B+

Moments after Goldman completed the trifecta of controlling every major developed world central bank, with its tentacles now in charge of the Fed, the ECB and now the BOE, Obama announced his designee for the new head of the SEC. The name of Mary Schapiro's replacement: Elisse B. Walter, and no, she did not most recently work for Goldman. Yes. Shocking (for Gary Gensler). Oh, and don't worry Mary Schapiro. Nobody will shed any tears over your departure: perhaps if someone had known you were there even one day over the past 4 years this would be different.

Stopping or scaling back would be "counterproductive" for the economy.

About a month ago, in the third-quarter report of a Canadian global macro fund, its strategist made the interesting observation that “…Four ideas in particular have caught the fancy of economic policy makers and have been successfully sold to the public…” One of these ideas “…that has taken root, at least among the political and intellectual classes, is that one need not fear fiscal deficits and debt provided one has monetary sovereignty…”. This idea is currently growing, particularly after Obama’s re-election. But it was only after writing our last letter, on the revival of the Chicago Plan (as proposed in an IMF’ working paper), that we realized that the idea is morphing into another one among Keynesians: That because there cannot be a gold-to-US dollar arbitrage like in 1933, governments do indeed have the monetary sovereignty. It is not; and in the process of explaining why, we will also describe the endgame for the current crisis... "…We cannot arbitrage fiat money, but we can repudiate the sovereign debt that backs it! And that repudiation will be the defining moment of this crisis…"

Linda Green Bitchez!!!

Earlier today Hewlett Packard stunned investors by announcing that its had effectively bungled a massive acquisition, that of Autonomy plc, despite extensive prior warnings about the accounting practices of the UK firm (for which it appears Deloitte will now have to take the blame), by paying over $10 billion for a transaction that is now clear will provide zero income statement benefit. The one problem, however, is that HP incurred a massive debt load to fund EBITDA and Cash Flow which will never materialize. The result: a capital structure that is now appropriate of a B1/B+ rated company, i.e., one whose debt needs would be serviced by a firm like Jefcadia, and therefore whose time to default in years can be counted on the fingers of one hand. The chart below explains it all: why shareholders should just get out while they can, and also explains why despite, or rather due to, endless central bank mingling, cash flows still, oddly enough, matter. Oh, and those hoping the HPQ dividend continues uninterrupted in perpetuity, hope again.

While the prior week was marked by some kind of awakening, this week was more about finding a direction. Eventually mostly downwards, but always in jumps, marked by tentative rebounds. Europe mostly lost, so unused not to be the focal point anymore, waiting for US input. If it wasn’t for the Fiscal Cliff, and in absence of further news out of the Periphery, we seem to have

"No Direction" (Bunds 1,32% -2; Spain 5,86% +5; Stoxx 2429% -2,1%; EUR 1,27 -10)

You've probably noticed the cookie-cutter format of most financial media "news": a few key "buzz words" (fiscal cliff, Bush tax cuts, etc.) are inserted into conventional contexts, and this is passed off as either "reporting" or "commentary" depending on the number of pundits sourced. Correspondent Frank M. kindly passed along a template that is "officially deny its existence" secret within the mainstream media. With this template, you could launch your own financial media channel, ready to compete with the big boys. Heck, you could hire some cheap overseas labor to make a few Skype calls to "the usual suspects," for-hire academics, hedge fund gurus, etc. and actually attribute the fluff to a real person.

Tim Geithner will put a pen to the FHA bailout before the end of the year. It will be his last act as Treasury Secretary.

When you hear Republican politicians pointing figures at Jon Corzine for his “alleged” acts of fraud in the MF Global collapse, ask them why they changed the bankruptcy code in 2005 to allow such acts of fraud to go unpunished.  

• Wal-Mart misses topline expectations: Revenue $113.93bn, Exp $114.89bn, Sees full year EPS $4.88-$4.93, Exp. $4.94, Unveils new FCPA allegations; Stock down nearly 4%
• China chooses conservative new leaders (FT)
• Eurozone falls back into recession (FT)
• Moody’s to Assess U.K.’s Aaa Rating in 2013 Amid Slowing Economy (Bloomberg)
• Another bailout is imminent: FHA Nears Need for Taxpayer Funds (WSJ)
• Hamas chief vows to keep up "resistance" after Jaabari killed (Reuters)
• Obama calls for rich to pay more, keep middle-class cuts (Reuters)
• Obama Undecided on FBI's Petraeus Probe (WSJ)
• Battle lines drawn over “growth revenue” in fiscal cliff talks (Reuters)
• Rajoy’s Path to Bailout Clears as EU Endorses Austerity (Bloomberg)
• Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)
• Russia warns of tough response to U.S. human rights bill (Reuters)
• Japan Opposition Leader Ups Pressure on Central Bank (WSJ)
• Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)

It may be one of the smallest partner "classes" in recent Goldman history but for the 70 names below, today is one of the best days of their lives: it marks their induction into the real Master of the Galaxy club (sadly, not even Goldman is Master of the Universe any more). This is what Lloyd had to say: “We congratulate all those selected on this important achievement and look forward to their leadership in the years ahead." Spoiler alert: neither Greg Smith, nor Shashank Tripathi, are on the list.

Farce #1: “Market value” and “free markets” have become a joke.

Farce #2: Private, self-assigned, fake value is being traded for public money at 100 cents on the dollar.

Farce #3: Printed money is backed by nothing.

Farce #4: We have a “free” enterprise system dominated by monopolies that force people to buy inferior goods and services at exorbitant rates.

Farce #5: High-level financial crimes, no matter how egregious or widespread, are not being prosecuted.

Farce #6: Risk is gone. Now there is only liability borne by citizens.

Farce #7: Productivity has been supplanted by parasitism.

Bridgewater's Ray Dalio believes four factors drive relative economic growth: competitiveness, indebtedness, culture, and luck. The returns from his machine-like investment process clearly indicate he is on to something as he notes that the most powerful influences of this relative income (and power) are 1) the psychology that drives people’s desires to work, borrow and consume and 2) war (which we measure in the “luck” gauge). Throughout history, Dalio advises these two influences have changed countries’ competitiveness and indebtedness which have caused changes in their relative wealth and power. He goes on to add that since different experiences lead to different psychological biases that lead to different experiences, etc., certain common cause-effect linkages drive the typical cycle of a nation's growth, power and influence - and that countries typically evolve through five stages of that cycle.

Well, my fellow Slope-a-Dopes, you may have noticed that I have been completely turned upside down by this week's developments.  Let me be clear, my crazed compromised counter comportment has nothing to do with the fact that the sitting U.S. president was re-elected.  After all, every single national poll, swing state survey, and comprehensive electoral college considerations, had the President as the winner by a cushy considerably comfortable count.  In this age of definitive digital data mining, why anyone would have been surprised by the well known outcome entirely eludes even eye.  The only truly shocking surprise, would have been if the dastardly dog delivery dirtbag had beaten the coy corrupt community creep.  So what has utterly upset & upended your favorite Idiot Savant's uneven universe?