The Euro, Bonds And Commodities Fell Lower As German Chancellor Angela Merkel Quietly Pushes A New European Government Framework, And As Ben Bernanke Reaffirms Debt Purchases

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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.
Financial Market Report for February 3, 2011

1) … The Eurozone became mired anew in economic governance conflict, sending the Euro lower.
The Euro, FXE, fell lower to 135.80 today February 3, 2011, commencing an Elliott Wave 3 Down. The Euro Weekly, FXE weekly, fell lower to 135.80 commencing an Elliott Wave 3 of 3 Down.   

Euro, FXE,

FXE weekly,

Open Europe In Press Summary for February 3, 2011 relates Germany Angered By Commission’s Plans To Cap Trade Surplus In The Eurozone:  

“Open Europe has published a new briefing arguing that, whereas Greece is unlikely to make it through this year without debt restructuring or additional outside help, the specific proposal for restructuring being discussed by EU leaders is not a sufficient solution to Greece ’s debt problems or its lack of competitiveness. The briefing shows that EU plans for a Greek restructuring would only cut Greece ’s debt by between 2.4% and 4.2%, whereas the country would need to have more than one-third of its debt written off to return to sustainability. The findings are cited by the WSJ and the Irish Daily Mail.

Handelsblatt and Der Spiegel report on the dispute between the European Commission and the German government over new plans to cap eurozone countries’ trade surpluses at 4% of GDP, which could curtail Germany ’s exports. German Economy Minister Rainer Brüderle said that he considered the targets “absurd”, adding that “the proposal does not fit a modern competitive Europe .”

Meanwhile, France and Germany are due to present their plan for a ‘pact for competitiveness’ at tomorrow’s European Council summit. German Chancellor Angela Merkel will today meet Spanish Prime Minister José Luis Rodríguez Zapatero in Madrid to discuss the details of the pact. Le Figaro reports that French President Nicolas Sarkozy wants to include a ‘golden rule’ in the French Constitution – a sort of balanced budget rule inspired by Germany ’s ‘debt brake’. La Croix notes that the French Socialist Party has called the idea "grotesque".

A separate article in the paper reports that yesterday, in a speech to the European Parliament, European Commission President José Manuel Barroso implicitly criticised the Franco-German plans, saying: “Establishing a system of reinforced economic governance for the EU, and in particular the euro area outside the Union framework raises important, and politically very sensitive, questions.”

Handelsblatt reports that, in spite of increasing inflation in the euro area, the ECB will probably not raise interest rates for the moment, for fear of further destabilising peripheral eurozone economies. Open Europe ’s Pieter Cleppe is quoted in the Irish Daily Mail saying that if the ECB decided to raise interest rates in the near future, “it would kill any Irish recovery.”

EUobserver reports that credit rating agency Standard & Poor’s has downgraded Ireland ’s sovereign rating by one notch. An Irish Independent/Millward Brown Lansdowne poll shows that only one in three people believe that their money is secure in an Irish bank. El País quotes Spanish Secretary of State for Economy and Industry José Manuel Campa saying that Spain will “never” need a bailout.” Open Europe briefing Open Europe press release Les Echos Handelsblatt Spiegel FT European Voice El País Le Monde Le Figaro Le Figaro 2 EurActiv La Croix AFP WSJ WSJ 2 FT El País 2 Handelsblatt WSJ Handelsblatt WSJ: Smith Guardian Telegraph FT EUobserver Irish Independent Irish Independent 2 EurActiv

Open Europe continues in its Press Summary relating EU Plans For Greek Restructuring Are Not A Sufficient Answer: Will Greece lightening strike twice? Open Europe blog

2) … Ben Bernanke held a rare press conference to affirm continuation of QE 2.
AFP news reports Ben Bernanke holds rare press conference reaffirmed his policy of continued bond purchases.

“The US economic recovery has strengthened and is gaining pace, but still not enough to significantly improve the job market, Federal Reserve Chairman Ben Bernake said Thursday.

Pointing to a faster recovery in 2011 and positive signs almost across the board, Bernanke nevertheless cautioned against claiming victory too soon.

"Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established."

"The economic recovery that began in the middle of 2009 appears to have strengthened in recent months, although, to date, growth has not been fast enough to bring about a significant improvement in the job market," he said in prepared remarks.

Citing improvements in consumer spending, the jobs market, a healthier financial sector, more bank loans and the Fed's own policies, Bernanke said Americans could expect to see "a more rapid pace of economic recovery in 2011 than we saw last year."

"Recent gains in consumer spending look to have been reasonably broad-based," he said, adding there was "increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold."

But in a further cautionary note, Bernanke, rebuffed critics who say that the Fed's decision to keep interest rates at historic lows and pump $600 billion into the US economy is no longer necessary and risks stoking inflation.

Bernanke said that broad inflation rates remain below the Fed's target levels despite price rises for commonly used goods like food and gas.

"We have recently seen significant increases in some highly visible prices, notably for gasoline," he said. "Nevertheless, overall inflation remains quite low." “

3) … Precious metals and precious metal stocks soared as the Euro, bonds and commodities fell lower. World stocks traded volatily, as fears of sovereign crisis, both in the US and Europe were stirred today.
Bonds, BND, as in investment, died today, February 3, 2011, falling 0.34%, as the US  Federal Reserve Chairman Ben Bernanke held a rare news conference and announced that he fully intends to continue with the purchase of US sovereign debt.

The bond vigilantes called interest rates higher across the board, declaring that the US Federal Reserves policies monetize debt. Even the so called inflation protected bonds were called lower as monetization of debt; these now offer no protection against the ravages of debt deflation brought on by the printing of money to buy sovereign debt. A sovereign crisis is starting to brew in the United States in addition to Europe; the risk of a failed US Treasury Bond auction increased today, which brings on in turn, systemic risk.  And today the risk of failed state and municipal bond auctions also rose significantly, as state and municipal bonds turned lower. In times past the Fed Chairman’s speech drove markets higher; today his words made the market tremble.

Bonds, BND, fell 0.3%; manifesting a fall lower from a bear flag pattern. Bonds entered an Elliott Wave 3 of 3 Down today. These waves are the most sweeping and dramatic of all waves; they build wealth most of the wealth on the way up and destroy most all wealth on the way down. Once started there is no intervention or stimulus or remedy to counter their action. Economic waves are simply part of the human experience: it is man’s destiny to live in a sea of waves. The global investment bubble was pricked at the beginning of the year by the FX currency traders selling the emerging market currencies. Then it was pricked again yesterday with the strong sell of the US Dollar. And it was prick more substantially today by the announcement of continued printing of money by the US Federal Chairman. Monetization of debt is destroying currency values world wide. That is why I am invested in the sovereign currency gold. Its value relative to the Australian Dollar increased today as is seen in the chart of GLD:FXA.    

It was a slaughter house in the bond market today; bonds of all types got butchered.
Aggregate Bonds, AGG, -0.4%
Lehman Aggregate Bonds, LAG, -0.3%; manifesting three black crows.
Corporate Bonds, LQD, -0.2%
Corporate Long Term Bonds, BLV, -0.4%
US Government 30 Year Bonds, EDV, -1.1%
US Government 10 Year Note, TLT, -0.8%
California Municipal Bonds, CMF, -2.0%
Municipal Bonds, MUB, -0.1
PIMCO 15 Year TIPS, LTPZ, -0.5%
PIMCO 1-5 Year TIPS, STPZ, -0.2%
PIMCO Enhanced Short Maturity Strategy Fund, MINT,
TIPS, TIP, -0.5
MBS Bonds, MBB, -0.4%
World Government Bonds, BWX, -0.4%
International Corporate Bonds, PICB, -0.2
Build America Bond, BAB, -0.3%
Long Duration Build America Bonds, BABS,

Commodities, DJP, -0.6%

US Commodities, USCI, -0.6%

Sugar, SGG, -9.4%
Cotton, BAL, -4.0%
Agriculture Commodities, JJA, -1.7%
Corn, CORN, -1.0%
Grains, GRU, -0.6%
Livestock, COW, -0.4%
Timber, CUT, -0.1%

Base Metals, DBB, no change; these manifested a spinning doji for the second day now.

Brent oil, BNO, -0.7%
Heating Oil and Petroleums, DBC, - 0.7%
Oil, USO, -0.2%

Natural Gas, UNG, -1.7%

Major World Currencies, DBV,  -0.1%
Emerging Market Currencies, CEW, -0.3%
Commodity Currencies, CCX, -0.2%

South African Rand, SZR, -1.75%
Euro, FXE, -1.27%
Swedish Krona, FXS, -1.00%
New Zealand Dollar, BNZ, -0.72%
Swiss Franc, FXF, -0.57%
Emerging Market Currencies, CEW, -0.27%

US Dollar, $USD, rose to close at 77.75; objectives are 78.00; 78.50 and 78.75 and 79.00. It is very, very unlikely that the US Dollar will rise above 79, as the currency traders have commenced a global currency war against the world’s central bankers, which is one of competitive currency devaluations, based upon rising interest rates on sovereign debt. Ben Bernanke’s QE 2 has monetized the debt, sent the Interest rate on the 30 Year US Government Bond, $TYX, and the US Ten Year Note, $TNX, soaring; and ever since January 11, 2011, sent the US Dollar, $USD, lower; this as inflation destruction, and bank lending has been tightened by a number of countries including China, YAO, stimulated a sell of Emerging Market Currencies, CEW, and Emerging Market Bonds, EMB, and a run on Emerging Market Financial Institutions and Banks, EMFN.    

The chart of the Euro Yen Carry Trade, that is the EUR/JPY, FXE:FXY, shows a fall lower, from 200 day moving average resistance.


The ratio of the small cap pure value relative to the small cap pure growth, RZV:RZG,is continue in a downward channel, suggesting that global currency deflation commenced with the emerging market currencies, CEW, falling lower beginning in January 2011.   

Junior gold mining stocks, GDXJ, 5.8%
Gold mining, GDX, 2.7%
Silver mining, SIL, 3.3%
Exploratory silver mining company, Silver Standard Resources Inc., SSRI,  3.2%
Canada Small Caps, CNDA, 2.2% to resistance, manifesting a lollipop hanging man candlestick.
Australia Small Caps, KROO, 2.0%

The precious metals, JJP, continued their breakout from February 1, 2011, 1.6%   
Silver, SLV, continuing its breakout from January 31, 2011, 2.1%
Gold, GLD continuing its breakout from February 1, 2011, 1.3%

Soon perhaps tomorrow, February 4, 2011, stocks will be following bonds lower. Yes stocks, VT, with perhaps the exception of the HUI precious metal mining stocks, ^HUI, will be going lower on falling major world currency values, DBV, and emerging market currency values, CEW, now that the bond vigilantes have called gained control of interest rates globally and have called interest rates higher world wide.

When junk bonds, JNK, turns lower, then the end of credit as it has been will commence.

The anticipation of QE II, and then the success of the EFSF Monetary Authority in raising funds, gave seigniorage to junk,JNK, leveraged buyouts, PSP, and to distressed securities, such as those in mutual fund FAGIX, the value of which approximates the value of the US Federal Reserves Balance sheet, as distressed investments of all type were accepted in, and money good US Treasuries given out in exchange to financial institutions world wide in order to prevent a collapse of the global retail banking and investment banking system.

The seigniorage of Central Banks, State Finance Ministers and Treasury Secretaries is about to fail. The result of which will be part and parcel of Götterdämmerung, that is an investment flame out. Then a Chancellor, a Sovereign, and a Banker, a Seignior, will arise, most likely out of a Federal, that is a United States of Europe, to provide order, money good seigniorage, and credit coupled with austerity for all. Soon the word, will and way of these two will be the law of the Eurozone replacing constitutional law and the traditional rule of law. Bondholders are unwilling to take haircuts on debt. Debt cannot be written off or simply be done away with. The debt that the currency traders are unable to depreciate through competitive currency deflation will be applied by the seignior to every man, woman and child on planet earth.      

Internet software company, Internet Capital Group, ICGE, asset management company Blackstone Group, BX, and Dow Chemical, DOW, rose, manifesting an Evening Star.

Credit provider Master Card, MA, rose to the middle of a broadening top pattern.

Networking stock, IGN, rose manifesting three white soldiers; like wise television company, Liberty Media, LCAPA, rose parabolically manifesting three white soldiers as well; a turn lower in these stocks is imminent.

A number of stocks rose up to what is likely an Elliott Wave 2 Crest preparing them for a fall lower into an Elliott Wave 3 Down; these include the following: Industrial company Fastneal, FAST, Business Services company, True Blue Inc, Labor Ready, TBI,  Gaming company Las Vegas Sands, LVS, Latin America, cement company, Cemex, CX, Bank of Montreal, BMO, and the Retail Stocks,  XRT.

A number of stocks are topping out very vigorously, many of these have high PEs, they have been the thoroughbreds of the EFSF and US Dollar Liquidity Rally; but now the Euro is turning lower and the US Dollar has taken a spill. It is wise to short sell these at their market top. Some say that SunPower Corp, SPWRA, closing 0.79% higher at 15.24, is now moving out of a bullish consolidation pattern, and has further to go. Given the fundamentals of falling currencies, first with the Emerging Market Currencies, and now with the US Dollar, and this stock having a PE of 44, and given that in the last downturn solar stocks fell quickly, it is much better to suggest that one go short the solar stocks such as SunPower Corp, SPWRA, and GT Solar International, SOLR, which manifested a lollipop hanging man candlestick in its chart today, at the crest of an Elliott Wave 2 up at 11.50. Those who bullishly suggest to investors to watch for a further breakout or who suggest going long do a dis-service to investors, precluding them from having entered a short position on these and other stocks today.     

The rise in the 200% of the Russell 2000, URTY, represented a great short selling opportuntiy for those not invested in gold, as in a bear market, and the chart suggests a bear market is underway in this ETF, one sells into strength, just as in a bull market, one buys dips.      

Brazil Financials, BRAF, -3.2%
European Financial, EUFN, -1.5%
Emerging Market Financials, EMFN, -0.5%

Brazil Small Caps, BRF, -1.5%
Spain, EWP, -1.3%
New Zealand, ENZL, -0.7%
Europe, VGK, -0.4%

Home builder M/I Homes, MHO, fell strongly lower, as other home builders, ITB, fell lower.

ANR Resources, ANR, and Arch Coal, ACI, fell lower, as coal producers, KOL, fell lower.

4) … In today’s news
Maggie Michael, Hadeel al-Shalchi, Sarah El Deeb, Hamza Hendawi, Diaa Hadid, Lee Keath and Michael Weissenstein, of the Associated Presst report in Yahoo News that Cairo Square chaos intensifies, and violence spreads as Egypt Authorities Say Foreigners Fuel Turmoil:

“Protesters and regime supporters fought in a second day of rock-throwing battles at a central Cairo square while new lawlessness spread around the city. New looting and arson erupted, and gangs of thugs supporting President Hosni Mubarak attacked reporters, foreigners and rights workers while the army rounded up foreign journalists.

The government increasingly spread an image that foreigners were fueling the turmoil and supporting the tens of thousands in the street who for more than 10 days have demanded the immediate ouster of Mubarak, this country's unquestioned ruler for nearly three decades.

"When there are demonstrations of this size, there will be foreigners who come and take advantage and they have an agenda to raise the energy of the protesters," Vice President Omar Suleiman said in an interview on state TV.

In Washington, U.S. State Department spokesman P.J. Crowley condemned what he called "a concerted campaign to intimidate international journalists in Cairo."

Pro-government mobs beat foreign journalists with sticks on the streets outside downtown Tahrir Square, the epicenter of the protests. Dozens of journalists, including ones from The Washington Post and The New York Times, were reported detained by security forces. One Greek print journalist was stabbed in the leg with a screwdriver, and a photographer was punched in the face by attackers who smashed some of his equipment. The Arabic news network Al-Arabiya pleaded on an urgent news scroll for the army to protect its offices and journalists, and Al-Jazeera said two of its correspondents were attacked.

Human rights activists were also targeted. Military police stormed the offices of an Egyptian rights groups as activists were meeting and arrested at least five, including one from the London-based Amnesty International and another from New York-based Human Rights Watch, the groups said.

"We call for the immediate and safe release of our colleagues and others with them who should be able to monitor the human rights situation in Egypt at this crucial time without fear of harassment or detention," said Salil Shetty, Secretary General of Amnesty International.

Lawlessness that had largely eased since the weekend flared anew. A fire raged in a major supermarket outside Sheikh Zayed, a suburb of the capital, and looters were ransacking the building. A residential building neighboring a 5-star hotel on the Nile River corniche was also ablaze, blocks away from Tahrir. Other fires erupted in the Cairo district of Shubra, north of the center, security officials said, speaking on condition of anonymity because they were not authorized to talk to the media.

Under an onslaught of international condemnation for Wednesday's assault on protesters by pro-Mubarak rioters that sparked the renewed wave of turmoil, the government offered a series of gestures trying to calm the fury.

The prime minister apologized for Wednesday's assault and acknowledged it may have been organized. The vice president promised that the 82-year-old Mubarak's son Gamal would not run to succeed his father in presidential elections in September and offered to hold negotiations on the country's future even with the regime's biggest domestic enemy, the Muslin Brotherhood.

But the gestures appeared likely to be drowned out by the chaos around Tahrir, or Liberation, Square, which for the past 10 days has been the center of the unprecedented movement demanding Mubarak's immediate ouster. Protesters accuse the regime of organizing a force of paid thugs and police in civilian clothes to attack them Wednesday afternoon, sparking the violence that still raged after nightfall Thursday.

At least eight people have been killed and hundreds wounded in the fighting in and around Tahrir.
Thursday's fighting centered on and under a highway overpass about 500 yards (meters) north of the square's center that pro-government attackers had used as a high ground to rain down stones and firebombs. Anti-Mubarak protesters surged from the square in the afternoon in volleys of stones, bottles and metal rebar, chasing their foes around the fly-over.

At one point, a police truck barreled wildly through the crowds under the bridge, mowing down several people in its path, according to footage aired on Al-Jazeera. Heavy barrages of gunfire were heard from time to time, and at least one wounded person was carried away.

In the morning, the military took its first muscular action to halt the fighting after standing by without interfering since the fighting began. They moved after heavy barrages of automatic gunfire over the course of two hours before dawn killed five protesters in a serious escalation.

Four tanks cleared the highway overpass and several hundred soldiers on the streets below lined up between the two sides, pushing the pro-government fighters back and blocking the main battle lines in front of the famed Egyptian Museum and at other entrances to the square. For several hours after, more protesters streamed into the square to support those who had fought through the night.

But when clashes resumed in the afternoon, soldiers disappeared from the streets, moving inside their tanks and armored vehicles without intervening again. Every once in a while, protesters would wrestle a Mubarak supporter to the ground, search him for an ID, then raise the card in the air to prove he was a police officer or ruling party member.

The anti-Mubarak movement has vowed to intensify protests to force the president out by Friday. In a speech Tuesday night, Mubarak refused to step down immediately, saying he would serve out the remaining seven months of his term — a halfway concession rejected by the protesters.

A sense of victory ran through the protesters Thursday after they succeeded in keeping their hold on the square and pushing back their attackers.

"Thank God, we managed to protect the whole area," said Abdul-Rahman, a taxi driver who was among thousands who stayed hunkered in the square through the night, hunkered down against the thousands besieging the entrances. "We prevented the pro-Mubarak people from storming the streets leading to the square." He refused to give his full name.

Many dismissed the government concessions, which would have been stunning only a month ago, and said they wanted nothing less than Mubarak to go now.

"We have gone beyond these demands a long time ago," said Waheed Hamad, a 40-year-old schoolteacher among the protesters. "What we need is something bigger. And the road is still long." He said the attacks on protests would only make them grow. "Blood is the fuel of the revolution."

Bands of Mubarak supporters moved through side streets around Tahrir, trading volleys of stone-throwing with the protesters and attacking cars to stop supplies from reaching the protest camp. One band stopped a car, ripped open the trunk and found boxes of juice, water and food, which they took before forcing the driver to flee.

The Mubarak backers seethed with anger at a protest movement that state TV and media have depicted as causing the chaos and paralyzing businesses and livelihoods. "You in Tahrir are the reason we can't live a normal life," one screamed as he threw stones in a side street.

The anti-Mubarak youths posted sentries on the roofs and balconies of buildings around the square to raise the alert of any approaching attackers and rain stones on them. Other lookouts in the streets banged metal poles against pedestrian barriers alarm when they sighted incoming Mubarak backers.

One sentry waved his arms in the air like an airport runway traffic controller, directing defenders carrying piles of stones as ammunition to a side street to fend off an assault. But then another sentry waved a hand across his chest horizontally in a new signal. The crowd understood: false alarm, and they melted back into the square.

The men who led the defense Wednesday and throughout the night were easily identified. Many of them had cotton padding and grubby bandages dangling from their faces, arms and legs. Many had chunks of rock stuck to their hair and clumps of dust in their beards. A large number had the trimmed beards of Muslim conservatives, a sign of how the Muslim Brotherhood a major role in the fight.

Mubarak, the country's unquestioned ruler for nearly three decades, has rejected demands he step down but said he would not run for re-election in September. His top ally the United States has pressed him to quickly transition to a democratic government but has said his earlier gestures, including forming a new government, were insufficient.

On Thursday, authorities offered new concessions, trying to defuse the chaos. Prosecutors announced an assets freeze and travel ban against the former interior minister, Habib el-Adly, whose police forces led a fierce crackdown against the protests when they initially broke out on Jan. 25. Similar measures were announced against the former housing and tourism ministers, who were among the unpopular millionaire businessmen who dominated the ousted government.

Vice President Omar Suleiman told journalists he had invited the Muslim Brotherhood to enter negotiations with the government. He said the Brotherhood remains "hesitant" but underlined that it was a "valuable opportunity" for the fundamentalist movement.

The Brotherhood, which calls for an Islamic state in Egypt, is the top political opponent of Mubarak's regime, which has always rejected any contact with the group and has launched heavy campaigns of arrests against it over past year. The Brotherhood is among the many disparate anti-Mubarak groups organizing the protests, though secular activists have so far dominated the movement. All have rejected any dialogue with the government before Mubarak steps down.

Prime Minister Ahmed Shafiq acknowledged that the attack "seemed to have been organized" and said elements had infiltrated what began as a demonstration against the protesters to turn it violent. But he said he did not know who, promising an investigation into who was behind it.

"I offer my apology for everything that happened yesterday because it's neither logical nor rational," Shafiq told state TV. "Everything that happened yesterday will be investigated so everyone knows who was behind it."

Shafiq, a former air force general appointed by Mubarak over the weekend, defended Mubarak's announcement Tuesday that he would serve out the rest of his term. "Would it be dignified for a nation for its president to leave immediately?" Shafiq said. "There are ethics that must be observed." “
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