Bank of America

It was only logical that following its most profitable year in history, the world's most successful hedge fund (by absolute P&L), which generated $77 billion in profit in the past year, would follow up with mass promotions. In other news, it is now more lucrative, and with better job security, to work for the FRBNY LLC Onshore Fund as a vice president than for Goldman Sachs as a Managing Director. Also, since one only has to know how to buy, as the ancient and arcane art of selling is irrelevant at this particular taxpayer funded hedge fund, think of all the incremental equity that is retained courtesy of a training session that is only half as long.

All you need to read.

• Euro-Region Debt Sales Top $29B This Week (Bloomberg)
• Greek Fury at Plan for EU Budget Control (FT)
• Greek "football players too poor to play", leagues running out of money, may file for bankruptcy (Spiegel)
• After insider trading scandal, Einhorn wins the battle: St. Joe Pares Back Its Florida Vision (WSJ)
• China Signals Limited Loosening as PBOC Bucks Forecast (Bloomberg)
• China's Wen: Govt Debt Risk "Controllable", Sets Reforms (Reuters)
• IMF Reviews China Currency's Value (WSJ)
• Watching, watching, watching: Japan PM Noda: To Respond To FX Moves "Appropriately" (WSJ)
• Cameron to Nod Through EU Treaty (FT)
• Gingrich Backer Sheldon Adelson Faces Questions About Chinese Business Affairs (Observer)

Because our political system is corrupted by corporate lobbyists, it leaves the people with few choices. Those who do not wish for a violent revolution are left with the one alternative of taking control of their own money. Money can be anything two parties in a transaction choose it to be. Precious metals is one good choice. Converting ones savings from Federal Reserve Notes into precious metals is not some kooky survivalist ploy. It is empowering a person to vote against the immoral monetary system. Hoarding food is not a kooky survivalist ploy, it is hedging against an immoral banker tax. We all have the moral obligation not to pay the banker tax. Refuse to deposit your funds into a money center bank. Support efforts to end the Federal Reserve System.

Bloomberg's Trish Regan (yes, she is no longer at CNBC), has just announced that the bank which earlier announced it is shutting down its catastrophic prop trading desk (at which point shreholders let out a sigh of relief), has proceeded with slashing banker pay by 30% for overall comp and some bonuses by as much as 70%. This follows earlier announcements by Bank of America and Morgan Stanley which earlier said they would limit cash bonuses to $150K for senior positions. At the end of the day, the biggest losers are secondary, non-financial New York jobs (supposedly there are some: rat exterminators; strippers; limo drivers; food spitters also known as waiters?) as each banker jobs indirectly supports up to 3 downstream jobs. In other words between layoffs and comp cutting, the immediate impact will likely be to leave New York City, which is the farthest point on the economic procyclical receiving end, with hundreds of thousands of layoffs. Which incidentally, to the bizarro crazy scientists at the BLS, means that initial claims are about to go negative (with the traditional upward revision in the following week).

• Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
• Italy Sells Maximum EU11 Billion of Bills (Bloomberg)
• Romney Demands Gingrich Apology on Immigration (Bloomberg)
• China’s Residential Prices Need to Decline 30%, Lawmaker Says (Bloomberg)
• EU Red-Flags 'Volcker' (WSJ)
• EU Official Sees Bailout-Fund Boost (WSJ)
• EU Delays Bank Bond Writedown Plans Until Fiscal Crisis Abates (Bloomberg)
• Germany Poised to Woo U.K. With Transaction Tax Alternative (Bloomberg)
• Ahmadinejad: Iran Ready to Renew Nuclear Talks (Bloomberg)
• Monti Takes On Italian Bureaucracy in Latest Policy Push to Revamp Economy (Bloomberg)

We noted last night that heavy and large average trade size was going through after the cash market close in S&P futures and it seemed overnight we needed one more push to flush out some more chasers before today's less than euphoric macro prints (aside from CFNAI's market-centric index) stalled the Fed-induced excitement. Financials had their worst day of the year (worst performing sector 2 days in a row), down just under 1% as did the Tech and Energy sectors as Utilities were best once again. Volumes were up with ES at its 50-day average and NYSE volume second highest of the year as ES (the e-mini S&P 500 futures contract) slid 20 points or so from opening highs up near 1330. Equity and credit markets tracked on another closely all day (as did broad risk drivers) with a last-30-minutes ramp (once again on high average trade size) just for good measure taking ES back to Tuesday after-hours swing highs. The late swing up looked like a recovery from being modestly oversold relative to risk assets as TSYs, FX, and commodities all trod water as stocks pulled up 5-6 S&P pts into the close. TSYs all rallied on the day with 2s-10s all at week low yields and 30Y starting to catch up to the excitement at the end of the day (though 2s10s30s remains notably 'low' relative to ES currently). Gold and Silver continued to outperform (up around 3.5% on the week) and Copper held onto its gains while Oil dropped back below $100 after getting above $101 early in the day. The correlation of EURUSD and risk has re-emerged recently and post-Europe's close today, USD strengthened though EUR remained just above 1.31 as we closed.

All you need to read.

• BOJ Should Be Allowed $643 Billion Fund to Buy Foreign Bonds, Iwata Says (Bloomberg)
• Banks Hoarding ECB Cash May Double Company Defaults (Bloomberg)
• China Police Open Fire on Tibetans as Protests Spread (Bloomberg)
• Sarkozy Presidential Rival Hollande Would Lower Retirement Age, Lift Taxes (Bloomberg)
• IMF takes tougher stance over Greek debt (FT)
• Iran threatens to act first on EU embargo (FT)
• PM says ‘no complacency’ on economy (FT)
• George Soros: How to pull Italy and Spain back from the edge (FT)
• Japan's NEC to slash 10,000 jobs (Reuters)
• Obama Planning Corporate Tax Overhaul (Bloomberg)

For a new investor in gold and silver, here is the most lucid piece of advice I can offer. Identifying severe undervaluation points in gold and silver, buying gold and silver assets during these times, and not worrying about interim short-term volatility, even if the immediate volatility is downward, is much more likely to impact your accumulation of wealth in a positive manner than trying to perfectly time market tops and bottoms in the highly manipulated gold and silver game.

In all, the President's speech was reminiscent of George Clooney’s in Ides of March. We’ve heard it all before, maybe with slightly different words: America lost 4 million jobs before I got here, and another 4 million before our policies went into effect, but in the last 12 months, we added 3 million job. We must reduce tax loopholes, and provide tax incentives to businesses that hire in America. We must reform taxes for the wealthy (though he signed an extension of Bush’s tax cuts.) We must train people for an apparent abundance of expert jobs. We need more clean energy initiatives.  We created regulations (big sigh of relief he didn’t use the word ‘sweeping’) to avoid fraudulent financial practices. We will help homeowners. Wall Street must ‘make up a trust deficit.”   Like Jamie Dimon cares. In other words, Obama gave Wall Street a pass, while waxing populace. Don’t get me wrong. I expected nothing different. I will continue to expect nothing different, when he gets a second term, given the lame field of contenders all around.

• Fears Mount That Portugal Will Need a Second Bailout (WSJ)
• EU to Have No Deadline for End of Greek Talks (Bloomberg)
• Japan economy predicted to shrink in 2011 (AFP)
• Japan’s Fiscal Pressure Intensifies as Tax-Boost Plan Insufficent: Economy (Bloomberg)
• Berlin ready to see stronger ‘firewall’ (FT)
• Obama Speech to Embrace U.S. Manufacturing Rebirth, Energy for Job Growth (Bloomberg)
• EU Hits Iran With Oil Ban, Bank Asset Freeze in Bid to Halt Nuclear Plan (Bloomberg)
• China's Oil Imports from Iran Jump (WSJ)
• Croatians vote Yes to join EU (FT)
• Japan’s $130 Billion Fund Unused in Biggest M&A Year in More Than Decade (Bloomberg)
• Buffett Blames Congress for Romney’s 15% Rate (Bloomberg)

The CDS index market remains one of the most liquid sources of hedges and positioning available (despite occasional waxing and waning in volumes) and is often used by us as indications of relative flows and sophisticated investor risk appetite. However, as Kamakura Corporation has so diligently quantified, the broad CDS market (specifically including single-names) remains massively concentrated. This concentration, evidenced by the Honolulu-based credit guru's findings that three institutions: JPMorgan Chase, Bank of America, and Citibank National Association, have market shares in excess of 19% each has shown little to no reduction (i.e. the market remains as closed as ever) and they warn that this dramatically increases the probability of collusion and monopoly pricing power. We have long argued that the CDS market is valuable (and outright bans are non-sensical and will end badly) as it offers a more liquid (than bonds) market to express a view or more simply hedge efficiently. However, we do feel strongly that CDS (indices especially) should be exchange traded (more straightforward than ever given standardization, electronic trading increases, and clearing) and perhaps Kamakura's work here will be enough to force regulators and the DoJ to finally turn over the rock (as they did in Libor and Muni markets) and do what should have been done in late 2008 when the banks had little to no chips to bargain with on keeping their high margin CDS trading desks in house (though the exchanges would also obviously have to step up to the plate unlike in 2008).

One big happy family ...

The debt ceiling, coporate taxes and health care.