Apple

This is just the latest revelation in the stealth inflation and food fraud theme we have written about frequently in recent months.  The non-profit group Oceana took samples of 1,215 fish sold in the U.S. and genetic tests found that that 59% of those labeled tuna were mislabeled. It seems that “white tuna” should be avoided in particular as “84% of fish samples labeled “white tuna” were actually escolar, a fish that can cause prolonged, uncontrollable, oily anal leakage.”  Oh and if you live in New York City or Southern California, you should pay particular attention if you're heading to Sushi!!

It looks like the Dow Jones Industrial Average will be the first major U.S. equity benchmark to breach new highs, so ConvergEx's Nick Colas breaks down this closely watched measure of domestic stock prices noting that the Dow is a quirky “Index” – price weighted (not market capitalization), compact (30 names) and fundamentally global (lots of brand-name multinationals).  Change just one name in the index, and the outcomes vary considerably.  If Google had been added at the end of last year, we’d be at 14,330 – well over the old high of 14,165.  But if the Dow committee had added Apple instead, the index would have closed at 13,475 yesterday, up less than 3% on the year.  And if Netflix had been the lucky company added for 2013, well…  We’d be saying hello to Dow 15,000, and then some. The point here is that the notion of a “New High” for the Dow is a little arbitrary, by virtue of the price weighting function and stock selection process.

Big name brand banks push 75% loss ponzi schemes, yet everybody still flocks to work, and do business, with them. The term Muppet is a compliment!

Apple is under pressure this morning -1.8%. It has broken recent lows and is traversing the gap from 1/24/12 (meaning if you bought at any time after that you are now losing money - and notably relative to the market). These are 13-month lows - great buying opportunity we are assured by Topeka et al. Just think, an iWatch, iTV, iDunno...

• US braced as cuts deadline passes (FT)
• U.S. stares down start of steep "automatic" budget cuts (Reuters)
• Yeltsin-Era Tycoons Sell Resources for Distance From Kremlin (BBG)
• Italy's center-left leader rules out coalition with Berlusconi (Reuters)
• Apple Required Executives to Hold Triple Their Salary in Stock (WSJ)
• BOJ Seen Spiking Punchbowl in April Under New Chief Kuroda (BBG)
• Diplomatic fallout from EU bonus cap (FT)
• Italy’s Stalemate Jeopardizes Resolution of Crisis, Finland Says (BBG)
• Chinese trader accused of busting Iran missile embargo (Reuters)
• JPMorgan No. 1 Investment Bank Amid a Flurry of New Deals (BBG)
• Eurotunnel’s Ferry Strategy at Risk as Rivals Cry Foul (BBG)
• Telepathic rats team up across continents (FT)

The cuts for the balance of the fiscal year come to $42b; an amount that is equivalent to 45 points on Apple’s market capitalization. Not a big deal??

• Grillo kills move to break Italy deadlock (FT)
• Abe nominates Kuroda to run BoJ (FT)
• More WMT bad news: Wal-Mart Chief Administrative Officer Mars to Leave: WSJ (BBG)
• Japan's Abe: Islands Are Indisputably Ours (WSJ) - Except for China of course
• Low-key departure as pope steps down, to enter the final phase of his life "hidden from the world" (Reuters)
• Cuts unlikely to deliver promised budget savings (Reuters)
• European Union caps bankers’ bonuses (FT)
• White House, Republicans dig in ahead of budget talks (Reuters)
• Jockeying Stalls Deal on Cuts (WSJ)
• Argentina Says It Won’t Voluntarily Comply With Bond Ruling (BBG)
• Italian president says forming new government cannot be rushed (Reuters) - or happen at all
• Central Banks Spewing Cash Must Plan Exit Timing, Rohde Says (BBG)
• China Regional Targets Cut in Sign Debt Concerns Heeded (BBG)
• RBA Says Up to 34 Central Banks Holding Australian Dollars (BBG)

Bernanke gave more testimony on Wednesday emphasizing and defending all Fed policies. He successfully parried all questions about QE and ZIRP risks and made no mention of any policy exit dates. Bulls translation, the printing press will be on “auto” to infinity.

Interesting testimony tidbits were:

“Fed could go some time without sending profits to Treasury,” (Fed is allowed to be a deadbeat).

“Savers will benefit with economic recovery; savers won't get strong returns in a weak economy,” (So not in my lifetime?).

• Italy sold EUR 6.5bln in 5y and 10y BTPs this morning, solid b/c and competitive yields, especially when considering the  uncertain political situation in Italy.
• Moody's also said that Italian election is indirectly credit negative for other pressured EU sovereigns.
• Fears rise that ECB plan has a weakness as the strings in the Eurozone bond buying programme may be its frailty.

• Wal-Mart's Sales Problem—And America's (WSJ)
• Investors fret that Italy may undermine ECB backstop (Reuters)
• Monti Government Mulls Delaying Monte Paschi Bailout (BBG)
• Norway Faces Liquidity Shock in Record Redemption (BBG)
• ECB's Praet Says Accommodative Policy Could Lose Effectiveness (BBG)
• EU Chiefs Tell Italy There’s No Alternative to Austerity (BBG)
• New Spate of Acrimony in congress As Cuts Loom (WSJ)
• BOE's Tucker hints at radical growth moves (FT)
• Kuroda Seen Getting DPJ Vote for BOJ, Iwata May Be Opposed (BBG)
• Russian Banks Look to Yuan Bond Market (WSJ)
• Dagong warns about rising debt (China Daily)
• Italy Election Impasse Negative for Credit Rating, Moody’s Says (BBG)

With little on the event calendar in the overnight session, the main news many were looking forward to was Italy's auction of €2.5 billion in 5 and €4 billion in 10 year paper, to see just how big the fallout from the Hung Parliament election was in the primary market. As SocGen explained ahead of the auction: "The target of Italy's 2017 and 2023 BTP auction today is a maximum EUR6.5bn, but in order to get to that tidy amount the Tesoro may be forced to offer a hefty mark-up in yield to compensate investors for the extra risk. Note that Italian 6-month bills were marked up at yesterday's sale from 0.731% to 1.237%. Who knows what premium investors will be asking for today for paper with the kind of duration that is not covered by the ECB OMT (should that be activated)? Will Italian institutions, already long BTPs relative to overall asset size, be forced to hoover up most of the supply?" The outcome was a successful auction which, however, as expected saw yields spike with the 4 year paper pricing at 3.59% compared to 2.95% before, while the 10 Year paper priced some 60 bps wider to the 4.17% in January, yielding 4.83%. The result was a brief dip in Italian OTR BTP yield, which have since retraced all gains and are once again trading in the 4.90% range on their way to 5%+ as JPM forecast yesterday. And as expected, talk promptly emerged that the auction was carried by "two large domestic buyers" in other words, the two big local banks merely levered up on Italian paper hoping furiously that they are not the next MF Global.

Ben was in congress campaigning er, testifying mostly about the effectiveness of all things ZIRP and QE. He was grilled about #0000ff;">#0000ff;">possible risks with QE especially if interest rates should rise. The Bernank saying that interest rates would rise was unlikely but he then cavalierly stated if rates rise, the Fed would just “hold back on payments” er, stiff the Treasury. That’s no big deal for him since by then he’ll be down the road writing his memoirs, making speeches and joining some big Wall Street firm as a well-paid consultant. The Bernank was also asked if he noted any bubbles or market excess and said he saw none. 

• Italy Political Vacuum to Extend for Weeks as Bargaining Begins (BBG)
• Italian impasse rekindles eurozone jitters (FT)
• On Spending Cuts, the Focus Shifts to How, Not If (WSJ)
• Obama spending cuts strategy focused on waiting game (Reuters)
• BOE’s Tucker Says He’s Open to Expanding Asset-Purchase Program (BBG)
• Fed Faces Explaining Billion-Dollar Losses in Stress of QE3 Exit (BBG)
• Carney warns over lack of trust in banks (FT) - here's a solution: moar bank bailouts!
• Bundesbank tells France to stick to budget (FT)
• China to tighten shadow banking rules (FT)
• Saudis Step Up Help for Rebels in Syria With Croatian Arms (NYT)
• After election win, Anastasiades faces Cyprus bailout quagmire (Reuters)
• Just for the headline: Singapore’s Darwinian Budget Sparks Employer Ire (BBG)

Is the U.S. economy about to experience a major downturn?  Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened.  Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality.  When the stock market did finally catch up with reality, it happened very, very rapidly.  Sadly, most people do not appear to have learned any lessons from the crisis of 2008.  Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever.  As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed.  In the end, we will pay a great price for our overconfidence and our recklessness.

With the entire world, and certainly GETCO's ES and EURUSD algos, focused on every single update out of the Italian Senate race, which now appears certain to not bring the necessary 158 seats to the Bersani-Monti coalition leading to a chaotic revote in the coming months, here is some tangential news of the "who could have ever seen this coming variety." Following last week's Heinz insider trading probe, which implicated a Goldman Sachs account in Zurich belonging to some private wealth client, who was so anonymous not even Goldman knows who it belonged to, we now learn that yet another Goldman employee has just left the company in a totally separate insider trading probe.