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Review of World Financial InStability.

 

My Thanks to our friends over at http://www.wealthbuilder.ie/.   for sending this article on “Review of World Financial InStability”.

Summary: (World: US Dollars: Approx. 2013).
11. Total Value of Derivatives (Notional): 1,200 Trillion (1.2 Quadrillion).
10. Total Value of All Assets (Fin. /Real Estate): 318 Trillion (8. Plus 9.)
9. Total Value of Financial Assets: 198 Trillion
8. Total Value of Real Estate: 120 Trillion
7. All Debt. (Owned by Banks): 257 Trillion (5. Plus 6.).
6. Total Priv. Debt. (Owned by Banks): 193 Trillion (Priv./Corporate).
5. Total Gov. Debt. (Owned by Banks): 64 Trillion
4. World GDP: 60 Trillion
3. Total Value of Derivatives (Cash Val.): 20 Trillion
2. Total Value of Circulating Currency: 4 Trillion
1. Total Value of Gold Reserves: 1.5 Trillion

When you comprehend the above you begin to understand why many are
beginning to realize the reality behind the “inverted pyramid” below. This is
why it is believed that the current “fiat” (Fiat = let it be) money system favors
the few to the detriment of the many and cannot continue.

Note1: Nearly 16% of world GDP is income earned on dividends, interest and
rent: 9.5 Trillion dollars. A further approximately 15 % is earned by banks
through “fractional reserving”: 9 Trillion dollars. Thus annually nearly 18.5
Trillion dollars, or 31% of world GDP, is income earned but unworked. This is the
financial reality behind the phrase: “the money system is not physically working
and is therefor “virtual”, not “real”.

Note 2: Worldwide the ratio of private debt to public debt is approx. 4:1
respectively.

Note 3: Total Chinese debt: 18 trillion dollars.

Note 4: Euro Dollar debt: 16 trillion dollars.

Note 5: World fractional cash reserve ratio: 64. (257 trillion dollars, total bank
debt, divided by 4 trillion dollars, total cash).
Note 6: World fractional gold reserve ratio: 171. (257 trillion dollars, total bank
debt, divided by 1.5 trillion dollars, total Gold reserves).

Note 7: Hyper-Inflation Trending: For that last 20 years the level of “cash in
circulation” has doubled every 5 years approx. Cash in circulation as opposed to
debt is a true barometer of hyper-inflation tendencies.

full article in PDF form here:World Economic In-Stability – Copy(1)

Stocks drop on Libya, surprise Chinese deficit

LONDON -The battle for control of Libya and weaker than expected Chinese economic data weighed on markets Thursday while a debt rating downgrade of Spain hit the euro, a day ahead of a crucial meeting of EU leaders.

Sentiment over the past few weeks has been driven by developments in North Africa, most recently in Libya, which in normal times produces a little under 2 percent of the world’s global oil needs.

Though the regime of longtime leader Moammar Gadhafi appears to be recapturing ground lost to rebels, investors remain cautious of staking out fresh positions given worries over oil supplies and how the crisis in the Arab world will spread.

The main impact has been in oil markets, sending prices up to their highest levels for around two and a half years. By early afternoon London time, the benchmark oil contract on the New York Mercantile Exchange was down 98 cents at $103.40 a barrel, while Brent crude in London fell $1.36 to $114.58.

Both figures are somewhat lower than where they were on Monday but remain elevated and a threat to global growth prospects. That fear has hung over stock markets recently — equities are a leading indicator of perceptions for economic expansion.

It’s clear that rising oil prices are having an impact in China, which has been one of the main pillars behind the global economy over the past few years. Many analysts argue that buoyant Chinese economic growth effectively prevented the economic recession from becoming a depression.

The world’s second biggest economy, however, reported a surprise trade deficit in February as surging prices for oil and other commodities pushed up its import bill.

“Confidence in equity markets is being shaken once again as China’s surprise posting of a trade deficit combined with the ongoing geopolitical uncertainty — something that’s still focused very much on Libya — is pushing traders very much into a bearish mindset,” said Harley Salt, head of sales trading at IG Markets.

In Europe, the FTSE 100 index of leading British shares was down 1.1 percent at 5,874 while Germany’s DAX fell 0.7 percent to 7,081. The CAC-40 in Paris was 0.6 percent lower at 3,969.

Wall Street was poised for a retreat at the open — Dow futures were down 42 points at 12,132 while the broader Standard & Poor’s 500 futures fell 6.4 points to 1,309.

Hardly helping matters was the news that Moody’s has downgraded its credit rating on Spain by one notch to Aa2, citing worries over the cost of the banking sector’s restructuring, the government’s ability to achieve its borrowing reduction targets and grim economic growth prospects.

The euro retreated in the wake of the downgrade, trading 0.5 percent lower on the day at $1.3832.

The downgrade came amid signs that Europe’s debt crisis is flaring up again ahead of the March 24-25 summit of EU leaders in Brussels. Portugal’s cost to borrow 10-year bonds stands near a euro-era record.

Though a “comprehensive solution” to the debt crisis has been trumpeted, there are growing fears that the 17 countries that use the euro will not agree a revamped bailout mechanism, set new rules on budget deficits and a system of support funds to flow from richer countries in the single currency bloc to the poorest.

“Eurozone issues have returned to the fore as we approach a period of critical decisions on the funding facilities and bank stress tests,” said Richard Cochinos, a foreign exchange strategist at Bank of America Merrill Lynch.

News that the Bank of England kept its main interest rate unchanged at the record low of 0.5 percent was not a huge surprise.

However, the bank is expected to start raising borrowing costs in the next couple of months in response to inflation running at double the 2 percent target.

Earlier in Asia, Japan’s Nikkei 225 stock average ended 1.4 percent lower at 10,434.38 after the government said the economy shrank 1.3 percent in the fourth quarter.

Chinese shares fell too, with the Shanghai Composite Index closing down 1.5 percent to close at 2,957.14 while the Shenzhen Composite Index of China’s smaller, second exchange fell 0.7 percent to 1,302.65.

Hong Kong’s Hang Seng index retreated 0.8 percent to 23,614.89.

Kelvin Chan in Hong Kong contributed to this report.

See full article from DailyFinance: http://srph.it/g2Ck6m

wealthbuilder.ie latest market brief

Wealthbuilder.ie

Quarterly Market Brief

1st. December 2010

Chris over at wealthbuilder.ie has sent over his latest market brief

My favourite indicator of market breath, the McClennan Summation Index, is finally beginning to get to a level where it is becoming interesting. A move into negative territory, though some ways to go, will herald the probability that stocks will soon begin providing price action that brings solid technical support. This is good news particularly for those who have been out of the market since the early September bull move. In my books patience is a major key to achieving above average investment returns. Those investors who relaxed and held off while the herd chased the trend should now begin to sharpen their attention. At the moment the Dow Transports (DJ-20) are showing more strength than the Dow Industrials (DJ-30).  However, Technology, Mid-Caps and Small Caps all remain strong despite pull-backs. This indicates that the March 2009 bull trend is still solidly in place for the moment.full PDF Doc here Nov Market brief

The Final Act of Treachery

 sent in today

 Photo :Irish independent(altered text )

29.th  November 2010

 I was utterly speechless when I discovered that Paddy Honohan of the “Irish” central bank was leading the “negotiations” to save the financial system of the Irish nation.

A leading Irish tabloid had the former Central Bank governor a lead joker in its card deck of Ireland’s most wanted. So everybody knew that the central bank was part of the problem not part of the solution. Brian Cowen’s appointment of Joker Honohan was Fianna Fails’s last act of national treachery. The outcome has proved true to form. The deal forcing Ireland to use its sovereign wealth funds first before any drawdown of IMF/ECB loans renders Ireland utterly bankrupt and helpless. When the next term of negotiations take place within the next few years, (as our austerity deal starts to unravel, due to negative growth) Ireland will have no fall back reserves. It’s hidden off-balance sheet derivative position mentioned by Pat Rabbit over the weekend ( see attached CSO report) will finally be laid bare for all to see and the repercussions will be onerous. The sovereign wealth fund could have been used to fund an unencumbered commercial state bank but instead the funds have been squandered by an incompetent administration. At this stage their failure is bordering on the criminal and criminal acts are null and void.

The rate of interest charged on this loan is penal. It is high because every financial dog on Wall Street knows default is in the offing thanks to Angela Merkels indiscretion. History will show that her lack of candour and experience was the beginning of the end for the Euro project. This currency which is actually an exchange rate experiment will die by a thousand crises over the next decade or so. The end result will be financial oblivion for Ireland unless its demise is planned for. If not Eire will end up but a piece of real estate foreign-owned. Life will go on as they say but it will never be the same. I believe the Fianna Fail party will never recover from this catastrophe and we will see it go the way of the Redmondite Party whose soul and purpose was usurped one week by a group of national patriots who took over a small part of Dublin on a faithful Easter Sunday to start a revolution and found a nation. The rest became history.

 Christopher

*Photo :Irish independent(altered text )

Warning “Flash Crash” of May 6th.

One of my viewers has sent me a warning note to be passed on to all traders and investors please be aware that the “Flash Crash” of May 6th. was not an isolated incident.
I attach two recent examples of similar “events”. The forces that worked in May last are still alive and well see PDF Doc ” Dark Pool

Recent Market “Events”

If like me you have become puzzled by the recent Market “events” you should find this excellent article sent to me to-day helpful

Recent Market “Events”


Following quite a number of requests from students and clients this brief will deal with my understanding of what transpired last Thursday the 6th. May when just after 2.30 PM the Dow Industrials collapsed by nearly 10% and then suddenly recovered in 11 minutes.

The implications of what occurred are far reaching and unless the regulatory issues are resolved we can expect similar “events” of like nature.

In the main to comprehend the situation in the “Market” one must realise that there are now many markets. In the good old days, in America, all we had was the New York Stock Exchange where real people dealt with real market makers in real time. But computers in general and the internet in particular have changed all that. In addition as well as the “public market” we now have the (OTC) Over the Counter Market. The OTC is basically a private market between banks and large institutions which has little or no active supervision. I find this development strange because the trading activity on the OTC is 60 trillion dollars annually, while turnover on the public market is 5 trillion. Now in addition to public markets and private markets let us now bring in “Dark Pools” to our explanation.

“Dark Pools” What are they? ” Dark pools of liquidity” are crossing networks that provide liquidity that is not displayed on order books. This situation is highly advantageous for institutions that wish to trade very large numbers of shares without showing their hand. Dark liquidity pools thus offer institutions many of the efficiencies associated with trading on the exchanges’ public limit order books but without showing their actions to other parties. This is achieved because neither the price nor the identity of the trading entity needs to be displayed. Many of the OTC “exchanges ” used by the dark pools use high frequency trading programmes to minimise order size and maximise order execution. Now you may think that this manner of doing business on the “stock market” is carried out by minor unknown entities but this is not the case. Below I list the Independent dark pools, the broker-dealer dark pools and exchange-owned dark pools.

Independent dark pools: Instinet, Smartpool, Posit, Liquidnet, Nyfix,Pulse Trading, RiverCross

and Pipeline Trading.

Broker-dealer dark pools: BNP Paribas, Bank of New York Mellon, Citi, Credit Suisse, Fidelity, Goldman Sachs, Knight Capital, Deutsch Bank, Merrill Lynch, Morgan Stanley, USB, Ballista ATS, BlocSec and Bloomberg.

Exchange-owned dark pools: International Securities Exchange, NYSE Euronext, BATS Trading and Direct Edge.

When you understand that all the big players in banking and finance are using the OTC system and have a turnover 12 times that of the “public” markets you get to wonder why there is a New York Stock Exchange at all. Well you see there is a big difference between the OTC “private” market and the NYSE “public” market. The NYSE is comprised of market makers. These market makers are specialists who are obliged to buy and sell on their own and the publics’ account to create a liquid active market. The OTC market faces no such obligation. Over the past number of years attempts have been made to abolish the specialist role and remove the “human” engagement.

What happened on Thursday was the high frequency OTC trading programmes

created “trades” which did not make sense to the NYSE specialists. Accordingly the NYSE stopped handling orders so that the situation could be analysed. The OTC computerized networks then began rerouting orders to other “markets” and with no “public” markets participating prices collapsed through sell stops and the rest is history.

There are many lessons to be learned from this event. But for me the main question is whether a “market” that is only 8% “transparent” is actually a market (5 trillion as a ratio of 60 trillion). Going forward it is obvious that additional “circuit breakers” must be brought in to modify the exchange activity of high frequency dark pools. Whatever the eventual fallout from last Thursday’s events are it is clear that the issues I have touched upon are only the tip of the iceberg and any trader or investor worth his salt must reflect upon what happened and adjust his or her strategies appropriately.

Wealthbuilder.ie


Wealthbuilders market-update (April2010)

Many thanks to www.wealthbuilder.ie  for their stock-market up-date

The upward pulse of the bull trend that commenced in March of 2009 continues to forge ahead with considerable power. Both the Dow Transports and the Dow Industrials gave new buy confirmation

signals last week. That this happened in the middle of an earnings season is most encouraging. Thus it would appear that the probability of the Industrials hitting the 14,000 level without significant difficulty is high, allowing for the odd pullback.

for full report PDF doc here Wealthbuilder_Market_Brief 

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