European stocks post weekly drop on debt-crisis concern.  The chart of the EUR/USD closed the week at 133.5, down 2%, taking Europe Shares, VGK, 1,5% lower. And the chart of the EUR/JPY closed the week at 123.75, down 2%, taking World Shares, VT, 0.5% lower, Nation Investment, EFA, 1.5% lower, and Small Cap Nation Investment, IFSM, 1.0%, lower.

Two sectors have been an ongoing safe haven from the Eurozone Sovereign Debt Crisis, as they were given seigniorage by the US Federal Reserve policies of QE. The first is US Infrasturcture Shares, PKB, such as those seen in this Finviz Screener.  And the second is Business Services, seen in this Finviz Screener. Team Inc, TISI, specializing in high pressure piping system construction and repair, as well as FleetCor Technologies, FLT, specializing in payment systems for commercial fleets, have both topped out.

Credit companies, such as AXP, seen in this Finviz Screener, will be falling lower.

The ongoing Yahoo Finance chart of the Small Cap Pure Value Shares, RZV, together with the Small Cap Pure Growth Shares, RZG, the Large Cap Growth Shares, JKE, Nation Investment, EFA, Small Cap Nation Investment, IFSM, and Global Producers, FXR, communicates that it has been demand for Major World Currencies, DBV, and Emerging Market Currencies, CEW, working through a Euro Yen Currency Carry Trade, EURJPY, for the last eight months that has taken World Stocks, VT, higher.

Yet a global bear stock market has commenced, as the daily chart of both Major World Currencies, DBV, and the Emerging Market Currencies, CEW, show a turn lower. This bear market is seen in the Direxion Bear Market ETFs, trading higher, EDZ, DPK, RUSS, and YANG, trading higher. And in the Proshares Bear Market ETFs, EEV, EFU, BIS, and FXP, trading higher, as well.

Nations trading lower this week included:
EWI, -6.1%
EWQ, -5.2
EWN, -5.0
EWG, -4.3
TUR, -3.9
ARGT -3.8
INP -3.2
YAO, -3.1
EWP, -2.6
ENZL -2.3
EWD, -2.1
EWZ, -2.0
RSX, -2.0
THD -1.4

The chart of S&P 500, $SPX, shows a weekly gain of 0.4% to achieve an Elliott Wave 5 High to close at 1,157; with an ETF, SPY, close at 151.80. In contrast, the chart of World Stocks, ACWI, shows a weekly loss of 0.6% to enter an Elliott Wave 3 Down to close at 50.06. The chart of the Philippines, EPHE, shows a weekly gain of 1.9%, to an all time high of 38.60.

Weekly gainers include Airlines, FAA, 3.1%, Energy Production, XOP, 2.0, Networking, IGN, 2.0, Defense Contractors,  PPA, 1.9, Automobiles, CARZ 1.7, S&P Transports , XTN, 1.3 … And
Weekly losers include Chinese Financials, CHIX, -6.2%, Coal Production, KOL, -3.2,  European Financial, EUFN, -2.7, Solar Energy, KWT, -1.8, Home Building, ITB, -1.6, Steel, SLX, -1.3, Miners, PICK, -1.1.

Of significant note, a nascent investment demand for gold has commenced, as is seen in the chart of the gold based ETFs, UGL, and DGP, trading higher, as Gold, GLD, has been trading higher since January 1, 2013; it’s chart shows that it stands at the apex of a consolidation triangle at 161.50, with support at 160. Spot Gold, $GOLD, is trading at is 200 Day Moving Average at $1,660.

7) … Wealth can only be preserved and garnered by ownership and personal possession of gold.
An inquiring mind asks, as all forms of fiat wealth die, that is as the Major World Currencies, DBV, and the Emerging Market Currencies, CEW, World Stocks, VT, Sovereign Debt, BWX, and Commodities, DBC, such as Base Metals, DBB, perish on the exhaustion of the world central banks’ monetary authority, …. will physical possession of Platinum, PGM, and Silver, SLV, rise to join Gold, GLD, as measures of soveign wealth?

I believe that Silver is a base metal, and that while its price may be suppressed by a financial contracts and a number of investment schemes, it will forever be just a base metal used in the production of material goods. One can follow Platinum, Silver, and Gold, together with Base Metal, in this ongoing Yahoo Finance Chart.

The daily chart of silver, SLV, shows a close at strong resistance 30.43. I doubt that silver will ever break above even stronger resistance at 31.

Those who invested in Silver Miners, SIL, at market close last Friday, saw a weekly gain of 0.1%; and those who invested in the Junior Silver Miners, SILJ, saw a weekly gain of 0.8%

I personally have no financial wealth whatsoever as I live in financial poverty. I recommend that one invest in and take physical possession of gold bullion and invest in it on Internet Trading Vaults like Bullion Vault.

8) … News and commentary around the Internet

8A)  … Perhaps Nigel Farage is one of the few who understands that there is an Illuminati New World Order conspiracy well underway.

Nigel Farage’s first barrage against the New World Order was presented in Economic Policy Journal article You Have Never Seen a Political Leader Say Anything Like This Before.

Well, he has come out with another lambast presented in Economic Policy Journal article Nigel Farage Slams War Making French President François Hollande

D. Robert Singer writes in article The Modern State of Israel: Providence, Miracle, or What Really Happened, In 1871 Albert Pike founder of one of the Rothschild secret societies, Order of Perfectibilists, received a vision, which he described in a letter dated August 15, 1871 that graphically outlined plans for three world wars that were seen as necessary to bring about the One World Order.

The Third World War must be fomented by taking advantage of the differences caused by the “agentur” of the “Illuminati” between the political Zionists and the leaders of Islamic World. The war must be conducted in such a way that Islam (the Moslem Arabic World) and political Zionism (the State of Israel) mutually destroy each other. Meanwhile the other nations, once more divided on this issue will be constrained to fight to the point of complete physical, moral, spiritual and economical exhaustion…We shall unleash the Nihilists and the atheists, and we shall provoke a formidable social cataclysm … Then everywhere, the citizens, obliged to defend themselves against the world minority of revolutionaries, will exterminate those destroyers of civilization, and the multitude, disillusioned with Christianity, whose deistic spirits will from that moment be without compass or direction, anxious for an ideal, but without knowing where to render its adoration, will receive the true light through the universal manifestation of the pure doctrine of Lucifer, brought finally out in the public view. [1] [Cmdr. William Guy Carr: Quoted in Satan: Prince of This World, Albert Pike received a vision, which he described in a letter that he wrote to Mazzini, dated August 15, 1871. http://www.threeworldwars.com/albert-pike2.htm]

8B) … Business Insider relates Financial Advisor Insights: Investment Newsletter Writers Haven’t Been This Bullish On Stocks In 13 Years.

8C) … Reuters reports Record Low Current Account Surplus Shows Japan’s Challenge.  Data last month showed Japan posted a record trade deficit of 6.9 trillion yen in 2012, as exports fell in annual terms through the second half of the year.

8D) … Doug Noland asks New Bull Or Bigger Ro,Ro?  CNBC’s Andrew Ross-Sorkin (February 7, 2013): “Are you worried about Europe, still?” Former Secretary of the Treasury and Goldman Sachs co-chairman Robert Rubin: “I think that Europe is very different than most people think it is. I think there’s a complacency about Europe that is probably a product largely of… the announcements Mario Draghi made. And I think he’s an outstanding leader and, in fairness, he’s a very good friend. But that has nothing to do with my evaluation. He made an announcement on a Thursday that he was going to do what was needed. And the markets reacted very positively. He subsequently, very wisely, said that the ECB was only going to act if conditionality was met, so that the politicians would do what they need to do. I think there’s been a very substantial complacency in Europe and I think the risks are probably considerably higher than people think. And I’ll just add one more point: a lot of the Europeans will say a lot’s been accomplished over the past year. What I think is that European leaders have been behind the curve from the very beginning. And if you look at the facts now, in the troubled countries, the banking systems, nobody knows what the numbers are. Growth is still negative and therefore the output gaps are greater and the debt-to-GDP ratios are greater. So I think Europe is probably far more troubled.”

Two of the region’s bigger potential problem-children – Spain and Italy – appear to be facing acute political uncertainties. Italian elections are less than three weeks away. A savvy old campaigner and a resonating populist (anti-reform) message have propelled a surprising rise in the polls for Silvio Berlusconi’s People of Liberty party. Meanwhile, the former professor, now Caretaker Prime Minister, Mario Monti really struggles on the campaign trail. There is increasing talk of “inconclusive” results, a “hung parliament,” and potentially the need for a second election, as the leading Democratic Party (and its leader Pier Luigi Bersani) sees its lead in the polls almost disappear. The likely outcome will be a fragile coalition government and limited power (not to mention desire) to move forward with difficult reform programs.
The political backdrop in Spain appears even more tenuous.
February 6 – Financial Times (David Gardner): “The avalanche of slush fund allegations threatening to engulf the ruling Popular party of Mariano Rajoy is only the latest in a long line of illegal party financing cases in Spain, after the restoration of democracy in 1977 brought with it the expensive inconvenience of regular elections. In the mid-1990s, there was the Filesa scam whereby the then-ruling Socialists collected large corporate donations for fictitious consultancy work not carried out by dummy firms. The scandal helped bring down the government of Felipe González… The current, so-called Bárcenas case, which centres on the purported secret accounts kept by former PP treasurer Luis Bárcenas that detail covert donations and cash payments allegedly made to senior party figures including Mr Rajoy, is in the same league.”
Prime Minister Rajoy has denied receiving illicit funds, although in some cases payments on the purported handwritten ledger (published by El Pais) have been confirmed by other recipients. The opposition party has called for Rajoy’s resignation. This scandal doesn’t look good, although some have suggested it might remain in the courts for awhile. Yet it further weakens public trust, while emboldening separatist movements.
The Financial Times’ David Gardner notes a key risk: “…A [Popular party] back in power for barely a year risks implosion, but the Socialists, demoralised and divided regionally as well as ideologically, are in retreat. If elections were to take place now, Spain could face Greek-style political fragmentation, with the two main parties reduced to something like the diminished size of Greece’s conservative New Democracy and former prime minister George Papandreou’s Pasok (which, like the PP, also had a recently won absolute majority). Two decades ago Spaniards were enamoured of Europe. Now, amid the compound devastation wrought by the fiscal, banking and euro crises, the EU is ‘like a wicked stepmother’, one Spanish analyst says.”
Speculative markets love “bi-polar” – that is, as long as the bad pole (“risk off”) ensures an aggressive policy response, short-squeeze and abrupt lurch toward the good pole (“risk on”). And, over the years, everything has just gotten a lot bigger – and, accordingly, only more bi-polar.
Remember the “asymmetrical” policy response issue from the Greenspan years? Well, these days of systemic structurally maladjusted economies and financial systems, global “risk off” provokes just the most incredible policy measures. In contrast, what kind of provoking do we see with a major bout of global “risk on” market speculation? Well, essentially no response whatsoever. To be sure, the Fed’s $85bn monthly “money printing” operation is exempt. Extreme global monetary looseness? Right. Exempt.
The inevitable upshot to this unwieldy “risk on, risk off” and New Age Policy Asymmetry is unanchored global liquidity and general currency market instability. The Draghi and Bernanke Plans incited re-risking, re-leveraging and an absolute global market liquidity bonanza. Many now talk openly of “currency wars” – recalling the destabilizing “beggar thy neighbor” Credit/currency devaluations from the Depression era. Watching their moribund economies, European leaders are getting antsy. And the elevated euro (weak dollar and yen) was the target of strong words this past week from French President Hollande: “We can’t let the euro fluctuate according to the mood of the market. We have to act at the international level to assert our interests… We have to determine for the medium term an exchange-rate level that appears most realistic, that is most in line with the state of our real economies.”
The euro weakened 2.0% this week. Even Draghi seemed to imply that the ECB would now closely monitor the consequences of a strong euro. Sentiment had turned quite bullish on the euro of late, in the face of major economic and political uncertainties. If this week’s reversal points to a shift in sentiment against the euro, then we’ll have to closely monitor how this translates throughout European securities markets. European equities have rather quickly given up most of what were strong January gains. Debt markets are also indicating heightened vulnerability. And, while we’re on the subject, “developing” markets didn’t trade all that impressively this week either.
As noted by Robert Rubin, “there’s been a very substantial complacency in Europe and I think the risks are probably considerably higher than people think.”
I’ll suggest complacency and unappreciated risks are a global product of worldwide monetary disorder. And with all the talk of new secular bull markets, I’ll suggest that the backdrop might actually be more conducive to just A Bigger “Ro,Ro” (risk on, risk off) Dynamic. If so, the key will be gauging the potential for subtle shifts away from risk-taking and leveraged speculation. A weak euro, recovering yen and stronger dollar might be expected to engender a somewhat more cautious approach to risk-taking. Yields in Spain and Italy should be monitored closely, along with Credit spreads/risk premiums more generally. Almost across the board, these indicators this week pointed to a somewhat less robust “risk on” market backdrop.

Global central bank “international reserve assets” (excluding gold) – as tallied by Bloomberg – were up $712bn y-o-y, or 6.9%, to a record $10.960 TN. Over two years, reserves were $1.670 TN higher, for 18% growth. …  And M2 (narrow) “money” supply rose $9.8bn to $10.413 TN. “Narrow money” has expanded 6.7% ($653bn) over the past year.

8E) … Benson te writes Venezuela Devalues Currency By A Third; Symptoms of Hyperinflation

8F) … Benson te writes PBOC Sets Another Record Weekly Liquidity Injection

9) … Summary
Doug Noland writes in article New Bull or Bigger Ro,Ro? Global central bank “international reserve assets” (excluding gold) – as tallied by Bloomberg – were up $712bn y-o-y, or 6.9%, to a record $10.960 TN. Over two years, reserves were $1.670 TN higher, for 18% growth. …  And M2 (narrow) “money” supply rose $9.8bn to $10.413 TN. “Narrow money” has expanded 6.7% ($653bn) over the past year.

The chart of the 200% Dollar ETF, UUP, shows a breakout, and the US Dollar, $USD, rose a strong 0.6%, to close at 80.19. The Swedish Krona, FXS, The Euro, FXE, Ths Swiss Franc, FXF,   Rupe, ICN, the Australian Dollar, FXA, the Canadian Dollar, FXC,  and the Emerging Market Currencies, CEW, traded lower.  The Brazilian Real, BZF, rose to strong resistance.  The US Dollar is no longer sinking it is rising; currencies are no longer floating, they are sinking.  The US Dollar can no longer serve as the world’s reserve currency.

Derisking out of Nation investment, EFA, and Small Cap Nation Investment, IFSM, and deleveraging out of Commodities, DBC, on the exhaustion of the world central banks authority, has commenced competitive currency devaluation.  Monetization of debt by the US Fed, the ECB, and the Bof Japan, and the PBOC, has finally turned “money good” investments, bad.   Excessive credit liquidity has commenced the death of currencies.  The chart of Major World Currencies, DBV, and Emerging Market Currencies, CEW, both show a trade lower from recent seven month peak highs.  The chart of Commodity Currencies, CCX, shows a trade lower from an ascending wedge pattern.
Debt deflation, that is currency deflation, is causing the Milton Friedman Free To Choose Floating Currency System, that is the fiat money system, to start to die.

The twin spigots of Liberalism’s Finance, these being central banks monetary policies of credit liquidity, credit support, and quantitative easing, as well as currency carry trade investment based upon a falling Yen, have run dry and have turned toxic.

Liberalism’s Inflationism is turning into Authoritarianism’s Destructionism, with the result that the Age of Fiat Asset Inflation is ending, and the Age of Fiat Asset Deflation, is commencing.

The Mario Draghi Trade, that is the Euro Yen Currency Carry Trade, EUR/JPY, came to an end on February 7, 2012, as it closed lower at 125.50, as the Euro, FXE, closed 0.9% lower at 132.92, and the Yen, FXY, closed 0.1% lower at 104.71.  With a full debased Yen Currency Carry Trade, there is no more fuel to stimulate Global Producers, FXR, or Nation Investment, EFA, and  IFSM.  As the dynamos of corporate profit and global growth, continue to wind down, a debt deflation cycle of falling currencies, and rising interest rates will intensify, causing the destruction of fiat wealth.

With increasing interest rates, on a Steepening 10 30 US Sovereign Debt Yield Curve, $TNX:$TNY,as is seen in the Steepner ETF, STPP, steepening, Bonds, BND, will be continually trading lower.   And with the failure of Major World Currencies, DBV, and Emerging Market Currencies, CEW, and the derisking out of World Stocks, VT, VSS, and the deleveraging out of Commodities, DBC, a see saw destruction of fiat wealth has commenced.

A paradigm change is in the process of occuring. Liberalism’s democratic governance is pivoting to Authoritarianism’s regional governance.  Investment choice is transitioning  to leader diktat.

The chart of S&P 500, $SPX, shows a weekly gain of 0.4% to achieve an Elliott Wave 5 High to close at 1,157; with an ETF, SPY, close at 151.80. In contrast, the chart of World Stocks, ACWI, shows a weekly loss of 0.6% to enter an Elliott Wave 3 Down to close at 50.06. The chart of the Philippines, EPHE, shows a weekly gain of 1.9%, to an all time high of 38.60.

A nascent investment demand for gold has commenced, as is seen in the chart of the gold based ETFs, UGL, and DGP, trading higher, as Gold, GLD, has been trading higher since January 1, 2013; it’s chart shows that it stands at the apex of a consolidation triangle at 161.50, with support at 160. Spot Gold, $GOLD, is trading at is 200 Day Moving Average at $1,660

This article Stocks Trade Lower On Fears Of Eurozone Financial And Political Instability
has been posted to the internet.

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