A few days ago we pointed out that the latest Japanese GDP deflator came at multi-decade lows, this despite years of printing, pumping and other -ings. Today, Albert Edwards takes the observation of rampant regional deflation and concludes precisely what we have long claimed, that once rampant deflation is finally acknowledged by central bankers everywhere, and they are now running out for time, their only natural response to preserve the system will be to do what Japan has been doing for decades (successfully, they will claim) and respond with the most extreme round of monetization ever seen, "inevitably driving us towards out ultimate destination - 1970's style 20-30% inflation." Edwards also has an interesting observation in the aftermath of Tuesday's "no more incumbents" Primary Election results - with the administration now realizing it is losing the economic battle, it will instead focus on keeping some political credibility. To do that, Obama will attempt to focus voter anger abroad. And the resulting trade tensions, particularly with China, will be the catalyst for "shock Chinese yuan devaluation." Needless to say, we wholeheartedly agree with Edwards conclusion that "a global downturn is close." We also do not disagree with his bullish case for gold in the least.

An interesting chart depicting European monthly yoy change in electricity consumption comes to you via Goldman. Now that Europe's true fiscal problems are being exposed, look for such datapoints, which Goldman is of course using as a pitch to just how great Europe's condition is (for a real indication how "good" things are, check the EUR Libor, or the TED spread posted earlier, but let's not forget Jim O'Neill fluff piece about How Good The World Is, issued about 50 S&P handles higher - tells you all you need to know about bias), another, and more objective way to read the data, is to expect European electric output to decline materially. What that may mean for nattie and spent uranium rods, one can decide on their own.

The rumor that pushed the Dow up 200 points from the lows, was, as we expected, completely false and just a pretext to ramp the market into Opex. Of course, the SEC will never investigate into who actually leaked the rumor as the SEC's very existence is contingent on the continuation of that particular ponzi.

The biggest beta chaser in existence, Bill Miller, who does great when the market is up, and blows up spectacularly when the market plunges, may soon be leaving Legg Mason. Reuters reports that Legg Mason has picked the "eventual successor" to "famed" stock picker Bill Miller, according to the Value Fund. Presumably, this is news.

What Caused The May 6th Flash Crash? – It was not a “fat thumb”. It was not human error. It was simply mindless order routing by computers who appeared to send orders to “favorite spots” that had no liquidity in a crisis. SEC Chair, May Shapiro, revealed yesterday that error trades (traders 60%, or more, away from their prices at 2:40) took place in 326 securities. A stunning 21,000 trades were canceled, all on the all-electronic exchanges. There were no cancelations of any trades done on the NYSE floor system. The vast majority of the cancelations came in ETFs. No ETFs trade on the NYSE floor and, thus, there are no protective speed bumps. It was all just computers, pre-programmed to route orders to a favorite exchange that lost all its liquidity when pressure hit. They could just as well have sent those orders to a cigar store in Paterson, New Jersey. Heck, they might have even got a better bid.

The “pig farmers” at the prop desks at the big banks, the ones who drove the last leg of the bear market rally, seem to be placing their bets the other way right now and with few bids, the prices are adjusting lower (the ‘flash crash’ was an exaggerated version of how a market can move when there is no bid). Since much of the bear market rally off the March 2009 lows was technical rather than fundamental in nature, one cannot rule out a move down towards the 900-950 area for the S&P 500, which is where a classic retracement would take it; not to mention where it would offer fair-value on a normalized P/E ratio basis.