Barclays

• Cyprus leader invites family firm probe (FT)
• How the Fed fueled an explosion in subprime auto loans (Reuters)
• Wal-Mart Customers Complain Bare Shelves Are Widespread (BBG)
• JC Penney CEO gets no bonus, stock award after dismal year (Reuters)
• New Bird Flu Virus Kills 2 in China, Sparking WHO Probe (BBG)
• Algorithms Play Matchmaker to Fight 7.7% U.S. Unemployment (BBG)
• Fed hawk Lacker and dove Evans face off over inflation (Reuters)
• Infamous silver market "cornerer" WH Hunt Becomes Billionaire on Bakken Oil After Bankruptcy (BBG)
• Japan Auto Sales Fall on Subsidy End as Korea Extends Drop (BBG)
• Black Hawks Near North Korea Show Risk in U.S. Command Shift (BBG)
• SEC Embraces Social Media (WSJ)
• Tesla Touts ‘True Out of Pocket’ Financing for Model S (BBG)
• U.K. Banks Try to Dodge Bonus Caps by Defining Risk-Taker (BBG)

• The revolving door continues: Mary Schapiro joins Promontory Financial (WSJ)
• First Peek at Health-Law Cost (WSJ)
• Abe warns over Japan inflation target: warns 2% inflation target may not be reached within two years (FT)
• BoJ's Kuroda tested by divided board (Reuters)
• Nanjing poultry butcher fourth person infected with H7N9 bird flu (SCMP)
• What time do top CEOs wake up? (Guardian)
• Cyprus Seeks More Time to Meet Targets in Talks With Troika (BBG)
• Investors Ignore Negativity at Their Peril (WSJ)
• Apple bows to Chinese pressure (FT)
• One can only laugh: North Korea to restart nuclear reactor in weapons bid (Reuters)
• Visa Demand Jumps (WSJ)
• Bloomberg's refutation of Stockman: yes, yes but... look over there, stocks are up! (BBG)

• Goldman's Mario Draghi convinced Italy president Napolitano not to resign (Reuters)
• David Stockman Warns of Crash Of Fed-Fueled Bubble Economy (BBG)
• Cyprian archbishop calls on Central Bank's head, Finance Minister to resign (Voice of Russia)
• Cyprus Parliament President Says Country Should Exit Eurozone (Zero Hedge)
• Cyprus seeks to find people behind bank crisis (FT)
• Argentina sticks to its guns over holdout creditor payments (FT)
• 40% of all trading is now done in dark pools and off exchanges (NYT)
• Sequester Impact Remains Elusive (WSJ)
• China’s Home Prices Increase Most in 26 Months, SouFun Says (BBG)
• Beijing, Shanghai Add to Home Curbs as China Acts to Cool Market (BBG)
• Two men die in Shanghai in first human cases of bird flu strain (SCMP)
• Economics will catch up with the euro  (FT)
• How much gold is there in the world? (BBC)
• Fannie Mae Regulator Sets No-Doc Modifications for Borrowers (BBG)

From a European perspective, the list of broken taboos and assumptions continues to grow. The euro’s core founding principles, based on the Maastricht Treaty’s “irrevocable” fixing of currency rates, and of the free movement of capital, have been violated. The euro will never be the same again; its preservation now depends urgently upon economic recovery. Without the delivery of economic growth, unemployment will rise to yet higher post-war record levels, and the widespread and growing disillusionment felt by EU citizens towards their economic regime will threaten to spill over into more explicit questioning of the euro’s suitability.

Far from being a unique situation, the fragile exposure of unsecured depositors across the Euro zone is the norm; and their fragility was further increased in the last twelve months thanks to policies created by the same authorities who now refuse to honor their promise of a banking union, and instead impose capital controls, which have effectively destroyed any credibility on the safety of capital in the Euro zone. However, even if one accepts my view, the unintended outcome begs the following question: Why was there cheap money available for subordinated debt holders to cash out, but there is none now to protect the savings of depositors?

Pinning the blame for the collapse of the Cypriot banking system (and the country itself) on the shoulders of one man may seem harsh but Laiki Bank's chief risk officer Dimitris Spanodimos represents the tip of the spear of mass delusion that encompasses most (if not all) of Europe. Cypriot banks had been swamped with deposits courtesy of their cozy relationship with Russia and this left them with, in Spanodimos' words, "comfortable liquidity and capital position to deepen selectively some highly profitable and highly promising client relationships." In short, they had so much excess that they had to invest it somewhere and given the regulators light tough (which gave the banks a clean bill of health through 2011), they bought Greek government debt and extending huge amounts of mortgage loans (in Greece and Cyprus). So, as the WSJ reports, while everyone else was purging, Spanadimos had swallowed the red pill and decided his banks' gorging on extremely risky investments was tolerable - until of course the EU pulled the plug with the haircuts from the Greek bailout. These losses, and the need for new capital, is why Cyprus needed a bailout - so who is to blame...

• Lines Form as Cyprus Banks Reopen (WSJ)
• Greek Bets Sank Top Cyprus Lenders - Banks at Heart of Cyprus Mess Were Bullish on Athens as Other Investors Fled (WSJ)
• Hollande Economic Woes Masked by Cyprus Fig Leaf (BBG)
• M&A Stumbles Amid March Deal Drought (BBG) ... but any minute now
• Train hauling Canadian oil derails in Minnesota  (Reuters) - must be an evil pipeline riding first class
• Slovenian Austerity After Cyprus Fails to Stem Yield Gain (BBG)
• Banks Seek to Overturn Judge’s Ruling in Critical Mortgage Case (NYT)
• Ships Costing U.S. $37 Billion Lack Firepower, Navy Told (BBG)
• OECD still gloomy on eurozone recovery (FT)
• BOJ's Kuroda says asset purchase limit already broken (Reuters)
• Kuroda warns Japan debt ‘not sustainable’ (FT)
• BOJ’s Kuroda Vows to Continue Easing Until 2% Target Achieved (BBG)
• South Korea cuts economic forecast (FT)

Below are portions of a comment letter submitted by R.T. Leuchtkafer to the SEC on April 16, 2010, just 3 weeks before flash crash. The second paragraph in the excerpt below, unknowingly describes exactly how the flash crash was started. The letter goes on to alert the SEC on the dangers of High Frequency Trading (HFT), phantom liquidity and other concerns.

• What bread... What circuses... JPMorgan Chase Faces Full-Court Press of Federal Investigations (NYT)
• European Regulators to Charge Banks Over Derivatives (WSJ) ... but forgive us if we don't hold our breath
• Cyprus readies capital controls to avert bank run (Reuters)
• Damage ripples through Cypriot economy (FT)
• G4S readies guards as Cypriot banks prepare to open (Reuters)
• Global pool of triple A status shrinks 60% (FT)
• Customers Flee Wal-Mart Empty Shelves for Target, Costco (BBG)
• BOE Says U.K. Banks Have Capital Shortfall of $38 Billion (BBG)
• U.K. Banks Facing Capital Shortfall (WSJ)
• Cyprus Details Bank Revamp (WSJ)
• Kazumasa Iwata Joins Kuroda Naysayers as BOJ to Meet (BBG)
• BRICS Nations Need More Time for New Bank, Russia Says (BBG)

Barclays index of high yield bond total returns is now 63% higher that its pre-crisis peak. This compares to an equivalent total return index for the S&P 500 was only 12% (and it has yet to break the October 2007 highs). These numbers are astronomical in the face of micro- and macro-fundamentals and while equity markets remain the policy tool du jour for the central planning elite, it appears they are perhaps starting to become a little concerned that driving all the retiring boomers 'safe' money into risky bets may not end so well. Just as Alan Greenspan stepped on the throat of equity markets with his now infamous 'irrational exuberance' speech, we wonder, as Bloomberg notes, if last night's speech to the Economic Club of New York by Bill Dudley is the new normal equivalent, as he noted, "some areas of fixed income - notably high-yield and leveraged loans - do seem somewhat frothy," just as we warned here. With the high-yield index trading at 5.56% yield - the lowest in over 25 years and loans bid at 98.27 (the highest since July 2007), perhaps he is right to note, "we will need to keep a close eye on financial asset prices."

After one of the most fabulous verbal faux pas in recent history was committed yesterday, in which the truth briefly escaped the lips of the new Eurogroup head who still has to learn from his masterful "when it becomes serious you have to lie" predecessor and ever since both he and all of uber-incompetent Europe have been desperate to put the genie back into the bottle to no avail, everyone has been caught in a great debate: to template, or not to template?  Below is a summary of Wall Street's thinking on this key for so many European (and soon global) depositors.

Up until just a week or so ago, the euro, the market seems to be telling us, has been saved, and peripheral Europe is widely seen as being out of the woods. Thanks to the ECB - who are willing to pump as much liquidity into the markets as it needs - it seems rising debt levels, greater political fragmentation, and a worsening economy somehow don't really matter and it is impolitic to sound pessimistic. But is peripheral Europe really suffering primarily from a liquidity crisis? It would help me feel a lot better if I could find even one case in history of a sovereign solvency crisis in which the authorities didn’t assure us for years that we were facing not a solvency crisis, but merely a short-term problem with liquidity. A sovereign solvency crisis always begins with many years of assurances from policymakers in both the creditor and the debtor nations that the problem can be resolved with time, confidence, and a just few more debt rollovers. The key point is that bankers are not stupid. They just could not formally acknowledge reality until they had built up sufficient capital through many years of high earnings – thanks in no small part to the help provided by the Fed in the form of distorted yield curves and free money – to recognize the losses without becoming insolvent.

For those still with capital in the paper markets, Peak Prosperity's Chris Martenson believes there are dangerous risks re-building. In particular, he sees an unacceptably high and growing risk of a cascading series of corrections in the bond markets (corporate and sovereign), which would have a much greater impact on destroying wealth worldwide than any stock market crash could. The return of reckless practices like CDOs and overuse of derivatives indicates that we are far along the timeline in repeating a 2008-like contraction -- but worse. Despite today's heady elevated prices, it's time to get to the sidelines, and use your paper - while it still has the purchasing power it does - to park your wealth in hard assets.

It seems that the Cypriot government is going full circle on its plans to save its nation and its people. As UK Think Tank Open Europe notes, "it now seems we have come all the way back round to the deposit levy as a solution in Cyprus. Overnight, the EU/IMF/ECB Troika rejected the plans for a Cypriot solidarity fund, particularly one based on pension assets and gas reserve revenues (which German Chancellor Angela Merkel specifically spoke out against)." The new - Plan 'D' - (Plan A - Haircuts; Plan B - Beg Russia for Bailout; Plan C - Solidarity Fund) appears to be moar haircuts and double-dip on the large depositors (seemingly what Brussels wants anyway). Plan 'D' - a restructuring and bigger deposit levy (a 12.2% tax on deposits above €500,000 or a 9.46% deposit on deposits above €100,000 would yield the necessary €3.5bn) - "may amount to trying to burn the larger depositors twice," as the plan to shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses. As the FT notes, "that may make sense in the medium term, but in itself does not create new money"

• Euro zone call notes reveal extent of alarm over Cyprus (Reuters)
• Stagnant Japan Rolls Dice on New Era of Easy Money (WSJ)
• Cyprus, European data batters shares and euro (Reuters)
• UK cuts taxes to revive stagnant economy (FT)
• "Quality Control" Rat Body Linked to Blackout at Fukushima (NYT)
• North Korea issues fresh threat to U.S., South probes hacking (Reuters)
• South Korea Says Chinese Code Used in Computer Attack (BBG)
• Osborne paves way for Carney to retool Bank of England (Reuters)
• Carney Gets ‘Escape Velocity’ Mandate With Limiter (BBG)
• Osborne Pledges Five More Years of U.K. Austerity (BBG)
• Bernanke Saying He’s Dispensable Suggests Tenure Ending (BBG)
• Senate Passes Bill to Fund Operations (WSJ)