Financial market report for the week ending Friday March 14, 2014
1) … On Thursday March 13, 2014, a see saw destruction of equity investments and credit investments got strongly underway, as the Rider on the Red Horse appears in the Ukraine, beginning the first investment storm of Kondratieff Winter, the final phase of the Business Cycle.
The six year long running bull stock market turned to a bear stock market as Nation Investment, EFA, traded lower on fears of growing Russia and Europe conflict over Crimea, news that China will pilot five private banks, and that Italy’s UniCredit bank recorded a severe loss. The pivotal investment change is seen in the market vane, Call Write Bonds, CWB, trading lower parabolically lower in value from its market high.
Liberalism’s twin spigots of investment liquidity, turned toxic. The Euro Yen Currency Carry Trade, EUR/JPY, traded lower, as the Euro, FXE, manifested bearish engulfing, and traded slightly lower, from its recent high of 137.40 while the Yen, FXY, traded strongly higher. And debt trades such as Junk Bonds, JNK, Leveraged Buyouts, PSP, and Real Estate Rental Investment Company, Blackstone, BX, traded lower. The ongoing Yahoo Finance Chart of Eurozone Nations shows that Ireland, EIRL, has been the Eurozone’s best performing nation; this as Benson te posts Ireland’s Parallel Universe.
The Era of riding the swelling currency carry trades and debt trades, in both developed and emerging markets, is over, through finished and done.
Fat-Pitch posts Mark Hulbert notes that corporate officers are dumping stocks to a degree not seen in almost 25 years; greater than in either 2007 or in early 2011 (here). So, net, historically ‘smart money’ seems to be selling the rally to historically ‘dumb money.’ Jeff Gundlach sounded a warning on the exuberance in the high yield market: “There’s no way for prices to go up at this point. The average junk bond yields just 5.3% and trades above 104 cents on the dollar, higher than the 103 level at which many bonds can be called by their issuers”. Valuations on the Russell 2000 index, IWM, are higher than at any time since the 1970s. The forward returns over the following year at prior extremes are minus 20%.
Nation Investment, EFA, traded 1.8%, lower. Small Cap Nation Investment, SCZ -1.5%, leading World Stocks, VT -1.4% lower, and Global Financials, IXG -1.2% lower, with Emerging Market Financials, EMFN -2.9%, Chinese Financials, CHIX, -2.3%, with China News Service reporting China To Pilot Five Private Banks, and European Financials, EUFN, -2,0%, with Bloomberg reporting Italy’s UniCredit Posts Record Loss, Plans 8,500 Job Cuts. Royal Bank of Scotland, RBS, -2.5%, as The Guardian reports RBS Debt Nears Junk Bond Status After Moody’s Downgrade. Brazil Financials, BRAF, -2.0%.
Blessed Economist writes Red Horse in Ukraine. Nations trading lower included German Small Caps, GERJ, -4.6%, Russia, RSX, -4.5, Russia Small Caps, ERUS -4.5, Australia Small Caps, KROO, -4.0, Denmark, EDEN, -3.4, Poland, EPOL, -3.3, China, YAO -2.7, India, INP -2.5, Germany, EWG -2.8, Eurozone, EZU -2.7, The UK, EWU, -2.7, Sweden, EWD, -2.7, Switzerland, EWL, -2.6, South Korea, EWY, -2.6, the Nikkei, NKY, -2.5, with Daily Mail UK reporting Red Army Masses 80,000 Troops On Ukraine Border, with Zero Hedge reporting German Stocks Collapse To 3-Month Lows As Russia Nears Bear Market, with WSWS reporting Germany Threatens Massive Damage To Russia Ahead Of Crimea Referendum, and with Elaine Meinel Supkis writes Energy Prices Skyrocket While Putin Controls Huge Sector Of Energy Markets, and provides the illustration Key gas pipelines and gas fields in the Ukraine, and remarks we will have sky high energy prices. These can be followed with a Finviz Portfilio of Natural Gas, UNG, and Oil, USO.
Sectors trading lower included Social Media, SOCL -3.6%, Solar Energy, TAN -3.4, Timber Producers, WOOD, -3.0, Biotechnology, IBB -2.6, Nasdaq Internet, PNQI, -2.5, Housing, XHB, -2.4, Internet Retail, FDN -2.1, Resorts and Casinos, BJK -2.0, US Infrastructure, PKB, -2.0, Global Industrial Producers, FXR, -2.0, Aerospace, PPA, -2.0, Automobiles, CARZ, -2.0, and Steel, SLX, -2.0.
Utilities, XLU, traded higher, as the Interest Rate on the US Ten Year Note, ^TNX, traded lower to 2.65%, which took Aggregate Credit, AGG, higher, led so by the 30 Year US Government Bond, EDV, and the US Ten Year Note, TLT.
M2 Money may have peaked at $11.114 TN, a decline of $13.9bn from its last observation.
2) … Liberalism became the paradigm and age of investing through the intervention of the world central banks. Liberalism is defined as freedom from the state and commenced with John Calvin as Doug Phillips writes John Calvin (was) the man most responsible for our American system of liberty based on Republican principles of representative government.
With the decisive turn lower in Nation Investment, EFA, World Stocks, VT, and Global Financials, IXG, the world has pivoted from the paradigm and age of liberalism into that of authoritarianism.
A global credit bust and worldwide financial system breakdown, known as Financial Apocalypse, is about to occur; possibly as early as the summer of 2014, coming from the failure of trust in the world central bank monetary policies to continue to stimulate investment gain, with the result of wholesale derisking out of debt trades, such as Ireland’s Bank, IRE, and deleveraging out of currency carry trades such as Ireland’s Ingersoll Rand, IR, Mallinckrodt, MRH, and CRH PLC, CRH.
Austrian Economists have documented that economic busts always follow economic booms; for example Mises Daily, quotes Murray Rothbard in article The Case Against The Fed who relates, It is clear that the credit-creation process by the banks habitually generates destructive boom bust cycles.
The Apostle Paul, writing in the Epistles of New Testament Scripture, reveals that All things are of God, 2 Corinthians 5:17-18, and presents the Economy of God in Ephesians 1:10, where Jesus Christ is seen acting in stewardship of all things economic and political to bring them to fulfillment and completion.
Beginning with the Repeal of the Glass Steagall Act, Jesus Christ began to develop the investor and investment choice as the centerpiece of economic activity.
The greatest ever credit creation initiative came in 2008 with the US Federal Reserve beginning with QE 1, where money good US Treasuries were traded out for the most toxic of debt held by banks, such as those traded by Fidelity Investments, mutual fund FAGIX, and has underwritten stock investments worldwide with ongoing reiterations of world central bank easings through global ZIRP.
Two investment extinction events have occurred. The first extinction event was the bond vigilantes calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%, on October 23, 2013, which terminated fiat money, defined as the combination of Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW.
Bond vigilantes in calling the interest rate on the Emerging Market Local Currency Bonds, EMLC, higher, and the currency traders calling the Japanese Yen, FXY, higher, and Emerging Market Currencies, CEW, lower, which forced the investor to derisk out of the Emerging Market, EEM.
The second investment extinction event came on March 14, 2014, with investors selling out of Nation Investment, EFA, World Stocks, VT, and Global Financials, IXG, which turned Major World Currencies, DBV, lower.
Fion Li of Bloomberg reports China’s Yuan, CYB, fell after the central bank cut the currency’s fixing by the most since July 2012 and the nation’s exports unexpectedly declined last month, compelling a strong fall in Chinese DSUM bonds.
Bloomberg reports Chinese steel companies, the world’s largest, helped drive a regional industry benchmark index to a seven-month low as concern builds that some mills face financial difficulty amid a government credit squeeze. Iron ore this week had its biggest drop in more than four years, spooked by the credit squeeze and a surge in stockpiles.
Fion Li of Bloomberg reports Volatility in the yuan is raising dollar borrowing costs for Chinese developers already choked by a domestic property-market crackdown and slowing sales. Real-estate companies accounted for six of the 10 worst performers in Asia’s high-yield dollar debt market in the past month. The Shanghai Stock Exchange Property Index, tumbled 8.9%, compared with a 2.7% drop in the Shanghai, CAF, CHNA, benchmark. The yuan’s record 1.4% slump last month as the central bank seeks to end one-way appreciation bets is narrowing one of the few remaining funding windows for developers, after a ban on onshore bond sales, limits on domestic bank loans and a crackdown on trust lending.
Atif Mian and Amir Sufi of House of Debt writes China and the House of Debt. This week, China stocks fell as follows, China Technology, CQQQ, -7.7%, China Industrials, CHII, -6.2%, China, YAO, -6.1%, Chinese Financials, CHIX, -5.6%, China Small Caps, ECNS, -4.9%, and Chinese Real Estate, TAO, -4.4%. Bloomberg reports China’s Big Four Banks See $70 Billion Vanish From Stocks
Atif Mian and Amir Sufi of House of Debt posts Emerging Market Nightmare Hyun Song Shin analysis points to the inherent dangers of debt in emerging markets. A reliance on debt – especially debt denominated in foreign currency (i.e. dollars) – exposes emerging market economies to run risk. We typically associate such run risk with leveraged financial institutions, but Shin is arguing that bond managers may also run if things go sour.
IMF Direct asks The Trillion Dollar Question: Who Owns Emerging Market Government Debt Half a trillion dollars in foreign investment poured into emerging market government bonds from 2010 until 2012 alone, most of it from foreign financial institutions that aren’t banks (large institutional investors, hedge funds, sovereign wealth funds). These investors held about $800 billion of the debt—80 percent of the total—at end-2012.
Because of past Dollarization, Emerging Market Bonds, EMB, has a much greater fall potential than Emerging Market Local Currency Bonds, EMLC. Bloomberg posts Asia’s Borrowers Halt Dollar Bond Sales As Ukraine Tensions Rise.
Liberalism in its 500 years of history has seen many fathers, that is starters; each coming at his appointed time to set an ever greater number of individuals free from the state.
In 1971, President Nixon set currencies free, by implementing Milton Friedman’s Free To Choose floating currency regime to fund the Vietnam War by taking the US off the gold standard.
In 1999, President Bill Clinton repealed the Glass Steagall by signing the Gramm–Leach–Bliley Act, eliminating legal barriers between commercial banks, investment banks, securities firms, and insurance companies.
The subprime crisis led to the financial system crash of 2008; and it is likened to a fatal automobile crash that killed all the occupants. Regeneration of economic life came through Paulson’s Gift, that being Ben Bernanke’s QE1 and TARP, which traded out “money good” US Treasuries for Distressed Investments, such as those traded in Fidelity Mutual Fund FAGIX.
Jesus Christ acting in dispensation, as presented by the Apostle Paul in Ephesians 1:10, completed liberalism on March 14, 2014, as both a paradigm and an age, by turning equity investments, World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, Yield Bearing Investments, DTN, as well as currencies, Major World Currencies, DBV, Emerging Market Currencies, CEW, as well as credit investments, Distressed Investments, FAGIX, and Junk Bonds, JNK, lower in value.
He perfected the governance of democratic nation states and the inflationism of the world central banks, working through the three dynamos of creditism, corporatism, and globalism, as well as through money manager capitalism of the speculative investment community, which produced investor centric, peak moral hazard investment prosperity in March 2014, which drove the concentration of income and wealth into the hands of the few, as stellar financial rewards accrued to shrewd corporate executives and to wily investors.
Income inequality and wealth inequality was by the express design and purpose of God, and came through the hand of Jesus Christ, acting in dispensation as presented in Ephesians 1:10, driving the creature from Jekyll Island to its achieve its maximum credit intervention to reward shrewd executives and to drive up stock market values to perfect liberalism both as a paradigm and an age.
Atif Mian and Amir Sufi of House of Debt posts The top 20% of the wealth distribution owns over 80% of the financial assets in the economy. So when the aggregate Flow of Funds data show a rise in financial asset values, it is important to remember that the rise primarily benefits the rich and as James Kwak of Baseline Scenario posts Good Times for Capital. Such was the genius of Jesus Christ fulfilling, and completing liberalism, much like a ship’s captain unloads a ships manifest before setting sail on another journey.
3) … Economic leadership never has come by election or selection, but rather by the appointment of God.
Beginning on October 23, 2013,The First Horseman of the Apocalypse, that is the Rider on the White Horse, seen in Revelation 6:1-2, began passing The Bow of Economic Sovereignty from democratic nation states and the world central banks, to regional sovereigns and regional sovereign bodies.
The purpose of His ride over is humanity is to effect global coup d’etat, by enabling the bond vigilantes to begin calling the interest rate higher on the US Ten Year Note, ^TNX, from 2.48%, literally taking out democratic nations and establishing the beast regime, of Revelation 13:1-4, which forms a singular world empire, replacing the banker regime, and its partner the US Dollar Hegemonic Empire.
Regional leadership is now growing in the form of political capital, and its authority will establish regional economic fascism, replacing all isms, such as crony capitalism, European Socialism, Greek Socialism, and Communism, where the debt serf, and debt servitude, is the centerpiece of economic action, to counteract the destructionism of economic deflation coming from unwinding debt trades and currency carry trades, as well as a natural deflation in the EU, as the Irish Independent posts Deflation ‘ogre’ threatens to derail Europe’s fragile recovery
Open Europe posts Looking ahead to the appointment of the next European Commission President, the Economist’s Charlemagne related in Election or Selection “Politicising the commission, the EU’s civil service, could undermine its important functions as an impartial arbiter, for instance in policing the single market and monitoring national economic policies. The old method of selecting a president was unedifying, and led to several disappointments. But the EU is close to stumbling into a system that may be even worse.”
Regional economic fascism is rising to rule in the world’s ten regions and occupy therein in every one of mankind’s seven institutions.The beast regime is making landfall in the Eurozone, by The Sovereign, Revelation 13:5-10, and his partner, the Seignior, Revelation 13:11-18, that is a top dog banker, who in the process of minting money, takes a cut, is fated to be the singular, all inclusive, economic experience, as the ships of state flounder, and sink, in the tossing sea of debt deflation driven, competitive currency devaluation.
There be no longer any citizens, rather there be only residents of regions of economic governance.
Under authoritarianism a new form of money is rising to rule all. Regionalism is establishing a new debt based money system, that being the diktat money, where regional overlords, ruling in each one of the world’s ten regions in mandates of regional economic governance, and in debt servitude schemes of totalitarian collectivism, to unify all of mankind’s seven institutions, and establish regional security, stability and sustainability.
Those living in the EU will soon be prisoners in a regional banking, debt, fiscal, debt, economic and military panopticon and union.
Prudent Bear’s Doug Noland writes in Safehaven.com The Ukraine and China pose clear and present danger to global markets. The germane issue is that the Federal Reserve doesn’t control China, Ukraine or Russia. The combined power of the Fed, Bank of Japan, ECB and Bank of England’s balance sheets just doesn’t command great influence on Russia’s Putin or China’s policymakers – or geopolitical issues for that matter. Actually, a strong case can be made that “Western” monetary inflation has at the end of the day had a profoundly destabilizing impact on geopolitics. Putin these days surely doesn’t buy into the “Truman Show” World. He likely despises it.
Friday from a leading Wall Street firm: “The pressure being applied to Moscow by financial markets will likely help resolve the crisis…” This is a commonly held view (within the “Truman Show” World Bubble). “Globalization” – with its heavily interdependent economies, financial systems and markets – provides the added benefit that disputes will now be handled through market pressure and sanctions – rather than tanks and missiles. It’s an element of this halcyon “tail risk”-free World
So-called “black swans” are by definition unexpected, perceived very low-probability market occurrences with major consequences.
There is today a not insignificant probability that the situation in Ukraine spirals out of control – with unforeseeable financial, economic and political ramifications. I would argue years of uncontrolled central bank inflationism have played an integral role in today’s highly unstable backdrop.
One could establish a portfolio of ETFs for collateral for short selling, such as those seen in this Finviz Screener FLAT, XVZ, JGBS, GLD, EUO, YCS, SAGG, ZSL,HDGE, TOTS and commence short selling of selected stocks such as Small Cap Pure Value Stock, RZV, United Rentals, URI, or Small Cap Pure Growth Stock, RZG, Trinity Industries, TRN. Yet, in the age of destructionism, the only two forms of sustainable financial resource are diktat and the physical possession of gold bullion. Gold may be putting in a temporary high. Zero Hedge posts Gold soars to fresh 6-month high while risk off accelerates
The lollipop hanging man candlestick in the chart of the Gold Mining Stocks, GDX, suggests that their rally is complete.
Finviz Presentation of GDX
Stockcharts Presentation of GDX
4) … In news of the fulfillment of Bible prophecy of genetic manipulation, just as is was in the days of Noah so it will be in the days of the coming of the Son of Man, as foretold by Christ Christ, in Matthew 24:37, Huffington Post reports A new generation of transhumanists is emerging and reports The reality of Dr Moreau: Human animal cross species. Also The Daily Mail reports Babies born with tweaked DNA could be in the UK next year. And The Guardian reports Genetically modified monkeys created with cut-and-paste DNA.