General Motors

Unfortunately, nobody in the Treasury seems to want to deal with the mess at Ally Financial before Election Day.  But the question is whether Ally can wait until then.

• Low cost era over for China's workshops to the world (Reuters)
• The HFT scourge never ends: SEC Probes Ties to High-Speed Traders (WSJ)
• Rehn says Portugal may need "bridge" (Reuters)
• China's GDP likely to have slowed in the first quarter (China Daily)
• Chinese Premier Blasts Banks (WSJ)

Can this last?

• More HFT Posturing: SEC Probes Rapid Trading (WSJ)
• Fed’s Bullard Says Monetary Policy May Be at Turning Point (Bloomberg)
• Hilsenrath: Fed Hosts Global Gathering on Easy Money (WSJ)
• Dublin ‘hopeful’ ECB will approve bond deal (FT)
• EU Proposes a Beefed-Up Permanent Bailout Fund (WSJ)
• Portugal Town Halls Face Default Amid $12 Billion Debt (Bloomberg)
• Hidden Fund Fees Means U.K. Investors Pay Double US Rates (Bloomberg)
• Europe Weighs Trade Probes Amid Beijing Threats (WSJ)
• Bank of Japan Stimulus Row Fueled by Kono’s Nomination (Bloomberg)

All you need to read.

German lawmakers are to review Bundesbank controls of and management of Germany’s gold reserves.  Parliament’s Budget Committee will assess how the central bank manages its inventory of Germany’s gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild.  The German Federal Audit Office has criticised the Bundesbank’s lax auditing and inventory controls regarding Germany’s sizeable gold reserves – 3,396.3 tonnes of gold or some 73.7% of Germany’s national foreign exchange reserves. There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany's central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany’s gold reserves. The eurozone's central bank system is massively imbalanced after the ECB’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans. The concern is that were the eurozone to collapse, Bundesbank's losses could be half a trillion euros - more than one-and-a-half times the size of the Germany's annual budget. In that scenario, Germany’s national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark.  The German lawmakers are following in the footsteps of US Presidential candidate Ron Paul who has long called for an audit of the US’ gold reserves. It is believed that some 60% of Germany’s gold is stored outside of Germany and much of it in the Federal Reserve Bank of New York.

Having spent this money, your next concern becomes avoiding popular outrage as sooner or later folks will find out that this money was practically given away and that everyone else got a raw deal. Let’s say that you just spent a large sum, to the tune of several trillion Dollars, bailing out various businesses that were literally run into insolvency by shortsighted and greedy business practices. 

On Thursday, we were the first to expose GM's latest strong car sales data as nothing more than the latest in a long series of accounting gimmicks known as 'channel stuffing' when excess inventory is offloaded to a vendor channel, in this case GM dealers, while allowing the company to book revenue, and, of course, profits (most likely on a FIFO basis thus further making numbers a complete myth in a time of once again surging input costs). The problem with channel stuffing is it can only go on for so long before the intermediary collapses under its own weight due to so much excess inventory the only next possible step is wholesale dumpin, in the process destroying the brand. Sure enough, it took about 24 hours for this latest speculation to be proven right as GM announce it was "temporarily" halting production of its Volt electric car. Per The Hill: "We needed to maintain proper inventory and make sure that we continued to meet market demand," GM spokesman Chris Lee said in a telephone interview." Translated into English, this means that GM has flooded dealer floors with so many of the spontaneously combusting cars that it has managed to bring demand to zero.

• Brazil declares new ‘currency war’ (FT)
• Postal Cuts Are Dead Letter in Congress (WSJ)
• China state banks to boost selected property loans (Reuters)
• ECB Says Overnight Deposits Surge to Record (Bloomberg)
• Van Rompuy confirmed for 2nd term as EU Council president (Reuters) - you mean dictator
• BOJ Shirakawa: Japan consumer prices to gradually rise (Reuters)
• IMF Says Threat of Sharp Global Slowdown Eased (Reuters)
• Eurozone delays half of Greece’s funds (FT)
• BOJ Openings Can Shape Monetary Policy (Bloomberg)

• Euro-Area Banks Tap ECB for Record Amount of Three-Year Cash (Bloomberg)
• Papademos Gets Backing for $4.3B of Cuts (Bloomberg)
• China February Bank Lending Remains Weak (Reuters)
• Romney Regains Momentum (WSJ)
• Shanghai Raises Minimum Wage 13% as China Seeks to Boost Demand (Bloomberg)
• Fiscal Stability Key To Economic Competitiveness - SNB's Jordan (WSJ)
• Bank's Tucker Says Cannot Relax Bank Requirements (Reuters)
• Life as a Landlord (NYT)

Stocks advanced as market participants looked forward to tomorrow’s 3yr LTRO by the ECB where the street expects EU banks to borrow around EUR 400-500bln. All ten sectors traded in positive territory for much of the session, however less than impressive demand for the latest Italian government paper saw equity indices lose some of the upside traction. Of note, the ECB allotted EUR 29.469bln in 7-day operation, as well as EUR 134bln for 1-day in bridge to 3yr loans. In other new, although Portugal's finance minister announced the country has passed its 3rd bailout review by the EU/IMF, this did not stop S&P's Kraemer saying that if there is a probability of default, it is higher in Portugal than in any other Euro-Zone country.

• IMF Official: 'Huge' Greek Program Implementation Risks In Next Few Days (WSJ)
• European Banks Take Greek Hit After Deal (Bloomberg)
• Obama Urged to Resist Calls to Use Oil Reserves Amid Iran Risks (Bloomberg)
• Hungary hits at Brussels funds threat (FT)
• Bank Lobby Widened Volcker Rule Before Inciting Foreign Outrage (Bloomberg)
• Germany fights eurozone firewall moves (FT)
• New York Federal Reserve Said to Plan Sale of AIG-Linked Mortgage Bonds (Bloomberg)
• G-20 Asks Europe to Beef Up Funds (WSJ)
• New Push for Reform in China (WSJ)

The softer PMI reports have weighed on risk markets, which as a result saw equities trade lower throughout the session. In addition to that, market participants continued to fret over the latest Greek debt swap proposals, which according to the Greek CAC bill will give bond holders at least 10 days to decide on new bond terms following the public invitation, and the majority required to change bond terms is set at 2/3 of represented bond holders. Looking elsewhere, EUR/USD spot is flat, while GBP/USD is trading sharply lower after the latest BoE minutes revealed that BoE's Posen and Miles voted for GBP 75bln increase in APF. Going forward, the second half of the session sees the release of the latest Housing data from the US, as well as the USD 35bln 5y note auction by the US Treasury.

• German president resigns in blow to Merkel (Reuters)
• China central bank in gold-buying push (FT)
• Germany Seeks to Avoid Two-Step Vote on Greek Aid, Lawmakers Say (Bloomberg)
• Eurozone central bankers and the taboo subject of losses (FT)
• Bernanke: Low Rates Good for Banks in Long Run (WSJ)
• Cameron and Sarkozy to test rapport at talks (FT)
• Chinese Enterprises encouraged to invest in US Midwest (China Daily)
• Goldman Sachs Group Inc. and Morgan Stanley have reduced their use of "mark-to-market" accounting (WSJ)
• Regulators to raise trigger for rules on derivatives (FT)

• Europe Demands More Greek Budget Controls in Bid to Forge Rescue (Bloomberg)
• Moody's Warns May Downgrade 17 Global Banks, Securities Firms (Reuters)
• Officials at Fed Split on More Bond Buys (Hilsenrath)
• Greek deal delays pressure periphery (Reuters)
• Talk, but No Action, to Break US Grip on World Bank Job (Reuters)
• Greek Rhetoric Turns Into Battle of Wills (FT)
• Greece Seeks Monday Bailout Deal, EU Questions Remain (Reuters)
• US Lawmakers Announce Payroll Tax-Cut Deal (Reuters)
• China Leader-In-Waiting Xi Woos and Warns US (Reuters)
• China's FDI falls 0.3% in Jan (Reuters)