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China’s monthly data dump was the main macro update overnight, which however with ongoing mockery of the Chinese data "goalseeking" and distribution methodologies, most recently by the likes of Goldman, UBS and ANZ, had purely political window dressing purposes for the new Chinese politburo. Sure enough, that all the data came precisely Goldilocks +1 was enough to put a smile on everyone's face. To wit - Q4 GDP growth came in just higher than consensus (+7.9%yoy v +7.8%). On a full year basis the economy grew by 7.8%, also a tad above expectations. Then we got industrial production, also just higher than expected (+10.3% v +10.2%) and retail sales - just higher as well (+15.2% v +15.1%). Much more important than meaningless, jiggered numbers, was the announcement from the PBOC that in light of the entire world going "open-ended" on easing, China - which now can't afford to lower rates for fears of rampant inflation together with importing everyone else's hot money - announced it will start short-term liquidity operations as additional tool for controlling liquidity, engaging in a reverse repo on a daily basis, which will have a maturity of less than 7 days. This way the central bank will be able to reacted almost instantly to any inflationary spikes across the economy, as it too has no choice but to ease although not by the conventional inflation targeting methods now used by everyone else.

Stocks surged (apart from AAPL) gloriously out of their super-narrow recent range, driven by recycled JPY rumors and some potential 'give' by the Republicans, and the rest of the risk-on complex tracked higher with it. Treasury yields pinged back to higher on the week as the S&P took out recent highs amid a very large surge in average trade size - something that often marks a climax in trend. It seems the selling of vol has hit its short-term limit (as VIX flatlined in general today) and so FX and credit were the levers today. Gold and Silver also surged on the day as Oil popped on the growing tensions in Algeria. In a premature release, Intel exposed an EPS beat, revenue miss, and weak guidance which sent algos scurrying and the share price snapping up and down into the close (and falling after). The bottom-line seems to be that the BoJ joining the infinite print brigade (and some very mixed US macro data) was enough to break us out of a narrow range - but the VWAP reversion into the close appears anything but follow through for the next leg up - as trade size suggests short-term trend change.

Same overnight pattern, different day. After a late day ramp in the US market, followed by a selloff in the futures after hours, taking the ES to trading session lows, we get the European trading crew which day after day sends the EURUSD soaring as Europe opens, pushing futures to unchanged or even green and easily negating the key news event of the day, in this case the full grounding of the entire global Boeing fleet which will once again weigh on the stock and DJIA. In the meantime, the big rotation behind the scenes in FX land continues, with the ongoing and very sudden pounding of the Swiss Franc taking the EURCHF to 1.2450, or the highest, since 2011. Same with the USDJPY which after another attempt to fall, rallies on more of the same regurgitated rumors. Not to mention the EURUSD of course, which as mentioned above has surged some 100 pips since the European open. In other words the overnight beating of the USD is enough to push the US stock market high enough in nominal terms, avoiding that there is no incremental cash flow. Then again, who needs cash flow when you have "multiple expansion."

Those who went long Boeing in the last few days on hopes the "smoking battery" issue had been resolved, especially following Ray LaHood comment's he would fly the Dreamliner, which is rapidly becoming the Nightmareliner for Boeing, anytime anywhere, are about to be grounded, as is the entire 787 fleet of All Nippon Airlines and Japan Airlines following yet another incident forcing an emergency Dreamliner landing. This happened after ANA "alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a "burning-like smell" in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. The plane also carried eight crew members. ANA said that the exact cause was still undetermined. The event was designated as a "serious incident" by Japan's transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene." The result - a 4% drop in the stock so far premarket, and if any more airlines are to ground their fleet the implications for the backlog could be devastating, it will only get far worse for both the company and the Dow Jones average, of which it is part.

As we anxiously await the titanic announcement about to spew forth from Menlo Park, we thought a look at 2013's +20% performance was worthwhile. We would expect to hear a plethora of 'monetizing mobile' and a cajillion eyeballs must mean something. Will the Facebook phone replace the Obama-phone? Will being 'liked' provide external stimulus? Will they be merging with Dell (or Radioshack?) Feeling bullish? Be wary, implied vol is at its most expensivce to realized vol in 7 months... Rest assured, we will bring the critical headlines as they break...

*FACEBOOK SAYS IT'S A PRODUCT ANNOUNCEMENT                :FB US
*FACEBOOK ANNOUNCES GRAPH SEARCH                          :FB US

FB stumbling now -1.7%

And so the consequences for Europe of accommodating the US, and the rest of the world, in having the EUR soar following ECB intervention while everyone else's currency is diluted to death, comes to the fore, following today's announcement of German 2012 GDP which came below expectations of 0.8%, printing at 0.7%, with government adding a substantial 1.0% to this number, while plant and machinery investment tumbled by a whopping -4.4%. And while the specific Q4 data was not actually broken out, a subsequent report by the German stat office indicated that Q4 GDP likely shrank by 0.5% in Q4. All that is needed is one more quarter of sub zero GDP, which will almost certainly happen in Q1 absent a massive surge in government spending which however will not happen in tapped out Germany, whose resources are focused on keeping the periphery afloat, and thus the EURUSD high, and Germany's exports weak. Confirming this was a Bild report which stated that the government now sees 2013 GDP growth of a paltry 0.4%, which assumes growth in H2. One wonders just how much longer Germany will opt for a currency regime that punishes its primary GDP-driver: net exports, at the expense of nothing beneficial but making tourist trips to Greece far more expensive than under the Drachma.

At precisely 14:04:08 a flashing red Bloomberg headline hit that "DELL IS SAID TO BE IN TALKS TO GO PRIVATE." Moments later the stock slammed higher by 10% triggering a circuit breaker. Whether or not there is an actual deal behind this is unknown: considering the "two sources" used by Bloomberg gave virtually no details on who the buyers are, or what the vision for the pro forma private company will be, we are inclined to assume this is nothing but a big, and successful, fishing expedition by a party that sought to make a quick buck. What we do know, is something completely unrelated. Courtesy of Nanex, who have broken down the trades from the pre-headline prices of $10.90 to the halt price of just under $12.00, it appears that today's robotic algo brains take no more and no less than 4 seconds to fully process flashing red headlines. This is how long it took to send the stock in a straight line from the bottom of the range to the top, because all along the ride there were offers, until finally the offer stack was exhausted at the circuit breaker price. To anyone who blinked and missed the move: condolences - just get a collocated algo and any future LBO announcements - real or fake - will be far more lucrative courtesy of an electronic trigger finger located right on the exchange.

We are back to that phase in market euphoria where no news is good news, good news is better, and bad news is best. While there was little news over the weekend, and overnight, what news there was uniformly negative: northern China drowning in smog, the Apple fad bubble bursting, European Industrial production printing below expectations (-0.3%, exp.-0.2%, down from revised -1.0%), and ever louder rumors that the debt ceiling debate may metastasize into an actual government shutdown for at least a few days, which means the first technical default in US history. Yet nothing seems able to faze the risk on mood, still driven by a relentless surge in the EURUSD which touched on 1.34 overnight before retracing, and the EURCHF, which too has soared by over a 100 pips in recent trading action, which according to some is a result of Swatch buying the Harry Winston watch and jewelry brand for $1 billion, and an aggressively selling of CHF into USD by the company. Eventwise, today will be a quiet day in the US, although the action will pick up tomorrow as more companies report earnings as well as the all important retail sales report will put to rest all debate over just how good or bad this holiday shopping season (pre and post seasonal adjustments) truly was.

The Constitution of the United States is an undeniably powerful document.  So powerful in fact, that it took establishment elitists with aspirations of globalized governance over a century to diminish the American people’s connection to it.  It’s been a long time coming, but in the new millennium, there is now indeed a subsection of the masses that not only have no relationship to our founding roots, they actually despise those of us who do! There are a number of reasons for this dangerous development in our culture...

The main macro event today will be the interest rate announcement by the ECB due out at 7:45 am (with the Bank of England reporting earlier on its rate and QE plan, both of which remained unchanged as expected, which will remain the case until Carney comes on board) which is expected to be a continuation of the policy, with no rate cut despite some clamoring by pundits that Draghi should cut rates even more. Overnight, we got Chinese December trade (better than expected) and loan (slightly worse than expected) data, coming in precisely as a country which has a new communist politburo leadership implied they would. Of particular note was that the US has now replaced the EU as the largest Chinese export market: what happens when the euro weakens even further? But at least the net benefit to European GDP as a result of declining imports will, paradoxically, help. Elsewhere, Spain auctioned off more than than the expected €4-5 billion in its first 2013 auctions of 2015, 2018 and 2026 bonds, sending the 10 year SPGB yield to under 5%, or the lowest since 2010, a process driven by expectations of a Spanish bailout. Thus the incredible odyssey of Schrodinger Spain continues, whose interest rates are improving on hopes it is insolvent. Fundamentally, things got better nowhere, with Greek unemployment rising to 26.8% in October from 26.0% previously, while bad loans in Italy soared by 16.7% Y/Y to €121.8 billion, while loans to businesses dropped at the fastest pace ever. And so the scramble to offset the trade and economic collapse of Europe using central bank tools continues.

VIX rose majestically (by a mere 0.25 vols and still below 14%) for the first time in seven days (but the term structure steepened a little more) and while stocks did not like that, they still managed to pull off the lows, close green, and remain in a 1% range for the last week. Treasury yields continue to slide lower (even with a weak auction today) as it would appear the end of the bond bull market was called a little premature (and as we noted, merely reflected short-term rate-locks for corporate issuance). While HLF grabbed headlines, it is AAPL that seems to be swept under the rug as it ends the day crashtastically at its lows (where its margins will be after the iPoor is released). The USD leaked ever so gently higher on the day - ending practically unchanged on the week (with JPY 0.5% stronger on the week). Commodities chopped around non-directionally (though Silver is the week's winner so far). Financials, and Energy had a tough day (and homebuilders were sold hard after Europe's close). HYG seemed today's lever of rampaciousness and remains rich to intrinsics (as cash HY bonds just can't catch a bid at record-high prices). Once again the S&P reversed its (up)trend at around the European close but late-day VWAP reversion held us bid on the day.

Update: this is just getting better and better: flashing headlines that the SEC has opened an inquiry into Herbalife. Dow Jones adds that inquiry may not result in action. Stock slides on the news, however following speculation that the SEC may (or rather should) be investigating the various massive puts in HLF stock before the Ackman presentation in mid-December, it bounces. Total chaos, and all very exciting.

One guy (whose positive P&L in 2012 was primarily thanks to the gap lower in HLF in the last two weeks of 2012, since filled entirely and then some), says $0. Another guy, whose nearly $10 billion hedge fund was up 30% in 2012, says over $60. Whom do you trust? As far as we are concerned, the second Tilson goes long, we dump everything.

With Alcoa kicking off the earnings season with numbers there were in line and slightly better on the outlook (as usual), attention will largely shift to micro data and disappointing cash flows over the next two weeks, even as the countdown clock to the debt ceiling "drop dead" D-Day begins ticking with as little as 35 days left until debt ceiling extension measures are exhausted and creeping government shutdowns commence. There was little in terms of macro data from the US, even as a major datapoint out of Germany, November Industrial Production, missed expectations of a 1% rise, pushing higher by just 0.2% M/M (up from a -2.0% revised October print), once again proving that "hopes" (as shown by various confidence readings yesterday) of a boost to the European economy are wildly premature. This disappointing print comes a day ahead of the ECB conference tomorrow, when the governing council may or may not cut rates, although it is very much unlikely it will proceed with the former at a time when at least the narrative is one of improvement - pursuing even more easing will promptly dash "hopes" of a self-sustaining trough (forget improvement) for yet another quarter. Putting the German number in context, Greek Industrial Output slid 2.9% in November, down from a revised 5% rise, refuting in turn that this particular economy is anywhere near a trough.

The biggest highlight of the day is the launch of Q4 earnings season with Alcoa after the close. The question is by how much will the ES/SPY correlation have dragged individual stock prices higher from far lower cash flow implied valuations - we will get a glimpse this week, as well as get a sense of how Q1 is shaping up, this week but mostly next week as earnings reports start coming in earnest. There was the usual non-event newsflow out of Europe, which has no impact on risk levels, now driven solely by every twitch of Mario Draghi's face, and best summarized by this from SocGen: "In the wake of September's 3 point VAT increase in Spain, which saw a significant bringing forward of consumption to beat the tax hike, euro area activity in Q4 has been genuinely awful."

The epic farce that is the opaque balance sheets of European banks, sovereigns, NCBs, and the ECB, continues to occur under our very eyes. Only when one sniffs below the headlines is the truth exposed with no apology or recognition of 'cheating' anywhere. To wit, following November's farcical over-payment on collateral by the ECB to Spanish banks (that was quietly brushed under the carpet by Draghi et al.), Germany's Die Welt am Sonntag has found that the Bank of France overpaid up to EUR550mm ($720mm) on its short-term paper financing to six French and Italian banks. The reason - incorrect evaluation of the crappy collateral (i.e. the NCB not taking a big enough haircut for risk purposes) on 113 separate occasions. The problem lies in the increasingly poor quality of collateral the CBs are willing to accept (and the illiquidity of the underlying markets) - as higher quality collateral disappears; which leaves the central bankers clearly out of depth when it comes to 'risk management', no matter how many times Draghi tells us this week.