Financial market report for the week ending February 9, 2012
1) … Volatility increases as fears of Greek default arise and Eurozone Ministers set new conditions for aid.
The increase seen in these volatility ETFs, TVIX, VIXY,VXX, VIXM, illustrates the rising fears of Greek default communicated in numerous reports such as the AP report German FinMin says German FinMin Says Greek Deal On Spending Cuts Appears To Not Yet Fulfill Bailout Conditions. German Finance Minister Wolfgang Schäuble said "we still don't have the conditions that were clearly required." Eurozone finance ministers will reconvene on 15 February, with the aim of completing the deal if Greece has met all of the eurozone's demands
BBC goes on to report Eurozone ministers set new conditions.
2) … Fate is working through creative destruction to produce a Federal Europe.
Bloomberg reports ECB Taking Losses on Greek Debt May Sink Italy. The International Monetary Fund's pressure on the European Central Bank to take part in Greek debt writedowns may backfire by deterring the central bank from extending its program of buying bonds from distressed nations. Greek creditors meet in Paris today to discuss a debt-swap designed to halve the nation's privately held obligations by eliminating 100 billion euros ($132 billion) of debt. While bonds bought by the ECB in its Securities Market Program are exempt from the deal, Greece needs to trim its burdens further to qualify for further aid and make a payment of 14.5 billion euros on March 20. "They will have to think of something, but it would be wrong to force the ECB to take losses," said Stuart Thomson, who helps oversee $121 billion at Ignis Asset Management in Glasgow. "The ECB taking a haircut would imply a fiscal transfer, which isn't its mandate. And the SMP would collapse if they do that. We can do without another rout in the market." (Hat Tip to Gary of Between The Hedges)
When the ECB takes a loss on Greek debt, or when it passes the Greek debt to a debt fund such as the EFSF or ESM, then political gears will turn for a one Euro Government.
Another factor for regional integration of Europe is that the nations and banks are insolvent as reflected in the Bloomberg report S&P Downgrades 34 Italian Banks After Reducing Nation's Rating. Sovereign insolvency and banking insolvency will lead to regional integration as called for by the Club of Rome in 1974. That Clarion Call comes with an authoritarian imperative that cannot be resisted.
Ever since the July Merkel-Sarkozy Comminique for a "true European economic government", Angela Merkel has been consistent in pressing for a unified Eurozone. Reuters reports Merkel Says Won't Force Greece Out of Euro. German Chancellor Angela Merkel said on Tuesday she did not want to see Greece being forced out of the euro, warning that this would have "unforeseeable consequences."
3) … The great deleveraging commenced today; it is accompanied by wildcat governance where leaders bite, rip, and tear one another; capitalism is dying and is being replaced by regional global governance.
Neoliberalism featured the spirit of the cat in the hat, and wildcat finance, where bankers waived wands of ponzi finance, which produced inflationism. Gold Money writes of neo liberal finance, Bank Of England Undisputed Champ Of QE.
Capitalism is dying by an excess of credit and failure of fiat money. The recent rally was a debt contagion safe haven rally into currencies, stocks and bonds fueled by the ECB's LTRO credit liquidity facility. World Stocks, ACWI, ACWX, VT, VSS, DVY, PAGG, EEB, EEM, EPP, VGK, PFF, traded lower on fears of a Greek default on its sovereign debt, being led so by financials, NBG, EUFN, IXG, XLF, KRE, RWW, EMFN, CHIX, and recent rally leaders, TAN, XBI, PSCT, PSCI, RZV, ITB, XSD, FAA, EWX, EMIF, PKB, EMMT, MXI, ALUM, COPX, URA, KOL, REMX, SLX, CHXX, and countries GREK, EWI, EWO, EPOL, CEE, TUR. The end of the safe haven rally is communicated in the chart of RZV:RZG trading lower having manifested a hanging man lollipop candlestick. Shipping, SEA, having been fueled by the ECB's neo liberal finance, finally turned lower.
Apple, AAPL, shows completion as the weekly chart shows a parabolic rise with three white soldiers, and the daily as well.
Gold, GLD, is both a commodity and a currency; it traded lower with the rest of the currencies, resulting in the US dollar, $USD, UUP, trading higher.
Gold Miners, GDX, GDXJ, and Silver Miners, SLV, traded sharply lower on lower precious metal, JJP, prices. The HUI Precious Metal Stocks, GDX, always market market turns lower with US Treasuries, EDV. The latter recently turned lower, and now the former are turning lower. The failure of the seigniorage of US Central Bank debt, is now deleveraging gold stocks, as is seen in the chart of GDX:EDV turning lower. HUI Precious Metal Stock leader, GOLD, traded parabolically lower, after having made a double top. Wealth cannot be preserved by investing in gold stocks; wealth can only be restored by owning and taking possession of gold bullion.
Commodities, DBC, and USCI, traded lower. Copper, COPX, traded 3.1% lower as Bloomberg reports Copper Drops Most in Two Months on Greek Outlook, China Imports. Inventories monitored by the Shanghai Futures Exchange advanced for a ninth straight week to an all-time high. Imports of unwrought copper and products by China were 413,964 metric tons in January, falling from a record 508,942 tons in December, the General Administration of Customs said today. Copper, JJC, -2.8% lower, JJN, -5.1%, LD, -3.6%, DBB, -2.6%, JJT, -2.0%. Wood and Paper Manufacturers, WOOD, traded lower on lower Timber, CUT, prices.
Global debt deflation likely commenced today with competitive currency devaluation recommencing after from the July, 2011, global currency sell off, when fears that a debt union had formed in the EU.
The world currencies were led lower by the South African Rand, SZR. All of the currency ETFs, FXY, FXE, FXM, FXC, ICN, FXB, FXS, FXF, BZF, FXA, FXRU, SZR, traded lower.
The US Dollar, $USD, traded by UUP, rose to 79.1. Its recent high of 81.5 may be the yearly high as all currencies fall into the pit of financial abandon together. The daily chart of the USD/JPY shows a rise to 77.7 after a recent low of 76.2 The monthly chart of its inverse, JYN, shows a bearish engulfing candlestick, portending a fall lower.
Neoauthoritarianism features the spirit of wilding and wildcat governance, where EU regional leaders demand monetary discipline and efficiency; and call for both fiscal austerity and structural reforms, as Greece has lost its debt sovereignty. Destructionism commenced as fears of debt contagion unwind carry trade and ponzi financed investments.
In Europe, public private partnerships led by monetary cardinals will provide credit, and oversee natural resources and production, under the monetary pope, Mario Draghi. Also, budget commissioners will oversee government budgets implementing strategic reforms and austerity measures.
These new sovereign authorities will work together to mature regional global governance; their work will be describe as regionalization. In the new economy, diktat will replace both fiat money and credit. Choice is an epitaph on the tombstone of a bygone era. Freedom, free enterprise, and a free monetary system, are Libertarian principles seen in the Ron Paul agenda; yet they are mirages on the Neoauthoritarian Desert of the Real. The sovereign, junk, personal, and corporate credit boom that produced the debt economy, is history; the debt servitude experience will commence soon.
The old economy of capitalism was based upon the Milton Friedman Free To Choose script of floating currencies for growth, and profit. Fears of debt contagion, are now rising as a Greek default is seen, derisking out of stocks and deleveraging out of commodities has commenced.
Fate is working through creative destruction, to produce leaders' framework agreements which will provide diktat for regional security and stability. These will establish the new economy of regional global governance. A ten toed kingdom of regional global governance will emerge. Germany will take the preeminence in forging a type of revived Roman empire, where a seemingly Little Authority, will become a New Charlemagne. This Sovereign, and his banking partner, the Seignior, will provide order out of chaos. And the people will place trust in their word, will and way, giving them their allegiance as they rule the Eurozone.
Commodity trading and processing firms, such as Archer Daniel Midland will experience significant transformation as they become partners in regionalization. In as much as major world currencies, DBV, and emerging market currencies, CEW, traded lower in July, 2011, yet recovered with the ECB's LTRO credit liquidity operation. Nevertheless inflationism has turned to destructionism and growth has turned to contraction. Reuters reports Volatile Commodity Market Hurts Profit At Archer Daniel Midland. ADM has experienced sharply lower quarterly earnings and cut its capital spending plans. Commodity trading firms like ADM are experiencing increased risks and costs. We are prioritizing capital projects, said CEO Patricia A Woertz. ADM said in January that it will cut about 1,000 workers. The chart of ADM shows a parabolic three white soldiers rise into a grand finale finish.
4) … Pimco goes long bonds as world enters peak credit.
The Flattner ETF, FLAT, traded parabolically lower and the Steepner ETF, STPP, traded parabolically higher, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened as bond vigilantes have called the Interest Rate on the US 10 Year Note, ^TNX, and the Interest Rate on the 30 Year US Government Bond, ^TYX, higher.
Leveraged Buyouts, PSP, and Junk Bonds, JNK, traded lower on risk aversion. International Corporate Bonds, PICB, World Government Bonds, BWX, traded lower on lower World Currencies, DBV, and Emerging Market Bonds, EMB, traded lower on lower Emerging Market Currencies, CEW. Fears of global sovereign insolvency are seen in the Bloomberg reports Sovereign Bond Risk Soars as Greece Plan Rebuffed, Aid Withheld.
The weekly chart of Municipal Bonds, MUB, and Mortgage Backed Bonds, MBB, both suggest an Elliott Wave 5 completion.
The combined ongoing chart of MBB, AGG, BND, LAG, shows peak credit is being achieved.
Tyler Durden writes of Bill Gross's wrong way bet Pimco Borrows A Record $88 Billion To Bet On Fed's Upcoming MBS Monetization
5) … Hard, non-dilutable, real, money will increase in value as fiat money decreases in value.
Tyler Durden writes Fiat Money Everywhere. As the world's central banks embark on the latest and hopefully final attempt to reliquify everything. All we can add to Taylor's analysis, especially in light of today's incremental easing in ECB collateral requirements, is that the biggest beneficiary by far of what in a few months will be another multi-trillion balance sheet expansion, is and continues to be hard, non-dilutable, i.e., real, money.
John Taylor of FX Concepts writes Although we can't be positive about the real economy, this expanding liquidity will keep us happy until a political accident intervenes. Europe offers some candidates: Greece in March.
6) … Oil and soil towns are experiencing vibrant economic activity.
These six basic materials and agricultural towns have been showing strong economic activity since the 2008 financial collapse:
Williston, ND 58801; energy production.
Andrews, TX 79714; radioactive waste disposal; energy production.
Elk City, OK 73644; agriculture; energy production.
Hobbs, NM 84032, incarceration; energy production.
Gillette, WY 82716; energy production.
Ferndale, WA 98248; oil refining, aluminum production, agriculture.
7) … The republican nominee for president will likely be voted into office on economic disapointment with President Obama.
Reuters reports Consumer Mood Worsens On Income Worries
8) … Conclusion
A European Super state will emerge out of financial armageddon, that is a credit bust and financial collapse.
Open Europe reports the EU/IMF/ECB troika is constantly setting new conditions for Greece's rescue, which are almost impossible to satisfy, a Greek government source told FT Deutschland. Under the latest draft agreement, Greece will cut minimum wages in the private sector by 22%, abolish permanent jobs in state enterprises and cut 150,000 jobs in the public sector by 2015 (15,000 of which will come this year), according to the WSJ. The draft also sees the Greek economy contracting by 4% - 5% this year, but still returning to growth in 2013. Reports suggest the ECB will not decide whether it will take part in the voluntary restructuring until the final plan is agreed, while S&P said yesterday that "the reduction [without the ECB]…is probably not sufficient debt relief to make debt sustainable."
Greece is imploding economically and politically. Austerity measures and structural reforms are required that go beyond the level of what is socially acceptable. There is nothing that can be done in the short term that can restore Greece to solvency.
The recent US industrial, PSCI, technology, PSCT, infrastructure, PKB, small cap pure value, RZV, biotechnology, XBI, housing, ITB, semiconductor, XSD, airline, FAA, as well as emerging market infrastructure, EMIF, banking, EMFN, mining, EMMT, rally, are manifesting the final stage of capitalism.
The Euro, FXE, provided the investment capital for the debt trade of the last 13 years since the Drachma has been replaced in 1998. The debt trade underwrote European Socialism and Greek Socialism. But now, excessive credit of all types is introducing the death of fiat money and fiat wealth.
Investment capital is being replace by political capital, where the dynamos of regional security and stability operate to replace the dynamos of growth and profit. Fate is working to pass the baton of sovereignty from nation states to the EU ECB and IMF Troika. Diktat will rise as currency to replace fiat money as currency.
The 1974 call by the Club of Rome is Clarion, that is ringing, clear and distinctive for regional global governance to replace capitalism. Fate is working through creative destruction to obliterate all current forms of economic and political life. Statism will rise to rule the world's ten regions. Eventually this ten toed kingdom of iron diktat and clay democracy will crumble, and a fierce one world government, will rise to power, and will establish a one world currency to rule mankind.
In the age of deleveraging, ownership and physical possession of gold will be the only means of preserving wealth.