Anglo Irish

This is the beginning of War and those on the losing side don't even realize they're in battle. Remember, Merkel has already declared the EU to give up sovereign authority for the greater good, the United Germanic Republic of Europe! This is how she will do it.

#666666; font-family: Arial, Helvetica, sans-serif; font-size: 12.800000190734863px; line-height: 19.200000762939453px;">How many important (or worse yet, systemically important) banks can fail to disclose pertinent debt info before it becomes evident that the tax payer/depositor/regulators/stress tester realizes they don't know the Irish banking system's true condition? 

Mounds of cold, hard, indisputable evidence not found ANYWHERE else! Damn, you thought Cyprus was newsworthy? Ireland already Troika'd & they're bigger than Cyprus. Depositor recap of banks looks inevitable if this research is right!

Anglo Irish Bank/IBRC bondholders will actually get some of their money back! April Fools!!! Ireland makes the Cyprus deal look downright generous in comparison.

It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity. 

While this kind of 'wealth tax' has been predicted, as we noted yesterday, this stunning move in Cyprus is likely only the beginning of this process (which seems only stoppable by social unrest now). To get a sense of both what just happened and what its implications are, RBS has put together an excellent summary of everything you need to know about what the Europeans did, why they did it, what the short- and medium-term market reaction is likely to be, and the big picture of this "toxic policy error." As RBS summarizes, "the deal to effectively haircut Cypriot deposits is an unprecedented move in the Euro crisis and highlights the limits of solidarity and the raw economics that somebody has to pay. It is also the most dangerous gambit that EMU leaders have made to date." And so we await Europe's open and what to expect as the rest of the PIIGSy Banks get plundered.

Following 'no change' in policy, we assume we will be treated to a plethora of confidence-building market-implied views of just how great everything is in Europe (apart from fundamentally). Of course, the Q&A is what we want to hear and his involvement in the Monti Paschi debacle, his view on Anglo Irish, his ignorance of currency wars ("I do not talk about currencies"), and just how great the repayment of LTRO funds are (even as European stocks and bonds move into the red for the year)...

*DRAGHI SAYS DATA SIGNAL FURTHER WEAKNESS IN EARLY 2013
*DRAGHI SAYS RISKS TO OUTLOOK REMAIN ON DOWNSIDE
*DRAGHI SEES UPSIDE PRICE RISKS FROM OIL PRICES, INDIRECT TAXES
*DRAGHI SAYS ECB WILL MONITOR MONEY-MARKET CONDITIONS

Slowly things in Europe are starting to go bump in the night again, with the EURUSD down some 150 pips from Friday's multi-year 1.37 high, Spanish bond yields spiking 20 bps to over 5.41%, back over the declining 50 DMA, Italian BTPs getting slammed up some 10 bps to 4.42%, as both Spanish and Italian stocks are sharply down on the day, by 1.2% and 1.9% respectively, following yet another Monte Paschi halt lower earlier in trading. The reason goalseeked by the media for today's weakness is signs of upcoming "political turmoil", namely the escalating Monte Paschi incident out of Italy, which we have been following closely, as well as the Spanish graft scandal, in which the ruling PP party and Mariano Rajoy have been implicated in massive kickbacks, and which may cost Rajoy his leadership at this pace. Of course, none of the data above is new, and neither is France's Moscivi repeating for the second time in a week that the EUR has risen far too high, and to call it catalytic is very naive, but it merely goes to show how the manipulated market decides when and if to actually follow the newsflow. As a result, US futures are pointing to a mildly lower opening, which however may reverse quickly once today's $2.75-$3.5 billion POMO kicks in. Of course, if the Italian political turmoil drags Draghi further into the mud, all bets are suddenly off about Europe being "fixed."

Following yet another quiet overnight session, futures have surprised many walking into work today as the traditional overnight levitation is strangely missing. The reason for that may be the lack of the traditional for 2013 lift in various funding currency pairs, with both the USDJPY and the EURUSD lower. While there was no major macro news, the former may have been dragged lower by various comments from the German BDI industry federation chief who said he is worried about the devaluation race stemming from Japan's central bank policy echoing Merkel's comparable sentiment and revealing that the EURUSD may have topped out, while the latter was pushed lower following today's 7 day ECB MRO, which saw some €124.1 billion allotted at a 0.75% yield. This was largely in line with expectations, with Barclays seeing some €135.4 billion maturing, while BNP had expected modestly more, or some €150 billion. The MRO is the first such operation, with tomorrow's 3 month refinancing operation likely to give a better glimpse of the bank's post-LTRO repayment funding needs. Whether it is this, or the market finally demanding some action out of central banks which, except for the Fed, have been in constant promise mode, or just a random walk, is unknown, but for now the carry funded nominal devaluation of risk may have topped out.

Been a while since we had some amusement out of the Bazooko Circus known as Europe, which for the past month has gone completely dormant, not because "it is fixed" but because, just like in Japan where the JPY has plunged on expectations of an action by the BOJ, so Europe has continued to benefit from the threat of the latest and greatest proposed ECB intervention: the OMT, which on one hand keeps the vigilantes in check, but on the other delays any painful reforms even as the underlying Spanish economy continues to deteriorate without any real structural reforms: something which a surge in rates would promptly precipitate (and once expectations turn to reality, it's all over: just see the recent QE3 and QE4 attempts by the Fed). So speaking of Spain, today's recap sentence of the day goes to Reuters' Julien Toyer with the following: "Spanish lender Bankia will wipe out 350,000 shareholders, many of them small savers with little knowledge of financial markets, after it emerged it had a negative value of 4.2 billion euros." Now if only the Spanish wipe out ended with Bankia's shareholders...

• Obama-Romney: Breaking the Tie (BBG)
• Fiscal cliff looms over campaign climax (FT)
• Tough Calls on Deficit Await the Winner (WSJ)
• Election Likely to Leave Housing Unmoved (WSJ)
• Regulator Investigating Rochdale Trading (WSJ)
• Greeks Plan Strikes On Eve of Votes (WSJ)
• China Communists consider internal democratic reform (Reuters)
• Wen urges Asia-Europe co-op to promote world economy (China Daily)
• Italy Said to Reject Bad Bank That May Boost Ties to Sovereign (BBG)
• IMF warning adds to French economy fears (FT)
• Europe, Central Bank Spar Over Athens Aid (WSJ)
• Unlimited Lending May Help Weaken the Yen, BOJ Official Says (BBG)
• PBOC Official Says U.S. Election Won’t Impact Yuan Level (BBG) - Just the USD level to which it is pegged

• ECB's Nowotny - ESM banking license could be advantageous (Reuters) - just keep regurgitating headlines until they generate a short squeeze
• IMF Says China Downside Risks Significant as Growth Slows (Bloomberg)
• Moody's cuts outlook on EU stability facility to negative (Reuters)
• Rome places spending controls on Sicily (FT)
• Big banks' glory days feared to be gone for good (Reuters)
• China's CNOOC scoped Nexen, partnered, then pounced (Reuters)
• Germany backs Spanish austerity plans (FT)
• Are 2012 Games one too many for London? (Reuters)
• Euro Crisis Spreading East Damps Growth, Development Bank Says (Bloomberg)
• Japan Flags Yen-Sales Impact as BOJ Eyes More Easing (Bloomberg)

• Greece now in "Great Depression", PM says (Reuters)
• Geithner "Washington must act to avoid damaging economy" (Reuters)
• Moody’s warns eurozone core (FT)
• Germany Pushes Back After Moody’s Lowers Rating Outlook (Bloomberg)
• Austria's Fekter says Greek euro exit not discussed (Reuters)
• In Greek crisis, lessons in a shrimp farm's travails (Reuters)
• Fed's Raskin: No government backstop for banks that do prop trading (Reuters)
• Campbell Chases Millennials With Lentils Madras Curry (Bloomberg)

All you need to read.

Nowhere in S&P’s statement about “global economic and financial crisis”, did it clarify that sovereigns were hit due to backing their largest national banks (and international, US ones) which engaged in half a decade of leveraged speculation. But here’s how it worked: 1) Big banks funneled speculative capital, and their own, into local areas, using real estate and other collateral as fodder for securitized deals with derivative touches. 2) They lost money on these bets, and on the borrowing incurred to leverage them. 3) The losses ate their capital. 4) The capital markets soured against them in mutual bank distrust so they couldn’t raise more money to cover their bets as before. 5) So, their borrowing costs rose which made it more difficult for them to back their bets or purchase their own government’s debt. 6) This decreased demand for government debt, which drove up the cost of that debt, which transformed into additional country expenses. 7) Countries had to turn to bailouts to keep banks happy and plush with enough capital. 8) In return for bailouts and cheap lending, governments sacrificed citizens. 9) As citizens lost jobs and countries lost assets to subsidize the international speculation wave, their economies weakened further. 10) S&P (and every political leader) downplayed this chain of events.... The die has been cast. Central entities like the Fed, ECB, and IMF perpetuate strategies that further undermine economies, through emergency loan facilities and  bailouts, with rating agency downgrades spurring them on. Governments attempt to raise money at harsher terms PLUS repay the bailouts that caused those terms to be higher. Banks hoard cheap money which doesn’t help populations, exacerbating the damaging economic effects. Unfortunately, this won't end any time soon.