White House

As Europe approaches the halfway point of the week, equities are suffering losses on the day as North America comes to market, with underperformance observed in the CAC and peripheral bourses. Markets have been weighed down upon from the open with commentary from the Portuguese PM garnering attention in the press, saying that there are ‘no guarantees’ that Portugal will return to the financial markets as planned. A Bank of Spain release has shown the bad loan ratio for the country’s banks has increased to 8.16%, further weighing on sentiment. There was also market talk of stop-loss buying of German Bunds at the cash open, the security had sold off since then but safe haven flows have kept the Bund in positive territory.

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

After Obama's "fairness doctrine" was roundly rejected by the Senate last night as the doomed from the beginning Buffett Rule was voted down, Obama needs to find some more evil villains for society to demonize, and whom to blame for the failure of central planning, or rather its success in pushing gas prices to all time highs. Today - it is that mysterious, amorphous blob of vile, conspiratorial henchmen known as "oil speculators." Forget that these "speculators" are merely conduits for the Fed to conduct its open market operations, forget that the same free liquidity that drives stocks up relentlessly in nominal terms (what? no demonization of evil stock pumping speculators?), even as it produces ever increasing inflation in all those items not tracked by the Fed, forget that Obama's speech is about to be replica of Jimmy Carter's Crisis of Confidence platitude in 1979. Finally forget that the biggest speculator is none other than the White House with its periodic release of SPR release rumors any time WTI approaches $110. Forget all that, and merely focus on the hypnotic, undulating intonation of the engrossing, populist sermon: that is all that is demanded of you. Everything else is to be ignored. And now since the time of "fairness" is over, it is time to do a shot every time "speculator" is uttered. And get ready for many, many CL margin hikes.

When it comes to evil, evil speculators driving stocks higher on endless gobs of cheap zero-cost liquidity, one will hear nary a peep out of the administration: after all: wealth effect or bust. However, when someone hears oil speculators, run and hife. Indeed, now that Obama's uber-central planning mandate has proven completely powerless to redirect the flow of zero-cost money from acquiring real, as opposed to paper-based, assets (read crude), the Teleprompter in Chief will have a sit down with the nation at 11:10 am and in the latest sermon from the White House mound, will "confront" oil speculators once and for all. His plan: why encourage margin hikes of course - the same principle that crushed the spine of the gold and silver spike in 2011. Unfortunately, unlike gold and silver, whose trading is still dominated by the Comex, energy has numerous alternative venues, such as the ICE, and increasing exchanges in China, which also happens to be the marginal demand setter with 3 consecutive months of near record imports. Which is why we are 100% confident that just like every failed attempt at central planning, all Obama will achieve is another spike in crude prices, just in time for the next global reliquification cycle, just in time for 2012's debt ceiling scandal, and just in time for the reelection.

• 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)

Eurozone periphery concerns continue to loom as Italian and Spanish spreads against the German 10yr remain elevated, but have come off their widest levels in recent trade amid some unconfirmed market talk of real money accounts buying Spanish paper.  Despite the concerns in Europe, the major European bourses are trading higher with individual stocks news from over the weekend propping up indices with reports of intra-European M&A and a string of good news for mining stocks pushing up markets today. Some stock stories of note include the agreement of an offer between France’s GDF Suez and UK’s International Power for GBP 4.18 per share, and a speculated merger of BHP Billiton’s and Rio Tinto’s diamond units by private equity firm KKR. The financials sector, however, is showing the strain, as the 3m EUR basis swap moves sharply lower to -53.87 from approximately -50 on Friday, with particular underperformance noted in the French banking sector.  The session so far has been very data-light, with Eurozone trade balance coming in slightly lower than expectations but markets remained unreactive to the release.

Obama may not be the most successful president when it comes to creating jobs at home, but when success is measured by the number of blowjobs outsourced abroad, he may be truly second to none, as his visit to Colombia proves before it has officially begun. According to the AP, "A dozen Secret Service agents sent to Colombia to provide security for President Barack Obama at an international summit have been relieved of duty because of allegations of misconduct." Relieved here being a perfectly randomly selected verb. Because according to a tip received by The Associated Press "the misconduct involved prostitutes in Cartagena, Colombia, the site of the Summit of the Americas. A Secret Service spokesman did not dispute that allegation." Or, as Goldman would call it, an "Asymmetric (Secret) Servicing Initiative" where much more than just inside information is leasked. Unfortunately, while he may be far more successful in generating jobs in Latin America than domestically, even those jobs have proven to be quite transitory, just like virtually all quickie temp jobs "created or saved" in the US in the past several years. Furthermore, just like in the US, we doubt that the incremental wealth benefits will trickle down to the local population. After all, unlike in the US, endogenous Colombian liquidity may be abundant everywhere but certainly not at the central bank, which is far, far tighter at a rate of 5.25% (and rising), compared to extra loose central planners the "developed" world over.

Courtesy of the class division SWAT team, we already know all too well that Buffett had a lower tax rate than this secretary. We however have a question: according to just released data, the Obama's paid $789,674 in taxes in 2011...

• OBAMAS PAID 20.5% IN TAXES ON $789,674 IN 2011

So... inquiring minds want to know if the Fairness Expert in Chief paid less than his secretary in 2011?

In a few weeks the Treasury will most likely launch Floating Rate Notes. Will that be the signal to get out of Dodge? If history is any precedent, and especially the 1951 Accord... you bet.

• With a 2 Year delay, both FT and WSJ start covering the shadow banking system. For our ongoing coverage for the past 2.5 years see here.
• Trouble in shipping turns ocean into scrapheap (Telegraph)
• First-Quarter Home Prices Down 20.7% in Capital (China Daily)
• Bernanke Says Banks Need Bigger Capital Buffer (Reuters)
• Monti’s Overhaul Can’t Stop Pain From Spain: Euro Credit (Bloomberg)
• Spain Confronts Crisis Threat as Rajoy Seeks Deficit Cuts (Bloomberg)
• Japan’s Noda Announces Anti-Deflation Talks as BOJ Sets Policy (Bloomberg)
• White House makes case for Buffett Rule (CNN)
• Cameron to Make Historic Myanmar Trip (FT)
• 'Time for Closer Ties' With India (China Daily)

European cash equities are seen mixed as the market heads into the US session, with the DAX index the only bourse to trade higher at the midpoint of the European session. European markets were seeing some gains following the open after the weekend release of better than expected Chinese manufacturing data, however the main price action of the day occurred after some European press reports that the Bundesbank had stopped accepting sovereign bonds as collateral from Portugal, Ireland and Greece garnered attention, however the Bundesbank were quick to deny reports and state that it continues to accept all Eurozone sovereign bonds. Following the denial, participants witnessed a slight bounceback, but failed to push most markets into the green.  Data releases from Europe so far have been varied, with outperformance seen in the UK Manufacturing PMI, beating expectations and recording its highest reading since May of 2011. However, the French manufacturing PMI came in below expectations, weighing on the CAC index as the session progresses. A further release from the Eurozone has shown February unemployment coming in alongside expectations recording a slight increase from January to 10.8%.

• Mixed signals from China's factories in March (Reuters)
• EU wants G20 to boost IMF funds after Eurogroup move (Reuters)
• Euro Leaders Seek Global Help After Firewall Boosted (Bloomberg)
• Euro-Region Unemployment Surges to Highest in More Than 14 Years (Bloomberg)
• Big banks prepare to pay back LTRO loans (FT) ... don't hold your breath
• Coty Inc. Proposes to Acquire Avon Products, Inc. for $23.25 Per Share in Cash (PRnewswire)
• Spain Record Home Price Drop Seen With Bank Pressure (Bloomberg)
• Firm dropped by Visa says under 1.5 million card numbers stolen (Reuters)
• Japan Tankan Stagnates With Yen Seen as Threat (Bloomberg)
• Fed to buy $44 billion Treasuries in April, sell $43 billion (Reuters)

Taking Bernanke’s statement to indicate that QE is coming in April is wishful thinking at best. Bernanke’s actual words imply, if anything, that the Fed may have failed to fix the US economy. This is more of the Fed playing damage control because the reality is that Bernanke is well aware of this:  by the Fed’s own data we’re clearly in a structural Depression, NOT a cyclical recession.

All you need to read.

What a difference two months of record high gas prices make. After Obama unceremoniously killed the Keystone XL pipeline proposal in January, and has since seen his popularity rating slide in inverse proportion to the surge in gas prices, which as noted yesterday have now passed $4 (still quite a bit better than Europe's $9.81 average/gallon), he is now actively seeking to fast-track its approval. Or at least half of it. Per Reuters: "President Barack Obama will issue a memo on Thursday directing federal agencies to prioritize permitting of TransCanada's southern leg of the Keystone oil pipeline, a senior White House official said on Wednesday. With his Republican opponents hammering away at the president over high gasoline prices, Obama will visit Cushing, Oklahoma on Thursday to promote his energy policies, which include support for the southern leg of the pipeline." In the meantime, enviromentalists just realized they were Corzined.