Financial Market Report For Wednesday January 25, 2012
1) … Global financial investments rose on acceptance of the Federal Reserve announcement.
Global financial investments, stocks, VSS, VT, ACWI, ACWX, VTI, EEB, EEM, EWX, bonds, BND, commodities, DBC, USCI, currencies, DBV, CEW, rose, as the US central bank stated that is ready to offer the economy additional stimulus, and that it will likely keep interest rates near zero until at least late 2014.
Despite the announcement, bond vigilantes gained control of interest rates on January 20, 2012 when the Interest Rate on the US 10 Year Treasury Note, ^TNX, passed 2.0%, It stands at 2.01% today, and caused US 10 Year Notes, TLT, 30 Year US Government Bonds, EDV, and the Zeroes, ZROZ, to trade lower. This has derisked investors out of the debt laden, and interest sensitive utilities, XLU, and railroads. This has left railroad service company, GBX, and railroad, KSU, with high PEs, so that when the downturn does come, these transportation, IYT, shares will be fast fallers. Because of their debt and physical nature, these old infrastructure are now abandoned investments, as investors for the last week have been pursuing value in new infrastructure. The design build and basic material stocks, seen in this Finviz Screener, have been ongoing safe haven investments, that is investments far away from the European sovereign debt crisis. These include URS Corp, URS, Great Lakes Dredge And Dock, GLDD, Strandex, SXI, Manitowoc, MTW, Eagle Materials, EXP,
Bond vigilantes gained the upper hand over the Fed as global currency debasement has been underway as the US Dollar, $USD, UUP, has been rising since September 1, 2011. The world passed through peak credit on December 19, 2011, when Bonds, BND, peaked and traded lower on December 20, 2011. The loss of debt sovereignty by the US Central Bank is seen in the Flattner ETF, FLAT, falling, and the Steepner ETF, STPP, rising. The steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, portends an upcoming global depression.
A continuing rising 10 Year US Interest Rate, ^TNX, and a rising 30 Year US Interest Rate, ^TYX, is going to be destabilizing to world economics and to personal wealth. The Fed's six officials referenced by Tyler Durden in article Six Fed Officials Do Not See Rate Hike Until 2015 are in denial of the fact that the bond vigilantes are in control of US Sovereign Debt Interest rates.
Today, the US Federal Reserve gave carry trade seigniorage to the most sold-off material stocks and to the countries with the greatest basic materials resource base, as well as to an on going EU debt contagion safe haven rally in home builders, ITB, design build, PKB, small cap value, RZV, biotechnology, IBB, XBI, steel, SLX, and dividend, DVY, as is seen in the chart of VTI, ITB, PKB, RZV, IBB, XBI, SLX, DVY; these ETFs are seen in this Finviz Screener together with four other strong small cap ETFs. Steel, SLX, finally reached its 200 day moving average objective.
Confidence and trust in Ben Bernanke and the US Federal Reserve, continues to give ongoing seigniorage, that is moneyness, to consumer services, IYC, small cap consumer discretionary, PSCD, recreational vehicles, small cap value stocks, business services, asset management companies, rental and leasing services, seen in this Finviz Screener, such as Artic Cat, ACAT, Winnebago, WGO, Harley Davidson, HOG, Global Payment Network, GPN, Clear Channel Outdoor Holdings, CCO, Cedar Fair, FUN, Prospect Capital Corporation, PSEC, Rent A Center, RCII, Alliance Data Systems, ADS,
Faith in Ben Bernanke continued to fuel a safe haven rally in North American infrasturcture, that is design build and basic materials, PKB,
The Fed's message was debt debasing to the US Dollar, $USD, UUP, as currency traders responded by taking world currencies, DBV, and emerging market CEW, firmly higher and the Yen, FXY, lower. Currencies rising included, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXA. And the Fed's message gave seigniorage to Gold, GLD, and Silver, SLV.
The Fed's announcement stimulated Commodities, DBC, US Commodities, USCI, Natural Gas, UNG, Aluminum, JJU, Copper, JJC, Base Metals, DBB, and Agriculture Commodities, JJA, to move higher.
Stock ETFs rising today included, GDXJ, GDX, SIL, XME, KOL, ALUM, REMX, COPX, URA, SLX
PSCM, MXI, IYM, MOO, IBB, XBI, PKB, PSCD, ITB, DVY, RZV, FAA, SEA, XLU, IYR, XRT.
Country ETFs rising today included, EWZ, RSX, INP, SCIF, EWA, KROO, LATM, TUR, EWO, EWI, EWW, EZA.
The Fed's reassuring statement of ongoing neo liberal finance, stimulated the financial shares to rise, EUFN, NBG, IXG, XLF; and stimulated Industrial Office REITs, FNIO, and REIT General Growth Properties, GPP
Investors are now waiting news of resolution of a potential Greek Default. FT reports Uncomfortable Days for ECB. The ECB started buying Greek bonds in May 2010, when the eurozone debt crisis first erupted. The objective of Jean-Claude Trichet, president, was to stabilise financial markets. The assumption was that bonds bought at market prices would be held until maturity, when the ECB would book a tidy profit. Having taken action when the private sector held back, it justifiably feels it should not have to pay a price now, said Erik Nielsen, chief economist at UniCredit. "In an emergency, the fire brigade goes in - but the deal is that it is protected." Economists estimate that a 70 per cent "haircut" on the face value of the ECB holdings could leave a loss of more than €20bn - a significant but not disastrous sum given the size of the reserves held by the ECB and eurozone national central banks. But the ECB's resistance to accepting losses is not just principled. Agreeing to take a loss could be viewed as providing financial assistance to Greece - and in violation of the European Union's ban on central banks funding governments. I comment that the ECB does not want to take a loss on Greek debt and that it does not want to monetize that debt. It was globalist leader and former ECB Chief Jean Claude Trichet who bought the Greek debt to support Herman Van Rompuy's May 2010 plan to preserve Greece in the EU. It was Bundesbank president Axel Weber who resigned in protest of the move.
The FT also reports IMF Takes Tougher Stance Over Greek Debt. On Wednesday IMF Chief Christine Lagarde argued that if Greece's private creditors did not accept a big enough writedown, the European Central Bank might have to take a reduction in its own Greek debt holdings. "The balance between the participation of the private and the public sector is a concerning question," Ms Lagarde said.
Mike Mish Shedlock relates "If the ECB and IMF never have to take losses, and everyone else does, then investors are buying subordinate debt that should have a much higher yield. The situation is obviously a complicated mess in more ways than one."
And investors await insight from global leaders meeting at the Davos Forum Summit, where global visionaries and global leaders are communicating problems with capitalism, as Robert Wenzel of EconomicPolicy Journal writes Now Greenspan Says Capitalism Needs Adjustment.
2) … A New Constitution and a Deep Restructuring will produce a New Europe.
Kenneth Rogoff, professor of Economics at Harvard University, and listed in the Council On Foreign Relations' publication Foreign Policy Top 100 Global Tinkers, told CNBC, "they are so far from having a solution in Europe, they need a new constitution, they need deep re-structuring, this is not just about Greece this is way deeper than that, it sort of has a certain calm because they are printing money, but that doesn't work."
An inquiring mind asks, will there be a United States of Europe one day? Die Presse reports Israeli Foreign Minister Avigdor Lieberman saying at a conference in Vienna "My vision is that Israel must be part of united Europe."
Open Europe reports Swedish Finance Minister Anders Borg, whose country is currently grappling with whether to sign up to the Euro Fiscal Pact, spoke with harsh words on Greece's reform effort, relating he is not impressed by Greece's implementation of its EU-led austerity programme.
In July 2011, investors became aware that a debt union formed in the EU, and sold out of the world major currencies, DBV, and emerging market currencies, CEW, and derisked out of stocks, and deleveraged out of commodities, DBC. Fiat money died, only to be revived by the ECB's LTRO money printing ponzi scheme.
Capitalism is marked by bad money, poisoned credit, insolvent banks and insolvent nations. The European Financial, EUFN, are insolvent banks, brought back to life by the ECB zombification maneuver. Strong risers today included NBG, and IRE. The PIIGS are insolvent nations, yet Italy, EWI, Spain, EWP, and Ireland, EIRL, were all zombified by Bernankeism and rose today. The death of fiat money, the failure of credit, banking insolvency and sovereign insolvency are bringing about the death of capitalism. Debased currencies, insolvent banks and insolvent nations cannot support growth and profit. These are diseases destroying democracy and capitalism.
Capitalism is going to be replaced by true socialism. Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that "There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don't see this projection as being in the least utopian but I also don't feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy."
The credit based fiat system known as Neoliberalism is entering a debt deleveraging cycle. Out of a credit bust, creative destruction will bring forth a diktat based system, that is Neoauthoritarianism, where a Federal Europe will be one component of a ten toed kingdom of regional global governance.
Fate is operating to replace the Banker Regime with the Beast Regime which is rising out of the profligate Mediterranean Sea nations of Italy and Greece. This monster of statism has seven heads, which will come to occupy in all of mankind's institutions, and will rule in all of the world's ten regions.
Despite the stated intentions and stated monetary policies of US Federal Reserve to maintain inflation, as reported by Binyamin Appelbaum in the NYT article Fed to Maintain Rates Near Zero Through Late 2014, the global debt economy is deflating, as is seen in the chart of world government bonds, BWX, international corporate bonds, PICB, world stocks, ACWX, VT, VSS, EWX, EEM, EEB. Today, is likely final rise in Neoliberalism's death rattle rally.
Democracy is giving way to diktat. Out of a soon coming Sovereign Armageddon, that is a credit bust and global financial collapse, stemming from a Greek Default, a New Constitution and a Deep Restructuring will produce a New Europe. EU leaders will meet in crisis summits and announce regional frame work agreements to establish a United States of Europe, that is a Federal Europe, with the ECB or Bundesbank empowered as Europe's Bank, and a Fiscal Union to oversee dramatically reduced government spending. This New EU Policy Infrastructure, will feature monetary cardinals, that is regional stake holders, appointed to work for the region's security and stability.
The dynamos of growth and profit that powered Neoliberalism, will give way to the dynamos of regional security and stability, that will empower Neoauthoritarianism. Regionalization is the Clarion Call of the 300 elite who met in 1974 at the Club of Rome. Their Call is clear, distinctive and ringing for regional global governance to replace democracy, when destructionism replaces inflationism, as the global dynamic of political and economic activity. Ten regional blocs will coalesce to form a ten toed kingdom of regional global governance, characterized by a miry mixture of clay democracy and iron diktat, featuring dollar restriction zones, and un-dollar transactions, such as bartering and the exchange of local currencies. Robert Wenzel of EconomicPolicy Journal features the Marin Katusa, Lew Rockwell, article The Demise Of The Petro Dollar. The global hegemony of the UK and the US will soon be history.
Fate is now passing the baton of sovereignty to new sovereigns, that is the EU ECB and IMF Troika, giving them sovereign authority over all of the Euro zone. Fate, not any human action, will also soon open the curtains, and onto the world's stage, will step the most credible of leaders. A seemingly Little Authority, will come to be known as the Sovereign, and together with his banking partner, The Seignior, will change our times and laws. By working in the schemes of regional framework agreements, they will make sweeping economic and political changes. Their word, will and way, will replace the rule of law, and provide the seigniorage of diktat, replacing the seigniorage of neo liberal credit. They will lead Germany to become preeminent in a type of revived Roman Empire.
In Ian Traynor Guardian article, Germany's Chancellor Angela Merkel relates incrementalism in European Federalism. "My vision is one of political union because Europe needs to forge its own unique path. We need to become incrementally closer and closer, in all policy areas," the chancellor said. "Over a long process, we will transfer more powers to the [European] Commission, which will then handle what falls within the European remit like a government of Europe. That will require a strong parliament. A kind of second chamber, if you like, will be the council comprising the heads of [national] government."
"And finally, the supreme court will be the European court of justice. That could be what Europe's political union looks like in the future - some time in the future, as I say, and after a goodly number of interim stages."
Wall Street Journal reports Merkel's Speech Is Firm on Austerity, Bailout Limits German Chancellor Angela Merkel, sharply criticized for her government's prescriptions of austerity as a cure for the euro zone's sovereign-debt crisis, said labor-market reforms and greater European integration also were needed to correct flaws in the makeup of the common currency.
Ambrose Evans Pritchard writes Merkel defiant as IMF attacks Germany. Angela Merkel has defied calls for a radical shift in strategy to lift Europe out of crisis but is increasingly isolated as the IMF and global bodies join ranks.
My take is that Angela Merkel's comments are prophetic, and set the stage for one greater to rise to power to provide order out of chaos.
Tyler Durden relates Barclays presents the definitive Greek End-Game Scenario decision tree
3) … In Today's US News
Mat Negrin Of ABC News relates the Meet The Billionaire Behind Newt Gingrich's Rise To Power