Bank of America

• Bonds Tumble With Stocks as Gold Drops in Rout on Fed (BBG)
• Bernanke Sees Beginning of End for Fed’s Record Easing (BBG)
• Gold Tumbles to 2 1/2 Year-Low After Fed as Silver Plummets (BBG)
• PBoC dashes hopes of China liquidity boost (FT)
• U.S. Icons Now Made of Chinese Steel (WSJ)
• Emerging Markets Crack as $3.9 Trillion Funds Unwind (BBG)
• Everyone joins the fun: India sets up elaborate system to tap phone calls, e-mail (Reuters)
• China Manufacturing Shrinks Faster in Threat to Europe (BBG)
• More on how Syria's Al-qaeda, and now US, supported "rebels", aka Qatar mercenaries, operate (Reuters)
• Echoes of Mao in China cash crunch (FT) - how dare a central bank not pander to every bank demand?
• French watchdog tells Google to change privacy policy (Reuters)

Over the course of decades we have allowed ourselves to be corrupted by the love of material possessions, the lure of a debt based faux wealth, the money for nothing entitlement promises of dishonorable politicians, the evil of currency debasement, the effectiveness of mass media propaganda, and the belief that we could sacrifice freedom and liberty for promises of safety and security made by a cabal of powerful rich men. Power has been concentrated into the hands of the few, who operate in secrecy and despise the people. They don’t want transparency or open debate. Freedom of speech is nothing but a thorn in their side. They believe they are smarter than the serfs and have no morality when it comes to committing illegal acts and disregarding the Constitution. They are not acting in the public interest. Their abuse of power and looting of the national wealth have put us on a path towards a bloody revolution. This is not a time for conformity, obedience or submission. It’s time to stand up and expose the evil doers. It’s time to rally around those who care about this country. Who are the real traitors? You know the answer.

A Roundup of What's REALLY Going On ...

Bank of America, Wells Fargo and JPMorgan Chase control 67.87% of 1-4 Family First Liens NPLs yet only had 32.62% of the charge offs in the quarter.

• Reports on surveillance of Americans fuel debate over privacy, security (Reuters)
• Apple to Yahoo Deny Providing Direct Access to Spy Agency (Bloomberg)
• Misfired 2010 email alerted IRS officials in Washington of targeting (Reuters)
• Spy vs Spy: Cyber disputes loom large as Obama meets China's Xi (Reuters)
• When NSA Calls, Companies Answer (WSJ)
• How the Robots Lost: High-Frequency Trading's Rise and Fall (BBG)
• Japan's Pension Fund to Buy More Stocks  (WSJ)
• ‘Frankenstein’ CDOs twitch back to life (FT)
• China’s ‘great power’ call to the US could stir friction (FT)
• Toyota Tries on Corolla Look That’s Just Different Enough (BBG)

Another day, another sell off in Japan. The Nikkei index closed down 0.9%, just off its lows and less than 1% away from officially entering a bear market, but not before another vomit-inducing volatile session, which saw the high to low swing at nearly 400 points. Hopes that a USDJPY short-covering squeeze would push the Nikkei, and thus the S&P futures higher did not materialize. And while the weakness in Japan is well-known and tracked by all, what may come as a surprise is that the Chinese equities are down for the 6th consecutive session marking the longest declining run in a year. Elsewhere in macro land, the Aussie Dollar continues to get pounded on China derivative weakness, tumbling to multi-year lows of just above 94 as Druckenmiller, who called the AUDUSD short nearly a month ago at parity shows he still has it.

How Another Housing Bubble Was Blown … And Why

• National Security Advisor Tom Donilon resigning, to be replaced by Susan Rice - Obama announcement to follow
• Japan's Abe targets income gains in growth strategy (Reuters), Abe unveils ‘third arrow’ reforms (FT) - generates market laughter and stock crash
• Amazon set to sell $800m in ads (FT) - personal tracking cookie data is valuable
• 60 percent of Americans say the country is on the wrong track (BBG)  and yet have rarely been more optimistic
• Jefferson County, Creditors Reach Deal to End Bankruptcy (BBG)
• Turks clash with police despite deputy PM's apology (Reuters)
• Rural US shrinks as young flee for the cities (FT)
• Australia holds steady on rate but may ease later (MW)
• The Wonk With the Ear of Chinese President Xi Jinping (WSJ)
• Syrian army captures strategic border town of Qusair (Reuters)

• BIS lays out "simple" plan for how to handle bank failures (Reuters) - Are we still holding our breath on Basel III?
• Deficit Deal Even Less Likely - Improving U.S. Fiscal Health Eases Pressure for a 'Grand Bargain' Amid Gridlock (WSJ)
• IRS Faulted on Conference Spending (WSJ)
• Deadly MERS-CoV virus spreads to Italy (CNN)
• Turkish PM Erdogan calls for calm after days of protests (Reuters)
• Financial system ‘waiting for next crisis’ (FT)
• Russia to send nuclear submarines to southern seas (Reuters)
• China Nuclear Stockpile Grows as India Matches Pakistan Rise (BBG)

One of the problems with QE is that the Fed is forcing people to buy riskier investments than they otherwise would have. The immorality of their actions aside, they create a significant psychological mismatch between assets and their holders. Stocks are in weak hands, insuring one great stampede for the chairs when the music stops.

Corruption thrives when good people do nothing. Societies rebound when good people do something. Isn't it time to make democratic capitalism happen. Democratic capitalism is about worthwhile production and exchange by communities of people who give a damn. It is expressly not about either crony-driven concentration of wealth or government redistribution.

It doesn't take an Econ Ph.D to realize that what Japan is trying to do: which is to recreate the US monetary experiment of the past four years, which has had rising stocks and bonds at the same time, the first due to the Fed's endless monetary injections (and pent up inflation expectations) and the second due to quality collateral mismatch and scarcity and shadow bank system funding via reserve currency "deposit-like" instruments such as TSYs, is a problem. After all, those who understand that the BOJ is merely taking hints from the Fed all along the way, have been warning about just that, and also warning that once the dam breaks, and if (or when) there is a massive rotation out of bonds into stocks, it is the Japanese banks - levered to the gills with trillions of JGBs - that will crack first. Apparently, this elementary finance 101 logic has finally trickled down to the BOJ, whose minutes over the weekend revealed that members are pointing out "contradictions" in the Kuroda-stated intent of doubling the monetary base in two years, unleashing inflation, sending the stock market soaring, all the while pressuring bondholders to not sell their bonds. As the FT reports, "According to the minutes of the April 26 policy meeting, released on Monday, a “few” board members said the BoJ’s original stance “might initially have been perceived by market participants as contradictory”, causing “fluctuations in financial markets”.

With part two of today's Fed-a-palooza due out shortly in the form of the May 1 FOMC meeting minutes, here is an informative recap of the current roster of assorted birds at the FOMC via Bank of America. Of course, since every decision always begins and ends with Ben, and soon his replacement Janet, all of below is largely meaningless.

Has China been hiding the real state of its economic data?

Another event-free day in which the only major economic data point was the release of UK CPI, which joined the rest of the world in telegraphing price deflation, despite bubbles in the real estate and stock markets, printing 2.0% Y/Y on expectations of a 2.3% increase, the lowest since November 2009 and giving Mark Carney carte blanche to print as soon as he arrives on deck. In an amusing twist of European deja-vuness, last night Japan's economy minister who made waves over the weekend when he said that the Yen has dropped low enough to where people's lives may be getting complicated (i.e., inflation), refuted everything he said as having been lost in translation, and the result was a prompt move higher in the USDJPY, quickly filling the entire Sunday night gap. That said, and as has been made very clear in recent years, data is irrelevant, and the only thing that matters, at least so far in 2013, is whether it is Tuesday: the day that has seen 18 out of 18 consecutive rises in the DJIA so far in 2013, and whether there is a POMO scheduled. We are happy to answer yes to both, so sit back, and wait for the no-volume levitation to wash over ever. The US docket is empty except for Dudley and Bullard speaking, but more importantly, the fate of Jamie Dimon may be determined today when the vote on the Chairman/CEO title is due, while Tim Cook will testify in D.C. on the company's tax strategy and overseas profits.