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While we wait for the antics in Greece to result in some announcement, I can’t help but think about how different the Greek situation is from when JPM bought Bear Stearns (shortly after the last time the Giants won the super bowl). The “weekend” deadline for Bear was neither artificial, nor self-imposed. Without a deal, Bear would have failed that week as risk aversion hit an extreme. Greece has until the March 20th payments, so all the deadlines we keep hearing about are mostly negotiating ploys. The negotiators in Greece will have to approve whatever they decide, so they will need some time. When Jamie Dimon said “done” on the Bear deal, it was done. It also meant a very savvy investor had his people do the analysis and was comfortable with the deal (I’m sure the Fed backstop didn’t hurt). But in Europe, almost none of the people involved in the negotiations have the authority to “pull the trigger”. They have to go back to their respective parties or groups or special interests they represent and get the deals approved. Even more bizarre, is how few of the people involved have financial experience, let alone investment experience. They are largely politicians. The Minister of Finance was the Minister of Defense less than a year ago. The IIF team has limited experience in distressed debt. The “technocrat” in charge has experience, but like many of the Troika members it is as an economist in a functioning economy – not the disaster that is Greece.

Isn’t it meaningless to look at the inverse floaters in isolation? To assess risk, shouldn’t we look at the entire portfolio held by Freddie Mac?

Yesterday we presented why when it comes to Syria, the UN Security Council can forget any attempt at "overhauling" a regime that is a cornerstone for Russian naval presence in the Mediterranean and the middle east. Today, in the aftermath of the UN reminder that it is the world's biggest collection of post-facto hypocrites, not to mention, the world's most irrelevant and ineffectual organization, anger at the Russian and Chinese veto has already manifested itself, as protesters have attacked the Russian embassy in Tripoli and tore down the Russian flag, Al Jazeera reported on Sunday. As Itar-Tass reports, "According to Al Jazeera, the riots staged by the Syria opposition involved Libyans as well. No further details are available so far. None of the Russian diplomats has been hurt in an rally stage by the Syrian opposition in front of the Russian embassy in Tripoli on Sunday, an officer from the Russian embassy told Itar-Tass over the phone. “No one has managed to break into the territory of the Russian diplomatic mission, no one of the personnel has been hurt. All are safe and sound. Although the protesters have managed to tear down the Russian flag,” the diplomat said." Still, the wily occupiers of the Kremlin preempted what they perceived as potential 'displeasure' with Russian tactics to protect its own national interests. Because as Zero Hedge has been reminding readers on occasion, Russia has something that is far more valuable to Europe than the Goldman-alum controlled printing press: it has the world's largest natural gas reserves. Which for a continent gripped in one the coldest winters on record, whose heating infrastructure is based primarily on natgas, and where Russian imports account for 25% of total nat gas, Russia has the upper hand in, well, everything. Which it gladly reminded the world of yesterday. According to the AP: Russia's state-controlled Gazprom natural gas giant acknowledged for the first time Saturday that it "had briefly reduced gas supplies to Europe amid a spell of extreme cold."  Oops... Just a fat finger there, nothing to worry about. Oh, and if anyone forgets that in the Eurasian continent it is Russia who increasingly holds all the cards, Gazprom may "briefly" cut all supplies to Europe, -40 C degree temperatures be damned. Briefly...

Following up on our report from this morning that according to former Greek defense minister, German submarine chief procurer, and not to mention Jenny Twenty repeat offender, Evangelos "Xanax" Venizelos, we learn that the god of Deus Ex Machinae is about to abandon Greece, after an announcement by that most magic unicorn-infatuated of bureaucrats, Eurogroup head Jean-Claude Juncker made it clear that Greece is all but finished. As Reuters reports, "The possibility of a sovereign default by Greece cannot be ruled out, Jean-Claude Juncker, head of the Eurogroup of finance ministers from the single currency zone, said in a German magazine on Saturday." Translation: A Greek default on that €14.5 billion bond maturity D-day of March 20, is now inevitable. In an advance copy of comments to news weekly Der Spiegel, Jean-Claude Juncker was quoted as saying Greece could no longer expect solidarity from other euro zone members if it cannot implement reforms it has agreed. "If we were to establish that everything has gone wrong in Greece, there would be no new programme, and that would mean that in March they have to declare bankruptcy," he said. So after years of delaying the inevitable sovereign Lehman weekend, it is finally here. As a reminder, when Lehman filed, everyone, at least those in charge, thought the fall out could be contained. It couldn't, and the Fed had to step in with roughly $30 trillion in backstops, guarantees, and asset purchases. The same will happen this time.

UPDATE: Hardly reassuring (from Bloomberg): *U.S. IS `DISGUSTED' WITH RUSSIA, AMBASSADOR RICE SAYS AT UN

The world is suddenly aflutter in its usual fake indignation (how many times have we seen this) having realized what has been going on in Syria for months on end. It was none other than the Headhunter In Chief who "condemned the "unspeakable assault" Saturday by Syrian forces on the city of Homs, a sustained attack that activists say killed more than 200 people in what may be the bloodiest confrontation of the uprising against Bashar Assad's regime.  The assault sparked fierce international outcry ahead of a meeting Saturday of the U.N. Security Council, where the U.S. and other nations are pushing for a vote on an Arab League-backed resolution calling for Assad to step down." Needless to say, just like in the case of Libya, both China and Russia are now a confirmed veto for any security council resolution that enforces a regime change, no fly zone, or what have you. Only this time the stake for Russia (and China as well, as Syria is nothing but a gateway to Iran), are far higher. And as Zero Hedge noted regarding Iranian developments yesterday, "We've seen this play by play many times before and frankly at this point the posturing is getting just silly. What we do want to find out, however, is how will Russia get involved in all of this. Because if recent actions are any precedent, we fully expect Putin to send an aircraft carrier, purely symbolically, in the Arabian Sea himself, just to indicate that any invasion, pardon, liberation, of Iran crude, will first have to go through him. And not to mention China... or India." Sure enough, speaking of aircraft carriers, it was none other than the Russian navy's aircraft carrier Kuznetsov that landed at the Russian naval base in Tartus "in support of the al-Assad regime" back in November, and it is the Tartus base that is arguably one of the most critical locations for the US military vis-a-vis developments in the middle east. And here is why Russia will block any attempt by the west to impose its own will in Syria.

With the world ever more lethargic daily, as if in silent expectation of something big about to happen (quite visible in daily trading volumes), it is easy to forget that just about a year ago the Mediterranean region was rife with violent revolutions in virtually every country along the North African coast. That these have passed their acute phase does not mean that anything has been resolved. And unfortunately, as BMO's Don Coxe reminds us, it is very likely that the Mediterranean region, flanked on one side by the broke European countries of Greece, Italy, Spain (and implicitly Portugal), and on the other by the unstable powder keg of post-revolutionary Libya and Egypt, will likely become quite active yet again. Only this time, in addition to social and economic upheavals, a religious flavor may also be added to the mix. As Coxe says: "Today, the Mediterranean is two civilizations in simultaneous, rapidly unfolding crises. To date, those crises have been largely unrelated. That may well be about to change." Coxe bases part of his argument on the same Thermidorian reaction which we have warned about since early 2011, namely the power, social and economic vacuum that is unleashed in the aftermath of great social change. But there is much more to his argument, which looks much more intently at the feedback loops formed by the divergent collapsing economies that once were the cradle of civilization, and this time could eventually serve as the opposite. To wit: "The eurocrisis has been front and center for nearly two years, during which time the economic and financial fundamentals have continued to deteriorate. “The Arab Spring” came suddenly, in a series of outbursts of optimism. It may have come at the worst possible time for the beleaguered nations of the North Shore. The Mediterranean has entered one of the stormiest periods in recorded history. It is the major contributor to risk in global equity markets. It is too soon to predict how these crises will end. The Cradle of Civilization is rocking amid an array of winds and storms. “The Arab Spring” ...may have come at the worst possible time for the beleaguered nations of the North Shore."

While we first presented Bill Dudley's financial disclosure two days ago, we did so to present the New York Fed's president, and former Goldman managing director's, implicit need to perpetuate the status quo from even purely personal wealth reasons (AIG and GE waiver issues aside). Yet that a Fed member, especially a Goldman alum, is deeply enmeshed within the fabric of the existing, and failing, monetary system is not all that surprising. What is far more surprising, is that the Fed's FOMC may well have a gold bug within its midst, because we were rather surprised to find that none other than the Dallas Fed's Dick Fisher, who however is no longer a voting Fed president in the 2012 year, is a proud owner of at least $1 million worth of Gold in the form of the GLD ETF....and another up to $250K in physical (not paper) platinum. Which begs the question: is Fisher the only Fed president to have seen the light and to put a substantial portion of his wealth in the only asset class that benefits in real terms, from the perpetuation of the Fed's dollar, and fiat broadly, debasement strategy?

In the past, when discussing the goalseeking C-grade excel jockeys at the Congressional Budget Office (or CBO), we have not been technically full of reverence. After all when one uses a phrase such as this one: "What do the NAR, Consumer Confidence and CBO forecasts have in common? If you said, "they are all completely worthless" you are absolutely correct", it may be too late to worry about burned bridges. We do have our reasons: as we pointed out last year, following the whole US downgrade fiasco when the Treasury highlighted the CBO's sterling work in presenting a US future so bright, Timmy "TurboTax" G had to wear shades, we said "according to the same CBO back in 2001, net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion." As we know now they were off only by a modest $17.5 trillion on that debt forecast. Yet we never attributed to malice and bias and outright corruption, what simple stupidity and gross incompetence could easily explain. Until today that is, when following a WSJ article, we are left wondering just how deep does the CBO stench truly go and whether its employees are far more corrupt than merely stupid?

Counterfeiting is illegal because it is the false creation of value. The counterfeiter takes low-value paper and turns it into high-value money, which is fundamentally a claim on the real productive value of the economy that issues the currency and recognizes it as a proxy means of exchanging that productive value. Counterfeiting is illegal because the counterfeiter creates no additional value--he creates only the proxy for value. Creating real value--adding meaningful goods or services to the economy--is tedious, hard work. How much easier to simply transform near-worthless paper into a claim on actual goods and services.  If this is illegal, then would somebody please arrest the Board of the Federal Reserve for counterfeiting? The Fed has blatantly printed money without creating any real value to back up their added claims on productive value. Hence they are counterfeiting, pure and simple. A government based on rule of law would arrest these fraudsters and cons at the earliest possible convenience.

Solyndra, Ener1, and now Kaufman Bros - The current economy may not be very good at creating jobs, even minority-focused ones, but its track record in inverse job creation is rapidly becoming second to none. Bloomberg reports that "Kaufman Bros. LP, the minority-owned investment bank that helped unwind U.S. stakes in bailed-out financial companies, ceased operations as of yesterday, according to a notice posted on its website. Chief Executive Officer Benny Lorenzo told employees that New York-based Kaufman was closing immediately in a meeting yesterday after trading closed, according to two people with knowledge of the matter, who declined to be identified because they weren’t authorized to speak publicly. Neither Lorenzo nor Chief Financial Officer Gerard Durkin returned messages left on their office and mobile phones yesterday and today." More amusing is the following description: "The company, which also has offices in San Francisco, said it was sought out by institutional investors, hedge funds and government agencies to help meet diversity goals." No comment. The closure notice can be found on the company's website. And so another bank bites the dust. Many more coming.

What do the NAR, Consumer Confidence and CBO forecasts have in common? If you said, "they are all completely worthless" you are absolutely correct. Alas, the market needs to "trade" off numbers, which is why the just released CBO numbers apparently are important... And the fact that the CBO predicted negative $2.5 trillion in net debt by 2011 back in 2011 is largely ignored. Anyway, here are some of the highlights, but here is the kicker: "Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"- translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%. Thank you.

The so-called January-Effect is almost at an end and if the market closes near these levels, the S&P 500 will have managed a 4.4% gain or its 20th best January since 1928 (84 years) and best since 1997. The outperformance of banks and sovereigns (LTRO) and the worst-of-the-worst quality names (most-shorted Russell 3000 stocks +9% YTD vs Russell 3000 +5.2%), as Morgan Stanley noted recently, is not entirely surprising since the January effect is considerably larger in mid-cap and junk quality names than any other size or quality cohorts. We have pointed to the seasonal positives in high-yield credit and volatility and along with the obvious short squeeze in S&P futures (which has seen net spec shorts come back to balance recently), we, like MS, are concerned that the tailwinds of exuberance that virtuously reflect from seemingly pivotal securities (such as short-dated BTPs now or Greek Cash-CDS basis previously) very quickly revert to a sense of reality (earnings and outlook changes) and perhaps the slowing rally and rising volatility of the last few days is the start of that turbulence.

With under 3 months left until the first round of the French presidential election on April 22, it maybe prudent to start paying attention to France, where socialist presidential candidate Francois Hollande has just widened his lead over President Nicolas Sarkozy despite a flurry of measures being advanced by the conservative leader to boost employment and competitiveness, a poll showed on Tuesday. This is quite relevant for Europe, as Hollande has made it very clear that none of the recent treaties and agreements would stand in their current version if elected, in the process overturning austerity and the position of the ECB in Europe's bailout org chart, and will gradually add an element of uncertainty to the second most important country in Europe's core, even if no longer AAA-rated. And for those who say there is no chance Hollande could take over, according to IFOP Hollande would trash Sarkozy in a runoff election by a whopping 58% to 42%, a result that even Romney and Diebold would be envious of.

Sometimes it’s impossible to tell whether the financiers and politicians who carry water for the central banks are bad liars or just clueless dolts. A bureaucrat from the U.K. surfaced in the Wall Street Journal over the weekend, exhaling what seemed to us an ostentatious sigh of relief over the supposed success of the European Central Bank’s latest loan program: “[It provides] a very significant degree of breathing space to banks.” Yeah, sure. 

Surging Greek and Portuguese bond yields? Plunging Italian bank stocks? The projected GDP of the Eurozone? In the grand scheme of things, while certainly disturbing, none of these data points actually tell us much about the secular shift within European society, and certainly are nothing that couldn't be fixed if the ECB were to gamble with hyperinflation and print an inordinate amount of fiat units diluting the capital base even further. No: the one chart that truly captures the latent fear behind the scenes in Europe is that showing youth unemployment in the continent's troubled countries (and frankly everywhere else). Because the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be "someone's" fault that there are no job opportunities for anyone. Below we present the youth (16-24) unemployment in three select European countries (and the general Eurozone as a reference point). Some may be surprised to learn that while Portugal, and Greece, are quite bad, at 30.7% and 46.6% respectively, it is Spain where the youth unemployment pain is most acute: at 51.4%, more than half of the youth eligible for work does not have a job! Because the real question is if there is no hope for tomorrow, what is the opportunity cost of doing something stupid and quite irrational today?