Yuan

• French unemployment rises again to highest since 1999 (Reuters)
• BoJ rejects call for monetary easing (FT)
• North Korea threatens pre-emptive nuclear strike against US (Guardian)
• Firms Race to Raise Cash (WSJ)
• Time Warner Will Split From Magazine Unit in Third Spinoff (BBG) - slideshows, kittens, "all you need to knows" coming to Time
• U.S. economy, world's engine, remains in "neutral": Fed's Fisher (Reuters)
• BOE Keeps QE on Hold as Officials Weigh More Radical Measures (BBG)
• Jobs start to go as US sequestration cuts in (FT)
• BofA Times an Options Trade Well  (WSJ)
• Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook (BBG)
• Dell’s Crafted LBO Pitch Gets Messy as Investors Circle (BBG)
• Dell says Icahn opposes go-private deal (Reuters)
• Portugal Rating Outlook Raised to Stable by S&P on Budget Plan (BBG)
• China’s Richer-Than-Romney Lawmakers Reveal Reform Challenge (BBG)

• Kuroda to Hit ‘Wall of Reality’ at BOJ, Ex-Board Member Says (BBG)
• Venezuelans mourn Chavez as focus turns to election (Reuters)
• South Korea says to strike back at North if attacked (Reuters)
• Milk Powder Surges Most in 2 1/2 Years on New Zealand Drought (BBG)
• As Confetti Settles, Strategists Wonder: Will Dow's Rally Last?  (WSJ)
• Pollution, Risk Are Downside of China's 'Blind Expansion' (BBG)
• Obama Calls Republicans in Latest Round of Spending Talks (BBG)
• Ryan Budget Plan Draws GOP Flak (WSJ)
• Samsung buys stake in Apple-supplier Sharp (FT)
• China Joining U.S. Shale Renaissance With $40 Billion (BBG)
• Say Goodbye to the 4% Rule  (WSJ)
• Traders Flee Asia Hedge Funds as Job Haven Turns Dead End (BBG)
• Power rustlers turn the screw in Bulgaria, EU's poorest country (Reuters)

Unlike the session before, there has been little actionable news overnight, with the euphoria from the record high DJIA still translating into a buying panic, and forcing algos to buy futures because other algos are buying futures, and so on, simply because nothing says cheap like all time high prices (and forward multiples that are higher than 2007 levels). The one event so far was the Europe's second Q4 GDP estimate which came in as expected at -0.6%, the fifth consecutive decline in a row. More notable was that Q4 exports tumbled by 0.9% which was the biggest fall since Q1 2009. And while the news has served to keep the EURUSD in line and subdued ahead of tomorrow's ECB conference, the stock market buying panic has moved to European stocks which continue to ignore fundamentals, and are soaring, taking peripheral bond yields lower with them, despite ongoing lack of any clarity what happens in Italy as Bersani is ready to propose a government to parliament which is certain not to pass. But in a world in which fundamentals and reality have lost all significance, and in which only momentum and hope matter, we expect that risk will continue being bid in line with central bank balance sheet expansion until this tired 4 year old last recourse plan no longer works.

China’s foreign currency reserves have surged more than 700% since 2004 and are now enough to buy every central bank’s official gold supply -- twice. The Bloomberg CHART OF THE DAY shows how China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012. The price of gold has failed to keep pace with the surge in the value of Chinese and global foreign exchange holdings. Gold has increased just 263% from 2004 through to February 28, with the registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures. By comparison, China’s reserves rose 721% through 2012, while the combined total among Brazil, Russia and India rose about 400% to $1.1 trillion.

• Must defend against Chinese colonial expansion and get the Nigerian oil: U. S. Boosts War Role in Africa (WSJ)
• BOJ nominee Kuroda sets out aggressive policy ideas (Reuters)
• China becomes world’s top oil importer (FT)
• Baby Cured of HIV for the First Time, Researchers Say (WSJ)
• Obama to nominate Walmart's Burwell as White House budget chief (Reuters)
• Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors (BBG)
• Nasdaq executing trades at a loss (FT)
• Spending cut debate casts pall over Obama's second-term agenda (Reuters)
• Russell Indexes to Reclassify Greece as Emerging Market (BBG)
• Bond Bears Collide With Swaps Showing Low Rates (BBG)
• Buffett Deputies Leaving Billionaire in the Dust Get More Funds (BBG)
• Brazil's leftist president fights to win back business (Reuters)
• U.S. Special Forces train Syrian Rebels in Jordan (Le Figaro)
• Carlos Slim Risks Losing World’s Richest Person Title as Troubles Mount (BBG)

With now daily reports that the smog levels in Beijing are frequently literally "off the charts", it was only a matter of time before some aspiring Chinese entrepreneur decided to provide a much demanded product: clean air. As expected, Xinhua reports  that "philanthropist" Chen Guangbiao is now actively selling canned air to willing and eager Beijingites, tired of inhaling toxic, carcinogenic smog particles. The cost: $0.80 for a can of fresh air.

A major shift is taking place in Central Bank policy. The herd is ignoring the language as usual... just like they did in 2008.

• US braced as cuts deadline passes (FT)
• U.S. stares down start of steep "automatic" budget cuts (Reuters)
• Yeltsin-Era Tycoons Sell Resources for Distance From Kremlin (BBG)
• Italy's center-left leader rules out coalition with Berlusconi (Reuters)
• Apple Required Executives to Hold Triple Their Salary in Stock (WSJ)
• BOJ Seen Spiking Punchbowl in April Under New Chief Kuroda (BBG)
• Diplomatic fallout from EU bonus cap (FT)
• Italy’s Stalemate Jeopardizes Resolution of Crisis, Finland Says (BBG)
• Chinese trader accused of busting Iran missile embargo (Reuters)
• JPMorgan No. 1 Investment Bank Amid a Flurry of New Deals (BBG)
• Eurotunnel’s Ferry Strategy at Risk as Rivals Cry Foul (BBG)
• Telepathic rats team up across continents (FT)

A dispassionate discussion of the impact of the sequester and implications for investors. I look also look at how the dollar has performed since QE3+ was announced and it is not what many might have expected.

• Grillo kills move to break Italy deadlock (FT)
• Abe nominates Kuroda to run BoJ (FT)
• More WMT bad news: Wal-Mart Chief Administrative Officer Mars to Leave: WSJ (BBG)
• Japan's Abe: Islands Are Indisputably Ours (WSJ) - Except for China of course
• Low-key departure as pope steps down, to enter the final phase of his life "hidden from the world" (Reuters)
• Cuts unlikely to deliver promised budget savings (Reuters)
• European Union caps bankers’ bonuses (FT)
• White House, Republicans dig in ahead of budget talks (Reuters)
• Jockeying Stalls Deal on Cuts (WSJ)
• Argentina Says It Won’t Voluntarily Comply With Bond Ruling (BBG)
• Italian president says forming new government cannot be rushed (Reuters) - or happen at all
• Central Banks Spewing Cash Must Plan Exit Timing, Rohde Says (BBG)
• China Regional Targets Cut in Sign Debt Concerns Heeded (BBG)
• RBA Says Up to 34 Central Banks Holding Australian Dollars (BBG)

• Wal-Mart's Sales Problem—And America's (WSJ)
• Investors fret that Italy may undermine ECB backstop (Reuters)
• Monti Government Mulls Delaying Monte Paschi Bailout (BBG)
• Norway Faces Liquidity Shock in Record Redemption (BBG)
• ECB's Praet Says Accommodative Policy Could Lose Effectiveness (BBG)
• EU Chiefs Tell Italy There’s No Alternative to Austerity (BBG)
• New Spate of Acrimony in congress As Cuts Loom (WSJ)
• BOE's Tucker hints at radical growth moves (FT)
• Kuroda Seen Getting DPJ Vote for BOJ, Iwata May Be Opposed (BBG)
• Russian Banks Look to Yuan Bond Market (WSJ)
• Dagong warns about rising debt (China Daily)
• Italy Election Impasse Negative for Credit Rating, Moody’s Says (BBG)

Ben was in congress campaigning er, testifying mostly about the effectiveness of all things ZIRP and QE. He was grilled about possible risks with QE especially if interest rates should rise. The Bernank saying that interest rates would rise was unlikely but he then cavalierly stated if rates rise, the Fed would just “hold back on payments” er, stiff the Treasury. That’s no big deal for him since by then he’ll be down the road writing his memoirs, making speeches and joining some big Wall Street firm as a well-paid consultant. The Bernank was also asked if he noted any bubbles or market excess and said he saw none. 

• 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)

• Risk of instability hangs over Italy poll (FT), Protest votes add to uncertainty in close Italy election (Reuters), and... Risk On
• Czech inspectors find horsemeat in IKEA meatballs (Reuters)
• China’s Slower Manufacturing Casts Shadow Over Recovery (Bloomberg)
• So much for reform: China Prepares for Government Shuffle as Zhou Stays at PBOC (Bloomberg)
• France to pause austerity, cut spending next year instead: Hollande (Reuters)
• Sinopec to buy stake in Chesapeake assets for $1.02 billion (Reuters)
• White House warns states of looming pain from March 1 budget cuts (Reuters)
• China Quietly Invests Reserves in U.K. Properties (WSJ)
• Osborne Keeps Austerity as Investors See Downgrade as Late (BBG)
• South Korea's new president demands North drop nuclear ambitions (Reuters)
• Russia accuses U.S. of double standards over Syria (Reuters)

Equities have rallied to all-time highs, sovereign debt is still just off their all-time lows and risk assets have compressed to their benchmarks in ways not dreamed about five years ago. The absence of hyper-inflation, once thought to be the consequence of this type of behavior, is nowhere to be seen and this has befuddled many economist and money manager alike.  In other words, what most people thought would happen has not happened and there is a lesson here which rests upon all of the Central Banks acting in concert.  Money is always put to use, it is never idle because it then earns nothing, but since it cannot be invested off-world it must go into the spaces that are provided and so it has. One can honestly say that the game has been rigged and this is an accurate statement but it makes no difference; this is the game that we have been given to play. Investors get to make all kinds of choices but we do not make the rules and arguing with reality may be an interesting academic exercise but it changes nothing in the end.