Financial Market report for the week ending June 10, 2013
I … Introduction: Only the elect have basis in reality and from it have the possibility to receive grace, truth, and mercy.
The apostle Paul reveals that reality is found in Jesus Christ, Ephesians 4:21, which according to the Apostle John has facets of truth and grace, John 1:17. This beloved of the Lord, reveals that mercy is available to those who keep Christ’s word of endurance and shrink not from his name, Revelation 3:8-10.
II … In this week’s financial market trading
II A) … Dispensationalism presents the concept that Liberalism was an age of nation state, investment choice based inflationism, producing a moral hazard credit experience of prosperity. Jesus Christ acting in dispensation, that is in the administrative plan of God for the fullness and completion of all things in every age, Ephesians 1:10, terminated liberalism in May of 2013, and is establishing Authoritarianism, as the age of statist regional governance, diktat based destructionism, producing a debt servitude experience of austerity.
II B) … On Monday, June 3, 2013, Turkey, TUR, plummeted, Japan, EWJ, and Japan Small Caps, JSC, and the Philippines, EPHE, traded lower, as the intraday chart of the S&P 500, SPY, manifested a parabolic rise, as Risk Assets, in particular the Small Cap Pure Value Stocks, RZV, such as the Junior Gold Miners, GDXJ, the Junior Gold Miners, GDXJ, Apparel Retailers DEST, CTRN, NWY, BEBE, BODY, BKE, PSUN, MW, WTSL, EXPR, GES, CBK, the Automobile Retailers, LAD, SAH, KMX, Recreational Vehicles, DW, WGO, and the Financial Services, such as WRLD, EEFT, ENV, GFIG, FXCM, rose, on higher Major World Currencies, DBV, and higher Emerging Market Currencies, CEW, as the US Dollar, $USD, UUP, traded lower, to close at 82.68, down from its recent high of $84.40, ignoring the WSJ report Weak signs for US output: Factories suffer worst slump since end of recession. US factories in May posted their worst month since the end of the recession, as weakness overseas overwhelmed a still-shaky manufacturing recovery at home.
Three signs of a stock market top.
1) Risk Assets peaking out. The rise in the Small Cap Pure Value Stocks, RZV, relative to the Small Cap Pure Value Stocks, RZV:RZG, has risen to a two year and six month high
2) Screencast reports that the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years meaning that lots of “smart money” has been getting out of the market and lots of “dumb money” has been pouring in.
3) Market Oracle reports Margin debt on the New York Stock Exchange has set a new all-time high. Margin debt is the amount of money borrowed to purchase stocks reached its all-time high in April 2013. Margin debt registered at $384.3 billion as the key stock indices hit new record highs. The highest margin debt ever reached prior to this was in July of 2007, when it stood at $381.0 billion.
The chart of the 200% Dollar ETF, UUP, shows that the price objective of the US Dollar is being achieved; that is the topping out of the US Dollar is coming in around 82.95 to 84.40, as it will be pushed a little higher as Major World Currencies, DBV, and Emerging Market Currencies, trade lower in ongoing competitive currency devaluation, at the hands of currency traders exiting Yen based currency carry-trades, such as the EUR/JPY, and as bond vigilantes call interest rates higher and go short the most toxix of debt, such as Junk Bonds, JNK, on a steepening of the 10 30 US Sovereing Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, rising in value. Soon even the US Dollar, $USD, will be falling lower into the pit of financial abandon, as all forms of fiat wealth, Major World Currencies, DBV, Emerging Market Currencies, CEW, Stocks, VT, and Credit, AGG, trade lower on the exhaustion of the world central banks’s monetary authority.
Christopher Quigley writes in Financial Sense, Get ready to be “Cyprused” at a bank near you. From an investors perspective it is time to exit both equity and credit investments and start to dollar cost average into the physical possession of gold, both in bullion form and in Internet trading vaults such as Bullion Vault, and for Institutional Investors to do likewise as well as to start short selling.
Bloomberg reports American International Group AIG, Prudential Financial, PRU, and a unit of General Electric, GE, were named systemically important by a panel of US Regulators. The companies were identified by US regulators as potential risks to the financial system in a step toward putting the firms under tighter government scrutiny.
Bloomberg reports Assad’s Hezbollah ally prepares northern attack, opposition says. Thousands of troops loyal to Syrian President Bashar al-Assad and allied Hezbollah militiamen are preparing to enter the province of Aleppo, a rebel stronghold close to the Turkish border, activists said. Assad’s forces will seek to enter the province’s northern region, Al-Jazeera television said, citing unidentified rebels
CNBC reports Two-thirds of Americans don’t know if they will insure under Obamacare. There’s no assurance folks will be buying insurance under Obamacare, and that could spell trouble for the Affordable Care Act
Pater Tenebrarum of Acting-Man blog writes in Zero Hedge, Merkel to Brussels on Fiscal Union: “Nein”. A German election is drawing close and it is evident in many small things that are happening lately. The latest is that Mrs. Merkel is now apparently distancing herself from her erstwhile demands to create a ‘fiscal union’ and give the eurocracy in Brussels more powers. Incidentally, her change of heart comes shortly after her summit with France’s president Hollande, which indicates that the latter has probably let her know that France is none too happy with the idea either. Since this means that the drive toward more centralization will be slowed down, we take it as good news. “German Chancellor Angela Merkel has come out against handing the European Commission more powers, in the clearest sign yet that she is reining in her ambitions to create a “fiscal union” in which euro members cede control of their budgets to Brussels.
The comments, made in an interview with weekly Der Spiegel, come days after Merkel held talks with President Francois Hollande in Paris and the two unveiled joint proposals for the future shape of the euro area, including the creation of a permanent president of the Eurogroup forum of finance ministers.
Merkel spoke out strongly in favour of closer fiscal integration last year, but France and some other euro members have deep doubts about ceding sovereignty, a step which would require politically sensitive changes to the EU treaty, and Berlin appears to have realized that this resistance is too great to overcome for now.
With a German election looming in September and a new anti-euro party threatening to eat into support for her conservative bloc, Merkel may also be adjusting her message for voters at home, many of whom are leery about ceding national powers.
“I see no need in the next few years to give up more powers to the Commission in Brussels,” Merkel said in the interview, adding that she agreed with Hollande on EU member states cooperating more on economic issues.
“We are thinking for example of the labour and pension markets but also of tax and social policy. Economic policy coordination in Europe is far too weak, it must be strengthened and this is rather different to giving more competences to Brussels,” she said.”
Bloomberg reports EU seeks role in bank shutdowns that goes against German Plan. The European Commission is seeking to give itself the power to shut down failing euro-area banks as part of a draft crisis blueprint that defies German calls for a more decentralized approach. The Brussels-based authority is set to propose that decisions to force losses on crisis-hit lenders’ creditors, as well as other steps to prevent a disorderly collapse, should be taken largely out of national hands, according to a document obtained by Bloomberg News. While the system would include a “newly-created central resolution body,” final decisions would be taken by the commission itself
II B) … On Tuesday June 4, 2013, World Stocks, VT, Emerging Markets, EEM, and Aggregate Credit, AGG, both traded lower, as Reuters reports Wall Street ends down on fears Fed may scale back stimulus.
Volatility, ^VIX, rose, as is seen in the charts of TVIX and VIXY.
The Steepner ETF, STPP, rose, as the Interest Rate on The US Ten Year Note, ^TNX, traded at 2.14%, as Zeroes, ZROS, and the 30 Year US Governemnt Bonds, EDV, fell more than the US Ten Year Note, TLT. Long Term Corporate Debt, BLV, fell more than Corporate Debt, CSQ, inducing Aggregate Credit, AGG, lower.
Gary Dorsch writes of the rise in the Interest Rate on the 10 Year Government Bond, ^TNX, relating Dangerous divergences betweens Bonds and Stocks, James Carville, a former political adviser to President Clinton famously remarked at the time that “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody,” he remarked. However, the so-called T-bond vigilantes appeared to be dead and buried over the past few years, as the US-Treasury was able to borrow trillions of dollars, largely financed by the Fed at the lowest interest rates in history. Keeping the T-bond vigilantes on ice, is a key linchpin of the Fed’s Ponzi scheme, that’s used to inflate the value of the US-stock market and keep it perched in the stratosphere.
However, last month, (May ’13), something very strange began to happen. It looked as though the long dormant T-bond vigilantes were suddenly beginning to awaken from their slumber. Indeed, – the long-end of the US Treasury bond market suffered its worst monthly decline in 2-½-years, as yields jumped to their highest levels in 13-months. Ticker symbol TLT.N, – the iShares Barclays 20+ Year Treasury Bond fund lost -7% of its market value. It looked as though Wall Street’s bond dealers were whittling down their holdings of T-bonds, – acting upon insider information from the New York Fed, – that the biggest buyer in the T-bond market could soon reduce the size of its monthly purchases and thereby cause T-bond prices to fall
The Bernanke Fed is coming under increasing criticism. On May 29th, the 85-year old icon of central banking, – the greatest warrior against inflation in US-history, – former Fed chief Paul Volcker waded into the debate over when the Fed should start unwinding its radical QE operation, arguing that the “benefits of bond-buying are limited and is like pushing on a string.” Volcker launched a scathing critique of the Bernanke Fed, inferring the central bank had become a serial bubble blower. “The Fed is effectively acting as the world’s largest financial inter-mediator. The risks of encouraging speculative distortions and the inflationary potential of the current approach plainly deserve attention,” he warned.
Volcker reminded the new breed of Fed lackeys that the central bank’s basic responsibility is to maintain a “stable currency,” and that it should unwind its reckless scheme of massively increasing the US-money supply and blowing bubbles in the stock market. “Credibility is an enormous asset. Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment. The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives. Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse,” Volcker warned. Last week, the Treasury’s 10-year yield climbed above the 2%-level, following Volcker’s remarks.
Yields on 10-year T-Notes increased by a half-percent in the month of May, including a jump of +16-bps on May 28th, – seen as a signal that the Fed’s would scale back its QE-injections.“A slowing in the pace of purchases could be viewed as applying less pressure to the gas pedal, rather than stepping on the brake,” said Kansas City Fed chief Esther George on June 4th. “It would importantly begin to lay the groundwork for a period when markets can prepare to function in a way that is far less dependent on central bank actions and allow them to resume their most essential roles of price discovery and resource allocation. I support slowing the pace of asset purchases as an appropriate next step for monetary policy. Waiting too long to prepare markets for more-normal policy settings carries no less risk than tightening too soon,” Ms George added.The Kansas City Fed chief cited signs of overheating markets, including margin loans at broker-dealers at a record $384-billion in April.
Minor Earthquake in Tokyo Bond market. The recent sharp slide in US T-Notes was preceded by a tremor in the world’s second largest bond market in Tokyo. On April 4th, the Bank of Japan’s (BoJ) new governor, Haruhiko Kuroda, unveiled the most radical scheme ever, – designed to “shock and awe” Japanese bond traders into complete submission. The BoJ said it would double the amount of yen in circulation over the next two years, in order to whip-up inflation in the world’s third largest economy. The BoJ said it would trump the Fed, by printing ¥7-trillion each month, to be used to buy Japanese government bonds (JGB’s).
The BoJ was certain that it could continue to arm-wrestle Japanese banks and persuade its loyal citizens into buying 10-year JGB’s at yields of less than 1%, even as the BoJ says its aim is weaken the value of the Japanese yen, increase the costs of imports, and increase the consumer inflation rate to +2%. In other words, the BoJ expects investors to lock in negative yields for the next ten years. However, the gambit began to backfire, when yields on 10-year JGB’s rebounded from a historic low of 0.315% and surged to as high as 1% on May 23rd, – triggering a -7.3% crash in the Nikkei stock index. It was the Nikkei’s biggest one-day fall in 2-years, and kicked off an extended -17.5% slide to 13,050 by June 3rd.
It was later revealed on May 30th, that Japan’s biggest banks decided to slash their holdings of JGB’s to ¥96.3-Trillion, in the month of April, – a sign that their selling played a major role in pushing up yields to 1%. Japanese banks were unusually rebellious, – they dumped 11% of their JGB’s holding onto the BoJ’s balance sheet, fearing a major rout in the future. For the BoJ, trying to force JGB yields lower, when its trying to weaken the value of the yen and whip-up inflation, – is like trying to submerge a helium balloon under water.
If this exodus from the JGB market continues, it could blow apart the BoJ’s Ponzi scheme. Japan’s outstanding debt is equivalent to 245% of its annual economic output, and 92% of the debt has been financed by domestic savings. But this may not continue. A government panel’s draft report has reportedly warned that there is “absolutely no guarantee” that domestic investors will keep financing government debt. The BoJ has calculated that a rise in JGB yields of just 1% would lead to market losses equivalent to 10% of the core capital for the top Japanese banks, and 20% losses for the smaller regional banks.
Stock markets are under the spell of QE. In fact, both the BoJ and the Fed are in the crosshairs of the Bank for International Settlements (BIS), which warned on June 2nd, about the dangers of their ultra-cheap money policies that are driving up stock prices, despite worsening economic news. “Investors have ignored poor economic news as stocks have risen, leaving markets vulnerable to unsettling volatility and potential losses. Excessive monetary easing helped market participants to tune out signs of a global growth slowdown. But the rapid gains left equity valuations vulnerable to changes in sentiment, as witnessed in the recent bout of volatility in Japan,” the BIS warned.
Today, US Fed stimulated Homebuilding, ITB, led Risk Assets, Clean Energy, PBD, Wind FAN, Solar Energy, TAN, Biotechnology, IBB, Pharmaceuticals, PSP, Small Cap Pure Value, RZV, US Infrastructure, PKB, Leveraged Buyouts, PSP, and Mobile Home Construction, CVCO, lower. Of note Industrial Miners, PICK, Interent Retail, FDN, and Global ZIRP Induced Paper Products, WOOD, traded lower. Gold Mines, GDX, GDXJ, traded lower Bullion Vault reports Gold price falls as India blocks gold imports.
Premium REITS, KBWY, Water Resources, PHO, and Real Estate, IYR, led Yield Bearing Investments, lower.
Semiconductors manifested a blow off top as High Beta, STM, Netherlands based, NXPI, France Based, ALU, and US based, MPWR, ONNN, INTC, TXN, AMAT, XLNX, TQNT, AMBA, SMI, IMOS, INTT, CYMI, DIOD, PLAB led Semiconductors, SMH, seen in Finviz Screener, higher; while Netherlands based ASML, traded lower.
Countries trading lower included Greece, GREK, Egypt, EGPT, the Philippines, EPHE, Emerging Market Technical Leaders, PIE, India, INP, Veitnam, VNM, Sweden, EWD, Australia, EWA, Asia Excluding Japan, EPP, Indonesia, IDX, the Russell 2000, IWM, and China, YAO, China Small Caps, ECNS, China Financials, CHIX.
The failure of Credit, AGG, in particular Junk Bonds, JNK, and the derisking and deleverging out of Nation Investment, EFA, and Small Cap Nation Investment, IFSM, on currency carry-trade disinvestment, seen in the Major World Currencies, DBV, and the Emerging Market Currencies, CEW, trading lower, and the Japanese Yen, FXY, trading higher, is a defining characteristic, of Jesus Christ, working in the Economy of God, Ephesians, 1:10, to pivot the world out of the economic and political and economic paradigm of Liberalism and into that of Authoritarianism. The fiat money system introduced by Milton Friedman in 1971, based upon floating currencies died in May 2013; it is being replaced by the diktat money system, where diktat serves as credit, money, power and wealth.
The failure of nation investment is seen in Turkey, TUR, the Philippines, EPHE, Australia, EWA, New Zealand, ENZL, Thailand, THD, Greece, GREK, South Africa, EZA, Peru, EPU, and Chile, ECH.
Japan, EWJ, and Japan Small Caps, JSC, closed higher by as traders gobbled up shares ahead of tomorrow’s speech by Prime Minister Abe, in which he discusses Part III of Abenomics, with financial stocks such as MFG, SMFG, NMR, MTU, and IX, being strong gainers.
Tyler Durden reports in Zero Hedge The Debt Of Nations. Following on from our annual update on the wealth (re)distribution of nations, we thought it important to look at the other side of the household balance sheet – that of ‘debt’ to see just how much ‘progress’ has been made in the world. In the aftermath of the credit crisis (and the ongoing crisis in Europe), government debt levels continue to rise but combining trends in household debt highlights countries that have sustainable (and unsustainable) overall debt levels – and thus the greatest sovereign debt problems. Whether the ‘number’ is from Reinhart & Rogoff or not, the reality is that moar debt is not better and the nations with the highest debt-per-capita may surprise many. Critically, despite the rise in ‘wealth’ from 2000-2008, the ratio of debt-to-net-worth rose on average by about 50% (and in many nations
continues to rise). With the regular occurrence of sovereign debt crises, relatively little attention has been given to the parallel issue of personal debt. Yet household debt has transformed over the past 30 years from low level borrowing mostly securitized on housing assets into wholesale credit seemingly available to anyone for any purpose
II C) … On Wednesday, June 5, 2013, the economic supercycle that began in the late 1940s came to an end, as the mother of all bear markets began on the Abenomics crash in Japan, EWJ, JSC, which hit Asia Excluding Japan, EPP, and the Emerging Markets, EEM, quite badly, and turned US stocks, VTI, lower.
Japan’s Nikkei 225, NKY, fell 4% bringing the benchmark index’s losses to ten percent in the last ten trading days since its market peak and adding to pressure on Emerging Market Stocks, EEM, US Stocks, and World Stocks, VT, from both economic data and fears of Fed tapering, commencing the mother of all bear markets.
It was the Far East Financials FEFN, Asset Managers, ASMA, such as WETF, BLK, BEN, EV, AMP, WDR, LM, AMG, CNS, IVZ, Investment Bankers, KCE, such as JPM, European Financials, EUFN, such as IRE, Financials, IXG, the Too Big To Fail Banks, RWW, such as BK, C, BAC, Chinese Financials, CHIX, such as SHG, Emerging Market Financials, EMFN, such as BBD, BCH, Regional Banks, KRE, such as RF, ZION, CATY, CPE, SIV, HBAN, GBCI, PACW, SNV, FITB, OSBC, FULT, TRMK, ORIT, BOH, and Stock Brokers, IAI, ETFC, SCHW, TRO, AMTD, ITG, that led the markets lower.
The twin spigots of Liberalism’s Finance, these being trust in the most toxic of debt, as well as currency carry-trade financing failed, on May 24, 2013, transitioning the world from the Liberalism’s Banker Regime into Authoritarianism’s Beast Regime, thus terminating the fiat money system, and birthing the diktat money system.
The nation of Greece, traded by the ETF, GREK, is the very linchpin in the Economy of God, Ephesians, 1:10, as the sovereign Lord God, has designed it as a part of a collection of Mediterranean Sea states, known as the PIGS, for their profligacy, to be the beachhead for the rise of the Beast Regime of Revelation 13:1-4, to rise to rule the world in ten regions of totalitarian regional governance, and occupy in all of mankind’s seven institutions, to replace the Banker Regime that has governed the world since the introduction of the Milton Friedman Free To Choose Floating Currency System in 1971.
Fiat money died on May 24, 2013 with the failure of currency carry-trade investing, ICI, and disinvestment out of Junk bonds, JNK, on the failure of the world central banks’ monetary authority, and especially the Bank of Japan’s Kuroda Abenomics monetary policies. The monetary stimulus, credit liquidity, and monetization of debt initiatives of the US Federal Reserve and other central banks, have crossed the Rubicon of sound monetary policy, turning “money good” investments bad.
While the diktat money system was conceived by Herman van Rompuy acting together with the EU Finance Minsters, in early May 2010 with the provision of Greek Bailout I, as well as the more recent Greek Bailouts II and III, and the Cyprus Bank Bailin, the diktat money system was unleashed onto the world by the bond vigilantes calling the Interest Rates on the US Ten Year Note, ^TNX, higher, and the currency carry traders calling the Yen, FXY, higher, on May 24, 2013, inducing investors out of currency carry-trade, yield bearing investments, such as Electric Utilities, XLU, Mortgage REITS, Global Real Estate, DRW, and Premium REITS, KBWY, and then this week, inducing investors out of Nation Investment, EFA, and Small Cap Nation Investment, IFSM, as well as risk assets such as Biotechnology, IBB, and Small Cap Pure Value Stocks, RZV, which were the loss leader style of the day.
Yield bearing stocks trading lower included, DRW, TAO, KBWY, ROOF, AMJ, AUSE, BRAF, PHO, DBU, and SEA. Dividend Growth, VIG, leader McDonalds, MCD, fell 2.0%.
All most all of Asia, Exluding Japan, EPP, traded strongly lower; this included CAF, THD, EWA, KROO, EWH, EWHS, EPHE, IDX, IDXJ, ENZL, EWS, EWSS, EWY, and VNM.
Other nations trading lower included, EGPT, EWW, EZA, RSX, ERUS, EWD, EFNL, EWN, EWZ, RSX, ERUS, EFNL and EWN.
Sectors trading lower included, IBB, CARZ, PKB, BJK, FXR, IHF, RXI, PSP, PBS, ITB, PJP, SMH, and WOOD.
Automobile Dealerships, PAG, SAH, ABG, KAR, AN, KMX, LAD, seen in Finviz Screener, traded lower … Industrial Equipment, ROK, AB, ETN, LFUS, traded lower … Regional Airlines, RJET, JBLU, ALK, LUV, SKYW, seen in Finviz Screener, traded lower … Foreign Airlines, ASR, PAC, CPA, RYAAY, seen in Finviz Screener, traded lower … Advertising Agencies, IPG, WPPGY, OMC, and LAMR, seen in Finviz Screener, traded lower.
Aggregate Credit, AGG, traded somewhat higher but Junk Bonds, JNK, UJP, and the Euro Yen currency carry-trade, EUR/JPY, continued lower, a trend that developed Friday May 24, 2013.
The Australian Dollar, FXA, plummeted, turning Major World Currencies, DBV, lower, and Emerging Market Currencies, CEW, traded lower, as the Japanese Yen, FXY, traded strongly higher, unwinding carry-trade investments worldwide.
Jesus Christ is carring out the economic plan of God, Ephesians 1:10, and is unraveling the Four Apocalyptic Seals, Revelation 6:1-8, to destroy all economic and political life, as well as to take peace from the world, introduce scarcity, and unleash death by all types of bad actors.
Turkey, TUR, traded lower again as Bloomberg reportys Lira weakens as Turkish yields climb on sixth day of protests. The lira weakened and bond yields rose as anti-government demonstrations in Turkey continued for a sixthday. Shares slid, with Akbank TAS among the decliners as Bank of America Merrill Lynch cut the lender to underperform. Markets swung to negative after a record rally in two-year bonds yesterday followed the biggest plunge a day earlier. Protesters accusing Prime Minister Recep Tayyip Erdogan of autocratic governance and citing grievances, including alleged police brutality and curbs on alcohol sales, clashed overnight with police, who responded with tear gas and water cannons in about 10 cities.
Dow Jones reports IMF to publish paper admitting lapses in Greece bailout. IMF says own projections on Greece too optimistic. Says EU commission weak in crisis management.
Dow Jones reports Rehn hits back at IMF over Greece. European Union Economics Chief Olli Rehn had harsh words for the International Monetary Fund Friday as he responded to a report by the IMF criticizing the European Commission over the Greek bailout. “I don’t think it’s fair and just that the IMF is trying to wash its hands and throwing the dirty water on European shoulders,” Mr. Rehn said using unusually tough language.
Zero Hedge reports ECB To launch EU-wide audit of Bank’s balance sheets. Under Liberalism, wealth was generated by the world central banks, and was coined by the Too Big To Fail Banks, such as JP Morgan, JPM, via programs such as POMO, as well as by Asset Managers, such as Blackrock, BLK, via securitization of ETFs, such as RZV, PSP and PJP, for one’s investment gain. Under Authoritarianism, wealth is generated by the word, will and way regional sovereign bodies, such as the ECB, and is coined by the diktat of sovereign regional nannycrats and statist public private partnerships, such as Macquarie Infrastructure Company, MIC.
II D) … On Thursday, June 6, 2013, World Stocks, VT, US Stocks, VTI, and Emerging Market Stocks, EEM, bounced higher, as the US Dollar, $USD, UUP, traded strongly lower, to 81.52, taking Major World Currencies, DBV lower, as the Japanese Yen, continued strongly higher. The Swiss Franc, FXR, the British Pound Sterling, FXB, and the Euro, FXE, rose parbolically higher to new rally highs. Today was a risk on currency carry trade day driving a number of sectors higher; these included, ITB, IBB, IGN, PKB, and PJP. Aggregate Credit, AGG, rose, on higher Junk Bonds, JNK.
Chris Nichols of The Exchange reports Smucker slumps 4.3% as sales growth comes to a halt. Smucker, SJM, joins other big name staple producers such as CMP, HRL, GIS, and K, seen in combined Yahoo Finance chart, in a sell off as world cental bank monetary authority has failed to stimulate global growth and trade
Despite today’s stock market rally, the chart of the EUR/JPY, seen in ratio of FXE:FXY, communicates that the direction of the stock market is inexorable down. The significance of today’s stock rally action is that the plunge protection team and currency traders joined in a rally of the Euro, FXE, despite the WSJ report In Europe, angst fills sovereign bond gap. The cost of insuring some European government debt against default hit a record after regulators issued proposed rules on bank bailouts that would hurt bondholders. The move higher reflects a widening gap between what the market is saying and how the major ratings companies judge these countries. “Further downgrades are certain, and we have not seen the last screen shot of this movie yet,” said Lena Komileva, head of G-7 market economics at Tullett Prebon, a brokerage firm in London. The costs of insuring against a default by Western European sovereign borrowers in the credit default swap market surged, briefly touching a record on Thursday, according to data provider Markit. Swaps prices for Spain, Belgium and Ireland closed at records, according to Markit. The gap between yields on most European sovereign bonds and relatively safe German debt also widened. The angst among investors seemed inspired by a European Union proposal that bondholders should share the future cost of bailing out European banks.
A day is coming soon, when the currency traders will gain the upper hand and call the Euro, FXE, significantly lower, and the Yen, FXY, higher, resulting in deleveraging investors out of currency carry trade risk investment and junk bonds.
Bloomberg reports Draghi acts to expand credit to banks, Doesn’t signal more ECB bond buying. European Central Bank President Mario Draghi cut interest rates and offered banks unlimited cash for three years while damping speculation the ECB will buy more government bonds to stem the region’s debt crisis. Policy makers meeting in Frankfurt today reduced the benchmark rate by a quarter percentage point to 1 percent, matching a record low. They also loosened collateral rules so that banks can borrow more from the ECB and announced two unlimited three-year loans. The measures “should ensure enhanced access of the banking sector to liquidity,” Draghi said at a press conference. Hours before European leaders meet in Brussels, Draghi kept the onus on them to solve the two-year debt crisis by repeating his call for a “fiscal compact” and denying he had hinted the ECB would automatically support such an initiative with more bond purchases. Draghi’s comments roiled markets, with stocks and the euro rising on the bank-lending measures before falling after he damped expectations of more ECB bond buying. The euro sank more than 1 percent and traded at $1.3310 at 6:30 p.m. in Frankfurt. “All euro-area governments urgently need to do their utmost” to deliver fiscal sustainability, Draghi said.
Bloomberg reports Weidmann says ECB bond plan tantamount to state financing. Bundesbank President Jens Weidmann criticized the European Central Bank’s bond-buying plan, saying it is “tantamount to financing governments by printing banknotes.” “Monetary policy risks being subjugated to fiscal policy,” Weidmann said in a statement issued by the Frankfurt based Bundesbank today. “The intervention purchases must not be permitted to jeopardize the capability of monetary policy to safeguard price stability in the euro area.” While Weidmann represents Germany, the euro area’s largest economy, he was the only objector on the ECB’s 23-member council, where each national central bank governor has one vote. The Bundesbank, which is required to carry out ECB policy decisions, didn’t say it would stand in the way of bond purchases. “If the adopted bond-purchasing program leads to member states postponing the necessary reforms, this will further undermine confidence in the political leaders’ crisis-resolution capability,” Weidmann said. “The announced interventions in the government bond market carry the additional danger that the central bank may ultimately redistribute considerable risks among various countries’ taxpayers,” Weidmann said. “Such risk-sharing, however, can be legitimately authorized solely by democratically elected parliaments and governments.
Alex Barker of FT Brussels Blog reports Arise the Brussels Bank Resolution Authority. After months of deliberation and some not-so-private sparring with Berlin, the European Commission has pretty much anointed who it wants to be the all-powerful bank bailout and clean-up authority for Europe’s banking union: the European Commission. There is no sign of Brussels bowing to pressure from Berlin. At the heart of the Commission’s proposed system is a powerful central authority, which has access to a single bailout fund and the clout to shut down a bank even against the wishes of its home state’s government. Brussels wants it operating by 2015.
What about those German concerns that this would breach the EU treaties? Michel Barnier, the EU commissioner responsible for financial issues, concedes in the paper that “only an EU institution” has the legal authority to take important decisions with European effect. Given there is no legal basis to give the European Central Bank this role, the Commission concludes that the only option is to anoint itself as the top resolution authority.
This goes well beyond the network of resolution authorities — or “board” — that Berlin prefers until the treaties can be changed. The Commission blueprint would create a separate resolution body to prepare decisions for the Commission to take, which is steered by a powerful executive board, dominated by Commission and ECB appointees. Member states could appoint a “limited” number of board members:
In each specific case, an executive board would take all operative decisions regarding what resolution action to propose to the Commission for its adoption. It would also decide autonomously on less discretionary actions involving for instance information gathering from banks and on-site inspections. The executive board would include permanent members appointed by the Commission (as final decision-making authority) and the ECB (as bank supervisor), as well as a limited number of members appointed by directly affected Member States.
To spell it out: the Commission is empowered to independently decide when to close down a bank. It can pull the trigger even when the bank’s parent state thinks it is solvent or disagrees with the form of resolution. Indeed Brussels has the power to shut down the bank even when the ECB as bank supervisor has not said it is in trouble. The only concession to member states seems to be that national authorities would be responsible for discharging the resolution and allocating losses among creditors but only under the “oversight” of the resolution body. Alongside this legal authority, the resolution body needs access to money. Berlin thinks this should be provided through building up national funds and perhaps knitting them together over time. Barnier goes for a more ambitious option: a single fund for the banking union, built up through private sector contributions: This would provide substantial synergies and enhance financial stability, compared to a mere network of national resolution funds, by pooling resources from and for all participating banks. Furthermore, this would prevent coordination problems arising in the deployment of national funds. Finally, it would be instrumental in breaking the link between sovereigns and banks. It is also the preference of the ECB, as it would strengthen the credibility of the whole mechanism. Banks would contribute “according to their risk” and those countries with existing resolution funds would gradually transfer those to the single pot. Even so it would take time to build up a serious fund. The Commission’s thinks that if the pot proves too small in a crisis, extra money could be raised after the event. The fund could also be empowered to “borrow from the market or for third parties”. “The backstop and the guarantee of the fund would thus be the assets of the euro area banks,” it says.
One interesting omission in this section is any mention of the European Stability Mechanism, the eurozone’s €500bn permanent bailout fund. In their joint letter France’s François Hollande and Germany’s Angela Merkel agreed that the ESM should provide a credit line to the resolution fund. But before any loans are extended the ESM would need Bundestag approval, of course, which is perhaps why the Commission gives the resolution body a wider range of borrowing options. The Commission blueprint, taken as a whole, far outstrips what Merkel and Hollande were able to agree in their letter. The Franco-German plan left a lot of blank spaces in key areas, not least in the exact balance of power between the centre and member states. The Commission’s response is to assume that silence meant centralisation. It’s vision much closer to the pure French (and ECB) view of resolution and pays little more than lip service to Berlin’s legal and political concerns.
There are details still to be settled and of course this is only a discussion paper to the college of EU commissioners — in theory there could be enough objections to overhaul the plan before it is published later this month. But that is unlikely. It looks like Brussels will set a high bar for the talks, which realistically need to be concluded between member states by December
Irish Times reports ECB wants changes to bill tackling banking crisis. The ECB wants the Government to change legislation that gives the Minister for Finance broad powers to intervene in the banking sector. The ECB, one of the three institutions backing the €85 billion bailout agreed with the Government last month, has criticised the Credit Institutions (Stabilisation) Bill, which is designed to give the Government the powers it needs to tackle the two year old banking crisis. The ECB has published a legal opinion which states that it fears the law as it stands could usurp its rights over collateral given as security for liquidity it has provided to Irish banks, which owe it €136 billion.
Ambrose Evans Pritchard writes Hard-line ECB washes hands of jobless crsis; sees no Japanese deflation. The European Central Bank has refused to take any further measures to lift the eurozone out of recession and curb rising unemployment, counting on spontaneous recovery later this year to do the job. Mario Draghi, the ECB’s president, said the wild moves in currencies and global stock markets over the past two weeks do not change the fundamental picture, though the bank has downgraded its economic forecasts and expects a deeper contraction of 0.6pc this year. “It is not enough to justify immediate action,” he said.
“The ECB seems to have given up. It is as if they have decided that there is not much more they can do and will simply allow events to run their course,” said David Owen from Jefferies Fixed Income.
The Governing Council held interest rates steady at 0.5pc, and discussed a range of measures to alleviate the credit crunch across Southern Europe and boost lending to small business, without reaching any conclusion. “People don’t have definitive ideas yet,” said Mr Draghi. “What worries us is that the eurozone is moving ever closer to a Japanese deflation trap where animal spirits die and trend growth falls. It is something that a central bank should avoid at all costs,” said Mr Owen. “Greece, Spain and Cyprus are already in deflation if you strip out tax rises, and Portugal will be soon, and that makes it even harder to stop the debt burden rising. The ECB should have launched quantitative easing a long time ago,” he added.
Eurozone core inflation has fallen to a post-EMU low of 0.6pc once adjusted for austerity levies, one shock away from outright deflation that could prove hard to reverse.
“The eurozone is already in a Japan-trap,” said Lars Christensen from Danske Bank. “What we are seeing in the money supply data and falling monetary velocity is exactly what happened in Japan in the 1990s, yet the ECB seems to think everything is fine.”
Mr Draghi said there is no sign of systemic deflation across a wide range of commodities and all sectors. “We don’t see it,” he said.
The German bank Berenberg said Mr Draghi is constrained from taking any action before a crucial decision next week by Germany’s constitutional court on the legality of the ECB’s rescue policies, including its pledge to back-stop the Italian and Spanish debt markets, known as Outright Monetary Transactions (OMT).
“This is now the most important risk to watch in the eurozone,” said Holger Schmeiding, the bank’s Europe economist. “We cannot fully rule out an awkward verdict in which the court may, for instance, attach conditions to any Bundesbank/German participation in ECB actions.”
While the court does not have jurisdiction over the ECB, the OMT would die instantly if judges ruled that Germany may not take part. This would knock away the central prop of EMU crisis strategy over the past year, leaving Italy and Spain once again at the mercy of skittish markets.
Bundesbank chief Jens Weidmann told the court last December that the debt pledge entails huge risks, breaches ECB independence, and violates fundamental principles. “It is not the duty of the ECB to rescue states in crisis,” he wrote, adding that the ECB has no mandate to uphold the “current composition of monetary union”.
Mr Draghi said yesterday that the OMT had been the “most successful monetary policy in recent times”, citing equity rallies and a reversal of capital flight from southern Europe. German exposure to crisis countries through the ECB’s internal Target2 payments system has fallen by €160bn. “It brought stability to markets worldwide,” he said.
Marc Ostwald from Monument Securities said Mr Draghi’s hands are tied. He is being forced to bluff because he cannot secure backing for further stimulus from the Bundesbank or a bloc of northern hawks. “There is complete disagreement on the ECB council. Draghi’s policy of ‘jawboning’ markets with platitudes is dead in the water,” he said.
Gary of Between the Hedges posts Handelsblatt reports ECB acting outside mandate, ZEW’s Fuest says. ECB has signaled to financial markets that it will guarantee govt debt without limits, and that’s not within the bank’s mandate, Clemens Fuest, head of Germany’s ZEW Center for European Economic Research, says in an interview. ECB is operating in “grey zone”, he said. Reasoning of ECB is faulted, while bank hasn’t proven wrong the assertion that all it does is ensure cheap credit for countries in crisis. The ECB should step aside and let governments prevent a potential collapse of the euro zone, he said
The WWJ reports Austerity Isn’t Europe’s Only Burden. Arguments continue in Europe over whether governments should relax budgets to encourage growth. But some analysts argue this debate is drawing attention from something more important that is generating serious headwinds for the region’s economies: Europe’s broken financial sector. António Borges, a former European director of the International Monetary Fund who is now at the Católica Lisbon School of Business and Economics, says arguing about austerity misses the point. In most of Europe, he says, governments have no scope for expansionary budgets because there is no market appetite for more of their debt.
MarketWatch reports Euro zone periphery bond yields spike on ECB comments
Business Insider reports Draghi sell off worsens:Peripheral Eurozone sovereign bonds are getting destroyed.
The above news reports communicate that the European nations, such as Portugal, Italy, Greece, and Spain, and the European Financial Institutions, EUFN, are insolvent sovereigns and insolvent banking institutions, sustained solely by the monetary authority of the ECB providing seringiorage, that is moneyness, for the fiscal spending of the EU.
The Apostle Paul writes that Jesus Christ at the helm of the economy of God, Ephesians 1:10, that is He operating in dispensation for the fullness and completion of every age, era, epoch and time period. The seigniorage, that is the moneyness, of fiat money system in supporting and financing Credit, AGG, Major World Currencies, DBV, Emerging Market Currencies, CEW, is for all practical purposes exhausted. The seigniorage of the fiat money system, has come to an end. Noow, the seigniorage of its replacement, the diktat money system, is rising to rule mankind’s economic and political economic activity.
II E) … On Friday, June 7, 2013, The Plunge Potection Team, PPT, took World Stocks, VT, US Stocks, VTI, and European Stocks, VGK, up strongly as the Euro, FXE, firmed, rising to strong resistance, and the Japanese Yen, FXY, traded lower, after hitting strong resistance. The Action Forex chart of the Euro Yen currency carry-trade, EUR/JPY, seen, in FXE:FXY, shows a trade lower to 50 day support at 97.54 after having fallen from its May 22, 2013 peak. The chart of the S&P 500, $SPX, SPY, shows a trade 1.3% higher on the day, and 0.8%, on the week. The Australian Dollar, FXA, lower, and the Indian Rupe, ICN, traded lower, driving Major World Currencies, DBV lower.
Emerging Market Stocks, EEM, and Asian Stocks Excluding Japan, EPP, traded lower, as China Stocks, YAO, slid in front of the Monday June 9th, China economic report.
Volatility, ^VIX, traded by TVIX, and VIXY, traded lower, as high beta ETFs traded higher, recovering from the Abenomics Crash. These included SPHB, XRT, FPX, SMH, PKB, RZV, IBB, CSD, PPA, FDN, PSP, IXG, PSCE, RWW, KRE, RXI, KCE, IAI, PBS, IYC, FDN, IGN, IGV, XLI, XTN, and OIH, presented in Finviz Screener.
Asset Managers, such as BLK, seen in this Finviz Screener traded higher.
Semiconductors, SMH, which have received ongoing currency carry trade seigniorage through a rising EURJPY, and include those seen in this Finviz Screener, traded higher.
The chart of US Infrastructure, PKB, shows a rise to the middle of a multiweek and mulitmonth broadening top pattern; and as Street Authority relates when you see the broadenin top, the market will eventually drop.
Aggregate Credit, AGG, traded lower as the Zeroes, ZROZ, the 30 Year US Government Bond, EDV, the US Ten Year Note, TLT, traded lower.
In commodities, Gold, GLD, and silver, SLV, traded lower, as Oil, USO, traded higher to strong resistance on the higher Euro, FXE, and the lower Yen, FXY. Silver Mining Stocks, SIL, and Gold Mining Stocks, GDS, traded lower, on their lower commodity counterparts.
IIF) .. Summary of this week’s financial trading
Friday’s strong rally was simply a short selling opportuntiy, as in a bear marekt one sells into pips, just as in a bull market, one buys into dips. This week Small Cap Pure Value, RZV, rose 1.1%, US Stocks, 0.7%, with the chart of the S&P 500, $SPX, SPY, up 0.8%, Europe,VGK, 0.6, with EIRL, 1.7%, and EWG, 1.2%, World Stocks, 0.3%, China, YAO, -1.2%, while Emerging Markets, EEM, -1.2%, with EMFN, -2.4%, and Asia Excluding Japan, EPP, -2.1%, with FEFN, -1.8, EPHE, -3.2, IDX -3.1, EWH, -2.5, EWA -2., 1 EWY, -2.0, EWS -1.1, THD, -1.1 and ENZL, -1.0. And EWJ, +1.5, and JSC, -1.2. on the rising Yen, FXY. Countries trading lower included, EGPT, -5.4, EWZ, -2.2, ARGT, -2.1, INP, -1.6, EZA, -1.5. Yield bearing sectors trading lower included, BRAF,- 4.0, AUSE -2.2, and EPI -1.1.
Despite this week’s rally, Stocks, VT, seen for example in the chart of the S&P 500, $SPX, SPY, have turned lower on the failure of credit, AGG, during May 2013. Fiat money died on May 24, 2013 with the failure of currency carry-trade investing, ICI, and disinvestment out of Junk bonds, JNK, on the failure of the world central banks’ monetary authority, and especially the Bank of Japan’s Kuroda Abenomics monetary policies. Yes, a hard killing frost, has come to the credit market, with a parabolic steepening of the 10 30 US Sovereing Debt Yield Curve, $TNX:$TYX, seen in the weekly chart of the Steepner ETF, STPP, rising parabolically in value.
Gabrielle Coppolaof Bloomberg reports Foreign investors are dumping Brazilian real-denominated bonds sold overseas after the currency posted the second-biggest plunge in emerging markets. Yields on the country’s real-linked debt due in 2028 have jumped 1.12 percentage points in the past month, touching a record 8.73% on June 3. The bonds lost 13.4% in dollars in the period, the worst among local-currency government notes issued abroad after Peruvian debt. That exceeds the 12.3% loss in real-denominated bonds issued locally.
India Earnings, EPI, and Brazil Financials, BRAF, have been leading the Emerging Market Financials, EMIF, lower since early 2013, as is seen in ongoing Yahoo Finance chart. Nation Investment in India INP, SCIN, failed in January, and Nation Investment in Brazil, EWZ, EWZS, failed in March, and Nation Investment, failed in Asia, EPP, and Japan, NKY, failed in May, leaving Euorpe, VGK, supported by a higher Euro, fXE, and US, VTI, supported by safe haven investment. Yet World Stocks, VT, tradedlower, on the failure of Credit, AGG, -1.8%, in the last month, and Junk Bonds, JNK, -3.5%, in the last month, with Major World Currencies, DBV, and Emerging Market Currencies, CEW, both now trading strongly lower, reflecting that bond vigilantes have control of interest rates, and that the sovereignty and seigniroage of democratic nation states has failed.
Blake Schmidt and Josue Leone of Bloomberg report Brazil’s real fell to a four-year low after Standard & Poor’s cut the government’s credit-rating outlook to negative amid an economic slump that’s threatening to drive up the country’s debt levels. The currency depreciated 0.3% to 2.1351 per U.S. dollar. The benchmark Ibovespa stock index, EWZ, tumbled 2.2% to the lowest level on a closing basis since October 2011. Prices on the nation’s dollar bonds due in 2023 fell, driving yields up 0.07 percentage point to 3.62%.
Liberalism’s credit is being replace by Authoritarianism’s debt servitude and austerity. And Liberalism’s currencies are being replaced by the diktat of regional governance.
Wealth can no longer be preserved by investing in stocks, but can only be preserved by taking physical possession of gold bullion or by owning and trading it on Internet trading vaults such as BullionVault or Gold Is Money.
The Risk On Trade, ONN, leaders of the week were the Small Cap Pure Value Stocks, RZV, rising 1.1%, such as those in this Finviz Screener, as well as the Automobile Dealerships seen in this Finviz Screener, the Restaurants seen in this Finviz Screener, and the Apparel Retailers seen in this Finviz Screener. Sectors trading lower included, CARZ, -2.7%, US Infrastraucture, PKB, -2.5%, Home Building, ITB, -2.1%, and Coal, KOL, -2.0%.
Doug Noland in Safehaven.com article Twenty year anniversary of market backstops reports The U.S. dollar index dropped 2.0% to 81.67 (up 2.4% y-t-d). Seen in Stockcharts.com chart, $USD, which closed at $81.69, and Finziz Chart, UUP. For the week on the upside, the yen increased 3.0%, the British pound 2.4%, the Swiss franc 2.0%, the Canadian dollar 1.8%, the Norwegian krone 1.7%, the euro 1.7%, the Danish krone 1.7%, the South African rand 1.3%, the Singapore dollar 1.2%, the South Korean won 1.2%, the Swedish krona 0.9%, the Taiwanese dollar 0.6%, the Brazilian real 0.4% and the Mexican peso 0.3%. For the week on the downside, the Australian dollar declined 0.8% and the New Zealand dollar fell 0.7%
Mr. Noland relates the massive credit swell that began with US Federal Reserve Stimulus of QE1: The Fed’s balance sheet surpassed $1 Trillion for the first time back in 2008. Fed assets are now on track to reach $4.0 TN near year-end. The dominance of Washington finance has similarly long overstayed its welcome. When the Fed was aggressively expanding its balance sheet in 2008/09, its purchases were essentially accommodating financial sector de-leveraging (i.e. the Fed providing a liquidity backstop for troubled banks, leveraged hedge funds, securities firms, REITs and such). Federal Reserve buying (monetization) over the past six months has been of an altogether different kind. Instead of accommodating de-risking/de-leveraging, the Fed purchases have instead incited risk-taking and leveraged speculation. There’s a heck of a dilemma developing. The Fed has been using its balance sheet to stoke the asset markets, in the process incentivizing risk-taking and leveraging. If the Fed does at some point decide to restrict asset purchases, where will the markets look to for their coveted “liquidity backstop?”
“Flow of Funds” data tell the story pretty well. GSE assets surged an unprecedented $148bn in 1994, or 23%, to $782bn. With little fanfare, Fannie and Freddie had morphed from insuring mortgage securities to highly leveraged holders of mortgages and debt that were more than happy to buy huge quantities of securities (at top dollar) in the midst of acute market turbulence. And the GSEs were anything but finished in 1994. GSE assets increased $115bn in 1995, $92bn in 1996 and another $112bn in 1997. When markets were rocked by the collapse of LTCM and attendant speculative deleveraging, the GSE’s expanded holdings an unprecedented $305bn in 1998 – followed by another $317bn in Bubble year 1999. The GSEs added another $822bn during the tumultuous 2000-2002 period. By the end of 2003, GSE assets had inflated to $2.4 Trillion, in the process having transformed the marketplace for mortgage finance, market-based Credit and speculative finance more generally.
In the late-nineties, I was explaining to anyone that would listen (basically no one) that the GSEs had evolved into quasi central banks. With the revelation of accounting fraud and malfeasance at Fannie and Freddie, the leveraged speculating community had lost their liquidity backstop. By then, however, the mortgage finance Bubble had gained such powerful momentum that a euphoric marketplace saw no reason to fret. But as mortgage Credit came to so dominate the financial and economic systems, with each quarterly analysis of the Z.1 in the 2006/07 period I would contemplate how the system might function during the next period of market de-risking/de-leveraging. There was no doubt in my mind that the backstop function would rest exclusively with the Federal Reserve.
I look at 2013 as nearing the “Twenty-year Anniversary of the Liquidity Backstop”. Well, this is year five of the “global government finance Bubble.” This Bubble encompasses the world’s securities markets. Having played such a profound role in fueling this Bubble. (One can visualize this with the ongoing Yahoo Finance chart of credit investments of MBB, FAGIX, JNK, and equity investmentts of TLT, KRE, PSP, IAI, KCE, RWW, and BLK)
It’s not easy for me to conceptualize how central bank balance sheets will now be looked upon to backstop global markets in the next major de-risking/de-leveraging episode. A serious global de-leveraging would require multi-trillions of liquidity support, which I fear at this point might unleash currency and market chaos.
The liquidity backstop issue becomes especially pertinent to the MBS marketplace. Pressure is (again) mounting for Fannie and Freddie to further shrink their holdings. It would appear they’re out of the market backstop business for good. Moreover, pressure mounts for the Fed to wind down its foray into mortgage support (“Credit allocation”). Meanwhile, as the Fed apparently prepares to back away from its historic experiment in suppressing market yields, the situation becomes only more intriguing. MBS are a particularly problematic security in a rising yield and extraordinarily uncertain market environment. Perhaps this helps explain why MBS yields are up 74 bps since May 1st and mortgage borrowing costs this week jumped to a 14-month high.
U.S. homebuyers are not alone in confronting rising borrowing costs, while MBS investors have plenty of global company when it comes to contemplating prospective market liquidity backstops. Bloomberg’s William Pesek titled his most recent article “Specter of Another Bond Crash Is Spooking Asia.” “Developing” markets were this week showing heightened instability – bonds, currencies and equities. The thesis of problematic underlying financial and economic fragility is coming to fruition.
(One can visualize this via the ongoing Yahoo Finance chart of JGGS, NKY, EPP, VGK, VTI, DBV, and CEW)
Nowhere did the perception of boundless Japanese buying power boost market sentiment more than in peripheral Europe. Notably, when the yen launched its Thursday melt-up, Spanish, Italian and Portuguese bonds were taken out to the woodshed (yields up 25, 23 and 27 bps, respectively). For the week, Portuguese 10-year yields jumped 54 bps to a six-week high (6.14%) – having now reversed the entire “BOJ” rally. Italian and Spanish yields ended the week slightly higher, while their equities markets came under pressure. Notably, Italian stocks were hit for 3.0%. It is worth noting that European financial Credit default swap (CDS) prices jumped higher again this week – and it appears this important risk market has turned increasingly unstable.
I have posited that the Greek/European debt crisis was the first crack in the “global government finance Bubble”. Well, we are now witnessing the next important crack unfold in the “developing” markets and economies. And I don’t think it’s a stretch to suggest that another very important crack is emerging in the U.S. bond market (MBS, Treasuries and corporates). U.S. equities markets have shown resilience, not a shocking occurrence with sentiment so bullish and QE effects so powerful.
The surge in market yields (and widening spreads) in the face of the Fed’s $85bn portends future liquidity issues.
I noted above the “Twenty-year Anniversary of Market Backstops.” I wonder if historians will look back at this period as a strange aberration in financial history. If the Fed really plans on reining in its bloated balance sheet, then the markets will at some point have to contemplate a world without liquidity backstops. From my perspective, that would ensure higher global yields, wider Credit spreads and larger risk premiums generally. In such a world, I would expect corporate profits, inflated by enormous deficits and further inflated by Fed monetization and financial engineering, would deserve higher discount rates and significantly lower equities market valuations. But for now, the focus will be on how the emerging markets dislocation and the unfolding global “risk off” play out
Lyubov Pronina of Bloomberg reports The worst month in a year for emerging market currencies, CEW, with South Africa’s Rand leading declines. This was accompanied by a strong sell in Emerging Market Bonds, EMB, and Emerging Market Financials, EMFN; all taking Emerging Markets, EEM, lower, which included the Philippines, EPHE, Thailand, THD, New Zealand, ENZL, Indonesia, IDX, Egypt, EGPT, Mexico, EWW, South Africa, EZA, Chile, ECH, Peru, EPU.
EcPiFi reports The M2 Money Supply declined 0.35% on two weeks ago, was up 6.95% on the same period last year and remains largely unchanged from the end of last year (up 0.14%). Perhaps the most interesting development during the previous two weeks is the climb in the 10-year treasury yield which closed the week on 2.01%, up a not insignificant 17 basis points on two weeks ago. The spread between the 10- and the 1-year treasury yield widened by 16 basis points as the latter only increased by 1 basis point. The spread is currently 189 basis points, substantially higher than the long term average of 147 basis points (series starts in 1984), 36 basis points higher than the same period last year and 26 basis points higher than the end of last year. The yield curve, as measured by this spread, has therefore steepened. (This is seen in the weekly chart of Steepner ETF, STPP, steepening for six weeks.) Two weeks ago in this bi-weekly report we wrote: The declines in the growth rates for both M2 and bank credit are, as stated before, important to the extent that money supply and credit help drive stock prices (e.g. see here and here). Paying close attention to the growth rates in the two is perhaps especially important now as we believe the U.S. stock market is expensive in a historical perspective. Readers who are stock market investors can take a look at the following reports (more reports are available at both this website and the economicsnexus.com, just search for “stock market”):
Debt monetization on steroids has finally caused the death of credit, money and wealth. Bond vigilantes have called the Interest Rate on the US Ten Year Government Note, ^TNX, higher to 2.16%. And currency traders have successfully sold Major World Currencies, DBV, and Emerging Market Currencies, CEW, driving them lower. The Milton Friedman Free To Choose Floating Currency System has failed, as currencies are no longer floating, they are sinking. Debt deflation, that is currency deflation, currency volatility, unwinding currency carry-trades, and the sale of Junk Bonds, JNK, have turned Nation investment, EFA, and Small Cap Nation Investment, IFSM, as well as World Stocks, VT, strongly lower.
Lisa Abramowicz of Bloomberg reports Losses on junk-bond exchange-traded funds are outpacing the broader U.S. speculative-grade market by the most in three years, signaling a deepening slump for debt that traded at record-high prices less than a month ago. After reaping returns of 127% since 2008, junk-bond buyers are demonstrating concern that rising interest rates will erode future gains as Federal Reserve policy makers consider a pullback from stimulus measures. While ETFs hold less than $40 billion of the $1.15 trillion U.S. high-yield bond market, they act as a quicker gauge of market sentiment because their shares trade more frequently than most corporate bonds.
Bloomberg reports on liquidity evaporation, that is liquidity squeeze The rate China’s lenders charge one another on overnight loans jumped the most in almost two years as shrinking capital inflows led to a cash squeeze before a three-day holiday. Yuan positions at local financial institutions, an indication of money pouring into Asia’s largest economy, rose 294 billion yuan ($48bn) in April and China International Capital Corp. estimates the gain slowed to around 100 billion yuan last month.
Liberalism’s credit schemes, such as the ponzi scheme of securitization of Mortgage Backed Bonds, MBB, by Mortgage REITS, REM, such as IVR, and the acquisition of Distressed Investments, by the US Federal Reserve, under QE1, like those traded by Fidelity Mutual Fund FAGIX, for US Treasuries, and Japan’s Kuroda Abenomics, have run their course and have resulted in making “money good” investments, in Japan, EWJ, JSC, and Australia, EWA, KROO, “bad”.
Charles Stein of Bloomberg reports U.S. bond funds suffered their second-worst withdrawals last week in more than two decades after speculation about an eventual end to the Federal Reserve’s bond purchases sent fixed-income markets lower. Investors pulled $9.1 billion from fixed-income mutual funds and exchange-traded funds in the week ended June 5, Lipper said. That’s the second-biggest redemptions for a week since the company started tracking the data in 1992. Corporate high-yield funds saw redemptions of $3.2 billion, the largest weekly withdrawal on record. Global bond markets posted their biggest monthly losses in nine years in May, as the more than $40 trillion of bonds in the Bank of America Merrill Lynch Global Broad Market Index fell 1.5% on average.
Sridhar Natarajan and Mary Childs of Bloomberg report US high-yield funds recorded their biggest outflow on record this week, according to Bank of America. Investors pulled an unprecedented $4.8 billion from funds that purchase notes sold by companies rated below investment grade. That was accompanied by outflows from high-grade funds, the first weekly decline this year, even as leveraged loans attracted about $1 billion, bringing this year’s gains to $28.5 billion, a 38% increase in assets since the start of the year.
The banking system, IXG, RWW, EMFN, FEFN, EUFN, KRE, seen in combined ongoing Yahoo Finance Chart, as it is has been known, is starting to collapse, on the bursting of the bubble of Aggregate Credit, AGG. The money of Liberalism is no longer a trustworthy thing. The money of Authoritarianism, that is diktat money, is beginning to win people’s faith and trust, a case in point being that those in Cyprus are now trusting in the ECB’s mandates for regional security, stability, and sustainability.
Liberalism was an age of prosperity and credit that came by trust in the monetary schemes of World Central Bankers such as Ben Bernanke and Hiroki Kuroda with their monetary policies of ZIRP, and Wall Street Bankers with their credit underwriting policies of Dollarization.
Under Liberalism, Dollarization facilitated securitization of emerging market bonds, EMB, as the debt monetization of the US Federal Reserve, continually caused a decline of the US Dollar, $USD, UUP; but with the rise of the US Dollar, $USD, beginning in January 2013, the Dollarization scheme, literally blew up, causing deleveraging out of Emerging Market Currencies, CEW, and derisking out of Emerging Market Bonds, EMB, Emerging Market Financials, EMFN, and Emerging Market Stocks, EEM, driving investors into safe haven investment in the most risk of stocks, the Small Cap Pure Value Stocks, RZV.
Some might call for a new Britton Woods Agreement, and others such as Robert Wenzel are calling for gold backed currencies, such as a gold backed Chinese Yuan. With Jesus Christ at the helm of the economy of God, Ephesians 1:10, there are three chances of such happening: slim, none, and no way. God from eternity past has purposed that there be five empires to rule mankind, Daniel 2:25-45, before the final one world government, Daniel 7:7; these five are Babylonian, Greek, Roman, then the British Empire and the United States, and then Regional Governance in the world’s ten regions.
Authoritarianism is an age of austerity and debt servitude where one complies with and trusts in the schemes of new taxes, bank deposit bailins, and capital controls of regional statist sovereign nannycrats such as Olli Rehn, Jeroen Dijsselbloem, and Michel Barnierm, all for regional security, stability and sustainability. Market Oracle reports France imposes cash and gold capital controls
III) … The Conflict In And About Syria Escalates And Constitutes The Prelude To The Ezekiel 38 War.
The Lebanon Daily Star reports Fighting renews in norrthern Lebanon Two rival families, one supporting the Hezbollah-led March 8 coalition and the other pro-Salafists, fought fierce clashes once more Friday in Tripoli, Lebanon’s second largest city which has been rocked by daily violence linked to the crisis in Syria. Evening rocket attacks between the Salafist Heijar clan and the pro-March 8 Nashar family in Talat Ar-Rifaia wounded at least two people, including Omar Nashar, prompting the Army to intervene to end the fighting, security sources said. The two sides had fought in Tripoli’s Old Souk area Thursday into Friday, the sources said, leading to the wounding of three people. Machine gunfire and rocket-propelled grenades had been used in the fighting between the two families and Army efforts to end the clashes were hampered by the narrow alleyways leading to the clash point. The renewed fighting between the two sides came after the military cautioned citizens of plots against Lebanon and warned them against being dragged into the Syria war. “The Lebanese Army, as much as it’s going to be resolute in its security measures, urges citizens to be aware of the plots aimed at taking Lebanon back and dragging it into a futile war,” the military said in a statement. It called on Lebanese to express political views regarding the Syria conflict “democratically and peacefully and without provoking anyone.”
IV) … What underlies the failure of the economy in Turkey?
Aljazeera asks What inspires Turkey’s protest movement which resulted in unprecedented country wide demonstrations and riots against the Turkish government and its Prime Minster Recep Tayyip Erdogan commencing on May 30, 2013, two days after one hundred activists started a sit-in protest in Gezi Park. Turkish youth, who have often been regarded as apolitical since a military coup in 1980 and its subsequent restoration in 1983, have flowed into the streets, clashing with police across the country.
“It is the first time I join a demonstration and I am not affiliated to any political group,” Kerem Gencay, a 28-year-old marketing employee, told Al Jazeera. Like many demonstrators, he stressed that he joined the protests in an individual capacity. “I came here on Friday after the police crackdown on people who were passively resisting to demolition of Gezi Park. I am happy with what it has evolved into because it is right; the government seeks to interfere with people’s lifestyles.”
Another protester, 26-year-old publicist Nihan Dinc, said she is worried about the direction of the country under the governing AK Party. “We are here for our freedom, for a space to breath. We are here to be able to kiss in public, consume alcohol, read without any censorship. We are here for a life without any pressure from the state,” Dinc said. Others say the prime minister, who was democratically elected with a large mandate, is acting like an authoritarian. “Prime Minister Erdogan thinks that he is a sultan, he does not listen to anybody, consult with anybody,” said Yesim Polat, a 22-year-old student. “He thinks he can do whatever he wants.” Those views are shared by most protesters. A recent poll by Istanbul Bilgi University researchers who talked to 3,000 activists revealed that the demonstrators’ anger is directed strictly towards Erdogan, not his aides nor his political party; 92.4 percent of the participants said that they have taken to the streets because of Erdogan’s “authoritarian” attitude. Fuat Keyman, a professor of political science at Sabanci University in Istanbul, told Al Jazeera that the recent social backlash was specifically directed at the prime minister. “Five or six years ago there was social reaction against the AK Party. Today Erdogan is the only target,” he said, adding the riots have broken out because there was no response to democratic action. Before the protests erupted, recent developments had worried and frustrated many secular Turks.
Erdogan has publicly criticised the content of some TV shows, made frequent statements opposing alcohol consumption, and spoken out against public displays of affection. He recently called all people who consumed alcohol “alcoholics” but then changed his definition to “the ones who drink on a regular basis”. The prime minister also supported an announcement calling on young couples to act “in line with moral values” and not to kiss at a subway station in Ankara. And Erdogan responded to the unrest saying “No one has the right to increase tensions with the excuse that trees are being demolished.” In his references to the issue, he often referred to the economic and environmental success of the government, calling himself “the servant of the nation”. In its almost 11 years of AKP governance, Turkey has achieved unprecedented economic success, transforming a crisis-hit economy into a quickly growing one fuelled by trade and foreign investment.
Other voices respond. Meanwhile, other voices in the government as well as Turkish President Abdullah Gul tried to ease tensions. Gul asked the protesters to go home, saying: “The message has been taken. Democracy is not only about [the] ballot box.” Deputy Prime Minister Bulent Arinc apologised for the police’s actions against the initial protests in Gezi Park, though he added the government did not “owe anything to those causing harm”.
Liberalism has failed in Turkey, that is investment choice no longer provides reward to those invested in Turkey Not only has nation state investment, failed in Turkey, but its economy has failed as well, as Turkish government Treasury bonds, its currency, the Lira, and the Istanbul stock market, traded strongly lower. The Turkey ETF, TUR, lost 9.7% this week, taking its value back to the beginning of the year, with a week of social protests by Liberalism’s nonparticipants, who lack a forum for their agenda, a place of gathering to exercise their movement, and an opportunity to exercise personal freedom in kissing and consuming alcohol. CNN reported that Gezi Park, the last green space in central Istanbul, had been scheduled to be replaced with a replica of 19th century Ottoman Empire barracks, which would include a shopping mall. Turkey, like Egypt, EGPT, is now a failed nation state; both of which document the transition out of Liberalism and into Authoritarianism.
Please consider the idea of the Apostle Paul, writing in Ephesians 1:10, that Jesus Christ is at the helm of the economy of God, and as such, He completed Liberalism in Turkey with the implosion of its economy, terminating all investment choice, and is now introducing diktat. There is no human action as conceived by the Austrian economists, rather the economic and political events in Turkey are Christ’s handiwork. He is pivoting the economy 1) from the paradigm of liberalism to the paradigm of authoritarianism, 2) from the fiat money system to the diktat money system, 3) from the banker regime of US Dollar hegemony to the beast regime of statist regional governance, totalitarian collectivism, debt servitude and austerity, Revelation 13:1-4, also known as the ten toed kingdom of regional governance, Daniel 2:25-45, where eventually ten kings will come to rule in each of the world’s ten regions, Revelation 17:12.
V) … Some be psychopaths.
There be antisocial people; these are three types of beastly people, bears, lions, and leopards. These psychopaths are people who are driven by the need to confront, to be preeminent, or to be busybodies ruling in the lives of other people with rude, preeminent, and even derogatory speech and behavior. Perhaps as much as fifty percent of the population is psychopathic at times, with the other fifty percent in denial of the others psychopathy. Many psychopaths are intermittent, yet some are continual practicioners either in speech and behavior, and become distant from responsible and regardful relations with others, and exist in total denial of reality. I know some here in the inner city where I live, who have consistently crossed the rubicon of economic regard for others and trespassed so frequently and so aggressively into the personal life of others, that they have become criminally insane resulting in them making death threats upon others; all very chilling really; it’s all part of God’s end time termination of human economic and political experience, as presented in Revelation 6:1-8, where God, beginning with Greek Bailout 1, has released the Four Horsemen of the Apocalypse; and power was given to them over a fourth of the earth, to kill with sword, with hunger, with death, and by the beasts of the earth.
VI) … Obama relates mass surveillance protects civil liberties.
Jason Ditz of Antiwar reports Obama relates mass surveillance protects civil liberties.
Jason Dits of Antiwar reports US Spy Chief slams reprehensible leak of NSA surveillance
Politico reports NSA targets credit card transactions
CNet asks Exactly what is Prism. Billions of calls mined by the USG.
The Exchange reports Behind surveillance flap, plunging trust in government
Glenn Greenwald of The Guardian reports Boundless Informant: NSA’s secret tool to track surveillance data
Lawrence Hurley and Joseph Menn of The Guardian report Few options for companies to defy US intelligence demands
Bloomberg reports Obama surveillance defies campaign civil liberty pledge.
Jay Stanley & Ben Wizner of Reuters Blogs Why the Government wants your metadata
Conor Friedersdorf of The Atlantic All the Infrastructure a tyrant would need, courtesy of Bush and Obama
Glenn Grewwall of The Guardian writes Boundless Informant: NSA’s secret tool to track surveillance data.
Joel Mathis of Philly Mag President Obama’s etrayal of vivil liberties is vomplete
Liberty Crier Ron Paul: NSA’s PRISM is an awakening call
National Journal reports NSA spying appears to stem from 550 word section of PATRIOT Act
Slate writes The foundation of the surveillance state
The Washinton Post Intelligence leaders push back against leakers, media
Glenn Grenwall of the Guardian reports Edward Snowden: the whistleblower behind the NSA surveillance revelations. The individual responsible for one of the most significant leaks in US political history is Edward Snowden, a 29-year-old former technical assistant for the CIA and current employee of the defence contractor Booz Allen Hamilton. Snowden has been working at the National Security Agency for the last four years as an employee of various outside contractors, including Booz Allen and Dell.
Washington Post reporter Barton Gellman writes Code name ‘Verax’: Snowden, in exchanges with Post reporter, made clear he knew risks. Edward Joseph Snowden disclosed some of the most sensitive secrets of a surveillance apparatus he had grown to detest. I asked him, at the risk of estrangement, how he could justify exposing intelligence methods that might benefit U.S. adversaries. “Perhaps I am naive,” he replied, “but I believe that at this point in history, the greatest danger to our freedom and way of life comes from the reasonable fear of omniscient State powers kept in check by nothing more than policy documents.” The steady expansion of surveillance powers, he wrote, is “such a direct threat to democratic governance that I have risked my life and family for it.”
Robert Wenzel of Economic Policy Journal reports Ari’s Freedom Switch reports on a Bilderberg attendee and his direct connection to the surveillance state. Bilderberg attendee Alex Karp’s Palentir Technologies works on the integration and analysis of large quantities of data, or as Palantir likes to say, helping to solve the world’s biggest problems. According to the NewYorker, Palentir’s software “helps government agencies track down terrorists, fraudsters, and other criminals, by detecting subtle patterns in torrents of information.” .Palentir Technologies was co-founded by another Bilderberger Peter Thiel. Palentir means “seeing stone” and its niche is cyber security, offense and defense. It’s likely on the case for this Bilderberg meeting.
In apocalyptic vision, referencing bible prophecy of Revelation 13:1-4, I relate that under authoritarianism, many of Liberalism’s leaders and their corporations will merge into government to form a cohesive statist panopticon of economic and political experience where all live in totalitairan collectivism under the mandate of soveign regional leaders and regional bodies which govern the use of natural resoures and manage the factors of production for regional security, stability, and sustainability.
VII) … The Ethopia Dam
Reuters reports ‘No Nile, No Egypt,’ Cairo warns Over Ethiopia Dam
VIII) … Summary: The elect comprehend and have resource, experience, life, virtues and ethics within the economic and political plan of God.
Only the elect of God believe, know and experience the very best things of God, as his Son, Jesus Christ, reveals the administrative plan of God for the fullness and completion of every age, epoch, age and time period, Ephesians 1:10. This unknown known, is a complete mystery to the fiat. Liberalism was the age of investment choice. Authortarianism is the age of dikat, an era in which the elect are called to have full knowledge of God’s Will, which provides all spiritual wisdom and understanding, Colossians 1:8-9, in the kingdom of the Son of God’s love, Colossians 1:13; leaving the fiat in the kingdom of darkness, as they flounder in the worship of their own will, in human philosophy and religion, Colossians 2:23.
God’s spiritual wisdom goes far beyond heartfelt emotion or a coordinated insight of bible doctrine to be the experience of the very breath of God, reproducing His nature and likeness in the believer. In other words, spiritual wisdom is not of letters of comprehension, but an immersion in God’s divine nature, providing peace and joy, in a world of hurt and suffering.
Thus motivation comes from the indwelling spirit of God and a mind renewed by the Spirt, so one can understand and interpret what one receives in one’s soul, Colossians 1:9, and thus speak and conduct onself in a manner pleasing to God in all things, bearing fruit in every good work, and growing by the full knowlege of God. The result of this is that one lives a life of ascendency and becomes a self transcendent individual and lives in the divine nature, adding to ones faith the seven addivites of 2 Peter 1:5-7, so as to make one’s calling and election a genuine thing, so as not to stumble, and to have broad entrance into the kingom off Gods Son, 2 Peter 1:10; such be the economy of God, Ephesians 1:10.
Liberalism’s thought leaders have largely been left leaning economists; these have included Donald Markwell, who Wikipedia relates maintains that the absence of an effective international approach in the spirit of Keynes, would risk allowing the return to play of the economic causes of international conflict which Keynes had identified back in the 1930s. And Brad DeLong, who Wikipedia relates that along with Joseph Stiglitz and Aaron Edlin, is co-editor of The Economists’ Voice And Lawrence Summers, who Wikipedia relates that upon the death of libertarian economist Milton Friedman, Summers wrote an Op-Ed in The New York Times entitled “The Great Liberator” arguing that “any honest Democrat will admit that we are now all Friedmanites.”
And Liberalism’s greatest, that is most influential, president was Lyndon Banes Johnson, father of the LBJ Great Society Programs, featuring the War On Poverty and an escalation of the Vietnam War. He was succeeded by Richard Nixon who accepted the recommendation by Milton Friedman that the US go off the gold standard, which enabled even greater expansion of the Vietnam War, and development of the Industrial Military Complex. Wikpedia relates that Johnson signed the Immigration Act of 1965. Since the liberalization of immigration policy in 1965, the number of first-generation immigrants living in the United States has quadrupled, from 9.6 million in 1970, to about 38 million in 2007. Johnson had a lifelong commitment to the belief that education was the cure for both ignorance and poverty, and was an essential component of the American Dream, especially for minorities who endured poor facilities and tight-fisted budgets from local taxes. He made education a top priority of the Great Society, with an emphasis on helping poor children. After the 1964 landslide brought in many new liberal Congressmen, he had the votes for the Elementary and Secondary Education Act (ESEA) of 1965. In 1964, upon Johnson’s request, Congress passed the Revenue Act of 1964 and the Economic Opportunity Act, which was in association with the war on poverty. Johnson set in motion bills and acts, creating programs such as Head Start, food stamps, Work Study, Medicare and Medicaid. During Johnson’s administration, NASA conducted the Gemini manned space program, developed the Saturn V rocket and its launch facility, and prepared to make the first manned Apollo program flights. His legacy includes Interstate 635 in Dallas is named the Lyndon B. Johnson Freeway.
Benton te posts 10 things economists won’t tell you (why you shouldn’t listen to them). The above can be restated as “10 reasons why you shouldn’t trust economists”. From Marketwatch.com (hat tip Professor Mark Thornton); I highlight numbers #7 and #8.
#7. “We lean to the left.”
As of 2008, nearly half of members of the American Economic Association said they were registered Democrats, while only 17% said they were Republicans. Furthermore, in the same survey (commissioned by Scott Adams, the “Dilbert” cartoonist), 60% of the economists said that among the presidential candidates at the time, they thought Barack Obama would make the most progress on important economic issues if elected. (The survey was managed by The OSR Group, a national public opinion and marketing research company.) A similar survey of members carried out that same year of the NBERfound that 46% identified themselves as Democrats and 10% as Republicans.
Those surveys, the most recent on the topic, suggest that economists skew further Democratic than most of the population—even compared to people with advanced degrees, who have long been skewered as “the liberal elite.” Among people with education beyond a bachelor’s degree, self-described Democrats had a 14 percentage point lead over Republicans among college graduates — with 39% identifying themselves as Democrats and 25% as Republicans, according to a 2012 study by Pew Research Center.Left-leaning political views can even be seen in economists’ reports, some experts say. A 2008 article in the journal American Economist argued that economists over the past half-century have helped sell voters on bigger government. “We find that the increased role of economists in society and in policymaking has led to an increase in favorable attitudes toward government intervention,” wrote the authors, economists Scott Beaulier, William J. Boyes and William S. Mounts. (Boyes describes himself as more libertarian than right or left wing and Beaulier describes himself as a “free enterprise” economist.) Mounts did not reply to requests for comment.)
#8. “We might have an agenda.”
The economic paradigm known as Liberalism was one of investment choice, as well as clientelism, and was centered around the US Federal Reserve monetary policy of credit liquidity, which created a historic credit bubble, AGG, which provided a moral hazard based prosperity, and was facilitated by financial system intervention in QE, the pursuit of ZIRP, the securitization of credit such as Build America Bonds, BAB, and Municipal Bonds, MUB, as well as equities, such as Nation Investment, EFA, in countries, such as Japan, EWJ, and the US, IWM, in the Emerging Markets, EEM, such as Egypt, EGPT, Indonesia, IDX, Chile, ECH, Peru, EPU, and Brazil, EWZ, Leveraged Buyouts, PSP, Mortgage REITS, REM, Residential REITS, REZ, Homebuilding, ITB, Biotechnology, ITB, and Small Cap Pure Value, RZV, by Asset Managers, such as Blackrock, BLK, the issuance of Junk Bonds, JNK, by corporations, the support of housing agencies with mortgage backed bonds, MBB, the encouragement of floating currencies by Milton Friedman, the establishment of a liberal economic knowlege cage by liberal economists, and the stirring of the public mind in Liberalism by liberal journalist Paul Krugman. Those living in the rust belt cities such as Detroit, Chicago, Cleveland, St. Louis and Cincinnati, were participants in Liberalism only to the extent that took out and defaulted on subprime loans. And many young people today are participants in Liberalism to the extent that they took out and/or take out student loans. Many qualified for Social Security Disability, and either ceased to work or never did work, and lived as clients of the state. The development and use of the Euro, FXE, established Greek Clientelism, where many in Greece have state employment as a constitutional guarantee, which the Economist Magazine described as a system of pork and patronage.
Now debt deflation, that is currency and credit deflation, is stalking the globe, devouring who ever it may, destroying both the investment value of credit investments, such as US Government Bonds, GOVT, and also stocks investments, such as Electric Utilities, XLU, as well, and most importantly nation investment, EFA, especially in the Emerging Markets, EEM, such as South Africa, EZA, Peru, EPU, and Chile, ECH.
It’s only a matter of time before the national sovereignty of democratic states totally gives way, and regional alliances form, fully establishing Authoritarianism, as foreseen by the 300 illuminaries of the Club of Rome in 1968, as organized by the Morgenthau Group, for the purpose of establishing ten regional zones for mutual security, stability, and sustainability. Such a development is presented in the bible prophecy of the Statue of Empires, Daniel 2:25-45, where a ten toed kingdom of regional governance forms to rule mankind, with toes of iron diktat and clay democracy, where the paradigm is one of debt servitude and austerity.
Governance and moneyness will no longer be exercised rewarding investment choice as it was under Liberalism. Now, under authoritarianism, rule will come from regional statist leaders exercising diktat.
During May 2013, Jesus Christ pivoted the world from the old economy to the new economy; that is 1) from the paradigm of liberalism to the paradigm of authoritarianism, 2) from the fiat money system to the diktat money system, and 3) from the banker regime of US Dollar hegemony to the beast regime of statist regional governance, totalitarian collectivism, debt servitude and austerity, as foretold in Bible Prophecy of Revelation 13:1-4, also known as the ten toed kingdom of regional governance, as presented in Daniel 2:25-45. The world is passing into Authoritarianism’s wildcat governance, where leaders will bite, rip and tear one another apart, to become top dog leader, Revelation 13:5-10, and top dog banker, Revelation, 13:11-18.