1) ... On Monday, January 27, 2014, a see-saw destruction of credit investments and equity investments commenced, as the Bond Vigilantes began steepening the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening, and in calling the Interest Rate on the US Ten Year Note, ^TNX, higher once again to 2.77%.
Aggregate Credit, AGG, traded 0.2% lower, putting a dent in as well as possibly terminating a fifteen day rally that commenced January 2, 2014. All the bonds, seen in this Finviz Screener SHY, IEF, TLT, EDV, QLTA, VCLT, PICB, BWX, and JNK, traded lower as Tyler Durden posted March T-Bills in panic selling as debt ceiling fears reignite.
World Stocks, VT, traded slightly lower; sectors trading lower included SOCL-2.3%, GEX, -2.2, IBB, -2.2, RZG, -2.1, PNQI, -2.0, FDN, -1.9, PJP, -1.8, IWC, -1.7, IGV, -1.6 XTN, -1.5, PBS, -1.2, RZV, -1.1, CSD, -1.0; of note these are all US based stocks that rose with a former safe haven rally on the trade lower in Aggregate Credit, and included, DXPE, ROLL, SNA, GNRC, CR, HEES, and JBT.
Global Financials, IXG, traded slightly lower; this included KCE, -2.2%, IAI, -2.1, BX -2.0, and KRE, -1.5.
Nation Investment, EFA, traded slightly lower; it was the carry trade darlings that traded lower today; these included, MES, -3.0%, EIRL, -2.0, and EDEN, -1.9. Of note China Industrial, CHII, traded 2.9% lower. India Small India Caps, SCIN, -4.1%, India, INP, -1.8, on the extinguishment of a former Indian Rupe and Japanese Yen Carry Trade. And Switzerland, EWL, -1.5, US Small Caps, IWM, -1.4, and Japan, EWJ, -1.3.
Pursuit of yield investments, that is Dividends Excluding Financials, DTN, traded lower; this included GRID, -1.8%, SEA,-1.6, PSP, -1.4%, IST, -1.2, Industrial Office REITS, FNIO, -1.1 and REM, -1.0.
Energy Production, XOP, traded 2.0% lower.
Silver Miners, SIL, -3.5%, and Gold Miners, GDX, -3.4%.
Gary of Between the Hedges reports in Bear Market Report, that RZG, was the style loss leader of the day.
Both the chart of Market Off ETN, OFF, and the Bear Market ETF, HDGE, are seen in breakout communicating that the stock market has turned from a bull market to a bear market, with confirmation comes from Call Write Bonds, CWB, trading parabolically lower.
Consumer Spending Investments, XRT, RXI, IYC, PSCC, and PSCD, as well as Risk Investments, FXR, RZG, PBS, RZV, PSCI, FPX, PJP, XTN, GEX, IWC, together with Credit Service Providers, such as V, AXP, IX, MA, CIT, FCFS, Payment System Providers, such as PFSW, EEFT, HPY, ADS, FIS, TSS, and Building Materials, such as PGTI, AAON, TREX, OC, are the loss leading sectors. In the Basic Materials, Steel, SLX, Coal Miners, KOL, Rare Earth Miners, REMX, Industrial Miners, PICK, and China Minerals, CHIM, are the loss leaders. Greece, GREK, is leading other EU Nations lower.
Components of the S&P 500, SPY, Energy, XLE, 11%, Staples, XLP, 10%, Industrial, XLI, 11%, Health Care, XLV, 13%, Consumer Discretionary, XLY, 13%, and Financial, XLF, 16%, Technology, XLK, 21%, seen in the combined ongoing Yahoo Finance Chart, shows Consumer Discretionary, XLY, to be leading lower; this being do to the strong trade lower in Retail, XRT.
Liberalism was the age of inflationism, that supported investment in things such as Boeing's, BA, Dreamliner, that helped propel Defense and Aerospace, PPA, ever higher. As seen in ongoing Yahoo Finance chart, these are now down six percent from their market peak. Credit Bubble Stocks posts Boeing 737, from cold and dark to read for taxiing. The new normal of economic destructionism will characterize the age of authoritarianism, which will produce a massive curtailing of plane orders, crushing the dreams of many, and sending Puget Sound unemployment soaring, and the Washington State economy spiraling downward into economic deflation.
Sony, SNE, led Japan, EWJ, lower, as Bloomberg reports Sony cut to junk by Moody's as mobile Devices lure buyers. Sony Corp, SNE, had its credit rating cut to junk by Moody's Investors Service as Japan's biggest television maker struggles to capture consumer demand for smartphones and tablet computers.
Only now, and only slowly, is the inflation trade in the Nikkei, NKY, which came via Abenomics, starting to unwind. Sony, SNE, is trading terrifically highly given that its debt is rated as junk. This shows not only liberalism's debt trade effect, and not only the Abenomics inflation trade effect, but also the carry trade sell of the Japanese Yen effect, which made all of Japanese companies exports low priced compared to similar products from other global manufacturers. Sony, SNE, and other Japanese companies, as well as electronics manufacturers have a long, long, way to fall lower; it is as the saying goes, "look out below". The economic reality of a lower yen is as Reuters reports economic deflation, No yen dividend yet as Japan posts record 2013 trade deficit
2) ... The great economic transformation from liberalism's investor to authoritarianism's debt serf has commenced on the failure of both fiat money and fiat wealth.
Trust in the credit monetary policies of the world central banks, and the stability of democratic nation states literally created the investor under liberalism; the investor was a creation of liberalism's dynamos of creditism, corporatism and globalism. The investor was the lynchpin, foundation and capstone of the paradigm and age of liberalism.
Trust in the monetary policies of the world central banks, coupled with freedom of investment choice provided by democratic nation state governance, under the operation of the US Dollar International Reserve Currency System, provided a life experience for all of humanity, as either an investor or a client of government.
The week ending January 24, 2013, was both epic and pivotal. World Stocks, VT, and the US Dollar, USD, UUP, as well as Major World Currencies, DBV, and CEW, traded lower on the failure of trust, terminating liberalism, and introducing authoritarianism, both as a paradigm and an age of regional governance and totalitarian collectivism, where regionalism is rising as the dynamo of economic activity producing economic fascism.
On the week ending January 24, 2013, stocks suffered their worst loss in 19 months; all flags fell down, that is nation investment, EFA, traded lower; now ten new flags are seen rising.
Out of the collapse of trust, in fiat money on October 23, 2013, and in fiat wealth on January 24, 2014, and out of the collapse of freedom of choice in a number of democratic nation states, as well as the failure of currencies, seen in the sinking of currencies, especially the US Dollar, $USD, UUP, the domain of economic experience is now authoritarianism, where economic life comes through diktat money, established by the diktat policies of regional economic governance, in the world's ten regions, and schemes of debt servitude of totalitarian collectivism unifying all of mankind's seven institutions.
Under authoritarianism, the debt serf is the centerpiece of authoritarianism, and debt servitude, is the foundation, capstone, and framework of economic life. The Creature from Jekyll Island perished in the twin extinction events of the failure of fiat money and fiat wealth. And a greater monster, the beast regime is rising to rule the world where all people are debt serfs. Examples of diktat money, that is economic mandates of regional leaders for regional security, stability and sustainability, are seen in the Reuters report Bundesbank calls for capital levy to avert government bankruptcies.
The Benchmark Interest Rate, ^TNX, was the Means of Economic Inflationism, but after the pivotal event of October 23, 2013, it is now the Means of Economic Destructionism, establishing economic deflation and economic recession, terminating economic inflation and economic growth. and its metrics such as World Trade Volume, World Industrial Production, and US, Eurozone, Asian Economies, and Emerging Economies Industrial Production.
Furthermore from January 24, 2014 onward, disinvestment out of liberalism debt trade investments, and currency carry trade investments will begin to be active factors of economic deflation, turning the aforementioned economic metrics ever downward.
Mike Mish Shedlock ask Start of a Global Currency Crisis? and posts that debt deflation, that is currency deflation is having its epicenter in countries with large current account deficits, and in countries with large amounts of credit owing to foreign banks. Turkey, TUR, being a prime example as Gavekal, as quoted by ZeroHedge relates "Turkey is not, however, showing any signs of stabilization. The lira continues to fall, and policymakers are doing little to contain the situation. And Not only is its current account deficit at nearly 8% of GDP, the highest in the MSCI's emerging markets universe, but the country is also geographically closer and thus more dependent on the eurozone, whose economic recovery is painfully slow. Its political situation is also clearly very unstable. Already fragile Greece is particularly exposed to the Eurasian republic. Turkish credit as a proportion of total Greek bank assets stands at over 5%.
Reuters reports Seagate misses estimates as growth slows in cloud business. Hard-disk drive maker Seagate Technology Plc, STX, second-quarter results missed analysts' estimates as growth slowed in its cloud storage business, sending its shares down 7 percent in extended trading, evidences the exhaustion of the world central banks' monetary policies of credit stimulus and democratic nation state policies of investment choice. These policies coupled with the banker schemes of currency carry trade investing, and debt trade investing propelled Nation Investment, EFA, making Ireland, EIRL, an investor's darling. And Troika banking and austerity policies drove Ireland's Bank, IRE, to become a global financial, IXG, leader. All of these investment choice leaders fell strongly lower in value beginning on January 24, 2013, as is seen on combined ongoing Yahoo Finance chart.
Of note on January 17, 2014 Moody's reports an upgrade of Ireland's sovereign ratings to Baa3/P-3: outlook changed to positive. The two main drivers for the upgrade are: (1) The growth potential of the Irish economy, which together with ongoing fiscal consolidation is expected to bring government debt ratios down from their recent peak; (2) The Irish government's exit from its EU/IMF support programme on schedule, with improved solvency and restored market access.
It's adios to the age and paradigm of liberalism whose foundation, framework, and capstone, was the investor, and his investment choice. And its hello to the new normal of debt servitude, as under authoritarianism, the counterpart is the debt self employed in debt servitude.
Bloomberg reports the unraveling of an inflation trade that started in June 2013, with PBOC monetary injections. Rubber Futures Poised for Bear Market as China's Inventory Rises. Rubber futures in Tokyo headed toward a bear market as stockpiles in China swelled to a nine-year high, signaling weakening demand from the largest consumer of the commodity used in tires. Rubber for delivery in June on the Tokyo Commodity Exchange fell as much as 1.2 percent to 226.5 yen a kilogram ($2,207 a metric ton) before trading at 227.3 yen at 9:13 a.m. local time. A close at or below 228.8 yen would be 20 percent decline from the Sept. 9 settlement for a most-active contract, meeting the common definition of a bear market. That would mark the end of bull run that started on Aug. 26 and stalled as stockpiles monitored by the Shanghai Futures Exchange climbed, advancing for eight straight weeks to 204,451 tons, the largest amount since October 2004. (Hat Tip to Gary of Between the Hedges)
With both fiat money and fiat wealth dead, yes literally dead, the world has fully PIVOTED from the paradigm and age of liberalism, into that of authoritarianism, which will be a universe and epoch of economic deflation and economic recession, the likes of which the world has never seen; with foretaste as AFP reportsRWE, Germany's second biggest power supplier said it plans to further axe 6,700 jobs.
Economic deflation is defined as a permanent type of economic recession, and is exemplified by Reuters reportGermany to feel brunt of 5,291 Airbus job cuts, and by the Jordan Shilton WSWS reportOver 400 jobs cut in Ireland as Lufthansa subsidiary shuts plant, and by the Market Watch reportRyanair paints a bleak outlook for budget airlines which caused Ireland's RYAAY to tumble.
Derisking out of liberalism's credit will be profoundly painful in Germany; it is not only a nation of large manufacturing companies, but also one of many small companies, who have paid their employees a subsistence wage in order to become an export superstar. Thus, as disinvestment comes out of Germany, EWG, and its Global Industrial Producer, SI, and German Small Cap Stocks, GERJ, the economic deflation will be both rapid and painful, producing a great human toll of personal suffering.
Bust always follow boom. Now after five years of money market capitalism, the tail risk of Global ZIRP coming from derisking out of debt trade investments, and deleveraging out of currency carry trade investments, is economic deflation and economic recession; these, through the dynamo of regionalism, will produce authoritarianism's regional economic fascism, as well as its debt serf.
ZH posts an end-of-the-age report Margin debt soars to record high; Investor net worth now doubly negative from 2007 peak. That margin debt kept rising into the last month of last year is no surprise. However what may come as a shock to many is that the other key metric provided by the NYSE, total net free credit, also known as investor net worth (calculated as Free Credit Cash plus Credit Balances in Margin Accounts less Margin Debt) just dropped to a whopping $148 billion, double where it was in February 2013, and double where it was during the peak of the last stock (and credit and housing) bubble, when it rose to a then-all time high of $79 billion in June 2007. It was all downhill from there.
The paradigm and age of liberalism was characterized by capitalism, investing and peace; but, authoritarianism is characterized by regional economic fascism and debt servitude as well as war.
Richard Christopher Whalen posts in ZH The end of normalcy If the 20th Century was the era of free trade, paid for by the US consumer and taxpayer, then the 21st Century is shaping up to be a very different model, one based more on self-interest and limited trade and global financial flows which, let us recall, were a function of American largesse in the post-WWII era. Let us repeat the words of President Wayne Harding: "America's present need is not heroics, but healing; not nostrums, but normalcy; not revolution, but restoration; not agitation, but adjustment; not surgery, but serenity; not the dramatic, but the dispassionate; not experiment, but equipoise; not submergence in internationality, but sustainment in triumphant nationality." That last phrase, "sustainment in triumphant nationality," is likely to be the theme of the 21st Century. With the US unable or unwilling to continue expanding credit and debt, the major nations of the world face lower economic growth, less dependence upon global trade and financial flows, and a resurgence of nationalism that is likely to end as it has before, in war.