Presidents’ Day report on the investment implication of the pivoting of Liberalism to Authoritarianism
1) … An investment demand for gold will be commence on the unwinding of the Euro Yen Currency Carry Trade and on competitive currency devaluation.
Keynesian and Monetarist stimulus, specifically the US Fed’s ZIRP, and Quantitative Easing, the ECB’s LTROs and OMT, the BoJ’s Unlimited Easing and PBOC monetary injections have stimulated global growth and trade, as well as have developed corporate profitability and rewarded investors who went long when QE1 commenced, or who hung in with their investments as they recovered.
Sovereignty begets seigniorage, that is moneyness. Where seigniorage exists, that is where moneyness manifests, there exists a sovereign producing it.
Sovereign nation states, and their central banks, such as the US Fed, the ECB, the BoJ, and the PBOC, are the sovereigns that have produced the seigniorage that stimulating Nation Investment, EFA, Small Country Nation Investment, IFSM, Emerging Market Investment, EEM, Global Production, FXR, Dividend Investment in yield high yield bearing ETFs, such as Vanguard REITS, VNQ, such as SPG, and Mortgage REITS, REM, as well as Risk Investment in Leveraged Buyouts, PSP, Junk Bonds, JNK, Senior Bank Loans, BKLN, Emerging Market Bonds, EMB, Spin Offs, CSD, and IPOs, FPX, as is seen in the ongoing two year combined chart of EFA, FXR, VNQ and PSP.
Since the eruption of the global financial crisis in 2008, the US Federal Reserve has increased its holdings of financial assets some threefold. These purchases of financial assets added to the supply of dollars and worked to push down the US Dollar, $USD, UUP, both expanding fiat assets globally and increasing exports from a number of US based industries, such as Metal Manufactures such as STLD, RS, WOR, VMI, AZZ, CMC, and ITW, seen in this Finviz Screener, Specialty Chemical Manufacturers such as PPG, seen in this Screener, US Infrastructure Stocks, PKB, such as USG seen in this Screener, and Small Cap Industrial Stocks, PSCI, such as LECO, SWK, and BGG, seen in this Screener.
The Sovereignty of Liberalism is at its zenith. And the US is Liberalism’s Premier Sovereign. The US, the second of two iron legs of global hegemonic power since the late 1700s, is as President Obama just finished speaking in the State of the Union Address, manifesting Peak Hegemony.
The adoption of the Milton Friedman Free To Choose Floating Currency Regime has produced Liberalism’s Peak Credit, Peak Currencies, Peak Nation Investment, Peak Global Production, Peak Stock Wealth, Peak Central Bank Wealth, and Peak Sovereignty, pretty much in that exact order.
Dollar Hegemony is at its peak, as Allan Sloan communicates in Fortune Magazine article The Fed’s Big Dollar Gamble. Ben Bernanke’s low interest rate policy has driven down the dollar; the Fed’s keeping-lowering-rates program doesn’t have an an indefinite shelf life. The bottom line is that pharmaceutical stimulus is forever; but Fed stimulus isn’t. It’s as Ron Paul, in Lew Rockwell, writes we are seeing The End Of Dollar Hegemony.
New sovereignty, new sovereigns, and new sovereign wealth is coming on the unwinding of the Euro Yen Currency Carry Trade, that is the EUR/JPY, together with competitive currency devaluation. These two agents will destroy, firstly fiat wealth, secondly the traditional cohesion of the EU as witnessed by the rising level of protests, such as the reported by the Euro News YouTube report Anti-austerity protests on Portugal’s streets, and thirdly, the global hegemonic power of the US.
Inflationism turned to Destructionism on Valentines Day, February 14 and on Friday February 15, 2015, as World Stocks, VT, Commodities, DBC, joined Bonds, BND, in turning lower on the exhaustion of the world central banks’ monetary authority and resulting inability to stimulate global growth and corporate profitability, as well as on the dynamic that the monetary policies of the US Fed, the ECB, the BoJ, and the PBOC, have crossed the rubicon of sound monetary policy, and have turned “money good” investments, bad.
The chart of the S&P 500 Weekly, $SPX, SPY, crested February 11, 2013, at 152.11, in an Elliott Wave 5 High. And World Stocks Weekly, ACWI, crested January 28, 2013, at 50.34, in an Elliott Wave 2 High. Nifty Charts writes Weekly $SPX chart has hit a crucial resistance line
Ryknow of PositiveExpectedValue(You) writes This is an equity rally driven by one simple factor: the growth of debt. In this entry I will show charts and give explanations that should leave very little questions on why I see the end results of this being a flight from capital markets. It has been the most heavily ended stocks which have drawn strong investor interest; these include, Diversified Equipment Manufacturer, GE, Paper Producer, IP, and Dig and Dirt Moving Stock, MTW, Rubber and Plastics Manufacturer, CSL.
It has been the Dividend Paying Stocks Excluding Financials, DTN, that is the first of two factors underwriting Nation Investment, EFA, Small Cap Nation Invesment, IFSM, Global Producers, FXR, Emerging Markets, EEM, and other yield bearing instruments such as VNQ, and REM, as is seen in the combined ongoing Yahoo Finance Chart, of DTN, EFA, IFSM, FXR, EEM, and VNQ.
And more importantly, the second factor in underwriting such wealth has been trust in the Distressed Investments held by the US Federal Reserve, that were taken in under QE1, such as those traded by Fidelity Investments FAGIX, and exchanged for “money good” US Treasuries; it is these that have been the basis for Liberalism’s expanding wealth and Dollar Hegemony. But the Distressed Investments topped out January 22, 2012, portending a turn lower in all forms of fiat wealth.
After a soon coming Financial Apocalypse, that is a credit bust and financial system breakdown, two forms of sovereign wealth will manifest under Authoritarianism.
The first form of sovereign wealth will be physical possession of Gold, GLD, either in bullion form, or in Internet Trading Vault form, on platforms such as BullionVault, which will be the Investors form of sovereign wealth. Gold, GLD, is both a currency and a commodity; and it is being fully debased by the rise of the World’s Major Currencies, DBV, and Emerging Market Currencies, CEW; and a sell of the Japanese Yen, FXY. Spot Gold, $GOLD, at $1600, is back at August 2012 levels; but is up 134% from the 2008 Lehman Event. Gold will soon will be trading higher as fiat wealth of World Stocks, ACWI, Base Metals, DBB, Major World Currencies, DBV, and Emerging Market Currencies, CEW, and Bonds, BND, tumble into the Pit of Financial Abandon. The Gold ETF, traded down to 155.75, and could conceivably trade lower to 147.50. An inquiring mind asks will silver go boom or will silver go bust? Resource Investor reports Bank short silver positions near record, risk squeeze. And Gold Money reports Spike in banks’ net short silver position. I believe that despite the short positions, Silver, SLV, is simply a base metal, and will trade lower with Base Metals, DBB.
The second form of sovereign wealth will be diktat, coming from regional sovereign leaders, from regional sovereign bodies such as the Troika, and from public private partnerships, managing regional economic production, conserving regional natural, and overseeing human resources.
2) … The very nature of money is changing as the world pivots from Liberalism to Authoritarianism; money will become a means to pay the debts of Liberalism.
The Mediterranean nations of Greece, GREK, Italy, EWI, and Spain, EWP, have been in the throes of sovereign and banking crisis since may 2010, when Herman Van Rompuy came forward with the first of what is now three Greek Bailouts, and now have finally introduced Systemic Risk.
Hans-Werner Sinn writes in Project Syndicate The collateral damage of Europe’s rescue. The euro’s appreciation lays bare the huge collateral damage that Europe’s rescue policy has caused. The measures taken so far have opened channels of contagion from Europe’s crisis-ridden peripheral economies to the still-sound economies of Europe’s core, placing the latter’s taxpayers and pensioners at great financial risk, while hindering long-term recovery in the troubled countries themselves. True, Europe’s rescue policy has stabilized government finances and delivered lower interest rates for the over-indebted economies. But it has also led to currency appreciation, and thus to lower competitiveness for all eurozone countries, which may yet turn into a debacle for the southern eurozone and France, which are too expensive anyway, and for the euro itself. The ECB’s rescue operations have hindered the internal depreciation, lower prices for assets, labor, and goods, that the troubled economies need to attract fresh private capital and regain competitiveness, while the euro’s appreciation is now compounding the challenge. In short, Europe’s rescue policy is making the eurozone’s most serious problem the troubled countries’ profound loss of competitiveness, even more difficult to solve.
Bloomberg reports, Lars Seier Christensen, the CEO of Saxo Bank, says he would be a “seller of the EUR at anything near 1.40,” noting that “right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.” … “people have been dramatically underestimating the problems.” …. “the whole thing is doomed”.
Phoenix Capital Research, writes in Zero Hedge If Europe were a house… It’d be condemned. One of the primary focal points of our writing is the corruption that has become endemic to the political and financial elites of the world. When we refer to corruption we are referring to insider deals, cronyism, lies and fraud. Since the Great Crisis began in 2008, these have become the four pillars of the financial system replacing the pillars of trust, transparency, truth and reality that are the true foundation of capitalism and wealth generation.
As we regularly note, corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (namely someone gets in major trouble), then everyone starts to talk.
In this sense, the entire EU has been held together by Draghi’s credibility as head of the ECB. The fact that we now have a major scandal indicating that he was not only aware of fraudulent deals in 2010, but gave them a free pass will have major repercussions for the future of the Euro, the EU, and the EU banking system.
We hope by now that you see why we have remained bearish on Europe when 99% of analysts believe the Crisis is over. The only thing that has the EU together has been the credibility of politicians who we are now discovering are all either corrupt, inept or both.
To use a metaphor, if Europe were a single house, it would be rotten to its core with termites and mold. It should have been condemned years ago, but the one thing that has kept it “on the market” was the fact that its owners were all very powerful, connected individual. We are now finding out that the owners not only knew that the home should have been condemned but were in fact getting rich via insider deals while those who lived in the house were in grave danger.
As we stated at the beginning of this issue, corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (in that someone gets in major trouble), then everyone starts to talk.
Business Insider adds, The new Spanish debt stats will give you chills. Insolvent sovereign nations, such as Ireland, EIRL, Italy, EWI, Greece, GREK, and Spain, EWP, and their insolvent financial institutions, EUFN, such as NBG, and SAN, are unable to provide seigniorage, that is moneyness, to stocks, such as Pharmaceutical Producers, NVO, Specialty Chemicals, LYB, Beverage Manufactuers, CCH, Energy Producers, E, Software Manufacturers, SAP, Copper Mining Stocks, COPX, Cement Manufacturers, JHX, Agricultural Chemicals, MON, Semiconductor Equipment Manufacturers, ASML, NXPI, Retailers, LUX, Telecom Services, TEF, TI, PT, and Base Metal Commodities, such as Lead, LD, and Tin, JJT. These investments were given seigniorage by the regional soveign, that being the ECB, and that sovereignty is beginning to wane as is witnessed by a decline in their stock market values..
The failure of the stock value Eurozone periphery nation states, that is the PIIGS, traded as Ireland, EIRL, Italy, EWI, Greece, GREK, and Spain, EWP, as investment vehicles, is the defining pivotal event in world investment history as the paradigm of Liberalism transitions into Authoritarianism. Nation State Investment, EFA, and Small Cap Nation Investment, IFSM, is failing, and World Stocks, VT, are trading lower. Volatility, VIXM, is turning up as investors are starting to derisk out of stocks and delever out of commodities.
It is reasonable to believe that a see-saw destruction of wealth will now commence. Total Bonds, BND, which have fallen in value two percent since December 6, 2012, will be going higher for a while, as the Major World Currencies, DBV, and Emerging Market Currencies, CEW, trade lower in competitive currency devaluation. Needless to say, investing in IPOs, FPX, will be a losing endeavor. Expecting a return of capital from investing in Dividend Appreciation, VIG, is an unreasonable expectation.
Money is no longer cheap as bond vigilantes have called for a steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as is seen in the Steepner ETF, STPP, steepening since December 6, 2012, when Bonds, BND, traded lower. One of the defining attributes of the shift from Liberalism to Authoritarianism is the end of ZIRP, as the Interest Rate on the Ten Year US Note, ^TNX, has risen to 2.01% from its September 14, 2012 low. The weekly chart of International Treasury Debt, BWX, seen in this Google Finance Chart shows a 4% loss since its September 14, 2012, high.
Money, and moneyness, as it has been known, is going to be literally dissolved away by the loss of national sovereignty of the EU periphery nations, and the failure of the European Financial Institutions, EUFN. On Friday February 15, 2013, disinvestment out of European Financials, EUFN, stimulated derisking out of the following investment sectors:
Solar, KWT, -1.8%
Small Cap Energy, PSCE, -1.8%
Small Cap Energy Service, IEZ, -1.8%
Energy Services, OIH, -1.4
Semiconductors, XSD, -1.3
Emerging Market Infrastructure, EMIF, -1.3
Energy, PXE, -1.1
Emerging Markets, FEMS, -1.0
Coal Miners, KOL, -1.0, such as WLT, ANR, BTU, ACI, JRCC
Energy Service, FLM, -0.9
Steel Producers, SLX, -0.8
Copper Miners, COPX, -07
Debt deflation, that is currency deflation, is going to pick up. An unwinding Euro Yen Currency Carry Trade, EUR/JPY, will be stimulating nation disinvestment out of heavily currency carry traded Switzerland, EWL, stocks, such as RIG, WFT, NE, SYT, TEL, FWLT, ABB, MT, ACE, TYC, and STM, especially, CS. Competitive currency devaluation at the hands of currency traders will be causing deleveraging out of the Swiss Franc, FXF, as well as the other world currencies.
Nick Beams of WSWS writes G20 issues empty declaration against currency wars. Because the dollar is the foundation of the international monetary system, the inevitable consequence of “quantitative easing” is to lower the value of the dollar in relation to other countries. This creates economic difficulties for US rivals both in export markets and in their domestic markets, due to the increased pressure of international competition.
Japan has been among those countries adversely affected. However, its program of lowering the value of the yen has impacted on its competitors, in particular South Korea. The head of South Korea’s central bank has warned that its future growth could be adversely affected.
Before the meeting got underway, stern warnings were issued about the dangers of competitive devaluation. “We refuse to enter into any kind of currency war,” the French finance minister Pierre Moscovici declared. Britain’s chancellor of the exchequer, George Osborne, took an even stronger line. “Currencies should not be used as a tool of competitive devaluation,” he said. “The world should not make the mistake that it has made in the past of using currencies as the tools of economic warfare.” However, following Osborne’s remarks, the senior Bank of England policymaker Martin Weale advocated precisely that. In a speech delivered on Saturday, he said that a 25 percent depreciation of the British pound in 2007-2008 had had little impact on boosting exports and that further depreciation was required. “The perhaps most natural means of resolving the problem is for the nominal exchange rate to fall,” Weale said
The G20 meeting held in April 2009 was full of promises of coordinated action to stimulate the world economy. At the Moscow meeting, however, there was barely even pretence that such action would be taken. This was despite the fact that at least one-third of G20 countries are officially in recession. The communiqué simply said that “ambitious reforms and coordinated policies” were the key to achieving strong sustainable growth, without specifying what they might be.
Yes indeed, the G20’s declaration is totally empty. The Age of Fiat Asset Inflation is pivoting into the Age of Fiat Asset Deflation, as investors derisk out of Emerging Market Investment, EEM, and Nation Investment, EFA, and delever out of Commodities, DBC, such as Natural Gas, UNG, Nickel, JJN, Tin, JJT, and Copper, JJC. Fiat Asset Deflation will pick up steam as currency traders call Major World Currencies, DBV, such as the British Pound Sterling, FXB, and Emerging Market Currencies, CEW, lower, with the result that the US Dollar, $USD, UUP, will be going higher for a while.
Dave Fairtex, of Market Daily Briefing writes in The Automatic Earth makes the case Europe is in deflation. Now don’t get me wrong, if the Spanish banks (among others) had been marking their loans to market, deflation would have arrived long ago, but according to the data series provided by the ECB, Official Europe has now recognized that they are in deflation. However you slice it, deflation is NOT a good sign for the equity markets. Fewer bank loans means less money to buy stuff.
The global economic and political tectonic plates are shifting as the International Reserve Currency System crumbles with the rise of the US Dollar, and the failure of currencies. A New System of Regional Governance will come forth to provide regional economic and political security, stability, and sustainability.
I wrote Risk on momentum trading failed on Valentines Day, Thursday, February, 14, 2013, this being confirmed in the Risk On ETN, ONN, trading lower, and the Risk Off ETN, OFF, trading higher. Volatility, ^VIX, hit a double bottom at 12.46. And VIXM, traded down while, VIXY, traded up.
ETF Trends reports on SVXY relating Inverse VIX ETF rises 170% as Volatility hits five year low.
Jesus Christ is at the helm of the economy of God, Ephesians 1:10, bringing forth the Beast Regime.
Operating through Destiny, Revelation 1:1, He is replacing the Banker Regime of Liberalism with the Beast Regime of Authoritarianism,.and that Crony Capitalism, in America, European Socialism, in France, and Greek Socialism, in Greece, is being replace by Regional Governance, Totalitarian Collectivism, and Debt Servitude, in Euroland, according to Revelation 13:1-4
This as Jesus Christ has unleashed the First Horseman of the Apocalypse, to transfer the baton of sovereignty from nation states to regional leaders, regional bodies, and soon regional public private partnerships, as presented in Revelation 6:1-2
And is bringing forth from the two iron legs of global hegemony, these being the UK and the US, a Ten Toed Kingdom of regional governance, where toes of a miry mixture of iron diktat and clay democracy, rule in the world’s ten regions, as foretold in Daniel 2:25-45. It’s as Peter Schiff relates in Yahoo Breakout America Is Becoming the United States of Britain. The President & CEO of Euro Pacific Capital says the near-term fate of the colonies is being foreshadowed across the pond as its sovereignty is crumbling.
Germany will be the hub of all economic production in Europe for ever. The PIGS will be desolate, hollow moons, revolving around Planet Germany, existing as colonies of Brussels and Berlin technocratic government. Germany will be the epicenter of a revived Roman Empire, exercising regional governance over vassal peripheral Eurozone states.
Of note, Tyler Durden reports German lawyer to head Vatican Bank A German pope may be vacating the Vatican but a German lawyer is about to head its bank, an institution some say is as important if not more, and whose shady dealing some say may have been the reason for the pope premature departure. Per Reuters, “The Vatican appointed German lawyer Ernst von Freyberg to be the new president of its bank on Friday, filling a post left vacant since May when the previous head was ousted from the scandal-tainted institution. As it grows in prominence, Germany will transition from being a One Euro Government to being a One World Government as foretold in Daniel 7:7: the fourth beast, and Daniel 7:23: the world empire.
The first beast is presented in Daniel 7:4 as being, “Like a lion; it has eagles wings”. This beast was Babylon, whose emblem was a lion with eagle’s wings.
The second beast is presented in Daniel 7:5, “Then behold! Another beast, a second one, similar to a bear; it was placed on one side, and there were three ribs in its mouth between its teeth; and this is what they said to it, ‘Arise, devour much flesh!’” The second beast was Medo-Persia.
The third beast is presented in Daniel 7:6, “After this I was watching and behold! Another beast, like a leopard, with four bird’s wings on its back; the beast had four heads, and it was given dominion”. The third beast was Greece. When Alexander the Great died in 323 C.E., his empire was divided between and ruled by four of his generals.
The fourth beast, is presented in Daniel 7:7-8, “After this I was watching in night visions, and behold! A fourth beast, exceedingly terrifying, awesome and strong. It has immense iron teeth, and it was devouring and crumbling, and trampling its feet what remained. It was different from all the beasts that had preceded it, and it had ten horns. As I was contemplating the horns, behold! Another horn, a small one, came up among them, and three of the previous horns were uprooted before it. There were eyes like human eyes in this horn, and a mouth speaking haughty words”. The fourth beast, Empire Germany, will manifest as a revived Roman Empire, that is an authoritative kingdom from today’s EU Debt Crisis, whose Emperor, The Sovereign, seemingly one of little authority, will eventually conquer three of the world’s other ten regional kings.
And Daniel 7:23, relates, “Thus he said, the fourth beast shall be the fourth kingdom upon the earth, which shall be diverse from all kingdoms, and shall devour the whole earth, and shall tread it down, and break it to pieces.” The coming European Empire will eventually rise to govern the world as a one world government, which will precede the coming of Christ to establish his World Wide Kingdom.
The economic and political shift from Liberalism to Authoritarianism being foretold in Daniel 2:25-45, as a Ten Toed Kingdom, that is a global empire, with toes of a miry mixture of iron diktat and clay democracy; and a Beast Regime, in Revelation 13:1-4, is unseen by practically everyone, as it has a coat of a leopard, whereby it blends in with all of mankind’s media, technology, banking, educational, banking, government and religious and think tank institutions; the feet of a bear which enables it to stand its ground as well as root out its enemies, and the mouth of a lion to make authoritative governing statements; this minotaur, is the ultimate predator, devouring all who it chooses to consume.
With the Great Paradigm Shift from Liberalism to Authoritarianism, political governance will change from the rule of sovereign nation states to regional governance; and economic experience from investment choice to debt servitude; as leaders meet in summits to renounce national sovereignty and pool sovereignty regionally, a concept that has been presented by Herman van Rompuy for a long time.
Under Liberalism, Asset Managers were the very wheels of fortune that drove credit and prosperity. Under Authoritarianism, Public Private Partnerships will be the chariots of debt servitude and austerity.
Asset Managers, such as BLK, BX, WDR, EV, STT, WETF, seen in this ongoing Yahoo Finance Chart, were the mints, that is the foundries of Liberalism’s wealth, rewarding investors for investing in corporate profitability, and economic growth. Yet under Authoritarianism, the Asset Managers will be seen as burned out foundries of investment mania.
Under Authoritarianism, Public Private Partnerships, will be the agents of diktat that manage regional resources, oversee the factors of production, and direct economic activity for the region’s security, stability and stability. With the paradigm shift from Liberalism to Authoritarianism, investment in US Infrastructure, PKB, and Emerging Market Infrasturcture EMIF, will rapidly evaporate. To survive, firms such as Macquarie Infrastructure Company, MIC, Quanta Services, PWR, and EMCOR Group, EME, will move from being service companies to being public private partnerships. And regional commodity and commerce exchanges will support trade and economic activity in un-dollar, that is dollar-less, transactions; that is something akin to Paxum e-wallet based upon a regional currency or something akin to the Alibaba business-to-business online marketplace.
Liberalism was characterized by wildcat finance, a Doug Noland Term, where bankers sought to outdo one another with financial schemes. Authoritarianism is characterized by wildcat governance where authoritarians bite, rip, and tear one another in order to rise to be the top dog.
Under Liberalism, money was the reward for meritocracy and the resource of credit.
Under Authoritarianism, money is the means of repaying liberalism’s debts.
3) … Inasmuch as Libertarianism is transitioning to Authoritarianism, an inquiring mind asks, does the concept of a sovereign individual and a sovereign investor ring true?
Libertarians proclaim themselves to be sovereign individuals existing in self ownership of one’s person. Wikipedia relates John Locke wrote in his Two Treatises on Government, “every man has a Property in his own Person.” Locke also said that the individual “has a right to decide what would become of himself and what he would do, and as having a right to reap the benefits of what he did.” And Josiah Warren was the first who wrote about the “sovereignty of the individual”.  And JPMorgan makes the claim that it partners with sovereign investors and governments in all parts of the world.
When reflecting from a bible point of view, there are two types of people.
The first type of person is the Fiat Individual, one who has identity and experience out of declarations of philosophy and religion. In light of bible prophecy of Daniel 2:25-45, and Revelation 13:1-4, the Fiat have daily experience in the Beast Regime’s panopticon of regional governance, totalitarian collectivism, and debt servitude. They have political life in the Sovereign, Revelation 13:5-10. And they have spiritual and economic life in the Seignior, Revelation 13:11-18.
The second type of person is the Christian, one who believes in Christ, and has life in Him. In light of Scripture, these are God’s called out ones; they were chosen by God to be in Christ from before the foundation of the world; appointed to live in sundry times and various places by Him; know him as the All Sovereign One, and experience Him as the All Sufficient One.