Gambling

• Merkel's Dilemma: Risk Euro Zone or Her Government (WSJ)... as first suggest by ZH 2 months ago, with only one resolution: referendum
• Russia warns West over Syria after Obama threats (Reuters)
• Consider keeping Bernanke, Romney adviser Glenn Hubbard says (Reuters)... Glenn Hubbard is the star of the movie Inside Job
• Spain Deficit Goals at Risk as Cuts Consensus Fades (Bloomberg)
• Czech Austerity Revolt Threatens Cabinet as Slump Bites (Bloomberg)
• Greek cuts to be deeper than trailed (FT)
• Akin rebuffs Romney, Republican calls to quit Senate race (Reuters)
• Obama Leads Romney in Poll Showing Disdain for Congress (Bloomberg)
• Greece needs more time to reform, PM Samaras tells paper (Reuters)
• UK banks face scandal over toxic insurance products (Reuters)
• Iceland Shelves Monetary Tightening as Krona Seen Appreciating (Bloomberg)
• India Considers $35 Billion Debt Revamp After Biggest Blackout (Bloomberg)

The face of Yemeni deli clerk Mutahar Murshed Ali was slashed nearly in two for committing that most grievous of offenses: refusing to "sell" a Colt 45 to a drunk 20 year-old in exchange for foodstamps (whose usage Zero Hedge readers know, recently reverted back to all time highs). Of course, Ali was perfectly in his right to refuse to exchange booze for EBT: we reported recently that "New York would prohibit welfare recipients from spending their tax-funded benefits on cigarettes, alcohol, gambling, and strip clubs under a bill passed overwhelmingly by the state Senate." That however appears to not have bothered the assailant, who nearly cut off the deli vendor's face off in retaliation for not getting the "entitled" quid-pro-handout.

• JPMorgan provided rescue financing to Knight (WSJ)
• HSBC hands U.S. more staff names in tax evasion probe (Reuters), HSBC, Credit Suisse Sacrifice Employees to U.S., Lawyers Say (BBG)
• Hong Kong shares slide to two-week closing low, China weak (Reuters)
• Israel Would Strike Iran to Gain a Delay, Oren Says (Businessweek)
• Britain 'threatened to storm Ecuador's London embassy' to arrest Julian Assange (AP)
• You have now entered the collateral-free zone: Spain Said to Speed EU Bank Bailout on Collateral Limits (BBG)
• China Can Meet Growth Target on Positive Signs, Wen Says (BBG)
• Risk Builds as Junk Bonds Boom (NYT)
• Berlin maintains firm line on Greece (FT)
• Brazil unveils $66bn stimulus plan (FT)

We have said it over and over, we'll say it again. For all those who for one reason or another would like to boycott the broken markets, yet trade gold in paper form, please understand that all the invested capital is at risk of total loss and can and will be lost, commingled and rehypothecated, not necessarily in that order, with little to zero recourse and the residual claim on liquidating assets pushed to the very end of the queue. Because if Lehman, MF Global, Peregrine, and countless other examples were not enough, here comes Amber Gold: a gold-based investment ponzi scheme out of Poland, in which it is likely needless to say that the gullible investors never had actual possession of the gold. And when they tried, it was gone. All gone.

While we already presented, courtesy of Nanex, the modus operandi of the Knight berserker algo, there was one outstanding question. What was the bottom line. And no, not how much the loss on Knight's Income Statement would be as a result of this glimpse into what really happens in the market: we already knew that would be $440 million. The question is what is the notional amount of stock that this algo bought in the 45 minutes in which it was operational. We now know: $7 billion. Or $155 million per minute. Or $2.6 million per second. Or, assuming the algo impacted just 150 stocks as previously reported, it was buying on average $17,333 in each name every second. Or, assuming an average stock price of the universe of 150 stocks of $30/share, the Knight algo lifted the offer roughly 600 times each second. For 45 minutes straight! That's right - the market making algorithm of a designated market maker which is responsible for 10% of the order flow in the US stock market, entered a pre-programmed mode (because the computer was told to do whatever it did by someone, and not without reason) that saw it buy up $2.6 million worth of stock every second.

Imagine you are driving to work this morning in Las Vegas (yes, you are one of the select few locals who has a job that does not involve relying on the strip's ever declining gambling revenues or flipping a house to John Paulson in the second, and far shorter, coming of the regional housing bubble, with poppage imminent), and you observe what appears to be a man who hung himself below a billboard saying "Dying for Work." Confused, you continue, only to drive by another billboard with what seem to be a man hanging off, this one saying "Hope you're happy Wall St." Slowly it all clicks: the man is not real, and this is not a suicide done in protest by some depressed unemployed person, instead it is merely a mannequin all part of some attempt at a statement. Would this be considered shocking, and will the thousands of commuters who saw this feel any worse or better toward Wall Street and its employees - America's bankers - having seen this, or will they merely continue with their lives? What if the dummy was a real person? And is this merely a foreshadowing of things to come in a country in which class warfare has never been as violent, and in which the divide between the haves and the have nots has never been as wide? And what happens when the next such stunt is a real person? More importantly, what happens if a depressed jobless person takes their life but first takes out some of those he thinks are responsible for his plight - say Wall Streeters?

• Bundesbank’s Weidmann Says ECB Shouldn’t Overstep Mandate (Bloomberg)
• Hollande and Monti Vow to Protect Euro (FT) - be begging Germany to death
• Monti Calls French, Finns to Action as Italy Yields Rises (Bloomberg)
• not working though: Banking license for bailout fund is wrong: German Economy Minister (Reuters)
• Switzerland is ‘New China’ in Currencies (FT)
• Regulator Says no to Obama Mortgage Write-Down Plan (Reuters) - tough: there will be socialism
• Gauging the Triggers to Fed Action (WSJ)
• When domestic monetization is not enough: Azumi Spurns Calls for Bank of Japan to Buy Foreign Bonds to Curb Yen (NYT)
• Indonesia’s July Inflation Accelerates on Higher Food Prices (Bloomberg) - remember: the Deep Fried black swan
• China Manufacturing Teeters Close to Contraction (Bloomberg)
• Spain Introduces Regional Debt Ceilings to Achieve Budget Goals (Bloomberg) - yes, they said "budget goals"

GDP Growth More Strongly Correlated with Rule of Law than Anything Else ...

Even Sandy Weill Says We've Got to Restore Separation Between Banking and Financial Gambling

Well not really, but it will be someone else's fault of course that there was gambling going on here. There is no way the head of the New York Fed at the time could have possibly known that Barclays was manipulating its Libor rate. Recall: : “Barclays: You know, LIBORs being set too low anyway, but uh, yeah, that-that is correct. Fed person: “Yeah.” Supposedly Geithner is not the Fed person. Anyway, the scheduled topic of today's hearing in the House Financial Services Committee is the annual report of the Financial Stability Oversight Council (FSOC) but the hearing seems likely to be dominated by questions about manipulation of LIBOR rate. Watch it live here.

Visitor volume to Las Vegas is the highest since 2007, despite rising hotel rates, but gaming revenues are near flat.  Online gambling is popular with Europeans – the Brits and Greeks in particular – yet it has slowed over the past 3 months. ConvergEx's latest off-the-beaten-path economic indicator – gambling – shows an increasing global reluctance to leave household finances at the whims of blackjack and poker tables, be they in actual casinos or online betting parlors. Discretionary spending behavior is reliant on consumer sentiment and economic outlook; gambling is the ultimate “luxury item” because there’s absolutely no guaranteed return, so gambling behavior is a near real-time indicator of changes in consumer confidence.  Our gambling indicators, both domestic and abroad, show what feels a lot like recessionary behavior and point to another leg down in the latter half of 2012.

Too Big Leads To Destruction of the Rule of Law

On the last day of May, when we first learned via Bloomberg that there was even the scantest likelihood that JPM may have been massaging its CDS marks within the (London-based of course) CIO organization - the backbone of hundreds of billions in notional exposure, and thus a huge counterfeited benefit to trader bonuses and corporate earnings - we wrote, "The Second Act Of The JPM CIO Fiasco Has Arrived - Mismarking Hundreds Of Billions In Credit Default Swaps" in which we explained precisely how this activity would and did take place, precisely why other traders caught doing the same are on the verge of being thrown in jail, precisely why everyone else does it, and precisely why the biggest CDS self-reporting and client/banker owned-organization (this is where images of Libor should appear), MarkIt, may well be implicated in everything - very much in the same way that the BBA is the heart of Lie-borgate. Because unlike all other allegations of impropriety, most of which rely on Level 2 and Level 3 assets whose valuations are in the eye of the oh so very sophisticated beholder (in this case JPM) who has complex DCFs and speaks confidently when explaining marks to naive, stupid outsiders (in other words baffles with bullshit), when it comes to one of the last places where Mark to Market is still applicable and used: the OTC CDS market, and where daily P&L records are kept, it will take any regulator, enforcer, or criminal investigator precisely 1 minute to find out if there was fraud, or gambling, going on here. Most importantly, it opened up the firm to a criminal investigation. Which as Reuters reports, is precisely what has now happened.

The second Barclays announced its $450 million Libor settlement, it was all over - the lawyers smelled not only blood, but what may be the biggest plaintiff feeding frenzy of all time. Which is why it was only a matter of time: "State attorneys general are jumping into the widening scandal over whether banks tried to manipulate benchmark international lending rates, a move that could open a new front against the top global banks. A handful of state attorneys general said they are looking into whether they have jurisdiction over the banks, and are starting preliminary discussions to determine what kind of impact the conduct involving the Libor rate may have had in their states."

Just out from Bloomberg, where we find that our own corrupt politicians have just discovered that gambling went on for years and years, and nobody had the faintest clue!

• SENATE BANKING COMMITTEE TO ASK GEITHNER, BERNANKE ABOUT LIBOR

Surely the wristslapping will be so profound, Geithner is already soaking his arm elbowdeep in vaseline. In other news, go long AMZN as Senate (and soon Congress) just bought out Amazon's entire inventory of "Libor for corrupt morons"