Blackrock

• BHP Billiton sees China iron ore demand flattening (Reuters)
• Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits (Bloomberg)
• State Capitalism in China Will Fade: Zhang (Bloomberg)
• Venizelos quits to start election campaign (FT)
• Fed’s Dudley Says U.S. Isn’t ‘Out of the Woods’ (Bloomberg)
• China Is Leading Foreign Investor in Germany (WSJ)
• Fed undecided on more easing: Dudley (Reuters)
• Martin Wolf: What is the real rate of interest telling us? (FT)

Who's more foolish, the fool, or the fool who follows him?

And how can it not be? As Banco de Espana just released earlier today, Spanish banks have borrowed a record €152 billion in February, a €19 billion increase from January. At least we now know what the capital shortfall was in Spain since pre-LTRO days, when total borrowings were €98 billion: "LTRO is for carry trade purposes"... right. So thank you European tax payers, and the 'bad bank' hedge fund formerly known as the ECB - you just bought Spain a few more months, however with your actions you guaranteed that nobody will change any part of their destructive behavior, and merely enable even more solvency crises in the future, which will be band-aided with even more trillions in free money, and so on, until the global central banks need to show their expansion not on a weekly but millisecond basis. And oh yes, this explains why Blackrock is tripping over itself this morning recommending Spanish bonds, which "may offer opportunities for long-term investors" - perhaps the same profit opportunity that the ECB had on its Greek bond holdings purchased at 80 cents of par and collapsed at about 20.

We were speechless when we read this from Bloomberg...

A lesson to be learnt from the individuals who continue to buy European Debt

Irish Finance Minister saying that whatever the ECB does with Greece would be of interest to Ireland. So if ECB forgives Greek debt (directly or through EFSF), Ireland is going to want the same deal. Portugal won't be far behind. And why stop at ECB and not go for PSI as well?

The last time the Fed tried to dump Maiden Lane 2 assets via a public auction in a BWIC manner, it nearly crashed the credit market. This time, the FRBNY, headed by one ex-Goldman Sachs alum Bill Dudley, has decided to go back to its shady, opaque ways, and transact in private, with no clear indication of the actual bidding process or transaction terms, and sell $6.2 billion in Maiden Lane 2 "assets" to, wait for it, Goldman Sachs, the same firm that would benefit in the first place if AIG's assets imploded (remember all those CDS it held on AIG which supposedly prevented it from losing money if AIG went bankrupt?). One wonders: does Goldman have a put option on the ML2 portfolio if the market experiences a sudden and totally impossible downtick some day? But all is well - we have assurance from the Fed that the sale happened in a "competitive process." Luckily, that takes care of any appearance of impropriety.

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Find out what the $3.6-trillion Blackrock sees in 2012

Instead of opting for a publicly transparent BWIC in the disposition of its Maiden Lane II assets, the Fed has once again gone opaque - long a critique of the Fed's practices which have required repeated FOIAs in the past to get some clarity on its secret bailouts and transactions - and proceeded with a private sale, without any clarity on the deal terms, in which it sold $7 billion in face amount of Maiden Lane II assets direct to Credit Suisse. The alternative of course would be the same snarling of the MBS and broadly fixed income market that we saw in June of last year. In other words, the Fed looked at the options: transparency and risk of grinding credit demand to a halt, or doing what it does best, which is to transact in the shadows, and avoid capital markets risk. It opted for the latter. As to why the Fed decided to go ahead with a deal shrouded in secrecy? "The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public." "I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, President of the New York Fed. Because if there is one thing Bill Dudley and the Fed knows is gauging what is in the best interest of the public... and the callorie content of the iPad of course.

• Hedge Funds Try to Profit From Greece as Banks Face Losses (Bloomberg)
• Spain Doubles Target in Debt Auction, Yields Down (Reuters)
• Italy 1-Year Debt Costs More Than Halve at Auction (Reuters)
• Obama to Propose Tax Breaks to Get Jobs (WSJ)
• GOP Seeks to Pass Keystone Pipeline Without Obama (Reuters)
• Debt Downgrades to Rise ‘Substantially’ in 2012, Moody’s Says (Bloomberg)
• Petroplus wins last-minute reprieve (FT)
• Geithner gets China snub on Iranian oil as Japan plans cut (Bloomberg)
• Fed officials split over easing as they prepare interest rate forecasts (Bloomberg)
• Draft eurozone treaty pleases UK (FT)
• Premier Wen looks at the big picture (China Daily)
• US Foreclosure Filings Hit 4-Year Low in 2011 (Reuters)

There's that name again: BlackRock, the world's largest asset manager, and the firm that was forced to deny last Wednesday it is in any trouble courtesy of accumulating unknown amounts of Italian bonds (how about a nice little Cusip list there Rick Reider?), just made the news following a report in Reuters that the firm anticipates massive haircuts in 3 of the 5 PIIGS. From Reuters: "Debt restructuring in Greece, Portugal and Ireland with write-downs for private creditors of 75 percent to 80 percent are needed to help stop Europe's debt crisis turning into a global meltdown, said BlackRock, one of the world's largest asset managers. "Governments are falling, bond yields are zig-zagging by whole percentage points and markets around the world are locking up: the euro zone turmoil risks turning into a global crisis," BlackRock said in a research note on Monday." So, let's see: Greece, Portugal and Ireland... But not Italy of course? The country that has the second largest amount of debt in Europe is somehow excluded from a very conflicted BlackRock's "objective" analysis. Why is that? "BlackRock also said the European Central Bank should buy more bonds and that policymakers should provide more details on the rescue fund and implement fiscal discipline without hurting growth, according to the note." Is BlackRock betting the farm that the ECB will bail it out? That didn't work too well for MF... Seriously, Rick, some CUSIP level breakdown of your Italian exposure would be terrific. Even if it is at the "net" level. We can wait. So can the market.

Earlier we asked some simple questions regarding BlackRock's sovereign debt exposure. Multi-trillion asset manager BlackRock responds:

• BLACKROCK RESPONDS TO QUESTIONS ON ITALIAN DEBT HOLDINGS
• BLACKROCK COMFORTABLE WITH INTERMEDIATE ITALIAN BONDS
• BLACKROCK ENCOURAGED POLICY MAKERS ADDRESSING CHALLENGES
• BLACKROCK CHIEF INVESTMENT OFFICER RIEDER COMMENTS IN A NOTE

Hopefully this response will satisfy the market and make it comfortable with BlackRock as an intermediate-term going concern. Then again clarifications such as this one by other Blackrock professionals, namely that the market is wrong, probably will not help:

• BLACKROCK'S ROVELLI: ITALY SPREADS DON'T REFLECT FUNDAMENTALS

So, what happens if the spreads do reflect fundamentals? Will Blackrock apply Mark to Market to its Italian holdings? And perhaps BLK can follow in Jefferies' footsteps and be so kind to break down it gross and net exposure for all to see? After all, there is nothing to hide among its "nominal exposures."

We repost this Monday article simply because it is now more topical than ever following today's 10-sigma cataclysm in Italian bonds, and again we ask: when will the market ask what Blackrock's gross or net Italian exposure is?

Why? Primarily because of this innocent statement by former R3 scion and former Lehmanite Rick Rieder, currently employed by the firm that ostensibly has more clout than even Goldman Sachs: BlackRock. From October 21 "BlackRock Inc. Chief Investment Officer Rick Rieder said the world’s biggest money manager remains a buyer of Italian government debt as European policy makers gather to address the region’s sovereign debt crisis. "Italy is attractive,” Rieder said during an interview on “InBusiness With Margaret Brennan” on Bloomberg Television. “As long as we are moving toward solutions, we think Italy is very reasonable at these levels. BlackRock, which manages about $3.66 trillion in assets, has also been buying debt issued by financial firms and high- yield bonds, Rieder said. As with the Italian bonds BlackRock has bought, the financial debt will benefit “as soon as you see stability,” Rieder said." Uh, Rick, you are marking to market right? Because Your P&L would be a 100% correlation to the following chart, which shows BTP prices since October 21.