Financial market report for Tuesday December 6, 2011
1) … World stocks trade lower.
World stocks ACWI, VSS, EWX, EEB, EPP, EEM, seen in this Finviz Screener traded lower today.
Country and region shares trading lower today included RSX, EWT, ARGT, EWY, EIS, YAO, CAF, IDX, EWA, TUR, GXG, EWM, EWS, EPOL, CEE, EWJ, as seen in this Finviz Screener.
Small cap country shares trading lower included RSXJ, HAO, KROO, SCIF, LATM, as seen in this Finviz Screener.
Sectors trading lower included TAN, OIH, IEZ, SLX, CHIM, CHII, KOL, REMX, IGN
Banks trading lower included, NBG, BAP, BSBR, BBD, ITUB, CIB, BMO, WF, SHG, KB, MFG, NMR, GGAL, BMA, BFR, CHIX, BCH, BCA, as seen in this Finviz Screener. The European Financial Institutions, EUFN, are not only illiquid, they are insolvent as they are experiencing a funding freeze as Gary of Between the Hedges reports The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is very near the highest since March 2009. The 3M EUR/USD Cross Currency Basis Swap is still near the worst since November 2008. The Libor-OIS spread is the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Business Insider reports Greek Bank Run Hits The Big Time.
Stocks trading lower included TSM, PANL, AUO, RCL, AMZN, ACH, ACAT, GFA, RCL, ULTA, TUP, SBUX, MTL, FIO, HAL, MAKO.
Emerging Markets, EEM, turned lower on Emerging Market Banks, FGEM, and EMFN, such as BAP, GGAL, BMA, and Emerging Market Miners, EMMT, such as SQM, VALE, lower.
Argentina shares trading lower included TEO, NTL, BMA, GGAL, ARCO, EDN, PAM. Argentina shares trading higher included BBVA, MELI, IRS. The components of Argentina ETF, ARGT, epitomize hot money flow carry trade investing, that prevailed in the former days of the Milton Friedman Free To Choose floating carry trade investment regime. When investors became aware that a debt union had formed in the Eurozone, and fled the stock market in July 2011, not only did the European shares, VGK, FEU, fall lower, but the zombies, that is the walking dead of Neoliberalism, gave way. These seen in this Finviz Screener, recently rose up from their grave, but are now turning lower again, led so by ARGT, CEE, EIS, EPOL, and TUR.
MWE led the oil pipeline energy partnerships seen in this Finviz Screener higher; these gave a lollipop hanging man candlestick finale to the age of profitable basic material, IYM, investing.
Silver is a risk asset, while Gold is a precious metal. The chart of silver on a weekly basis and a daily basis shows it rising to resistance; it will be falling lower. The chart of gold on a weekly basis and a daily basis shows it to be in a consolidation triangle; it will either collapse out or burst out.
Silver, is in its death rattle; it led commodities, DBC, with the exception of Aluminum JJU, seen in this Finviz Screener, higher today. Silver Miners, SIL, PAAS, and HL, have the same trading pattern as silver. These stocks, like their commodity counter part cannot preserve wealth. These are simply risk assets of a bygone era of fiat wealth. There is no profitable risk trade in the age of deleveraging.
AP reports Greek Lawmakers Approve 2012 Austerity Budget. "This is a difficult budget ... with ambitious targets," Prime Minister Lucas Papademos told lawmakers just before the after midnight vote. "But we must achieve our targets and implement the measures that are foreseen." … "Our position in Europe is not negotiable," he said. "The Greek people will defend it by all means. But participation in the euro involves rules and obligations, which we must consistently meet ... Greece belongs to Europe, and Europe cannot be envisaged without Greece."
2) … Herman van Rompuy circulates a paper promoting a stability union featuring the sacrifice of sovereignty.
Ian Tranor of The Guardian reports Confidential paper from European Council President Herman Van Rompuy Proposes Empowering Brussels To Impose Austerity. It calls for "more intrusive control of national budgetary policies by the EU" and lays out various options for enforcing fiscal discipline supra-nationally.
The two-page paper, obtained by the Guardian, is to be discussed on Wednesday among senior officials in an attempt to build a consensus ahead of the summit. It may instead set off an explosive rebellion by eurozone countries balking at the options outlined by Van Rompuy, who heavily emphasises the need for a new punitive regime overseen by EU institutions that would be given new powers of intervention.
The proposals and policy options, if agreed, will be seen as seriously curbing the sovereignty of member states in setting budgetary, economic, and fiscal policy.
For countries deemed to be insolvent and in receipt of eurozone and International Monetary Fund bailouts but failing to meet the terms, Van Rompuy raises the prospect of drastic action: "The granting of exceptional powers to the [European] commission (or another body) to take enforceable measures in the country concerned so as to ensure the stability of the euro area." It adds: "In case of consistent non-compliance, political sanctions such as the temporary suspension of voting rights [in EU councils]" might be imposed.
As part of a German-led drive for a eurozone "fiscal union", Van Rompuy highlights the potential for harmonising pension reforms, social security systems, labour market policy, and financial regulation: "Consideration could be given to use legislation to define minimum common features."
Other "possible further steps" generating a "higher degree of economic convergence" in the eurozone could include reinforcing the commission's and the eurogroup's rights of prior scrutiny "of all major economic reform plans" and sanctions if the commission's recommendations to individual countries are ignored.
Van Rompuy also raises the possibility of using the EU budget to reward sound fiscal conduct within the eurozone – and to punish recalcitrants.
On the two most important rules governing the single currency – that budget deficits do not exceed 3% of gross domestic product and that national debt ceilings stay within 60% of GDP – Van Rompuy calls for "stricter rules" and "extended capacity of the EU institutions to enforce them". Countries in breach of the euro rulebook could have to submit draft budgets "for approval" to the eurogroup and the commission. The document says "a budget adopted not in line with the stability and growth pact [euro rulebook] could be considered in breach of EU obligations".
While most of the options listed might appeal to Chancellor Angela Merkel and her campaign to entrench a new era of rigour in the eurozone, Van Rompuy breaks ranks with Berlin's objection to eurobonds, though he is careful to stress that any mutualisation of eurozone debt would need to be gradual. "A staged criteria-based process could be envisaged and be a powerful incentive for fiscal discipline."
The eurozone reform blueprint agreed on Monday between Merkel and President Nicolas Sarkozy is focused on the medium-term. But Van Rompuy argues that "the current situation calls for immediate action. Beyond stabilisation tools, some structural steps for deepening the economic union can be implemented rapidly."
Euro Source relates Luke Baker of Reuters reports Van Rompuy Urges Fast Track Of New Fiscal Compact Tighter oversight of euro zone fiscal policy can be achieved through minor, rapid adjustments to the EU treaty, European Council President Herman Van Rompuy told EU leaders in an interim report to be discussed at a summit on December 8-9.
The aim would be to achieve a “new fiscal compact” that ties euro zone member states more strictly into budget deficit and debt rules, a step that may provide the European Central Bank with room to step up its purchasing of sovereign bonds.
ECB President Mario Draghi used the phrase “new fiscal compact” when he addressed the European Parliament last week, in a comment that suggested the bank would be ready to use more firepower to resolve the debt crisis if the euro zone moved decisively towards a more complete economic union. Moving the euro area towards a true economic union requires additional steps in terms of integration, towards a ‘new fiscal compact’,” says the interim report, dated December 6 and obtained by Reuters.
“To restore market confidence in the euro area, and to ensure the political sustainability of solidarity mechanisms, it is crucial to enhance the credibility of our budgetary rules (deficit and debt levels) and to ensure full compliance.”
In the report, compiled after a week of intense consultation with all EU leaders, Van Rompuy also suggests that the euro zone’s permanent bailout fund, the European Stability Mechanism, could be given a banking license, which would potentially allow it access to vast ECB liquidity.
“Introducing the possibility for the ESM to directly recapitalize banking institutions and to have itself the necessary features of a credit institution,” the report lists as one of four proposed changes to the fund.
Other suggestions are that the ESM’s decision-making procedures be brought more directly into line with IMF practices and that the current 500 billion euro ceiling of the ESM’s capacity be reviewed.
Rapid adjustments to the ESM, which has not yet been ratified by all euro zone members, “is key to restore market confidence in sovereign debt markets” the report says.
Van Rompuy will chair the two-day summit, which begins with a dinner on Thursday evening, and
try to forge a consensus among EU leaders on treaty change so that the euro zone can move more rapidly introduce stricter budget rules.
The interim report, titled “Towards a stronger economic union” was commissioned by EU leaders after a summit on October 26-27, with Van Rompuy asked to explore ways of making euro zone economic union commensurate with monetary union.
The report said tighter deficit and debt rules could be enshrined in law through changes to protocol 12 of the EU treaty, which can be done quickly and would not require ratification by parliaments in most member states.
It would also not require anything more than “consultation” with the European Parliament and the European Central Bank, meaning it could be brought about much more quickly.
However, the interim report says it may also be necessary to revise secondary legislation, such as the EU’s stability and growth pact, and that deeper adjustments involving amendments to article 48 of the treaty may also be necessary.
The main aim, however, would be to ensure that euro zone member states keep their budget deficits below three percent of GDP, their debts below 60 percent of GDP and that they introduce into national legislation a “golden rule” that aims for a balanced budget in the medium-term. According to Van Rompuy’s consultations with lawyers and EU leaders, such measures can be brought about by overhauling one key element of the EU treaty, called protocol 12. “This decision does not require ratification at national level. This procedure could therefore lead to rapid and significant changes.”
The document also keeps alive the possibility of jointly issued euro zone bonds, which Germany opposes, and suggests that it should be possible for euro zone countries to make bilateral loans to the IMF to bolster its resources, possibly for lending back to needy euro zone states.
Under the heading of “economic union,” the report says two steps should be considered for closer convergence and budgetary discipline, including: “Opening up the possibility, in a longer term perspective, of moving towards common debt issuance in a staged and criteria-based process, for example starting with the pooling of some funding instruments.”
On the IMF, the report concludes: “Finally, there is a need to ensure that the IMF has sufficient resources to deal with the crisis through the provision of additional means, as was done in 2009, in particular through bilateral loans.”
3) … The EU ECB IMF Troika is emerging as the new and over arching sovereign authority in Europe ... and fate will soon produce a Sovereign and a Seignior to provide order out of chaos.
Insolvent sovereigns and insolvent banks can not sustain economic growth. The PIIGS lost their debt sovereignty when their interest rates passed six percent. These Latin nations must now rely on seigniorage, that is moneyness, from the Nordic nations. Only capable sovereigns possess seigniorage, and fate is bringing forth the EU ECB IMF Troika as sovereign authority in Europe.
The New Europe, will be a “true European economic government”, as called for by Angela Merkel and Nicholas Sarkozy who have heard and heeded the 1974 Clarion Call of the Club of Rome for regional economic governance. Three hundred of the world’s elite were called together and presented a plan for global governance in each of the world’s ten regions, as means of establishing stability and security for order coming out of the chaos of deleveraging and disinvesting out of debt and carry trade investing.
Neoliberalism featured ponzi credit and ZIRP which stimulate inflationism and growth. Now Neoauthoritarianism, features a ten toed kingdom of regional global governance and austerity to deal with destructionism.
Neoliberalism featured wildcat finance where shrew investors profited from carry trade investing and ponzi credit. One of the most carry traded investments of all times has been Silver Standard Resources, SSRI. And Irvine Renter provides a case of HELOC abuse where a mortgage owner was allowed to more than triple her mortgage debt over a nine year period and pocketed mortgage equity withdrawal amounting to $379,000.
Neoauthoritarianism features wildcat governance where fierce sovereigns work in regional framework agreements to subject others to expansionary fiscal contraction, which is the combination of structural reforms, austerity measures, pension overhauls, reworked national wage contracts and centralized fiscal supervision favored by German economic and political leaders, such as Wolfgang Schauble, Olli Rehn, and Guido Westerwelle, which eliminate labor privileges such as inflation inked wage rises, that eat away at intra Euro zone competitiveness. The economic theory of expansionary fiscal contraction is the concepts of Harvard’s Alberto Alesina, and Goldman Sachs’ Broadbent and Daly, writes George Irvin in the Social Europe Journal, stating, “it is very difficult to see how massive fiscal contraction can be expansionary in Britain today.” And Simon Johnson writes Under four conditions, fiscal contraction can be expansionary. But none of these conditions is likely to apply in the United States today. Wolfgang Muchau wrote in the FT, “I cannot see how somebody with a solid training in macroeconomics, and with a minimal sense of honesty, could come up with a fairy tale of an expansionary fiscal contraction. Or, that coordinated austerity programmes would not affect growth in the short run.” Finland lawyer Grahnlaw wrote several days ago The CDU resolution Starkes Europa – Gute Zukunft für Deutschland underlines that solidarity requires massive reforms for stability and competitiveness in countries needing help. And the Euro Plus Pact is seen as an agreement among 17 eurozone leaders and six other EU members to strengthen the economic union in the EMU, by increasing competitiveness. Expansionary fiscal contraction comes through the mandate of the EU ECB
and IMF Toika, which installs technocratic government through the Euro zone, as Stefan Steinberg, of WSWS reports Technocrat Monti Introduces New Drastic Austerity Package .
Greeks cannot be Germans. The former are of the olive state and are club med. The latter are of the industrious state and are hard working. Yet all will be one in a stability union led by a capable governor, The Sovereign, and an adept banker, The Seignior, which literally means top dog banker who takes a cut. These will provide seigniorage, that is moneyness; and the former countries of the democratic age, will exist as vassal states.
The EU insolvent sovereigns can no longer provide seigniorage to the fiat money known as the Euro. The fiat money system which has come under territorial monopolies of central banks and private banks, and that has produced elastic state money, is history.
Milton Friedman provided the Free To Choose script for Neoliberalism where bankers securitized all kinds of debt and underwrote massive amounts of carry trade investing based upon rising currencies of sovereign nations, which provided the seigniorage of fiat money, fiat fiscal finance and credit.
But now, with the bankruptcy of fiat currencies, Herman van Rompuy, and Angela Merkel, are providing a new script for Neoauthoritarianism, where leaders will meet in summits waive national sovereignty, and issue mandates based upon regional compacts, which provide the seigniorage of diktat where credit will come from stakeholder groups that work for a region’s security and stability, as the people labor in debt servitude.
Out of sovereign armageddon, that is a credit bust and world investment breakdown, a new global economic and political regime will arise.
At the appointed time, fate, not any human action, will open the curtains, and onto the Europe’s stage will step the Europe’s New Charlemagne, and his banking partner; they will not be elected; rather destiny will bring them forth in a Eurozone coup d etat, to provide order out of chaos. These sovereigns will develop the Eurzone into a type of authoritarian revived Roman Empire.
And these two will provide the seigniorage of diktat, as the seigniorage of fiat money, that existed under the Milton Friedman Free To Choose floating currency regime, is history. The word, will and way of these two will provide a new moneyness, and the people will be amazed and follow after it, placing their confidence and trust in it, giving it their full allegiance.
David R Reagan writes that sovereignty will be sacrificed as a Federal Europe is formed. “German Foreign Minister Joschka Fischer repeated his call for a European government in July, 2000, and said the European single currency, the Euro, was “the first step to a federation.” He added that he wanted a “powerful president.”1 Fischer said his aim was “nothing less than a European parliament and a European government, which really do exercise legal and executive power,” to operate under his powerful president. More sinisterly, he welcomed the progress made in removing the “sovereign rights” of nations which he defined as control of currency and control of internal and external security. In summary, Fischer said, “Political union is the challenge for this generation.”2 … (1 and 2 Ibid, “German Foreign Minister floats idea of elected EU president,” The Financial Times, July 7, 2000. This article was a report on a speech by Joschka Fischer to the European Parliament’s constitutional affairs committee.)
In the age of deleveraging and diktat, the only forms of sovereign wealth will be diktat and gold bullion.
Ambrose Evans Pritchard addresses the July 2011 investor awareness that a debt union had formed in the Eurozone. It was at this time that awareness of Eurozone default struck like lightning, as he writes Bank Of France Debts Jump Tenfold On Capital Flight. The Bank of France faces surging debts to Germany's Bundesbank and fellow central banks in the EMU system as foreign investors pull large sums out of French accounts.
French lenders lost €100bn (£86bn) in short-term deposits in September alone, mostly due to precautionary moves by US money market funds and Asian investors afraid of France's exposure to Italy. "There were huge net capital outflows," said Eric Dor from the IESEG School of Management in Lille. The effects of this capital flight are surfacing on the Bank of France's books under the European Central Bank's so-called "Target2" scheme, an ECB payment network that lets funds move automatically where needed. Liabilities jumped suddenly in late July, rising from €10bn to €98bn by September. Ireland's central bank owes €118bn, Spain's €108bn and Italy's €89bn.
The triple-trigger appears to have been a sudden drop in Club Med manufacturing orders, an ECB rate rise, and the EU's July summit – which led to haircuts on Greek bondholders and battered faith in EMU sovereign debt. Mr Dor said there had been an exodus from distressed states into German, Dutch and Luxembourg banks. This shows up in the Target2 data.
While the liabilities can in theory keep rising for ever within EMU, they signal grave imbalances, such as the North-South trade gap so long ignored until it proved fatal. They ultimately leave debtor central banks deep under water if the eurozone breaks up. "We are in unknown territory in terms of monetary theory," said Mr Dor.
On the creditor side, the Bundesbank is left holding €465bn in IOUs, and the Dutch central bank €89bn, stoking fears that these countries could suffer a big loss if EU leaders fail to contain the crisis. The national central banks are also on the hook for the ECB's other operations. Simon Ward from Henderson Global Investors said ECB support has jumped by €465bn since April, with a sharp rise of €102bn over the last four weeks. The total exceeds €1.3 trillion, or 4.5pc of eurozone GDP. It includes "repo" loans to eurozone banks, as well as emergency liquidity assistance (NYSE:ELA) to Greece and Ireland, and bond purchases. The nexus of liabilities would be a nightmare to unscramble.
4) … A Global Eurasia war is coming as Zero Hedge reports Iran Moves to War Alert.
5) … The Yuan has peaked … global competitive currency deflation is underway.
Yahoo Finance data shows that the Yuan, CYB, peaked the week ending November 7, 2011 at 25.71.
China Desk reports The yuan fell to the low end of its daily trading against the U.S. dollar for the fifth consecutive day. During Tuesday’s session, its central parity rate against the dollar hit 6.3651, forming a sharp contrast with a persistent strengthening before last Wednesday. The steep decline of the Chinese yuan during the past five trading days is market’s normal response to China’s falling trade surplus, analysts said, and predicted the yuan will stay balanced in value over the long run. The impetus behind a stronger yuan has been paired off, a narrowing trade surplus spurred this round of weakening, said Qu Hongbin, chief economist with HSBC China.
Global competitive currency devaluation has commenced with the Chinese currency, the Yuan, now trading lower.
Neoliberalism featured inflationism, but Neoauthoritarianism features destructionism, that is deflation, as carry trade investing, ICI, is seen failing and the fear of sovereign insolvency looms larger by the day as the global government finance bubble has burst. The failure of the seigniorage of fiat money is seen in the monthly chart of the currency demand curve, RZV:RZG, turning lower in April 2011, and the monthly chart of World Stocks relative to World Treasury Bonds, ACWI:BWX, turning lower in April 2011, and then again in December 2011.
An inquiring mind asks, how much higher will the US Dollar go before it too turns lower. The chart of the US Dollar, USD, shows a close at 78.50; higher resistance begins at 79.50. The USD/JPY is seen trading at 77.70 up from 75.70.
6) … Fate is moving the world from being dominated by British and American rule to establish the ten toed kingdom of regional global governance.
A progression of kingdoms is seen in today’s news. The world is moving from the two iron kingdoms of the UK and the US, to the ten toed kingdom of regional global governance.
A Latin America region of global governance is forming, as Timur Zolotoev writes in Global Research 33 Latin American Countries To Form A New Bloc. U.S. And Canada Not Invited. The Community of Latin American and Caribbean States, CELAC, pointedly excludes the US, Canada and Britain, as it forms a economic and political union.
The formation of the Latin American Bloc is an effective working of the 1974 Clarion Call of the 300 elite of Club of Rome for ten regions of global governance, as an economic means of dealing with deleveraging and derisking out of the carry trade investing of the former Milton Friedman Free To Choose floating currency regime. And the formation of the Latin American Bloc is a political means of detaching from the two iron pillars of British and American rule that have governed the world for over one hundred and fifty years.
Regional global governance will be partly iron, that is authoritarian, and partly clay, that is democracy. These elements are incompatible, and eventually they will give way to the rise of the Sovereign and the Seignior, who will establish a one world government, a one world bank and global seigniorage
Fate is intertwining the Ten Toed Kingdom with the Beast Regime of Neoauthoritarianism, which is replacing the Banker Regime of Neolieralism. The Beast Regime is a monster of banking led corporatism that is rising from the Mediterranean Sea nations of Italy and Greece. It has seven heads, symbolic of its occupation in mankind’s seven institutions and ten horns, symbolic of its occupation in the world’s ten regions.
Stocks: ACWI, VSS, EWX, EEB, EPP, EEM, RSX, EWT, ARGT, EWY, EIS, YAO, CAF, IDX, EWA, TUR, GXG, EWM, EWS, EPOL, CEE, EWJ, RSXJ, HAO, KROO, SCIF, LATM, TAN, OIH, IEZ, SLX, CHIM, CHII, KOL, REMX, IGNGY, BAP, BSBR, BBD, ITUB, CIB, BMO, WF, SHG, KB, MFG, NMR, GGAL, BMA, BFR, CHIX, BCH, ITCB, TSM, OLED, AUO, RCL, AMZN, ACH, A