Financial market report for the week ending June 13, 2014,
This post can be found in Google Documents format here
1) … Introduction. The June 11, 2014 trade lower in the Euro in response to the June 5, 2014, ECB NIRP Mandate of Mario Draghi, pivots the world into the Ten Toed Kingdom of Regional Economic Governance and commences Kondratieff Winter, the final phase of the business cycle. Libertarian Chris Rossini writes in Economic Policy Journal Man-Made Laws Are Never Permanent. If there’s one thing that is perfectly certain, it’s that government is not omnipresent, not omniscient, and certainly not permanent. The Roman Empire is no longer here, neither are the Mongols, nor the Spanish, Portuguese, or British Empires. No doubt they all saw themselves (and their man-made rules) as permanent too. But nothing that is man-made is permanent. The saying “from dust to dust” has been around for so long, yet enough people still can’t grasp its truth. Governments spring up, they loot until they reach the limit, and then the intense desire for survival kicks in to reverse course. If the reversals were never to occur, that would be it! Humanity would be finished.
There be an omnipresent and omniscient God, who in bible prophecy, ordained from eternity past that there be sovereign governments, issuing sovereign currencies, that is in fiat money; and that one day a Ten Toed Kingdom, seen in Daniel 2:25-45, known as the Beast Regime, seen in Revelation 13:1-4, arise out of waves of Club Med sovereign, banking, and corporate insolvency, to rule the world in diktat money, via policies of diktat in every one on the world’s ten regions, and via schemes of debt servitude, in all of mankind’s seven institutions, to establish regional security, stability, and sustainability.
By God’s ordination, the China Russia Deal has destroyed The US Dollar as the International Reserve Currency, and has given notice that undollar bartering agreements will be the basis for the new Eurasia region of economic governance, the WSJ reports Paul Volcker Calls For A New Bretton Woods Conference. Former Federal Reserve Chairman Paul Volcker called last month in Washington for a new Bretton Woods, the 1944 conference of World War II Allies that set up an international gold-exchange regime; his remarks received little media attention. GATA reports Russian Companies Prepare To Pay For Trade In Renminbi.
Since 1913, with the creation of the Creature from Jekyll Island, the world has been operating on a debt based money system, and will do so to the end of time. Public debt cannot be repudiated; it will be applied to every man, woman and child on planet earth; furthermore human government cannot be nullified; nor can it be ever be thrown off; it will rule, under the sovereignty of Jesus Christ, until He returns.
With the 1971 Milton Friedman Free To Choose mandate of sovereign currencies implemented by President Nixon, the US Dollar Hegemonic Empire rose in power to replace the British Empire. The most recent empire came to its zenith with the Thursday, June 5, 2014, Mario Draghi, ECB Mandate, of TLTROs and a Negative Interest Rate Policy. His word, will and way is the economic law of the Eurozone, and has pivoted the entire world from liberalism’s economic systems of capitalism, socialism, communism, into the singular economic system of regionalism.
The week ending June 13, 2014, the US Dollar, $USD, closed at 80.62, up from its June 6, 2014, close of 80.42.
Doug Noland writing in Safehaven Sound or Unsound? As follow-up to last week’s quarterly “flow of funds” analysis, I’ll take a brief look at the Rest of World (“ROW”) category. ROW now holds an incredible $22.971 TN of U.S. Financial Assets. To put this number into some perspective, ROW holdings began the nineties at $1.874 TN. Ballooning U.S. Credit and attendant unprecedented Current Account Deficits saw ROW holdings surge $4.335 TN, or 230% during the nineties. During the past 22 years, ROW holdings of U.S. Financial Assets have inflated $21 TN, or over 1,000%. Essentially, the U.S. has unrelentingly flooded the world with dollar balances. This helps explain a lot.
The consequences of the massive inflation/devaluation of the world’s reserve currency have for a long time been readily apparent.
In the 21 quarters since the end of 2008, ROW holdings have jumped $7.585 TN, or 49%. The world was once again literally flooded with dollars. The global government finance Bubble thesis posits that these dollar balances inundated the emerging markets, fueling unprecedented Credit growth, financial Bubbles and economic malinvestment. China, in particular, succumbed to Bubble Dynamics on an historic scale.
It is my view that if not for the massive inflation of U.S. Credit (dollar devaluation), it would have been impossible for the Chinese Credit system to have operated without any constraint for so long. Unfettered cheap Chinese finance has allowed massive overinvestment throughout scores of industries (not to mention apartment units!). The world now faces the consequences: “disinflationary” pressures on many things as well as the specter of major unfolding Chinese financial issues.
On Wednesday, June 11, 2014, pent-up disinflationary pressures released as global debt deflation commenced, as the chart of the EUR/JPY currency carry trade showed a strong turn lower, as the currency traders called the Yen, FXY, higher, and the Euro, FXE, lower, on the failure of trust in the monetary policies of the world central banks to continue to stimulate investment gains, as well as global growth, with the result that investors derisked out of World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, and Dividends Excluding Financials, DTN, and by which the world passed through an inflection point and entered into Kondratieff Winter, the final phase of the Business Cycle, where regional fascist leaders rule in diktat, to establish regional security, stability and sustainability.
2) … Details of this week’s financial marketplace trading reveal derisking out of debt trades and deleveraging out of currency carry trades, has introduced destructionism replacing inflationism.
2A) … On Wednesday, June 11, 2014, Competitive currency devaluation, coming at the hands of the currency traders calling the Euro, FXE, lower, caused investors to deleverage out of currency carry trades with the result of a stock market reversal from its Elliott Wave 5 High Top. The trade lower in Equity Investments commences the beginning of Kondratieff Winter, and evidences the beginning of the extinction of the investor.
Nation Investment, EFA, was led lower by Eurozone Small Caps, DFE, such as TNP, Eurozone Stocks, EZU, such as PT, IR, LYB, CBI, ALU, PHG, BUD, SNY, NVO, NXPI, ERIC, ENL, LUX, UN, and Eurozone Nations, such as Portugal, PGAL, Italy, EWI, Ireland, EIRL, Greece, GREK, and Spain, EWP. Airbus stock falls sharply as Bloomberg reports Emirates Cancel $16 Billion Of New Airbuses. Major Countries, Denmark, EDEN, Norway, NORW, Sweden, EWD, Switzerland, EWL, traded lower.
Global Financials, IXG, were led lower by European Financials, EUFN, such as DB, UBS, CS, NBG, SAN, IRE, India Earnings, EPI, Stock Brokers, IAI, such as TROW, AMTD, SCHW, Investment Bankers, KCE, such as JPM, MS, Regional Bankers, KRE, such as HBAN, FITB, RF, SNV, The Too Big To Fail Banks, such as BAC, C, KEY, USB, WFC, Life Insurance Companies, such as GNW, PFG, PUK, LFC, AEG, AEL, PRI, LNC, TMK, MET, and Asset Managers, such as BLK, IVZ, CG, LAZ, BEN, AMP, JNS, VOYA, CNS, LM, BR, IVZ, STT, BK. Columbia’s Bank, CIB, traded higher.
World Stocks, VT, were led lower by Airlines, such as DAL, UAL, AAL, US Infrastructure, PKB, Automobiles, CARZ, Manufactured Housing, CVCO, Homebuilders, ITB, Transportation, XTN, Global Industrial Producers, FXR, Aerospace, PPA, Consumer Services, IYC, Food And Beverage, PBJ, Small Cap Pure Growth Stocks, RZG, and Small Cap Pure Value Stocks, RZV.
Yield Bearing Sectors were led lower by Utilities, XLU, PUI, Smart Grid, GRID, China Real Estate, TAO, Global Infrastructure, IGF, Emerging Market Infrastructure, EMIF, Real Estate, IYR, and Shipping, SEA, such as SBLK, DRYS, DLNG, DAC, SB, and TNP. Their trade lower evidences the beginning of the extinction of the fixed income investor; this comes as Tyler Durden posts The Baltic Dry Index Is Having Its Worst Year Ever. Of note Shipping Stocks, SEA, relative to The Baltic Dry Index, $BDI, that is SEA:$BDI, has levitated into the moon, on pursuit of yield investing.
Dividends Excluding Financials, DTN, were led lower by BA, D, NEE, HD, ADP, HPQ, WM, JWN, GE. JNJ, PEP, F, GPC, MSFT, DOW, DIS. MCD, and HON.
Agriculture, PAGG, such as CAT, traded lower.
Materials, MXI, such as EXP, MLM, VMC, and USCR, traded lower.
Miners, PICK, such as RIO, AA, and SCCO, traded lower.
Credit Services, such as AXP, DFS, V, MA, HEES, and URI, traded lower.
Closed End Funds, GCE, traded lower.
As of June 11, 2014, most all Equity Investments began trading lower from their rally and market top highs, commencing an investment demand for gold.
Base Metals, DBB, traded lower, with Tin, JJT, Aluminum, JJU, Copper, JJC, Nickel, JJN, and Lead, LD, as the WSJ reports Owners May Move Metal From China. Operators of metals warehouses in South Korea and Taiwan are receiving inquiries about moving metal held in the Chinese port of Qingdao to their facilities in the wake of an investigation into potential irregularities at the port, according to people at three warehouse companies. Metal owners are looking to shift their stocks from China to warehouses in the region that are licensed by the London Metal Exchange
Aggregate Credit, AGG, traded higher, yet resides below May, 28, 2014, rally high, having been led lower by the 30 Year US Government Bonds, EDV, the US Ten Year Notes, TLT, and Long Term Corporate Bonds, LWC. Emerging Market Bonds, EMB, and Junk Bonds, JNK, traded lower. Thus all Credit Investments are trading lower from their rally and market tops, evidencing the failure of credit. Zero Hedge reports Bank of America Shocker: New Commercial Loan Plunge Is Largest Since Lehman.
The currency traders in selling the world’s leading sovereign currencies, following the bond vigilantes, in calling the Benchmark Interest Rate, that is the Interest Rate on the US Ten Year Note, ^TNX, higher from its October 23, 2013, value of 2.49% to 2.64%, and in steepening the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening, have underwritten the currency traders in commencing the final phase of the business cycle, that being Kondratieff Winter.
Hans Mikkelsen of Merrill Lynch Research relates Bond Funds In Retreat. As our interest rate strategists have highlighted one of the key contributors to lower interest rates this year has been short covering of bearish Treasury positions, as institutional investors capitulated on the view that interest rates should go up. The retail investor version of this capitulation manifested as tapering inflows and outflows from interest rate defensive products, such as short term high grade funds and loans, and the return of sizable inflows to assets whose returns are adversely impacted by rising rates – such as HG (ex. short term) and EM. Of course on the retail side (mutual funds/ETFs) we have found that flows tend to follow returns and, with HG (ex. short term) and EM leading financial markets with class leading performance in the first part of the year, this shift is no surprise in hindsight. However, as interest rates have increased this month the relative return performance has flipped.
Needless to say economic growth is impossible given that investors are starting to derisk out of debt trades and deleverage out of currency carry trades. A lower Euro, relative to the Yen, and higher interest rates are incompatible with global economic growth.
It is Jesus Christ, who on October 23, 2013, opened the First Seal of the Scroll of End Time Events, and released the Rider on the White Horse, seen in Revelation 6:1-2, who has the Bow of Economic Sovereignty, to begin economic coup d etats world wide, by empowering the bond vigilantes to commence calling the Benchmark Interest Rate higher from 2.49%.
It is Jesus Christ, who on June 11, 2014, opened the Fourth Seal of the Scroll of Scroll of End Time Events, and released the Rider on the Pale Horse, seen in Revelation 6:7-8, (compelling Equity Investments to trade lower on the trade lower in the EURJPY, following the ECB Mario Draghi Mandate of NIRP and LTLRO) who introduces economic deflation replacing economic inflation, the result of which is economic death replacing economic life.
With a see saw destruction of the components of fiat wealth underway, and a trade higher in most of these Inverse Market ETFs, (STPP, XVZ, EUO, YCS, CMD, MLPS, SAGG, DTYS, JGBS, GLD, GYEN, GEUR, GGBP, YXI, EUM, DOG, SEF, EFZ, DDG, PSQ, REK, MYY, RWM) the short selling opportunity of a lifetime has commenced.
Soon the US Dollar, $USD, UUP, will buckle and trade lower with the rest of the World Major Currencies, DBV, as well as the Emerging Market Currencies, CEW, which will invigorate the investment demand for Gold, GLD, whose price will rise from its current range of $1,240 to $1,260. Gold is in the middle of an Elliott Wave 3 Up, and as such only God knows how high it will go.
Doug Casey of Market Sanity posts US In Eye Of Gigantic Financial Hurricane
Zero Hedge posts New Commercial Loan Plunge Is Largest Since Lehman
Bloomberg reports Currency Carry Trades Rise In ECB’s Negative Rate World
Reuters reports Hundreds Killed As ISIL Gains Ground in East Syria
UNZ reports Battle To Establish Islamic State Across Iraq/Syria.
NYT reports Exhausted And Bereft Iraqi Soldiers Quit Fight
Zero Hedge reports Al Qaeda Militants Capture US-Made Black Hawk Helicopters In Iraq.
WSWS reports Al Qaeda Offshoot ISIS Captures Mosul From Iraqi Government Forces.
Business Insider reports ISIS Now Controls A Shocking Percentage Of Iraq And Syria/
CS Monitor posts Why Mosul’s Fall Is a Signature Moment in Iraq
Bloomberg reports Maliki Turns to Militias to Halt al-Qaeda Onslaught. As his army flees from an al-Qaeda splinter group, Iraqi Prime Minister Nouri al-Maliki is rallying Shiite militias to defend his government, raising the specter of civil war in OPEC’s second-biggest oil producer. In a televised news conference yesterday Maliki urged citizens to take up arms after the Islamic State of Iraq and Levant group seized control of the northern city of Mosul, stealing weapons and helicopters from police and army bases as Iraqi government forces fled. He vowed to build an army of volunteers to “pull the thorns out by ourselves.”
CS Monitor posts Hezbollah Stronger Than An Arab Army, Israel Documents
Bloomberg reports Iraq Bonds Slump on Mosul Seizure as Stocks Drop Most Since 2012. Iraqi bonds plunged and stocks fell the most in two years after fighters from a breakaway al-Qaeda group took control of Mosul in a move highlighting Prime Minister Nouri al-Maliki’s weakening grip on the country.
Reuters reports Palestinian Reconciliation Pact Threatened by Disunity
Business Insider posts How Google’s New Satellite Company Is Going To Change The World.
The WSJ reports Alibaba Launches U.S. Shopping Site 11 Main
Ukraine Rejects Gas Offer as Talks End Without Deal. Ukraine rejected a Russian proposal for the price of future natural-gas deliveries as European Union-brokered talks in Brussels ended without an agreement.
The largest government bond market in the world saw no futures trades in the morning session last night. Zero Hedge reports Japanese Bond Futures Volume Collapses To Zero Even As Service Sector Implodes.
David Stockman writes In Effect, The BOJ Is The Bond Market, That Is, The Buyer Of First, Last And Only Resort. After endless prodding by the Abe government, Japan Pension Fund Plans Massive Bond Dump Into Dead Mark. Japan’s pension system (GPIF) will now begin to massively dump hundreds of billion of JGBs, so that it can reduce its bond holding from 60% of its $1.3 trillion portfolio to 40%. This is being done, of course, to stimulate the Japanese economy by putting pensioners in harm’s way. The cash to be derived from this program of bond dumping will used to purchase Japanese and international equities, along with real estate, private equity, hedge funds and other “alternative asset” classes. And who will buy negative return bonds to be dumped by the GPIF? Why the BOJ. In Japan, all financial roads lead to the printing press.
Cantor said to leave house leadership on July 31. Republicans have been jockeying for Eric Cantor’s leadership position after his election upset last night. Wall Street Lost A Friend Last Night. Adam Munter posts in Economic Policy Journal David Brat Unscrubbed There is a lot of stuff in the news about David Brat’s victory over Eric Cantor. In the end, it matters little when one statist wins over another. And in Breitbart Profile Of David Brat, A native of Alma, Michigan, Brat attended Hope College, obtained a Masters in Divinity from Princeton Theological Seminary, and has a Phd. in economics from American University As a professional economist, Brat says “the Austrians are pure theory with no data. I like them. The Road to Serfdom [by Hayek] is on the money.” But Brat does not consider himself a proponent of the Austrian school. “If you had to peg me, I’m close to the Milton Friedman, Chicago School,” he told Breitbart News.
2B) … On Thursday, June 12, 2014, World Stocks, VT, were led lower by a trade lower in Transports, XTN, Global Industrial Producers, FXR, Retail, XRT, Aerospace, PPA, Global Consumer Discretionary, RXI, Medical Device Manufacturers, IHI, US Infrastructure, PKB, Small Cap Pure Growth, RZG. and Small Cap Pure Value, RZV.
Automobile Dealerships, PAG, SAH, ABG, KAR, AN, KMX, LAD, traded lower from their market top highs evidencing the end of risk-on investing.
Aluminum Producers, Timber Producers, WOOD, Miners, PICK, Materials, MXI, Coal, KOL, Steel, SLX, and Metal Manufacturing, XME, as as Base Metals, DBB, Palladium, PALL, and Platinum, PPLT, traded lower.
Energy Producers, XOP, and Global Energy Producers, IPW, traded higher as Commodities, DBC, traded higher, to strong resistance, as Energy, DBE, Oil, USO, Brent Oil, BNO, Unleaded Gas, UGA, and Natural Gas, UNG, traded strongly higher.
Gold, GLD, and Silver, SLV, traded higher, taking Gold Miners, GDX, GDXJ, and Silver Miners, SIL, SILJ, higher, confirming the beginning of the investment demand for gold.
The May 2014 Commerce Department Retail Sales Report shows Retail and food sales came in below expectations, rising by just 0.3 per cent, well below the 0.7 per cent rise expected by analysts. The report also revised the estimate for April 2014 Retail Sales growth from 0.1 per cent to 0.5 per cent.
Drug Stores, WAG, RAD, CVS, and Grocer, KR, DEG, and Department Store, DDS, M, led Retailers, XRT, lower, reflecting the failure of trust in the world central bank’s monetary authority and the death of currencies, in particular the Euro.
Nation Investment, EFA,were led lower by Thailand, THD, Indonesia, IDX, and Chile, ECH.
Global Financials, IXG, traded lower on lower Emerging Market Financials, EMFN.
Dividends Excluding Financials, DTN, traded lower.
Closed End Funds, GCE, traded to a new rally high.
The Australian Dollar, FXA, continued to a new rally high, taking Major World Currencies, DBV, to a new rally high.
Robert Sinche of Pierpont Securities writes Japanese Pension Fund Asset Shift Weakens Yen. The adjustment, sought by the Abe Administration, is not only to attempt to increase returns that have lagged other large global funds (a Bloomberg report indicates that over the 9 years ended March 2013 the GPIF generated a 2.8% average return compared to 5.2% for the Norwegian Government Pension Fund and 7.3% for CalPers) but also to help generate faster growth within the Japanese economy. The latter claim seems a bit weak, resting on the assumption that the GPIF can allocate resources to fast-growing companies better than can “the market”, although the Abe Administration would like to claim this shift as part of their “growth strategy”. While a large allocation shift in favor of domestic equities may boost market indexes and wealth, that hardly qualifies as a “growth strategy” designed to increase the rate of potential growth within an aging economy. Much like the effort to raise inflation, the focus appears to be the outcome rather than the process to achieve it – higher inflation (the desired outcome) resulting from a weaker currency and higher consumption taxes hardly seems to be economic improvement.
Will US fixed income markets benefit from the potential allocation shift of perhaps $65bn into foreign debt? If concentrated in a short period into the Treasury market, such a flow might have a meaningful impact, particularly if concentrated in the long end of the curve. However, against the backdrop of the expected tapering of Fed monthly purchases from $85bn per month during most of last year down to zero by late this year, the proposed allocation shift does not appear to be a dominant factor in driving US Treasury yields meaningfully for anything more than a short period.
Is there an investable impact of the shift? Maybe it is a result of my traditional FX focus, but a weaker JPY seems to provide an more attractive investable theme. While a flow of about $125bn into foreign denominated assets (equities and bonds) may not be a huge factor when diversified among many countries, markets and securities, if it takes place all that flow would involve selling the JPY versus some other currency. Indeed, one could wonder whether the Abe Administration is partly (mainly?) viewing the asset allocation shift as another factor helping to weaken the JPY, a pricing shift that could both increase measured inflation and provide another (modest) boost to the export/corporate sectors. In the historic context of a large current account (CA) surplus in Japan, a $125bn capital outflow might not have been a significant force weakening the JPY. But as we have noted on a number of occasions, the traditional CA surplus is no more, primarily a casualty of the persistently strong JPY, rising energy imports after the earthquake/tsunami changed the composition of electricity production and sluggish global growth trends. Moreover, there is a possibility that the increased allocation to foreign assets by the GPIF encourages private-sector investors also to increase their non-JPY asset holdings, increasing the capital outflow from Japan.
Aggregate Credit, AGG, traded higher, on a higher 30 Year US Government Bond, EDV, and a higher US Ten Year Note, TLT, which forced the Interest Rate on the US Ten Year Note, ^TNX, lower to 2.59%. The 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as traded by the Steepner ETF, STPP, traded lower to 37.90, where it waits to spring to life, with a rising Benchmark Interest Rate, $TNX, to utterly destroy Credit Investments, which are trading lower from their May 2014 highs.
2C) … On Friday, June 13, 2014, World Stocks, VT, traded slightly higher as Energy Service, OIH, Energy Producers, XOP, and Global Integrated Energy Companies, IPW, traded higher. Social Media, SOCL, Solar Energy, TAN, and Semiconductors, SOXX, traded higher. Design Build, FLM, traded lower.
Nation Investment, EFA, traded unchanged, as China, YAO, and Chinese Financials, CHIX, traded higher, on this week’s higher Chinese Yuan, CYB; and as South Korea, EWY, and its banks, KB, and SHG, traded lower; and as European Financials, EUFN, such as DB, LYG, UBS, CS, Greece, GREK, and its bank, NBG, traded lower.
India, INP, India Small Caps, SCIN, and India Earnings, EPI, traded lower as the India Rupe, ICN, traded strongly lower, forcing Emerging Market Currencies, CEW, to trade lower.
In Yield Bearing Investments, European Small Cap Dividends, DFE, Premium REITS, KBWY, Industrial Office REITS, FNIO, and Smart Grid, GRID, traded lower.
Closed End Funds, GCE, such as CSQ, AWP, PFL, RCS, EIM, UTF, IFN, HHY, and EMD, traded lower; their trade lower evidences the end of pursuit of yield investing; these have risen 7.5% YTD, and pay a 7% yield.
Gold, GLD, traded higher, taking Gold Miners, GDX, GDXJ, higher, confirming the beginning of the investment demand for gold. Spot Gold, $GOLD, rose its recent low of $1,240 to close at $1,275.
Aggregate Credit, AGG, traded lower on the day, and unchanged on the week as Junk Bonds, JNK, traded strongly higher, to a new rally high.
3) … At the end of the age of fiat wealth, credit flows like the Nile in flood stage.
3A) … Across The Curve relates Vivianne Rodrigues of the FT posts Investors Lap Up Ultra Long Corporate Bonds. An article regarding the robust demand for 50 year bonds and the explosion of issuance in that lightly issued sector. Once again it is the yield whores driving the trade. One investor noted how the 50 year bond he just bought yields 30 basis points more than the 30 year bond of the same company.
3B) … Credit liquidity underwrites currency carry trade investing in the Emerging Markets, EEM, in Emerging Market Bonds, EMB, and in Emerging Market Local Currency Bonds, EMLC, especially Columbia, GXG, and its bank, CIB.
Andrea Jaramillo of Bloomberg reports Colombia Is Handing Carry Trade Investors The Best Returns In The World. Investors who buy riskier assets with money lent from nations with lower borrowing costs have reaped a 9.47 percent gain in Colombia in the past three months as the central bank liftsinterest rates and the peso appreciates the most of any currency. The nation’s local debt has returned 13.2 percent in dollars, more than double the average gain for emerging markets.
WhileMexico surprised investors by cutting rates last week, Colombia increased benchmark borrowing costs for a second straight month in May to keep inflation in check as economic growth accelerates. With swaps indicating the central bank will raise rates by a full percentage point to 4.75 percent by year-end,Banco Bilbao Vizcaya Argentaria is recommending that investors snap up Colombian bonds due 2024.
“Colombia’s cycle calls for more rate hikes, opposite to a lot of these countries in the region,” Carolina Ramirez, a strategist at BBVA’s Colombia unit, said in a telephone interview from Bogota. “The carry trade is attractive.”
The latest central bank survey published May 12 shows analysts expectannual inflation to accelerate to 3.19 percent by year-end, which would be the highest annual rate since June 2012. The economy will expand 4.5 percent this year after growing 4.3 percent in 2013, according to the median forecast in a Bloomberg survey.
The peso has jumped 8.9 percent against the dollar in the past three months, data compiled by Bloomberg show.
“Larger returns given the hiking cycle add to the peso’s strengthening trend,” Armando Armenta, an economist at Deutsche Bank AG, said by phone fromNew York. “Colombia’s peso bonds should continue outperforming in dollar terms.
Banco de la Republica will raise borrowing costs to 4.25 percent by year-end to tame inflation, BBVA’s Ramirez said. She predicts yields on Colombia’s 2024 bonds will fall to 6 percent by September from 6.28 percent.
“Colombia is lifting rates for the right reasons,” Ramirez said. “The economy is growing and the central bank needs to keep inflation under control.”
3C) … Commodity backed lending spurred China investment. Daniel Inman, Fiona Law and Enda Curran of WSJ report The commodity-backed loans at the center of a probe into an alleged financial scam at a Chinese port are part of a ramp-up in offshore borrowing by Chinese companies that Beijing is looking to tamp down. As Chinese authorities tightened credit at home in the past year, local firms instead looked abroad for financing. Asian-Pacific banks alone had $1.2 trillion in loan exposure to China at the end of 2013, up two-and-a-half times from 2010, according to Fitch. A chunk of the borrowing has been by Chinese firms taking out short-term overseas loans backed by commodities, part of an effort to lock in gains by borrowing offshore at lower rates, and investing the money at higher rates on the mainland. This lending has complicated Chinese policy makers’ attempts to slow rapid credit growth in the nation’s so-called shadow banking sector. Foreign banks have stepped up commodity-backed lending to China in recent years, a profitable business that now is looking increasingly shaky.
3D) … Credit for automobile purchases has risen to an all time high, and has underwritten a great swell in automobile sales and has produced record investment in the automobile industry.
In the Great Financial Recovery, that is from 2008 to June of 2014, credit liquidity coming from Global ZIRP, and pursuit of yield investing, has underwritten automobile sales. and has underwritten investment in the Automobile Industry, CARZ, which traded lower from its rally high the week ending June 13, 2014, evidencing the failure of trust in the world central banks to stimulate investment gains and global economic growth.
The week ending June 13, 2014, Small Cap Pure Value Stocks, RZV, traded lower from their market top, as Automobile Dealerships, PAG, SAH, ABG, KAR, AN, KMX, LAD, traded lower from their highs evidencing the end of risk-on investing.
Lending to weaker companies on easy terms is becoming more and more common as investors’ appetite for higher yielding debt grows stronger and the Federal Reserve keeps money flowing at ultralow rates. Since the financial crisis, companies have been able to borrow more without offering investors what were once considered standard protections against possible losses.
More than half of the loans in the $747 billion U.S. market for loans made to junk-rated companies don’t have financial “covenants,” triggers that could cause a borrower to shore up its health, including periodic tests of overall debt levels and cash flow to cover scheduled interest payments. Thus far this year through Thursday, 62% of leveraged loans lacked these regular requirements, up from 57% for all of 2013, according to S&P Capital IQ LCD.
Leveraged loans, including loans with and without financial covenants, now yield 5.03% as of Wednesday, compared with 3.81% for investment-grade corporate bonds, according to JP Morgan JPM data, and about 2.59% on the 10-year Treasury note.
By having fewer strings attached to their loans, borrowers are once again able to build flexibility to take on more debt or to pay dividends to owners such as private-equity firms.
Kate Spade, KATE, borrowed to refinance debt in April, and its $400 million term loan required the New York-based company to maintain no regular financial targets, according to Xtract Research.
Federal Reserve Governor Daniel Tarullo said in February that there was “greater investor appetite for risky corporate credits, while underwriting standards have deteriorated.”
Covenant-lite loans comprise 54% of loans in a leveraged-loan index run by J.P. Morgan Chase. That is the highest in the bank’s index data going back to 2007, and it is up from 46% at the end of last year.
Issuance of leveraged loans in the U.S. has reached $531 billion so far this year, compared with $549 billion to this point last year, which was the busiest pace since 1987, said Thomson Reuters’ LPC unit.
Auto World News reports The Auto Industry Had Its Strongest Annual Sales Rate Since Before The 2008 Recession.
Jalopnik reports Car Sales In The US Exceeded Expectations In May as SAAR hit 16.8 million units, compared to a pace of 15.5 million last May, which makes it the strongest month since early 2007. Freep relates May Auto Sales Soar To 7 Year High As Weather And Easy Credit Lure Buyers. New vehicle sales soared in May to levels not seen since last decade’s housing bubble, fueled.
Who is winning? People who sell trucks and crossovers, of course. Chrysler was up 17%, GM up 13%, and Ford up 3%. Toyota, as well, hit a 17% increase (on the back of a lot of incentives) and Nissan was up 19%.
Motor Trader reports New Car Finance Sales Rise 4% In April. The number of new cars sold on finance in April grew 4% to 69,030 units, according to the latest figures from the Finance & Leasing Association.
In the 12 months to April, numbers were up 18% to 847,047 vehicles, reflecting the huge surge in PCP sales over the period.
For used cars, sales on finance rose 9% in April to 88,741 units and in the 12 months to April were up 20% to 975,164 units.
Geraldine Kilkelly, Finance & Leasing Association, head of research and chief economist, said: April was a quieter month for the car finance market following a strong performance in March.
Consumer car finance growth remained robust, with volumes 19% higher in the first four months of 2014 than in the same period last year.
FLA motor finance providers are optimistic about future growth prospects. The Q2 2014 Retail Motor Finance Survey results showed that more than 60% of respondents expected new business growth in excess of 10% in each of the new car, used car and light commercial vehicle finance markets over the next year, she said.
Atif Mian and Amir Sufi of House of Debt post Spending Worries? The growth in new auto purchases has been much stronger in low credit score zip codes over the past two years. In 2014, the growth was more than twice as strong in low credit score zips relative to high credit score zips.
So total spending is being driven in large part by auto purchases, and auto purchases are being driven in large part by purchases by low credit score individuals. What explains this pattern?
A very sharp rise in auto loans, especially to low credit score individuals. We showed this pattern in aprevious post. It also makes intuitive sense. Wage growth has been pretty stagnant, especially among middle and lower income Americans. So it makes sense that the only way low credit score individuals are able to buy cars is by taking on debt. They certainly haven’t seen improved income.
So what is the big picture? One view is that all of this is benign. Credit conditions were overly tight during the Great Recession, and now credit is flowing back to low credit score individuals who are purchasing cars at a fast clip. We should expect durable purchases by low credit score individuals to help fuel a spending recovery.
Another view, closely related to the secular stagnation idea, is that the only way we can generate real demand is by lending to individuals that have low income and low income prospects. The financial system is channeling funds toward individuals for whom economic circumstances remain poor, which offers only a fleeting boost to spending. This is closely related to arguments we make in our new book,House of Debt.
Can debt-fueled purchases of new autos continue to drive the spending recovery? This is a pattern worth watching closely.
Subprime automobile credit service company Nicholas Financial, NICK, traded slightly lower after Eddy Elfenbein posts The Nicholas Financial-Prospect Capital Deal Is Dead
Global ZIRP has incentivized risky lending and thereby established an unsound financial and economic system.
Sarah Mulholland of Bloomberg report Subprime Trading Like It’s ’07 in Car-Loan Bonds In the market where auto loans to people with spotty credit are bundled into bonds, the difference in yield between the lowest-rated securities and the safest has narrowed to the least since August 2007, according to Wells Fargo & Co. data. Demand for the bonds is translating into cheap funding for lenders, allowing them to make even more loans though payments more than 60 days late are on the increase.
Investors are turning to riskier debt to boost returns as stimulus measures from central banks around the world suppress interest rates. The European Central Bank last week became the first to take one of its main rates below zero, underscoring the lengths to which policy makers are willing to go to jumpstart growth more than five years after the worst financial crisis since the Great Depression.
“People have to reach further and further,” said David Schawel, a money manager at Square 1 Bank in Durham, North Carolina. “The objective now is to reach a certain yield target instead of feeling good about the underlying credit.”
Issuance of securities backed by the debt has reached $10 billion this year, up 5 percent from the pace in 2013 through May 30, according to Wells Fargo. Total sales of $17.6 billion last year were more than double the $8 billion sold in 2010, when securitized-debt markets started to revive after all but shutting down amid the 2008 financial crisis.
Aided by low interest rates, the U.S. auto industry has been one of the bright spots of the economic recovery. Vehicle sales rose 11 percent to 1.61 million in May, bringing the annualized pace to 16.8 million, the most since February 2007, according to researcher Autodata Corp.
The economy contracted at a 1 percent annualized rate from January through March, the first decline in three years. An unexpected drop in spending on health-care services means gross domestic product probably shrank even more in the first quarter, according analysts at JPMorgan Chase & Co. and Pierpont Securities LLC
Tidewater Motor Credit, a Virginia Beach, Virginia-based lender, sold $145 million of bonds last week that are backed by 7,438 loans carrying interest rates ranging from 9.45 percent to 26.55 percent, deal documents show. The transaction marks the first asset-backed bond offering for the company since 2012, according to data compiled by Bloomberg.
GM Financial Inc., the subprime lender acquired by General Motors Co. (GM) in 2010, boosted its asset-backed bond sale by $200 million earlier this month to $1.4 billion in its largest such offering since 2007, according to data compiled by Bloomberg.
Bond investors were paid a yield of 120 basis points more than the benchmark swap rate to buy the bonds rated BBB and maturing in four years in the June 3 sale. That compares with a spread of 175 basis points on similar debt sold in November.
The subprime auto segment has ballooned since contracting following the financial crisis. Private equity firms, attracted by the high margins, have flocked to the business during the past three years. New York-based Blackstone Group LP (BX) acquired Irving, Texas-based subprime lender Exeter Finance Corp. in 2011, the same year that Perella Weinberg partnered with CarFinance Capital LLC.
The influx of new players to the business has fueled concern that companies are lowering underwriting standards to win business.
“Subprime auto lending from banks, captive finance companies and credit unions continues to increase and is pressuring more traditional subprime lenders to lend to ever-weaker borrowers to maintain lending volumes,” Moody’s Investors Service analysts led by Peter McNally wrote in a January report.
The percentage of subprime auto loans that are more than 60 days late rose to 2.75 percent in March from 2.24 percent a year prior, Standard & Poor’s said in a report last month, citing the latest available statistics. The delinquency rate on loans to the most creditworthy borrowers was about flat at 0.28 percent.
Some lenders are pushing back against deteriorating underwriting standards, becoming less willing to extend loans to increasingly risky borrowers, according to Moody’s. Borrower credit scores for used car loans improved in the fourth quarter of 2013 for the first time since 2010, the rating company said in an April report.
Lengthening loan terms and rising debt burdens relative to the value of a vehicle show that lenders are still taking on more risk, the Moody’s analysts led by McNally wrote in the report.
“Since lenders will still continue to vie for borrowers, we don’t expect a major slowdown in subprime lending,” the Moody’s analysts said. “Competition will continue to pressure the credit quality of new originations as lenders fight for business.”
4) … The rise of the jihadist nation ISIS establishes the reality that a Ten Toed Kingdom of Regional Economic Governance is rising out of the meltdown of the US Dollar Hegemonic Empire.
CNS News posts Abu Bakr al-Baghdadi, Announces The Islamic State Of Iraq and Syria, ISIS. And Robert Fisk posts Sunni Caliphate Has Been Bankrolled by Saudi Arabia And Real Clear Politics posts Welcome To The Jihadi Spring.
Ruth Sherlock of the Telegraph reports Generals In Army Handed Over Entire City To al-Qaeda Inspired ISIS Forces. Three army deserters tell the Telegraph how Mosul, the second biggest city in Iraq, was given to terrorists by senior Iraqi army officials. Military deserters have painted a devastating picture of the inability of the Iraqi army to stand and fight, telling The Telegraph how entire divisions surrendered Mosul, Iraq’s second city, without firing a single shot. Speaking from the Kurdish city of Erbil, the defectors accused their officers of cowardice and betrayal, saying generals in Mosul ‘handed over’ the city over to Sunni insurgents, with whom they shared sectarian and historical ties. With Sunni insurgents now threatening the capital Baghdad the eyewitness accounts from the deserters’ reveal how sectarian enmity has, in the space of mere weeks, destroyed the Iraqi national army, which the US government spent billions of dollars to build.
Across The Curve posts Obama Channels Hamlet. The Leader of the Free World just concluded a statement and a truncated press conference before a flight to North Dakota and he stated that there would be no decision on Iraq for several days. I think that it took JFK and his associates less time to respond to missiles in Cuba in 1962 than it will have taken this Administration to respond to this real and present danger in Iraq. Maybe our role as super power is shifting and eroding as the pendulum of history swings in the direction of China but I think that the President highlights the fact when he insists that we need a change of attitude in Iraq and the cooperation of the major players there. For now we are the most powerful nation in the world and our interests are threatened. Why is he temporizing?
The Hill posts White House Faces Worst Case Scenario With Iraq Meltdown
Stratfor Intelligence reportsThe Logic Underpinning The Militant Offensive In Iraq. The transnational jihadist movement has since sought to exploit the ensuing anarchy in the region. The rise of the Iranian-led Shiite camp over the last decade or so has created an additional opportunity for jihadists to mobilize Sunni fighters from Muslim-majority countries and among Western expatriates.
Despite its audacious offensive, the Islamic State in Iraq and the Levant remains mindful that it has two still formidable Iranian-backed Shiite regimes blocking its path. To the west, the al Assad regime in Damascus has turned the tide against the rebels,giving rise to a stalemate. To the east, it faces the al-Maliki regime, though political and security conditions in Iraq have sharply deteriorated since the withdrawal of U.S. forces at the end of 2011. Power struggles among the country’s three principal groups (Shia, Kurd and Sunni) have weakened Baghdad’s writ, creating the opening that enabled the recent jihadist offensive. Refocusing on Iraq offers a way to force Iran and its Shiite allies to reallocate resources in Syria to defending their position in Iraq, which contains sites of greater significance to Shiite Islam. It could even help them break the stalemate in Syria. The shift toward Iraq enables the militant group to deflect criticism that it has been fighting with fellow Sunnis and even Salafist-jihadists in Syria.
The Islamic State in Iraq and the Levant knows that its opportunity in Iraq will not stay open for long given that demographic trends in Iraq favor the Shia. It also recognizes its limits among Iraq’s Sunnis. Most important, it understands the convergence of U.S., Iranian and Turkish interests that is underway; for different reasons, none of these three countries can tolerate its expansion in Iraq.
This means the group knows it is not in a position to seize Baghdad just yet. For now, it must try quickly to consolidate itself in the Sunni-dominated provinces of Anbar, Ninawa and Salah ad Din, as well as the mixed provinces of Kirkuk and Diyala. It knows that the outside countries will not send ground forces into Iraq’s Sunni areas and instead will rely on air power and special operations forces against its fighters.
Therefore, the Islamic State in Iraq and the Levant will limit itself to establishing a presence in western Iraq similar to what it has in eastern Syria, where outsiders will fear to tread and where neither the Shiite-dominated central government nor the Kurdistan Regional Government can impose its writ. If the jihadist group can survive, any amount of space where it can enjoy freedom of activity will suffice for its purposes of establishing an emirate in the roughly contiguous cross-border area, affording it strategic depth and a launchpad for later offensives against Baghdad and Damascus.
Stratfor posts Worsening Violence in Iraq Threatens Regional Security. The growing reach of the Islamic State in Iraq and the Levant has escalated an already brutal campaign in Iraq. Alarmingly quick advances by the militants across an important region of the Middle East could draw in regional powers as well as the United States.
Using hit-and-run tactics, the Islamic State in Iraq and the Levant, also known as ISIL, has sought to keep Iraqi security forces dispersed and under pressure. ISIL has achieved this by striking at areas where security forces are weak and withdrawing from areas where Baghdad has concentrated its combat power. The jihadists have been working hard to improve their tradecraft by developing skill sets ranging from staging complex ambushes to using Iraqi army equipment effectively in surprise raids. ISIL has also sought to better develop its ties with local Sunni communities.
As far back as the days of al Qaeda in Iraq and its predecessor, Jamaat al-Tawhid and Jihad, founded by Abu Musab al-Zarqawi, militancy has had a presence in Anbar province — and indeed in Mosul. During the Iraq War, the U.S. military considered Mosul one of the key gateways for foreign al Qaeda in Iraq fighters to enter the country. ISIL operations in Mosul and the wider Nineveh province are unsurprising. What is surprising is the degree of success that ISIL has managed to achieve in its latest offensive in the region.
Beyond Iraq, a number of countries are immediately affected by ISIL. The Syrian battle space bleeds heavily into Iraq due to a porous border, accelerated by the almost total collapse of Syrian army border crossing posts. Since January, ISIL has been heavily involved in fighting with more moderate Syrian rebel factions, as well as with Jabhat al Nusra, the official al Qaeda franchise in Syria. As the fighting has worn on, ISIL has gradually released its hold in western Syria and turned its attention to the Raqqah and Deir el-Zour governorates. Deir el-Zour was particularly important for ISIL as it allowed it to maintain a direct supply link with its established presence in western and northern Iraq, especially in Anbar province. Through this supply link, ISIL has been able to transfer experienced foreign fighters and captured Syrian army equipment to Iraq, including vehicles and anti-tank guided munitions. It has also replenished its stock of ammunition and explosives, greatly aiding operations in Iraq.
The Syrian conflict is affected by the ISIL push in Iraq in two ways. The first is that the jihadists may divert large numbers of fighters from Syria to its Iraq push, which would open ISIL to more pressure in Syria. The second impact is the withdrawal of large numbers of Iraqi Shiite militants,men that have been fighting alongside the Syrian army,leaving to concentrate their efforts back home against ISIL. Such a withdrawal would be unpopular in the Syrian regime because it would take away an important source of manpower.
Having succeeded in its Mosul operations, ISIL will continue to take advantage of its momentum and push its gains at a time when the Iraqi government is scrambling to recover from significant losses. As well as taking large portions of the city, ISIL militants seized many weapons and military vehicles as well as the contents of Mosul’s central bank. They also freed several thousand prisoners from a local prison, potentially adding more fighters to their cause.
Stretching from the north of Mosul through Tikrit to the south and toward Baghdad along the Tigris River Valley, ISIL is striving to maintain a continuous line of pressure running through what is practically the northern spine of populated Iraq. The Tigris River Valley contains a number of key strategic energy areas, including the oil refinery near Baiji. Although the refinery is still under state control at this time, the areas where ISIL is operating largely match areas where al Qaeda in Iraq was active during the height of the Sunni insurrection in Iraq from 2004-2006. As opposed to a first-time assault or new offensive, ISRAEL’s actions speak more of a resurgence into historical areas of operations.
As well as continuing to push forward, the Islamic State in Iraq and the Levant will largely seek to avoid stand-up fights against well-equipped and determined Iraqi army units, though they have held their ground against such forces in Al Fallujah and Ar Ramadi. The wide-ranging, mobile and rapidly dispersed ISIL forces have a key advantage when it comes to maneuvering in battle over the slower, mechanized units of the Iraqi army. While ISIL maximizes its impact against a disorganized Baghdad, the jihadist group seeks to consolidate its control over territory in heavily Sunni areas, where it has already made significant inroads with the local population. Ambitiously, these areas of control could include large portions of the north as well as Anbar Province.
More realistically, it would mean greater ISIL presence in the longer term and, in some cases, direct control in Anbar and possibly other provinces such as Nineveh and Salah ad Din. Working toward this goal, the Islamic State in Iraq and the Levant will continue to focus on its revitalized effort to dismantle the Awakening movement, a coalition of tribal elements that was instrumental in pushing al Qaeda in Iraq out of Anbar the first time, drawing Sunni tribes back into its fold in the process.
Ankara is also watching the events in Iraq with considerable attention. Not only are Turkish citizens directly implicated in the conflict, with a number of Turks reportedly seized by ISIL militants, but the Turkish government also maintains an important stake in energy development in northern Iraq. Ankara has long been involved in politics between Baghdad and the Kurdistan Regional Government on issues surrounding the delivery of energy. Turkey is also increasingly concerned about the growing reach of ISIL and has already clashed with militants on its border with Syria. Turkey is especially wary of the potential for attacks by ISIL, attacks that would exploit the long border that runs from the Mediterranean to Iran. While Turkey has been hesitant to directly send forces against ISIL in Syria, the fact that the Islamic State in Iraq and the Levant has seized large numbers of Turks, including the consulate staff from Mosul, may push Ankara to become more directly involved in the crisis.
Iran has long sustained the regime in Syria, as well as indirectly supporting al-Maliki’s government in its fight against Sunni jihadists in Syria and Iraq. The growing reach of ISIL, and its ever-closer presence to Iran, is sure to raise considerable anxiety in Tehran. Iran can therefore be expected to further bolster its support for al-Maliki as well as for Shiite proxies across Iraq. In supporting al Maliki’s fight, Tehran finds itself very much aligned with Washington.
The United States will avoid sending significant forces back into Iraq, but Washington will ramp up its efforts to contain the ISIL threat by delivering vital equipment such as helicopter gunships, Hellfire missiles, communications equipment, large volumes of small arms and ammunition. This assistance, coupled with a common regional interest to contain the Islamic State in Iraq and the Levant, will likely contain the threat to northern and western Iraq.
Though Iraq’s southern energy corridor will probably be spared, the Sunni belt in central Iraq and the territories disputed between the central government and the Kurdistan Regional Government will face rising sectarian stress, in line with ISIL’s designs for the region.
Miami Herald reports Iranian Commander ‘In Charge’ in Baghdad Fight. And Antiwar reports Iran Deploys Troops to Baghdad to Fight Against al-Qaeda.And McClatchy reports Pro Iran Militias Become Iraq’s Only Defense Against ISIS Advance.
Patrick Cockburn asks in UNZ Birth Of A Sunni Caliphate Or Just Presage to More War?
Bloomberg posts Black Banner in Mosul as Caliphate Edicts Rule Iraqi Lives. The Islamist militants who swept into Mosul had a simple message for residents of the northern Iraqi city: The path to a caliphate comes with clear rules. Lots of them.
Jihadism comes of age as Mike Mish Shedlock posts New Rules for Iraqis: Repent or Die, Say 5 Daily Prayers, Women Not Allowed Outside; Grim Massacres
Justin Raimondo asks Iraq War III?
Economic Policy Journal posts Platts Map Shows Iraq’s Oil and Gas Pipelines Around Iraq’s Oil Hub of Kirkuk Kurdish forces took control of the Iraqi northern oil hub of Kirkuk on June 12 to protect the major oil field against advancing Sunni militants in a move that appeared to ease concerns over control of Kurdistan’s growing oil infrastructure. Iraq’s North Oil Company (NOC) headquarters in Kirkuk and the nearby Kirkuk oil field remains in government control, a senior NOC official said.
Armed groups allied to the Islamic State of Iraq and al-Sham, known as ISIS or ISIL, have attacked a number of oil facilities across the north of Iraq since Monday, including the 320,000 b/d Baiji refinery and Bai Hassan oil field. ISIS took over the major city of Mosul in a two-day offensive ending Tuesday, followed by a push further into the Salahaddin, Kirkuk and Diyala provinces. But Kurdish peshmerga fighters said they have moved to halt the militants advance. “We tightened our control of Kirkuk city and are awaiting orders to move toward the areas that are controlled by ISIL,” Brigadier General Shirko Rauf of the Kurdish peshmerga security forces told AFP.
The defensive moves means the militants are less likely to move further east to threaten oil fields being developed inside the semi-autonomous Kurdistan by foreign players.
Bill Roggio posts in The Long War Journal The Battle Plan Which ISIS Will Employ To Strangle Baghdad
Economic Policy Journal relates, Tyler Cowen, who teaches at Koch-funded George Mason University and is general director of the Koch-funded Mercatus Center calls for War For Economic Growth,
There be a sovereign Lord God, who ordained from eternity past that there be sovereign governments, issuing sovereign currencies, that is in fiat money; and that one day a Ten Toed Kingdom, seen in Daniel 2:25-45, known as the Beast Regime, seen in Revelation 13:1-4, arise out of waves of Club Med sovereign, banking, and corporate insolvency, to rule the world in diktat money, via policies of diktat in every one on the world’s ten regions, and via schemes of debt servitude, in all of mankind’s seven institutions.
5) … ACPAC fears the Obama Administration push for Palestinian technocratic government will lead to East Jerusalem becoming the Palestinian Capital,
ACPAC fears technocratic governance will lead to Jerusalem being shared, and thus precluding “Jerusalem as the undivided capital of Israel”.
The Jerusalem Post reports Unified Senate Sends Obama Message on Palestinian Unity
6) … Money Market Funds and Banks will be integrated into the government and become known as the Goverment Funds and the Goverment Banks, or Gov Funds, and Gov Banks, for short.
Across The Curve posts Money Fund Accounting. The SEC has been arguing and analyzing methodologies for harsher regulation of money funds for several years. The root of the discussion is the run on the funds which began following the Lehman bankruptcy and subsequent breaking of the buck at the Reserve Fund in the fall of 2008.
The SEC has before it two proposals. One would force riskier funds to float and the second proposal would hold the buck but would allow for a limitations on redemptions. I do not get it. Why not just tell the funds that they are required to mark to market each and every day with clarity and precision?
If investors are uncomfortable with the volatility which that produces they can by the three month bill or park their money in an FDIC insured account.
Compelling money funds to mark to market will enlighten and educate investors and would allow the market place to weed out those firms which take imprudent risk.
Under Janet Yellen’s leadership, The Fed Reserve will be developing an exit strategy; it will be one of Financial Stability.
Out of soon coming credit crisis and global financial system meltdown, coming from the rise of the Interest Rate on the US Ten Year Note, ^TNX, as well as derisking out of debt trades, and deleveraging out of currency carry trades, Money Market Funds, such as Vanguard’s VMMXX, Regional Banks, KRE, such as HBAN, and Asset Managers, such as STT, BLK, will be integrated into the government, and become known as the Government Banks, or Gov Banks for short. Please note that said fund charges a fee in excess of its yield, in order to maintain its constant one dollar value.
The Primary Dealers, who hold Interest Rates Swaps, that they were literally gifted under POMO, and thus are short Treasuries, and whose customers are short 10 Year US Government Notes, TLT, will likely be forced into becoming Gov Banks as well.
The first step in developing the Exit Strategy will be an exit charge, that is an exit levy, on withdrawing funds from bond funds as well as money market funds.
7) … Conclusion. The world enters Kondratieff Winter on the trade lower in the Euro, in response to Mario Draghi’s ECB NIRP and TLTRO mandate, which pivots the world out of liberalism, and into authoritarianism, where the diktat of regional sovereigns provides seigniorage.
The June 10, 2014, and June 11, 2014, trade lower in the Euro, FXE, evidences the death of currencies.
Fiat money, defined as the combination of Aggregate Credit, AGG, and Major World Currencies, DBV, in particular the Euro, FXE, and Emerging Market Currencies, CEW, in particular the India Rupe, ICN, is starting to die.
With the Euro, FXE, trading lower, coming on the failure of trust in the world central banks’ monetary authority to continue to stimulate investment gains and global growth, sovereign currencies, are no longer floating, they are sinking; and as a result, World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, and Dividends Excluding Financials, DTN, are trading lower; fiat wealth is starting to die. On can follow the death of fiat wealth with this Finviz Screener of Common ETFs.
Robert Wenzel posts The Oil Industry Employment Boom. Energy sector technologies such as fracking and oil shale extraction are creating an employment boom in the oil sector.
The employment boom has come as investors have plowed great sums into the Leading Energy Producers, CRZO, PXD, XEC, FANG, COP, CLR, EOG, NBL, BCEI, and WLL as well as the Leading Frackers, CJES, BAS, RES, and EXH. The Energy Producers, XOP, and the Global Integrated Energy Companies, IPW, alike, are unable to leverage higher on the price of Oil, USO, and Natural Gas, UNG.
Economic growth that came during in the Great Recession was a byproduct of invesment gains, that came through debt trade investing in the most speculative of investments such as Real Estate Developer, BX, Industrial Office REITS, FNIO, Mortgage REITS, REM, Residential REITS, REZ, Premium REITS, KBWY, as well as the most wild of currency carry trades, such as in Ireland’s, EIRL, MNK, IR, JHX, ICLR, RYAAY, COV, ACN, STX, and IRE. Of note Bloomberg reports Condo Towers Rise From Boston to L.A. in U.S. Rebound. For the first time since the U.S. housing crash, new condominium towers are sprouting in downtown Boston, Seattle and Los Angeles as developers bet on the return of the riskiest type of residential real estate.
Global ZIRP produced the perfect moral hazard based prosperity. Now, ECB NIRP is introducing the most absolute austerity as foretold in Bible prophecy of Daniel 7:7, where fiat money and fiat wealth will be pulverized into dust.
There has been an economic death; and there has been a economic birth.
The death of sovereign currencies communicates, such as the Euro, FXE, and the Indian Rupe, ICN, establishes that the sovereignty of the Banker Regime has come to an end. And, the June 5, 2014, Mario Draghi, ECB, Mandate for TLTROs, and a Negative Interest Rate Policy, that being a sovereign mandate, communicates that the sovereignty of the Beast Regime is rising to govern mankind’s economic, political and social life; it manifests as a Ten Toed Kingdom, ruling in the iron of diktat of regional governance in the all of the world’s ten regions, and occupying in the clay of totalitarian collectivism in every one of mankind’s seven institutions.
The seigniorage of investment choice came through the economic dynamos of creditism, corporatism, and globalism. Now, the seigniorage of diktat, comes through the singular dynamo of regionalism. The NYT reports Leader in Austerity Push Appointed Head of Greek Central Bank
There can be no popular action as perceived by Liberal economists such as Mark Thoma who weeps Synthesis Lost. “I am coming around to the idea the intervention may also be needed to redistribute income as an offset for those who reap where they never sowed”.
There will ever be never be any human action, as presented by the Austrian economists such as Cato Institute’s, John Allison, an Objectivist, who advocates Free Markets, and who communicates The Importance Of Opportunity Cost.
There is only the divine action of the Son of God, specifically the stewardship of Jesus Christ for the perfection of every age, epoch, and time period, as presented by the Apostle Paul in Ephesians 1:10, who produced peak wealth the week ending June 6, 2014, and who pivoted the world into Kondratieff Winter, the final phase of the business cycle, the week ending June 13, 2014.
Jesus Christ prompted the ECB Chairman Mario Draghi to announce the NIRP and TLTRO Mandate of June 5, 2014, and in response the Euro traded lower, causing investors to derisk out of debt trade investments in European Grocer, DEG, and deleverage out of currency carry trades in European Financials, EUFN, Eurozone Stocks, EZU, European Small Cap Dividends, DFE, and EU Nations, such as Portugal, PGAL, Italy, EWI, Ireland, EIRL, Greece, GREK, and Spain, EWP, thus terminating the investor.
Having matured the paradigm and age of liberalism, meaning freedom from the state, where the investor was the centerpiece of economic action, Jesus Christ is now developing that of authoritarianism, where through the ECB Chairman Mario Draghi’s June 5, 2014, Mandate of NIRP and TLTRO, the debt serf is being established as the centerpiece of economic activity.
Having completed peak moral hazard, Jesus Christ is going to apply all the debts, public and private, to all the peoples of the world.