Reality

The surprising tale that I will attempt to pen in this blog entry has a very familiar cast of characters; the Obama Administration, the Housing Bubble, "Toxic Mortgages", and Too Big To Fail "TBTF" Banks among others. While the headline of TBTF banks in a $25bil mortgage settlement is known to many, the underlying details of the settlement are less known and quite appalling when you pull back the covers. The wounds on past and present homeowners are still fresh from the housing crisis. As Jonathan Laing points out in this weekend's Barron's cover story, "five million of the country's 76million mortgage holders have lost their homes to foreclosure or lender ordered short sales since 2006, and an estimated 14million more own more on their homes than their properties are currently worth. In all, some $7.4 trillion in homeowners' equity has been destroyed according to Mark Zandi..."

Back in May of last year, just after the now historic silver slamdown of "Silver Sunday" on May 1, 2011, when the metal imploded by nearly 20% in the span of seconds, a move that some considered 'normal', primarily the CFTC, we presented the extended biopic of the infamous "Silverfinger": Bunker Hunt, who attempted to corner the silver market, and succeeded, if only briefly (and they say Playboy has no good articles). Today, courtesy of Grant Williams, we have dredged up the following clip from the archives, which is a 10 minute overview of just how there is really nothing new ever in the silver market, bringing up memories of Silver Thursday, March 27, 1980, and raising questions whether last year the move in precious metals was not due to the same attempt to corner the silver and gold markets as happened 30 years prior. A far more important question perhaps is how was it that tried a redux of the Hunt brothers (and Warren Buffett of course), and when will someone take their place next?

Last week we learned two things: that Jamie Dimon specifically telegraphed he is now more powerful than the Fed, and that the US economy is back down to the same March 2009 optical exercises in financial strength gimmickry to stimulate rallies. Recall that on FOMC day, the market barely budged on Bernanke's ambivalent statement and in fact was in danger of backing off as the readthrough was that of no more QE... until JPM announced a major stock buyback and dividend boost. The catalyst: a successful passing of the latest and greatest Stress Test, which according to experts was "much more credible" than all those before it. Wrong. The test was merely yet another complete farce and a total joke. But as expected, the test had its intended effect: financial shares soared across the board, and banks promptly took advantage of investors and robot gullibility to sell equity into transitory strength. Bloomberg's Jonathan Weil explains.

The Fed is not a “dealer” giving “hits” of monetary morphine to an “addict”… the Fed has permitted cancerous beliefs to spread throughout the financial system. And the end result is going to be the same as that of a patient who ignores cancer and simply acts as though everything is fine. That patient is now past the point of no return. There can be no return to health. Instead the system will eventually collapse and then be replaced by a new one.

In the aftermath of the "Greg Smith" phenomenon, where now a variety of sources (for now of the terminated kind, but soon likely from those still on the payroll) have stepped up against the Wall Street and D.C. omerta, it is assured that we will see many more such pieces before the coolness factor of public employer humiliation. It is our hope that these lead to an actual improvement in America's criminal corporate culture (such as in "How a Whistleblower Halted JPMorgan Chase's Card Collections"), which is nowhere more prevalent than in the corner offices of Wall Street, long a place where "obfuscation" and "complexity" (recall that it was none other than the Fed telling us that "Liquidity requires symmetric information, which is easiest to achieve when everyone is ignorant") have been synonymous with legalized wealth transfer (after all, we now know that nobody ever read the fine print, and when the chips fell it was all the rating agencies' fault). Alas we are skeptical. But while we wait, here is a slightly lighter piece from the Globae and Mail's Tim Kiladze, who while not exposing anything new, shares with his readers just what the transition from "soulless banker" to a "less demanding, more fulfilling life" entails, and that it does, in the end, pay off. As Tim says - "The latter is a real option: I’m proof of it." Here is his story for all those 'wannabe Greg Smiths' who are on the fence about burning that bridge in perpetuity.

Eventually, people will discover that they cannot save in terms of dollars (those who don’t figure it out will be rendered economically irrelevant as their wealth is removed from their hands). Savings is a necessary prerequisite for investment. Investment is necessary for companies to grow, to develop new technologies, products, and markets. Growth is necessary to hire new workers. As existing companies achieve higher productivity of labor, and do not need as many workers to perform the same work, they lay off unneeded people. In a free market, the unemployed would quickly be hired by growing companies that expand and develop new businesses. But today’s structurally high unemployment can be traced back to Friedman’s quack prescription (among other government interference). Weakening the currency not only discourages savings, it also weakens businesses who have to keep the currency on their balance sheet and who have to import some of their inputs. When a currency loses value, then all who hold it incur a loss. It is not possible to employ workers and run a business in a country without holding significant amounts of its currency. Currency debasement therefore imposes constant losses on enterprises that try to operate in such an environment.

When it comes to being a NWO debt slave, one can accept their fate demurely and bent over, like a conditionally habituated dog electroshocked into perpetual submission just as the banker elites like it, with threats that the world would end the second one dared to change the status quo (see Greece), or one can do something about being a debt slave. Like Iceland. And then rapidly proceed to be the best performing economy in Europe. And reading some of the latest news out of Hungary, which has to count its lucky stars is not stuck in the inflexible nightmare that is the mercantilist Eurocurrency union, gives us hope that we may soon witness the next sovereign rebellion against the banker yoke. The WSJ reports: "Hungary's premier fired a new broadside in the country's running battle of wills with the European Union, saying that Hungarians should be free to make their own laws without interference from Brussels.  Speaking to a large crowd of supporters celebrating the anniversary of a 19th-century Hungarian revolt against Austrian rule, Prime Minister Viktor Orban said: "Hungarians will not live as foreigners dictate." This has promptly generated the anticipated response from European unelected dictator Barroso, who minutes ago said that Hungary's Orban doesn't get democracy. Oh, we think he does. What he doesn't seem to get, or like, is existence in a banker-governed technocratic, klepto-fascist state, in which the peasantry is merely an intermediary vessel for asset confiscation by insolvent banks. Like Greece... which however already is the butt of all jokes of personal submission to a foreign oppressor, so there is no dignity in kicking a dog that is down.

Just spent a record high amount at the gas pump for this time of year? The BLS says you didn't, and after all when it comes to reality, the BLS has a right of first refusal. The just printed headline CPI came at 0.4%, just in line with expectations of 0.4%, while core CPI of 0.2%, missed expectations of 0.3%. That's right: not only is inflation meaningless, it is less than expected, leading to surge higher in stocks, bonds and the EURUSD. As for those items which are once again soaring in prices such as food and gas? Luckily, those can be hedonically adjusted by everyone to virtually zero. (wait? You still pay your mortgage or rent? Sucker!) Remember: the iPad is deflationary.

A snoozer of an overnight trading session for now, with Asia rising modestly, Europe green and the now priced in futures levitation as US traders walk in. Nothing material to report, except the usual - the European leverage reality continues to deteriorate: as has been long discussed the taxpayer cost to rescue Greece keeps rising, and the latest and revised figure of the bailout is €172.6 billion, €43 billion than previously thought by some (as we have pointed out from the beginning the true cost of the bailout will hit €210 billion). We will shortly point out the total disaster that the Greek balance sheet is with 7 classes of debt outstanding post the OSI. More disturbing is the "austerity" report out of Spain, where we just learned that total public debt has hit €735 billion at the end of 2011, with regions debt at €140.1 billion, which means that public debt rose to 68.5% of GDP, from 61.2% a year prior.  As Peter Tchir says: "We are still in no one cares mode, but the exposure the core has to the periphery is growing by the day.  Germany's exposure is growing because of Target 2, and Spain and Italy are busy guaranteeing the debt of their banks. On the surface, all is calm. Below the surface it is messier than ever.  They are doing everything possible to keep that mess covered because if it rises to the surface, it will be harder to control than ever before." As a reminder, this is precisely what happened in early 2011... and early 2010. You can only keep trillions of underwater debt under the rug for so long.

Yet another whistleblower has stepped up, this time one already known to the general public, and one that Zero Hedge covered just over a month ago: we refer to the case of former CBO worker, Lan T. Pham, who, as the WSJ described in early February, "alleges she was terminated [by the CBO] after 2½ months for sharing pessimistic outlooks for the banking and housing sectors in 2010" and who "alleges supervisors stifled opinions that contradicted economic fixes endorsed by some on Wall Street, including research from a Morgan Stanley economist who served as a CBO adviser." As we observed in February, "what is most troubling is if indeed the CBO is nothing but merely another front for Wall Street to work its propaganda magic on the administration. Because at the core of every policy are numbers, usually with dollar signs in front of them, numbers which have to make sense and have to be projected into the future, no matter how grossly laughable the resultant hockeystick." As it turns out, somewhat expectedly, the WSJ version of events was incomplete. There is much more to this very important story, one which has major implications over "impartial" policy decisionmaking, and as a result, Ms. Pham has approached Zero Hedge to share her full story with the public.

The first session of this 112^th Congress was spent with Democrats and Republicans at loggerheads over the debt ceiling, taxes, spending cuts, the deficit super committee, appropriations bills and finally the extension of unemployment compensation and a two-month extension of the payroll tax cut. Standard and Poor's downgrade of the United States' federal debt was due in part to all the haggling over how, and actually whether, to reduce the debt. No One Is Willing to Pay the Political Price to Cut Spending This year Obama asked Congress for, and was given, an additional $1.2 trillion of borrowing authority, which will increase the debt limit to $16.4 trillion, just enough to get him past the 2012 election. It could be close, however. If budget projections prove to be overly optimistic, Obama could face another cliffhanger over a further increase in the debt ceiling in the midst of the presidential election in November. How embarrassing to have to say "re-elect me – and by the way, I need to borrow some more money to pay this month's bills."

Between our overnight discussion of the size of the Fed's QE and Goldman's call for QE as soon as April, risk assets all synced and surged today as the USD gave back most of the week's gains. The S&P 500 managed to close above 1400 for the first time since June of 2008 on decent volume - even as AAPL closed down 0.7% (and -2.5% from the $600 threshold it peered over) as financials once again took the lead. BofA is now up 13.6% from pre-JPM-dividend news (more than double its peers) while GS and C languish up only around 2% from that point. High-yield credit markets were nothing like as QE-ebulient as stocks today as investment grade outperformed (more up-in-quality rotation) and the last 45mins actually saw active selling in HY and HYG while IG and the S&P leaked higher. Treasuries steepened very modestly with the long-end maybe 1bp higher in yield close-to-close but the 7-8bps compression off overnight high yields is noteworthy and brought the broad risk asset complex back in CONTEXT with stocks (after yesterday's dislocation). The USD lost around 0.4% from late last night on the day (though still stronger on the week) as EUR and JPY tracked it broadly but higher yield AUD outperformed handsomely (more QE-funding currency needed). Commodities bounced nicely with Copper the day's winner followed closely by Gold and Silver (up around 0.9%) and Oil practically unchanged after dipping over 1% on the SPR chatter and recovering on the denial. VIX ended the day (spiking) higher and the term structure very slightly flatter. After spiking Friday and Tuesday (as we broke the uptrendline) average trade size has drifted notably lower and was its lowest in over a week today suggesting less institutional buying here.

Here is where the parasitic 1% have their problem. What they have “sold” the American public as the spirit of the nation is now in direct opposition to reality. In fact, it has become so obviously untrue that the population is waking in drove to the truth and the truth is that we have a utterly corrupt, sociopathic minority running the nation like a giant criminal syndicate for their own power and money. Therein lies their weakness however. They have no philosophy. These guys are actually so twisted that all they think about is how can they keep growing their money and power. Furthermore, they are operating under an exposed playbook of control. Just take a look at Obama’s approval ratings. They are plunging. They are plunging despite fabricated economic numbers and biblical stock market rigging to make things look good. They are plunging because people are waking up and seeing all of this for what it is. A gigantic scam. All the signs I see point to increasing desperation on their part and exponential awakening on the part of the meat of the bell curve. These guys are toast and what we should now be focusing most of our attention on is what kind of society we want when this one collapses. Hopefully the other side of the bell curve can influence the debate for the first times in five thousand years. That is my hope and my vision of the future.

Today, the metals space is abuzz with a CFTC "comment letter" posted on its website by an alleged "current JPM employee." There is only one problem - this letter is either a complete fraud or simply a total mockery, as it provides absolutely nothing new, and merely regurgitates existing manipulation claims already out in the public domain, and backed by precisely zero evidence. How about attaching a signed trade confirm, or a daily internal P&L report, or even a blotter entry? No? Because they don't exist? Needless to say, anyone can submit such an alleged insider letter, and since there is no name associated to it, we would advise everyone to merely enjoy this a prank attempt. Unfortunately, what more such repeated faux "whistleblower letters", which are likely forthcoming, from other "current JPM employees" will do is simply dilute the effect of any real such disclosure that may come in the future. For that purpose, we strongly caution anyone who considers submitting such disinformation attempts from doing so as it will merely impair and discourage any just intent of validated and justified whistleblowing, either at JPM or elsewhere.

Dirt-cheap natural gas is the cornerstone of President Obama’s energy policy, but drilling activity is falling off a cliff....