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First Official Greek Exit Polls: Pro-Bailout Parties Plunge; Anti-Bailout Radical Left, Neo-Nazis Soar

As we expected, the previous unofficial poll forecasts were total rubbish, and according to exit polls from NET TV, the results are as follows:

  • New Democracy: 17-20%
  • Pasok: 14-17%
  • In a stunner, Syrizia, or the coalition of the radical left - a vehement anti-Bailout party - gets more votes than the ruling PASOK party: 15.5%-18.5%
  • Independent Greeks: 10-12%
  • Finally, and not surprisingly in the aftermath of the French results, the ultra right Golden Dawn gets 6-8% of the vote and will make it into Parliament

Tallied across, up to 60% of the new parliament will be anti-bailout (at least according to exit polls), and hence "Domino toppling." Good luck with that pro-bailout coalition government. Needless to say these results are very ugly and make any prospect of a pro-bailout coalition cabinet virtually impossible. Suddenly the fate of the European experiment is in the hands of the ultra right and the far left - yup, Neo-Nazis will determine the future of Europe. How quaint... again - congratulations Europe.



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Lies, Damned Lies And Statistics

According to Reuters, Italy is going to propose to the European Union that they should exempt borrowing used to pay their commercial obligations from their calculation of public debt. Monti, the article states, is also going to propose exempting the counting of public debt used for investments. You may be sure that Italy’s $211 billion of derivatives will now be entitled an “investment.”  Now all of this will lower Italy’s debt to GDP ratio which is the real reason for these proposals and so even worse falsified numbers can be handed out to the Press in hopes that money will be invested in Italy based upon not just inaccurate but offically countenanced manufactured data. This way not only the debt to GDP ratio can be falsified but the growth numbers, the fiscal targets and a raft of other numbers that will no longer be real but just a systemic figment of Europe’s imagination.



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Unofficial Greek Exit Polls

And from one presidential election, we go to the other even more crucial parliamentary election, in Greece, where courtesy of Planet-Greece we have the first unofficial exit polls. Since these numbers differ massively with what opinion polls predicted as recently as 2 weeks ago, and indicate the status quo is likely to persist, we urge everyone to take these with a huge grain of salt.



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French Presidential Election Live Tracker

The second round of the French presidential election is by now well underway, with just 5 hours left in the voting day, a 30.66% voter turnout by noon (compared to 34.11% in the runoff round in 2007) according to the Ministry of the Interior, and in which the first exit polls give Hollande an expected 52.5-53% lead over Sarkozy. While not much can be disclosed by law until polling stations close at 8pm, our French speaking readers can find the best live blog of the election at Le Figaro, while for everyone else we recommend the following live feed of France24 TV in English with the best election coverage. At this point one thing is certain: it will take either a miracle, or Diebold, to prevent the official launch of Horkel (which we are more partial to, as we coined it, than Merlande), or in those rare occasions when the media establishment has has enough of being lied to, Merde.



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A Preview Of Monday Morning In Europe

While most will be following what appears to be an almost certain Hollande victory in the French presidential runoff elections tomorrow (InTrade odds around 10%), it is very likely that the Greek election will have a greater acute impact on the political and financial facade of Europe, especially in the short term. As we noted in what we dubbed our first (of many) Greek election previews, the biggest problem facing the new political regime will be its near certain inability to form a coalition government (with just 32.6% of the vote going to PASOK and New Democracy)  that does not undo most of what has been achieved through popular sweat and tears over the past 2 years to assist Europe's bankers in transferring what little Greek wealth remains to fund the insolvent European bank balance sheets. This in turn could begin the latest cascading contagion waterfall, which coupled with an anti-austerity drive emanating from a newly socialist France will threaten to topple Angela Merkel's carefully constructed European hegemony.



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Strategic Investment Conference: David Rosenberg

david-rosenberg

Stocks are currently priced for a 10% growth rate which makes bonds a safer investment in the current environment which cannot deliver 10% rates of returns. We are no longer in the era of capital appreciation and growth. The “baby boomers” are driving the demand for income which will keep pressure on finding yield which in turn reduces buying pressure on stocks. This is why even with the current stock market rally since the 2009 lows - equity funds have seen continual outflows. The “Capital Preservation” crowd will continue to grow relative to the “Capital Appreciation” crowd.... According to the recent McKinsey study the debt deleveraging cycles, in normal historical recessionary cycles, lasted on average six to seven years, with total debt as a percentage of GDP declining by roughly 25 percent. More importantly, while GDP contracted in the initial years of the deleveraging cycle it rebounded in the later years.



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Guest Post: One Simple Rule To Stop Unnecessary Wars

The trouble is that war is a great excuse for weapons contractors to make lots of money, and weapons contractors happily fund war-mongering politicians into power. That’s the self-perpetuating military industrial complex. So the problem then lies in differentiating the necessary actions from the unnecessary. I propose a simple heuristic for this purpose, one that if introduced would also render the war-mongering politician — the Congressman who votes to authorise, or the President who signs the authorisation into law — personally responsible:

If you start a war, you have to fight. If you cannot fight, then your nearest fit relative has to fight.



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A Whole Lot Of Uncivilized People Out There...

Charlie Munger: "gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold"

...and yet:

David Einhorn: "I will keep a substantial long exposure to gold -- which serves as a Jelly Donut antidote for my portfolio. While I'd love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn't even have quarterly conference calls

Kyle Bass: "Buying Gold Is Just Buying A Put Against The Idiocy Of The Political Cycle. It's That Simple!"

The uncivilized people have spoken, and the winner is...



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Berkshire Annual Meeting Highlights

While Charlie Munger has so far to comment on the 24K content of made in the basement tribalware, he and his partner have made quite a few other statements on items ranging far and wide, during the annual Berkshire Omaha convention, which year after year represents the annual pilgrimage for thousands to a crony capitalist Mecca, and which with the passage of time, has become increasingly more irrelevant. Why? Because with a $58 billion bet (on $37.8 billion in cash and equivalents) that asset prices will go higher, it is rather clear on what side of the 'bail out' argument, and its 'all in' fallback: central planning, Warren Buffett sits. 



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Guest Post: Is An Economic Deluge Nigh?

If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity. In this way mistakes are quickly resolved and progress assured. Conversely, the deeper the muck of regulation, mandates, taxes, subsidies and other bureaucratic meddling, the slower we humans are in following our natural instincts until the point that progress is slowed or even stopped. It is said that history doesn't repeat itself, but it often rhymes. In the current circumstances, it appears that enough time has passed that current generations have completely forgotten the critical connection between the ability of humans to freely pursue their aspirations and economic progress. You can see this ignorance in the popular demand for even more, not less, meddling in the affairs of humankind. Should this trend continue – and for reasons I will touch on momentarily, I firmly believe it will – then the aspirations of the productive minority will soon be dampened by ever higher taxes and other attempts to "level the playing field" and the global economy, already in tatters, will fall off the edge. There is no more timely nor acute example of this growing trend than what is currently going on in France. I refer, of course, to the first round of the presidential election process, scheduled for this weekend.



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"The Paucity Of Growth" - Previewing The New Political Landscape In Europe

Europe is about to begin its "Audacity of Hope" moment.  I'm not sure how markets will react on Monday to the various results.  My best guess is that after an initial sell-off we see a rebound.  European politicians will start to say the "right" things about working with the new governments.  "Growth" will be the most commonly used word.  Equities “LOVE” growth. If there is one thing equity markets love, it is the talk of growth, stimulus, of more money being spent. .. Why is everyone so willing to believe Europe can achieve growth?  Let's assume that no one ever tried for growth before (though seriously, most policies implement in past 15 years had growth as at least part of the rationale).  What experience does Hollande have in creating growth?  If growth opportunities are so easy to spot and identity why do we pay 2 and 20 to hedge funds and private equity?... That is the harsh reality.  Identifying opportunities just isn't that easy.  Figuring out what projects will generate returns that pay for themselves is difficult.  A political body with many competing agendas is hardly likely to do better than companies whose whole goal is to find growth opportunities.  Corporations have no shortage of cash right now, they have a shortage of growth ideas. .. "Growth" which is really just code for spending, will be a failureThe credit markets will see it sooner than equities, but equities will eventually see it too.  Saying you are going to become an actress is really easy.  Moving to L.A. in an effort to become an actress is a bit more difficult but still relatively easy.  Becoming an actress is really hard!  Growth won't buy years.  It might not even buy months. Like so much else through the entire crisis, the markets are willing to suspend their disbelief on the back of attractive headlines.  In the end, the actual plans disappoint.  Not because the politicians aren't good at making plans, but because the original announcements never had a chance of being implement and the suspension of disbelief (or critical thinking) was the market's real mistake.



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Nine Takeaways From Earnings Season

With earnings season now virtually over, it is time to ask why, despite a majority of the companies beating expectations, is the S&P inline with where it was when earnings season started. There are two main reasons why the market has not been impressed: the percentage of "beaters" is nothing spectacular on a historical basis as was shown previously, especially in the aftermath of aggressive cuts to Q1 top and bottom line forecasts heading into earnings reports; more importantly, even with Q1 earning coming out as they did, the bulk of the legwork still remains in the "hockeystick" boost to the bottom line that is completely Q4 2012 loaded, as bottom up consensus revisions to the rest of 2012 are negative despite Q1 beats. As Goldman summarizes: "1Q 2012 will establish a new earnings peak of $98 on a trailing-four-quarter basis. With 88% of S&P 500 market cap reported, 1Q EPS is tracking at $24.10, 1% above consensus estimates at the start of reporting season and reflecting 7% year/year growth." So far, so good. And yet, "Despite the positive surprises, full-year 2012 EPS estimates are unchanged relative to the start of earnings season, and currently stand at $105 vs. our top-down forecast of $100. Over half of consensus 2012 earnings growth is attributed to 4Q. Margins at 8.8% have hovered near peak levels for a year, but consensus expects a sudden jump in 4Q to a new peak of 9.1%. We forecast a further decline to 8.7%."



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Paul vs Paul: Round 2

Bloomberg viewers estimate that Ron Paul was the winner of the clash of the Pauls. But that is very much beside the point. This wasn’t really a debate. Other than the fascinating moment where Krugman denied defending the economic policies of Diocletian, very little new was said, and the two combatants mainly talked past each other.  The real debate happened early last decade.



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Charlie Munger: Gold Is For Holocaust-Era Jewish Families To Sew Into Their Garments; Civilized People Don't Buy Gold

While Becky Quick's CNBC interview with the Charlie Munger has a little for everyone to love and hate (from Keynesian-doctrine to easy-living-Greeks and Bad-trading-robots), Buffett's right-hand was particularly eloquent in his views (at around 9:08) on Einhorn's distrust of the Fed and buying Gold: "gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold - they invest in productive businesses." End quote.



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Guest Post: Dr. Lacy Hunt On Debt Disequilibrium, Deleveraging, And Depression

If you want to know how weak the economy really is all you need to do is look at the 30-year bond. It is one of the best economic indicators available today. If economic conditions are robust then the yield will be rising and vice versa. What the current low levels of yield on 30 year bonds is telling you is that the underlying economy is weak. "The 30-year yield is not at these low levels DUE to the Federal Reserve; but in SPITE OF the Fed," Hunt said. The actions of the Federal Reserve have continued to undermine the economy which is reflected by the low yield of the 30 year bond. The "cancerous" side effects of nonproductive debt are being reflected in real disposable incomes. Just over the last two years real disposable incomes slid from 5% in 2010 and -0.5% in 2012 on a 3-month percentage change at an annual rate basis. This is critically important to understand. While the media remains focused on GDP it is the wrong measure by which to measure the economy. A truly growing economy leads to rises in prosperity. GDP does NOT measure prosperity — it measures spending. It is the measure of real personal incomes that measures prosperity. Prosperity MUST come from rising incomes.



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