Reuters

As reported on Friday, the most recent example of a breach in informational Chinese walls was confirmed at Bloomberg, where it was discovered that reporters have the same degree of client surveillance as workers on the API/terminal side. The reason why this is problematic is that since Bloomberg is a monopolist in the financial terminal industry, with such competitor attempts as Reuters' Eikon being massive failures, virtually every finance professional needs a terminal (even if the rate of sale of such terminals is slowing down as a result of the ongoing financial margin headaches). Which means that Bloomberg journos, an increasingly competitive service to the likes of Dow Jones, Reuters and AP, may have had an unfair advantage when it comes to tracking their "pray" - Bloomberg's own clients. And now, following the original Goldman complaint which Bloomberg said ended such informational commingling, it is the turn of the Treasury and the Fed (certainly very heave users of the BBG Trading terminal) to complain. What is left unsaid in all of this is the simple question of just why is it material information what the Fed, arguably an entity that at least in a normal world should not have any day to day trade interactions with financial markets, looked up on its trading terminal.

While the H7N9 birdflu epidemic is still raging in China, with 4 news deaths bringing the total confirmed death toll to 31 (and who knows how many unconfirmed) on 129 infections leading to a mortality rate that is simply staggering, even if the mordibity rate is largely a function of Chinese data censorship, Europe and the middle east may be set for a viral breakout of their own. First is the case of Saudi Arabia where two more people have died from novel coronavirus, a new strain of the virus similar to the one that caused SARS, in an outbreak in al-Ahsa region of Saudi Arabia, the deputy health minister for public health said on Sunday. What is more troubling is that with the lack of accurate newsflow out of Saudi Arabia, come unforeseen consequences, such as the eventual spread of the virus from its localized region to a new area, such as Europe or in this case France, to start. Reuters report that a "second diagnosis of the new SARS-like coronavirus has been confirmed in France, the Health Ministry said on Sunday, in what appeared to be a case of human-to-human transmission. The new infection was found in a 50-year-old man who had shared a hospital room with France's only other known sufferer, the ministry said in a statement."

• PBOC Says China Shouldn’t Be ’Blindly Optimistic’ on Inflation (BBG)
• Foreigners Buying Half of London New Homes Prop Up Building (BBG) - first they come for the foreign deposits, then for the real assets...
• Investors Rediscovering Margin Debt (WSJ) - well, yes: it is at record highs
• China issues new rules targeting wealth management fund pools (RTRS)
• Navy $37 Billion Ships Seen Unsuitable Have 2-Year Window (BBG)
• New York may have to drop claims against BofA over Merrill (RTRS)
• FBI Rejects Boston Police Stance in Spat Over Terror Data (BBG)
• In eastern Syria oil smugglers benefit from chaos (RTRS)

This is not Thursday Humor - though perhaps it should be. First, the Japanese promoted bond-buying as not just patriotic, but a manly endeavour that will get you the girls; but now the idea of inflating assets has been taken one step further. The Japanese have argued that 'sex sells bonds' in the past but now, as Reuters reports, the lingerie-maker Triumph's Japanese division has launched a special edition "growth strategy" Abenomics Bra. "We hope that, as the Japanese economy grows, we can also help bust sizes to get bigger," a spokewoman noted as the bra features a rising trendline, three arrows pointing up, and promises a 2% increase in volume with extra padding. The analogy of an exogenous force maintaining a natural force at an unsustainable size is just too easy - as, just as in the real-life, at some point that 'supportive bra' of monetary policy has be removed.

By the end of next week, the Obama administration will no longer be able to borrow money to fund government operations because Congress has only agreed to extend the government's borrowing authority until May 19. While he has smartly expressed his preference that the most liquid bond market in the world "not default,", Speaker Boehner will take to the lectern this morning at 1045ET to discuss the upcoming "debt prioritization" bill.  As Reuters notes, House Republicans are expected to pass the bill today that would require the Obama administration to prioritize government debt payments and retirement benefits if Congress fails to reach a deal to raise the U.S. debt ceiling. The legislation is not expected to go anywhere in the Democratic-controlled Senate and the White House has said it will veto the bill, but what is essentially a tactical maneuver will allow the Republicans, who control the House, to argue they have done their best to avoid a potential U.S. credit default. We are sure the M.A.D. defense card will be played at least once...

• Einhorn's advice to investors: don't take my advice (Reuters)
• Next: floating dead vegetables: Chinese inflation rises on soaring vegetable prices (FT)
• The scramble for the bottom dollar is on: McDonald's, Wendy's Battle for Value-Centric Customers (WSJ)
• Cheaper iPhone coming after all: Apple supplier Pegatron boosts China workforce by 40 percent in second quarter (Reuters)
• House set to pass tactical Republican debt bill (Reuters)
• Underwriting bonanza: Goldman Said to Earn $500 Million Arranging Malaysia Bond (BBG)
• G7 finance chiefs to discuss bank reform push (Reuters)
• Big Banks Push Back Against Tighter Rules (WSJ)
• University endowments trim holdings in US Treasuries (FT)
• Ex-Pakistan PM's son abducted as Taliban threaten poll (Reuters)
• China Dowry Filled With Gold Signals Gains for Jewelers (BBG)
• As discussed here over a year ago: China inflation data shows central bank policy dilemma (Reuters)

The U.S. stock market rally has recently passed its fourth anniversary after the terrifying lows of March 2009. During that time, massive and unconventional reflationary policy from the Federal Reserve has managed to lift the S&P 500 to new all-time highs. But perhaps even more improbably, it has finally (for now?) built a floor under U.S. residential real estate prices. This 'Less Bad' Recovery continues in other ways as well. Jobs have been created. Not good jobs. Not high paying jobs. Not full time jobs. But some rudimentary sets of tasks and responsibilities that could be called jobs. There has also been deleveraging. But here, too, the scale of debt reduction is nothing close to the unadjusted figures often touted in the media. Americans, and more generally, OECD citizens, remain highly burdened by debt. When combined with poor wage growth, this explains the continued suppressed demand so pervasive in developed nations. And of course, oil prices – as expressed through prices at the pump – remain stubbornly elevated and are likely to persist at their new elevated level. Combined, these factors have kept a lid on consumer confidence and make for a precarious disparity between the stock market and the real economy. Welcome to the Great Constraint - a growing failure to thrive.

There are a dozen significant economic indicators that are warning that the U.S. economy is heading into a recession.  The Dow may have soared past the 15,000 mark, but the economic fundamentals are telling an entirely different story.  If historical patterns hold up, the economy is heading for a very rocky stretch. But most average Americans are not that concerned with the performance of the stock market.  They just want to be able to go to work, pay the bills and provide for their families.  During the last recession, millions of Americans lost their jobs and millions of Americans lost their homes.  If we have another major recession, that will happen again.  Sadly, it appears that another major recession is quickly approaching. The following are 12 recession indicators that are flashing red...

Confirming that while Central Banks may have halted economic logic and reason indefinitely, supply and demand still have some relevance in the real world was today's earlier news that in the aftermath of McDonalds' 20% price hike of basic burgers in Japan three weeks ago, that the company's Japanese same store sales tumbled by a whopping 3.7% in April, a major contributor for the miss in the expected global same store sales for April which came at -0.6%, below Wall Street expectations. One can only guess what the SSS drop would have been had MCD implemented the price hike at the start of the month. One can also guess if the increase in average price offset the drop in sales volume - we will know soon, but just to make doubly sure if what MCD loses in volume it makes up for in price, McDonalds announced that one month after the 20% price hike in Japan, its Indian franchise operator said it too would proceed with a price hike - the second one this year - amounting to 5-6%.

Who Should You Believe …  The UN Investigator or the U.S.?

In what must be an inexplicable move to momentum-chasers everywhere, as gold continued to decline in price in March, and long before its targeted smash in April, China was not backing off its gold purchases of the yellow product. Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons. This follows 97.1 tons in February, and brings the total imports for the first quarter of 2013, or 372 tons, on par with what China imported in the entire first half. It also means that since January 2012, China has imported an absolutely stunning 1,206 tons of gold. Putting this number in context, this is 20% more than the entire reporter official gold holdings of 1054 tons, and represents roughly half of the total 2500 tons of gold mined every year.

All Chinese economic data is manipulated: that much is known. So is its trade data. However, the manipulation has become so grossly evident, some wonder if there is a far bigger problem behind the scenes. Turns out there is: a $60 billion per month "hot capital" inflow problem, and an economy on the very of bursting at the inflationary seams.

• Pentagon Plans for the Worst in Syria (WSJ)
• Russia and US agree to Syria conference after Moscow talks (FT)
• Hedge Funds Rush Into Debt Trading With $108 Billion (BBG)
• Detroit is the new "deep value" - Hedge funds in search of distress take a look at Detroit (Reuters)
• Commodities hedge funds suffer weak first quarter (FT)
• But... but... Abenomics - Toshiba posts 62% decline in Q1 net profit (WSJ)
• Americans Are Borrowing Again but Still Less Than Before Freeze (WSJ)
• Man Utd announce Alex Ferguson to retire (FT)
• Asmussen Says ECB Discussed ABS Purchases to Spur SME Lending (BBG)
• Benghazi Attack Set for New Review (WSJ)
• Belgium Says 31 People Arrested Over $50 Million Diamond Theft (BBG)
• Brazilian diplomat Roberto Azevêdo wins WTO leadership battle (FT)
• Bangladesh Garment Factory Building Collapse Toll Reaches 782 (BBG)

In yet another example of the massive gap between the American people's perception of what is going on around them (whether by propaganda channels or simply cognitive bias) and the actual reality, Reuters reports that while gun-related homicides are down 39% from the 1993 peak, only 12% of people believe that gun crimes have fallen. Non-fatal firearm crimes declined by 69% to 467,300 in the same period but 56% of Americans believe that gun crime is higher now than it was 20 years ago, the Pew Research Center said its poll showed. The dichotomy between record food stamp usage (and non-employment) and multi-year highs in consumer sentiment comes to mind - we wonder which is more 'real'.

What REALLY Happened?