Financial market report for Friday January 31, 2014
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1) … Reuters reports Wall Street drops on emerging market worry. Stocks gapped open lower on Friday January 31, 2014, making for their first monthly decline since August 2013, on ongoing concerns about emerging markets; this week Emerging Market Mining, EMMT, traded 2.7% lower, and Emerging Market Financials, EMFN, traded 2.0% lower.
World Stocks, VT, traded 0.8% lower for the week, with the Sector Small Cap Pure Value, RZV, -1.9%, leading lower; while Electric Utilities, XLU, such as Next Era Energy, NEE, rose 3.0% this week to new rally highs, on a “reflation trade” on the Benchmark Rate, ^TNX, trading lower.
Global Financials, IXG, traded 1.3% lower for the week with Regional Banks, KRE, -4.0%, such as GBCI, -8.4%, Life Insurance, PUK, -2.5%, Investment Bankers, KCE, -2.4% Emerging Market Financials, EMFN, -2.0%, and European Financials, EUFN, -1.8, leading lower.
Yield Bearing Sectors trading lower included, Global Telecom, IST, -2.5%, Leveraged Buyouts, PSP, -2.2%, and Shipping, SEA, -2.1%, leading lower.
Nation Investment, EFA, traded 1.9%, lower for the week, with the UK, EWU, -2.3%, Sweden, EWD, -2.2%, Nikkei, NKY, -2.1%, Eurozone, EZU, -1.7%, leading the developed nations lower.
2) … Doug Noland posts of Yen currency carry trade unwinding in the last two weeks of January 2014. Over two weeks versus the yen, the Argentine peso has declined 17.1%, the Russian ruble 6.6%, the Hungarian forint 6.1%, the Chilean peso 5.1%, the Brazilian real 5.0%, the Colombian peso 4.7%, the Polish zloty 4.6%, the South African rand 4.4%, the South Korean won 4.1% and the Indian rupee 3.9%,
3) … Risk On Investing, ONN, turned to Risk Off Investing, OFF, as investors derisked out debt trade investments in January 2014, with Leveraged Buyouts, PSP, falling 4.1%. And as investors deleveraged out of currency carry trade investments in the Emerging Markets, EEM, -8.6%, with Argentina, ARGT, -11, Russia, ERUS, -11, Chile, ECH, -14, Brazil, EWZS, -11, Columbia, GXG, -14, Poland, EPOL, -6, South Africa, EZA, -11, South Korea, EWY, -9, India, SMIN, -10%, Turkey, TUR, -13, Emerging Middle East and Africa, GAF, -11, as is seen in combined Yahoo Finance Chart.
4) … Aggregate Credit, AGG, rose 0.2% on the day, and 0.5% on the week, and 1.5% on the month, as the Benchmark Interest Rate, ^TNX, traded lower to 2.67%. Sarika Gangar of Bloomberg reports The rout in emerging markets is sending a chill over corporate bond sales worldwide as issuance slows and investors demand the highest extra yield to buy new debt in two months; the chart of Global Corporate Bonds, PICB, shows topped out, and trading 0.7% lower this week.
Fiat money, defined as Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW, died on October 23, 2013, when the bond vigilantes began calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%.
And fiat wealth died on January 24, 2013, when Global Financials, IXG, led World Stocks, IXG, and Nation Investment, EFA, lower on investment fears that the world central banks monetary policies have crossed the rubicon of sound monetary policies and have made “money good” investments bad.
5) … With the trade lower in the Emerging Markets, EEM, beginning with the rise of the Benchmark Interest Rate, ^TNX, on October 28, 2013, and their strong trade lower the week ending January 31, 2013, the world has fully passed from the paradigm and age of liberalism, into that of authoritarianism.
Confirmation of the death of fiat money, and the death of fiat wealth, as well as the failure of trust in ability of the debtor to repay the lender, comes from short term debt MINT, and FLOT, trading lower in value, as is seen in their combined ongoing Yahoo Finance chart.
Mike Mish Shedlock posts What the crisis taught us: More bubbles! We need bigger bubbles to combat deflation! The Monetarists are out in full force warning about pending deflation. First it was Christine Lagarde with her message about the deflation ogre (see Christine Lagarde warns of Lord Voldemort, hopes to put deflation ogre in a bottle). Next on the list, deflation fighter extraordinaire, Telegraph writer Ambrose Evans-Pritchard, picked up on Lagarde’s commentary and screamed at the top of his lungs “More Bubbles! We need bigger and bigger bubbles to combat the threat of deflation!” Of course Pritchard did not state it precisely that way, but it is indeed exactly what he called for, in equally loud, unmistakable tones.
Tightening? What Tightening? Pritchard calls a decrease in asset purchases by the Fed from $85 billion a month to $65 billion a month “tightening”. The claim is preposterous. It’s very much like telling an obese child you can only have three pieces of cake after dinner, not four. Correctly viewed, tapering asset purchases is a reduction in stimulus, not tightening.
I respond correctly viewed we see that greed has turned to fear, specifically fears that the US Fed’s monetary policies of credit stimulus have crossed the rubicon of sound monetary policy and have made “money good” investments bad, that trust investments in China cannot be repaid, that Emerging Market Local Currency Bonds, EMLC, cannot be repaid, that Emerging Market Governments are untrustworthy, that the ECB will not back dollar denominated lending risks, that the European nations are insolvent sovereigns and their banks are insolvent financial institutions, and that global growth has slowed and that businesses worldwide will be to fail in increasingly large numbers. Mr Shedlock continues with a most excellent economic read here.
Doug Noland writes in Safehaven End Of An Era. We might have reached the initial phase of the visible failure of inflationism. When I began referring to the “global government finance Bubble” back in April 2009, I had reason to fear that the unfolding Bubble would indeed prove to be the “Granddaddy of all Bubbles.” In particular, unprecedented amounts of “money” were poised to flood into China and the developing economies. The Bernanke doctrine specifically sought dollar devaluation along with the impetus to coerce savers from the safety of their savings out to the inflating global risk markets. And, importantly, policies had once again created a highly conducive backdrop for leveraged securities speculation.
Scott Sumner writes Farewell to Ben Bernanke Bernanke had studied both the Great Depression and the Japanese “liquidity trap” and hence was better prepared than almost any other economist to deal with the crisis of 2008. From a market monetarist perspective he did poorly. But market monetarism is a tiny fringe group that’s completely out of the mainstream. There was absolutely no way that Bernanke could have implemented the MM agenda even if he had wanted to. Judging the Fed chairman by this criterion would be like judging a President of the US on the assumption that he was a dictator freely able to enact the preferred agenda of a Bryan Caplan or Matt Yglesias. You judge people according to their marginal product. Bernanke did better than most would have done in his shoes. And for that he deserves thanks, and an enjoyable retirement.
If the economics profession had been solidly market monetarist in 2008 then I’m confident that Ben Bernanke would have gladly implemented NGDPLT. We need 5% NGDPLT. The economics profession never gave him the support he needed to be more aggressive. The profession failed us, the Fed was just a symptom. OK, start hammering me in the comment section for being soft on Bernanke. I don’t care.
Liberalism was a paradigm and age of inflationism that in its terminal phase featured the US Dollar Hegemonic Empire. Fed Chariman Ben Bernanke was the father of the inflation trade, he led the greatest liberation movement of all time; he set the investor free to pursue investment choice. Under his leadership, the Great Investment Years, that is from 2008 through 2013, became the epoch of the riskless trade. Yet many chose not to invest, keeping their money in what has been safe assets, that is checking accounts and savings accounts, as is seen in the chart of M2 Money Supply, rising to what will likely be its peak value of 11,017.
Liberalism’s debt based money system was revitalized after the 2008 crash by Ben Bernanke who traded out “money good” US Treasuries for the most toxic of debt, such as that traded by Fidelity Mutual Fund, FAGIX, and then oversaw Global ZIRP, with the result that wily investors garnered tremendous gains in Small Cap Pure Value, RZV, Spin Offs, CSD, Pharmaceuticals, PJP, Nasdaq Internet, PNQI, Biotechnology, IBB, and Resorts and Casinos, BJK, as is seen in the ongoing chart of FAGIX, and these investments. Small Cap Pure Value, RZV, leaders, now trading lower, include Automobile Dealers, such as PAG, SAH, ABG, KAR, AN, KMX, and LAD.
It was not US Government Bonds, GOVT, such as US Treasuries, TLT, or World Government Bonds, BWX, that underwrote liberalism’s crack up boom.
Rather, it was the most toxic, and highest yielding debt, such as Distressed Investments, FAGIX, Junk Bonds, JNK, Business Development Bonds, BDCS, Long Dated Corporate Bonds, VCLT, Eurozone Debt, EU, Emerging Market Bonds, EMB, Global Excluding US High Yielding Corporate Bonds, HYXU, and High Yield Municipal Bonds, HYMB, seen in combined ongoing Yahoo Finance chart of JNK, BDCS, VCLT, EU, EMB, HYXU, EMLC, HYMB, that underwrote ongoing investing, and generated liberalism’s peak moral hazard wealth.
Not only was it investors chasing yield, but it was also currency traders pursuing carry trades, such as the EUR/JPY and GBP/JPY, that drove investments from July 1, 2013, through January 24, 2014, continually higher.
Dispensation economics presents the faith based concept of the apostle Paul who wrote in Ephesians 1:10, that Jesus Christ is at the helm of the economy of God, overseeing all things in every age and bringing them to their fullness and completion who ordains kings and seigniors, that is money lords, who in the process of coining currency, take a cut. This contrasts with the concept of Ludwig von Mises who wrote “society lives and acts only in individuals; it is nothing more than a certain attitude on their part”; and with the concept that “all economic phenomena are the result of individual action.”
In God’s economy there are no bastards; as all things are of God, come through God, and exist unto God, 2 Corinthians 5:17-18. God ordained all things from eternity past; as time unfolds, He brings them forth; and for the saints they know the election of Grace; but for the aints, the only thing they know is appointment unto death.
From the dispensation economics viewpoint, the two greatest economic geniuses of all time have been first, Milton Friedman, in developing the Free To Choose Floating Currency Regime and in suggesting to President Nixon that the US off the gold standard; and second, Ben Bernanke in maturing and perfecting the Creature From Jekyll Island as the platform for developing investors trust. It was under their guidance, that liberalism’s democratic nation state’s policies of investment choice, and banker regimes’ policies of credit stimulus, created stupendous wealth for the wily investor.
These two thought leaders have truly been economists extraordinaire, as they created liberalism’s investor, and as they established liberalism’s four dynamos of economic activity: creditism, corporatism, globalism, and clientelism.
Nick Beams of WSWS details the zenith of the emerging markets debt trade. According to the Institute for International Finance, emerging markets have attracted about $7 trillion since 2005, which has been invested in a mixture of manufacturing and service enterprises, mergers and acquisitions, and stocks and bonds. JPMorgan Chase estimates that outstanding “emerging market” bonds are now $10 trillion, compared to just $422 billion in 1993.
6) … Bust always follows boom. Destructionism has been underway ever since Jesus Christ opened the first seal of the Scroll of End Time Events, seen in Revelation 6:1-2, and released the Rider on the white horse, that is the rider who has a bow without any arrows, to effect a global coup d’etat, by transferring sovereignty from democratic nation states to sovereign regional leaders and sovereign regional bodies such as the ECB, by enabling the the bond vigilantes to begin calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48% on October 23, 2013.
Now after five years of money market capitalism, the tail risk of Global ZIRP is economic deflation and economic recession; she is presented in bible prophecy of Revelation 17: 1-5; and she is going to be a bad bitch, as she is the scarlet beast, full of names of blasphemy, having seven heads and ten horns, and upon her forehead a name written, Mystery, Great Babylon, the mother of the harlots, and of the abominations of the earth. Regionalism is the singular dynamo of economic activity under authoritarianism.
John Redwood reports on the failure of UK sovereignty The death of Britain. Labour changed the UK and its constitution radically. We no longer have a constitution based on a powerful Parliament subject to the sovereignty of the people, expressed at election time in the ballot box and the rest of the time as public opinion. We are now a member state under European control in many fields.
The UK was once the centerpiece of a global empire that spread across the globe. But its failure as a global hegemonic empire, like that of the US Dollar hegemonic empire, was ordained from eternity past, and foretold in the Statue of Empires prophecy of Daniel 2:25-45, where the two iron legs would melt into the Two Feet and Ten Toed Kingdom of iron diktat and clay totalitarian collectivism to come forth as the Beat Regime of Revelation 13:1-4. The Labour government was simply God’s nail in the coffin to decisively and thoroughly terminate the power of the once mighty British Empire.
God works through empires. He has worked through empires, is now working through empires and always will work through empires. The Apostle Paul communicates in Ephesians 1:10, that God appointed his Son, Jesus Christ, as administrator of the economy of God, with responsibility to mature and complete every age, bringing to perfection all things therein. He terminated fiat money on October 23, 2013, and terminated fiat wealth on January 24, 2034, to bring forth a new debt based money system, that being the diktat money system, where regional overlords in each one of the world’s ten regions rule in mandates of regional economic governance and in schemes of totalitarian collectivism unifying all of mankind’s seven institutions for regional security, stability and sustainability. News reports reflect that the Beast Empire is now rising out of waves Club Med sovereign, banking, and corporate insolvency. It has the feet of a bear in banking supervision in Frankfurt; mouth of a lion in Berlin, as DW reports German FM vows more aggressive foreign policy; and coat of a leopard in fiscal supervision in Brussels.
Duane and Shelly Muir ask Why are banking executives killing themselves? Ambrose Evans-Pritchard posts Italy is wasting away month by month. CNBC reports Italy’s anti-establishment party bids to impeach president. Cliff Küle asks Is Europe heading for the largest debt default in history? Mike Mish Shedlock posts Barcelona to fine owners of empty homes 100,000 Euros.
The Great Economic Transformation commenced with the failure of fiat wealth, that is World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, on the week ending January 24, 2014, and it pivoted economic experience from the paradigm and age of liberalism into that of authoritarianism,
There be Austrian economists a plenty; their vision comes from the fiat of human philosophy; their writings are what the Apostle Paul calls in Colossians 2:23, will worship, that is the worship of one’s will, rather than God’s will. Dr. Arnold King write I believe that as government scales up, it gets worse. My recent essay offered international evidence for this. I discuss it in the widely-unread Unchecked and Unbalanced. Michael Lotus and James Bennett in America 3.0 also suggest that a country with more states, each less populous but with more governing autonomy, would be a desirable future. Almost ten years ago, I wrote We Need 250 States. Such be blinded visionaries, having no insight that one day soon, the North American Continent will become the North American Union, as Dana Gabriel writes in GlobalResearch Canada The integration of Canada into a US dominated North American Security Perimeter.
Beginning on October 23, 2013, there was a regime change from the banker regime with its rule of bankers and democratic nation states, where economic life centered on the investor and investment choice, to the beast regime with its rule of diktat of leaders in regional economic governance and totalitarian collectivism, where economic life is centered around the debt serf and debt servitude.
Leaders such as Olli Rehn, not investors, are authoritarianism’s fathers, and thus the legislators of economic value, as well as the legislators that shape one’s means and one’s ends; these are increasingly enforcing austerity to establish regional security, stability, and sustainability.
The US Dollar, $USD, UUP, traded up to strong resistance at 81.37; it often trades inversely of gold.
Jack Chan, in Safehven.com chart article, documented a breakout in Gold, GLD, in early January 2014; as he relates an investmet demand for gold commenced on 12/27/2013. In the age of authoritarianism, the only two sustainable economic resources will be the diktat of leaders, and the physical possession of gold bullion; these are the only resource to assure that one not fall into poverty.
7) …. Rental properties are now showing up for sale as foreclosures, this includes the York Neighborhood, 2 Bedroom and 1 Bath home at 1539 Grant St. Bellingham, WA 98225, which according to Zillow last sold for $251,000 in 2005; current foreclosure comparables are priced at $184,000. There is nothing apparently wrong with the property; it is a corner lot, and therefore likely going to be a rental property forever. The likely reason it is in foreclosure is inability of rental payments to cover investment costs. Although there are a few urban settlers doing the gentrification thing and raising families, the neighborhood is known as a rental one for Western Washington students who typically go in as a group of three and rent a two bedroom home on a year lease. I fully expect an economic catastrophe beginning around May 2014, that is immediately before the rental season begins in August, with the result that the York neighborhood will look like a ghost town. Over the years it has largely been parents buying homes for their university aged children or realtors picking up rental properties as a investment; the result is going to be a number of realtors having to board up their properties.
John Gittelsohn and Heather Perlberg of Bloomberg report “Mark Takano saw how subprime mortgages devastated his hometown of Riverside, California, after Wall Street helped inflate a housing bubble that burst and left a trail of foreclosures among the worst in the U.S. Now a first-term Democratic Congressman representing a district east of Los Angeles, Takano said he worries about a repeat as banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. prepare to create securities based on the latest real estate boom: Rental homes. ‘We should learn from history,’ Takano, 53, said. ‘We see a similar kind of instrument now being pioneered.’ While Takano will find it difficult to gain traction in the Republican-controlled House of Representatives, other policy makers, regulators and investors are increasingly scrutinizing private-equity purchases of homes across the U.S. and the potential impact on homeownership.”
Symbols, UUP,GLD, EEM, VT, CEW, XLU, RZV, NEE, IXG, KRE, GBCI, PUK, KCE, EMFN, EUFN, CSD, IST, PSP, PJP, SEA, EWU, EWD, NKY, EZU, OFF, EMMT, AGG, PICB, MINT, FLOT, PNQI, IBB, BJK, JNK, EMLC, BDCS, VCLT, EU, EMB, HYXU, HYMB, PAG, SAH, ABG, KAR, AN, KMX, LAD
Keywords, Inflationism, Destructionism, Money Good, NGDPLT, Death of Fiat Money, Death of Fiat Wealth, Dispensation Economics, Debt Trade, Milton Friedman Ben Bernanke, Riskless Trade, Debt Based Money System, Global ZIRP,