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First Russian Newscaster Gives Obama The Finger, Next President Gets Heckled At Home

Things for Obama, whose ratings tumble to new record lows with each passing day, are just going from bad to worse...



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FOMC Minutes Leaked Early

While the FOMC Minutes have not yet been officially released by the Fed, it appears someone has broken the embargo. Here are the headlines.

  • A FEW FOMC MEMBERS BELIEVED OUTLOOK MAY WARRANT MORE EASING
  • FED OFFICIALS AGREED TARGETING NOMINAL GDP NOT ADVISABLE
  • A FEW FOMC MEMBERS FAVORED TIME PERIOD FOR INTEREST-RATE PLEDGE
  • A FEW FOMC MEMBERS BELIEVED OUTLOOK MAY WARRANT MORE EASING
  • A FEW FOMC MEMBERS FAVORED TIME PERIOD FOR INTEREST-RATE PLEDGE
  • FED OFFICIALS BACKED IDEA OF OFFERING MORE DATA ON RATE PATH
  • US RECOVERY SUBJECT TO SIGNIFICANT DOWNSIDE RISKS

In other news - nothing substantially different from the statement or the conference that followed.



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$35 Billion In 5 Year Bonds Price Below 1% For First Time Ever

Following yesterday's record high 2 Year Bond Auction Bid To Cover, we now get another record, this time in the just completed $35 Billion 5 Year auction whose yield priced for the first time ever below 1%, or 0.937% specifically, well inside of the 0.95% WI at 1pm. And the Bid To Cover was no slouch either: at 3.15 this was the second highest BTC, runner up only to May's 3.20. The take down was distributed normally, with Directs, Indirects and PDs accountable for 9.6%, 45.3% and 45.1%, respecitvely, more or less in line with LTM average. Needless to say, when the world is imploding, the only safe fiat location remains US paper. As for the safety of fiat itself, when the world's biggest economic block and specifically its banking sector which had double the "assets" of America, needs daily rumors to stay afloat, we leave that to others.



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Egan Jones With Latest Jefferies Shocker: "Unsustainable... 77 Cent Recovery On Senior Debt... We Will Cut Without A Major Deleveraging"

And here is Egan-Jones again: "Synopsis: Unsustainable, in our opinion - JEF needs to raise equity (i.e., $1B) AND deleverage to reduce its 9.5+% LT yield. JEF's total debt to capital is 90.4% vs. 67% for IBKR, 62% for RJR and 43% for GFIG. GS and MS have ratios near 88% but they are significantly larger and should have some federal support via their banking charters. Furthermore, MF's freezing and shortchanging client funds have increased scrutiny of other medium-sized brokers. Raising $1B in new equity and reducing assets by $5B would reduce total debt to capital to only 86%. Email us for a more granular liq. analysis showing a 77% recovery for the sen. debt. Watch the recent rise in int. exp. relating to an acq. and the cost and avail. of funding. We will cut without a major deleveraging."



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Uncle Sam To The Rescue: IMF Creates New European Bail Out Facility, The "Precautionary And Flexible Credit Lines"

And here comes Uncle Sam:

  • IMF APPROVES CREDIT LINE PROGRAM CHANGES TO PROVIDE LIQUIDITY
  • IMF CREDIT LINE CREATES NEW SOURCE OF FUNDS FOR MEMBER NATIONS
  • IMF ADDS EMERGENCY FUNDING TOOL TO ASSIST COUNTRIES IN CRISIS
  • IMF NEW CREDIT LINE AVAILABLE FOR SIX MONTHS TO TWO YEARS
  • IMF CREATES PRECAUTIONARY AND LIQUIDITY LINE
  • IMF SAYS ACCESS UNDER 6-MONTH LIQUIDITY LINE COULD BE UP TO 500% OF MEMBERS QUOTA

And here is the math: Italy's quota is 7,882.3SDR; Spain is 4,023.4 SDR. Multiply by 5 and you get 40 Billion and 20 billion SDRs respectively, which  translates to $61 billion and $31 billion. A total of $91 billion in additional capacity? And that's it: enough to fund Italy and Spain for... two months. This is the best the regime can come up with? 



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UnoccupyWallStreet: As 200,000 Depart, And The Rest Face Plunging Bonuses, A Look At Wall Street From The "Other Side"

“This is something very different,” said Huw Jenkins, a former head of investment banking at UBS AG who’s now a London- based managing partner at Brazil’s Banco BTG Pactual SA. “This is a structural change. The industry is shrinking.” In his latest pseudo-profile piece, Bloomberg's Max Abelson captures some of the very much unspoken and tacit changes on Wall Street, which over the past several years has become the poster child of all that is wrong with the world, despite the fact that Wall Street does not exist in isolation from Washington, and the true enabler of all the criminal behavior are those men and women in the US Congress and Senate, whose conscience can be bought by the highest bidder. And while not a single person in DC is going to lose their job over the economic catastrophe of the past several years, Wall Street is preparing for one of the biggest layoff rounds ever. As Abelson reports, "John Brady, co-head of MF Global Inc.’s Chicago office, was having a vodka cocktail at the Ritz- Carlton in Naples, Florida, overlooking the Gulf of Mexico, on the day his company reported its largest-ever quarterly loss. "Wow, the sun just set,” Brady said to his wife and two colleagues attending a conference with him, he recalled in an interview. “I hope it doesn’t set on MF Global.” A week later, on Oct. 31, the firm led by former Goldman Sachs Group Inc. co-Chief Executive Officer Jon Corzine collapsed. Brady and 1,065 colleagues joined a wave of firings that has washed away more than 200,000 jobs in the global financial-services industry this year, eclipsing 174,000 in 2009, data compiled by Bloomberg show. BNP Paribas SA and UniCredit SpA announced cuts last week, and the carnage likely will worsen as Europe’s sovereign-debt crisis roils markets." While it will hardly evoke nary a tear from most, those curious at how the "other side" is faring with what may well be the worst bonus season on Wall Street, and the biggest layoff wave, in 3 years are encouraged to peruse the following profiles.



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"Whither Europe?" - UBS' George Magnus Asks What Happens After The ECB Prints

'By George' author, UBS George Magnus asks the right question, and one posed by Zero Hedge two weeks ago, namely even assuming Germany relents and allows the ECB to print, what happens then? "Some argue that Germany will, sooner or later, capitulate on this issue too, since the only real alternative to the ECB adopting a full lender of last resort role is the slimming down of the EZ in what would be dangerous, unpredictable and almost certainly acrimonious circumstances. If the crisis escalates alarmingly, the ECB does look a little more likely to be given the light to widen its remit, even if under conditions. But then what? How would German voters and the powerful banking elite react to ECB policies that would turn the Bundesbank white? And what would the political consequences of further printing of money be? I ask the questions not to disagree, but to emphasise that what many of us think as the logical way out also has consequences that may not be immediately transparent."



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Spanish Yield Curve Inverts Most Since 1994

The spread between Spanish 2Y and 10Y bonds has dropped to record lows as the yield curve inverts most since 1994. Troughing intraday at -12bps at its most inverted, today's as-good-as-failed Spanish bill auction sends an ugly message to the market that risk appetite is non-existent. At -5bps, if we end today at this level, it will be the first inverted close since August 1994.



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Guest Post: What's Lost With the Demise of the Euro? Only What Was Unsustainable

Scaremongering aside, the demise of the euro does not end European integration. It only means that which is unsustainable has been relinquished and a return to stability is finally possible. So the euro is doomed. Toast. History. This will lead to:

  1. The end of civilization
  2. The end of European integration
  3. The start of new Dark Ages
  4. The return to a sustainable reality

The correct answer is 4. The euro was an unsustainable, self-destructing extension of the integration that has long simplified trade, travel and work throughout the EU (European Union).



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Anti-Tilson: The Gift That Keeps On Giving

Our favorite trade since Friday, November 11, when Whitney Tilson went public with his short GMCR, Long NFLX theses, namely to do the opposite and Buy GMCR and Sell NFLX has now returned 40% in 6 days. And we don't even collect 2 and 20, nor do we organize hedge fund hotel symposia.



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Italy Welcomes Its New Brussels Overlords

It was nice knowing you "sovereign" Italy. Next time get a "technocrat" PM/FinMin who is not a certified card carrying agent for a major banking cartel.

  • MONTI SAYS EUROPE'S INDICATIONS ARE IN ITALY'S BEST INTERSETS
  • MONTI SAYS EU CAN HELP ITALY DEVELOP BETTER POLICIES
  • MONTI SAYS EU IS NOT A `CONSTRAINT' FOR ITALY
  • MONTI SAYS ITALY'S PROGRAM PRESENTED TO EU IS `STARTING POINT'

Oh, and good luck finding that gold, a topic which finally makes the mainstream FT several weeks after Zero Hedge tentatively suggested that it's gone... It's all gone.



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If You Own CSJ, We Would Sell

One of the most crowded trades around is short-dated credit - especially short-dated positions in higher yielding debt. Its the Goldilocks trade - not too hot (low duration and things will be ok for the short-run) and not too cold (carry and yield advantage is relatively good) - for every fixed income manager with new money to put to work. However, recent events are bringing stress into the here-and-now and jump risk (or more immediate concerns of significant credit events)is rising. Credit curves have flattened significantly in the last few weeks and are back to 'normal' given spread levels but it is the composition of the CSJ ETF (short-dated credit bond fund) that is most worrisome. Heavy exposure to Supranationals, Agencies, and Financials - all of which we have highlighted in recent weeks as showing significant systemic weakness - makes us and Peter Tchir of TF Market Advisors nervous.



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European CDS Rerack: Germany Back To Triple Digits

In addition to broad bloodletting across the board, with Belgium and Spain getting crushed as noted earlier, the core confusion continues with Germany back in triple digits, and the UK, which has roughly 500% total debt/GDP including all debt - corporate and private, or double Germany's, still shockingly in double digits. This won't last long.



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Austria, Belgian Bonds Crushed

Yesterday we posted a note on Austria, titled "35 Seconds Of TV Air Time Explaining Why Austria's AAA Rating Is Doomed" which among other things demonstrated in very vivid fashion, why courtesy of its massive Hungarian and broadly Eastern European exposure, an Austrian downgrade is virtually imminent. The follow up news that the Austrian Central Bank has henceforth forbidden any incremental Eastern European loan issuance is merely the cherry on top, and confirms that Austria's biggest banks are now on the verge. As the chart below demonstrates which shows Austria benchmarks (which like Spain we expect will be promptly changed to a lower yielding piece to buy 1-2 days of breathing room), the hammering has returned. And elsewhere, Belgium is also getting annihilated as the ECB is now left with far too many plates to juggle.



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