President Obama

Russia is back. President Vladimir Putin wants the world to acknowledge that Russia remains a global power.  He is making his stand in Syria. The Russians are troubled by what they see as a growing trend among the Western Powers to remove disapproved administrations in other sovereign countries and a program to isolate Russia. Again, Russia is seeing Washington’s hand in Syria in the conflict with Iran. The Russians are backing their determination to block another regime change by positioning and manning an advanced air defense system in what is becoming the Middle East casino.  Putin is betting that NATO will not risk in Syria the cost that an air operation similar to what was employed over Libya will impose.  Just in case Russia’s determination is disregarded and Putin’s bluff is called, Surface to surface Iskander missiles have been positioned along the Jordanian and Turkish frontiers. Putin is certain that he is holding the winning hand in this very high stakes poker game. When the Turks and U.S see that there is little chance of removing Al-Assad, they will have no option other than to negotiate a settlement with him; and that would involve Russia as the protector and the mediator.

• Italy Political Vacuum to Extend for Weeks as Bargaining Begins (BBG)
• Italian impasse rekindles eurozone jitters (FT)
• On Spending Cuts, the Focus Shifts to How, Not If (WSJ)
• Obama spending cuts strategy focused on waiting game (Reuters)
• BOE’s Tucker Says He’s Open to Expanding Asset-Purchase Program (BBG)
• Fed Faces Explaining Billion-Dollar Losses in Stress of QE3 Exit (BBG)
• Carney warns over lack of trust in banks (FT) - here's a solution: moar bank bailouts!
• Bundesbank tells France to stick to budget (FT)
• China to tighten shadow banking rules (FT)
• Saudis Step Up Help for Rebels in Syria With Croatian Arms (NYT)
• After election win, Anastasiades faces Cyprus bailout quagmire (Reuters)
• Just for the headline: Singapore’s Darwinian Budget Sparks Employer Ire (BBG)

Peak oil we can handle. We find new sources, we develop alternatives, and/or prices rise. It's all but certain that by the time we actually run out of oil, we'll already have shifted to something else. But "peak water" is a different story. There are no new sources; what we have is what we have. Absent a profound climate change that turns the evaporation/rainfall hydrologic cycle much more to our advantage, there likely isn't going to be enough to around. As the biosphere continually adds more billions of humans (the UN projects there will be another 3.5 billion people on the planet, a greater than 50% increase, by 2050 before a natural plateau really starts to dampen growth), the demand for clean water has the potential to far outstrip dwindling supplies. If that comes to pass, the result will be catastrophic. People around the world are already suffering and dying en masse from lack of access to something drinkable... and the problems look poised to get worse long before they get better.

Waste and Fraud Are the Real Causes of the Deficit

The sequester was supposed to be such a bad outcome that it would force a compromise. The across-the-board cuts were so rigid and hurt so many favored programs, BAML notes, the “Super Committee” was almost certain to come up with a more flexible alternative. And yet, not only did the Super Committee fail to even make a proposal, the negotiations have now devolved into a blame game – the two parties are trying to pin the blame, and the political cost, onto the other party. As we have expected for some time, the sequester will very likely hit on March 1. This well likely add further downward pressure to the economy in the second quarter, with job growth averaging less than 100,000 per month and GDP growth slowing to 1%.

A listless overnight session with just the previously noted first disappointing LTRO-2 repayment and the now traditional big beat out of the "other" German confidence indicator, IFO, which beat expectations of 104.9, rising to a 10 month high of 107.4 to attempt to push the economy out of the recessionary slump (just don't mention yesterday's PMI), and nothing on today's US calendar is a fitting way to end the week, and further shows that markets are once more completely oblivious to the risks of the Hung Parliament outcome that this weekend may bring in Italy should the Berlusconi juggernaut maintain its momentum. The EURUSD and the US futures have disconnected once more, with almost all of yesterday's market weakness filled in the overnight session as the good old low-volume levitation returns. Here are the few news items worth reporting.

Presented without any comment (see original Titan letter here), and google translated to add Babel fishing insult to an already injurious, or is that hilarious, exchange between a hard core capitalist and a socialist... perfect ignorance, admiration of Obama, trade tariff threats, oh, and don't mention the war.

• China drains cash to curb liquidity (FT) - no longer just a New Year issue...
• Hilesnrath speaks (but nobody cares anymore) - Fed Split Over How Long To Keep Cash Spigot Open (WSJ)
• Chasm opening between weak French and strong German economies (Reuters)
• JPMorgan Said to Seek First Sale of Mortgage Bonds Since Crisis (BBG)
• China's Bo Xilai not cooperating on probe, been on hunger strike (Reuters)
• Fed minutes send warning on durability of bond buying (Reuters)
• Sony Seeks an Extra Life in New PlayStation 4 (BBG)
• Rajoy pledges fresh round of reforms (FT) - and by reforms he means kickbacks?
• Doubts loom over eurozone recovery (BBG)
• China Extending Zhou Stay Seen as Aid to Financial Overhaul (BBG)
• King Pulls Out Stops to Energize Economy in Carney Handover (BBG)
• Central Banks Discussed Nominal GDP Targets at G-20 (Businessweek)
• Grand Central Owner Opposes IPO of Empire State Building (BBG)

Every voice in the FOMC minutes is not a voting member. Bernanke, Yellen, Dudley are the keys and they are committed to QE. That is a descriptive claim not normative. Debt market has shown little reaction to FOMC minutes compared with the dollar and stocks. PBOC drained, but did not really tighten monetary policy. Euro zone PMI poor and gap between Germany and France grows. And what's up with Abe's trip to the US ?

It has been a few years since Kyle Bass suggested the 'nickel trade' and the idea remains as profitable for those with large wheel-barrows now as it ever was. As Bloomberg notes, the penny currently costs almost 2 cents to make and the nickel more than 10 cents - more than double the cost from 2006. In those seven years, the US taxpayer has lost a stunning $436 million thanks to the inflationary devaluation of the USD relative to the metals involved, and while a former Arizona congressman (Jim Kolbe) tried to sponsor a bill to abolish the penny (to save the cost of minting), President Obama noted that "given all the big issues, we're not able to get to it," even as the Canadian Mint just stopped distributing pennies - saving $11mm annually. It seems, while the production process may have costs, the 100% markup for pennies and nickels remains an intriguing disconnect.

• Office Depot Agrees to Buy Officemax for $13.50/Shr in Stock
• Bulgarian Government Resigns Amid Protests (WSJ)
• Rome will burn, regardless of Italian election result (Reuters)
• Abe Says No Need for Foreign Bond Buys Under New BOJ Chief (BBG)
• Rhetoric Turns Harsh as Budget Cuts Loom (WSJ)
• Muddy Waters Secret China Weapon Is on SEC Website (BBG)
• Business Loans Flood the Market (WSJ)
• Staples May Be Winner in Office Depot-OfficeMax Merger (BBG)
• Fortescue Won't Pay Dividend, Profit Falls (WSJ)
• Key Euribor rate on hold after rate cut talk tempered (Reuters)
• FBI Probes Trading in Heinz Options  (WSJ)
• Spain Said to Impose Yield Ceiling on Bond Sales by Regions (BBG)
• BOK’s Kim Signals No Rate Cut Needed Now as Outlook Improves (BBG)

We suspect that if one combines all the most apocalyptic scenes from 'Day After Tomorrow', 'Armageddon', 'Planet of the Apes', and '2012', then President Obama's address (scheduled for 1045ET) on the impact of the sequester will come close. Of course, he could merely comment on the fact that we need to cut spending (not slow spending growth) in order to revert to sustainability but we suspect this is not 'silver linings playbook'. Young children and pets should probably be removed from the room as our leader explains just how cataclysmic things are going to get unless we all just get along... As a gentle reminder, here is the very same President threatening to veto any effort to stop spending cuts - oh well, it seems there really are no easy off-ramps.

The big story this past week, besides the annual State of the Delusion speech by Barack “It won’t add a cent to the deficit” Obama, was the fate of the passengers on the Carnival Triumph as their skyscraper sized ship was left adrift at sea for days without power. The ordeal at sea of the Carnival Triumph and the leadership displayed by the Carnival management and executive officers is a microcosm of our declining empire. Rather than deal with our reality, Obama chose the Carnival Cruise Line method of public relations - misinformation, denial and delusion. He has embraced the Big Lie concept as if he had created it. Our cruise of illusions and delusions is headed for troubled water. The math challenged citizens on this ship have been enjoying the 24 hour pizza buffet without the labor required to pay for the bounty. This voyage is reaching an end and the bill is coming due. The engine is on fire but the captain is telling us all is well. Eventually, everyone will know the captain lied.

• G-20 Signals Support for Japan Easing Without Yen Talk (BBG) - but how will Mrs Watanabe know to sell the JPY without nightly proddings?
• Obama Faces Risks in Pipeline Decision (NYT)
• White House Immigration Plan Leaked (WSJ)
• Reader’s Digest Is Bankrupt as Iconic Magazine Falters (BBG)
• Venezuela's Chavez in surprise return from Cuba (Reuters)
• German Recovery Hinges on Euro Zone (WSJ)
• Hong Kong’s Bankruptcy Requests Climb to Almost Two-Year High (BBG)
• China New Year Retail Sales Growth Slows on Frugal Drive (BBG)
• Debt Bubble Born of Easy Cash Prompts Swedish Rule Review (BBG)
• In Europe's tax race, it's the base, not the rate, that counts (Reuters)
• Ugliest Danish Banks Find No Buyers in Toxic Asset Trap (Bloomberg)
• Italian Undecided Voters Targeted in Campaign’s Last Week (BBG)

Jobs! President Obama has set a record. In his speech to Congress on Tuesday, he uttered the word "jobs" more than in any of his previous four State of the Union addresses. His 45 mentions were more than double the references to any of the other policy ambitions encapsulated in his speech by such words as health, education, immigration, guns, deficit, debt, energy, climate, economy, Afghanistan, wage, spend or tax (the runner-up). If only the president's record on unemployment were as good. After four years America remains in a jobs depression as great as the Great Depression.