Today May Have Been Peak Dollar
Thursday, 4. September 2008, 00:50:38
Mid-day stock market report
Introduction
The US Dollar failed to move higher as the USD/JPY fell, even though the EUR/JPY fell lower decimating natural resource stocks.
Today may have been peak dollar.
Mid day trading action
The Yahoo Finance 5 day ongoing chart of the usd/jpy relative to the eur/jpy shows that the fall of the USD/JPY has put a cap on the US Dollar, DX, moving higher even though the yen carry trade fell lower today .... The usd/jpy fell lower as well as the eur/jpy
The Yahoo Finance 5 day ongoing chart of USD/JPY shows a close at 108.28. This is presented in ActionForex USD/JPY Mid-Day Outlook
The Yahoo Finance 5 day ongoing of the EUR/JPY shows a fall of the EUR/JPY to 157, FXE:FXY, continued to decimate natural resource stocks such as KOL, OIH, SLX, and XME.
The EUR/USD has finally hit the long-term uptrend support line that has been in place for at least two and a half years. Poking slightly below the line during the first half of European session on Wednesday, price has since rebounded somewhat to settle slightly above the trendline again at 145.01 in chart courtesy of OneBrownGuy. Greg Michalowski of FXDD reports that is 1.4357 is 38.2% retracement.
The HUI Indexed precious metal mining shares, that is the gold shares, GDX, got further disconnected from the price of gold.
Even the venerable fertilizer stock, POT, got further beaten down.
The Nasdaq 100, QTEC, and the Semiconductors, SMH, are taking the Nasdaq, QQQQ, down.
IndexTrader in article NDX: In Search of Support provides the chart of the $NDX falling out of a consolidation triangle.
The fall of the semiconductors, SMH, communicates that investing US growth stocks is over.
A rise in the financials buoyed the Russell 2000, IWM, which manifested a harami at 74.
The chart of the Russell 2000, IWM, compared to the Nasdaq, QQQQ, communicates that investors are selling out of growth stocks yet retaining the value stocks .... IWM:QQQQ.
The Russell 2000 value shares, IWN, compared to the growth shares shows, IWO, IWN:IWO shows how the US Dollar rally has benefited the value shares more than the growth shares. The harami shown will stay up, as long as long as the rally in the US Dollar itself and the financial shares stays up. But then, lookout below, the IWN, that is the value shares, will really go on a tear, and take the Russell 2000 lower.
While, financials, IYF, and homebuilding, XHB, and retail, XRT, are up.
The growth shares are falling, where as the value shares are holding up, on the financial, IYF, sector strength, as seen in this MSN Finance chart of growth shares jkh and iwo, compared to value shares iwn, xhb, xrt, rzv ... Growth shares jkh and iwo have turned down whereas as the value shares iwn, xhb, xrt, rzv are still up.
The Yahoo Finance ongoing 5 day solar stocks, TAN, shows that they have fallen lower with the growth stocks, semiconductors and oil. TAN fell lower with JKH, SMH, and USO.
Gainers today include
SSG on the fall of Dell computer ... up 10%
FXP on the fall of the EUR/JPY ... up 5%
SMN on the fall of the EUR/JPY ... up 4%
EEV on the fall of the EUR/JPY ... up 4%.
REW on the fall of Dell computer and the fall of the semiconductors ... up 4%
SFK on the downturn of the growth stocks ... up 3%
SDP following the coat-tails of SSG ... up 3%
LEH on rumors of Korean buying interest and rumors of Japanese buying interest
Elaine Meinel Supkis writing in Driving Global Banking Off The Cliff relates: Lehman is basically bankrupt. The Asian powers are like the vultures and in the case of China, the dragon that is picking at the corpse to see who gets what portion. One might get the belly. Another one, the eyeballs and tongue. Teeth rend at the inert body. Blood on fangs and noses, they shove each other aside. I wonder which unidentified bank in China is buying Lehman Brothers. I would not shock me to learn the buyer is someone I knew years ago. A high Chinese official told me, in my house, in New Jersey, 'I be BANK!' when he figured out how banks really work.
The mortgage related group rose today
RDN up 21%.
SCA up 28%
MTG up 14%
RAMR up 14%
SUR up 15%
AGO up 5%
ABK up 22%
MBI up 2%
Gold ... Not US Treasuries, or stocks is the real lifeboat of safety
The gold ETF, GLD, lost only 0.5%, and closed at 78.89 as the US Dollar, DX-Y.NYB, failed to move higher .... GLD compared to DX-Y.NYB.
Gold, $GOLD, closed at $800. I am a gold optimist -- I like to think that gold is in an Elliott Wave 2 Down ready to go in an Elliott Wave 3 higher.
Gold relative to the Euro, GLD:FXE Daily and GLD:FXE Weekly is at a critical juncture and needs to keep rising from 0.540
The US Treasury Bubble is about to burst and interest rates are going severely higher
Treasuries ETF TLT moved higher today to 94.77.
The futures Treasuries is calling a market top in Government Bonds, $USB.
The cash market place Treasuries is over extended in relation to the futures Treasuries: TLT:$USB
The chart of the zero coupon mutual bond fund BTTRX suggests that a market top is approaching in government bonds.
And the spike down in the interest rate on the 30 Year US Treasury Bond, $TYX, suggests the same as well.
Utility shares fell lower today: VPU Daily and VPU Weekly.
Higher interest rates and lower utility shares suggest that headline inflation, that is the prices people pay for basic living, will rise even if oil prices continue to drop.
We are transitioning out of the age of prosperity and into the age of financial ruin.
The fall in the USD/JPY today is communicating that the age of prosperity that came through investing in growth stocks is done and over.
We will soon see another fall in the financial shares, IYF, and that will continue to communicate that the age of prosperity that came through financialization is done and over.
Today we have likely seen the death of automobile lending and the death of home loan lending MockThe Market relates that US automakers reported continued declines in sales for the 10th straight month. August sales dropped 20% for GM, 27% for Ford and a whopping 34% for Chrysler. GMAC, the auto and mortgage finance company still partly owned by GM, has announced that it planned to eliminate 5,000 jobs at its Residential Capital mortgage unit and close all 200 GMAC Mortgage retail offices. The job cuts amount to roughly 60% of its workforce and a closure of all of its retail offices.
Soon the US dollar will be falling lower with the commodity currencies and gold will arise as the world's currency and measure and means of garnering and preserving wealth.
The very important economic report comes out on Friday, I hope it will be a turning point lower for the US Dollar, that is DX-Y.NYB, Here is today's chart of DX-Y.NYB; I hope this is as high as it goes.
The Dollar Bull ETF, UUP, shows the same topping out as the US Dollar, DX ... UUP
The gravestone doji in the Dollar, DX, in article Charts in the Babson Style Midweek 3 September 2008 is remarkeable. And note that this is full retracement to the October Citigroup CDO Bust. This gives extra credence to possibly finally being Peak Dollar.
If it is Peak Dollar, then the US Stocks, VTI, will fall; and the world stocks, EFA should rise. There is an ungodly harami candlestick in the weekly VTI:EFA that goes back to December 2006; the Dollar Rally when coupled with the unwinding of the yen carry trade has created a freak of nature in overvalued US stocks ... VTI:EFA
With the exception of XHB and XRT, the MSN chart of VTI and QQQQ suggests that August 15, was Recent Peak US Stock Wealth. VTI, QQQQ, XHB, XRT
As stocks fall lower the carry traders will sell the US Dollar and then the US Stocks will fall even more.
But then again, I thought time and time again we had arrived at Peak Dollar.
The currency traders, especially the yen carry traders, are destabilizing the world financial system and bringing on Kondratieff Winter
Those with access to the 0.5% interest loans from the Bank of Japan are destabilizing currencies world wide, and stock markets globally such as Brazil, EWZ, and South Korea, EWT.
Using the Bank of Japan lending window at the rate of only 0.5% the currency traders are able to destabilize whole countries such as South Korea, where they have gone short the Won and long the US Dollar. The M&C Business News article South Korea Currency Firms Briefly On Dollar-Selling Intervention reports: "The South Korean won was briefly lifted against the US dollar in morning trade on Wednesday, apparently due to suspected dollar-selling intervention by the government.
The slide was temporarily stopped after the South Korean currency fell to a session low of 1,159 won at one point late Wednesday morning. It is suspected that earlier losses were cut as foreign exchange authorities poured in an estimated 1.5 billion dollars.
'It is believed that the dollar selling took place for one hour this morning, as the government must keep the won value above the 1140-level, which is usually seen as the psychological threshold,' said one foreign exchange dealer in Seoul.
The South Korean won hit its weakest since August 18, 2004, on Wednesday with the benchmark index plunging to its lowest level in 17 months as a slowing economy pushed bond and stock funds to move money out of South Korea.
The won has lost almost 18 per cent versus the dollar so far this year, putting upward pressure on already high inflation.
The slowing global demand, combined with inflation has raised concern that a repeat of the 1997 financial crisis may strike Asia's fourth largest economy, which the government tried to deflect Wednesday.
'Our economy is expected to undergo significant difficulties,' said Lee Sung Tae, governor of the central Bank of Korea. 'But it is still my judgement so far that the economy won't go as badly as it was in the 1997 crisis,' he added.
South Korea currently holds 243.2 billion dollars of foreign exchange reserves, which is below the IMF-recommended level of 320 billion dollars. In 1997, the short-term foreign loan stood at 63.7 billion US dollars, which was three times as much as the foreign-exchange reserve.
As of the end of June 2008, short-term foreign loans stood at 175.8 billion US dollar, representing 72 per cent of total foreign-exchange reserve, according to the central Bank of Korea.
South Korean corporations have reduced debt rate. The average debt rate by major manufacturing companies reduced from around 400 per cent in 1997 to around 100 per cent in 2007."
Here is the ongoing MSN chart of the South Korean Market Shares KY, compared to the Russell 2000. KY compared to IWM shows that beginning in May, investors sold the Korean shares and the high yield dividend payers; but then the US Dollar Rally came July 15, which brought the dividend payers and the Russell 2000 shares back up ... KY compared to IWM.
The unwinding yen carry trade has acclerated Kondratieff Winter
Mike Head writing in World Socialist Website article Global Downturn Begins To Puncture Australian Mining Boom describes the personal misery and economic dislocation that comes as investors use 0.5% interest loans from the Bank of Japan "to go short the Euro, FXE, and long the Yen, FXY", in other words go short the EUR/JPY, to take advantage of the falling yen carry trade, and risk aversion to rising inflation and diminishing growth opportunities in the emerging markets. Mr. Head's article, reproduced below, documents the onset of Kondratieff Winter.
Since July, definite signs have emerged that Australia’s mining boom, a major factor in the country’s much touted economic growth during the past decade, has started to crumble under the weight of the world economic slowdown. Mineral export prices have begun to turn. The London Metal Exchange Index of six base metals, including copper, zinc and nickel, fell more than 20 percent from a peak of 4,400 in March to 3,400 in early August.
As a result, the Australian dollar has tumbled. After rising to near parity with the weakening US dollar in the first half of this year, it has become one of the world’s weakest currencies in recent weeks, falling well over 10 percent against the greenback.
While fluctuations in metal prices are certainly affected by speculative flows, the latest downturn is, at bottom, an expression of the markets’ reaction to what some financial commentators have called a “tidal shift” in the world economy. With the exception of China and India, all the major markets for Australian mineral and energy exports are now contracting or on the brink of recession: Japan, the US, Britain and the Euro zone.
While China, which last year overtook Japan as Australia’s largest trading partner, is still growing, its growth has slowed from 11.5 percent last year to less than 10 percent this year, and is expected to drop to 9 percent next year. An even sharper slowdown could be ahead, because about one-third of China’s growth is estimated to come from exports.
Over the past seven years, the Australian mining sector, has benefited from an extraordinary surge in world prices for coal, iron ore, base metals and natural gas. The Reserve Bank of Australia (RBA) Index of Commodity Prices rose by more than 250 percent between 2002-03 and mid-2008, reversing a long period of falling or stagnating prices.
Some of the key rises were even greater. Thermal coal rose fivefold, from $US25 per tonne in 2000 to $125 in the first half of 2008 (January to May); hard coking coal from $40 a tonne to $300; and iron ore from 27 US cents per dry metric tonne to 133. The World Bank’s natural gas index rose to 266.87 in the first half of 2008, from 100 in 2000.
In some cases, these increases are still accelerating. Prices for manganese, a key component in steel and iron production, have more than trebled since June 2007, largely because of a “drought” in manganese supplies, with no new mines on the near-term horizon.
Under contracts signed with Chinese steel manufacturers earlier this year, the coal and iron ore prices will remain at their stratospheric levels for another 12 months. In a June speech to a Canadian business summit, RBA governor Glenn Stevens boasted that iron ore and thermal coal prices would approximately double this year, while those for metallurgical coal would treble. He gloated that China was still “running hot”, whereas Canada’s main export market, the US, was “very weak”.
As a result, Stevens said, Australia’s terms of trade would rise by 20 percent in 2008, taking the total increase since 2002 to nearly 70 percent. He estimated the rise in real domestic income as about 13 percent of GDP, commenting, “We are talking real money here!”
In other words, an extra $A130 billion has flowed into corporate coffers and government tax revenues over the past six years. On the surface, the bonanza is still continuing. Over the past two weeks, the two biggest part-Australian-owned mining giants, BHP-Billiton and Rio Tinto, have announced record profits—$A17.7 billion in a year for BHP and $8 billion over six months for Rio.
Since June, however, spot prices for iron ore and coal have started to fall, along with steel. Iron ore landed in China has fallen from $US200 a tonne to $155; thermal coal at port in Australia from nearly $200 a tonne to $155, and steel is down 10 percent. Chinese steel production is still growing, but much more slowly. Indian prices are also falling.
Even as Stevens was speaking, it was already apparent that prices for other mining exports—freely-traded base metals—had turned downward. Between March and July, the RBA’s base metals index fell almost 16 percent in $A terms and 12.5 percent in US dollars. Some metals have plunged more sharply—zinc is down 37 percent since the start of March, and lead almost 50 percent.
Nickel rose as high as $US50,000 per tonne in May 2007, but it has since fallen almost two-thirds to $18,000. Gold hit an all-time peak of $1,032 an ounce in March and was trading at $965 in mid-July but has since dropped below $775. Copper has fallen almost 20 percent from $8,950 a tonne on July 2 to $7,335.
Particular factors have affected some of these movements. In the case of nickel, for instance, new mines have opened, stainless steel production has been cut massively and China has been substituting domestically produced low-grade nickel pig iron for refined nickel. More fundamentally, however, the falls express the verdict of the markets on decreasing global demand.
“Sentiment in commodity markets has swung heavily negative in the past month,” ANZ Bank senior commodity strategist Mark Pervan wrote in a note to clients this month. “The extent and speed of the declines has prompted us to downgrade our 2008-2010 prices forecasts.” The ANZ warned that the price fall had not ended. It expects the price of iron ore, Australia’s principal export to China, will tumble 10 percent in 2009 and again in 2010. Nickel is set to fall by another quarter this year, then 9 percent in 2009 and a further 19 percent in 2010.
Job losses are another early indicator of the turnaround. Although workers are still flooding into iron ore and coal mining areas, lured by the prospect of high wages, jobs have begun to be axed in other mines.
The lead, zinc and silver mine at Broken Hill in western New South Wales, is sacking more than 450 workers, or almost two-thirds of the workforce. Last month, Minara Resources retrenched nearly 200 workers from its Murrin Murrin nickel operation in Western Australia and Crescent Gold is said to have laid-off about 150 workers when it suspended operations at its Laverton mine in Western Australia. In June, CBH Resources dismissed 220 workers, almost 40 percent of its workforce, at the Endeavour silver, lead and zinc mine near Cobar in central NSW.
Given the dependence of all these sectors on China’s continuing growth, any fall off in Chinese demand will ever more sharply expose the Australian economy’s vulnerability to the global slump, belying claims that it has “de-coupled” from the financial crisis in the US because of the expansion of Chinese and other Asian markets.
The puncturing of the mining boom will have serious implications for the entire economy, not only by slashing jobs, consumer spending and government tax revenue, but also by further undermining debt-laden investment firms and financial institutions, including the major banks.
Commentators have begun voicing fears of severe economic dislocation. “Commodity booms end ugly, they always do, and there has never been an exception,” Access Economics director Chris Richardson told the Australian last week, warning: “The commodity markets are more central to Australian national income than either credit markets or share markets.”
VII. Kondratieff Winter Means An EU US Iran War, Fighting Terrorists, Military Conflict In The Black Sea and Syria Area, And Eventually The Outbreak Of World War III
EU US Iran War: A confrontation between the trans-Atlantic EU US Western World Government and Iran, is imminent over its nuclear ambitions, and will manifest as a military strike on Iran, by the naval armada currently residing in the Persian Gulf.
Fighting Terrorists: Umberto Pascali writing in GlobalResearch.ca article Obama's Running Mate Presents The Strategic Plan For The Next Administration quotes Joe Biden as saying at the Democratic Convention in Denver on August 27, 2008: "The fact of the matter is, al-Qaida and the Taliban - the people who have actually attacked us on 9/11 - they've regrouped in the mountains between Afghanistan and Pakistan and are plotting new attacks. And the Chairman of the Joint Chiefs of Staff has echoed Barack's call for more troops and John McCain was wrong and Barack Obama was right. Should we trust John McCain's judgment? When he rejects, when he rejected talking with Iran and asked what is there to talk about? Or Barack Obama, who said we must talk and must make clear to Iran that it must change?"
Military Conflict In The Black Sea Area And In Syria: RIA Novosti reports that Vladamir Putin Pledges Measured Response To NATO Warships In Black Sea.
World War III: F. William Engdahl writing in GlobalResearch.ca article Missile Defense: Washington And Poland Just Moved The World Closer To War
Who was Kondratieff and what was his Kondratieff Wave Theory?
Following is an part of the Who Was Kondratieff? article found on Kwaves.com and KondratieffWinter.com.
To introduce the Kondratieff Theory, we must go back over seventy years and examine a remarkable story in economic history, encompassed within the life of one still little known man. I am certain that, in time, Kondratieff will rank with the giants of discovery as Einstein and Newton. Like these men, his insights have begun to alter radically and permanently our perceptions of economic history. The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.
Professor Nickolai Kondratieff ( pronounced "Kon-DRA-tee-eff") Shortly after the Russian Revolution of 1917, he helped develop the first Soviet Five-Year Plan , for which he analyzed factors that would stimulate Soviet economic growth. In 1926, Kondratieff published his findings in a report entitled, "Long Waves in Economic Life". Based upon Kondratieff's conclusions, his report was viewed as a criticism of Joseph Stalin's stated intentions for the total collectivization of agriculture. Soon after, he was dismissed from his post as director of the Institute for the Study of Business Activity in 1928.
He was arrested in 1930 and sentenced to the Russian Gulag (prison); his sentence was reviewed in 1938, and he received the death penalty, which it is speculated was carried out that same year. Kondratieff's major premise was that capitalist economies displayed long wave cycles of boom and bust ranging between 50-60 years in duration.
Kondratieff's study covered the period 1789 to 1926 and was centered on prices and interest rates. Kondratieff's theories documented in the 1920's were validated with the depression less than 10 years later.
Today, we are faced with another Kondratieff Winter (depression) when the majority of the world anticipates economic expansion. Each individual needs to weigh the risk of depression in light of Kondratieff's work.
In desperate times people look for a leader who promises change and deliverance
Sam Mathid in 321gold article How Obama Won the Election relates: "Obama will win this election ... The word 'Change' will be uttered more and more by Obama, and the need for change will become ever more pronounced as we approach voting day. The only pitfall is now behind Obama. That pitfall was selecting Clinton as VP. Clinton represents 'No Change' and would have killed off Obama's chances of the presidency. Every person who is in dire financial straits will vote for Obama ... McCain is not just old, he is old hat. He stands for no change. There is no chance of McCain being a good president. He is rock solid locked into a mindset that brooks no possibility of new thoughts. He is a man of fixed ideas, and those fixed ideas are the very exposed ideas of George Bush and the neo-cons. Couple that with a bad temper and you have a dangerous mix ... There is a possibility, albeit slim, of Obama becoming a good president because he is a charismatic man who stands for nothing. As such he has a chance of coming to grips with what is really happening in America right now. He is not committed to anything or anybody other than his own success ... McCain has fixed ideas and cannot change anything. Obama has no ideas and can change anything. That is the only message that will come across in November. It is the only message that matters. That is why Obama will win ... God help us".
These people have seen the Christ and his name is Obama; photo courtesy of Gene of the SayAnythingBlog.
Kondratieff Winter will see the rise of combined state corporate rule
State corporatism will replace capitalism: here framework agreements, such as the Security and Prosperity Partnership, the SPP, replace traditional and constitutional law. Stakeholders are appoined to govern in global governance principles of civil security, and decrees of working groups and councils such as the North American Competitiveness Council, the NACC. The stakeholders will oversee the factors of production and direct the use of natural resources for the purposes of the homeland.
Militaism and patriotism be synomous; and will be a cultural more.
Businesses will be tightly entertwined with government as we see from the Military.com and AdvertisingAge article Sears to Sell Army-Approved Clothing which announced that Soldier Chic isn't a new fashion trend, but now consumers will be able to buy officially endorsed military merchandise at their local department store. The U.S. Army has officially licensed its First Infantry Division marks and insignias to Sears.
Sears, Roebuck & Co. has signed a deal with the U.S. Army to launch the All American Army Brand's First Infantry Division clothing collection. It marks the first time the U.S. Army has officially licensed its marks and insignias; licensing fees will be used to support military programs for troops and their families.
Coming to Fashion Week
The president of Sears Apparel said the brand will be prominently featured during the retailer's Fall Forward fashion. The line will also be included in future marketing campaigns, including those slated for the holiday season.
"Over the years, military-inspired clothing has played a distinct role in shaping fashion trends," Mr. Israel said. "We are now able to exclusively offer a line that is pure to the origins of that inspiration."
Military booster
The collection aims to simultaneously raise the profile of the U.S. Army and round out Sears' military program. The collection dovetails with Sears' "Heroes at Home" program, which provides home renovations to military families and has been promoted through twice-a-year marketing campaigns. Sears also has an extensive military-support program that includes community outreach and employee assistance, among other things.
VIII. My investment recommendations remain unchanged
I recommend the use a trust account to
1) buy SKF,
2) short sell of MBI, ABK, and RDN, SCA, MTG, RAM, SUR, and AGO.
I recommend a small short position in USD/JPY in a Forex account.
And I recommend the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.
The other reason for buying gold is that the former well springs of liquidity, the USD/JPY and the EUR/JPY, have now gone toxic on risk aversion to inflation, debt and decreased profit and growth opportunity.
These currency pairs will now be saws of destruction working to cut asunder fiat wealth; and in the process of sawing, gold will fall out as the worlds's currency and measure and means of garnering and preserving wealth.
In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.
US Treasuries are no longer a lifeboat of safety as they seem to be topping out -- look for gold to soon arise as the defacto world currency and measure and means of garnering and preserving wealth as people flee fiat assets and world conflicts escalate.
IX. Suggested Reading
The Building Storm: Gold, the Dollar and Inflation
Either the Fed Kills the Dollar or the Banks. Is It That Simple?
In the Eye of the Storm
The Big Question
Introduction
The US Dollar failed to move higher as the USD/JPY fell, even though the EUR/JPY fell lower decimating natural resource stocks.
Today may have been peak dollar.
Mid day trading action
The Yahoo Finance 5 day ongoing chart of the usd/jpy relative to the eur/jpy shows that the fall of the USD/JPY has put a cap on the US Dollar, DX, moving higher even though the yen carry trade fell lower today .... The usd/jpy fell lower as well as the eur/jpy
The Yahoo Finance 5 day ongoing chart of USD/JPY shows a close at 108.28. This is presented in ActionForex USD/JPY Mid-Day Outlook
The Yahoo Finance 5 day ongoing of the EUR/JPY shows a fall of the EUR/JPY to 157, FXE:FXY, continued to decimate natural resource stocks such as KOL, OIH, SLX, and XME.
The EUR/USD has finally hit the long-term uptrend support line that has been in place for at least two and a half years. Poking slightly below the line during the first half of European session on Wednesday, price has since rebounded somewhat to settle slightly above the trendline again at 145.01 in chart courtesy of OneBrownGuy. Greg Michalowski of FXDD reports that is 1.4357 is 38.2% retracement.
The HUI Indexed precious metal mining shares, that is the gold shares, GDX, got further disconnected from the price of gold.
Even the venerable fertilizer stock, POT, got further beaten down.
The Nasdaq 100, QTEC, and the Semiconductors, SMH, are taking the Nasdaq, QQQQ, down.
IndexTrader in article NDX: In Search of Support provides the chart of the $NDX falling out of a consolidation triangle.
The fall of the semiconductors, SMH, communicates that investing US growth stocks is over.
A rise in the financials buoyed the Russell 2000, IWM, which manifested a harami at 74.
The chart of the Russell 2000, IWM, compared to the Nasdaq, QQQQ, communicates that investors are selling out of growth stocks yet retaining the value stocks .... IWM:QQQQ.
The Russell 2000 value shares, IWN, compared to the growth shares shows, IWO, IWN:IWO shows how the US Dollar rally has benefited the value shares more than the growth shares. The harami shown will stay up, as long as long as the rally in the US Dollar itself and the financial shares stays up. But then, lookout below, the IWN, that is the value shares, will really go on a tear, and take the Russell 2000 lower.
While, financials, IYF, and homebuilding, XHB, and retail, XRT, are up.
The growth shares are falling, where as the value shares are holding up, on the financial, IYF, sector strength, as seen in this MSN Finance chart of growth shares jkh and iwo, compared to value shares iwn, xhb, xrt, rzv ... Growth shares jkh and iwo have turned down whereas as the value shares iwn, xhb, xrt, rzv are still up.
The Yahoo Finance ongoing 5 day solar stocks, TAN, shows that they have fallen lower with the growth stocks, semiconductors and oil. TAN fell lower with JKH, SMH, and USO.
Gainers today include
SSG on the fall of Dell computer ... up 10%
FXP on the fall of the EUR/JPY ... up 5%
SMN on the fall of the EUR/JPY ... up 4%
EEV on the fall of the EUR/JPY ... up 4%.
REW on the fall of Dell computer and the fall of the semiconductors ... up 4%
SFK on the downturn of the growth stocks ... up 3%
SDP following the coat-tails of SSG ... up 3%
LEH on rumors of Korean buying interest and rumors of Japanese buying interest
Elaine Meinel Supkis writing in Driving Global Banking Off The Cliff relates: Lehman is basically bankrupt. The Asian powers are like the vultures and in the case of China, the dragon that is picking at the corpse to see who gets what portion. One might get the belly. Another one, the eyeballs and tongue. Teeth rend at the inert body. Blood on fangs and noses, they shove each other aside. I wonder which unidentified bank in China is buying Lehman Brothers. I would not shock me to learn the buyer is someone I knew years ago. A high Chinese official told me, in my house, in New Jersey, 'I be BANK!' when he figured out how banks really work.
The mortgage related group rose today
RDN up 21%.
SCA up 28%
MTG up 14%
RAMR up 14%
SUR up 15%
AGO up 5%
ABK up 22%
MBI up 2%
Gold ... Not US Treasuries, or stocks is the real lifeboat of safety
The gold ETF, GLD, lost only 0.5%, and closed at 78.89 as the US Dollar, DX-Y.NYB, failed to move higher .... GLD compared to DX-Y.NYB.
Gold, $GOLD, closed at $800. I am a gold optimist -- I like to think that gold is in an Elliott Wave 2 Down ready to go in an Elliott Wave 3 higher.
Gold relative to the Euro, GLD:FXE Daily and GLD:FXE Weekly is at a critical juncture and needs to keep rising from 0.540
The US Treasury Bubble is about to burst and interest rates are going severely higher
Treasuries ETF TLT moved higher today to 94.77.
The futures Treasuries is calling a market top in Government Bonds, $USB.
The cash market place Treasuries is over extended in relation to the futures Treasuries: TLT:$USB
The chart of the zero coupon mutual bond fund BTTRX suggests that a market top is approaching in government bonds.
And the spike down in the interest rate on the 30 Year US Treasury Bond, $TYX, suggests the same as well.
Utility shares fell lower today: VPU Daily and VPU Weekly.
Higher interest rates and lower utility shares suggest that headline inflation, that is the prices people pay for basic living, will rise even if oil prices continue to drop.
We are transitioning out of the age of prosperity and into the age of financial ruin.
The fall in the USD/JPY today is communicating that the age of prosperity that came through investing in growth stocks is done and over.
We will soon see another fall in the financial shares, IYF, and that will continue to communicate that the age of prosperity that came through financialization is done and over.
Today we have likely seen the death of automobile lending and the death of home loan lending MockThe Market relates that US automakers reported continued declines in sales for the 10th straight month. August sales dropped 20% for GM, 27% for Ford and a whopping 34% for Chrysler. GMAC, the auto and mortgage finance company still partly owned by GM, has announced that it planned to eliminate 5,000 jobs at its Residential Capital mortgage unit and close all 200 GMAC Mortgage retail offices. The job cuts amount to roughly 60% of its workforce and a closure of all of its retail offices.
Soon the US dollar will be falling lower with the commodity currencies and gold will arise as the world's currency and measure and means of garnering and preserving wealth.
The very important economic report comes out on Friday, I hope it will be a turning point lower for the US Dollar, that is DX-Y.NYB, Here is today's chart of DX-Y.NYB; I hope this is as high as it goes.
The Dollar Bull ETF, UUP, shows the same topping out as the US Dollar, DX ... UUP
The gravestone doji in the Dollar, DX, in article Charts in the Babson Style Midweek 3 September 2008 is remarkeable. And note that this is full retracement to the October Citigroup CDO Bust. This gives extra credence to possibly finally being Peak Dollar.
If it is Peak Dollar, then the US Stocks, VTI, will fall; and the world stocks, EFA should rise. There is an ungodly harami candlestick in the weekly VTI:EFA that goes back to December 2006; the Dollar Rally when coupled with the unwinding of the yen carry trade has created a freak of nature in overvalued US stocks ... VTI:EFA
With the exception of XHB and XRT, the MSN chart of VTI and QQQQ suggests that August 15, was Recent Peak US Stock Wealth. VTI, QQQQ, XHB, XRT
As stocks fall lower the carry traders will sell the US Dollar and then the US Stocks will fall even more.
But then again, I thought time and time again we had arrived at Peak Dollar.
The currency traders, especially the yen carry traders, are destabilizing the world financial system and bringing on Kondratieff Winter
Those with access to the 0.5% interest loans from the Bank of Japan are destabilizing currencies world wide, and stock markets globally such as Brazil, EWZ, and South Korea, EWT.
Using the Bank of Japan lending window at the rate of only 0.5% the currency traders are able to destabilize whole countries such as South Korea, where they have gone short the Won and long the US Dollar. The M&C Business News article South Korea Currency Firms Briefly On Dollar-Selling Intervention reports: "The South Korean won was briefly lifted against the US dollar in morning trade on Wednesday, apparently due to suspected dollar-selling intervention by the government.
The slide was temporarily stopped after the South Korean currency fell to a session low of 1,159 won at one point late Wednesday morning. It is suspected that earlier losses were cut as foreign exchange authorities poured in an estimated 1.5 billion dollars.
'It is believed that the dollar selling took place for one hour this morning, as the government must keep the won value above the 1140-level, which is usually seen as the psychological threshold,' said one foreign exchange dealer in Seoul.
The South Korean won hit its weakest since August 18, 2004, on Wednesday with the benchmark index plunging to its lowest level in 17 months as a slowing economy pushed bond and stock funds to move money out of South Korea.
The won has lost almost 18 per cent versus the dollar so far this year, putting upward pressure on already high inflation.
The slowing global demand, combined with inflation has raised concern that a repeat of the 1997 financial crisis may strike Asia's fourth largest economy, which the government tried to deflect Wednesday.
'Our economy is expected to undergo significant difficulties,' said Lee Sung Tae, governor of the central Bank of Korea. 'But it is still my judgement so far that the economy won't go as badly as it was in the 1997 crisis,' he added.
South Korea currently holds 243.2 billion dollars of foreign exchange reserves, which is below the IMF-recommended level of 320 billion dollars. In 1997, the short-term foreign loan stood at 63.7 billion US dollars, which was three times as much as the foreign-exchange reserve.
As of the end of June 2008, short-term foreign loans stood at 175.8 billion US dollar, representing 72 per cent of total foreign-exchange reserve, according to the central Bank of Korea.
South Korean corporations have reduced debt rate. The average debt rate by major manufacturing companies reduced from around 400 per cent in 1997 to around 100 per cent in 2007."
Here is the ongoing MSN chart of the South Korean Market Shares KY, compared to the Russell 2000. KY compared to IWM shows that beginning in May, investors sold the Korean shares and the high yield dividend payers; but then the US Dollar Rally came July 15, which brought the dividend payers and the Russell 2000 shares back up ... KY compared to IWM.
The unwinding yen carry trade has acclerated Kondratieff Winter
Mike Head writing in World Socialist Website article Global Downturn Begins To Puncture Australian Mining Boom describes the personal misery and economic dislocation that comes as investors use 0.5% interest loans from the Bank of Japan "to go short the Euro, FXE, and long the Yen, FXY", in other words go short the EUR/JPY, to take advantage of the falling yen carry trade, and risk aversion to rising inflation and diminishing growth opportunities in the emerging markets. Mr. Head's article, reproduced below, documents the onset of Kondratieff Winter.
Since July, definite signs have emerged that Australia’s mining boom, a major factor in the country’s much touted economic growth during the past decade, has started to crumble under the weight of the world economic slowdown. Mineral export prices have begun to turn. The London Metal Exchange Index of six base metals, including copper, zinc and nickel, fell more than 20 percent from a peak of 4,400 in March to 3,400 in early August.
As a result, the Australian dollar has tumbled. After rising to near parity with the weakening US dollar in the first half of this year, it has become one of the world’s weakest currencies in recent weeks, falling well over 10 percent against the greenback.
While fluctuations in metal prices are certainly affected by speculative flows, the latest downturn is, at bottom, an expression of the markets’ reaction to what some financial commentators have called a “tidal shift” in the world economy. With the exception of China and India, all the major markets for Australian mineral and energy exports are now contracting or on the brink of recession: Japan, the US, Britain and the Euro zone.
While China, which last year overtook Japan as Australia’s largest trading partner, is still growing, its growth has slowed from 11.5 percent last year to less than 10 percent this year, and is expected to drop to 9 percent next year. An even sharper slowdown could be ahead, because about one-third of China’s growth is estimated to come from exports.
Over the past seven years, the Australian mining sector, has benefited from an extraordinary surge in world prices for coal, iron ore, base metals and natural gas. The Reserve Bank of Australia (RBA) Index of Commodity Prices rose by more than 250 percent between 2002-03 and mid-2008, reversing a long period of falling or stagnating prices.
Some of the key rises were even greater. Thermal coal rose fivefold, from $US25 per tonne in 2000 to $125 in the first half of 2008 (January to May); hard coking coal from $40 a tonne to $300; and iron ore from 27 US cents per dry metric tonne to 133. The World Bank’s natural gas index rose to 266.87 in the first half of 2008, from 100 in 2000.
In some cases, these increases are still accelerating. Prices for manganese, a key component in steel and iron production, have more than trebled since June 2007, largely because of a “drought” in manganese supplies, with no new mines on the near-term horizon.
Under contracts signed with Chinese steel manufacturers earlier this year, the coal and iron ore prices will remain at their stratospheric levels for another 12 months. In a June speech to a Canadian business summit, RBA governor Glenn Stevens boasted that iron ore and thermal coal prices would approximately double this year, while those for metallurgical coal would treble. He gloated that China was still “running hot”, whereas Canada’s main export market, the US, was “very weak”.
As a result, Stevens said, Australia’s terms of trade would rise by 20 percent in 2008, taking the total increase since 2002 to nearly 70 percent. He estimated the rise in real domestic income as about 13 percent of GDP, commenting, “We are talking real money here!”
In other words, an extra $A130 billion has flowed into corporate coffers and government tax revenues over the past six years. On the surface, the bonanza is still continuing. Over the past two weeks, the two biggest part-Australian-owned mining giants, BHP-Billiton and Rio Tinto, have announced record profits—$A17.7 billion in a year for BHP and $8 billion over six months for Rio.
Since June, however, spot prices for iron ore and coal have started to fall, along with steel. Iron ore landed in China has fallen from $US200 a tonne to $155; thermal coal at port in Australia from nearly $200 a tonne to $155, and steel is down 10 percent. Chinese steel production is still growing, but much more slowly. Indian prices are also falling.
Even as Stevens was speaking, it was already apparent that prices for other mining exports—freely-traded base metals—had turned downward. Between March and July, the RBA’s base metals index fell almost 16 percent in $A terms and 12.5 percent in US dollars. Some metals have plunged more sharply—zinc is down 37 percent since the start of March, and lead almost 50 percent.
Nickel rose as high as $US50,000 per tonne in May 2007, but it has since fallen almost two-thirds to $18,000. Gold hit an all-time peak of $1,032 an ounce in March and was trading at $965 in mid-July but has since dropped below $775. Copper has fallen almost 20 percent from $8,950 a tonne on July 2 to $7,335.
Particular factors have affected some of these movements. In the case of nickel, for instance, new mines have opened, stainless steel production has been cut massively and China has been substituting domestically produced low-grade nickel pig iron for refined nickel. More fundamentally, however, the falls express the verdict of the markets on decreasing global demand.
“Sentiment in commodity markets has swung heavily negative in the past month,” ANZ Bank senior commodity strategist Mark Pervan wrote in a note to clients this month. “The extent and speed of the declines has prompted us to downgrade our 2008-2010 prices forecasts.” The ANZ warned that the price fall had not ended. It expects the price of iron ore, Australia’s principal export to China, will tumble 10 percent in 2009 and again in 2010. Nickel is set to fall by another quarter this year, then 9 percent in 2009 and a further 19 percent in 2010.
Job losses are another early indicator of the turnaround. Although workers are still flooding into iron ore and coal mining areas, lured by the prospect of high wages, jobs have begun to be axed in other mines.
The lead, zinc and silver mine at Broken Hill in western New South Wales, is sacking more than 450 workers, or almost two-thirds of the workforce. Last month, Minara Resources retrenched nearly 200 workers from its Murrin Murrin nickel operation in Western Australia and Crescent Gold is said to have laid-off about 150 workers when it suspended operations at its Laverton mine in Western Australia. In June, CBH Resources dismissed 220 workers, almost 40 percent of its workforce, at the Endeavour silver, lead and zinc mine near Cobar in central NSW.
Given the dependence of all these sectors on China’s continuing growth, any fall off in Chinese demand will ever more sharply expose the Australian economy’s vulnerability to the global slump, belying claims that it has “de-coupled” from the financial crisis in the US because of the expansion of Chinese and other Asian markets.
The puncturing of the mining boom will have serious implications for the entire economy, not only by slashing jobs, consumer spending and government tax revenue, but also by further undermining debt-laden investment firms and financial institutions, including the major banks.
Commentators have begun voicing fears of severe economic dislocation. “Commodity booms end ugly, they always do, and there has never been an exception,” Access Economics director Chris Richardson told the Australian last week, warning: “The commodity markets are more central to Australian national income than either credit markets or share markets.”
VII. Kondratieff Winter Means An EU US Iran War, Fighting Terrorists, Military Conflict In The Black Sea and Syria Area, And Eventually The Outbreak Of World War III
EU US Iran War: A confrontation between the trans-Atlantic EU US Western World Government and Iran, is imminent over its nuclear ambitions, and will manifest as a military strike on Iran, by the naval armada currently residing in the Persian Gulf.
Fighting Terrorists: Umberto Pascali writing in GlobalResearch.ca article Obama's Running Mate Presents The Strategic Plan For The Next Administration quotes Joe Biden as saying at the Democratic Convention in Denver on August 27, 2008: "The fact of the matter is, al-Qaida and the Taliban - the people who have actually attacked us on 9/11 - they've regrouped in the mountains between Afghanistan and Pakistan and are plotting new attacks. And the Chairman of the Joint Chiefs of Staff has echoed Barack's call for more troops and John McCain was wrong and Barack Obama was right. Should we trust John McCain's judgment? When he rejects, when he rejected talking with Iran and asked what is there to talk about? Or Barack Obama, who said we must talk and must make clear to Iran that it must change?"
Military Conflict In The Black Sea Area And In Syria: RIA Novosti reports that Vladamir Putin Pledges Measured Response To NATO Warships In Black Sea.
World War III: F. William Engdahl writing in GlobalResearch.ca article Missile Defense: Washington And Poland Just Moved The World Closer To War
Who was Kondratieff and what was his Kondratieff Wave Theory?
Following is an part of the Who Was Kondratieff? article found on Kwaves.com and KondratieffWinter.com.
To introduce the Kondratieff Theory, we must go back over seventy years and examine a remarkable story in economic history, encompassed within the life of one still little known man. I am certain that, in time, Kondratieff will rank with the giants of discovery as Einstein and Newton. Like these men, his insights have begun to alter radically and permanently our perceptions of economic history. The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.
Professor Nickolai Kondratieff ( pronounced "Kon-DRA-tee-eff") Shortly after the Russian Revolution of 1917, he helped develop the first Soviet Five-Year Plan , for which he analyzed factors that would stimulate Soviet economic growth. In 1926, Kondratieff published his findings in a report entitled, "Long Waves in Economic Life". Based upon Kondratieff's conclusions, his report was viewed as a criticism of Joseph Stalin's stated intentions for the total collectivization of agriculture. Soon after, he was dismissed from his post as director of the Institute for the Study of Business Activity in 1928.
He was arrested in 1930 and sentenced to the Russian Gulag (prison); his sentence was reviewed in 1938, and he received the death penalty, which it is speculated was carried out that same year. Kondratieff's major premise was that capitalist economies displayed long wave cycles of boom and bust ranging between 50-60 years in duration.
Kondratieff's study covered the period 1789 to 1926 and was centered on prices and interest rates. Kondratieff's theories documented in the 1920's were validated with the depression less than 10 years later.
Today, we are faced with another Kondratieff Winter (depression) when the majority of the world anticipates economic expansion. Each individual needs to weigh the risk of depression in light of Kondratieff's work.
In desperate times people look for a leader who promises change and deliverance
Sam Mathid in 321gold article How Obama Won the Election relates: "Obama will win this election ... The word 'Change' will be uttered more and more by Obama, and the need for change will become ever more pronounced as we approach voting day. The only pitfall is now behind Obama. That pitfall was selecting Clinton as VP. Clinton represents 'No Change' and would have killed off Obama's chances of the presidency. Every person who is in dire financial straits will vote for Obama ... McCain is not just old, he is old hat. He stands for no change. There is no chance of McCain being a good president. He is rock solid locked into a mindset that brooks no possibility of new thoughts. He is a man of fixed ideas, and those fixed ideas are the very exposed ideas of George Bush and the neo-cons. Couple that with a bad temper and you have a dangerous mix ... There is a possibility, albeit slim, of Obama becoming a good president because he is a charismatic man who stands for nothing. As such he has a chance of coming to grips with what is really happening in America right now. He is not committed to anything or anybody other than his own success ... McCain has fixed ideas and cannot change anything. Obama has no ideas and can change anything. That is the only message that will come across in November. It is the only message that matters. That is why Obama will win ... God help us".
These people have seen the Christ and his name is Obama; photo courtesy of Gene of the SayAnythingBlog.
Kondratieff Winter will see the rise of combined state corporate rule
State corporatism will replace capitalism: here framework agreements, such as the Security and Prosperity Partnership, the SPP, replace traditional and constitutional law. Stakeholders are appoined to govern in global governance principles of civil security, and decrees of working groups and councils such as the North American Competitiveness Council, the NACC. The stakeholders will oversee the factors of production and direct the use of natural resources for the purposes of the homeland.
Militaism and patriotism be synomous; and will be a cultural more.
Businesses will be tightly entertwined with government as we see from the Military.com and AdvertisingAge article Sears to Sell Army-Approved Clothing which announced that Soldier Chic isn't a new fashion trend, but now consumers will be able to buy officially endorsed military merchandise at their local department store. The U.S. Army has officially licensed its First Infantry Division marks and insignias to Sears.
Sears, Roebuck & Co. has signed a deal with the U.S. Army to launch the All American Army Brand's First Infantry Division clothing collection. It marks the first time the U.S. Army has officially licensed its marks and insignias; licensing fees will be used to support military programs for troops and their families.
Coming to Fashion Week
The president of Sears Apparel said the brand will be prominently featured during the retailer's Fall Forward fashion. The line will also be included in future marketing campaigns, including those slated for the holiday season.
"Over the years, military-inspired clothing has played a distinct role in shaping fashion trends," Mr. Israel said. "We are now able to exclusively offer a line that is pure to the origins of that inspiration."
Military booster
The collection aims to simultaneously raise the profile of the U.S. Army and round out Sears' military program. The collection dovetails with Sears' "Heroes at Home" program, which provides home renovations to military families and has been promoted through twice-a-year marketing campaigns. Sears also has an extensive military-support program that includes community outreach and employee assistance, among other things.
VIII. My investment recommendations remain unchanged
I recommend the use a trust account to
1) buy SKF,
2) short sell of MBI, ABK, and RDN, SCA, MTG, RAM, SUR, and AGO.
I recommend a small short position in USD/JPY in a Forex account.
And I recommend the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.
The other reason for buying gold is that the former well springs of liquidity, the USD/JPY and the EUR/JPY, have now gone toxic on risk aversion to inflation, debt and decreased profit and growth opportunity.
These currency pairs will now be saws of destruction working to cut asunder fiat wealth; and in the process of sawing, gold will fall out as the worlds's currency and measure and means of garnering and preserving wealth.
In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.
US Treasuries are no longer a lifeboat of safety as they seem to be topping out -- look for gold to soon arise as the defacto world currency and measure and means of garnering and preserving wealth as people flee fiat assets and world conflicts escalate.
IX. Suggested Reading
The Building Storm: Gold, the Dollar and Inflation
Either the Fed Kills the Dollar or the Banks. Is It That Simple?
In the Eye of the Storm
The Big Question
WIDGETIZE