Poland

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.

Last week was a scratch in terms of events, if not in terms of multiple expansion, as 2012 forward EPS continued contraction even as the market continued rising and is on the verge of taking out 2012 highs - surely an immediate catalyst for the New QE it is pricing in. This week promises to be just as boring with few events on the global docket as Europe continues to bask in mid-August vacation, and prepare for the September event crunch. Via DB, In Europe, apart from GDP tomorrow we will also get inflation data from the UK, Spain and France as well as the German ZEW survey. Greece will also auction EU3.125bn in 12-week T-bills to help repay a EU3.2bn bond due 20 August held by the ECB. Elsewhere will get Spanish trade balance and euroland inflation data on Thursday, German PPI and the Euroland trade balance on Friday. In the US we will get PPI, retail sales and business inventories tomorrow. On Wednesday we get US CPI, industrial production, NY Fed manufacturing, and the NAHB  housing index. Building permits/Housing starts and Philly Fed survey are the highlights for Thursday before the preliminary UofM consumer sentiment survey on Friday.

 Every summer, my colleagues and I invite young people from all over the world for an intensive 4-day workshop about freedom and entrepreneurship. This year’s workshop just concluded yesterday afternoon, and it was, without doubt, the best one ever. For the past several years, we have been conducting this event at a lovely resort in the Lithuanian countryside. It’s a pretty place– a nice, comfortable, relaxing environment away from all the noise and distraction of daily life.  Now, I pay for the whole thing myself. I rent out the entire resort and pick up the total cost of food, lodging, entertainment, etc. For this year’s event, my staff was able to negotiate the same price as last year, and I was happy about this. But after the first two days, we began to notice something different: the resort was actually skimping out on our food portions! In other words, they kept the price the same as last year… but they were delivering less value than before. In this case, it was in the form of food portions that were at least 10% smaller!

In what has become a typical pattern; Europe has a summit, everyone says this, that, their own variation of that and the other to appease their citizens and it is not until days later that some sort of reality begins to be released to the Press. Not only has this become the pattern but it generally comes over the weekend when the markets are not open and when no one is paying much attention. It is a purposeful scheme and useful I suppose for dampening effects and it allows the bliss to continue. In the meantime there is no ESM in place, only $65 billion left in the EFSF after Spain and Cyprus are funded and the German Constitutional Court declared over the weekend that there would be no ruling on the ESM until September 12. The Golden Rule lives on; “He that has the Gold rules.”. For those that believe in the usefulness of firewalls, which would not include me, you are now staring at bricks to build dollhouses and it is not just the flank but the center that is fully exposed and vulnerable. This is Vichy reborn and Anschluss déjà vu and the takeover of Poland just accomplished on a different battlefield. The weapon is money and not armaments and while the stench is more polite the demand for victory has not lessened.

It seems increasingly the European leaders themselves (absent the self-referential peripheral political paeons) are getting the joke in Europe. Following Buba's Weidmann's rational comments this morning (via Bloomberg):

• *WEIDMANN SAYS CAN'T SOLVE EURO CRISIS WITH EVER BIGGER FUNDS
• *WEIDMANN BANK FINANCING (Bailout - kicking the can) COULD WORSEN WITH EURO CRISIS

Now, Poland's deputy finance minister is pulling back dramatically from their desire to enter the European union:

• *POLAND PLANS `OPPOSITE OF ACCELERATION' IN EURO DRIVE: DOMINIK
• *POLAND SAYS EURO-AREA STABILITY IS NEW CRITERION FOR EURO ENTRY

It seems there is some rational thinking occurring in Europe - no matter how algos react to recycled headlines.

The politics of the EU summit appear quite tense, and as JPMorgan's CIO Michael Cembalest notes, you have to wonder if this is how monetary unions are made or broken: by strong-arming the Chancellor of the country primarily expected to fund the Euro’s survival. In order to better comprehend the shenanigans, Michael provides an aerial view of the summit and how these maneuvers played out. The next move is Germany’s.

A preview of the key events in the coming week (which will see more Central Banks jumping on the loose bandwagon and ease, because well, that is the only ammo the academic econ Ph.D's who run the world have left) courtesy of Goldman Sachs whose Jan Hatzius is once again calling for GDP targetting, as he did back in 2011, just so Bill Dudley can at least let him have his $750 million MBS LSAP. But more on that tomorrow.

Big Banks Are Rotten to the Core

Despite the July 4th mid-week holiday, the coming week will be packed with major economic updates. Goldman Sachs summarizes what to look for in the next 5 days.

One week to solve all problems, or else....

We have no doubt that everyone is tired of bad news, but we are compelled to review the facts: Europe is currently experiencing severe bank runs, budgets in virtually every western country on the planet are out of control, the banking system is running excessive leverage and risk, the costs of servicing the ever-increasing amounts of government debt are rising rapidly, and the economies of Europe, Asia and the United States are slowing down or are in full contraction. There's no sugar coating it and we have to stop listening to politicians and central planners who continue to downplay, obfuscate and flat out lie about the current economic reality. Stop listening to them.

One European think tank which has been spot on in its skepticism over the past two years, is OpenEurope. Below they share their views on the next steps for Greece.

All you need to read.

With Europe now seemingly in exile from even the bravest knife-catcher value-manager, and, despite media protestation, US equities facing weak macro data and a fiscal cliff of epic proportions; it is no surprise that everyone and their mom thinks emerging markets are the place to be. However, as UBS notes today, not all EM balance sheets (whether government, corporate, or private) are the same and they break down the low, medium, and high risk balance sheets across Asia, LatAm, and EMEA. As is evident in Europe, high debt levels are detrimental to economic growth and equity returns. Solid government accounts generally reward policymakers in such markets with valuable policy flexibility, while healthy consumer balance sheets allow credit growth to be a strong domestic growth driver. In a slow and uncertain global growth environment, pillars to support growth are crucial and are market differentiators - especially if global contagion spreads as we suspect

All you need to read