Goldman Sachs

No, it’s not Greece Prime Minister and bankster puppet Lucas Papadermos who serves his former masters at Goldman Sachs rather than the people of the country he was “appointed” to lead.  No, it’s not German Chancellor Angela Merkel who is putting the interests of the banks and bailout recipients above her fellow Germans at the risk of a continually devaluing euro.  And no, it’s not European Central Bank president Mario Draghi whose cheap euro policies are propping up both the banking sector and governments of the periphery at the expense of capital investment in sectors that would result in actual wealth creation rather than sustaining a clearly unsustainable status quo. Meet Ed Houben.  He is not solely responsible for the slow implosion of the poster boy of New World Order also known as the Eurozone, but the results of his career certainly play a part.  So who is Ed Houben? Well, he is not a politician buying votes with stolen funds.  Nor is he a banker looking to use taxpayers to cover his poor investments.  Mr. Houben is just a lowly entrepreneur.  His business just happens to be in putting a strain on the various welfare states which permeate throughout the Eurozone. Ed Houben is a sperm donor; but he is not just any sperm donor.  The “fruits of his labor,” pardon the phrase, have thus far granted him 82 children; with at least 10 more on the way.

Three key issues remain at the heart of current markets: the strength of the US growth cycle; the sovereign and financial risks in the Euro area; and the risks of ongoing deceleration in Chinese growth. Goldman has created proxies for these various risks and the sensitivities of different assets to those risk factors. They further note that looking at those three proxies over time confirms what general qualitative commentary has also spelled out. From late November to early February, the market relaxed about all three risks, as better global data and the impact of the LTROs on European financial risks provided a strong tailwind. From February until mid-March, China fears reappeared and the market downgraded its views of China significantly while still relaxing about European and growth risk. Since then, both European – and to a lesser degree – US growth risks have re-emerged, but at the same time there are some very tentative signs that the market is becoming a little less worried about China. They, however, remain increasingly cautious on them all: Europe seems increasingly in the hands of governments, not the ECB, raising volatility; unspectacular growth trajectory in the US continues as outlooks adjust down; and even thouigh China's risk has stabilized they have avoided active exposures 'given the muddiness of news'. Understanding which assets are more sensitive and how these risks evolve might help prognosticators understand the need to pay attention to Europe - as opposed to merely Apple's earnings.

• BARROSO SAYS TOTAL GREEK AID EQUAL TO 177% OF GREEK GDP

As a Korean-American, many people expected me support Jim Yong Kim's appointment to the World Bank. Here is why I do not.

Back in November we penned "The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman's World Domination Plan)" in which we described what the long-term reality of Europe, not that interrupted by the occasional transitory LTRO cash injection and other stop-gap central bank measure, would look like. And yet there was one piece missing: after Goldman unceremoniously set up its critical plants in Italy via Mario Monti and the ECB via Mario Draghi, one key target of Goldman domination was still missing. The place? Why the center of the entire modern infinitely rehypothecatable financial system of course: England, which may have 1,000x consolidated debt/GDP, but at least it can repledge any asset in perpetuity thus giving the world the impression it is solvent (no wonder AIG, MF Global, and now the CME are scrambling to operate out of there). Which is why we read with little surprise that none other than former Goldmanite, and current head of the Bank of Canada, is on his way to the final frontier: the Bank of England.

Size of Banks Killing Economy … But Giant Banks Have Only Gotten Bigger Since Financial “Reform” Enacted

European markets are seen trading higher as North America comes to market, with some momentum seen following the release of the forecast-beating German ZEW Survey. An economist from the institution commented that downside risks have decreased significantly over the past month, prompting some risk-appetite in Europe during the morning. Participants were also looking towards the Spanish T-Bill auction with particular focus, but it did not confirm the nation’s worst fears as the auction passed with strong bid/covers, selling to the top of the indicative range. Yields, however, did increase over both lines. As such, the Spanish 10-yr yield has fallen below the key 6% mark and remained below that level for most of the session. Peripheral 10-yr spreads against the German Bund are seen tighter throughout the day, amid some market talk early in the session of domestic accounts buying the paper, however this remains unconfirmed.

• This is just hilarious on so many levels: Japan Will Provide $60 Billion to Expand IMF’s Resources (Bloomberg) - just don't look at Fukushima, don't look at the zero nuclear plants working, don't look at the recent trade deficit, and certainly don't look at the Y1 quadrillion in debt...
• US Senate vote blocks ‘Buffett rule’ (FT)
• Reserve Bank of Australia awaiting new data before considering rate move (Herald Sun)
• Merkel Offers Spain No Respite as Debt Cuts Seen As Key (Bloomberg)
• RBI cuts repo rate by 50 bps; sees little room for more (Reuters)
• China allows banks to short sell dollars (Reuters)
• Central bankers snub euro assets (FT)
• Shanghai Econ Weakening’ Mayor Vows to Pop Housing Bubble (Forbes)
• Wen's visit to boost China-Europe ties (China Daily)
• Madrid threatens to intervene in regions (FT)

All you need to read and more.

In one of the most coherent take-downs of the government's data gatherers, economists, reporters, and the general investing public that soak up the propaganda spewed forth by the former, TrimTab's CEO Charles Biderman destroys today's 'Advance' retail sales, and crushes the Census Bureau's process. Needing little additional comment, we can only hope that the 'ignorance is bliss' approach of the mainstream media and self-serving talking heads is at least questioned by the broad investing public when they hear the sense that Biderman speaks with regard to the antiquated methodologies used to gather data and the factual destruction of Wall Street Journal "I am the law" headlines straight off the government's press releases. The simple fact is that while anyone suggesting the government's data may not be accurate is dismissed as a tin-foil-hat-wearing conspiracy theorist (Goldman Sachs client 'muppetry', high-frequency-trading liquidity destruction, rehypothecation and shadow-banking deleveraging, LTRO-Stigma, and real European sovereign balance sheet aside for example), when faced with the facts - the unadulterated numbers - it is hard to argue with tough reality; leaving only the shrug, 'money-on-the-sidelines', 'trend-is-your-friend', 'retail not participating yet', self-fulfilling mutual masturbation that is now become our virtuous circle of reporting, government data, and sell-side economists.

The extent of Obama’s duplicity continues to grow apace. And yes — it’s duplicity. If you can’t or won’t fulfil a promise, don’t make it. From Bloomberg: "Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis." And the hilarious (or perhaps soul-destroying) thing? The size of the banks isn’t even the major issue. AIG didn’t have to be bailed out because of its size; AIG was bailed out because of its interconnectivity. If AIG went down, it would have taken down assets on balance sheets of a great deal more firms, thus perhaps triggering even more failures. So the issue is not size, but systemic interconnectivity. And yes — that too is rising, measured in terms of gross OTC derivatives exposure, as well as the size of the shadow banking system (i.e. pseudo-money created not by lending but by securitisation) — which sits, slumbering, a $35 trillion wall of inflationary liquidity ready to crash down on the global dollar economy.

All you need to read and some more.

• Downgrades Loom for Banks (WSJ)
• China Loosens Grip on Yuan (WSJ)
• Sarkozy Embraces Growth Role for ECB (WSJ)
• A Top Euro Banker Calls for Boost to IMF (WSJ)
• Wolfgang Münchau - Spain has accepted mission impossible (FT)
• Hong Kong Takeovers Loom Large With Banks Lending Yuan: Real M&A (Bloomberg)
• Banks urge Fed retreat on credit exposure (FT)
• Drought in U.K. Adds to Inflation Fears (WSJ)
• France faces revival of radical left (FT)
• Euro Area Seeks Bigger IMF War Chest as Spanish Concerns Mount (Bloomberg)

Curious what the investing world will focus on next week? Here is a recap courtesy of Goldman Sachs, though for those who want the punchline now, just fast forward to Thursday when get Spain and French bond auctions. In the meantime just ignore all the intraday trading halts of Intesa, UniCredit And Banco Popolare. The rest is just the supporting cast.

George Soros has been a busy man the last few days. Appearing at the INET Conference a number of times and penning detailed articles for the FT (and here at Project Syndicate) describing the terrible situation in which Europe finds itself - and furthermore offering a potential solution. Critically, he opines, the European crisis is complex since it is a vicious circle of competing crises: sovereign debt, balance of payments, banking, competitiveness, and structurally defective non-optimal currency union. The fact is 'we are very far from equilibrium...of the Maastricht criteria' with his very clear insight that the massive gap, or cognitive dissonance, between the 'official authorities' hope and the outside world who see how abnormal the situation is, is troublesome at best. Analogizing the periphery countries as third-world countries that are heavily indebted in a foreign currency (that they cannot print), his initial conclusion ends with the blunt statement that "the euro has really broken down" and the ensuing discussion of just what this means from both an economic and socially devastating perspective: the destruction of the common market and the European Union and how this will end in acrimonious recriminations with worse conflicts between European states than before.