None

Benefitting from two diametrically opposed systems.

Since the system itself has disconnected risk from consequence with backstops, guarantees and illusory claims of financial security, then it is has lost the essential feedback required to adapt to changing circumstances. As the risk being transferred to the system rises geometrically, the system is incapable of recognizing, measuring or assessing the risk being transferred until it is so large it overwhelms the system in a massive collapse/default. The consortium has only two ways to create the illusion of solvency when the punter's $100 million bet goes bad: borrow $100 million from credulous possessors of capital or counterfeit it on a printing press. These are precisely the strategies being pursued by central banks and states around the globe. BUt since risk remains disconnected from gain/loss, then capital and risk both remain completely mispriced. Risk is being transferred to the entire global financial system at a fantastic rate, because counterfeiting money or borrowing it on this scale to cover losses creates new self-reinforcing feedbacks of risk....At some unpredictable stick/slip point, the accumulated risk will cause the system to implode like a supernova star.

To all those who stayed up until 6 am local time yesterday to hear Europe announce that the Greek deal is done, Europe is fixed, and that a pot of gold was found at the end of the rainbow, our condolences. Sorry, no isn't. Following up on our earlier post about the potential of UK-law bondholders to once again scuttle the deal, here comes none other than the IIF's Charles Dallara who basically says that the fate of Greece, the Euro, and the Eurozone, are in the hands of Greek creditors as we have been cautioning all along. And after all why on earth would hedge funds who just lost over 70% of their recoveries bear a grudge whatsoever...

Just when we thought that when it comes to nonsensical announcements Europe is second to none, here comes the White House and takes the cake:

• WHITE HOUSE SAYS RISE IN GASOLINE PRICES CAUSED BY VARIETY OF GLOBAL FACTORS, INCLUDING UNREST IN SOME PARTS OF WORLD, FAST GROWTH IN OTHERS - RTRS

Uhm, would the "unrestful" parts of the world be those that have an above average US drone presence. At least we know that said price surges have nothing to do with the following chart:

The day dawns with a deal for Greece that is full of smoke and mirrors; lies and deceptions. It is a deal pretty much as expected and, as I have said before, now the realities are going to be confronted. Europe has spun the agreement and the Euro has rallied some and the S&P futures are up but the next few weeks, I am afraid, will hold some serious disappointments. The page turns today because now we are about to confront not what is told to us but the actuality of what has been presented to us and just what will happen as a result.

While all eyes are on Europe and its Greek farce, Japan is advancing at an inexorable pace...

While it has been well-documented by now, that even as the campaign of Mitt Romney continues to be funded exclusively by Wall Street legacy firms, that of Ron Paul is largely in the hands of the US military. Yet when it comes to the recently infamous SuperPAC, things have changed. Because as Politico reports, of the roughly $3.4 million total in cash raised by the pro-Paul group Endorse Liberty since its founding on December 20, none other than PayPal cofounder and Clarium Capital chief Peter Thiel has donated $2.6 million. So as the renegade financier, whose opinion on Ben Bernanke and the gold standard is well-known to Zero Hedge regulars emerges as a primary backer of all that is wrong with the status quo, and the Ben Bernanke way of monetary suicide, we wonder who is next? Actually, scratch that: Bill Gross has already made his opinion well known vis-a-vis Ron Paul's candidacy. Isn't it about time the Newport Beach multibillionaire reached into his back pocket and put his money where his mouth is, especially following his tongue in cheek endorsement of Ron Paul for president?

Following the recent downgrades of many of the major European banks and insurers and last year's comments by Fitch on insurers' inability to pass on losses to policyholders, the hot-topic of ASSGEN, ALZ, and the rest of the capital-impaired forced-soakers-up-of-new-issue-demand in the European insurance market are under new pressure as The WSJ points out today that new 'rightly punitive' capital rules have been watered down. The 2014 introduction of 'Solvency II' - the insurers' equivalent to banks' Basel III capital rules - did indeed attempt to create risk-weighted capital requirements and better balance assets and liabilities within these firms. However, as Hester Plumridge notes, regulators bowed to industry pressure (again) adding the ability to shift discount rates to get around low-rate-implied valuations for their annuity streams and the introduction of a 'countercyclical premium' to avoid the growing (and negative) spread between distressed assets and rising liabilities. As Plumridge concludes, "a solvency regime that ignores all European sovereign credit risk looks increasingly unrealistic. Investors could end up none the wiser." After some systemic compression, the last week or so has seen insurers start to deteriorate as perhaps the market will enforce its own capital expectations even if regulators are unwilling to.

Let’s be honest, quite a few Americans love a good war, especially those Americans who have never had to bear witness to one first hand.  War is the ultimate tribally vicarious experience.  Anyone, even pudgy armchair generals with deep-seated feelings of personal inadequacy, can revel in the victories and actions of armies a half a world away as if they themselves stood on the front lines risking possible annihilation at the hands of dastardly cartoon-land “evil doers”.  They may have never done a single worthwhile thing in their lives, but at least they can bask in the perceived glory of their country’s military might.   This attitude of swollen ego through proxy is not limited to the “Right” side of the political spectrum as some might expect.  In fact, if the terrifyingly demented presidency of Barack Obama has proven anything so far, it is that elements of the “Left” are just as bloodthirsty as any NeoCon, and just as ready to blindly support the political supremacy of their “side” regardless of any broken promises, abandoned principles, or openly flaunted hypocrisies.  No matter how reasonable or irrefutable the arguments against a particular conflict are, there will ALWAYS be a certain percentage of the populace which ignores all logic and barrels forward to cheerlead violent actions which ultimately only benefit a select and elite few.

Now that the bipolar market has once again resynced general risk appetite with the EURUSD (high Euro -> high ES and vice versa), everything in the macro front aside from European developments, is noise (and the occasional reminder by data adjusting authorities in the US that the country can in fact decouple with the entity responsible for half the world's trade. This will hardly come as a surprise to anyone. In fact, the conventional wisdom as shown by Goldman's latest client poll has European sovereign crisis worries far in the lead of all macro risks. Behind it are Iran and nuclear tensions, China hard-landing, the US recovery/presidential election and the Japanese trade deficit/record debt/JGB issues. Which for all intents and purposes means that the next big "surprise" to the market will be none of the above. What are some of the factor not listed as big macro risks? According to David Kostin 'Risks that clients did not mention include late March US Supreme Court review of health care reform (implications for 12% of S&P 500); mid-year deadline to implement Dodd-Frank financial reform (14% of market); and the French Presidential election on April 22nd where polls show incumbent Nicolas Sarkozy trails opposition candidate Francois Hollande." Oddly enough, one very crucial item missing is once again surging inflation courtesy of trillions in stealthy central banks reliquification, sending crude to the highest since May 2011, and the most expensive gas price in January on record.

Aspirin at the door

While we have done our best to explain what the implications are of the actions of the various parties in the Greek/German/ECB/Euro swap/default/CAC/PSI/Austerity events, it is perhaps worth one more try to address how we see this playing out and exactly what the ECB just did. The weakness in GGBs today along with the rise in the cost of Greek basis packages (a hedged bond trade that looks to profit from a credit event or compression) suggest markets are beginning to wake up to reality but the dead-currency-walking behavior of the EUR (and ES) since last night's close suggests many remain sidelined or have all their chips on the constantly-tilting table. In the end every private holder will write-off 50 percent permanently and those that live in a mark to market world (fewer and fewer live in that world in Europe) probably lose another 20 points or so. CDS will be triggered and we will be told how great it was that Greece avoided a default and that it is an isolated case. Is that scenario priced in?

Bailout somehow seems too nice of a word.  It implies working together, giving a helping hand, making a real effort to help someone out.  As we read the headlines coming out of Greece for the past 2 weeks, all we can think of is, how do you say “squeal like a pig” in German. The market is happy because it looks like PSI will go through and that in theory will be enough to convince the Troika to send money to Greece, so long as they live by the latest austerity package.  That all seems fine, we guess, but looking beneath the headlines, it seems far worse than that.

This one's hot off the presses. Just yesterday, our friends at the Financial Crimes Enforcement Network (FinCEN) issued a press release on its latest ruling related to foreign 'money service businesses (MSBs).' An MSB is a private company that provides certain financial services like check cashing, money orders, title pawn, payday loans, travelers' checks, prepaid stored value cards, tax refund payments, etc. Frequently, traditional MSB clients tended to be individuals without bank accounts or access to credit. But increasingly, the US government is looking at companies engaged in electronic payments, crowdsourced funding, and even microcredit finance as money service businesses. The implication? They should all be regulated. Even if they're not even US companies. That's right. FinCEN's latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES "even if none of its agents, agencies, branches or offices are physically located in the United States."

When Greece defaults, the fall-out will be much, much larger than people expect simply by virtue of the fact that everyone is lying about their exposure to Greece.