Countrywide

While everyone's attention this morning will be focused on the sheer, seasonally-adjusted noise that is the monthly NFP report (keep in mind that any number +/- 200,000 of the actual, is entirely in the seasonal adjustments and is thus entirely in the eye of the Arima X 13 beholder), which is expected to print at 140,000, resulting in an unemployment rate of 7.6%, there were some events overnight worth noting. First, the China non-manufacturing PMI printed at 54.5 in April, down from 55.6, and tied with the lowest such print in two years. The biggest red flag was that New Orders dropped below 50, with the price index also declining sharply, indicating that either the Chinese slowdown is for real, and the national bank will have no choice but to ease unleashing inflation, or that the politburo wishes to telegraph to the world that China is slowing, because what goes on in China, and what data is released out of China are never the same thing. Elsewhere, in Europe Mario Draghi's henchmen were stuck in damage control mode, and Ewald Nowotny said markets over-interpreted a signal yesterday that the ECB would consider a deposit rate below zero. Policy makers have “no plan in this direction,” Nowotny said in an interview with CNBC today. This helped boost the EUR from its languishing levels in the mid 1.30s higher by some 50 pips following his statement.

When it comes to the US housing market there appear to be three groups of people: those who who have either unlimited cash and/or access to credit, and like the most rabid of bubble-chasing speculators, are perfectly happy to engage in a game of Flip That House for a short-term profit pending the discovery of a greater fool (often times converting the house into rental properties as numerous hedge funds have been doing on cost-free basis courtesy of the government's REO-To-Rent program) - they are the vast minority of speculators; then there are those who currently rent and are opportunistically looking at home prices, willing to dip their toe at the right price - these too are few and far between and mostly represent a function of the natural growth of the US household offset by the availability of jobs; and then there is everyone else. Sadly, it is the "everyone else" that is the vast majority of the US population. It is this "everyone else" who comprises the bulk of those who have been kicked out of the American Dream, whose core pillar has always been owning your own home (with or without a massive mortgage attached), not renting. As the US Census Bureau reported earlier today, the US homeownership rates in the first quarter of 2013 dropped by another 0.4% to a fresh 18 years low, or 65% - the lowest since 1995!

MERS: The Center of the Mortgage Scam

After showing Ireland's biggest banks failed to report borrowings/encumbrances, I give EVERYONE means to play credit analyst. Calculate Ireland needing another bailout right here (hint: this app probably shames your favorite ratings agency).

When Mary Schapiro quit the laughing stock US stock market regulator, the only question was which Wall Street firm the latest SEC "revolving door" migrant would end up with, with most bets being on, naturally, Goldman and JPM. Today, to some surprise, the news hit that the former head of the internet porn-addicted regulator (which like clockwork always complains about its low budget: maybe get a refund for that bangbus.com subscription?) has decided to join none other than the revolving door extraordinaire consulting firm Promontory Financial. Per the WSJ: "Ms. Schapiro will work full-time in Promontory's office in Washington as a managing director leading the consulting firm's governance and markets practice and advising clients on risk management and compliance. Ms. Schapiro and a Promontory spokesman declined to say how much she will be paid in the new job." So who is Promontory? Nothing short of an "expert network" of all former government workers who having moved on, are willing to spill the beans about all the secrets of government operations... for a fee of between $1000 and $10,000 per hour. The chart below shows a sampling of all current and former employees of Promontory, explaining why it is a perfect fit for anyone intent on justifying the allegations of those who claim all the SEC does is provide a revolving door opportunity for ex-government workers.

In late 2010, in a superficially stunning move, Bank of America was sued by, among many others, the New York Fed over the biggest bogeyman for the bank's balance sheet - its legacy portfolio of super toxic Countrywide mortgages it inherited in the worst M&A deal of all time (its purchase of CFC) and the inheritance of woefully inadequate mortgage issuance standards which ever since then (recall our prediction on this issue) has cost the bank billions in litigiation payments and reserves.  Obviously, the Fed had no concerns about collecting the money it itself creates, and it certainly doesn't care about legality and criminal financial impropriety, so why was it among the list of plaintiffs? Simple: as we suggested back then, and as has since been proven correct, it was simply so that Bill Dudley's henchmen have a first row view of everything going on in the putback litigation that has been the primary concern for BofA, but with a few of keeping the damage to a minimum. Sure enough, Ever since then the Fed has done everything in its power to mitigate potential losses to BofA as a result of Agent Orange selling hundreds of billions in biohazardous mortgages to anyone and anything with a pulse. It has gotten so bad that the Fed was last week caught lying under testimony, forcing the Fed to take back testimony in a parallel lawsuit between AIG and BofA, which has also involved the New York Fed, as a indirect guardian of BAC's cash hoard.

It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity. 

It's not just Cyprus, and no - it's not just Canada either. I'm preparing a list of specific banks that I have 1st hand knowledge that would prevent me from keeping my money in them. Get "Cyprus'd"!!!

No, this is not about Dick Bove's Buy recommendation of Lehman days ahead of the bankruptcy, or what seems like his "Buy" rating on Bank of America since the end of World War II, or 4 years after Bove's birth. No: we have a special surprise for readers out of the overhyped banking analyst, who still inexplicably appears on various TV outlets, even if the anchors have a tough time remembering just what firm he is with these days. So, without further ado, here is Bove's take on the single worst merger in the history of the financial industry: that between Bank of America and the toxic mortgage factory Countrywide Financial.

Following up on Friday's abysmal consumer income data, we now take look at the spending side of the equation, without much optimism. Not surprisingly, as Bloomberg's Richard Yamarone summarizes, the consumer health picture in January was "grim" and "after adjusting for inflation and taxes, is simply insufficient to sustain the expansion." He adds that "over the last couple of weeks, no fewer than a dozen consumer-related companies made mention of the deterioration in incomes as a risk to  business and performances." Yamarone concludes: "Spending on discretionary items has softened in recent months. Four of our ‘Fab Five’ spending barometers fell or were unchanged in January from December. Comments from the Bloomberg Orange Book suggest further deterioration ahead." That this is happening with rates at zero, and with an effective countrywide mortgage payment moratorium allowing millions to live mortgage payment free, means that if and when things normalize, consumption - the driver of 70% of the US economy - will fall off the proverbial cliff.

First it was Walmart letting the truth finally slip last Friday when a leaked memo showed recent sales are a "total disaster." Today, as anyone who has looked at AAPL premarket quotes will surmise, it's Apple's turn, following a report in the FT that FoxConn, the world's largest contract electronics manufacturer, "has imposed a recruitment freeze across almost all of its factories in China 5th as it slows production of Apple's iPhone." It is not an internal memo, but in this particular case actions speak even louder than leaked words: 'The suspension in hiring by China's largest private sector employer, and the biggest assembler of Apple products, is the first search countrywide move since the 2009 downturn, prompted by the financial crisis. It underscores the weakening demand for some Apple products, Which has put pressure on the American company's battered share price. "Currently, none of the plants in mainland China have hiring plans," said Liu Kun, a company spokesman at Foxconn's largest manufacturing facility in the southern Chinese city of Shenzhen." So first Walmart, the world's largest private sector employer with over 2 million workers, and now FoxConn, the world's largest tech-focused employer with 1.2 million workers, is also realizing what a cashless, consumerless "recovery" means, regardless whether it is due to Apple or not. And the markets still continues to wave it off as one off events.

• Euro Tremors Risk Market Respite on Spain-Italy, Banks (Bloomberg)
• Obama Says U.S. Needs Revenue Along With Spending Cuts (Bloomberg) 
• China Regulators Moved to Restrain Lending (WSJ)
• Low Rates Force Companies to Pour Cash Into Pensions (WSJ)
• JAL wants to discuss 787 grounding compensation with Boeing (Reuters)
• Abe Shortens List for BOJ Chief as Japan Faces Monetary Overhaul (Bloomberg)
• Monte Paschi probe to widen as Italian election nears (Reuters)
• Hedge funds up bets against Italy's Monte Paschi (Reuters)
• Spain's opposition Socialists tell Rajoy to resign (Reuters)
• Electric cars head toward another dead end (Reuters)
• BlackRock Sued by Funds Over Securities Lending Fees (Bloomberg)

We have discussed Dallas Fed's Richard Fisher's money-where-his-mouth-is perspective on the world before and the (sadly) non-voting member is among UBS' Art Cashin's most respected and candid of the FOMC. A glance through the transcripts that Art highlights below should both make readers sick at the constant pollyanna-ish nature of Fisher's comrades and perhaps more confident that his insights will be listened to more astutely 'the next time' as he noted at the time "No amount of rewriting of history will exonerate us". Once again, after reading these transcripts, do we really believe that central bankers are omnipotent? or incompetent?

Over a year ago we noted that when it comes to Bank of America "earnings", items which traditionally are classified as non-recurring, one-time: primarily litigation and mortgage related charges, have now become recurring, and all the time, courtesy of the worst M&A transaction of all time - the purchase of Countrywide and its horrifying mortgage book. Today, this is finally being appreciated by the market where even the pompom carriers have said that it is time to start ignoring the endless addbacks and focus on actual earnings. The same cheerleaders have also, finally, understood that the primary source of "profitability" at this lawsuit magnet of a company, is nothing other than the accounting trick known as loan loss reserve releases - not actual profits but merely bottom line adjustments whose purpose is to mitigate the impact of quarterly charge offs on loans gone horrible bad. Remember that Bank of America has some $908 billion in total consumer loans and leases, and every day hundreds of millions of these go 'bad' and ultimately have to be discharged, offset by "hopes" that the future will improve. This hits both the balance sheet and the P&L. So, if one steps back and ignores the non-recurring, one-time noise, what emerges? A truly frightening picture.

Bank of America just reported yet another quarter marked by a bevy of "one-time" charges, which have now become normal course of business, even as NIM declined Y/Y, and sales and trading revenues declined sequentially. Loan loss reserve releases of $900 million more than offset the declining Noninterest income, and contributed to a positive pre-tax net income number. The biggest threat continue to be private Rep and Warrant outstanding claims which increased by almost 42 billion in the quarter to a total of $12.3 billion.