One of the biggest "givens" of the New Normal was that no matter what happens, US corporations would build their cash hoard come hell or high water. Whether this was a function of saving for a rainy day in a world in which external liquidity could evaporate overnight, whether it was to have dry powder for dividends and other shareholder friendly transactions, or to be able to engage in M&A and other business transformations (but not CapEx, anything but CapEx), corporate cash swelled to over $2 trillion (the bulk of it held in deposit accounts, or directly invested in "cash equivalents" i.e. risk assets, in banks in the US and abroad). Whatever the use of funds, the source was quite clear: ever declining interests rate which allowed corporate refinancings into ever lower cash rates, a "buyer's market" when it comes to employees, the bulk of which have been transformed into low paid geriatric (55 years and older), part-time workers: the only two categories that have seen a steady improvement in employment since the start of the second great depression, and low, low corporate taxes (for cash tax purposes; for GAAP purposes it is different story altogether). So some may be surprised that the great corporate cash hoard build appears to have finally tapered off. As the chart below from Goldman shows, after hitting an all time high of 11.2%, the ratio of S&P500 cash to total assets has once again started to decline.

Just as the president reminded us yesterday we are not a deadbeat nation, merely borrowing money today to pay the bills of yesterday, so, as the NY Times reports in this all-too-real article, many of the citizens of the US are also living not just paycheck-to-paycheck but short-term-loan-to-short-term-loan. As one debt-consolidation service noted "They've been borrowing just to meet payments on previous loans; it builds on itself." Rings an awfully loud bell eh? (and yes, we know the government's finances are not run like a households - though at some point the check book needs to balance). People in tough 'economic' situations fall into the 'poverty trap', borrowing money at ever higher interest rates in a shell game to keep previous borrowers at bay. The average debt for households earning $20,000 a year or less more than doubled to $26,000 between 2001 and 2010 - as people dig deeper, precisely because they long to escape. As the focus of the article notes, "the belt-tightening was the easy part... the larger problem was cash-flow." Critically, experiments show that 'economic' scarcity by itself - independent of personality or any other factors - fuels a drive to borrow recklessly.

In what could be a watershed moment for the price, provenance, and future of physical gold, not to mention the "stability" of the entire monetary regime based on rock solid, undisputed "faith and credit" in paper money, German Handelsblatt reports in an exclusive that the long suffering German gold, all official 3,396 tons of it, is about to be moved. Specifically, it is about to be partially moved out of the New York Fed, where the majority, or 45% of it is currently stored, as well as the entirety of the 11% of German gold held with the Banque de France, and repatriated back home to Buba in Frankfurt, where just 31% of it is held as of this moment. And while it is one thing for a "crazy, lunatic" dictator such as Hugo Chavez to pull his gold out of the Bank of England, it is something entirely different, and far less dismissible, when the bank with the second most official gold reserves in the world proceeds to formally pull some of its gold from the bank with the most. In brief: this is a momentous development, one which may signify that the regime of mutual assured and very much telegraphed - because if the central banks don't have faith in one another, why should anyone else? - trust in central banks by other central banks is ending.

In a world where "3 and 50" funds are revealed to be nothing but expert network-boosted Armstrong clones, performing great until exposed for having been boosted to the brim with stimulants, in this case inside information, or where even serious players are caught in ego pissing contests over who is right and who is wrong over a given stock (Herbalife comes to mind) it becomes almost difficult to find true alpha generators, which outperform the market not due to non-public, material information. Yet they still do exist, and probably the best example of one, continues to be Ray Dalio's Bridgewater, a fact which is not lost on us, or the bulk of the sophisticated asset allocators out there. As per the firm's latest monthly update, the hedge fund's total AUM has risen to a mind-blowing $142.1 billion - a record for any hedge fund anywhere, of which $60.8 billion is allocated to Pure Alpha, the firm's active strategy.

That China openly manipulates, goalseeks and otherwise distorts its economic data is no secret to anyone: and it is not at all surprising - after all the Chinese GDP model is based on how much goods and services are produced, which means end demand is completely irrelevant, and thus unfalsifiable. It also explains why as part of its miraculous 8% GDP growth year after year, we get such wonderful externalities as ghost cities, the biggest mall in the world lying totally empty, and shoddy buildings that tumble over. But one piece of data that not even China dared to fudge was trade data, for the simple reason that every Chinese "credit" is someone else's "debit", and vice versa, and could therefore be easily confirmed or denied. After all, bilateral trade is always a zero sum game. Except... in China. Which is what the observent eyes of some ANZ (and even Goldman) analysts caught over the weekend, and as was described in "Even Goldman Says China Is Cooking The Books." It didn't take long for China to take offense and boldly state that there is nothing at all wrong with its books.