Financial market report for January 7, 2011
I … The Nasdaq 100 topped out, and Bank stocks, the S&P, Russell 2000, fell lower, as Reuters reports Mass Court rules unanimously against banks in key foreclosure case.
Jonathan Stempel, Dena Aubin, Joe Rauch and Dan Wilchins, Lisa Von Ahn, Matthew Lewis, and Dave Zimmerman report in Reuters Friday article Banks Lose Key Foreclosure Case In Top Mass Court:
In a decision that may affect foreclosures nationwide, Massachusetts' highest court voided the seizure of two homes by Wells Fargo & Co and U.S. Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.
Bank shares fell, dragging down the broader stock market, after the Supreme Judicial Court of Massachusetts on Friday issued its decision, which upheld a lower court ruling.
The unanimous decision is among the earliest to address the validity of foreclosures done without proper documentation. That issue last year prompted an uproar that led lenders such as Bank of America Corp, JPMorgan Chase & Co and Ally Financial Inc to temporarily stop seizing homes.
"A ruling like this will slow down the foreclosure process" for banks, said Marty Mosby, an analyst at Guggenheim Securities. "They're going to have to be really precise and get everything in order. It doesn't leave a lot of wiggle room."
Wells Fargo and U.S. Bancorp lacked authority to foreclose after having "failed to make the required showing that they were the holders of the mortgages at the time of foreclosure," Justice Ralph Gants wrote for the Massachusetts court. In a concurring opinion, Justice Robert Cordy lambasted "the utter carelessness" that the banks demonstrated in documenting their right to own the properties.Courts in other U.S. states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly.
Friday's ruling "will be certainly cited as persuasive authority by anybody in a similar scenario who's trying to hold onto his home," said Robert Nislick, a real estate lawyer at Marcus, Errico, Emmer & Brooks PC in Braintree, Massachusetts.
Analysts said the decision may also threaten banks' ability to package mortgages into securities, and may raise the specter that loans transferred improperly will need to be bought back.
"What they were doing was peddling these mortgages and leaving the paperwork behind," said Michael Pill, a partner at Green, Miles, Lipton & Fitz-Gibbon LLP in Northampton, Massachusetts, who represents homeowners and is not involved in the case.
U.S. Bancorp spokesman Steve Dale said the decision has no financial impact on the Minneapolis-based bank, which has "no responsibility" for the terms or means of transfer of mortgages used in the securitization trusts it oversees as trustee.
Wells Fargo shares, WFC, were down 2.0 percent, while U.S. Bancorp shares, USB, were down 0.7 percent. Bank of America stock, BAC, was down 1.1% percent, JPMorgan, JPM, fell 2.0 percent, and the KBW Bank Index, KBE, which includes all four lenders, was down 0.7% percent. The S&P, SPY, was down 0.2%, the Russell 2000, IWM, was down 0.6% and the Nasdaq 100, QTEC, was down 0.3%
In the Massachusetts case, U.S. Bancorp and Wells Fargo had said they controlled through different trusts the respective mortgages of Antonio Ibanez and the married couple Mark and Tammy LaRace, who lost their homes to foreclosure in 2007. The banks bought the Springfield, Massachusetts, homes in foreclosure, and sought court orders confirming they had title. A lower court judge ruled against them in March 2009, and Friday's decision upheld this ruling.
Massachusetts is one of 27 U.S. states that do not require court approval to foreclose.
"It is the first time the supreme court of a state has looked straight at securitization practices and told the industry, you are not immune from state statutes and homeowner protections," Paul Collier, a lawyer for Ibanez, said in an interview.
The Supreme Judicial Court also rejected the banks' request that the ruling apply only in the future, leaving homeowners who had already been foreclosed upon without a remedy.
"I'm ecstatic," Glenn Russell, a lawyer for the LaRaces, said in an interview. "The fact the decision applies retroactively could mean thousands of homeowners can seek recovery for homes wrongfully foreclosed upon."
Russell said the LaRaces moved back to their home after the 2009 ruling, while Collier said Ibanez has not. "U.S. Bancorp will have to compensate him in exchange for the deed, or will have to walk away," Collier said.
Analysts said the decision will make it harder and more costly for banks to foreclose, and weigh on their share prices and perhaps even the nation's economic recovery. "If banks can't prove ownership, it will clog up the foreclosure process," said Blake Howells, head of equity research at Becker Capital Management in Portland, Oregon. "The inventory on foreclosures will keep a lid on housing prices for some time."
Gants did suggest in his opinion how banks might properly transfer mortgages via securitization trusts.
"The executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder," Gants wrote. "However, there must be proof that the assignment was made by a party that itself held the mortgage."
The cases are U.S. Bank N.A. v. Ibanez and Wells Fargo Bank NA v. LaRace et al, Supreme Judicial Court of Massachusetts, No. SJC-10694.
KBW Bank Index, KBE,
Russell 2000, IWM,
Nasdaq 100, QTEC,
II ... The Morgan Stanley Cyclicals Index manifested a spinning top on 1-7-2011 suggesting that a market top has been achieved.
The Morgan Stanley Cyclicals Index, $CYC, finished the week manifesting a spinning top suggesting that a market top has been achieved.
Index Component Ford, F, has topped out with a lollipop hanging man candlestick.
Morgan Stanley Cyclicals Index Components F, FCX, DE, MAS, C, AA, TIN, IP, R, JCI, have been the underlying support factors of the S&P; theses as a group rocketed up 24% in the last 90 days, exceeding the surge 16% surge the Russell 2000 Growth Shares, IWO.
Another support factor for the S&P has been the 16% rise in Exxon Mobil, XOM, over the last year; while not a Morgan Stanley Cyclicals Index component, it is a heavy weight in the S&P.
The Morgan Stanley Cyclicals Index, CYC, rose 2.6% for the week to close at 1069.46 having risen from 794.73 on July 7, 2010 when the Euro, FXE, rose as the EFSF monetary authority was announced. Given the spinning top and dramatic rise in Ford, F, coupled with support from the Cyclicals home building Masco, MAS, this is likely a high for the Index and provides additional support for an overall market top having been achieved.
Like International Utilities, DBU, the Morgan Stanley Cyclicals Index is Euro, FXE, sensitive.
In as much as currency deflation has restarted, debt deflation will be coming to stocks. Debt deflation is the contraction and crisis that follows credit expansion. One of the most famous quotations of Austrian economist Ludwig von Mises is from page 572 of Human Action: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.
III ... The Euro, European Shares and the European Financial Institutions fell lower the first week of January 2100 as European sovereign debt default risk rose.
Credit Lime reports Credit Western European nation CDS rises past the east: Credit default swaps on western European nations (at an average of over 200 bps) has exceeded that of CDS on central and eastern European, Middle Eastern and African nations for the first time according to Mark Brown of the WSJ.
The iTraxx SovX Western Europe index, which allows investors to buy or sell default protection on debt issued by 15 western European sovereigns, was at 203 basis points Wednesday afternoon, according to index owner Markit. The SovX CEEMEA index was at 199 basis points.
SovX Western Europe has risen steadily since mid-October last year on worries about the health of peripheral euro-zone sovereigns and about whether bondholders will be forced to take losses under a permanent euro-zone crisis mechanism to be introduced in 2013.
However, before this week, it had never traded higher than the CEEMEA index, which includes Hungary, Poland, Turkey, the Czech Republic, Russia, Ukraine, Qatar, and Abu Dhabi.
The rise in Eurozone default risk caused a sell off in The Euro, FXE; the Euro manifested three black crows this week to close at 128.59
For historical review, the most important event economic history occurred on November 4, 2010 as an Evening Star candlestick appeared in the chart of the Euro, FXE, with a price of 141.50, as currency traders called the Euro lower on November 5, in response to Mrs Merkel’s call for a sovereign default mechanism and for bondholders to take a haircut. It was at this time that the Euro, FXE, entered an Elliott Wave 3 Decline. Then the Euro entered into an an Elliott Wave 3 of 3 Decline at 133.30 on December 14, 2010 as European Leaders went from Summit having failed to come to a comprehensive to the European Sovereign Debt and Bank Debt crisis. It was as John Mauldin relates in Safehaven.com article, they were simply kicking the can down the road. The Elliott Wave 3 Declines are the most sweeping and powerful of all waves they build wealth on the way up and destroy wealth on the way down. The world has entered a stage when for all practical purposes wealth as we currently know it will literally be wiped out.
Elliott Wave Surfer provides a timely article EUR/USD as of Sunday January 9, 2010.
A deepening of the sovereign crisis sent the European shares, VGK, lower.
Debt deflation, that is currency deflation, took the European Financial Institutions, EUFN, lower.
Belgium, EWK, traded lower as AmerBankGroup reports in article Treasury Pulse: Risk that Belgium's sovereign debt rating will be cut were heightened as political turmoil continues to mount seven months after the nation's federal election. The impasse has left the country without a full-time government and has pushed up the costs of servicing Europe's third-highest debt burden, further making it increasingly difficult to implement fiscal consolidation policies.
Sweden shares, EWD and Austria shares, EWO, fell lower in sympathy with the falling Euro.
And Switzerland, EWL, traded lower in the wake of the Euro trading lower. The Swiss Franc, the Euro, and the Swedish Krona are the currency loss leaders this year, with each losing 3%.
IV ... Banco Santender and Spain Shares fell following the announcement of EU proposals to force bondholder to shoulder losses in future bank bail-outs.
Banco Santender, STD, and Spain, EWP, and Belgium, EWG, fall as Jill Traynor of The Guardian notes that yields on Portuguese and Spanish government bonds rose yesterday, following EU proposals to force bondholders to shoulder losses in future bank bail-outs. This comes ahead of crucial bond auctions next week. Deutsche Bank warns that survival of the single currency in its present form “can no longer be taken for granted”, reports the Times. A Reuters poll reveals that 44 out of 51 economists think Portugal will need a bail-out similar to Greece and Ireland and the FT quotes Jens Larsen, at RBC Capital Markets, saying, “If conditions deteriorate, then Spain is also at risk.”
World Government Bonds, BWX, closed 3.0% lower this week; and International Corporate Bonds, PICB, also closed 3.0% lower this week.
V … The Euro Yen Carry Trade fell lower this week.
The EUR/JPY, seen in the chart of FXE:FXY, traded lower this week.
VI ... The EU announced the Framework for Bank Recovery And Resolution which strengthens European economic governance and communicates that the Eurozone is establishing fiscal federalism.
Ambrose Evans Pritchard reports that the European Commission announced the "Framework for Bank Recovery and Resolution" which would establish a harmonised EU insolvency structure, which could be in place by 2012. The final phase would be the creation of a European Resolution Authority by 2014, adding a fourth institution to the EU’s new architecture of financial supervision and regulation. The Commission emphasised that the measures would only affect future debt. The plans allow oversight bodies to place a “permanent presence” of inspectors in the offices of suspect banks. The Authority will have power to take over failing EU banks, sack board members, and impose haircuts on senior bank debt.
VII ... The number and type of sectors topping out and falling lower documents that a global bear stock market commenced the week ending 1-7-2011.
VT, World Stocks, -0.3%
VSS, Small Cap World Stocks Excluding US, -1.7%
DES, World Small Cap Dividend, -0.4; has entered into an Elliott Wave 3 Down.
EEM, Emerging Markets, -0.8%, have turned parabolically lower on falling Emerging Market Currencies, CEW.
INP, India, -5.6%
SCIF, India Small Caps, -5.5%
EWA, Australia, -4.0%
KROO, Australia Small Caps, KROO, 3-.7%
DOO, International Dividend Payer, -3.0%; the chart of DOO communicates that they are all done!
IEZ, Dow Jones Oil and Gas, -2.6%; the fall in these US based energy service companies is other evidence that the US Dollar Carry Trade Rally is over. National Oilwell Varco, NOV, entered into an Elliott Wave 2 Up and is ready to enter into an Elliott Wave 3 Down; it is an excellent short selling opportunity.
OIH, Energy Service Providers, is a sell.
NLR, Nuclear, -2.1%; Risk avoidance has come to investing int the large design and build companies; investors are selling out of their large cap S&P stocks. Fluor, FLR, has entered an Elliot Wave 2 up and is about to enter an Elliott Wave 3 Down and thus is an excellent short selling opportuntiy. Foster Wheeler, FWLT, has topped out. The ongoing three month Yahoo Finance chart of Fluor and Foster Wheeler suggests that the gains in these stocks has come from a dollar carry trade as investors have sought safe have from the European sovereign crisis. A debt deflationary global economy cannot sustain behemoth companies that build large scale industrial plants.
CGW, Water -1.3
AWK, American Water Works has topped out.
WTR, Aqua America, is coming in with an Elliott Wave 2 Up and is ready to enter an Elliott Wave 3 Down
IDX, Indonesia, -3.1, the Indonesia shares trade in a volatile manner; and this week even more so as the Jakarta Globe reports Indonesia's core inflation stance spooks investors as Government talks of stern action.
EWZ, Brazil, -1.7% turned parabolically lower this week; as did BRF, Brazil Small Caps, -1.2%. Alexander Cuadros and Iuri Dantas of Bloomerg report: “Brazilian financial shares tumbled in Sao Paulo, with the benchmark gauge heading to the biggest two-day drop in six months, on concern government measures to contain currency gains and restrict credit will hurt earnings.”
LATM, Latin America, -2.3%
Companhia de Bebidas das Americas, ABV, and Grupo Televisa, TV, have started to sell off and are short selling opportunities,
EWT, Taiwan, -3.4 and TWON, Taiwan Small Caps, -1.2, have turned parabolically lower.
ENZL, New Zealand, -2.5%
EMFN, Emerging Market Financials, -1.1%
EUFN, European Financial Institutions, -0.8%
GDX, -7.9%, Gold Miners
XLES, Small Cap Energy Shares; these growth shares led the way up; now they are leading the way down, -2.4%
FAN, Wind Energy, -2.9%
ECON, Emerging Markets Consumer Staples, -2.1
DBU, International Utility, -2.8, the international utility share confirm a deflationary investment period lies ahead; they have turned lower on the falling Euro, FXE, and higher global interest rates seen in rates seen in International Corporate Bonds, PICB, falling lower.
EVX, Environmental Services, -2.9% have turned parabolically lower; this is seen in the sharp sell off of Nelco Holding, NLC.
XLYS, Small Cap Consumer Discretionary, -0.9% have entered into an Elliott Wave 3 sell off.
RWJ, Small cap revenue, the chart shows these to be topping out.
PXN, Nanotechnology; the chart show these have entered into an Elliott Wave 3 Down
SWH, Software, the chart shows these to be topping out.
PXQ, Networking, +2.7%, the lollipop in its chart suggest that a top has been achieved.
IGN, Networking, +5.2%, same comment.
HHH, Internet, +2.6, same comment.
FDN, Dow Internet, +2.5, and same comment.
PNQI, Nasdaq Internet, +3.0; the chart shows these have moved into an Elliott Wave 2 up and are ready for an Elliott Wave 3 Down.
ICGE, Internet Capital Group has sold off and is still an excellent short selling opportunity.
VIII … Base Metal Commodities turned lower.
Base metal commodities, DBB, have turned lower, with aluminum, JJA, copper, JJC prices falling.
Bloomberg reports Copper Heads for First Weekly Decline in Six Amid China Tightening Concern. Copper in London headed for the first weekly drop in six as concerns that China is set to further tighten monetary policy in the first quarter curbed demand, while rising inventories signaled adequate supply. “Market sentiment on China commodities in 1Q11 will be largely driven by potentially further tightening of monetary policies,” Goldman Sachs Group Inc. analysts Julian Zhu and Steven Tao wrote in a report today. “Potential tightening measures are likely to cause further near-term pressure on Chinese commodities.” (Hat Tip to Gary of Between The Hedges)
This means that basic material stocks, like Alcoa Aluminum, AA, a Morgan Stanley Cyclicals Index Component, Copper Miners, COPX, copper producer Southern Peru Copper, SCCO, Basic Materials leader BHP Billiton, BHP, are a sell. Falling base metal prices took a toll on Australia, EWA, Peru, EPU, and Chile, ECH. The 7.9% fall in Chile gives a salute to the end of the age of leverage that featured Free To Choose investing that prospered under the neoliberal Milton Friedman ZIRP Bank of Japan carry trade lending scheme. The chart below documents the new age of deleverage that will feature risk avoidance, deflation, and economic contraction.
IX … West Texas Intermediate Crude fell 3.3% the first week of January 2011.
Margot Habibi of Bloomberg reports Crude Oil May Decline Next Week as Hedge Fund Buying Drops, Survey Shows. Oil may fall for a third consecutive week on speculation buying by hedge funds will decline after bullish bets on crude oil rose to the highest level in more than four years in December, a Bloomberg News survey showed. Twenty-two of 42 analysts, or 52 percent, forecast crude oil will decline through Jan. 14. Eleven respondents, or 26 percent, predicted prices will rise and nine estimated there would be little change. Last week, 58 percent of analysts forecast the market would decrease. Hedge funds increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest total in records going back to June 2006. “Money managers came into the year with record net-long positions, so we may have just for the time being run out of buying,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It was a crowded trade. Everyone was already very heavily long.”
(Hat Tip to Gary of Between The Hedges)
The Chart of $WTIC
Chart of Petroleum and Oils, DBC,
Chart of 200% AIG oil, UCO
Chart of 200% Oil Stocks, DIG, shows completion with a spinning top and a number of dojis.
X … Junk bonds turned lower Friday January 7, 2011.
JNK, Junk bonds; these were quite strong in 2010 fourth quarter; these are a measure of investment liquidiy and as such should be very fast fallers in 2011; perhaps the fastest fallers of investments, matching the rapid fall of the Junior Gold Mining Stocks.
The distressed investment mutual fund FAGIX is topping out. The securities taken in by the US Federal Reserve under TARP, where it traded out prior money good US Treasury Bonds, under its 1.3 Trillion Quantitative Easing I, has an investment value which trades like FAGIX.
XI …. A run of the US based steel manufacturer and those companies which are steel based, documents that a run on stocks is underway and that a global bear market has commenced.
Investors are deleveraging from out of a dollar liquidity rally that came with anticipation of QE 2 and with anticipation of establishment of the EFSF Monetary Authority that commenced in July 2010. It is most interesting that moneyness came from anticipation of the US Federal Chairman’s Decision and anticipation of the European Leaders’ Decision, and that now the Fed is purchasing debt and the EFSF is going to be issuing debt, investors are pulling out. It is very much the case of buy the rumor and sell the action. I have my idea as to where they will be investing their gains. Where do you think they will be putting their gains?
Charts show risk appetite is gone for steel stocks
X, US Steel
American Rail Industries, ARII,
Insteel Industries, IIIN,
And the 6.4% sell off in shares of Siemens documents a global bear market has commenced as well. The weekly chart of Siemens, SI, shows that an Elliott Wave 3 Down has commenced in this global industrial giant.
Investment in vice stocks appears to be topped as the Vice Mutual Fund VICEX, VICEX, shows a dark cloud covering candlestick, suggesting that a market top has been achieved.
This as the gaming stocks, BJK, rise on an ascending wedge to close at 32.52 on strength in stocks such as MGM Resorts, MGM, and Las Vegas Sands, LVS.
XII … Gold mining stocks are leading the way lower.
Gold mining stocks, GDX, have been the swing trade of the decade, that has been underwritten from a formerly steepening 30 10 US Sovereign Debt Yield Curve, $TYX:$TNX, as well as rising commodity currencies, such as the Australian Dollar, FXA, the South African Rand, SZR, the Canadian Dollar, FXC, and yes even the Euro, FXE. But the currency traders are now in a global currency war with the world central banks for control of the world’s resources and people; and with help from the bond vigilantes, the tide has turned in the FX traders favor; and all currencies are now headed lower. All, including the US Dollar, will be headed off into the Pit of Financial Abandon together. The only surviving currency will be physical gold. The Canadian Dollar, FXC, is the last hold out, as its chart is manifesting a lollipop hanging man candlestick with a value of 100.28.
Is it too dramatic to say that a global bond and currency war has commenced? South Korea President Lee Myung Bak has called for a “war against inflation” as government bond prices declined, Amer Bank Group reports in article Treasury Pulse which adds: Taiwan’s Central Bank has increased the key interest rate by 12.5bps to 1.625%, and policymakers have introduced additional measures to curb capital inflows on December 30. Meanwhile Moody’s has revised Philippines’ credit rating outlook to positive from stable, underpinning the likelihood of upgrading its Ba3 debt rating in the near term. Asian currencies tumbled during the week after an initial surge as optimism continues to emanate from the US, prompting the US to strengthen against most major currencies. As of Friday noon, the Bloomberg JPMorgan Asia Dollar Index, which tracks the 10 most actively traded Asian currencies, declined by 0.4%.
Gold stocks, traded by the ETF GDX entered an Elliott Wave 3 Down on Monday January 3, 2010, after having fallen from a price of 61.47 on December 31, 2010.
The wave count on the gold mining stocks is as follows: All time high Elliott Wave 5 up of 63.75 on December 6, 2010. It is interesting that the gold stocks rose to their high immediately before the European Leaders met in Summit of December 13, 2010, and as John Mauldin relates came to be “kicking the can down the road”. That is they did not come to a comprehensive solution to the European sovereign debt crisis.
The gold mining stocks fell to 59.76 which is Elliott Wave 1 Down on December 16, 2010, and then rose to their Elliott Wave 2 high of 61.47, on December 31, 2010; and have been in an Elliott Wave 3 Down ever since. The Elliott Wave 3 Down is the most sweeping and dynamic of all waves, it builds wealth on the way up and destroys wealth on the way down. Once commenced their can be no stopping or intervention as Economic Nature simply will and must take its course.
The January 7, 2010 closing price is almost exactly the October 1, 2010 price of 56.22; the chart shows this to be the middle of a broadening top pattern established on October 1, 2010; and as Street Authority relates, when one sees the broadening top, the market will eventually drop.
Gold mining stocks have once again disconnected from the price of gold, as can be seen in the chart of GCX:GLD.
The HUI Precious Metal Mining Stocks, ^HUI, generally make turns lower with US Treasury Bonds, $USB, as is seen in the chart of $HUI:$USB.
I encourage that one invest in and take personal possession of gold bullion.
XIII … Retail stocks enter a strong sell off and their decline also documents a market top has been achieved.
XRT, Retail, -2.9%; given that the retail stocks have strongly sold off, the US Dollar Liquidity Rally is over. Retail stocks are now a short selling opportunity. TIF, Tiffany and Co. has entered into an Elliott Wave 3 Down. SKS, Saks is at the crest of an Elliott Wave 2 Up. PETM, PETsMART has entered an Elliott Wave 3 Down. ANF, Abercrombie & Fitch has entered into an Elliott Wave 3 Down. PIR, Pier 1 Imports is manifesting a spinning top. All of these stocks are a short selling opportunity.
Distressed Volatility report Howard Davidowitz, who's been consulting on the retail industry since 1981, thinks the overall consumer is still in "terrible shape" with "17.5% under employment, 46 million people on food stamps and housing continuing to go down, another 10% would bring a double dip recession. He said the rise in capital markets drove holiday spending mainly in the luxury space, Coach, Tiffany, Saks, jewelry. Sears, Wal-Mart, Toys R' Us, Best Buy, AJ Wright, A&P, Loehmann's, Charming Shoppes are a different story. He also talked about Edward Lampert's strategy on Sears and thinks Wal-Mart is "scared stiff" of Amazon.
Davidowitz ultimately believes that the explosion in online sales (Amazon) will put major pressure on retail commercial real estate going forward (this is interesting though as Antone Gonsalves of Bloomberg reports Malls Bet on MindSmack's FastMall App to Draw Shoppers Back). I embedded the video below and provided quotes. Here's what he said: "We're only at the beginning of this online sales and that has to lead you to question the whole retail real estate strategy. We've got 21 square feet of selling space for every man, woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and tons of shopping centers that are marginal. I think there are huge questions going forward about size of stores, locations of stores, distribution facilities. Huge changes are going to be taking place in the next 5-years as people continue to shop online."
"But in the end, what do you do with the retail space. This is going to be a huge question for retailing in the next 10 years. That's why Wal-Mart is starting to build smaller stores. That's why Wal-Mart is building more overseas than they're building here. There are major questions of positioning. Going forward, it's going to be the biggest retail change we've ever seen." (he called it a revolution)
"I don't think the commercial real estate problems are fixed by any means" (rolling debts, rents and occupancy problems and said hundreds of community banks will close)
This is an opportune time to go short an number of real estate investment sectors including
Asset Management: Blackrock, BLK, as it has just completed an Elliott Wave 5 up.
Asset Management: MCG Capital, MCGC, as it has entered an Elliott Wave 3 down.
Asset Management: Blackstone Group, BX, as it has just completed an Elliott Wave 5 up.
Commercial Property REIT: Starwood Property Trust, STWD, as it has just completed an Elliott Wave 5.
Industrial REIT: First Industrial Realty Trust, FR, as it has just completed an Elliott Wave 5 Up.
Office REIT: Brookield Properties, BPO, as it has just entered an Elliott Wave 3 Down.
Retail REIT: NorthStar Realty Finance, NRF, as it has topped out.
Retail REIT: Gilmcher Realty Trust, GRT, as it has entered an Elliott Wave 3 Down.
Michael Tsang and Lee Spears of Bloomberg report: “More than half of the U.S. initial public offerings planned for this year are from private equity firms as KKR & Co., Blackstone Group LP and Carlyle Group try to sell some of their biggest leveraged buyouts. HCA Holdings Inc., Nielsen Holdings BV, Kinder Morgan Inc. and more than two dozen other companies owned by private equity firms have registered with the Securities and Exchange Commission to sell $14 billion of shares in IPOs.”
The Leveraged Buyout ETF, PSP, has topped out. I believe that buyout firms like Blackstone Group LP and others are going to be stuck with properties they cannot sell.
XIV … Stocks surging strongly to what are likely market tops included the following:
URI, United Rentals
GSM, Globe Specialty Metals
KOP, Koppers rose on this weeks rise in the price rise in the Timber commodity
ININ, Interactive Intelligence
MAS, Masco Corp; this is a component of the Morgan Stanley Cyclicals Index
KBH, KBH Homes
F, Ford; this is a component of the Morgan Stanley Cyclicals Index.
XV … The Russell 2000 Growth manifests a spinning top in its monthly chart.
The Russell 2000 Growth shares, IWO, manifested a spinning top in its monthly chart, having manifested three white soldiers in October, November and December 2010; suggesting that a reversal is at hand.
XVI … S&P/LSTA U.S. Leveraged Loan 100 Index rises to a new high.
Richard Bravo of Bloomberg reports: “CommScope Inc., the telecommunications-equipment provider that Carlyle Group is buying, led companies this week seeking more than $2 billion in leveraged loans in the U.S. as borrowers take advantage of a rally in the debt to finance acquisitions. Demand for U.S. loans has pushed prices on the debt to a two-year high with the S&P/LSTA U.S. Leveraged Loan 100 Index rising 6.8% since the beginning of 2010.”
XVII … Bear market mutual funds bottomed out this week.
Bear Market mutual funds DXESX, DXRSX, and UKPSX bottomed out this week. I do not recommend these as their investment value extinguishes over time. I recommend if one must invest bearishly that short sell the Proshares Ultra ETFs.
XVIII…. The currency traders restarted competitive currency devaluation this week, as the bond vigilantes called interest rates higher globally.
World currencies, DBV, and emerging market currencies, CEW, traded lower in January causing the US Dollar, $USD, to rise. Loss leaders in currencies so far this year are, FXF, FXE, FXS, SZR, FXA, FXY, and BNZ.
The US Dollar, $USD, rose to strong resistance; it could easily go into sideways consolidation before falling lower with the other currencies.
The issuance of Eurobonds under the European Financial Stabilization Mechanism, EFSM, on January 5, 2011, as well as the forthcoming ones of the European Financial Stability Facility, EFSF, as reported by Paul A. Ebeling, of Live Trading News, are part of growing European Fiscal Federalism. The issuance of Euro Bonds establishes the Eurozone as a region of global governance, something that was called for by the Club of Rome in 1974. The issuance of E-bonds establishes the fiscal seigniorage of a Federal Europe, and monetizes the debt of all nations, particularly Germany. This is why there was a sharper sell off in German shares, EWG, this week compared to the European shares, VGK. The issuance of Eurobonds weighs on Germany’s fiscal sovereignty and debt sovereignty. Euro bonds are plainly and simply sovereign debt CDOs, and thus financial securitization that increases systemic risk.
IXX … Inability to profit from carry trade investing and the turn lower in the Optimized Carry Trade ETN ICI documents that the world has passed from an age of leverage and growth …. and into an age of deleveraging and contraction.
Ron Harui and Wes Goodman of Bloomberg report: “Currency traders that seek profits by borrowing in nations with low interest rates to fund purchases in countries with higher yields are losing more money than at any time in at least a decade. The strategy lost 2.5% in 2010 as the dollar -- a favorite for financing the trades because of record low U.S. rates -- appreciated, according to an index compiled by UBS … That’s more than the 0.98% drop in 2008.”
The Optimized Carry Trade ETN, ICI, entered an Elliott Wave 3 Down on December 28, 2010
XX … Taiwan has recovered since the commodity and subprime bust and has emerged as a global manufacturing marvel.
Chinmei Sung of Bloomberg reports: “Taiwan’s exports rose 19.1% in December from a year earlier, the Ministry of Finance said. The chart of Taiwan, EWT, together with EWY, IWO, THD, TUR, EPU, ECH shows Taiwan’s strong growth.
XXI …. The Municipal Employment Bubble has burst.
Simone Baribeau of Bloomberg report: “Employment at local governments, which provide almost 11% of all U.S. nonfarm jobs, fell to its lowest level in more than four years last month as municipalities cut payrolls to balance budgets. Workers employed by local government fell 0.1% to 14.2 million … after cities, towns and counties cut 20,000 jobs. ‘State and local government is just getting hit in every possible way on the revenue side,’ after the recession curbed property, income and sales tax receipts, said Heidi Shierholz, an economist with the Economic Policy Institute.”
XXII …. ProShares Ultra ETFs are topping out and even turning lower.
The ongoing Google Finance five day chart of URTY, UYM, UYG, USD, and DIG shows these five Proshares 200% ETFs are seen topping out and turning lower: UYM turned down 1% this week.
A) … URTY, 200% Russell 2000 has entered into an Elliot Wave 3 Down
B) … UYM, 200% Basic Materials has entered into an Elliott Wave 3 Down. The strong sell off in Brush Engineered Material, BW, communicates a fast fall is coming to Basic Material stocks.
Having gone parabolically higher, Tech Resources, TCK, and Uranez Resources, URZ, may be topped out.
China Material, CHIM, turned lower this week.
Coal Manufacturers, KOL, has topped out and turned lower; Arch Coal, ACI, has turned lower.
Basic Material General Moly, GMO, has turned lower.
Headwaters, HW, appears to be topping out.
Horsehead Holding, ZINC, has moved to the edge of a head and shoulders pattern.
Potash Corp, POT, appears to be topped out.
The small cap energy shares, XLES, has entered into an Elliott wave 3 Down and is a strong short selling opportuntiy. This makes Apco Oi and Gas, APAGF, Kodiak Oil and Gas, KOG, Bronco Drilling, BRNC, ION Geophysical, IO, a sell.
C) … UYG, 200% Financials is in what is likely an island reversal top.
D) …. USD, 200% Semiconductors has just completed an Elliot Wave 2 up and is ready to enter into an Elliott Wave 3 Down.
E) Chart of 200% Oil Stocks, DIG, shows completion with a spinning top and a number of dojis.
As I stated above I recommend investment in gold bullion; for those who are not so disposed, I recommend a Proshares Short Selling portfolio of short selling URTY, 50%, UYM, 10%, UYG, 10%, and USD, 10% , DIG 10%, and Junk Bonds, JNK, 10%. Please understand that I am not an investment professional and have no license to give trading advice. I’m just a guy who perceives of an investment demand for gold, and do my best to present that viewpoint.
XXIV … There is no safe sovereign: out of a soon coming Götterdämmerung, that is an investment flame out, Euro German or Euro Italy leadership will arise to provide moneyness in the Eurozone.
Simon Kennedy reported in Bloomberg on January 7, 2010: “Fears of a sovereign default are ‘manifest’ in Europe and will soon spread to Japan and the U.S. as governments struggle to control deficits, according to Citigroup Inc. economists led by former Bank of England policy maker Willem Buiter. ‘Despite the recent drama, we believe we have only seen the opening and second act, with the rest of the plot still evolving … There is absolutely no safe sovereign’”
Out of the growing European Sovereign and Bank Debt Crisis, a Chancellor, that is a Sovereign, will arise to establish order. This will likely be a European Leader, who has credentials, such as that of having been awarded the Charlemagne Prize. Candidates for the EU Leadership include Herman van Rompuy, Angela Merkel or John Redwood or Tony Blair
And a Banker, that is a Seignior, such as Wolfgang Schäuble, or Olli Rehn, or Jean-Claude Trichet, or Gordon Brown or Jose Manuel Barroso, or Giulio Tremonti or Jean-Claude Juncker will rise to provide credit.
I conclude with a word of encouragement: Forsan miseros meliora sequentur.
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