Best Buy

Being poor is like a game of poker where if you lose, the other players get to screw you. And if you win, the dealer screws you. A bunch of you reading this are among the 45 million “working poor” in America, and if you’re not, you know somebody who is. People are quick to tell you to pick yourself up by your bootstraps and just stop being poor. What they don’t understand is the series of intricate financial traps that makes that incredibly difficult...

As previewed previously, one half of the hurdle to enforce a universal online US sales tax has now been crossed, with the Senate voting moments ago to pass a Wal-Mart backed bill 69-27 allowing states to collect taxes on out of state Internet and catalog sales. The bill would end the era of tax-free Internet shopping. During the debate, senators offered examples of consumers who examine products in stores and then shop online to avoid paying sales tax. The pretext? Why fairness of course.  “This bill is about fairness,” said Senator Mike Enzi, a Wyoming Republican and co-sponsor of the measure. “It’s about leveling the playing field between the brick-and-mortar and online companies.”

• Euro-Area Unemployment Increases to Record 12.1% Amid Recession (BBG)
• Fed faces calls for radical reform (FT) - Has Jamie Dimon approved of this message? No? Carry on then
• CEO Pay 1,795-to-1 Multiple of Wages Skirts U.S. Law (BBG)
• Ex-UBS Executive Convicted of Paid Sex With Underage Girl (BBG)
• Six months after Sandy, New York fuel supply chain still vulnerable (Reuters)
• Older, richer shoppers lead Japan’s surge in consumer spending (FT)
• Sharp euro zone inflation fall, joblessness point to ECB rate cut (G&M)
• Gold Rush From Dubai to Turkey Saps Supply as Premiums Jump (BBG)
• Japan Industrial Output, Retail Sales Disappoint (MW)
• Gunmen surround Libyan justice ministry (Reuters)
• Insider-Trading Probe Trains Lens on Boards (WSJ)
• Best Buy exits Europe (WSJ)
• Banker Roommates Follow Zuckerberg Not Blankfein With IvyConnect (BBG)

• Helicopter QE will never be reversed (Evans-Pritchard)
• Bank of Japan Launches Easing Campaign under new leadership (WSJ)
• Draghi Considers Plan B as Sentiment Dims After Cyprus Fumble (BBG)
• Spain threatened by resurgent credit crunch (FT)
• U.S. Dials Back on Korean Show of Force (WSJ)
• Gillard Urges Aussie Firms to Emulate German Deutschmark Success (BBG)
• Bank watchdog warns on retail branches (FT)
• Xi's Russia visit confirms continuity of ties (China Daily)
• Portuguese Government Survives No-Confidence Vote (WSJ)
• Mortgage rates set for fall, Bank of England survey shows (Telegraph)
• Russia’s bank chief warns on economy (FT)
• Fed member hints at summer slowing of QE3 (FT)

It is clear now that we must have been wrong about the economy. No more proof is needed than the fact the Dow has gone up 1,500 points. Everyone knows the stock market reflects the true health of the nation – multi-millionaire Jim Cramer and his millionaire CNBC talking head cohorts tell us so. Ignore the fact that the bottom 80% only own 5% of the financial assets in this country and are not benefitted by the stock market in any way. It is time to open your eyes and arise from your stupor. Observe what is happening around you. Look closely. Does the storyline match what you see in your ever day reality? It is them versus us. Whether you call them the invisible government, ruling class, financial overlords, oligarchs, the powers that be, ruling elite, or owners; there are powerful wealthy men who call the shots in this global criminal enterprise. No amount of propaganda can cover up the physical, economic, social, and psychological descent afflicting our world. There’s a bad moon rising and trouble is on the way.

Is "discretionary income" rapidly becoming a thing of the past for most American families?  Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought.  Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank.  Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news.  How will we ever have a sustained economic recovery if consumers don't have much money to spend?  Well, the truth is that we aren't ever going to have a sustained economic recovery.  In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get.  Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years. The following are 16 signs that the middle class is rapidly running out of money...

• US braced as cuts deadline passes (FT)
• U.S. stares down start of steep "automatic" budget cuts (Reuters)
• Yeltsin-Era Tycoons Sell Resources for Distance From Kremlin (BBG)
• Italy's center-left leader rules out coalition with Berlusconi (Reuters)
• Apple Required Executives to Hold Triple Their Salary in Stock (WSJ)
• BOJ Seen Spiking Punchbowl in April Under New Chief Kuroda (BBG)
• Diplomatic fallout from EU bonus cap (FT)
• Italy’s Stalemate Jeopardizes Resolution of Crisis, Finland Says (BBG)
• Chinese trader accused of busting Iran missile embargo (Reuters)
• JPMorgan No. 1 Investment Bank Amid a Flurry of New Deals (BBG)
• Eurotunnel’s Ferry Strategy at Risk as Rivals Cry Foul (BBG)
• Telepathic rats team up across continents (FT)

Is the U.S. economy about to experience a major downturn?  Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened.  Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality.  When the stock market did finally catch up with reality, it happened very, very rapidly.  Sadly, most people do not appear to have learned any lessons from the crisis of 2008.  Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever.  As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed.  In the end, we will pay a great price for our overconfidence and our recklessness.

• John Kerry just got happier: Berkshire Hathaway, 3G Buying Heinz for $72.50 a Share, or $28 Billion - ~20% premium to last price (CNBC)
• US Airways, AMR to Merge (WSJ) - can thousands of workers spell "synergies"?
• Draghi, Carney show ascent of "whatever it takes" central bankers (BBG) ... to preserve the Goldman way of life
• Euro zone economy falls deeper than expected into recession (Reuters)
• Soros has made $1 billion betting against the Japanese Yen (WSJ)
• Ex-Analyst at SAC Felt Pressured for Tips  (WSJ)
• Desalination Seen Booming at 15% a Year as World Water Dries Up (BBG)
• China's 'Wall' Hits Business (WSJ)
• Israel publishes some details as Australian spy mystery deepens (Reuters)
• Tata Motors Profit Falls 52% (WSJ)
• AB InBev Will Sell Corona Unit to Salvage Modelo Takeover (BBG)
• "Blade Runner" Pistorius charged with murdering girlfriend (Reuters)
• In Ohio and beyond, Obama sees model for manufacturing revival (Reuters)

In the same way as any and every risk-asset in the world, the price of yield-providing CMBS (commercial mortgage backed securities) have risen to post-crisis highs in the last few months. These are some of the epicentric deals from the crisis that now trade close to par once again. However, the last month or so has not seen CMBS prices push higher with stocks and it appears, as the FT notes, that the reason is becoming clear in the post-holiday-shopping period. CMBS cash-flow streams are set to drop considerably as up to 15 per cent of the country’s suburban retail centres forecast to close over the next five years in the face of online competition. Retail is regarded as an especially risky component of CMBS as a mall can go downhill if an important tenant shuts its store because other tenants are usually able to renegotiate their leases if a traffic-driving anchor tenant leaves. That can have severe consequences for CMBS exposed to the mortgage on the property.

• 'London Whale' Sounded an Alarm on Risky Bets (WSJ)
• Deadly Blast Strikes U.S. Embassy in Turkey (WSJ)
• Abe Shortens List for BOJ Chief as Japan Faces Monetary Overhaul (BBG)
• Endowment Returns Fail to Keep Pace with College Spending (BBG) - More student loans
• Mexico rescue workers search for survivors after Pemex blast kills 25 (Reuters)
• Lingering Bad Debts Stifle Europe Recovery (WSJ)
• Peregrine Founder Hit With 50 Years (WSJ) - there is hope Corzine will get pardoned yet
• Deutsche Bank to Limit Immediate Bonuses to 300,000 Euros
• France's Hollande to visit Mali Saturday (Reuters)
• France, Africa face tough Sahara phase of Mali war (Reuters)
• Barclays CEO refuses bonus (Barclays)
• Edward Koch, Brash New York Mayor During 1980s Boom, Dies at 88 (BBG)
• Samsung Doubles Tablet PC Market Share Amid Apple’s Lead (BBG)

• U.S. Family of Mao’s General Assimilates, Votes for Obama (Bloomberg)
• Iron ore prices hit eight-month high (FT)... four months after plunging and crushing iron ore miners
• Obama seeks 60 Senate votes for cliff deal (MarketWatch)
• Need. Moar. InfinitQEeee: Japan PM adviser urges unlimited BOJ easing, higher price goal (Reuters)
• Yen Touches 16-Month Low Versus Euro Before Japan CPI (BBG)
• China consumers driving economic rebound (Reuters) - ot just year end window dressing to accompany the new Politburo
• Rajaratnam agrees to pay $1.5 million disgorgement in SEC case (Reuters)
• France should review 2013 deficit target with EU partners (Reuters)
• Monti-led poll alliance takes shape (FT)
• Bersani wants growth-oriented Europe (FT)

We remain in the throes of a secular era of disinflation. We also are in a long-term period of sub-par economic growth and below-average returns. This has become so well entrenched that U.S. pension plans now have more exposure to bonds than to stocks, as we highlighted two weeks ago. Look, this is not about being bearish, bullish or agnostic. It's about being realistic and understanding that in our role as market economists, it is necessary to provide our clients with information and analysis that will help them to navigate the portfolio through these stressful times. Our crystal ball says to stick with what works in an uncertain financial and economic climate — in other words, maintain a defensive and income-oriented investment strategy.

• More QE could distort rather than deliver (FT)
• Soros Buying Gold as Record Prices Seen on Stimulus (BBG)
• EU Leaders Face Greek Aid Gap in Brinkmanship With IMF (BBG)
• Weak data point to bigger economic drag from Sandy (Reuters)
• Shirakawa Pushes Back With Criticism of Abe Unlimited Easing (BBG) But... but... Bernanke??
• French Downgrade Widens Gulf With Germany as Talks Loom (BBG)
• Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
• BOJ in the Balance as Next Government Picks Top Posts (BBG)
• Exchanges Get Closer Inspection (WSJ)
• Greece edges closer to €44bn bailout (FT)
• Japan Government to Spend 1 Trillion Yen on Next Stimulus (BBG)
• China’s Richest Woman Divorces Husband, Fortune Declines (BBG)

• Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
• Petraeus: A Phony Hero for a Phony War (NYT)
• IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
• ECB's Asmussen says Greece to need aid beyond 2014 (AP)
• EU makes budget plans without (FT)
• Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
• Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
• Bond investor takes big punt on Ireland (FT)
• Noda defends BoJ’s independence (FT) Indewhatnow?
• Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
• Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
• US tax breaks worth $150bn face axe (FT)