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I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes the failure of credit has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation.
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  • Greece And The European Small Cap Dividends Lead Eurozone Stocks Lower On The Failure Of Credit

    Financial Market Report for Monday April 14, 2014.

    Volatility, XVZ, rose as Greece, The National Bank of Greece, and the Eurozone Small Cap Dividends are leading the Eurozone Stocks lower, as is seen in the ongoing Yahoo Finance Chart of Greece, GREK, Eurozone Small Cap Dividends, DFE, European Financials, EUFN, and the National Bank of Greece, NBG, communicating the failure of European Credit, EU.

    Investors are deleveraging out of EUR/JPY currency carry trade investments as is seen in the ongoing Yahoo Finance chart of EURJPY and the Eurozone Stocks, EZU, such as ALU, VE, ASMI, RYAAY, AIXG, AER, PHG, CRH, SI, and the Eurozone Nations, such as EWI, EWG, EFNL, EWN, EWQ, EIRL, EWP, EWO, PGAL, GREK, with the European Financials, EUFN, and the National Bank of Greece, NBG, leading lower.

    Open Europe relates Kathimerini Kathimerini 2 Reuters report Poul Thomsen, head of the IMF's mission to Greece, told Mega TV, "In our view, [Greece's bailout] is not fully financed the whole way to 2016 and one would need...to find some more money." Separately, Greek Prime Minister Antonis Samaras wrote in Kathimerini yesterday that "the country's return to the markets rebuffs [speculation]" about the need for a third bailout."

    The failure of credit in the US, VTI, is seen in Retail, XRT, US Infrastructure, PKB, Consumer Services, IYC, Small Cap Consumer Discretionary, PSCD, such as the Automobile Dealers, the Credit Service Companies, MA, V, AXP, DFS, Asset Managers, BLK, AMG, Regional Banks, KRE, Stockbrokers, IAI, Investment Bankers, KCE, the Too Big To Fail Banks, RWW, and the Russell 2000, IWC, trading lower from their highs.

    The Small Cap Growth, RZG, and the Large Cap Growth, JKE, are leading the Small Cap Value, RZV, and the Large Cap Value, JKF, lower, as is seen in their combined ongoing Yahoo Finance chart. And Utilities, PUI, XLU, such as GXP, BKH, NEE, UGI,NI, VVC, MDU, D, and NYLD, are topping out on the trade lower in the Interest Rate on the US Note, ^TNX, to 2.62%, on Friday April 11, 2014, and its close now higher on Monday April 14, 2014 to 2.64%.

    Eddy Elfenbein reports Best Retail Sales Report in 18 Months. While Atif Mian and Amir Sufi of House of Debt post The Consumer As A Shadow Of Its Former Self. Retail, XRT, bounced only slightly higher today, as did other ETFs, that had sold off most strongly last week. These included the Workplace Equality ETF, EQLT, which is comprised of companies that have a social mission to support workplace equality for lesbian, gay, bisexual and transgender employees; it is comprise of 164 companies that have scored 100% on the Human Rights Campaign Corporate Equality Index. The ETF follows in the line of socially responsible funds that are currently on the market; these products take into account social, environmental, and governance characteristics. The ETF has been a leading loss leader as Intuit relates that it is comprised of a number of large cap consumer discretionary, financial service stocks, and technology stocks such as GME, EA, MGM, WYNN, DIS, AAL.

    Junk Bonds, JNK, bounced higher, taking Aggregate Credit, AGG, slightly higher to a new rally high as International Treasury Bonds, PICB, traded lower manifesting a massive dark cloud covering candlestick chart pattern in its weekly chart confirming the failure of credit. Infrastructure Municipal Bonds, RVNU, popped 1.1% higher in short sell covering. Reuters reports RVNU focuses exclusively on municipal bonds issued to fund federal, state and local infrastructure projects, including water and sewer systems, public power systems and toll roads and bridges.

    Thursday, April 10, 2014, marked a pivotal economic change in mankind's history. The failure of credit commenced as popular currency carry trades unwound trading in Small Cap Nation Investment, IFSM, and Nation Investment, EFA, as the ECB failed to come forward with any new credit stimulus, and turned World Stocks, VT, Global Financials, IXG, lower. The failure of equity investments can be followed with this Finviz Screener of Equity ETFs.

    Another word for credit is trust. Investors no longer trust in the monetary policies of the world central banks to stimulate global investment growth. Said another way the world central banks' monetary policies have crossed the rubicon of sound monetary policy and have made "money good" investments bad.

    The failure of credit, commenced on Thursday, April 10, 2014, is the most remarkable turning point in economic history; and is seen in Call Write Bonds, CWB, trading lower from their March 2014 high, and is defined by the see saw destruction of equity investments (such as World Stocks, VT, Nation Investment, EFA, Small Cap Nation Investment, IFSM, Global Financial Investments, IXG, and Dividends Excluding Financials, DTN) and credit investments, AGG, which began to trade lower in May 2013.

    Investors no longer trust in the monetary policies of the world central banks to stimulate investment growth, despite TradingFloor reporting Global Manufacturing PMI Tracker Shows Growth Robust In March. One can follow the destruction of credit investments with this Finviz Screener of Credit ETFs.

    The failure of credit is established by Distressed Investments, such as those traded by Fidelity Investments, FAGIX, and by Junk Bonds, JNK, trading strongly lower on Thursday April 10, 2014 and Friday April 11, 2014. It was the Distressed Investments, that the US Fed took in and traded out "money good" US Treasuries in 2008 and 2009, as part of QE1 to regenerate the US and World Financial System. Regional Banks, KRE, lost 5% of their value last week, and thus document the failure of credit. Look for a strong destruction of Popular Notes And Bonds, such as SHY, EMCD, TLT, ZROZ, FLOT, QLTA, VCLT, PICB, BWX, MBB.

    Bespoke Investment Group reports Sovereign Yields Continue Lower. Yet, look for Aggregate Credit, AGG, to very soon, once again, trade lower as Corporate Bonds, LQD, Long Duration Corporate Bonds, BLV, International Corporate Bonds, PICB, and World Treasury Bonds, BWX, which are seen peaking out, turn lower, commencing the failure of currencies.

    Debt Deflation will be driving Major World Currencies, DBV, and Emerging Market Currencies, CEW, lower. Said another way, bond vigilantes calling the Benchmark Interest Rate higher, $TNX, from 2.62% on Friday, April 11. 2014, and on steepening the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening, from 38.67, on the exhaustion of the world central banks' monetary authority. Spectacular competitive currency devaluation will cause unwinding liberalism's currency carry trades and debt trades worldwide. One can follow the destruction of currencies with this Finviz Screener of Currency ETFs.

    The pursuit of yield is history. Global ZIRP is history. The failure of credit is terminating risk driven investors, such as those invested in High Yield Debt, JNK, VCLT, EU, EMB, HYXU, EMLC, HYMB, QLTB, EMCD, RVNU, and those invested in Biotechnology, IBB, Social Media, SOCL, Small Cap Pure Value, RZV, and Small Cap Pure Growth, RZG, as well as fixed income investors, invested in Dividends Excluding Financials, DTN, and other Popular Yield Bearing ETFs, DFE, GRID, SEA, FIW, PUI, PSP, KBWD, IST, DBU, as well the high yielding Dividend ETF, DVYL, which is 200% leveraged the S&P High Yield Dividend Aristocrats Index.

    As of Black Thursday April 10, 2014, the day credit died, as evidenced by World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, and Dividends Excluding Financials, DTN, trading lower, the investor is no longer the centerpiece of economic activity. He is being replaced by the debt serf, as Robert Stevens of WSWS reports Greek Parliament Approves New Attacks On Workers. The latest agreement between the European Union led Troika and the Greek government includes measures to limit the right to strike.

    Out of soon coming economic chaos stemming from derisking out of currency carry trade investments, such as the EUR/JPY, and the GBP/JPY, as well as out of deleveraging out of debt trades, such as Real Estate Company, Blackstone, BX, yield curves such as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, will be steepening, and short term interests rates will be rising, causing 1 to 3 Year US Government Note, SHY, to plummet.

    As the Benchmark Interest rate rises from 2.62%, popular real estate investments Global Real Estate, DRW, Office REITS, FNIO, Mortgage REITS, REM, Residential REITS, REZ, and Retail REITS, such as General Growth Properties, GGP, will plummet.

    Money market funds will break the buck, that is the traditional constant $1 Dollar Value, with the result that capital controls will be implemented and banks everywhere will be integrated into the Government, and be known as Government Banks, and in the US, the Bank's Excess Reserves will be captured, so as to speak, by the US Fed.

    Banks everywhere will be integrated into regional governments, with the Eurozone and the US being leading examples of economic fascism. Savings and Loans, Regional Banks, KRE, such as BOFI, SIVB, HBAN, and RF, the Too Big To Fail Banks, RWW, seen in this Finviz Screener, will be integrated into the banks and be known as the Government Banks, or Gov Banks.

    Money has been in an awesome bubble ever since it was underwritten by credit of the US Fed in taking in Distressed Investments, such as those traded by the Fidelity Mutual Fund, FAGIX, and in trading out money good US Treasuries, TLT, to underwrite faith in Regional Banks, KRE, and the Too Big To Fail Banks, RWW, under the Paulson Gift and Ben Bernanke Stimulus of QE1.

    The investor is going extinct: the failure of credit is an extinction event, that pivots the world economy out of liberalism, that is the paradigm and age of investment choice and credit, and into authoritarianism, that is the paradigm and age of diktat and debt servitude, which features the debt serf, is the centerpiece of economic activity.

    With the trade higher parabolically higher in Nickel, JJN, the rally in Commodities, DBC, DYY, is likely over. Bloomberg reports Oil Climbs to Five-Week High on Ukraine-Russia Tension.

    Buy and hold stock investing was an economic principle of the bygone era of credit. The greatest bear market of history has commenced: it will totally destroy all fiat investments where they be equities such as VT, EFA, IXG or DTN, or credit, AGG. One could use these Inverse Market ETFs as collateral for short selling: STPP, XVZ, JGBS, GLD, EUO, YCS, OFF, HDGE, SAGG, TYBS, DNO, PPLT, KRS, REK, SBB, SBM, DDG, EFZ, YXI, SZK, SDP.

    Gold, $GOLD, traded higher to $1,327, on a slightly higher US Dollar, $USD, UUP. The chart of the Gold ETF, GLD, shows that it entered an Elliott Wave 3 of 3 Up in January 2014; and now is technically overbought. Short Side Of Long posts Gold Has Outperformed Other Asset Classes In First Quarter 2014. In the age of the failure of credit, wealth can only be preserved by purchasing and taking possession of and safely storing gold bullion.

    Libertarian Richard Eleling writes in EPJ The Free Market vs. the Interventionist State What people call the "free market" in the United States and around the world, is in fact the regulated economy -- the Interventionist State. I explain the defining characteristics of a truly free market economy, as defined for example by the Austrian economist, Ludwig von Mises. And I contrast this with the meaning of the Interventionist State under which we all live. The Interventionist State distorts the economic activities of all those in society in various ways.

    The Interventionist State featured the Banker Regime, that is the Creature from Jekyll Island, and its cohort, democratic nation state rule, which featured inflationism, coming from the three economic dynamos of creditism, corporatism, and globalism, under policies of investment choice and schemes of liberal credit.

    The bond vigilantes are effecting a global economic coup d'etat, transferring sovereignty from democratic nation states to sovereign regional leaders and sovereign regional bodies, such as the ECB, by calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48% on October 23, 2013, and thus are powering up the singular dynamo of regionalism to establish regional security, stability, and sustainability, to deal with the destructionism of unwinding currency carry trades and debt trades.

    Out of a soon coming Financial Apocalypse, that is a credit bust and financial system breakdown, the Beast Regime will rise to replace Banker Regime, where policies of regional economic governance and schemes of totalitarian collectivism will establish regional gulags of debt servitude.

    Under liberalism, the speculative investment community provided seigniorage through money manager capitalism, Under authoritarianism, regional leaders provide seigniorage through the word, will and way of their diktat .

    Specifically out of Eurozone sovereign, banking and corporate insolvency, leaders will meet in summits to renounce national sovereignty and announce pooled regional sovereignty, where regional framework agreements will provide the legal basis for regional economic fascism enabling leaders from Brussels and Berlin to rule in diktat establishing Europe as the preeminent world power. Johannes Stern of WSWS writes German Government Planning Major Military Build-up. The German government is using the mounting conflict between NATO and Russia to massively rearm the army.

    Chart of the Day, International Corporate Debt, PICB Weekly, courtesy of Finviz (click to enlarge)

    Apr 14 9:54 PM | Link | Comment!
  • World Stocks And Nation Investment Pop To New Highs On A Rally In The Euro Yen Carry Trade And Margin Credit While Aggregate Credit Trades Lower As The Benchmark Interest Rate Trades Higher

    1) ... Liberalism became the paradigm and age of investing through the intervention of the world central banks. Liberalism is defined as freedom from the state and commenced with John Calvin as Doug Phillips writes John Calvin (was) the man most responsible for our American system of liberty based on Republican principles of representative government.

    It was Founding Father and the second President of the United States, John Adams, who described Calvin as "a vast genius," a man of "singular eloquence, vast erudition, and polished taste, [who] embraced the cause of Reformation," adding: "Let not Geneva be forgotten or despised. Religious liberty owes it much respect."

    Calvin, a humble scholar and convert to Reformation Christianity from Noyon, France, is best known for his influence on the city of Geneva. It was there that his careful articulation of Christian theology as applied to familial, civil, and ecclesiastical authority modeled many of the principles of liberty later embraced by our own Founders, including anti-statism, the belief in transcendent principles of law as the foundation of an ethical legal system, free market economics, decentralized authority, an educated citizenry as a safeguard against tyranny, and republican representative government which was accountable to the people and a higher law.

    Quantitative Easing, fathered by Ben Bernanke, started the final phase of liberalism as a paradigm and age of investing, which featured the investor as the centerpiece of economic action whose investment choice was underwritten by currency carry trade and debt trade investing, and which also featured the client of government whose dependency was underwritten by SNAP Food Stamps, Public Housing, Section 8 Vouchers, SSI/SSD payments and other transfer payments such as TANF.

    What began with QE1, was finalized by Global ZIRP of the world central banks, consisting of what amounted to money printing operations of LTRO 1 and 2 and OMT, as well as Abenomics which rewarded risk-on investing and powered up Liberalism's three dynamos of economic activity: corporatism, creditism and globalism.

    The government policies of democratic nation states, and the credit schemes of the world central banks and the speculative leveraged investment community, set the investor free, yes liberated the investor, to pursue investment choice, and experience a moral hazard based prosperity based upon his risk appetite.

    With the exception of clients of government, such as those in Greece who experience what the Economist Magazine describes as a culture of pork and patronage, and those living in the US in public housing on transfer payments, the entire world's population was set free in 2008 as investors.

    2) Peak liberalism came in on Thursday, March 6, 2014, World Stocks, VT, and Nation Investment, EFA, popped to new highs on a rally in the Euro Yen Carry Trade and Margin Credit, while Aggregate Credit, AGG, traded lower as Junk Bonds, JNK, topped out and traded lower, and as the Interest Rate on the US Ten Year Note, ^TNX, traded higher to 2.79%, forcing US Government Bonds, GOVT, lower, commencing a see saw destruction of credit investments and equity investments, establishing liberalism's peak investment experience.

    Currency traders took the Euro, FXE, higher to close at 137.03, and the Yen, FXY, lower to close at 94.47, driving the Euro Yen Currency Carry, EUR/JPY, to close higher at a new rally high of 142.64 driving the Eurozone Stocks, EZU, European Financials, EUFN, and moving Global Financials, IXG, including Regional Banks, KRE, as well as the Too Big To Fail Banks, RWW, roaring back to new rally highs. The US Dollar, $USD, UUP, closed lower at 79.73.

    Nations outside of the Eurozone trading higher included, Switzerland, EWL, UK Small Caps, EWUS, the UK, EWU, Sweden, EWD, Denmark, EDEN, and Norway, NORW, all rose to new rally highs. The Nikkei, NKY, traded higher. Australia, EWA, KROO, blasted higher, and New Zealand, ENZL, rose parabolically higher to a new rally high, as Major World Currencies, DBV, rose to a new rally high.

    World Small Nation Investment, SCZ, were led higher by India Small Caps, SMIN, India, INP, being led higher by India Earnings. China Small Caps, ECNS, and China, YAO, were led higher by China Financials, CHIX. Brazil, EWZ, and Brazil Small Caps, EWZS, were led higher by Brazil Financials, BRAF. Indonesia, IDX, Indonesia, IDXJ, Argentina, ARGT, Thailand, THD, the Phillippines, EPHE, South Africa, EWZ, Egypt, EGPT, and Israel, EIS, traded higher. All rising on a rising Emerging Market Currency Carry Trade, seen in CEW:FXY, trading higher, as Emerging Market Currencies, CEW, rose to a new rally high, which drove the Emerging Market Financials, EMFN, and the Emerging Markets, EEM, higher.

    Investors driving Transportation Stocks, XTN, in particular, Airlines, Railroads, and Trucking Stocks, has been truly spectacular, as these have been in greater demand than Small Cap Pure Value Stocks, RZV, or Small Cap Pure Growth Stocks, RZG.

    Yield Bearing Stocks, DTN, traded to a new rally high, being led so by debt trade investing in Leveraged Buyouts, PSP, European Small Caps, DFE, Global Telecom, IST, Water Resources, FIW, Global Real Estate, DRW, and Chinese Real Estate, TAO.

    3) ... The world is at the inflection point between liberalism and authoritarianism; it is about to pivot from the paradigm and age of freedom into that of diktat, as the monetary policies of the world central banks have crossed the boundary of sound monetary policy and have money good investments bad and because of the failure of democratic nation states such as the Ukraine.

    International Financing Review posts Eurozone banks' sovereign exposure hits new high The world is at peak equity market capitalism, peak national sovereignty, and peak banking sovereignty, as the seigniorage, that is the moneyness, that is the fiat money consisting of Aggregate Credit, AGG, together with Major World Currencies, DBV, and Emerging Market Currencies, CEW, of the Milton Friedman Free to Choose floating currency regime has failed.

    While posts Stefan Isaacs posts Arguments in favour of high yield, clearly, s stock values, nation investment, and bank investment, as well as Junk bonds, JNK, International Treasury Bonds, BWX, and International Corporate Bonds, PICB, have risen to their maximum potential on massive currency carry trade investing and debt trade investing. The dynamos of creditism, corporatism, and globalism are now winding down economic systems such as crony capitalism, European socialism, Greek socialism, Russian communism, and clientelism.

    Inflationism has come to an end as the Distressed Investments, similar to those which were taken in by the US Fed under QE1, and traded by the Fidelity Mutual Fund, FAGIX, are trading lower in value.

    Thus the world has attained peak economic expansion and peak global growth. The liberal Economist's View posts Four Components of AD Relative to the Business Cycle Peak. As exports have expanded to their maximum, US Infrastructure Stocks, PKB, seen in this Finviz Screener will be trading lower; their chart shows the terminal lollipop hanging man candlestick pattern.

    Excessive easy money led to the death of fiat money, defined as Aggregate Credit, AGG, Major World Currencies, DBV, and Emerging Market Currencies, on October 23, 2013, when bond vigilantes called the Benchmark Interest Rate, ^TNX, higher from 2.48; and is about to cause the death of fiat wealth, that is World Stocks, VT, Nation investment, EFA, and Global Financials, IXG. Money manager capitalism is about to cause a Minsky Moment, that is a global credit bust and world wide financial system breakdown.

    With the dual extinction event of the death of fiat money and the death of fiat wealth, the world will pass from the paradigm and age of liberalism into that of authoritarianism, and the world will enter the final phase of the Business Cycle, that being Kondratieff Winter.

    Destructionism is the new normal. Deflation is already underway in the Eurozone as Eurostat reports in PDF document Industrial producer prices down by 0.3% in euro area. Disinvestment out of currency carry trades, and out debt trades, deleveraging factors for economic recession and economic deflation, which will be marked by falling economic metrics such as falling Industrial Producer Prices, falling ISM, and falling GDP. Furthermore deflation will be the order of the day as Reuters reports US factory orders, shipments fall in January. And as Reuters reports US service sector growth at slowest since Feb 2010 - ISM survey reveals.

    Under authoritarianism, the singular dynamo of regionalism is already powering up regional economic fascism, as the beast regime rises in regional sovereignty authority replacing that of democratic nation states, in response to ever increasing waves of national, banking, and corporate insolvency, as well as investors deleveraging out currency carry trade investments and debt trade investments.

    Deutsche Welle posts Italy's sovereign debt explodes as economy shrinks in 2013 Italy's public debt hit a new high in 2013, soaring to a level not seen since the country's statisticians began taking records. The debt exploded as Europe's third-largest economy remained locked in recession. Reuters reports Italy 2013 fiscal deficit hits EU 3 pct limit for second year running, GDP falls 1.9 pct. Bloomberg reports EU says italy faces a major challenge in reducing debt

    The beast regime's power establishes policies of regional economic governance, and schemes of totalitarian collectivism, which enforces debt servitude producing austerity for all, in each of the world's ten regions to establish regional security, stability and sustainability.

    Regional leaders, working in public private partnerships, provide the seigniorage of diktat money, as they coin mandates, which direct the factors of production, establish fiscal spending, and oversee banking, commerce and trade, as the debt serf working in debt servitude becomes the centerpiece of economic action.

    Under authoritarianism the only prevailing forms of economic resource are diktat and the possession of gold bullion.

    4) ... A sound investment strategy.

    As a whole, a Finviz basket of inverse market ETFS, rose; these include STPP, HDGE, XVZ, JGBS, GLD, EUO, YCS, SAGG, JGBS, and HDGI; these could be used as a basis for short selling. Yet I recommend that one buy and take possession of gold bullion.

    5) ... In the news

    My Budget 360 reports Household debt first increase in 4 years largely driven by massive increases in student debt. Auto loans showed increase volume in sub-prime loans.

    My Budget 360 reports Personal income faces first year-over-year drop since recession ended: As incomes collapse, spending via consumer credit begins to increase.

    Mike Mish posts Nigel Farage: "UKIP biggest threat to political establishment in modern times.

    Julie Hyland of WSWS reports Germany's Angela Merkel feted by the UK to little effect. The German chancellor allotted just six hours to her visit, stopping off on the way back to Berlin from Israel, where she had spent two days with her entire cabinet.

    Jason Ditz of Antiwar reports Kerry to AIPAC: America Won't Fail Israel

    Jason Ditz of Antiwar reports Palestinians see AIPAC Speech as end to peace talks

    Bloomberg reports Philippine Index to monitor the risk of property bubble. The Philippine central bank is set to introduce a residential property-price index in the first half of the year as it intensifies monitoring of asset-bubble risks, Deputy Governor Diwa Guinigundo said. The index initially will cover Manila and nearby provinces using data including building permits and wholesale prices of construction materials of new housing units from 2006 to 2012, Guinigundo, 59, said in an interview in his office in Manila late yesterday.

    Bloomberg reports Oaktree's Marks urges caution as money flows Into junk loans. The head of the world's largest distressed debt fund is emphasizing the need for making careful choices as loan funds inundated with unprecedented cash enable junk-rated companies to borrow at cheaper rates. "When things are rollicking and the market is permitting low-quality issuers to issue debt, that's when you need a lot of caution," Howard Marks, the founder and chairman of Oaktree Capital Group LLC, said in a telephone interview. "You have to apply a lot of discernment."

    Mother Earth News asks Is Roundup the cause of 'gluten intolerance'? and Peak Prosperity posts

    Dr. David Seaman: inflammation from our diet is killing us.

    Illusion of Prosperity posts Employment growth is slowing again. Employment growth has been slowing in a fairly predictable way since December of 2012. Contrary to popular expert financial opinion, this downtrend cannot be blamed on this winter's weather. It's been going on for more than a year. I firmly believe that we are in the late stages of this business cycle and I'm fairly comfortable with my recession by October of 2014 prediction.

    Macronomy writes Credit the thin red line. The Thin Red Line became an English language figure of speech for any thinly spread military unit holding firm against attack. The phrase has also taken on the metaphorical meaning of the barrier which the relatively limited armed forces of a country present to potential attackers. You must therefore be already wondering where we are going with our chosen analogy. Colin Campbell, 1st Baron Clyde, the commanding officer of the "Thin Red Line" had such a low opinion of the Russian cavalry that he did not bother to form four lines but two lines, although military convention dictated that the line should be four deep.

    When ones look at the growing sense of "impunity", in both the equity space with the S&P breaking records after records and in the credit space with the Markit CDX North American Investment Grade Index touching the lowest intraday point of 61.6 basis point, the lowest level since the 1st of November 2007, we are left wondering in this replay of "Balaclava" if investors are not too "complacent" by not bothering to protect their portfolio, preferring, like Colin Campbell, to hold two lines of defense, rather than the conventional four (volatility being currently very cheap).

    Credit wise, we reminded ourselves that dealers' books have shrunk from $256 billion in 2007 to $56 billion today. So, when and not if, the market turns, mind the gap because, as goes one of our favorite quote which we have used repeatedly:

    "Liquidity is a backward-looking yardstick. If anything, its an indicator of potential risk, because in liquid markets traders forego trying to determine an assets underlying worth - they trust, instead, on their supposed ability to exit." - Roger Lowenstein, author of When Genius Failed: The Rise and Fall of Long-Term Capital Management. - "Corzine Forgot Lessons of Long-Term Capital"

    So dwindling dealers' books and rising bond offerings might make DCM bankers put on a huge smile but if the market turns, everybody will cry, much more than in 2008.

    For us "The Thin Red Line" is how thinly liquid credit markets are today relative to 2007. Valuations wise in segments of the technology space are akin, we think to 1999, and credit markets looks more eerily familiar to 2007. We could indeed be looking at 1999+2007 for both equities and credit.

    In this week's conversation, we wanted to convey our thoughts and some of the "Red Flags" we have seen as of late, not justifying the on-going complacency when it comes to assessing the replay of "Balaclava". We are not too sure the "Scots" (USA and Europe) can hold the line this time around versus Russia but we digress slightly.

    More and more, investors are not getting compensated for the credit risk they expose themselves to in the High Yield space. For instance, a recent example of the complacency we think is illustrated by the new HeidelbergCement 2019 new issue in Euro, offering 2.40% of yield, for an annual coupon of 2.25%. It isn't much being paid out for a BB+ 5 year bond when you think that the Iboxx Euro Corporate All benchmark index commonly used in investment grade mutual funds is offering a yield of 2.12% for a modified duration of around 4.5 years.

    Another illustration of this 1999 feeling comes from the recent surge in China's Tencent Holdings Ltd, as displayed by Bloomberg's Chart of the Day. (The chart of Tencent Holdings TCEHY shows a likely market top was attained the week ending March 7, 2014)

    Mar 10 2:09 PM | Link | Comment!
  • Both Stocks And Credit Both Blast Higher Driving The Interest Rate On The US Ten Year Note Lower To 2.75%, As An ECB Official Said The European Central Bank Is Seriously Considering Negative Interest Rates

    The impetus for the February 2014 comes from the Austrian economist Mike Mish Shedlock report who wrote very critically ECB seriously considering negative interest rates. Via translation from El Economista, please consider Coeuré Benoit, a member of the European Central Bank government, said today that the ECB is 'seriously' considering negative interest rates.

    Mario Draghi has repeatedly recognized that there is a debate within the ECB on the pros and cons of negative rates that would seek to force banks to lend. Forcing capital impaired banks to lend is blatantly stupid. The expected result is higher losses.

    The revelation blasted both stocks and credit higher, driving the Interest Rate on the US Ten Year Note, ^TNX, lower to 2.71%.

    1) ... Since February 1, 2014, credit investments had been losing value, as the bond vigilantes have been calling the Benchmark Interest Rate, ^TNX, higher from 2.67%; but that rate traded lower to close at 2.71%, on February 17, 2014, with the result that credit investments seen in the ongoing Yahoo Finance Chart of ORNAX, FAGIX, JNK, HYMB, BWX, and AGG; as well as other credit investments, as is seen in the ongoing Yahoo Finance Chart of SHY, PICB, LQD, and GOVT, traded higher.

    2) ... The rally in equity investments, specifically World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, that commenced on February 3, 2014, continued higher, largely on a falling US Dollar, $USD,UUP, and a strengthening Euro, FXE, which closed at 135.92, and a awesomely stronger British Pound Sterling, FXB, which close at 164.28; this being seen in a number of equity investment charts such as,

    the ongoing Yahoo Finance Chart of Financials, IXG, KRE, EUFN, RWW, IAI,

    the ongoing Yahoo Finance Chart of Social Risk Sectors, IBB, BJK, SOCL, FDN, PNQI, PBS, PJP, PPA,

    the ongoing Yahoo Finance Chart of Manufacturing Risk Sectors, FXR, RZV, PSCI, FPX, CSD,, XTN, GEX, RZG, IGN,

    the ongoing Yahoo Finance Chart of Eurozone, EZU, Nations EWO, EWI, GERJ, EWN, EIRL, EWP, PGAL, GREK,

    the ongoing Yahoo Finance Chart of the Most Toxic Nation Investments, ARGT, IDXJ, KROO, CAF, EWUS, VNM, EGPT, GULF, EDEN,

    the ongoing Yahoo Finance Chart of Global Growth And Trade Sectors, SOXX, TAN, PICK, FLM, SLX, WOOD, IHI, MHK, CARZ,

    the ongoing Yahoo Finance Chart of Consumer Sectors, XLY, RXI, IYC, PBJ, PSCC, XRT, KXI, PSCD. Of note Bloomberg reports Sales at US Retailers Decline by Most Since 2012: Economy Bloomberg and the Washington Post reports Cold snap continues for retail sales,

    the ongoing Yahoo Finance Chart of Real Estate Sectors, DRW,TAO, KBWD, KBWY, FNIO, REZ, ROOF, REM,

    the ongoing Yahoo Finance Chart of Yield Bearing Sectors, DTN, DFE, GRID, SEA, FIW, XLU, PSP, KBWD, IST,

    and the ongoing Yahoo Finance Chart of High Yielding Debt, AGG, JNK, BDCS, VCLT, EU, HYXU,

    The chart of the US Dollar, $USD, UUP, shows a close at $80; and that of Gold, $GOLD, which often trades inversely of the former at $1324.

    4) ... There be no more economic tigers. The Celtic Tiger, the Asian Tiger, in fact all tigers are gone; these have been killed off by the extinction event of the rise in the Benchmark Interest Rate, ^TNX, from 2.48% on October 23, 2013, as the singular Beast Regime is effecting coup d etats, establishing regional economic fascism, manifesting in policies of regional economic governance and schemes of totalitarian collectivism.

    Liberalism was based upon nation state governance, supporting liberal economic systems, such as Germany Capitalism, French Municipal Governance Socialism, Greek Clientelism, and banker regime schemes, consisting of credit and carry trade investing establishing the investor and investment choice. Liberalism featured wildcat finance, a Doug Noland term, where bankers waived magic wands of prosperity, providing all kinds of speculative leveraged investment opportunities.

    The world pivoted from the paradigm and age liberalism into that of authoritarianism, with the death of fiat money on October 23, 2013, and the death of fiat wealth on January 22, 2014.

    Destiny is operating and administrative oversight of all thing; it is strongly stimulating investors are derisking out of debt trades and currency carry equity trades, and bond vigilantes are once again calling the Benchmark Interest Rate, ^TNX, higher from 2.67%, forcing investors out of credit investment such as Emerging Market Local Currency Bonds, EMLC, and equity investors out of stock investments, on fears that the world central banks monetary policies have crossed the rubicon of sound monetary policy. These actions of the see-saw destruction of equity investments and credit investments, will increasingly stimulate economic destructionism, in particular economic deflation, thus quickening the introduction of paradigm and age of authoritarianism.

    Bloomberg reports Deflation threat worries G-20 roiled by emerging markets. The Toronto Star writes Why deflation is a central banker's nightmare: Deflation can set off a spiral where, as prices fall, people delay purchases, leading to falling demand, a drop in output and falling wages.

    Forbes reports Forbes explains Venezuela, Argentina Currency Devaluations Hit Consumer Staples Provider PG Expected Sales And Earnings;

    Mike Mish Shedlock writes Italy's prime Minister Letta resigns under pressure; Party backs Renzi; Rise of the Oligarchy; Trial by fire coming up. Automatic Earth writes Coups and Constitutions. ZH posts Meet the Men with the plan behind Italy's bloodless coup. Oligarchy is the intermediary economic phase between liberalism and authoritarianism.

    Under authoritarianism, regional leaders, providing mandates of public private partnerships are the transmission of economic activity, which organize the factors of production, underwrite lending, marshall banking resources, disburse fiscal spending, and appropriate private property for regional security, stability and sustainability, to counteract ever increasing destructionism. Regional economic fascism is the singular economic system, where regionalism asserts that regional property rights and establishes the debt serf and debt serfdom, replacing liberalisms economic systems such as crony capitalism.

    Authoritarianism features technocrats yielding clubs of austerity in wildcat governance where leaders bite, rip, and tear one another apart in order to rise to be the top dog.

    Liberalism's fiat money will increasingly be replaced by authoritarianism's diktat money, and requires oaths on the part of workers as Maud van Gaal of Bloomberg reports "'I swear that I will do my utmost to preserve and enhance confidence in the financial-services industry. So help me God.' The oath, the first of its kind in Europe, became binding on board members of Dutch banks last month as the government sought to rein in an industry with assets more than four times the size of the country's economy. All 90,000 Dutch bank employees must take the pledge, or a non-religious affirmation, starting the second half of this year. They'll be punished should they break new ethical rules, Banking Association Chairman Chris Buijink said."

    Reutersreports Andrea Leadsom MP, co-chair of the Fresh Start Project and the APPG for EU Reform, argues that "The EU needs to understand that if it wants to have a future it needs to appreciate matters of principle, democracy, the right of taxpayers, the rights of sovereign governments."

    Open Europe reports David McAllister, the CDU's lead candidate in the upcoming European elections, argues in a Die Welt Sunday Times interview that, "For the reinforcement of a citizen-friendly and democratically legitimate union, a repatriation of powers to a national level must be possible."

    Authoritarianism's diktat money comes from the Brussels forge and mint of economic mandates. Open Europe relates Die Welt reports that German crafts trades are concerned about the European Commission's plans to facilitate access to skilled professions in all EU member states. The paper cites the President of German Confederation of Skilled Crafts Peter Wollseifer as saying that "the dual training [system] in Germany is endangered by the new plans from Brussels".

    Open Europe blog Telegraph live blog analyse the unexpected triple-dip recession in Finland

    Theo Francis of Across The Curve posts A whiff of economic deflation, According to the WSJ, firms pinched by pressure to hold down their prices, keep a lid on prices, ceasing revenue growth and hindering recovery. Executives from companies as varied as General Electric, Kimberly Clark. and Royal Caribbean Cruises, said some prices slipped in the last three months of the year, sometimes significantly, amid intense competition, weaker demand and pressure from cost-conscious customers. Falling prices for adhesives weighed on Eastman Chemical, cheaper packaged coffee dragged on Starbucks, and "value and discounts" hit McDonald's in the fourth quarter in what the fast food chain called a "street fight" for market share. Xerox. is eyeing acquisitions that can "help us be more competitive on price pressure." Corporate revenues are showing the strain, whether from lower prices, weak demand or a combination of the two.

    RT News reports Violent protests across Bosnia injure 150, as people demand government overhaul. The demonstrations began with a tipping point being controversial privatizations of key local industries, which since 2000 have resulted in eventual bankruptcies, leaving much of the working population unemployed. Bosnia is now considered the poorest country in the whole of the former Yugoslavia. But as protests have spread, so the demands have broadened. The demonstrators are now asking not just for better economic conditions, but for an overhaul of the political system. This has led to a televised address by the Bosnian tripartite government presidency's chairman, Zeljko Komsic. He asks for peace, while taking the blame as politician. "We are responsible for everything ... Nothing good will come from anarchy," he appealed to the country, promising to hold an emergency meeting of the leadership. Prime Minister Nermin Niksic, who held the meeting on Thursday, has recognized the validity of the protesters' complaints, but implored them to refrain from violence. According to non-profit Transparency International, Bosnians experience more corruption than any other Balkan state. A presidential election is scheduled for October.

    Implode-o-Meter reports The uncomfortable truth in china's property market. Via Businessinsider.com The central government faces a dilemma. Rising discontent over house prices is a threat to the social and economic stability the Communist Party uses as justification for its one-party rule. But the real estate sector is also a major economic driver, supporting some 40 other industries and generating about 16 percent of the country's $8.5 trillion GDP. That has been important this year in supporting economic growth, which is expected to droop to a 23-year-low of 7.5 percent this year. And it is a major source of income for local governments, so if the central government clamped down too hard, it would cause problems for city authorities. Credit Bubble Stocks asks What has the dry bulk fleet been carrying?

    The Automatic Earth reports The China Shadow Banking System is equal to 69% of GDP, so shrinking it by just 10% means having to replace 6.9% of GDP. On top of the huge expansion that's been happening in the past 5 years. There's no doubt that the PBoC and the government have scores of economists and other experts trying to figure out how to deal with this without having it blow up in everyone's face, but how do you cure an addict that needs more, not less, all the time? There's only so much methadone that will have an effect on a heroin junkie.

    ZH writes Spot The Real Liquidity Bubble. In this context, the January number is precisely what it appears: the bank's logical response to a liquidity crunch as the Chinese regime finds itself in the same spot that the Fed has been in for the past 5 years - it must keep the monetary spice flowing, or else the party is over. And just like the Fed, and now the BOJ, so too does China not want to deal with the fall out if all it takes to create yet another quarter of increasingly subpar economic growth is another record of funny money conceived out of thin air.

    Bloomberg reports China's imports of copper and iron ore climbed to a record in January as demand increased from buyers who used the commodities as collateral to get credit. Shipments of copper advanced 53% to 536,000 metric tons from a year earlier while purchases of the steelmaking ingredient increased 32% to 86.83 million tons... 'Financing could continue to drive significant imports as China's central bank is unlikely to abandon its tightening bias unless growth disappoints,' said Zijin Cheng, a commodities analyst at Barclays.

    Francisco Marcelino of Bloomberg reports China's trust assets surged 46% in 2013 to a record 10.9 trillion yuan ($1.8 trillion), underscoring investor interest in products that pay more than bank deposits even as default risks mount. About 20 billion yuan of trust products had repayment difficulties in 2012, accounting for 0.27% of the industry's assets at that time, the China Trustee Association said. Asset quality is 'quite sound and systemic risks are impossible' with 9.06 billion yuan of reserves set aside, the association said.

    Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez ask in Vox.EU What drives social mobility?We begin by showing that upward income mobility is significantly lower in areas with larger African-American populations. However, white individuals in areas with large African-American populations also have lower rates of upward mobility, implying that racial shares matter at the community (rather than individual) level. One mechanism for such a community-level effect of race is segregation. Areas with larger black populations tend to be more segregated by income and race, which could affect both white and black low-income individuals adversely. Indeed, we find a strong negative correlation between standard measures of racial and income segregation and upward mobility. Moreover, we also find that upward mobility is higher in cities with less sprawl, as measured by commute times to work. These findings lead us to identify segregation as the first of five major factors that are strongly correlated with mobility.

    The second factor we explore is inequality. Commuting zones with larger Gini coefficients have less upward mobility, consistent with the "Great Gatsby curve" documented across countries (Krueger 2012, Corak 2013). In contrast, top 1% income shares are not highly correlated with intergenerational mobility both across zones within the US and across countries. Although one cannot draw definitive conclusions from such correlations, they suggest that the factors that erode the middle class hamper intergenerational mobility more than the factors that lead to income growth in the upper tail.

    Third, proxies for the quality of the K-12 school system are also correlated with mobility. Areas with higher test scores (controlling for income levels), lower dropout rates, and smaller class sizes have higher rates of upward mobility. In addition, areas with higher local tax rates, which are predominantly used to finance public schools, have higher rates of mobility.

    Fourth, social capital indices (Putnam 1995) - which are proxies for the strength of social networks and community involvement in an area -- are very strongly correlated with mobility. For instance, high upward mobility areas tend to have higher fractions of religious individuals and greater participation in local civic organizations.

    Finally, the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area. As with race, parents' marital status does not matter purely through its effects at the individual level. Children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.

    The Detroit News reports Delta to lay off 741 workers at Detroit Metropolitan Airport

    Feb 18 5:41 PM | Link | Comment!
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