Financial Market Report for the week ending December 7, 2012
1) … Introduction
The world passed through peak currency and peak credit, as the Euro currency and the copper commodity traded lower, introducing the diktat money system, as the Troika's technocratic government in Italy wavered on Berlusconi withdrawing support. A major selloff in stocks and junk bonds is imminent.
2) … The world passed through peak currency and peak credit the week ending December 7, 2012, as the Euro Currency, FXE, and the Copper Commodity, JJC, traded lower.
The systemic risk factors of excessive world central bank credit and a technocratic government breakdown in Italy, portends a major selloff in World Stocks, ACWI, and Junk Bonds, JNK.
This week, World Stocks, VT, traded higher as Italy, EWI, and Spain, EWP, led European Shares, VGK, lower, while China Infrastructure, CHXX, led Asia Shares, EPP, higher, as Bloomberg reports Monti clings to power as Berlusconi seeks early vote. Italian Prime Minister Mario Monti said he plans to keep his government intact as his biggest parliamentary supporter, billionaire media magnate Silvio Berlusconi, threatens to withdraw his backing.
And this week, World Banks, IXG, rose past its September 14, 2012 high, to make a new high, as Swiss Banks, UBS, and CS, Chinese Financials, CHIX, and India Earnings, EPI, rose parabolically, and Ireland's, IRE, took European Financials, EUFN to a new rally high, and as Bank of America, BAC, and Citigroup, C, rose strongly, taking the Too Big To Fail Banks, RWW, higher.
After a three week rally, the twin spigots of credit liquidity are no longer providing economic health; they are running toxic, on the exhaustion of the world central banks' monetary authority. The first spigot of credit is Bonds, BND, and the second is bank Banks, IXG, which is comprised of European Financial Institutions, EUFN, Investment Bankers, KCE, the Too Big To Fail Banks, RWW, Regional Banks, KRE, and Small Cap Revenue, RWJ; these peaked out the week ending December 7, 2012. Of note, the UK bank, RBS, and India bank, HDB, have risen dramatically this year and have topped out.
The trade lower in closed end stock fund, CSQ, and closed end debt fund, PFL, as is seen in their combined chart, confirms that trust has evaporated from the world financial markets that the global central bankers will be able to provide stimulus to continue global growth and corporate profitability. The word, will and way, of ECB's Mario Draghi has provided seigniorage, that is moneyness, with the exception of US Banks, KRE, as is seen in the combined chart of XLF, EUFN, IXG, KCE, RWW, KRE, RWJ.
Peak Seigniorage, that is peak moneyness, of both the ECB and most likely the Chinese Central Bank, has been achieved. The seigniorage, that is the moneyness, of the US Federal Reserve has failed as Mortgage REITS, REM, have traded significantly lower, on lower Mortgage Backed Bonds, MBB; and the US Federal Reserve is unable to stimulate Regional Banks, KRE, and US Real Estate IYR higher. The failure of the world central banks monetary authority as a whole, is seen in the trade lower in the combined chart of XLF, JKE, IYR, XLE, OIH, MTK, SLX, XSD, GDX, IYZ, and IHE, trading lower since September 14, 2012; it was at this time that the world pivoted through Peak Fiat Wealth.
Of note, the Shanghai Shares, $SSEC, traded by CAF, which had been performing very poorly ever since QE1 was introduce, rose 4.1% this week
MarketWatch reports Toll Brothers profits and revenues rise. Homebuilder Toll Brothers, TOL, reported fiscal fourth-quarter profit of $411 million, or $2.35 a share, compared to $15 million, or 9 cents a share a year ago, yet the stock is trading below its September 14, 2012 high, suggesting that the rally in home building stocks, ITB, is over.
This week, Commodities, DBC, and USCI, traded lower, as Precious Metals, JJP, traded lower, as Gold, GLD, fell through a consolidation triangle, and Silver, SLV, traded sharply lower. Spot gold, $GOLD, traded lower to $1,705; support is lower at $1,680 and $1665; support for GLD is 162. Oil, USO, traded lower; and Unleaded Gas, UGA, fell sharply lower. Natural Gas, UNG, fell to support, and its chart looks like it could break sharply lower. Bespoke Investment Group reports Gasoline inventories soar by most in more than 10 years. Base Metals, DBB, traded lower; Copper, JJC, a measure of the Shadow Banking System in China, traded lower. Timber, CUT, traded to a new high.
Total Bonds, BND, traded up to a new high of 84.99, before closing lower this week at 84.81. Peak Debt is being attained. Distressed Investments, FAGIX, Junk Bonds, JNK, Senior Bank Loans, BKLN, and Leverage Buyouts, PSP, traded to new highs International Corporate Bonds, PICB, traded to a new high. Mortgage Backed Bonds, MBB, and Municipal Bonds, MUB, traded lower, with the closed end equity fund Michigan Municipal Bonds, MIW, selling off strongly. The 30 Year US Treasury Bond, EDV, and the US Ten Year Note, TLT, have been rising to strong resistance, yet could trade higher if stocks quickly sell off.
The Steepner ETF, STPP, fell lower, to its lowest value yet at 33.73, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, flattened, as the 30 Year Rate fell more than the 10 Year Rate on the US Treasury Debt. Soon the 10 30 US Sovereign Debt Yield Curve will rise as bond vigilantes gain control of US Treasury interest rates. The Interest Rate on the 10 Year US Note, $TNX, is forming a bottom at 1.57%; and the Interest Rate on the 30 Year US, $TYX, is forming a bottom at 2.72%. The combined chart of US Treasuries will be soon be showing that both the 10 Year US Note and the 30 Year US Government Bond, will be falling lower, with the latter falling faster than the former.
The ongoing Yahoo finance chart of the Flattner ETF, FLAT, together with Tips, TIP, Long Durations Tips, LTPZ, US Ten Year Notes, TLT, 30 Year US Government Bonds, EDV, Asian Shares, EPP, European Shares, VGK, and World Stocks, VT, TIP, LTPZ, TLT, EDV, EPP, VGK, and VT, communicates the strong seigniorage given to stocks by the combination of the US Fed and the ECB which took the Euro, FXE, up over and then just below 130.
The Dollar, $USD, UUP, has traded lower over the years since its peak in 2002, on US Central Bank credit liquidity and easing, until it recently rose from $79.00 on September 14, 2012, and is now trading at its 50 day moving average, at $80.42, as the Euro, FXE, rose to a new rally high of 129.99, pushing the Swiss Franc, FXF, to a triple top high of 106.24, before the Euro, traded lower to 128.26. The chart of the world major currencies, DBV, shows that they jumped to a new high of 26.02, and the chart of emerging market currencies, CEW, shows they are approaching their September 14, 2012, high.
The world has passed through Peak Monetization. Generally speaking individual currencies globally are failing to rise higher on debt monetization, that is currency debauchery of the world central banks neoliberal finance. The world is passing through Peak Monetization, meaning that the world central banks are unable to stimulate further global growth and corporate profitability. Debt monetization is no longer able to leverage World Stocks, VT, higher.
The Euro currency, FXE, has peaked out. Monetizing of debt is one of two factors that caused the Euro, FXE, to peak out and trade lower this week; and as result Italy, EWI, and Spain, EWP, traded lower from their rally high and both the European Financials, EUFN, and the European Shares, VGK, manifested bearish harami candlesticks, at the top of ascending wedges, suggesting that the rally in these shares is now complete. The other factor for that caused the Euro to peak out and trade lower, is an ongoing political leadership crisis in both Italy, and in Europe as a whole.
The ongoing Yahoo Finance combined chart of DBC, CEW, VT, VSS, and DBC, communicates that the Age of Deleveraging commenced on September 14, 2012, with World Stocks, VT, and Commodities, DBC, trading lower on the exhaustion of the world central bank's monetary authority.
The global bear market that commenced September 14, 2012, is definitely underway again as Transports Weekly, ITY, are making lower highs, while the Industrials Weekly IYJ, are pushing up to strong resistance. Chemical Giants, DOW, and DD, as well as by Industrial Gases, PX, and APD, manifest very weak trading patterns. Bespoke Investment Group relates Apple, AAPL, suffered its biggest decline since December 17th, 2008 with a fall of 6.43%, establishing it as a technology, MTK, loss leader. The bearish trading pattern in technology, MTK, and Steel, SLX, evidences the inability of the inability of the world central banks to stimulate global growth and ongoing corporate profit.
This week's rally and fall in the Euro, FXE, stimulated Peak Currency and Peak Credit. Of note, Peak Stock Wealth, occurred September 14, 2012 as world stocks, VT, topped out. The Pure Small Cap Value Shares, RZV, have outperformed the Small Cap Growth Shares, RZG, as is seen in their combined chart, that is the currency demand curve, that is RZV:RZG, rising to a new rally high. And the Pure Small Cap Value Shares, RZV, have outperformed the Pure Large Cap Value Shares, RPV, as is seen in their combine chart, that is the credit demand curve, that is RZV:RPG, on the rise in the Euro, FXE, to its rally high of 129.99, before it turned parabolically lower to close at 128.36.
Although the Small Cap Pure Value Shares, RZV, have been given strong currency seigniorage, the Small Cap Pure Growth Shares, RZG, have risen strongly as well; these include Aircraft Rehabilitator, BEAV, Electrical Equipment Manufacturer, AIMC, AME, Irrigation Equipment Manufacturer, VMI, Specialty Chemical Manufacturers, ODC, RPM, Chemical Manufacturer, SHLM, Business Services, TISI, VVI, FLT, MMS, Synthetics, MTX, CSGP, Dig And Dirt Moving, MTW, Networking, JDSU, FNSR, ARUN, EPIQ, Diversified Electronics, GLW, MOLX, Technical Software, MENT, ACIW, Cloud Computing, CRM, N, RAX, Application Software, CVLT, PDFS, NTWK, CEDR, PLUS, Business Software, PERI, SLH, Biotechnology, CLSN, CRMD, INFI, DYAX, AFFY, NPSP, Diversified Communication Services, NSR, Building Products, TREX, Diversified Machinery, NDSN, LII, FLS, MIDD, CFX, ITW, BGG, IEX, Diversified Electronics, SPA, Consumer Services, ZIP, and Information Technology, CTXG, CSC.
Restaurants, DIN, BKW, DPZ, BK, and Entertainment Stocks, TIVO, DISH, VMED, SJR, LMCA, DISCA, TWX have likely topped out. Manufactured Housing Manufacturer, CVCO, is the weather vane of market direction and it traded strongly lower this week from its November 30, 2012 high of 51.50 as is seen in its Yahoo Finance Chart, which is provided with comparison to the Small Cap Pure Value Shares.
The major world currencies, DBV, the emerging market currencies, CEW, are peaking out as is seen in their combined chart, producing Peak Currency. And Peak Credit is seen in both Total Bonds, BND, and Aggregate Credit, AGG, topping out, as well as the Credit Providers seen in this Finviz Screener, such as AXP, COF, MA, V, and DFS, trading lower in December 2012. Debt deflation is underway on falling currency values. Federal Reserve data shows that Peak M2 Money occurred in early November 2012, specifically on 11-05-12 with a value of 10292T; current M2 Money stands at 10264T. And Zero Hedge provides this troubling credit report Margin debt rises to 18 month high as net free credit plunges to -44 billion.
Investment trading is starting to heat up. On both Monday and Tuesday, Volatility, VIX, traded higher and Inverse Volatility, XIV, is trading lower from its recent high; and 200% Volatility, VIIX, is trading higher from its recent low, suggesting that a change in market direction is at hand.
The Milton Friedman Free to Choose Floating Currency Regime, that has supported global economics since 1971, was based upon investment opportunities in sovereign nation states, is now failing as investors are derisking and deleveraging out of fiat financial instruments. The Beast Regime of Totalitarian Collectivism and Regional Governance is rising out of the Mediterranean Sea countries of Greece, Italy and Spain to rule in all of the world's ten regions and all of mankind's seven institutions, and will be based upon regional sovereign bodies, such as the ECB, and regional sovereign leaders, such as Herman Van Rompuy, as current country leaders will meet in summits to waive national sovereignty and pool sovereignty regionally; and to announce regional framework agreements which will replace national constitutions as the basis for power and authority. Public private partnerships between corporations and governing officials will direct the factors of production regionally. The announcement on Azom by Alcoa that it has signed a long-term power contract with Bonneville Power Administration, BPA, for its Ferndale, Wa, based Intalco Works aluminum smelter, exemplifies the type of process that will manage economies regionally.
Regional sovereignty is rising to replace national sovereignty. Ten regional zones, that is ten regional blocs of power, are developing to replace the global hegemony of the UK and the US that has ruled the world since 1776. Dr Worden writes in China or USA: Which Will Rule Trade? As the twenty-first century was coming into its own, two major economic powers in the world were contending not only for economic dominance, but political hegemony as well. Would it be another American century, or would power follow economic growth over to Asia? The "control battle" itself ostensibly about ordering trade alliances could be an indication that power was about to shift on a massive scale in terms of which economic power would become the definitive superpower. The Association of Southeast Asian Nations (ASEAN) announced at its meeting in November 2012 that it would host negotiations among its members on "a sweeping trade pact that," according to the New York Times, "would include China." The trade agreement would include not only the ten countries that are in the association, but also six other countries that have free-trade agreements with the association. In addition to China, those countries include Australia, India, Japan, New Zealand and South Korea. Half of the world's population would be included in the pact. Notably absent is the United States. This is no accident, as the Obama administration's own proposal for an eleven-nation Trans-Pacific Partnership excludes China. In other words, the contending proposals may be more about a "control battle" between two contending empires-the United States and China-than anything else. Moreover, which proposal succeeds could say something about whether China succeeds the United States as the hegemonic superpower of the twenty-first century.
Regionalism is rising to replace Crony Capitalism European Socialism and Greek Socialism as The Express UK quotes Steen Jakobsen, chief economist at investment bank Saxo, "The magnitude of this debt crisis is far larger than the market realizes, so big there is no real solution as imagined by either side of the north-south divide." … "There is only one solution: the system must fail and both the Euro and the Eurozone need to be redefined."
The EU faces political crisis on a country, by country level; and it faces a political crisis on an EU wide basis. Guy Dinmore of Financial Times reports Berlusconi's show of power piles pressure on Monti. Silvio Berlusconi's centre-right party has abruptly withdrawn its support from Mario Monti's technocrat government in parliament for the first time in over a year, plunging Italian politics deeper into confusion and raising the possibility of snap elections. And the Wall Street Journal reports EU Officials set cautious vision of integration. In a long-awaited report that aims to map out future efforts to bind euro-zone economies more closely, Herman Van Rompuy, the president of the European Council, proposed some important piecemeal steps toward integration but seemed to bow to pressure from Berlin to limit initiatives that would force German taxpayers to stand behind their European counterparts. There was no proposal to adopt a common euro-zone bank-deposit guarantee, and an initiative to create a centralized fund to help countries absorb economic shocks was pushed off until after 2014. Mr. Van Rompuy called for immediate action in setting up a single bank supervisor, to be fully operational by the start of 2014, and said the euro-zone bailout fund should develop the ability to directly recapitalize member-state banks by 2013. The pooling of funds and sharing risk on debt issuance among eurozone members, as diverse as robust Germany and debt-stricken Greece, is possibly the single most politically controversial issue in the currency bloc.
Soon, the most capable of leaders will step into the limelight of Europe's political stage, to establish order out of chaos. He will rise to power, not through traditional political means, but rather through regional framework agreements. He will establish a type of revived Roman Empire, that is a powerful authoritarian government. The Sovereign will be accompanied in power by the Seignior, that is the top dog banker who takes a cut; their word, will and way will rule the EU.
3) … In financial news
Bloomberg reports Republicans counter Obama olan with entitlement cuts. U.S. House Speaker John Boehner proposed $2.2 trillion of spending cuts and new revenue that lack what President Barack Obama calls essential for a fiscal agreement: higher tax rates for top-earning Americans. The leaders delivered the offer to the White House on Monday with a three-page letter signed by Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.), and four other senior Republicans, including Rep. Paul Ryan (R-Wis.). According to the Speaker of the House, in PDF document, the Republicans propose to increase tax revenue through pro-growth tax reform that closes special interest loopholes and deductions while lowering rates.
AP reports Obama: No deal without higher rates. AP President Barack Obama says there will be no deal to avert the "fiscal cliff" unless Republicans drop their opposition to raising tax rates on the wealthiest Americans.
Bespoke Investment Group reports ISM Manufacturing surprises to the downside. The ISM Manufacturing report for the month of November came in lower than expected (49.5 vs. 51.4), and it was the indicator's worst monthly reading since July 2009. While readings below 50 are indicative of economic contraction, the weak report may be due in part to some residual impact from Sandy.
Ambrose Evans Pritchard writes Pritchard French economy buckles as car sales collapse. Industrial woes deepened last month as car sales crashed 19pc.
Reuters reports Top US firms are cash rich abroad but poor at home The WSJ reports At a time when American companies hold near record amounts of cash, many are surprisingly cash poor at home.
Reuters reports Spain makes formal request for EU bank aid
Reuters reports that Transparency.Org reports Greece has scored the worst ranking of all 27 European Union nations in a global league table of perceived official corruption, falling below ex-communist Bulgaria as public anger about graft soars during the country's crisis.
Markus Salzmann of WSWS reports Austrian billionaire Stronach launches new right-wing party. Given the increasing economic and social tensions in Austria, Frank Stronach stridently represents the interests of the financial elite and receives the support of business circles.
Vicky Short, and Alejandro Lopez of WSWS report Spanish government prepares repressive measures against social opposition. Mariano Rajoy's Popular Party government is preparing to impose €90 billion in budget cuts over the next two years.
Marianne Arens of WSWS reports Italian steel workers fight for jobs. Employees of the Ilva steel group carried out demonstrations throughout Italy last week to protest against the closure of the company's main plant in Taranto.
Reuters reports Military halts clashes as political crisis grips Egypt.
Alex Lanier of WSWS reports Spanish bank bailout paves way for new attacks on working class. Euro zone finance ministers approved a bailout requested for Spain's banking sector.
Patrick Jenkins of the Financial Times reports "The risk facing Japanese banks from their vast holdings of government bonds has been underlined by the chief executive of the country's largest bank who said it would struggle to reduce its exposure. Nobuyuki Hirano, chief executive of Bank of Tokyo-Mitsubishi, admitted that the bank's Y40tn ($485bn) holdings of Japanese government bonds were a major risk but said he was powerless to do much about it. 'This is analysts' main concern… A default of Japanese government bonds would have a severe impact on us. But we need to be responsible to keep that market in order.' According… the Bank for International Settlements… the holdings of JGBs by Japan's banks equate to 900% of their tier one capital, compared with about 25% for UK banks' exposure to gilts and 100% for US banks' exposure to US Treasuries."
4) … Summary … The fiat money system has broken down on the failure of the monetary authority of the world central banks; it has been replaced by the diktat money system, where mandates from regional leaders serves as currency, credit and wealth.
Neoliberalism's final global debt rally, seen in World Treasury Bonds, BWX, and Emerging Market Bonds, EMB, topping out, is bringing about a topping to the global debt trade, BND, that has provided prosperity under Crony Capitalism, European Socialism, and Greek Socialism.
The ongoing Yahoo Finance chart of Distressed Investments FAGIX, with ETFs, JKE, RZV, MTK,VGK, BJK, SLX, XSD, with a close December 7, 2012 for FAGIX of 9.47, having risen from its September 14, 2012 value of 9.37, reflects the seigniorage, that has come from rising commodity currencies, CCX, such as the Euro, FXE, the Canadian Dollar, FXD, the Australian Dollar, FXA, as well as the British Pound Sterling, FXB, Emerging Market Currencies, CEW, the Indian Rupe, ICN, the Brazilian Real, BZF, and the Chinese Yuan, CYB, giving rally to Small Cap Pure Value Shares, RZV, Technology Stocks, MTK, European Stocks, VGK, Vice Socks, BJK, Steel Stocks, SLX, and Semiconductors, XSD.
Yet, Large Cap Growth Stocks, JKE, such as Exxon Mobil, XOM, on the trade lower in Oil, USO, did not participate in the what amounts to the final risk on momentum rally of world central bank monetary authority. Large US Telecom, IYX, shares such as AT&T, T, did not participate in the recent currency driven rally. Uranium Stocks, URA, Junior Gold Mining Stocks, GDXJ, Gold Mining Stocks, GDX, and Silver Mining Stocks, SIL, were completely abandoned beginning September 14, 2012.
Neoliberalism's final risk on currency based carry trade rally gave strong seigniorage to the World's Banks, IXG, in particular to Ireland's Bank, IRE, Netherlands Insurer, ING, India's Banks, IBN, HDB, Brazil Banks, ITUB, BBD, Argentina Banks, BBVA, GGAL, BFR, BMA, Swiss Banks, CS, UBS, Chinese Financials, CHIX, German Bank, DB, UK Banks, RBS, HBS, LYG, Korea Banks, WF, KB, SHG, Japanese Banks, NMR, SMFG, MFG, MTU, Canadian Banks, RY, BMO, Spain's Bank, SAN, Australia Bank, WBK; but failed to give seigniorage to Regional Banks, KRE.
Currency carry trade leverage came to carry trade darlings have carried country stocks higher, as seen in the Finviz Screener of the following stocks.
EWI … LUX,
EWU … DLPH, RUK, DEO, UL, ARMH,
EWN ... PHG, LYB, ENL, UN,
EWA … BHP, AWC,
EWG … SI, SAP,
EWD … ALV,
EIRL ... ACN, JHX, CX, IR, ICLR,
EPU … SCCO
EWL … SYT, ABB, MTD, TEL
EIS … PERI,
EWZ … ABB, FBR, rose vertically
EWQ … SNY,
TUR … TKC,
YAO … NTE, NED, HNP, ACH, LIWA
EWT … HIMX, TSM, ASX, AUO,
EWY ... LPL, MX
EZA … SPP, rose vertically
EWW … IBA, ASR, KOF, PAC rose parabolically
EWJ … KYO, KUB, MKTAY,
VGK … BUD, TX
ACWI … YHOO
The Euro, FXE, traded parabolically lower on Thursday December 6, 2012 and closed at 128.36 on Friday December 7, 2012. Of note the South African Rand, SZR, and the Japanese Yen, FXY, are the loss leaders in global competitive currency devaluation, the first on the failure of gold mining stocks, GDX, and the latter on the huge amounts of Japanese Government Bonds held in Japanese Banks.
The world has reached Peak Prosperity coming from maximum beneficial debt monetization by the world central banks. As world stocks, VT, traded lower on September 14, 2012, they pivoted through Peak Stock Wealth, and today December 7, 2012, they have reached yet another tipping point, as the world is attaining Peak Currency, with the World Major Currencies, DBV, Commodity Currencies, CCX, and Emerging Market Currencies popping higher to produce Peak Credit, with Aggregate Credit, AGG, and Total Bonds, BND, rising to new highs.
Ambrose Evans Pritchard relates the aggressive monetary policy of the ECB. The ECB mulls negative rates as Europe's economic crisis deepens. The European Central Bank has slashed its eurozone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar. And Bloomberg reports Draghi leaves rate-cut door ajar as ECB reduces forecasts. The European Central Bank cut its growth and inflation forecasts and President Mario Draghi said the euro area won't start to shake off its slump until the second half of 2013, leaving the door ajar for further interest rate reductions. "Weak activity is expected to extend into next year," Draghi said at a press conference in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. "By the second part of the next year, we should see the beginning of a recovery" as global demand strengthens and the ECB's low rates feed through to the economy.
Fidelity Investments Distressed Investments, FAGIX, reflects the topping out of toxic investments taken in by the US Federal Reserve under QE 1, and which are held by Investment Banker JPMorgan, JPM, and the Too Big To Fail Bank, RWW, in particular Bank of America, BAC. These banks, because of their debt holdings have been given strong seigniorage, that has accompanied the rise in value of the worst of debt such as Junk Bonds, JNK, Leverage Buyouts, PSP, and Senior Bank Loans, BKLN, which has risen strongly since mid November 2012. The three week currency rally, that began in mid November 2012, has given strong seigniorage to International Corporate Bonds, PICB, which have risen to a new high, as well as to High Yield Municipal Bonds, HYB. S&P High Beta, SPHB, rose, taking the S&P, SPY, higher. World Stocks Monthly, ACWI, appear to be at the point of entering an Elliott Wave 3 of 3 Down from 2008 high, with November 2012 likely being the actual turn lower, should stocks fall lower in December 2012.
The speculative global debt trade, BND, is coming to an end, and with that a pivot from investment choice to ruler diktat. The dynamos of global growth and trade, together with corporate profit are winding down. The dynamos of regional security, stability, and sustainability, are powering up. The Milton Friedman Free To Choose Floating Currency Regime, that has provided a basis for global economics since in 1971, when the US abandoned the gold standard, is giving way to the Beat Regime of Totalitarian Collectivism and Regionalism.
The fiat money system is starting to collapse, as is seen in the value of Mortgage Backed Bonds, MBB, trading lower in value, resulting in Real Estate, IYR, falling in value, and Mortgage REITS, REM, turning lower, as World Real Estate, DRW, is topping out on Chinese Real Estate, TAO, and World Water Resources, CGW, is topping out on American States Water, AWK. Peak Money is seen in the topping out of the Major World Currencies, DBV, Commodity Currencies, CCX, and the Chinese Yuan, CYB; and Peak Credit seen in the topping out of the World's Major Bank, IXG, seen in this Finviz Screener, whether they be European Financials, EUFN, Brazil Financials, BRAF, India Financials, EPI, the Too Big To Fail Banks, RWW, Chinese Financials, CHIX, or Japanese Banks. There are no more speculative adventures or stock safe haven investments.
The risk on global currency carry trade that began in mid November 2012, has rallied European Stocks, VGK, and Asian Stocks, EPP, to the very apex of Systemic Risk on December 6, 2012. All that awaits is a sharp or sustained sell off with impetus coming from a number of sources, such as political conflict in Italy, investor awareness of the excesses of neoliberal credit stimulus, that is world central bank credit liquidity and monetary easing, investor margin calls, or a correction in the price of copper commodity which is used as collateral in the Chinese shadow banking system.
Fiat Money is based upon trust and speculation. Now trust in the world central banks has reached the breaking point; the global credit bubble, BND, is about to burst, and stock values, VT, are going to fall off quickly. Deleveraging out commodities and derisking out of stocks is the process which precedes Financial Armageddon, a global credit bust and worldwide financial system breakdown.
The chart of Consumer Goods, such as Cleaning Products, Ecolab, ECL, Packaging and Containers, TUP, and BMS, Appliance Manufacturer, WHR, Soft Drink Producer, FIZZ, Toy Manufacturer, MAT, Recreational Vehicle Manufacturer, WGO, Personal Products, IPAR, Rubber And Plastics Manufacturer, CSL, and CTB, Housewares, NWL, Home Furnishings And Fixture, BEST, and FBHS, and ETH, and LEG, Sporting Goods, POOL, Business Equipment, SCS, Auto Parts Manufacturer, DORM, Food Producer, HRL, Textile Manufacturer, PVH, and HBI, Paper Producer, IP, and COLM, and GILD, Steel Manufacturing, MUSA, and ROCK, Diversified Electronics Manufacturer, RVLT, Solar Manufacturer, FSLR, Semiconductors, MPWR, SLAB, LSI, Gaming Stocks, MCRI, VAC, ASCA, PNK, communicates Peak Fiat Wealth, and the end of the Age of Prosperity and Credit Creation.
The Fiat Money System was replaced by The Diktat Money System on December 7, 2012, as the Euro, FXE, traded below 1.30.
The failure of neoliberalism's seigniorage, that is moneyness, has introducing the Age of Austerity and the Age of Debt Servitude, where people will come to trust in the Diktat Money System, where diktat serves as currency, credit, and wealth, as exemplified in Egypt, EGPT, and Argentina, ARGT.
The failure of neoliberalism's seigniorage, that is moneyness, has introduced the new global economic paradigm of neoauthoritarianism. Crony Capitalism, European Socialism, and Greek Socialism are being replaced by Regionalism and Diktat.
Milton Friedman suggested the Free To Choose Floating Currency Regime, and it was adopted by President Nixon who used it to fund the Vietnam war. Now Mario Draghi and the Troika are providing the Beast Regime of Regional Governance And Totalitarian Collectivism to establish debt servitude.
Previously seigniorage, that is moneyness, came from a combination of sovereign nation states and central banks. For example, from November 15 through December 7, 2012, a combination of the US Fed Reserves' and ECB's monetary authority gave strong seigniorage to Small Cap Pure Value Stocks, RZV, and Small Cap Pure Growth Stocks, RZG, as the Euro, FXE, rose to over 130.
From December 7, 2012, forward, seigniorage will come from a combination of regional sovereign leaders and central banks. In Europe, a Regional President will be appointed by country Presidents and country Finance Ministers who will work with Mario Draghi and Public Private Partnerships to oversee the Eurozone's economy. As moneyness comes more and more from regional governance, investors will be deleveraging ever increasingly out of stocks world wide. Small Cap Pure Value Stocks, RZV, will fall more precipitously than Small Cap Pure Growth Stocks, RZG, as World Currencies such as the Euro, FXE, the Yen, FXY, the South African Rand, SZR, the Brazilian Real, BZF, the Swedish Krona, FXS, the Swiss Franc, FXF, the British Pound Sterling, FXB, the Indian Rupe, ICN, the Canadian Dollar, FXC, the Australian Dollar, FXA, the Chinese Yuan, CYB, and a whole host of Emerging Market Currencies, CEW, trade competitively lower, while the US Dollar, $USD, UUP, has relative stability.
Beginning the week of December 10 2012, global trade dependent South Korea, EWY, will be falling more rapidly than most other country stocks; yes it will be falling like a rock, reflecting the unwinding of global economic trade. India Infrastructure, INXX, and India Small Caps, SCIF, which have seen speculative investment will also be fast fallers. The country stocks KWY, INXX and SCIF are high beta ETFs which will be losing value very quickly.
The chart of both oil, USO, and Gold, GLD, show a bottoming out; the chart of Silver, SLV, shows a massive consolidation triangle, from which its price will either rise or fall. The investment demand for gold will soon rising taking gold, $GOLD, higher from its current price of $1,700. Commodities, DBC, traded lower today December 6, 2012, falling through a consolidation triangle, to the edge of a massive head and shoulders pattern, suggesting a fall lower is coming soon. In the Age of Deleveraging and the Age of Competitive Currency Devaluation, both diktat and physical ownership of gold, either in gold coins, or in Internet trading vaults, such as Bullion Vault, will be the sole forms of sustained and sovereign wealth.