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The Potential Unwinding Of Yen Carry Trades And A Flattening Yield Curve, Threatens The Jobs Report Rally


I ... Currency traders rallied the major currencies, DBV, a stunning 6.0%, for the week ending September 3, 2010; taking them back to the middle of a broadening top pattern going back to October 2009. And they rallied the developing currencies, CEW, 1.1%, taking them back to the middle of a broadening pattern going back to November 2009. Thus  the currency traders reset both currencies and stocks for falling.

The currency traders action gave birth to a rally in those stocks that had been sold off heavily since April 26, 2010: the bloating currencies "rallied the dogs", that is the most risky and shack of stocks and ETFs.

The ratio of major currencies, relative to developing market currencies. DBV:CEW, rose a breathtaking 6.1% today. In just one day, the ratio of major currencies relative to developing currencies, was brought back to its pre European Sovereign Debt Crisis level. The chart shows today's action "burst the ratio up" from a head and shoulders pattern and "took the ratio up and out" of a consolidation triangle.


The South African Rand, SCR, rose 1.6%; the New Zealand Dollar, BNZ, 1.5%; the Canadian Dollar, FXC; the Mexico Peso, FXM, 0.9%; it is rolling over, the Swedish Krona, FXS, 1.8%, it rose to the middle of a broadening top pattern going back to mid July 2009, all I can say is lookout below both for the Krona and the Sweden shares, EWD;  the Australian Dollar, FXA, 2.0%, to make for a triple high in this currency; the Brazilian Real, BZF, 1.3% manifesting three white soldiers to a new all time high; the Euro, FXE, 1.3%; the Ruble, XRU, traded unchanged on a ledge of support just above 32, there is nothing but thin air below; the British Pound Sterling, FXB, has dribbled lower to trade above a ledge of support at 153; the Indian Rupe, ICN, 1.3%; Swiss Franc, FXF, 1.2%. The Japanese Yen, FXY,  rose 1.1% to close at 117.28, it has risen from 105 since March of this year, its rise is the anti-thesis of investing long; its rise as shown in the monthly chart, has caused a terrific unwinding of yen carry trade investing in stocks, VT, and commodities, DBC. And  now a flattening yield curve, seen in the ETF, FLAT, will act to destroy bonds, whether they sovereign debt, corporate debt, or municipal debt.  Yes, debt deflation, commenced April 26, 2010 in stocks, and September 1, 2010 in bonds. In just three days, Zeroes, ZROS, fell 8.0%, US Government Bonds TLT, fell 4.5%, and the US Treasury Note, IEF, fell 2% as seen in Yahoo Finance chart .... ZROZ, TLT, IEF

The action of the currency traders in calling the major currencies higher has reloaded and restrengthened the ability of yen carry trade investing to unleash a severe bout of yen carry trade disinvestment. And the sharp sell off in US Government bonds portends the systemic risk of sovereign debt default by the United States coming from a failed Treasury auction, which would send bonds of all types lower, stop the funding of social program, as well as eliminate the funding of the mortgage GSEs, and create a liquidity evaporation where the Government would have to step in and be the sole provider of money, banking, credit and lending.      

World stocks, ACWI, rose 3.7% for the week; taking them up, but below support of early November 2009. Emerging market stocks, EEM, rose 3.8% for the week; taking them back to them back to the middle of a broadening top pattern going back to January 2010. The emerging market stocks relative to the world stocks, EEM:ACWI, shows the emerging markets to have better relative value to than the world stocks.

Yet the overall worth of stocks, as seen in this relationship has fallen following the peaking out of the 30-10 Yield Curve, $TYX:$TNX, on August 11, 2010 which came as a result of the Federal Reserve Chairmans announcement of August 10, 2010 of the purchase of mortgage-backed securities.

Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt. This caused the bond rally in US Treasuries,  that began April 6, 2010, to fail September 1, 2010, sending bond prices lower and interest rates higher.

The safe haven rally in debt that began with the onset of the European Sovereign Debt Crisis is over.  Investors see Mr Bernanke’s plans as monetization of debt; and have gone short US Treasuries, especially the longer out ones such as the Zeroes, ZROZ; the chart of the Zeroes, shows three black crows, resulting in waterfall loss of value.     

II ... Debt deflation came to stocks, ACWI, April 26, 2010, when the currency traders sold the Euro, FXE, against the Yen, FXY, causing the US Dollar, $USD, to rally from $80 to $89 to June 7, 2010 when the EFSF Monetary Authority was announced. The US Dollar fell to $80.50 on August 10, 2010, where it began to rally as stocks turned lower. The rally in the US Dollar ended September 1, 2010, as US Government Bonds, ZROZ, TLT, IEF, failed, turning the US Dollar lower from 83 to 82.  

Stock deflation has been underway since April 26, 2010. Debt deflation has come to Bonds, BND, September 1, 2010.  

Debt deflation is the contraction and crisis that follows credit expansion.  One of the most famous quotations of Austrian economist Ludwig von Mises is from page 572 of Human Action: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”

Global Debt Deflation commenced on April 26, 2010, when the value shares failed to outperform the growth shares.

It was on April 26, 2010, the currency traders went long the yen and short the global currencies as is seen in this MSN Finance chart of FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, XRU, FXY causing the US Dollar to rise; as can be seen in this chart from April 26, 2010 to June 7, 2010

For the period of April 26, 2010 through September 3, 2010, the greatest volatility has been in housing, ITB, banking, KBE, the small consumer discretionaries, XLYS, semiconductors, XSD, and consumer discretionary Las Vegas Sands, LVS.  Agribusiness, MOO, recovered from its April 26, 2010 fall, due to a rise in the price of Potash, POT.  The Junior Gold Mining shares, GDXJ, Tin, JJT, and PowerShares Preferred, PGX, have actually risen in value since April 26.

The MSN Finance chart of BND,TLT, ZROZ, MUB, JNK, LQD, EMB, CMF, from the period of August 31, 2010 to September 3, 2010 reveals that the greatest debt deflation has come to the Zeroes, ZROZ. The Zeroes are "the first fallers in debt" as they are at the greatest maturity; and because the others are not perceived as yet as being risky and because the Junk bonds, JNK, actually rose on carry trade investing, resetting them for their massive fall which will come soon.     

III ... Debt deflation came to bonds, BND, with the purchase of the yen based carry trades, on September 1, 2010, which rallied stocks, ACWI; and turned the tide on bonds, BND, sending them lower, establishing August 31, 2010 as a high in bonds at 82.66, that is, "establishing August 31, 2010 as peak credit" ... bond deflation has been underway since September 1, 2010. 

The interest rate on the 30 Year US Government bond, $TYX, rose strongly September 1, 2010. 

And the interest rate on the US 10 Year Note, $TNX, also rose strongly September 1, 2010.

September 1, 2010 marks the transition from “the age of neoliberal Milton Friedman based credit liquidity” to “the age of the end of credit”; this also means ”the end of entitlements” and “the beginning of world-wide austerity”. Part of the end of entitlement will be that of “living payment free” in a bank’s shadow inventory of real estate property, as banks, being desperate for income will transition from being holders of real estate to lessors of property.

Yes with the coming stock market driven write down of bank equity, and bond market driven write down of US Treasuries kept at the Federal Reserve in Excess Liquidity, the banks will no longer amend pretend and extend lending as described by IrvineRenter and others. The bank’s FASB 157 entitlement to value real estate at mark-to-fantasy, rather than mark-to-market, "will have no meaning in a debt depreciated future"; in other words the FASB 157 entitlement, will be liked an expired option ... it will go worthless very soon.       

The 30-10 yield curve,$TYX:$TNX, began to flatten on August 11, 2010, reversing a trend that goes back to early 2000.

This signals risk aversion to sovereign debt. The flattening of the yield curve came as a result of the Federal Reserve Chairmans announcement of August 10, 2010 of the purchase of mortgage-backed securities. Then on August 27, 2010, the Federal Reserve Chairman stated the possibility of an even larger purchase of debt.

This caused the bond rally in US Treasuries, TLT , and Zeroes, ZROZ, that began April 6, 2010, to fail September 1, 2010, sending bond prices lower and interest rates higher.

The safe haven rally in debt that began with the onset of the European Sovereign Debt Crisis is over, repeat over and done, through and finished. Investors see Mr Bernanke’s plans as monetization of debt; and have gone short US Treasuries, especially the longer out ones such as ZROZ.

Investors should consider buying TMV or TBT on price dips. Personally I have no ETFs, stocks or bonds. I am invested in gold bullion, as I believe a sovereign debt, read TLT, crisis, is coming soon, as well as a global financial collapse, where there will be no liquidity to buy or sell paper assets; I want something liquid like gold of silver as an investment.  

Systemic risk is quite high. Liquidity evaporation could happen quite easily, either coming through a failed Treasury auction or a situation where there may not be enough buyers of investment securities to meet sellers demand.  

I  believe that soon, out of a liquidity evaporation and a liquidity crisis, stemming from a fast fall in bond and/or stock values, that here in the US a Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts. He will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.

I believe that here in the US, the Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing Program administered by the banks, KBE, on their delinquent and REO properties as well as those of Freddie Mac, Fannie Mae and the US Federal Reserve.

Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have created and serviced mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, and Annaly Capital Management, NLY, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value

The Emerging market bonds, EMB, turned lower August 20, 2010, as the 30-10 yield curve flattened 

Corporate debt, LQD, Municipal bonds, MUB, and California Municipal Bonds, CMF, turned lower September 1, 2010 on the world currency, DBV, rally, which blasted the dogs of stocks and ETF higher.

Junk bonds, JNK, turned lower August 10, 2010, only to recover dramatically with the yen carry trade investing of the recent major currencies rally.

On, September 1, 2010 gold mining stocks, GDX, manifested bearish engulfing and falling 1.4%, on a day when stocks, ACWI, rallied 3.0%.  The gold mining stocks generally make market turns lower with debt. This is seen in the chart of the precious metal mining shares, $HUI, relative to US Treasuries, $USB … $HUI:$USB.


The junior gold mining stocks, GDXJ,  parabolic rise to form a massive questioning harami suggests that their rally has come to an end. 


The bottoming in the 100% inverse of the Canadian gold mining shares, HIG.TO, suggests that gold mining stocks are disconnecting from the price of gold.  As the world goes into double dip recession, carry trade disinvestment will rapidly come out of these high PE stocks.


Distressed securities, traded by Fidelity Capital and Income, FAGIX, are the type of debt acquired by the Fed through its QE TARP facilities; these turned lower May 4, 2010 and on August 10, 2010 only to be resurrected by this weeks yen carry trade rally.  

The 300% inverse of the 30 Year Treasury, TMV, has finally risen from its August 31, 2010 hammered bottom.

The 200% inverse of the 30 Year US Treasury, TBT, also has finally risen from its August 31, 2010 hammered bottom.

III. There will be an ongoing "see-saw" exhaustion of fiat wealth with stocks, ACWI, and then bonds, BND, alternatively falling lower. There may be days when both fall lower. Todays chart of Bonds, BND, shows three black crows, with a fall in value to a head and shoulders patter at roughly 82.00.

The chart of world stocks, ACWI, as well as the S&P, SPY, shows that the world stock are about ready to enter an Elliott Wave 3 of 3 of 3 down. World Stocks, ACWI, rose 3.7% in the last week, while the stock ETFs present below rose generally 6% to 8%, on EUR/JPY or AUD/JPY carry trade investing, resetting them for successful short selling. 

IV ... The potential of unwinding yen carry trades and a flattening yield curve threatens the Jobs Report rally. 

I present on a listing of ETFs to sell short and ETFs to buy long for a debt deflationary bear market and describe the short selling opportunity below.

Many ETFs rose this week largely on yen carry trade investing, as seen in the chart of FXE:FXY and FXA:FXY, and these are now reset to fall lower; weekly gain are as follows:

MOO, Agriculture Business, 3.5% ..... Agribusiness may not fall rapidly given the recent strong investment in Potash, POT, which is likely to be a buy and hold investment. 

EWA, Australia, 5.9% ..... Australia has seen tremendous carry trade investing; this restored Australia, EWA, to the middle of a broadening top pattern going back to the first part of October 2009.

KBE, Banks, 5.6% ..... Banks have great fall potential. The major currency rally restored banks, KBE, to the middle of a broadening top pattern going back to August 2009. All of the Federal Reserve's QE Facilities such as TARP has only helped transfer, the control of banks from private ownership to Federal Reserve ownership where the Fed controls the banks through the 1.2 Trillion in Excess Reserves. Investment capital moved out of the United States and into US Treasuries, TLT, and into the emerging market countries, EEM. This global wealth transfer from US Banks, KBE, to the "Emergos", EEM, is easily and dramatically seen by comparing the weekly charts of the two. It's as Doug Noland wrote in AsiaTimes June 2, 2009 US Core no longer the magnet. The wealth in Treasures that is in the 20 to 30 year Treasuries, TLT, is rapidly going to be destroyed by concern over US Federal Deficit. Although there is significant wealth in Emerging Market Bonds, EMB, the wallop that will come through the unwinding of the 30-10 Yield curve, will be much more painful than that of the unwinding of the EMB or the EEM. The United States is going to be ground zero for austerity, pain and suffering. If one has the capability to move out of the United States to another country, such as Peru, EPU, or Thailand, THD, it would be a wise decision. I expect to see blue helmeted international peacekeepers in the US to maintain peace and provide security.  

HAO,  Chinese Small Caps, 5.1% ... Chart shows three white soldiers, a strong reversal pattern. 

CMG, Chipotle Mexican Grill, 6.8% ... The weekly chart of CMG shows an awesome five up Elliott Wave count ending at 163.51.    

FDN, Dow Internet, 4.9% ... Chart of this Internet ETF shows three white soldiers, a strong reversal pattern.

EXPD, Expeditors, 6.1% ... Chart of usiness services leader, EXPD, shows three white soldiers, a strong reversal pattern.

EUFN, European Financials, 5.6% .... The european banks, EUFN, have impaired lending capability; there is great fall potential here.

NUCL, Nuclear Energy,3.5% ... Chart shows it currently has rallied; just like it has in the past prior to turning lower; it will slowly bleed.

ITB, Homebuilding, 5.0% ..... Lots of fall potential as homebuilding, ITB, has move to the edge of head and shoulders pattern that goes back to late August 2009.

HHH, Internet vendors 6.0% .... The companies of internet frill, HHH, are terrifically over bought.

EIRL, Ireland, 5.0% ..... Ireland, EIRL, has significant sovereign debt issues and significant fall potential; it doesn't move very often, but when it does move, it does so significantly. EconomicPolicy Journal covers the Simon Johnson and Peter Boone report of the the calamity of the Irish banking system (and its deeper meaning for the rest of the global banking system).

GDXJ, Junior gold miners, 5.6% ..... I have documented in many articles that these are disconnecting from the price of gold; and I have documented in many articles that these generally turn lower with US treasuries. The junior gold mining stocks rose parabolically with stocks today September 3, 2010 to form a questioning harami, where as gold, GLD, fell a tiny amount lower. "The junior gold mining stocks got yen carry trade juiced up real good". Silver, SLV, rose with 0.7% with stocks and on today's yen carry trade support, which came with the positive response to the Job Report. "The junior gold mining stocks, GDXJ, are in a blow off top".

LCAPA, Liberty Media, 7.5% ... Chart of this consumer discretionary leader shows three white soldiers, a strong reversal pattern. The weekly chart of LCAPA shows its tremendous fall potential. 

LVS, Las Vegas Sands, 5.6% ..... Las Vegas Sands, LVS, has rallied strongly; it will fall quickly, rewarding those who are short.   

EWW, Mexico, 3.5% ..... Mexico, EWW, has been under attack from currency traders; and they will return to attack it once again, causing Mexico to fall rapidly in value.

NNI, Nelnet, 1.9% ... The daily chart of this credit service company shows the lollipop hanging man candlestick, a strong reversal pattern. And the NNI weekly chart shows a lollipop as well. It's the lollipop stock. It's the stock that has taken the yen carry trade cool aid.

PRN, Industrials, 4.7% .... Industrials, PRN, rallies strong at market turns; this time is no exception; they have been reset to fall once again.

PGX, Preferred, 0.5% ..... Chart shows two dark cloud cover candlesticks and two lollipop candlesticks. Preferred, PGX,  has great fall potential.

PMR,  Retail, 4.1% ..... Retail, PMR, has great fall potential; chart shows a lollipop hanging man candlestick.

PPD, Prepaid Legal Services, 7.2% ... Chart of this professional services company shows a bearish capping candlestick. The weekly chart of PPD shows a cup and handle completion pattern.

IWN, Russell 2000 Value, 4.4% ..... Russell 2000 Value, IWN, has great fall potential as it rose to the middle of a broadening top pattern going back to January 2010. These stocks move volatily up and down with changing financial and credit conditions; when the banks fall lower again, these will rapidly fall lower in value.    

TAN, Solar stocks, 7.5% ... Chart shows three white soldiers, a strong reversal signal.  

XSD, semiconductors, 2.6% .... Given that there is significantly less demand seen for personal electronics, semiconductors, XSD, will be a leading loss leader, greatly rewarding the short seller.  Its week gain of 2.6% brought it back to the middle of a broadening top pattern going back to January 2010.

XLYS, Small Cap Consumer Discretionary, 5.9% ... These small cap stocks have risen through resistance; the small cap consumer discretionary stocks have consistently been strong bears in downturns. The weekly chart of small cap consumer discretionary, XLYS, shows it to be in an awesome downdraft. 

EWP, Spain, 5.3% ..... Spain has risen to strong resistance. The weekly chart of Spain, EWP, shows that it rose to resistance to the apex of a broadening top pattern going back to July 2009. Investors played the thinly traded Spanish stocks like a Maestro plays a symphony, ballooning their value way, way, way up in front of what commonly came to be known as the European Sovereign Debt Crisis, which had its beginning in November 2009, when disinvestment commenced from Spanish stocks. The weekly chart of Spain, EWP, dramatically shows a "3 of 3 of 3 down" wave getting ready to be unleashed next week, the week starting September 7, 2010, in Spanish stocks. Edward Hugh writes in SeekingAlpha Spain's economy re-enters contraction mode in Q3.

EWD, Sweden, 4.5% ... The Swedish Krona, FXS, is moved by the currency traders, greatly rewarding those who go long in rallies and short in downturns.  The weekly chart of Sweden shows it to be in much better shape than Spain.

JJT, Tin, -2.2% ... Tin is over-bought; it fell 1% today from the top of an ascending wedge as seen in weekly Tin, JJT. The strong gains in tin have nothing to do with supply and demand; they have everything to do with contango, that is ETF buyers emphasizing trading in the futures market as hedge fund investors have promoted investment in tin.     

One can use leveraged ETFs to go long; these definitely are best traded by the experienced trader; these are seen in this Finviz screener of leveraged ETF. It is volatility that drives the 200% and 300% ETFs; without volatility, VXX, they wither and fall. 

Debt ETFs to sell short can be seen in this Finviz Screener of Debt ETFs .... The 30-10 Yield Curve, $TYX:$TNX, is flattening; this will release a wave of debt deflation in bonds, BND ... and will send the United States to the poor house ... Great austerity will be imposed by edict .... Get ready for investment shock and awe.  Yen carry trade investing and the 30-10 Yield Curve have been the two spigots of investment liquidity; these have now been turned off. The world has experienced unwinding yen carry trades since late 2007, and early 2008, and early 2010, as is seen in the chart of the monthly chart of emerging markets, EEM and the daily chart of EEM. What the world has not experienced, nor what the world has even imagined, is a flattening yield curve, FLAT. The investment and economic destruction that will come from a flattening yield curve will be centered in the America; the effect will be like a Category Five Storm making landfall across the entire US; it will be a total lights out experience in every meaning of that phrase.     

Losses for the week:

BND, -0.09%

TLT, -1.39%

MUB, -0.22%

JNK, +1.17% (it rose on strong carry trade investing)

LQD, -0.65%

EMB, +0.50 (it rose on strong carry trade investing)

CMF, -0.28%

ZROZ -3.20%; the weekly chart of the Zeroes, ZROZ, how wealth can be garnered or lost in bond market rallies and downturns. 

V ... In today's news

Associated Press reports Afghans continue pulling money from troubled bank.   Nervous Afghans pulled more deposits out of the nation's largest bank on Saturday, despite assurances from government leaders that their money was safe. Crowds gathered at Kabul Bank branches around the capital to withdraw dollar and Afghan currency savings, with customers saying they had lost faith in the bank's solvency following a change in leadership and reports that tens of millions of dollars had been lent to political elites for risky real estate investments.

"Kabul Bank has lost the trust of the people. Even the chairman resigned so all the people are concerned," said Mohammad Nawaz, head of an Afghan aid group who had been trying for three hours to withdraw the $15,000 in his account.

The bank run that began earlier in the week undermines efforts by the central government to build an efficient political and financial system to drag Afghanistan out of its dire poverty.

Problems at the bank could also have wide-ranging political repercussions since it handles the pay for Afghan public servants, soldiers and police in the unstable nation beset by a Taliban insurgency, widespread drug trafficking and the plundering of aid money.

While there was little apparent sign of panic, the deputy commander of the international coalition in Afghanistan said contingency plans were being drawn up to respond in the event of unrest. "We're prepared to deal with the unexpected," Lt. Gen. Sir Nick Parker said.

Kabul Bank's woes further underscore entrenched problems with cronyism and corruption, with millions of dollars in deposits allegedly loaned to relatives and friends of the ruling elite to buy property in financially troubled Dubai. The New York Times and The Wall Street Journal reported Wednesday that Kabul Bank's losses could exceed $300 million — more than the bank's assets. In addition, The Washington Post said Afghanistan's central bank had ordered Kabul Bank's newly resigned chairman to hand over $160 million in Dubai real estate holdings.

On Thursday, President Hamid Karzai reassured anxious bank customers, saying every penny of their deposits would be guaranteed by the government. "The Kabul Bank is safe," Karzai said in comments echoed by the country's central bank governor and independent banking association. Calls to bank executives rang unanswered Saturday and it wasn't clear how much had been withdrawn. People hoping to take money out were given numbers but many had yet to be served when branches closed at noon as is customary. University student Ahmad Fahim held number 1,724, but tellers had made it only to number 200 late in the morning. He planned to return Sunday to try again to withdraw his family business' funds and close the account. "We've never had any problems with Kabul Bank, but after the news broke, we decided to take our money out," the 23-year-old said. Fahim said his father had no plans to open a new account and would distribute the cash among the homes of relatives for safekeeping. State-owned banks imposed burdensome limits on the amount of money that could be transferred, while other private banks were even less trustworthy than Kabul Bank, he said.

Given such limited options, Kabul Bank could still be the best bet for Afghans with cash holdings, with its nationwide network of branches and automated teller machines and ability to provide financial services such as loans, bill paying and money transfers. Mohammad Habib Angar, a calligrapher, said he was taking out most of his Afghan and dollar savings, but wasn't ready to close his account. "I will wait to see what will happen next. If the bank is able to create confidence, for sure I will put my money back in Kabul Bank because I do not want to close my account," Angar said.

OpenEurope.Org reports: EU Institutions Strike A Deal O New Financial Supervisors ...  Barnier says that the Commission will continue to build EU financial supervision "brick by brick". It is widely reported that yesterday EU member states, the European Commission and MEPs reached an "agreement in principle" on the creation of three new EU financial supervisors and a Systemic Risk Board. Belgian Finance Minister Didier Reynders, who negotiated on behalf of member states, described the agreement as "maybe the most important decision" the EU has taken in response to the financial crisis. 

EU Commissioner for Internal Market Michel Barnier is quoted by European Voice saying that the deal sealed yesterday "is just a first step [...] we will dispose of a framework in which the Commission will continue brick by brick, piece by piece, to propose elements".

The European Parliament declared victory over member states in its efforts to give the EU supervisors substantial powers over national regulators.  German MEP Sven Giegold - the EP's rapporteur on the European Securities and Markets Authority - is quoted by EurActiv saying: "At the insistence of the Parliament, these authorities will now have real teeth".

Under the proposal, the EU supervisors will be given binding powers over national authorities in several key areas, including the mandate to ban "toxic" products and impose rules directly applicable to financial firms in "emergency" situations. As a rule, decisions within the supervisors will be taken by simple majority voting meaning that the UK will have the exact same voting weight as all other member states, despite being home to the bulk of the EU's financial sector.

Crucially, the European Parliament also approved the ECB President as chair the new ESRB - something which the UK was strongly opposed to, although this provision will be re-examined in five years. However, the UK Government still welcomed the deal. A spokesperson is quoted by the BBC saying it was "very good outcome for the UK, fully reflecting the priorities" of the Chancellor of the Exchequer George Osborne. Open Europe's Director Mats Persson is quoted in the Telegraph warning that the move is bound to raise fears in the City that it may impose tough new regulations from Brussels. 

The agreement now has to be endorsed by the EU's Finance Ministers at a meeting to be held next Tuesday 7 September. The European Parliament is expected to approve the proposal at meetings held between 20-23 September.

FT Telegraph Bloomberg WSJ Reuters EUbusiness El Mundo Le Figaro BBC EUobserver EurActiv European Voice Les Echos Le Point Nouvel Observateur Sueddeutsche Die Welt FT Deutschland Die Zeit FAZ  Il Sole 24 Ore Repubblica ANSA Knack FD EP website

EuroIntelligence reports: "The rise in Irish 10 year rates has prompted Peter Boone and Simon Johnson to ask whether Ireland is at the risk of imploding, and whether this might pose dangers for the global economy. The answer is essentially, yes and yes. They argue that Ireland derived its previous financial strength essentially from its role as a tax haven through which large corporation channelled their activity, on paper at least. “Ireland, simply put, appears insolvent under plausible scenarios with current policies. The idea that Ireland, Greece or Portugal can cut spending and grow out of overvalued exchange rates with still large budget deficits, while servicing all their debts and building more debt, is proving – not surprisingly – wrong. Such policies leave nations burdened with large debt overhangs that effectively tax businesses and borrowers – because interest rates must stay high to reflect risk.” The continue with some calculations to show why it is impossible for the Irish to repay their debt.

EuroIntelligence reports: "We reported yesterday that the EU may make it more difficult for countries to announce unilateral short sale bans, following Germany’s decision in May. For a different perspective on the same story, Bloomberg focuses on the fact that new EU rules make co-ordinated short sale possible, and thus more potent. Under the proposed rules, traders would be required to submit proof that they can access the underlying security to settle a trade designed to profit from falling prices, according to a European Commission document seen by Bloomberg.  Thus, the rules would bring the EU closer to the stance taken by Germany. So this would mean a victory of Germany. This is a very technical issue, which depends on the definition of “naked”, as there are many nuances with which traders can short a market. The proposed law would also give regulators emergency powers to require more disclosure or put “temporary restrictions on short selling and credit-default swap transactions,” the document said."

Christ Tupper provides the Yudislaidy Fernandez Miami Today article Israelis, Venezuelans buy condos as homes and  investments, relating that many of the international buyers scooping up condos in South Florida's top bayfront communities are buying to occupy part-time, brokers say, but many would consider a future sale at a profit.

Where these buyers decide to purchase depends in part to the condominium's location, as some are more attracted to beachfront enclaves like Miami Beach, Sunny Isles Beach and Aventura while others want to be in the center of the action and opt for condos in greater Downtown in areas such as Omni, Brickell and downtown.

At the 66-floor Marquis Residences, one of Miami's tallest buildings at 1100 Biscayne Blvd., many of the foreign buyers are from Brazil, Venezuela, Israel and Italy, said Wendy Marks Pine, sales director for Cervera Real Estate, which handles its sales.
For many of these buyers, she said, "their currency has increased in value, offering great opportunities for them to buy in the Miami market."

For example, "we are seeing a heavy influx of Venezuelan buyers who have been able to allocate funds into US dollars" and are buying condos, Ms. Marks Pine said. "The challenge for those who are in Venezuela is taking the currency out of Venezuela to buy."

Along the Biscayne Boulevard corridor, the cluster of performing arts venues, the neighboring art and design districts, the American Airlines Arena and the many restaurants that have sprung up are attracting Israeli buyers to Marquis, many of whom previously owned residences in North Miami Beach and other areas, said Penni Chasens, a Cervera sales associate.
"Miami is so multicultural it has something for everybody," she said.

About 50% of foreigners are buying in cash and the rest are using a seller financing program Marquis offers, Ms. Marks Pine said, "allocated specifically for buyers who are coming in and need to finance. It's unique to this building. Most buildings don't offer that type of financing, so it's an opportunity to get buyers here."

The 292-unit Marquis has about 200 condos left for sale, with 92 sold or awaiting closing, she said. Lofts and two and three bedroom units are selling at discounted prices that range from the $400,000s to $3 million.

"It's a combination of original buyers who closed on residences and new buyers who capitalized on opportunities with the 40% price reduction," she said.

Edgardo Defortuna, president of Fortune International Realty, said at the luxury condominiums he represents, many foreigners are buying for their own use "because they love the product and think it's a great value." Oceanfront residential towers such as Jade Ocean and Jade Beach in Sunny Isles Beach and ArTech in Aventura are being sold to many Latin Americans and Europeans. For example at ArTech, where Fortune has 50 units left to sell, buyers are mostly Jewish Latin Americans and locals, Mr. Defortuna said. At Icon Brickell's Towers 1 and 2, Fortune has sold 170 units, of which about 75% have been sold to international buyers, he said. The same at Jade, home to buyers from 22 nationalities, where foreigners represent 70% of buyers. Julián La Madrid, a Spanish-born developer based in Guatemala, bought a three-bedroom unit at Icon Brickell's Tower 2 because he liked the property's design and its location. Brazilians represent another strong buyer segment right now, followed by Argentines and Venezuelans, Mr. Defortuna said. He added that among the reasons for the latter groups to invest here is safety concerns and political problems affecting those countries. "The economy in Brazil is doing really well. In Argentina, the economy is also doing well, but they are concerned with the safety situation," he said. "In Venezuela, the politician turmoil and the concern it could get worse has made a lot of Venezuelans have some safety net here in the US, and Miami is the perfect place." About 62% of foreign buyers purchase condos, 21% single-family homes and another 10% townhomes, according to an international sales survey conducted by the Miami Realtors based on transactions in Miami-Dade from April 2009 to April 2010. These international buyers are helping condo sales stay strong.

While the re-sales of single-family homes in Miami-Dade dropped 8% in July, condo re-sales rose 43% this July from July 2009 and by 112% from two years ago, according to the realtor association and Southeast Florida Multiple Listing Service. Many buying today plan to use the condos as a vacation or second home, but some don't discard selling them at a profit some day.

But Mr. Defortuna described these as "solid" investors because more than 70% are paying cash. The investors who we saw in the good old days of the boom planned to sell or finance the rest of their purchase because they didn't have the cash to pay upfront," he said. "Also, the ability to rent the unit. If the price is right, the unit gets rented in a short period of time that makes it attractive."

Tyler Durden provides the Gonzalo Lira's ... Prosecution's Case Against Alan Greenspan. I consider Mr Greenspan to be the czar of credit liquidity, yes the purveyor of credit, the linchpin of neoliberal economic policy who created the former age of fiat wealth prosperity, that ended September 1, 2010 as US Treasuries, turned parabolically lower.

Associated Press reports US Military Chief seeks Turkish support over Iran: Turkey that the United States' top military officer, Adm. Michael Mullen, stressed on Saturday the need for Turkey to help enforce United Nations sanctions against Iran aimed at deterring the Islamic Republic from obtaining a nuclear bomb.

Reuters reports that Iran has material for 1-2 atom bombs. And the Herald Sun reports Israel 'can be removed from the world', Mahmoud Ahmadinejad says.

Associated Press reports shoes and eggs hurled at ex-British PM Blair in Dublin. Anti-war protesters hurled shoes and eggs at Tony Blair on Saturday as he held the first public signing of his fast-selling memoir.  Blair was paid a 4 million pound ($7 million) advance for "A Journey," which mounts a strong defense of his policies during his decade as prime minister, including the 2003 invasion of Iraq. Blair told the BBC World Service "the biggest threat in international security is this broader radicalized movement, because I think it is rather similar to revolutionary communism." He said al-Qaida-linked extremism was "loosely a global ideological movement, but Iran is a state sponsor of it." Released this week, "A Journey" is Amazon's best-selling title in Britain, and has climbed into the top 10 on the online retailer's U.S. chart.

VI .... Conclusion

Some stocks, including the diversified utilities, such as Nisource, NI, have so far been immune to debt deflation, as investors seek the defensive sector of high dividend paying utilities. Others immune so far have been emerging markets, THD, and Brazil small caps, BRF,

Debt deflation has been held in abeyance, it has not been abated, as currency traders have been going long the EURJPY and the AUDJPY. Soon debt deflation will recommence and small cap value shares, RZV, will fall more than small cap growth shares, RZG, as is seen in the chart of RZV and RZG. A falling AUDJPY will send the copper mining shares, COPX, and BHP Billiton, BHP, lower.   

The chart of the Euro, FXE, the Yen, FXY, together with the world stock, VT, the European stocks, FEZ, the Australian stocks, EWA, ... FXE, FXY, VT, FEZ, EWA shows the power of today's rising carry trade investing.

The chart of real estate, IYR, and residential real estate, REZ, shows their protection by the FASB 157 entitlement to be marked-to-manager's best estimate rather than to be marked-to-market. MyBudget360 provides a listing of the seven negative home equity epicenters. These are 1) Las Vegas, NV, ...  2) Stockton, CA, ...  3) Vallejo, CA, ... 4) Modesto, CA, ... 5) Riverside, San Bernardino, Ontario, CA, ... 6) Bakersfield, CA, ... 7) Orlando, FL.  I consider these to be economic dead zones; that is economic black holes, where all energy going in, is consumed and destroyed.

Gold, GLD, fell and Silver, Silver, fell on the surprising Jobs Report that private hiring surprises with 67,000 new jobs, Yahoo News relates. MarketWatch reports that services growth slows in August, ISM says. EconomicPolicy Journal provides the CalculatedRisk and BusinessInsider report of the scariest jobs chart ever.

Jesse provides the chart of gold, $GOLD, forming a rounded top; it could easily fall to $1,150 as well as the chart of silver, $Silver.  

Jesse also provides the chart of the S&P, S&P 500 which shows three white soldiers a reversal signal.  And I provide the chart of the S&P, SPY, and question: "has the major currencies rally brought the S&P higher to the point of a likely 3-of-3-of-3 downturn"? I have to answer in the affirmative. 

Like Hyman Minsky, and Doug Noland of Prudent Bear, John Taylor of FX Concepts "has it correct". StocksThatPay quotes Mr. Taylor:  "as the deleveraging process becomes globalized the developed world’s yield curves will literally flatten. Shifts in the yield curve in August are the beginning of a larger trend reflecting weak economic performance well into next year, anticipating central banks’ efforts to counter that weakness."  One can view the full post on ZeroHedge: on a long enough timeline, the survival rate for everyone drops to zero. I suggest gold bullion as an investment. 

Disclosure: I am invested in gold bullion