Transparency

The oil industry is full of bad analysts.

Bush and Obama Have Set Us Back 800 Years

Worldwide, politicians are not exactly famous for honesty. However, Europe is a very special case… where just about everyone is lying on just about everything involving the economy and banking system.

Government Prosecutes and Harasses those Who Expose Criminal Wrongdoing

The NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed granted MF Global primary dealer status a mere nine months before the latter went bankrupt?

As we have been reporting over the past ten days (most extensively here and here), the one European scandal that gets virtually no coverage on this side of the Atlantic, remains the escalating fiasco involving Italy's third largest bank, Banca dei Monte Paschi, which gets worse by the day due to its extensive political implications - the bank is seen domestically as the domain of the frontrunning centre-left candidate, something Berlusconi reminds his followers at every opportunity, but also will likely ensnare the head of the ECB as we predicted a week ago when we noted the aggressive attempts by the Bank of Italy, which was headed by the former Goldmanite at the time, to wash its hands of having had anything to do with the BMPS fiasco (and thus by implication indemnify that other Goldmanite, Mario Monti). As it turns out, and as Bloomberg reports today, the Bank of Italy did know of Monte Paschi's dirty laundry as long ago as 2010, but more importantly, and hence the title, the Italian law (and we use the term loosely) is now in play: "Prosecutors in Trani, Italy, opened an investigation into the Bank of Italy and market watchdog Consob’s supervisory activity on Monte Paschi, consumer group Adusbef said in an e- mailed statement today." Adding fuel to the fire is the just blasted headline from Reuters that Monte Paschi is now under investigation in Siena under law on company responsibility for crimes committed by staff, and suddenly life for the ECB head, not to mention the "stabeeleetee" of the banking sector looks quite problematic.

And now it's on us to mobilize and make sure at least one of us in each district contact our representatives and do what we can to inform them.  The longer this goes on, the more bad algo's will manipulate the system

Gold fell $4.00 or 0.24% in New York yesterday and closed at $1,654.90/oz. Silver climbed to $31.30 in Asia before it eased off to $30.73 and finished with a loss of 1.09%.

Gold in USD, 1 Year – (Bloomberg)

• Fed Pushes Into ‘Uncharted Territory’ With Record Assets (BBG)
• Next up in the currency wars: Korea - Samsung Drops on $2.8 Billion Won Profit-Cut Prediction (BBG)
• China Warns ‘Hot Money’ Inflows Possible on Easing From Abroad (Bloomberg)
• BOJ Shirakawa affirms easy policy pledge but warns of costs (Reuters)
• Merkel Takes a Swipe at Japan Over Yen (WSJ)
• Wages in way of Abe’s war on deflation (FT)
• Italian PM under fire over bank crisis (FT)
• Senior officials urge calm over islands dispute (China Daily)
• Spain tries to peel back business rules (FT)
• Rifts Over Cyprus Bailout Feed Broader Fears (WSJ)
• Soros Says the Euro Is Here to Stay as Currency War Looms (BBG)

If there is one concept on Earth that has been the absolute bane of human existence (besides global elitism), it would have to be the concept of the “majority opinion”.  The moment men began refusing to develop their own world views without first asking “What does everyone else think?”, they set themselves up for an endless future of failures. Human beings desperately want to belong, but, they also desperately want to understand the environment around them.  Often, the desire to belong and the desire to know the truth conflict.  In some societies, in order to be accepted, one must give up on his search for truth and avoid eliciting the anger of others. The idea of the majority view or the “mainstream”, gives people the sense that they are a part of a group, and at the same time, gives them the illusion of being informed.

The reliable data which policymakers and the public need if effective solutions are to be found is not available. As Tullett Prebon's Tim Morgan notes, economic data has been subjected to incremental distortion; Data distortion can be divided into two categories. Economic data has been undermined by decades of methodological change which have distorted the statistics to the point where no really accurate data is available for the critical metrics of inflation, growth, output, unemployment or debt. Fiscal data, meanwhile, obscures the true scale of government obligations. While he does not believe that the debauching of US official data is the result of any grand conspiracy to mislead the American people; he does see it as an incremental process which has taken place over more than four decades. From 'owner equivalent rent" to 'hedonics', few series have been distorted more than published numbers for inflation, and few if any economic measures are of comparable importance; and the ramifications of understated inflation are huge.

It is refreshing to see that the SEC has taken a much needed break from its daily escapades into midgetporn.xxx and is focusing on what is truly important, such as barring outspoken rating agency Egan-Jones from rating the US and other governments. From the SEC: "EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken." Hopefully the world is no longer insolvent in July of 2014 when this ban runs out.

To some, today is Martin Luther King day and as a result the US markets are closed, especially since today is also the day when Obama celebrates his second inauguration with Beyonce, Kelly Clarkson and James Taylor at his side (hopefully not on the taxpayers' dime). To others, January 21 is nothing more than the anniversary of the real beginning of the end, when five years ago a little known SocGen trader named Jerome Kerviel could no longer hide his massive futures positions and was forced to unwind them, sending global indices plunging resulting in the biggest single day drop in the Dax (-7.2%), and punking the Fed into an unannounced 75 bps cut. Luckily, today such cataclysmic unwinds are impossible as the market is priced perfectly efficiently, without central bank intervention, price transparency is ubiquitous and the Volcker rule has made prop trading by banks, funded by Fed reserves (which are nothing more than the monetization of excess budget deficits) and excess deposits, impossible.

Cyprus is the euro area’s third-smallest economy in GDP terms, accounting for less than 0.2% of the region’s output. Yet, we believe it is big enough to cause trouble. The country urgently needs external funding and applied for an EU/IMF/ECB (in short: troika) program last summer. However, the conditionality that comes with this program does not go down well with the current Cypriot government, whereas politicians in core eurozone countries have started to point fingers at the small economy’s low-tax, soft banking regulation business model. What emerges is the threat of another deadlock, in which a small country pulls the eurozone’s consistency per se into question. So despite the small size of the economy, Cyprus therefore has the potential, in our view, to become a catalyst that may eventually end the complacency brought about by the ‘Draghi plan’ in H2 last year. If this proves correct, it would likely mean that peripheral spreads widen and risk assets could turn more volatile, especially in view of Italy’s election and Spain’s funding needs.

I would expect that much more energy had to be used, and that much more electricity would be required just to keep regular business operations going, and keep the Chinese people from freezing to death.