8.5%

Just when we though that nobody would take advantage of the cover provided by the epic flame out of the FaceBomb IPO and the ongoing market crash, here comes Spain. Because there is nothing quite like a little Friday night action following a market drubbing and an "IPO for the people" shock in which to sneak the news that, oops, sorry, we were lying about all that austerity. Because while it came as a surprise to the market back in December when Spain announced it would post a 2011 budget deficit of 8.5% instead of the previously promised 6%, the market will hardly be impressed that Spain actually overspent by another €4.2 billion, to a brand new total of €95.5 billion of 8.9% of GDP. So Monday now has two things to look forward to: the Spanish bond margin hike on one hand courtesy of LCH.Clearnet earlier, and the fact that despite spending even more than expected, GDP growth has disappointed and the country is now officially in a double dip. Hardly what the country with the record wide CDS needs right now.

Remember the surge in the Empire Fed which was the straw so desperately clutched by all those who still held on to hope the US economy was still kinda sorta growing? Oops. The May Philly Fed just came out and was a disaster, printing at -5.8, down from 8.5 and crashing expectations for an increase to 10.0. This was the first contractionary print since September 2011 and the biggest miss since August 2011, but the worst news is that the Number of Employmees indicator was in absolute freefall, plummeting from 17.9 to -1.3. And now come the downward NFP revisions, and NEW QE (because courtesy of AAPL it is no longer QE [X] anymore) whispers.

All you need to read.

All you need to read and some more.

Now that Europe is all the rage again, below we again summarize the key Euro-centric events through the end of the month, as well as all the sovereign bond auctions to look forward to (we use the term loosely). Finally, the squid summarizes the key events in the past week as well as the expected global catalysts in the next several days. Somehow we get the impression it will be all about the unexpected developments in the next 168 hours, especially with Spain, Italy, France and Germany coming front and center with a boatload of bond issuance as soon as 9 hours from now...

Another weekend, another stunner in local European elections, this time as Merkel's CDU gets a record low vote in the state elections of Germany's most populous state North Rhein-Westphalia. According to a preliminary projections by ARD, the breakdown is as follows:

• SPD:39%
• CDU: 26%
• Greens:12%
• Pirates: 7.5%
• FDP: 8.5%
• Left:2.5%

Good news: no neo-nazis. Bad news: record defeat for the Chancellor. And the bext news for twitter fans: Angela_D_Merkel ist aus. Hannelore Kraft: in.

By now everyone knows that Chesapeake is a slow motion trainwreck: whether it is internal management issues, which eventually will culminate with the long overdue termination of the company's head (something the company had much control over and could avoid, but didn't, and should result in the sacking of the entire board for gross negligence), or plunging gas prices (something it had far less control over, but could have hedged properly, yet didn't), what is absolutely certain is that the firm's cash flow just isn't what it used to be. In fact, according to some, it is quite, quite negative. What, however, people do not know is that under ZIRP, when every basis point of debt return over 0% is praised, and an epic scramble ensues among hedge for any yielding paper no matter how worthless, the balance sheets of companies just do not matter. In other words, for companies that have massive leverage, high interest rates, negative cash flow, which all were corporate death knells as recently as 2008, the capitalization structure is completely irrelevant. We said this a month ago when we cautioned, precisely about Chesapeake, that "to all those scrambling to short the company: beware. CHK has a history of being able to fund itself with HY bonds and other unsecured debt come hell or high water. If and when the stock tanks, the short interest will surge on expectations of a funding shortfall. Alas, courtesy of the Fed's malevolent capital misallocation enabling, we are more than confident that the firm will be able to issue as much HY debt (unsustainably at 10%+, but that is irrelevant for the short-term) as it needs, crushing all short theses. What this means, simply, is that anyone who believes traditional fundamental analysis will and should work in the CHK case is likely to get burned." Sure enough, we were again proven right: Chesapeake just announced, following today's epic drubbing, that it is refinancing its secured debt facility (with its numerous restrictive covenants) with $3 billion in brand new Libor+7.00% unsecured paper (courtesy of Goldman and Jefferies). In doing so, CHK just got at least a one year reprieve.

All yopu need to read.

European equities continue the downward trend throughout the morning, despite opening slightly higher. Similarly to yesterday the moves are not data-driven, however the ECB have revised their forecasts for Euroarea growth downwards to -0.2% this year from -0.1% and have revised their inflation outlook upwards to 2.3% from 1.9%. The focus remains on Greece as the PASOK leader Venizelos grabs the baton and now attempts to form a stable coalition. Commentary from Greece so far has not been revelatory; Venizelos has reiterated that he wishes to remain within the Eurozone and affirmed that his party has not changed its policy with respect to the bailout. Flight to quality is observed throughout the markets, with the German Bund already testing yesterday’s highs several times and the major cash equities seen lower throughout the continent.

There was no good news overnight: CSCO (a rather prominent DJIA member) imploded on global demand weakness, China posted a larger than expected trade surplus which however was due to a greater than expected drop in imports, European industrial production was slightly better in Italy but offset by worse than expected news out of France (as for Greece - forget it), while all the attention continues to be focus on how the Greek endgame plays out, and now Spain too. Still, futures are on the cusp of greenness simply because following 6 days of declines stocks are oversold, and will desperately try to rally into any good news: such as initial claims later today, which will once again be spun as "declining" following a bigger upward revision to last week's number, making this week's appear to drop... at least until next week. As usual be on the watch for any erroneous headlines based on spurious rumors out of Greek developments: these tend to more the EURUSD, and thus ES, quite violently.

As noted earlier this week, while the theater of Greek elections serves as a convenient distraction from the epic depression the country of 10 million is undergoing, the reality is that very soon it won't matter at all who is left to govern this ruined country. Because if previously we demonstrated the collapse in two primary drivers of government tax revenue, namely tourism and commerce, today we show the logical follow through to economic flatlining: jobs and industries. Sadly, both are getting trounced. As Reuters reports, "Greece's jobless rate hit a new record in February, underscoring the pain austerity policies required by the EU and IMF have inflicted on the debt-laden country which is struggling to form a government. More than one in five Greeks and one in two youths are out of a job, statistics service ELSTAT data showed on Thursday. The unemployment rate hit 21.7 percent from a revised 21.3 percent in January. In the 15-24 age group, joblessness stood at a record 54 percent." It also appears that Greece has been getting ideas from the BLS: an 11 million population, and a pool of employed at a record low 3.87 million! "Nearly 1.1 million people were without a job, 42 percent more than in the same month last year, the data showed. The number of those in work declined by 8 percent over the same period to a record low 3.87 million." In other words, less than 4 million people are working to pay off the country's bailout package and debt which at last check was about 200% of GDP? At least of all indicators, the GDP is collapsing the fastest. Very soon Greece will be treated to a merciful #Div/0 when attempting to calculate its debt to GDP ratio. We can't wait to see the IMF's face then.

The entire bogus recovery is again being driven by subprime auto loans being doled out by Ally Financial (85% owned by the U.S. government) and the other criminal Wall Street banks. The Federal Reserve and our government leaders will continue to steer the country on the same course of encouraging rampant speculation, deterring savings and investment, rewarding outrageous criminal behavior, purposefully generating inflation, and lying to the average American. It will work until we reach a tipping point. Dr. Krugman thinks another $4 trillion of debt and a debt to GDP ratio of 130% should get our economy back on track. When this charade is revealed to be the greatest fraud and theft in the history of mankind, Ben and Paul better have a backup plan, because there are going to be a few angry men looking for them.

The only saving grace of the earlier horrendous Greek parliamentary vote was that, based on very preliminary results New Democracy and Pasok would be able to form a coalition government with precisely 151 seats needed in parliament to give them status quo powers. However, according to a more recent re-rack of the votes (New Democracy 18.9%, 108 seats, Pasok 13.4%, 41 seats, Syrizia: 16.6%, 51 seats, and all others), this assumption is now in jeopardy as the two pro-bailout parties will have just 149 seats in the new parliament, or not even a full majority. Why is this problematic? Because virtually every other party in the new parliament, and there may be up to 10 there including the New Dawn, have voiced their opposition to the bailout of Greece, which as everyone knows is merely a bailout of Europe's insolvent banks using Greek taxpayer funds as a conduit. And, adding insult to injury, Reuters now reports that "Greek leftist leader calls for anti-bailout coalition." It appears that finally, after many years of delays, the anti "bailout" genie is finally out of bottle...

As we expected, the previous unofficial poll forecasts were total rubbish, and according to exit polls from NET TV, the results are as follows:

• New Democracy: 17-20%
• Pasok: 14-17%
• In a stunner, Syrizia, or the coalition of the radical left - a vehement anti-Bailout party - gets more votes than the ruling PASOK party: 15.5%-18.5%
• Independent Greeks: 10-12%
• Finally, and not surprisingly in the aftermath of the French results, the ultra right Golden Dawn gets 6-8% of the vote and will make it into Parliament

Tallied across, up to 60% of the new parliament will be anti-bailout (at least according to exit polls), and hence "Domino toppling." Good luck with that pro-bailout coalition government. Needless to say these results are very ugly and make any prospect of a pro-bailout coalition cabinet virtually impossible. Suddenly the fate of the European experiment is in the hands of the ultra right and the far left - yup, Neo-Nazis will determine the future of Europe. How quaint... again - congratulations Europe.

US home prices have once again made a post-bubble low in spite of all the artificial intervention and massive bailouts to financial institutions.  The bottom line unfortunately is that US household incomes have been strained for well over a decade.  You can slice it up by nominal or inflation adjusted data but household incomes have been moving in a negative direction during the 00s and continuing into this decade.  Keep in mind there is a massive pipeline of problems still in the housing market with over 5.5 million mortgage holders in some stage of foreclosure or simply not paying on their mortgage.  This is more than a housing crisis but a crisis of quality job growth.