Reality

A little over a year ago, when the Greek CDS scapegoating campaign was in full swing (you see, the reason why the first $1 trillion Greek bailout failed is because of those evil, evil CDS traders: it had nothing to do with Greece being, well, bankrupt), one of the most hilarious discoveries was that among the chief speculative villains was none other than the state-owned Hellenic Postbank. That's right: the government of Greece was profiting by betting on its own demise even as it was making a stink about others doing the same. Well, justice for the insolvent is short, swift and quite poetic. According to Reuters, the first entity to fall to Greece's privatization ambitions will be the very same bank. (Granted, this is not really news: Greek Reporter noted this some time ago, see below). What will be funny is when Greece puts up its insolvent banks on the block and discovers that nobody wants to come within 10 feet of them, unless, of course, it is JP Morgan buying it up with the assistance of Maiden Lane IV, also known as My Big Fat Greek Bailout Taxpayer Funded Conduit, for 2 drachmas per share.

A former CDO manager and investor says the "case" against Goldman is nowhere near as strong as Taibbi claims. Nowhere close...

As the market enjoys (and we use the term loosely) this brief lapse back into deflation, which given the economic contraction, so long anticipated at least by Zero Hedge, has finally materialized and put the ball straight back into Bernanke's monetary policy court, here is a brief reminder of reality: i) total debt subject to the ceiling increased by $2 billion overnight to $14,282,174, less than $12 billion away from a breach, and ii) more importantly, total securities held by the Fed increased by $27.3 billion in the past week to $2.5 trillion, an all time record. And yes, i) and ii) go hand in hand. Especially once the $2 trillion debt ceiling hike is announced.

We predicted Goldman would be first to cut its Q1 GDP back in January. We were right.  We predicted Goldman would be the first to cut its Q2 GDP in late March (around the time we said Goldman will soon start pushing for QE3). So far, said prediction is being met with staunch denial. That said, we give Jan Hatzius at most 2-3 more weeks before the firm's 4% Q2 GDP is cut to 2.5% or lower. Denial: "In conclusion, the report is a disappointment, and suggests some
downside risk to our Q2 GDP forecast of 4%, but probably not as big a
disappointment as the numbers suggest on the surface." Anger is next...We are looking forward to the bargaining part.

When the current stock market bubble pops, the last shreds of the Fed's legitimacy will be blown away. Strip away all the distractions, and the Fed's entire campaign to "restore confidence" and "animal spirits" so that the "recovery" magically becomes "self-sustaining" is based on one thing, and only one thing: the current stock market rally. The equities rally is the only metric of "success" the Fed can point to that isn't risible. Once the rally implodes, so too does whatever remains of the legitimacy of the Fed and the Federal agencies which have aided and abetted the Fed's unprecedented propaganda campaign to replace economic reality with happy-happy "managed perceptions." The "news" is always good, because who knows what the people might do if the flimsy official facades sway in the breeze of truth and then collapse in a heap? They might demand new leadership and systemic changes that would disrupt the cozy Status Quo partnership of cartel-crony Capitalism, Wall Street and the Central State fiefdoms.

We are right on track for the next American revolution but it's a slow train so grab those fish while you can, my friends - you may need them to barter with down the road!

The borg collective is out in full force, with more gibberish on 'transitory inflation' coming from Atlanta Fed's Lockhart: "As I've said before, my expectation is that commodity price increases that are now translating into accelerating headline inflation will be transitory. In support of this claim, I'll make three points. First, these increases have been driven by global pressures in markets for food commodities, energy, and other commodities. These pressures are largely the result of supply-and-demand factors, some of which are one-off in nature. Second, inflation indices are made up of a wide spectrum of goods and services that don't uniformly have these commodities as inputs. Roughly two-thirds of consumer spending is on services, which are not materials-intensive. And, third, to the extent that some goods and services have these commodity inputs, the pass-through to ultimate consumer prices is limited." Fair enough: on the other hand one can present the following point indicating inflation is only transitionary to higher prices: "reality."

Contrarian, yet common sense, perspectives on Apple that so few seem able to see.

Wouldn't it be awesome if spin could actually solve problems? Then, you could just say the word 'recovery' every time you gave a speech, ignore any negative data, assume the markets are up because of general economic health and not a mass infusion of cheap money, and it would be so.

The Fed's blatant "Flip That Bond" criminal reality show, funded entirely by you, dear taxpayer, continues, and is in fact accelerating. Over the weekend we provided a list of the 10 cheapest bonds that the Fed should monetize based on their relative position on the spline, in terms of cheapness/richness (link) and implied that should the Fed veer away from this list, it would be engaging in what is certainly non-fiduciary activity, by merely facilitating taxpayer rape on behalf of the Primary Dealers who "put" to Sack Frost whatever issue they want, and certainly not the cheapest ones to be monetized by the US taxpayers (i.e., an act that would at least pretend to save some money). Specifically, we said: "The just auctioned off 2.75% of 12/31/2017  is not even among the top 10 cheapest bonds, which means that if on Monday the PN4 makes up for a material percentage of the $7-9 billion buyback, then something is very, very wrong." Well, one look at the final completion list of Today's POMO indicates that it is preciseley the just auctioned off PN4 due 12/31/2017 that made up over half of the entire bloody operation! At 4.551 billion (out of a total $8.869 billion in bonds monetized), the Fed actively conspired with PDs to defraud taxpayers by engaging in monetization not of bonds that were cheapest and thus bonds the Fed should have been buying, but merely was taking the other side of the trade in today's version of "Flip That Bond." And so the criminality continues unabated.

Unfortunately, the Ministry of Disinformation and Data Revision will not be able to blame the latest major economic data point revision on dyslexia. After as we previously noted, the Chicago PMI was revised lower from 68.6 to 66.8 just three short days ago, today that other standout number, the Philly Fed, which had originally printed at the better than expected level of 24.3, has just been revised much lower to 20.8. Since this number means the Philly Fed actually declined from the November print of 22.5, one can see why even the Chinese are seeing their jaws drop at the ceaseless "adjustment" of what has now become an unrepentantly upwardly economic data stream. Specifically, the December Employment Index has been lowered to 4.3 from 5.1, the December New Orders Index has swooned to 10.6 from 14.6, the December Current Inventories was lowered from -2 to -5.9, the Current Number of Employees dropped from 5.1 to 4.3, and the Current Average Employee Workweek contracted from 19.3 to 16.8. The silver lining: the December Prices Paid Index to 47.9 from 51.2. Also, virtually all the future indices improved. Then again, as today's PPI indicated, and as surging commodity costs validate, nobody doubts the margin collapse any longer. We can't wait to find out just how many more of the melt up inducing December economic indicators will continue to be revised lower (even as the BLS continues to backward revise jobless numbers higher).

We have already broadly discussed the recent euphoria in the market which especially in the Nasdaq has hit 5 year+ extremes. And as always in times of such irrational exuberance, the disconnect between perception and reality is truly astounding. David Rosenberg presents his views on the latest developments in the market's ongoing fight with manic-depressive disorder.

Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields. As for Bernanke's case for creating wealth effects via the stock market, one might look at this logic and conclude that while it may or may not be valid, the argument is at least the subject of reasonable debate. But that would not be true. Rather, these are undoubtedly among the most ignorant remarks ever made by a central banker. - John Hussman

I think what the Fed does will be irrelevant in terms of economic impact, and the more I talk to people about it the more I realize most share this view. The market is solely focused on the Fed and not the election as it is relatively understood that politicians are useless even though the list of tasks to fix our economy should in theory provide them an opportunity to make themselves useful. Given they will not rise to the challenge and will keep failing to deliver any concrete measures that could lead to progress, and that rates are at 0, as Bill Gross said the only thing for the Fed to do (OR NOT) is QE. I see no value but since they have made it their mandate to target inflation and now GDP I suppose Mr. Bernanke is at least consistent within his delusion. It is interesting however that even Bill Gross has joined the bandwagon. The ECB has also said the Fed is going in the wrong direction even though I bet they would be hard pressed to explain who is buying all these Spanish, Portuguese, Irish, Greek bonds and other turds they are trying to keep afloat. In that sense their only saving grace is that they sterilize their purchases, but they too are engaged in asset price fixing aiming at controlling GDP. Fighting a structural deficit and unemployment printing money is a bit like taking a leak in the ocean to warm it up, and you have to be careful because if the wind comes at you it can backfire. - Nic Lenoir

Unfortunately, this is a perfect summary of our daily financial lives.