Financial market report for July 27, 2011
1) … It's taken four months, but finally stocks fell lower lower fully entering an Elliott Wave 3 Down, on the failure of the seigniorage of neoliberalism, inflation destruction, and exhaustion of Quantitative Easing, particularly demand exhaustion.
The world has experienced the dusk of neoliberalism since April 2011, but today, July 27, 2011, the world has fully entered into the darkness of neoauthoritarianism, with leadership default being exemplified in Washington, with competing plans for deficit reduction presented by Democrats, who see cuts coming from reductions in the war on terror, and Republicans proposing social cuts, and the Heritage Foundation and Tea Party defying all. An acquiring mind asks, will the President declare martial law and rule by executive order? Doug Noland communicated that neoliberalism was characterized by wild cat finance, neoauthoritarianism is characterized by wild cat governance. The world has passed from prosperity that has come with the Age of Leverage and into debt servitude and austerity with the Age of Deleveraging. Neoliberalism featured democracy, but neoauthoritarianism features diktat of sovereign leaders who rule in regional framework agreements, waiving national sovereignty and effecting regional economic governance. In the Eurozone a debt union has formed with the declaration of the EFSF Monetary Authority to serve as a European Monetary Fund, a Eurozone Treasury, at the insistence of President Sarkozy, but long opposed by Germans. Soon Eurocrats will declare emergency fiscal rules transferring fiscal authority to a federal and fiscal union and out of the hands of states as they loose their debt sovereignty to bond vigilantes. Seigniorage, that is moneyness, will be mostly political, coming from the word will and way of the leaders. Out of a global economic collapse, where the head of mankind’s most important institution, that is finance, commerce, trade, banking and investment, suffers a massive head wound, a stroke, a cunning Chancellor, the Sovereign, and his partner, an adept Banker, the Seignior, will rise to power in Europe, and rule much like Charlemagne, and rule in a type of revived Roman Empire. Neoliberalism featured the floating currency policies of Milton Friedman and credit liquidity policies of the US Federal Reserve which produce fiat wealth, that is plastic seigniorage, that is moneyness, securitized by firms like Annaly Capital Management, NLY, and effected by firms like Cardtronics, CARD, and Discover Financial Services, DFS, and American Express, AXP. Last week’s Leaders’ Announcement of Debt Default of Greek Sovereign Debt effected a bloodless Eurozone wide political, banking, economic, and governmental coup d etat where the Leaders are now sovereign over the people living in the European Union; one is no longer living in a sovereign nation state, but rather in a region of global governance as called for by the Club of Rome in 1974. Whereas neoliberalism is likened unto an Anaconda slithering across the jungle floor, neoauthoritarianism is a beast system, that is a beast regime, of state corporatism occupying in ten regions of global government and ruling in mankind’s seven institutions.
It was a slaughter house on Wall Street today; stocks falling lower included:
The world entered Kondratieff Winter as international stocks falling lower included
Indonesia, IDX, manifested a spinning top, gaining 0.03%
The rapid decline in the closed end preferred stock fund F&C Claymore Preferred Securities Income Fund, FFC, is one of many indications of the failure of the seigniorage of neolilberalism.
2) … The US Dollar, $USD, traded by UUP, traded up slightly higher today from yesterday’s 73.50 to close at 74.00
The world currencies, DBV, emerging market currencies, CEW, commodity currencies, CCX, FXE, FXM, FXC, ,FXB, FXS, FXF, BZF, XRU, SZR, FXY, BNZ, traded lower, with the exception of FXA, ICN, and CYB.
3) … Commodities falling lower included oil and timber
USO - 2.2% Associated Press reports Oil falls as nation's crude supplies rise
CUT - 2.8%
4) … Junk Bonds, JNK, turned Bonds, BND, lower today.
5) … In today’s news
Open Europe reports German Finance Minister: Bailed-out countries should give up part of their sovereignty to the EU
In an interview with Stern, German Finance Minister Wolfgang Schäuble suggested that any country that receives a bailout must give up some sovereignty, saying, “A state with problems, that receives help, must be willing to give some of its sovereign rights to the EU.” According to a letter seen by Reuters, Schäuble also suggested that the German government would not support a carte blanche for bond purchases via the eurozone’s temporary bailout fund, the EFSF. His comments will add to investors’ growing scepticism over the speed and scale at which the EFSF can purchase government bonds, since it requires unanimous consent of eurozone members and the ECB. Schäuble’s comments also appear to have caused Spanish and Italian borrowing costs to rise this morning.
Meanwhile, the WSJ reports that leading Portuguese banks are pushing for changes to the aid they receive under the Portuguese bailout. They suggest that the €12bn currently earmarked for bank recapitalisation should be used by the state to repay its debt with the domestic banking sector, which would make it easier for banks to increase lending in the wider economy and therefore promote economic growth.
Head of the IMF, Christine Lagarde, has suggested that the IMF may need to increase its financial resources again to ensure it can deal with financial crises around the world, saying, “Maybe [the IMF] could do with more [financial resources]. In the not-too-distant future, we will probably have to revisit this issue.” Despite having a resource base of $1.5tr the IMF can only lend up to $396bn in the next year, given existing loans and delays in countries providing their cash quotas. Separately, Moody’s has downgraded Cyprus this morning to just above junk status, citing its exposure to the Greek crisis as part of the reason. Stern: Schäuble Reuters Reuters 2 Reuters Italia Dow Jones WSJ WSJ 2 Guardian WSJ 3 Independent FT FT 2 El Pais Le Monde ORF IHT Liberation Handelsblatt Euractiv SZ AFP
EuroIntellilgence in their for fee newsletter reports the latest Markit purchasing managers index points towards a sharply slowdown in the eurozone economy. “Frankfurter Allgemeine writes that the outlook for the eurozone economy has deteriorated significantly in the last few months. Citing the latest Markit purchasing managers index, the mood among purchasing managers has dropped sharply, with the balance only just above the growth line of 50. The problem is that Germany and France, which sustained the above average eurozone rates, recently have both weakened considerably. The paper, however, disputes Markit’s assessment that the German recovery was fragile, noting that various German indicators, including the Ifo index, show that the economy is still expanding strongly.” And EuroIntellilgence reports that Alan Beattie, in FT says the eurozone’s model of political governance is not suited for the handling of debt crises. “This is an interesting column by Alan Beattie in the Financial Times, comparing the European and US twin crises. In his comment, he makes the observations that the EU’s model of governance had served it well over the years, but the iterative consensus-driven approach is unsuitable to the management of currencies or debt crises. He said the issue had become so complicated that the most senior US officials only managed to keep with developments through the press. While Washington is better at solving debt and banking crises, there are similar governance problems as we can now see in the standoff about the debt crisis, which must be settled by August 2.”
Bloomberg reports Italian, Spanish Bonds Slump on Concern European Aid May Not Be Sufficient. Italian and Spanish government bonds declined, increasing the yield relative to benchmark German bunds, on speculation Europe’s aid package may not be sufficient to prevent contagion. German bonds rose for a fourth day and European bank stocks slid as Finance Minister Wolfgang Schaeuble said the government is against a “blank check” for the European Financial Stability Facility to buy bonds of troubled euro members in the secondary market. “If you look into the details of the EU summit decision, it doesn’t take you long to get to where the weak points are,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “You still have two countries that are too big to save and are not effectively protected from negative market sentiment." Italian 10-year bonds yields rose 14 basis points to 5.76 percent as of 4:12 p.m. in London. The difference in yield between Italian and Spanish bonds and their German counterparts widened. The Italian 10-year security yielded 311 basis points more than similar-maturity bunds, up from 289 basis points yesterday, while the Spanish- German spread rose to 334 basis points from 322. The cost of insuring against default on Italian government debt rose 16 basis points to 291 and Spain increased 14 to 337, according to CMA prices for credit- default swaps. “The mandate of the EFSF has been extended but the size hasn’t been increased accordingly,” said Daheim. “You get the impression that there are too many things the EFSF is supposed to be doing. The weak points justify spreads between Spain and Italy and bunds not having narrowed more since the summit.” The risk of bank writedowns and more contagion from the debt crisis helped to drag the Stoxx 600 Banks Index down 1.8 percent, led by Italian lenders. UniCredit SpA slid 3.9 percent while Intesa Sanpaolo SpA dropped 4.2 percent.
Reuters reports, Italy Assets Close Sharply Lower on Contagion Fears. Italian assets fell strongly on Wednesday on renewed fears of euro crisis contagion, with shares in leading banks down more than 4 percent and benchmark bond yields sharply higher. Milan's bank-heavy FTSE MIB share index closed down 2.81 percent. The drop came as the yield premium on 10-year Italian BTP bonds over German Bunds widened to 313 basis points from 290 basis points on Thursday on worries that the euro zone crisis could widen to Italy. The 10-year BTP fell almost a full point in price, pushing its yield up to 5.76 percent. That is not far from the 6 percent psychological threshold it broke this month for the first time since 1997. Italy borrowing costs are expected to soar on Thursday when it sells up to 8.5 billion euros of bonds. Jitters about its debt pile are seen pushing the yield on the 10-year bond to an 11-year high
Bloomberg reports Kandahar Mayor Is Killed in Suicide Bombing While Mediating Land Dispute. The mayor of the southern Afghan city of Kandahar was killed in a suicide bombing at his office today, two weeks after the region’s most powerful politician, President Hamid Karzai’s half brother, was assassinated
Bloomberg reports Palestinians Say Time Is Right for Statehood. Palestinians have made a “final decision” to pursue the first formal step toward recognition of statehood and United Nations membership in September, the Palestinian Authority’s envoy to the world body said today. Ambassador Riyad Mansour announced a “march to legislation” at the UN, saying his government “can’t wait any longer for the government of Israel to negotiate with us in good faith.” The initial move will come at the opening of the UN General Assembly in New York in late September, he said. The Palestinian decision defies pressure from the Obama administration, which has said the move will undercut efforts to restart direct Israeli-Palestinian talks, and jeopardizes U.S. aid to the Palestinian Authority. The Senate on June 28 passed by unanimous consent a resolution with 89 co-sponsors that calls for President Barack Obama to consider “restrictions on aid” if the Palestinians proceed at the UN. An inquiring mind asks, will the UN recognise Jerusalemm, particularly East Jerusalem, as the capitol of the Palestinian People, if so, will not Israel object, as it has asserted that Jerusalem will never be divided. Israel’s authorities maintain Jerusalem is their eternal undivided capital.
America's hopes for a second-half pickup in the U.S. economy dimmed today as companies warned of weakening demand for everything from industrial equipment to televisions and Bloomberg reports Orders for U.S. durable goods fell in June and the Associated Press reports Fed survey: Growth slows across much of the US,