Regional Banks

• Google's new CFO to make $70 million (WSJ)
• Senate passes Republican budget with deep safety net cuts (Reuters)
• With Yemen strikes, Saudis show growing independence from U.S. (Reuters)
• Banks Slash Dividends as Loans Sour From Beijing To Pearl River (BBG)
• North American Railroads Caught by Speed of Crude-Oil Collapse (BBG)
• Japan’s Zero Inflation a Setback for Abenomics (WSJ)
• Cooperman Says U.S. Seeks Information About Omega Trades (BBG)

Recent market actions, the rapid decline in interest rates, earnings deterioration and plunging energy prices have made many less comfortable being long the market. While the "buy and hold" crowd suggests this is all rubbish, it should be worth remembering that every single one of that group never saw the corrections in 2000 or 2008 until it was far too late. Their only excuse was "no one could have seen it coming." The truth is that many did see what was coming. Paying attention to what is happening at the margin leads to an understanding of when the "tides" begin to shift.

• ECB to decide on bond-buying plan to revive euro zone (Reuters)
• Draghi Is Pushing Boundaries of Euro Region with QE Program (BBG)
• Investors Wonder Whether ECB Will Do Enough (WSJ)
• Treasuries Drop With Bunds Before ECB; U.S. Futures Rise (BBG)
• European shares hit seven-year high (Reuters)
• At least eight civilians killed in shelling of Ukrainian trolleybus (Reuters), both sides blame each other
• OPEC Will Blink First in Battle With Shale Drillers, Poll Shows (BBG)
• China Injects $8 Billion Into Banking System (WSJ)
• New York says Barclays not cooperating in 'dark pool' probe (Reuters)

If you only paid attention to the mainstream media, you’d be forgiven for thinking that the US is going to get away from the collapse in oil prices scot free. It’s a crying shame. The US has come so close to becoming energy independent. But it’s going to have to get its head around the idea that it could become a big oil importer again. In the end, the US energy boom may add up to nothing more than an illusion dependent upon the artificially cheap debt environment created by the Federal Reserve’s easy money policy.

While most Americans are busy Christmas shopping and making preparations for trips to see family, Congress remains hard at work doing what it does best. Giving gifts to Wall Street and trampling on citizens’ civil liberties.

The oil and gas boom in the United States was made possible by the extensive credit afforded to drillers. Not only has financing come from company shareholders and traditional banks, but hundreds of billions of dollars have also come from junk-bond investors looking for high returns. Junk-bond debt in energy has reached $210 billion, which is about 16 percent of the $1.3 trillion junk-bond market. That is a dramatic rise from just 4 percent that energy debt represented 10 years ago. junk bonds pay high yields because they are high risk, and with oil prices dipping below $70 per barrel, companies that offered junk bonds may not have the revenue to pay back bond holders, potentially leading to steep losses in the coming weeks and months. The situation will compound itself if oil prices stay low.

Not everything is as it seems. While the PBOC may be taking a stand on monetarism and its character, it has been very curious that the yuan has not fully participated in the dollar turmoil marking so many other “dollar” dependent nations. While the yuan’s appreciation trend may have been altered, that has not led again to the kind of disorder that marked the currency earlier in the year. Maybe that is due, at least in part, to these expectations that the PBOC will eventually relent on its new approach, but we also think that the PBOC is at least looking the other way on some of the “old tricks” that supported the Chinese version of the dollar short.

We suspect the market will be disappointed by this morning's headlines from China. Chinese rate markets are implying a RRR cut is coming soon (as swap rates drop below deposit rates - previously signaled 2 RRR cuts) but the PBOC announced this morning a muich more focused injection of cash to 20 of the nations' largest banks. RRR cuts, are (theoretically) considerably more broadly stimulative to lending than a $32.8 billion cash injection to banks - which are struggling to lend as demand for loans (given high costs of debt for the firms that need the money the most) is weak. One can only imagine the holes in bank balance sheets that exist if the PBOC is forced to do this. Simply put, no matter how much hope there is, as we noted previously, the PBOC will not be providing broad stimulus.

The best performer among the top-five US banks is U.S. Bancorp (NYSE:USB) and by a wide margin... 

• Ferguson at Turning Point After Night of Relative Calm (BBG)
• Gaza war rages on, Hamas says Israel tried to kill its military chief (Reuters)
• Surge in Putin Patriotism Masks Pain of Sanctions (BBG)
• Bank of England splits over rate hike for first time in 3 years (Reuters)
• Putin Meeting Leaves Kiev With Tough Choices (WSJ)
• European Gas Reverses Biggest Drop Since 2009 on Ukraine (BBG)
• "Isolation"  Mongolia Seeks Economic Lifeline With Pivot to China, Russia (BBG)
• Uber Picks David Plouffe to Wage Regulatory Fight (NYT)
• China Levies Record Antitrust Fine on Japanese Firms (BBG)

• EU finalises Russian sanctions as BP warns of impact on business (FT)
• Geopolitical Risk Rises for Global Investors (BBG)
• Jaded Argentines brace for looming debt default (Reuters)
• In Argentina, Mix of Money and Politics Stirs Intrigue Around Kirchner (WSJ)
• Mom ‘Trusting God’ for Ebola-Infected U.S. Doctor’s Life (BBG)
• Thanks NSA: Tech Companies Reel as NSA's Spying Tarnishes Reputations (BBG)
• Goldman unit eyes foray into China amid metals financing scandal (Reuters)
• Cash out time: London’s Gherkin Tower Offered for Sale by Its Lenders (BBG)
• Apenomics strikes again: McDonald’s Japan axes profit guidance amid food safety scandal (FT)
• Do you see what happens Larry when you are the only USDJPY bid? Nomura Profit Falls More Than Estimated on Broking Slump (BBG)

• Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst (BBG)
• But how will math PhDs determine "fair value" - Wall Street Techs Take Secrets to Next Job at Their Peril (BBG)
• U.S., EU Escalate Russia Sanctions as Putin Holds Firm (Bloomberg)
• Australia Becomes First Developed Nation to Repeal Carbon Tax (WSJ)
• Gaza humanitarian truce goes into force, hours after tunnel clash (Reuters)
• Barclays, Deutsche Bank Said to Face U.S. Senate Hearing (BBG)
• ECB Asset Buying Far Off and May Not Come, Hansson Says (BBG)
• Time Warner win would make Murdoch U.S. media king (Reuters)
• Costly Vertex Drug Is Denied, and Medicaid Patients Sue (WSJ)
• China Rallying for All Wrong Reasons to Top-Rated Analyst (BBG)
• GM recalls some cars with problematic switches; judges others safe (Reuters)

Now that the World Cup is over, and following last week's global macro reporting slumber (aside for the Portuguese risk flaring episode of course), things pick up quite a bit in the coming week. Here are the key events.

Well, if you take the US Supreme Court and representatives of the Federal Reserve System at their own words, the case is pretty clear: the member banks of the Federal Reserve System are private corporations / banks.

Straightforward dispassionate overview of the investment climate