1) ... In early May 2014, the extinction of the investor commenced, at the hands of the currency traders and at the club of the bond vigilantes; the first investors to be butchered were investors in periphery Europe, that is Portugal, PGAL, Italy, EWI, Ireland, EIRL, Greece, GREK, but not Spain, EWP. The birth of the debt serf has commenced.
Ever since Milton Friedman came out with the Free To Choose doctrine of floating currencies, the world has been operating on a debt based money system, and to the dismay of Austrian Economist, not a hard asset money system.
At the end of the age of liberalism, meaning freedom from the state, debt becomes money, as the fiat, that is the rule of the Banker Regime is coming to a climax. And as is seen in May 28, 2014 financial marketplace trading, with 30 Year US Government Debt, EDV, and US Ten Year Notes, TLT, rising strongly in value, debt has become wealth.
The Distressed Investments, traded by the Fidelity Mutual Fund, FAGIX, have increased in value ever since the US Fed traded out "money good" US Treasuries for the worst of debt in QE1 in 2008, with the aim of restarting financial marketplace investing and regenerating the global economic system.
The US Fed's monetary policies and the Banker Regime's policies of credit choice were stunningly successful, in that they have produced terrific Equity Investment, VT, and Credit Investment, AGG. On May 28, 2014, the world is attaining peak wealth, it is an awesome moral hazard based wealth.
As the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, has flattened, seen in the Flattner, ETF, FLAT, trading higher in value, Gold, GLD, has been pummeled, and Distressed Investments, FAGIX, and Junk Bonds, JNK, have come to be established as the most valued of all investments.
Soon physical possession of gold bullion will emerge as the only "safe asset", as the fiat of the Banker Regime fails, as investors derisk out of currency carry trade investments and debt trade investments.
Not only is the death of currencies underway, but the failure of trust is underway as well. While there was only a slight follow through from the sale of the Major World Currencies, DBV, and the Emerging Market Currencies, CEW, seen in only a slight trade lower in Equity Investment, VT, there was a sell in Regional Banks, KRE, beginning in April, led by the weakest of banks such as MBFI, BBNK, UMBF, ABCB, SASR, ABCB, FRME. One reason for the trade lower in Regional Banks, KRE, and its follow through into the US Small Cap Stocks, IWM, is that bankers do not like to see a flattening yield curve, and the other reason is that investor's greed has turned to fear, specifically fear that regional banks can no longer serve as a transmission vehicle for the US Fed's monetary policies.
2) ... On Wednesday May 28, 2014, US 30 Year Government Bonds, EDV, US Ten Year Notes, TLT, and Mortgage Backed Bonds, MBB, traded higher, as the Benchmark Interest Rate, ^TNX, closed at 2.44% in a process of coming to establish peak credit wealth, AGG. Credit Investments are near to topping out.
If one is invested in a bond fund, then one is jubilant, as these have soared terrifically higher since the first of 2014. For example, the PIMCO Long-Term US Government C, PFGCX, has returned 8.9% this year, and at the same time yields 1.8%.
Mankind's peak economic experience has been attained, it came via the chieftain geniuses at the US Fed, the ECB, and the Bank of Japan, via their provision and enforcement of Global ZIRP.
Now, not only is the death of currencies underway, as is seen in the Major World Currencies, DBV, such as the Euro, FXE, and the Emerging Market Currencies, CEW, trading lower in value; the failure of credit, that is failure of trust in the Banker Regime is underway, and is seen in the Floating Rate Note, FLOT, paying 0.41%, starting to trade lower in value on May 28, 2014.
Of note, European Credit, EU, has traded lower in value, as Deutsche Bank posts in PDF document concerns over European social turmoil: the eurosceptic parties increased their share substantially, but winning parliamentary representation is not equivalent to gaining actual political influence.
3) ... On Thursday, May 29, 2014, risk on investing continued as Nation Investment and Small Cap Nation Investment, traded by ETF, EFA, traded to a new all time high (up 3.4 YTD) as Egypt, EGPT, Vietnam, VNM, and the Philippines, EPHE, traded lower from their rally highs, thus evidencing as market top is being achieved; other evidence of a stock market top is seen in the ratio of Stocks, VT, relative to Aggregate Credit, AGG, VT:AGG, topping out in value.
World Stocks, VT, and the S&P 500, SPY, (Up 4.1% and 4.6% YTD respectively) traded to new all time highs.
The three leading investment sectors have been Transportation, XTN, up 13.5% YTD, Semiconductors, SOXX, up 12.5% YTD, and Energy Service, OIH, up 10.3% YTD.
Dividends Excluding Financials, DTN, traded to a new all time high; up 6.5% YTD
Global Financials Institutions, IXG, traded to a new all time high; up 2.2% YTD
In Yield Bearing Investments, Global Real Estate, DRW, Global Utilities, DBU, Preferred Financials, PGF, Shipping, SEA, Global Infrastructure, IGF, traded to a new all time high, and European Small Cap Dividend, DFE, Australia Dividend, AUSE, traded strongly higher in recovery from a sell-off.
Closed End Funds, GCE, traded to a new rally high; up 8.3% YTD
Aggregate Credit, AGG, traded unchanged at its rally highs as Emerging Market Bonds, EMB, and Junk Bonds, JNK, rose strongly higher, pressing on to new rally highs.
The Defensive Stocks, DEF, all of which are Dividend Payers, such as Insurance Companies, KIE, Health Care Providers, IHF, Global Integrated Energy Companies, IPW, FILL, Real Estate, IYR, DRW, Global Agriculture, PAGG, Electric Utilities, XLU, PUI, Consumer Staples, KXI, and Global Utilities, DBU, are topping out, and some turning lower, reflecting that the rally in stocks is coming to an end.
The bull market is acting like a bull market and in the process, peak fiat money and peak fiat wealth was achieved on Thursday, May 29, 2014, this being conveyed in the chart of Call Write Bonds, that is convertible securities, CWB, establishing a double top high. Other evidence of peak economic experience comes from Ludwig von Mises which posts The New Skyscraper Curse. And the high PEs of ETFs evidence a market top; these include the debt trades of Industrial Office REITS, FNIO, with a PE of 45, and Residential REITS, REZ, with a PE of 38.
The Nasdaq, QTEC, QQQ, rally is over as is seen in the strong rise in Netflix, NFLX, and in Biotechnology leaders GILD, CELG, BIIB, coming to a screeching halt.
4) ... On Friday May 30, 2014, Automobile Dealership Carmax, KMX, traded lower, distinguishing itself as a loss leader amongst its peers and among Small Cap Pure Value Stocks, RZV, as is seen in the ongoing Yahoo Finance Chart of PAG, SAH, ABG, KAR, AN, LAD, and KMX. The auto dealers as a group have been the very definition of risk-on investing as well as the definition of the investor, and not employment, and not economic renaissance, as the centerpiece of economic recovery.
Clearly the investor was brought to the forefront of economic action by the US Fed's monetary policies and schemes of credit stimulus. The economy existed for the investor, and for the purpose of developing a moral hazard based prosperity. Spectacular investment results came to those who understood that Ben Bernanke's Cool Aid would be the Juice of All Economic Juice and the Elixir of Stock Jockeys. The Banker Regime has produced peak money and peak wealth.
The Commodity ETFs, DBC, and GSG, pivoted lower on Friday May 30, on the trade lower in the Major World Currencies, DBV, and Emerging Market Currencies, CEW, that occurred during May 2014. This loss of investment value is the birth pains of the new normal of destructionism replacing inflationism; and heralds that the paradigm of authoritarianism will replace that of liberalism. Thus commodity price deflation came as the result of currencies trading lower during the month of May 2014.
The South African Rand, ZAR, dropped strongly lower stimulating a trade lower in South Africa, EZA. The Brazilian Real BZF, traded lower stimulating Brazil's Integrated Energy Company, PBR, Brazil Financials, BRAF, and Brazil to trade lower. The India Rupe, ICN, traded lower, stimulating India Earnings, EPI, and India, INP, to trade lower. South Korean, Steel Producer, PKX, Electronic Manufacturer, LPL, Bank, SHG, KB, and Telecom Provider, KT, traded lower not on South Korea Won devaluation, but rather on Commodity, DBC, and GSG, deflation, which in turn stimulated South Korea, EWY, to trade lower.
Emerging Markets, EEM, traded lower as Indonesia, IDX, IDXJ, Philippines, EPHE, Egypt, EGPT, Russia, RSX, ERUS, Emerging Europe, ESR, Emerging Africa, GAF, Chile, ECH, Mexico, EWW, Turkey, TUR, traded lower.
The loss of Brazil's, India's, and South Korea's seigniorage is an investment coup d etat, coming from the ever increasing power of global investment destructionism, which is replacing inflationism.
Debt deflation, specifically currency deflation, coming at the hands of the currency traders, on fears that the world's central banks' monetary policies have crossed the rubicon of sound monetary policy and have made "money good" investments bad, has pivoted Commodities, DBC, GSG, lower in price, with the result that investors sold investments in Basic Industries; these include Steel Producers, SLX, such as OSN, GSI, X, AKS, NUE, GGB, SID, MTL, PKX, Global Industrial Miners, PICK, such as VALE, RIO, BHP, Coal Miners, KOL, Uranium Miners, URA, and Rare Earth Miners, REMX.
Ongoing currency carry trade disinvestment is going to be highly destructive economically. The result of debasement of the world's currencies will be economic economic destabilization and the much feared economic deflation.
Given currency deflation in the Euro, FXE, the British Pound Sterling, FXB, the Swedish Krona, FXS, and the Swiss Franc, FXF, as well as the India Rupe, ICN, and the Brazil Real, BZF, economic growth is impossible.
Economic growth was a largely a side benefit, that came from investment gains, flowing from the credit stimulus of Global ZIRP. Economic growth was a function of the investor pursuing investment gain in the bygone era of currencies, and the age of credit. One follow the ongoing collapse of currencies with this Finviz Screener of leading currencies.
The bond vigilantes, not the Fed, has been in control of interest rates beginning in May of 2013, and will continue to be hiking interest rates, and that at a rather quick pace.
This inquiring mind asks, just exactly who are the bond vigilantes? It is the Primary Dealers!!! And of note, it is these who hold tremendous amounts of Interest Rate Swaps, literally given to them by the US Fed, as part of an incentive to sell US Debt under POMO. So not only did the Primary Dealers get an a cut on issuing of bonds, they got deferred payment in terms of bets against bonds!
Financial Post reports Mohamed El-Erian in Bloomberg News reports "Judging from data provided by the Commodity Futures Trading Commission, the movements in both rates and flows are catching many professional traders by surprise. Despite some recent repositioning, the net short position of non-commercial investors in 10-year Treasuries is the biggest in two years, meaning speculators have made bets designed to profit from an increase in yields and related outflows. Dealers are similarly positioned: Their net short in the largest in almost a year".
The failure of trust in the Banker Regime, seen in Commodities, DBC, and GSG, trading lower on May 30, 2014, has begun to terminate the age of credit and the era of currencies, and is starting to birth the age of debt servitude and the era of diktat.
Economics is defined as one's life experience in sovereign money and sovereign authority. With the ongoing trade lower in Major World Currencies, DBV, and a sustained trade lower in Emerging Market Currencies, CEW, a new sovereignty, that is the sovereignty of regional economic governance will emerge; and it will provide new sovereign money, that being diktat money to replace fiat money.
Please consider that out of global economic chaos, national leaders will meet in summits to renounce national sovereignty and to announce regional pooled sovereignty, and to appoint regional fascist leaders who will head up the Beast Regime to establish regional security, stability and sustainability, and enforce debt servitude, first in the EU, and then in each of the world's ten regions, and throughout all of mankind's seven institutions.
This monster is completely different than the Creature from Jekyll Island as it arises first out of Club Med, waves of sovereign insolvency, banking insolvency and corporate insolvency. We see news of its rise in the Reuters report ECB Goes On 300 Million Euro Spending Spree For Bank Watchdog. ECB will spend 300 million euros this year and next in building an elite group to monitor top banks, with the lion's share spent on generous pay for many of its staff.
Now with destructionism replacing inflationism, the debt serf will become the centerpiece of economic action; and all economic resources will be centered upon him.
The WSJ reports Moody's Warns on EU New Banking Rules. Rating Agency Says Directive Could Leave Stakeholders Vulnerable to Banking Crises. Moody's Investors Service Inc. has become the latest of the three big debt rating firms to warn that new European Union rules could make stakeholders more vulnerable to losses in any future banking crisis. In response to the EU's so-called Bank Recovery and Resolution Directive, under which shareholders, bondholders and some depositors may have to stomach big losses or commit to so-called bail ins to help rescue ailing banks, Moody's has cut its long-term rating outlook on 82 European Banks, EUFN, to negative.
5) ... News reports document that there was a strong populist vote for new leadership in the Eurozone; and a call for a break from past policies; the European Debt Crisis seems to have fallen from the public's mind. The Telegraph posts The Race Is Wide Open For The European Commission's Top Job. The lesson is simple: offer voters a binary choice between "more Europe" and "no Europe", and eventually they will choose the latter. The answer must be sweeping reform.
Reuters posts Populist Advances Set To Hobble EU Integration. Tuning gains by anti-EU and populist parties in the European Parliament elections will prevent any new treaty on deeper Eurozone integration for the foreseeable future and may tilt Europe's economic policy mix more towards expansion.
Bruegel posts New European Leadership Needs To Focus On Growth The EU and in particular the euro area suffer from two key problems.Growth and job creation is unsatisfactory and one can therefore not say that the crisis is over.The governance of the European Union is still far too complicated and ineffective to address crises and respond to citizens' needs.A key message and mandate EU leaders should give to the post-election EU would therefore be to focus on what can actually be accomplished. The new European leadership consisting of the President of the European Commission, the President of the European Council and the President of the European Parliament should be able to act forcefully on growth. This will require the three individuals and their institutions to work together effectively. They will have to constantly remind the national leaders about the importance of enacting national reforms that not only create jobs but are also consistent with the prerogatives of monetary union. Putting public finances on a sound footing is one of the many challenges. But without a European growth initiative it will be hard to deliver on domestic fiscal targets. Therefore, the new EU leadership should develop a convincing European growth strategy.
There is waiting in the wings of Europe stage, the most capable of sovereigns, perhaps this one is Jean Claude Juncker. Out of the European Debt Crisis, the Sovereign will step into the limelight, and through cunning and shrewdness rise in power to rule, and be accompanied in power by the Seignior, that is top dog banker, who in coining money, takes a cut. Their combined word, will and way, will provide economic direction unifying all of the Eurozone.
6) ... Signs of headline inflation are emerging. Headline Inflation is a result of a steepening yield curve, as well as currency deflation, and can be present even in economic deflation. The chart of the Steepner ETF, STPP, reflects a slight steepening in the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX; it is out of this dynamic that headline inflation will eventually occur. And headline inflation will increase as formerly sovereign currencies buy ever increasing Dollar denominated commodities.
The chart of the ratio of Long Term Tips, LTPZ, relative to the US Ten Year Notes, TLT, that is LTPZ:TLT, communicates that bond market investors expect price inflation to occur; and the Proshares UltraPro 10 Year TIPS/TSY Spread, UINF, is trading higher confirming the expectation of inflation on the failure of credit. Headline Inflation is seen in the Reuters report Consumer Prices Post Biggest Gain In 10 months.
7) ... The short selling opportunity of a lifetime has arrived
As currency traders further force derisking out of debt trades and deleveraging out of currency carry trades by selling the Major World Currencies, DBV, and the Emerging Market Currencies, CEW, and as the bond vigilantes further force derisking out of credit investments, by calling the Benchmark Interest Rate, ^TNX, higher from 2.44%, both fiat money and fiat wealth will tumble, and being democratic nation state, being unable to underwrite safe assets will crumble.
The 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened at the end of the week of May 30, 2014, seen in the Steepner ETF, STPP, steepening, and given that Equity Investments are terrifically overbought, and given that US Government Debt, EDV, TLT, is approaching overbought.
Just as one buys into dips in a bull market one sells into pips in a bear market; for those inclined to trade, now is the time to start short selling, or better yet dollar cost averaging into the possession of gold bullion and storing it in a safe place, like a gun safe, and declaring its value on one's home insurance policy.
Those who are into short selling may want to consider using a portfolio of Inverse Market ETFs as basis for collateral; these might include STPP, XVZ, EUO, YCS, CMD, DNO, MLPS, SAGG, DTYS, JGBS, GLD, GYEN, GEUR, GGBP, as well as, HDGI, YXI, EUM, DOG, SEF, EFZ, DDG, PSQ, REK, which must be managed closely as they are volatile, and are not held to term but are traded on waves of buying and selling.
Efficient management of such a portfolio should produce a daily gain of 0.2%, and a weekly gain of 0.1%, before trading fees in and out of these ETFs.
Global Financial Institutions such as Japan's IX, NMR, Brazil's BSBR, ITUS, Mexico's BSMX, India's IBN, HDB, the UK's RBS, LYG, Canada's BNS, TD, CM, BMO, Chile's BCH, BCA Spain's STD, and Argentina's BFR, will be trading strongly lower, leading Nation Investment, EFA, lower, as debt deflation picks up at the hands of the currency traders and the call of the bond vigilantes, and thus are excellent short selling opportunities.