Wall Street Journal

For anyone who can't see the "WHY" or "HOW" in a Muppet Manipulators suit, re: Facebook IPO, here's a step by step guide comparing my research to that of the top 4 underwriters showing exactly what they did wrong & how everyone is ignoring it

If there was one catalyst for the market to be "convinced" of an imminent coordinated liquidity injection, as Zero Hedge first hinted yesterday, or simply a 25-50 bps rate cut from the ECB as some other banks are suggesting and Spain's ever more desperate Rajoy is now demanding, it was the overnight battery of European Flash PMI, all of which came abysmal, throughout Europe, the consolidated Eurozone PMI posting the worst monthly downturn since mid-2009, the PMI Composite Output and Manufacturing Index printing at a 35 month low of 45.9 and 44.7 respectively. PMIs by core country were atrocious: France Mfg PMI at 44.4 on Exp of 47.0 and down from 46.9, a 36 month low; German Mfg PMI at 45.0 on Exp. of 47.0 and down from 46.2. The implication, as the charts below show, is that GDP in Europe is now negative virtually across the board. Adding insult to injury was the UK whose GDP fell 0.3%, more than the 0.2% drop initially expected. The cherry on top was German IFO business climate, which tumbled from 109.9 to 106.9 on Expectations of 109.4 print, as the European crisis is finally starting to drag the German economy down, or as Goldman classifies it, "a clear loss in momentum." What does it all add up to? Why nothing but a massive surge in risk, as the market's entire future is now once again in the hands of the #POMOList, pardon, the central banks: unless the ECB steps up, Europe will implode due to not only political but economic tensions at this point. Sadly, as in the US, by frontrunning this event, the markets make it more improbable, thus setting itself up for an even bigger drop the next time there is no validation of an intervention rumor: after all recall what sent stocks up 1.5% yesterday - a completely false rumor of a deposit insurance proposal to come out of the European Summit. It didn't, but that didn't prevent markets to not only keep their massive end of day gains, but to add to them. it is officially: we have entered the summer doldrums, when bad is good, and horrible is miraculous.

All you need to read.

Translating Germany's standard line on joiontly-backed European bonds is simple: "We don't want to pay" - it is as simple as that so you can ignore the rest of the rhetoric. France at the next EU summit is going to push for Eurobonds and Germany will resist in what may be a quite unpleasant stand-off. From Germany’s perspective we can easily understand their feelings about this matter because the consequences of Eurobonds are very negative for them. Eurobonds are quite clearly a “transfer union” where Germany is the primary source of funding then for the rest of Europe. If Eurobonds are ever enacted we would suggest selling any/all of the “AAA” countries and buying the periphery ones as the correct play in the intermediate term. In fact, Eurobonds are the crux where Federalism comes head to head with Nationalism and where the rhetoric gives way to actualization.

Here are some hard facts that support what I made clear about Facebook last year - underwriters' dream, fundamental investor's nightmare. Happy Hyperinflated IPOing!

The only good news spin this morning was that the Greek, pardon Spanish contagion, has not reached Italy, after the boot-shaped country sold €5.25 in bonds this morning at rates that did not indicate a meltdown just yet. It sold its three-year benchmark at an average 3.91 percent yield, the highest since January but below market levels of around 4 percent at the time of the auction. It also sold three lines due in 2020, 2022 and 2025 which it has stopped issuing on a regular basis. And this was the good news. The bad news was the not only has the Spanish contagion reached, well, Spain, but that everything else is now coming unglued, as confirmed first and foremost by the US 10 Year which just hit a new 2012 low of 1.777%. Spain also is getting hammered with CDS hitting a record wide of 526 bps overnight, and its 10 Year hitting 6.26% after the country sold 364 and 518-Day Bills at rates much higher rates than on April 17 (2.985% vs 2.623%, and 3.302% vs 3.11%). But the highlight of the day was the Banco de Espana release of the Spanish bank borrowings from the ECB, which to nobody's surprise soared by €36 billion in one month to €263.5 billion, more than doubling in 2012 from the €119 billion at December 31.

All you need to read and some more.

Unbelievable.

That is the only way to express this author’s utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind.  Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for. It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment.  His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government’s initiatives to encourage home ownership, the foundation from which a housing bubble could emerge. It was moral hazard bolstering on a massive scale.  Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount.  Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices. 

All you need to read and some more.

And Keystone will only drive prices HIGHER

• Borrowers Face Big Delays in Refinancing Mortgages (WSJ)
• Greek left attacks ‘barbarous’ austerity (FT)
• Would-be suicide bomber was U.S. informant (Reuters)
• Cameron says Euro needs single government: report (Reuters)
• Demonstrators targeting BofA annual meeting (Reuters)
• Moody’s Bank Downgrades Risk Choking European Recovery (Bloomberg)
• Lehman E-Mails Show Wall Street Arrogance Led to the Fall (Bloomberg)
• What Hollande must tell Germany (Martin Wolf) (FT)
• Why France Has So Many 49-Employee Companies (BusinessWeek)

While Turkey has assured the U.S. government it will cut purchases of oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter from a year earlier. Sanctions aimed at isolating Iran because of its nuclear program, combined with revolutions in the Middle East, have spurred a tripling in the region’s purchases of Turkish precious metals and jewels to $942 million in the first three months, from $282 million in the same period last year. This 30% increase in demand is contributing to gold remaining above $1,600/oz in what has all the hallmarks of another period of consolidation prior to higher prices. “Turkey is exporting massive quantities of gold to Iran and Arab Spring countries as citizens in those countries switch to portable wealth,” Mert Yildiz, chief economist for Turkey at Renaissance Capital, told Bloomberg on April 30. The increase in trade with Iran comes as sanctions make it harder for trading partners such as Turkey, India and China to pay in dollars and euros. Iran said in February it would accept payment in any local currency or gold. Reuters report today that Iran is accepting payments in yuan for some of the crude oil it supplies to China, the Iranian ambassador to the United Arab Emirates said on Tuesday. "Yes, that is correct," Mohammed Reza Fayyaz told Reuters when asked to comment on an earlier report in The Financial Times.

According to Reuters, Italy is going to propose to the European Union that they should exempt borrowing used to pay their commercial obligations from their calculation of public debt. Monti, the article states, is also going to propose exempting the counting of public debt used for investments. You may be sure that Italy’s $211 billion of derivatives will now be entitled an “investment.”  Now all of this will lower Italy’s debt to GDP ratio which is the real reason for these proposals and so even worse falsified numbers can be handed out to the Press in hopes that money will be invested in Italy based upon not just inaccurate but offically countenanced manufactured data. This way not only the debt to GDP ratio can be falsified but the growth numbers, the fiscal targets and a raft of other numbers that will no longer be real but just a systemic figment of Europe’s imagination.

Fraud ... What Fraud?

There are deepening concerns in Switzerland about the debasement of the Swiss franc. The SNB has pegged the franc to the euro and is engaged in the same ultra loose monetary policies as the Federal Reserve, BOE and the ECB. The SNB won't allow the franc to rise above an arbitrary “ceiling” against the euro Walter Meier himself said on April 5 that the SNB is ready to buy foreign currencies in "unlimited quantities." Meier’s comments regarding the vastly depleted Swiss gold reserves came after Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland, called on the SNB to disclose where its gold is stored, in a letter published in the respected Swiss publication Finanz und Wirtschaft. Meier said that the SNB holds its physical gold reserves “domestically and internationally, with provisions for a crisis scenario being a main factor in the decision for this decentralized storage”.  “The criteria for the storage countries are: appropriate regional diversification, exceptionally stable economic and political environments, immunity for central bank investments, access to a gold market where stocks could be liquidated if necessary,”  he continued. He concluded by saying that “such a decentralized storage is still preferable to an exclusive storage in Switzerland. The listed factors can change over time and that’s why the central bank is reviewing and adapting the storage locations periodically.” The SNB’s monetary policies have been imprudent in recent years and their gold sales have lost the Swiss people a lot of money.