Fail

Just your typical London protest. The Telegraph has recorded the attempted break and entry into a bank, which however proves too much for scattered "anarchists" courtesy of reinforced glass. The same can not be said for the Ritz hotel unfortunately.

Angela Merkel is carefully observing what can only be classified as a peaceful revolution in Ireland, where a stunning amount, over 70% by some estimates, of voters turned out to punish the ruling Fianna Fail party for its betrayal of the Irish people and for the latest (and what some say last) broad banker bailout. The Telegraph reports that "Exit polls and early tallies from Ireland's general election heralded political annihilation for Fianna Fail (FF), the party which has ruled Ireland for more than 60 years of the Irish Republic's eight decades of independence." Bloomberg adds:  "Counting will continue today to fill the 166-seat parliament, with an exit poll giving Fine Gael and the Labour Party a combined 57 percent of the vote. Support for Fianna Fail, which has ruled for the last 14 years, dropped to 15 percent from 42 percent in the 2007 election, the poll showed." In other words, the Irish people have voted for a direct confrontation with the EU, and indirectly, for austerity: "Fine Gael leader Enda Kenny, likely to become prime minister, wants to re-negotiate the interest rate on the emergency loans and speed up planned spending cuts to narrow the budget gap. Labour is pushing for more tax increases." And the reason Merkel is not going to sleep much tonight is that Germany is next. The country, where the CDU saw a comparable annihilation in a recent Hamburg vote, faces several regional elections as early as a few weeks from now, and the political scene is expected to change drastically, as a warning to anyone who feels like putting the banking kleptocracy (again) over the interests of the taxpaying majority. But what is most troublesome for all those who think that the EURUSD at 1.38 is remotely credible, is that the European Nash Equilibrium is now completely destroyed, and the game theory defections are about to start in earnest: "Declan Ganley, the Irish businessman who led the 2008 No vote to the Lisbon Treaty, said Ireland must "have the balls" to threaten debt default and withdrawal from the single currency. "We have a hostage, it is called the euro," he said. "The euro is insolvent. The only question is whether Ireland should be sacrificed to keep the Ponzi scheme going. We have to have a Plan B to the misnamed bailout, which is to go back to the Irish Punt." Funny  nobody even pretends that modern economics is even a remotely viable concept. Also, the Fed's plan of keeping the USD artificially low against most currencies is about to crash and burn mercilessly.

If you don't know the stories of LTCM, Enron, Tyco, Worldcom, Adelphia, Global Crossing, the S&L Crisis, how portfolio insurance contributed to the 1987 crash, or countless other investing lessons going back centuries, then you have no business investing your or anyone else's money. Now, it looks like China MediaExpress Holdings is about to become another one of these lessons.

1 minute 23 seconds into the clip below a solitary Egyptian protester stands up to a riot police water cannon in an attempted recreation of the Tiananmen Square tank hold up... And gets blasted squarely in the face. Cause that's how Egypt rolls. Plus, whatever happens in Egypt stays in Egypt right? In other news, the first casualty has been reported, after reports from Khaled Said claim Egyptian police in Suez opened fire live ammunition killing Mustafa Reda Mahmoud Abdelfattah, 20 years old.

How the heck is the SEC supposed to identify and prosecute financial wrongdoing when they don't even have the staff in-place to analyze all of that data?!?

We’re still not sure whether CNBC was making a joke or simply advertising its ignorance with a recent headline, “Accounting Tweak Could Save Fed from Losses,” This was a tweak about as subtle and ingenuous as Bernie Madoff’s balance sheet. What the central bank did was revise and advantage its own rules so that if some financial catastrophe were to inflict huge losses on the Federal Reserve System, the U.S. Treasury would take the hit, not the Fed itself.

The first casualty of the great Irish "pension funded banker bail out" is the man responsible, Brian Cowen, himself. The Taoiseach has stepped down as the Fianna Fáil party leader, but says he will continue to remain in office as Taoiseach. According to The Journal, "Speaking at a 2pm press conference, Cowen began his announcement in
Irish, saying he was proud to have been elected party leader in April
2008. He said at that time, he saw the role the party had in the
development and growth of the country, but now he believes Fianna Fáil’s
role in the public is in doubt. He said that he understood the membership of Fianna Fáil is concerned
about the party’s prospects on 11 March and he believes the focus
should be on the policies each party is offering." In other words: the Olli Rehn protectorate now is leaderless two months ahead of a key election that may well overturn the recent bailout of the country's senior debtholders. Which of course ties in rather well with our theory that in April and May there may well be an "unexpected event" to quote Fed's Plosser, which will serve as the springboard for the QE2+ extension. And since this year has been a complete rerun of 2010 so far, we expect the source of such market "contagion" to naturally be in Europe once again.

Someone forgot to change Johnny 5's fuses. The result: no mas liquidez.

The Art of Bankmail etc..

As a reminder today is the day when Europeans are supposed to withdraw money from their bank, not necessarily in a beneficial manner. And maybe the action is already having an impact with the Bank of Ireland apparently the first casualty. BBC reports: "Customers of one of Ireland's largest banks have been unable to access their cash accounts through ATMs or online. The Bank of Ireland said it became aware at 1000 GMT on
Tuesday that ATMs were not working and customers were unable to make
online transactions. A spokesperson said the fault lay with the bank's internal system and engineers were working to restore normal services." And by bank's internal system presumably one meant lack of money...Perhaps Eric Cantona will have the last laugh after all.

Can silver bullets stop a monster from terrorizing us further?

19 Oct 2010 13:40 BST *DJ Trichet: Warns Not All EU Govt Finance Statistics Are Reliable
19 Oct 2010 13:40 BST *DJ Trichet: Must Close Information Gaps In Global Statistics

What's that, Trichet? The EUR is too high you say? Must kill the EUR you say? It was all a lie you say?

Read you 5x5 partner.

The NBER tried to pull a fast one on America a few weeks back when out of the blue it concluded that the recession ended in June 2009. Alas, Google Trends shows otherwise. The attached chart demonstrates the average use of the terms "food stamps", "I need a job", "unemployment claim" and "government assistance" via google trends. Either Americans are really clueless and are completely unable to get the memo that it is now all clear to spend, spend, spend, or the BLS, as John Lohman has suggested, aka the US version of the Ministry of Truth has infiltrated the corpulent and proud NBER Ph.D.s flagbearers.

One of the more obvious side-effects of Ben Bernanke's simplistic QE 2 plan is to force retail investors out of their existing trajectory directed at fixed income products, and back into stocks, so that retail can once again occupy it long-coveted (by the bankers) position of buying Apple and Amazon at triple digit forward multiples. Unfortunately, as JPM's Nikolaos Panigirtzoglou explains, all that QE's lowering of bond yields will do (in addition to sending soybeans limit up every day for the balance of 2010, despite what others claim is merely a hallucination) is "reinforcing retail investors' flows into bonds." The biggest problem with the secular shift away from equities, and into bonds, is that the very mindset that the banking cartel loved for so long: retail buying stocks high, buying even more higher, has now translated completely into bonds. As JPM says: "The more bonds rally, the stronger the buying of bond funds by retail investors." In addition to the daily flash crashes in now countless names, surely this phenomenon explains why retail investors have taken money out of stocks for 23 weeks now (leaving many mutual funds running on fumes and a prayer) and put it into the best performing asset category (after precious metals of course). And QE2 will cement not only retail, but institutional demand for bonds as well: "lower bond yields are widening the deficits of pension funds in both the US and Europe inducing them to move further into fixed income to reduce the mismatch between assets and liabilities... This raises the risk that these institutional investors will move more towards corporate bonds in search for yield. So a potential aggressive move away form government into corporate bonds could exert strong downward pressure on credit spreads." Suddenly the world will realize that the average duration on rate-based exposure is 10+ (especially if Mexico issues a few more 100 Year bonds). And when rates creep up even a tiny little bit, it is game over as the next negative convexity event will be the (credit) market itself. Which is why we have long said that the black swan is not a failed auction, but the merest hint that rates are finally starting to creep up.

Few people in the world know more about oil drilling disasters than Dr. Robert Bea. We would be wise to listen to what he has to say ...