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The JPY chart says it all.

From Goldman - "On May 14, we published our latest FX Monthly, largely focusing on why we decided to not change our EUR/$ forecasts. We expect EUR/$ to strengthen back to 1.35 and then to stay broadly unchanged in that area." Oops. Read the latest mea culpa and event spin below.

Thank you, Mr. Market, for finally coming to your senses! It’s about time that you kicked your ecstasy habit. There are now more broken 200 day moving averages than National Rifle Association bumper stickers at a Tea Party rally. Building short lists of your next big trades. It’s way too early to pull the trigger on any of this stuff. (AAPL), (GS), (YCS), (TBT),

Big picture I keep my long term target of 380 on the S&P 500. Broken record but I stick to my guns one this one. Short term we are still advising to be short but moving in on key supports. Fundamentally my view is that the inventory rebuilding/federal spending is absolutely not anything organic and sustainable we can build a long term growth outlook on. We have renewed balance sheet deflationary forces at work which have triggered a relapse of credit markets and this time sovereign debt is on the table too. There are measures that have been put in place in terms of liquidity but so far the impact on markets has been null with disruption in the funding markets still building up. At this point we think the solution will be for the Fed to step in and reactivate the liquidity facilities they let expire, but that will come only after a heavy political battle. Politicians are slowly finding out that maintaining artificially a market that is bankrupt in every possible way without printing money is quite tricky and they have not found the answer to that riddle yet. An overleveraged system supported by a structurally weak economy can only be maintained by a flooding of central bank liquidity combined with austerity. It will take a solid decade to get balance sheets in good health at the consumer/sovereign level without masive wave of defaults, pick your poison. - Nic Lenoir

In case you have missed the (primary) reason why the world is imploding this morning, and futures are collapsing, from Reuters: "North Korea puts military on combat readiness. North Korean leader Kim Jong-il has ordered his military to be on a combat footing, South Korea's Yonhap news agency said on Tuesday. It quoted a local group of North Korea watchers as saying their sources there had told them Kim's command had been broadcast by a top military official. Tensions have risen sharply on the peninsula after the South inmposed sanctions on its neighbour, which it accuses of sinking a naval ship in March, killing 46 sailors." The Korean Won, and global futures, are plunging on the news.

Guess who may be exposed to what? We will probably dig a little deeper into this if the market doesn't punish the company before positions can be expanded, in the mean time their is plenty for subscribers to chew on. I have included much food for thought for non-subscribers as well. Oh yeah, as I type this, futures are down 28 as the global markets drop 3 to 5% (again), all due to what I warned about since January yet the pundits said was "contained". Yeah, globally contained!

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 25/05/10

The end of the welfare state as we know it is near. No doubt this represents a victory for the Chicago Boys and neoliberal economics. But the final chapter has yet to be written, and labor will not go down quietly.

Spreads closed the day weaker after clinging to gains until mid-afternoon and outperforming stocks. A slow-and steady decline in FINLs finally cracked the low activity rally in risk assets but we note IG underperformed HY as stocks sold off helped by the EUR stalling. Cash underperformed synthetic single-name credit once again but the late-day rush for protection suggests investors once again covering with macro overlays - not a good sign for bonds.

What was David Stevens thinking of? Possibly the truth.

Game theory causal relations are now superseding simple myopic "in-a-vacuum" economic variables. Are you prepared for the paradigm shift? David Einhorn is (and so are we).

Remember the Bushism, "fool me once, shame on -- shame on you. Fool me -- you can't get fooled again." The National Association For Business Economics just came out with their latest forecasts for the economy. That's what brought up the old saying, "Fool me once, shame on you; fool me twice, shame on me" that George W. so magnificently bumbled.

A must watch two part interview of Eric Sprott by BNN, in which the Canadian asset manager shares his views on the economy, financial markets, sovereign overleverage, industrial commodities, and, of course, gold. The man who created the PHYS index to invest in physical gold, is, not surprisingly, not too excited about perspectives for stocks, and markets in general, which he qualifies as a "financial farce." Sprott is, and has been for a while, confident we will retest the March 2009 666 lows in the S&P. Slowly, more and more "experts" are moving to his camp. He also gives an advance glimpse of the topic of his upcoming May missive for all you Sprott groupies.

A week ago the FRBNY's Task Force On Tri-Party Infrastructure came out with an exhaustive must read report discussing its concerns about the massive $1.7 trillion US tri-party repo market, and specifically proposing several ideas that could prevent a bank run on a shadow market that is second in size only to the money-market $2+ trillion US money market. Incidentally, both markets were on the verge in the days after Lehman. Their day of reckoning may be coming again soon, and with the FRBNY task force's explicit attention on Tri-Party repos, all is probably not well. In fact even Moody's today agreed that until the proposed fixes are implemented (likely many months, if not years away), the tri-party repo "market will remain a major source of systemic risk, especially given the current market volatility and the fact that the Federal Reserve’s primary dealer emergency lending facilities are no longer in place." This should be another bright red flashing warning to those who still have to realize that the liquidity situation from a month ago and now are diametrically opposite.

Despite a better Friday, European sovereign risk and US financial reform continue to weigh on markets, causing some to connect the dots from these sorts of concerns to broader questions about the health and sustainability of the global cycle. Our baseline view remains that these fears are overdone. Indeed, in Wednesday’s Global Economics Weekly, Jim O’Neill argued that the world remains “Better than you think” with the needed austerity in peripheral Europe posing only minimal challenges to our above consensus global real GDP growth view. Importantly, conclusive economic evidence of a shift in the business cycle has yet to materialize. However, there are some faint signs of fraying around the edges of the evolving macro data set, and, especially in the US, we continue to expect a second half slowdown. US retail spending continued to grow in April, but the acceleration in spending has paused. Weekly UI claims have stalled, and shown no improvement for several months. The Philly Fed survey inched up by a tenth of a point in May, but key leading subcomponents (New Orders less Inventories in particular) failed to make headway, as has been the case for several months. Euroland PMI fell in May, though it remains solidly in expansionary territory, indicating a slowdown in the rate of growth but not a shift in direction, as did German PMI after a blowout reading in April. - Goldman's Noah "Top Trades For 2010" Weisberger