Raiffeisen Bank has snuck a gloomy prediction for the Romanian economy in the prospectus of the MedLife IPO, which it intermediates. "Most analysts claim that Romania needs a new stand-by agreement with the IMF", the MedLife prospectus , published yesterday in order to inform the investors interested in the Romanian stock market and in the MedLife shares in particular. The announcement is mind-boggling, especially as politicians and government members assure us that we are going to have economic growth, higher wages and lower taxes. Furthermore, prime-minister Dacian Cioloş has publicly announced that he would challenge all populist laws with the Constitutional Court. "Raiffeisen Bank" has dropped the aforementioned "bomb" in the Medlife IPO, five days ahead of the parliamentary elections. Except it hasn't taken responsibility for it directly, instead alleging this idea is the result of consensus from "most analysts", without naming them. It is not out of the question that "Raiffeisen Bank" just wanted to make noise and draw attention from investors, as the Romanian stock market has failed to become attractive, despite the projects for expansion conducted by the Bucharest Stock Exchange (the Project to remove the barriers to the entry on the stock market) and by the Financial Oversight Authority (the STEAM project, which has as its goal the move up to the emerging market status) and having brought in Pole Ludwik Sobolewski as CEO. Despite all these efforts, the BSE daily turnover only occasionally passes 7 million Euros a day. "Raiffeisen Bank" has stood out lately, precisely by the fact that it has threatened the Romanian government with a lawsuit in the International Court of Arbitrage, as well as following the ruling of the Supreme Council of Magistrates (CSM), which accused the bank of trying to intervene in the ruling rendering process in relation to the laws concerning the banking sector. The bank later changed its tune and sponsored an event of the Romanian government, which was attended by German finance minister Wolfgang Schauble.

"We are open to a whole menu of monetary policy instruments," Mr Draghi said, noting that further interest rate cuts had been discussed. "The discussion was wide open."" Sounds like he has Yellen's Disease, but printing money is always the solution for the left to fix fiscal abnormalities... “The ECB will almost certainly be delivering an early Christmas present this year,” said Nick Kounis, the head of markets and macro research at investment bank ABN Amro. Draghi is an enthusiastic proponent of “forward guidance”, the strategy of sending strong verbal policy signals in order to shift financial markets – in this case, driving down the euro.  His dramatic pledge in the summer of 2012 – in the middle of the Greek debt crisis – that the ECB would do “whatever it takes” to save the single currency helped to reassure panic-stricken investors. Jeremy Cook, the chief economist of international payments company World First, said ECB policymakers were likely to have become increasingly concerned in recent weeks about the strengthening of the currency, which makes eurozone goods less competitive on international markets. “Draghi and the executive council couldn’t have been clearer that additional policy easing was coming if they’d had the words ‘sell the euro’ tattooed on their faces,” he said. Euro area GDP rose 0.4% in the second quarter of 2015, a slight slowdown from 0.5% growth in the previous quarter. We must all call attention to the salient fact that the EU, US, UK and Japan are riding along using debt to sustain their economies. QE and other nostrums directly related to money printing thus monetizing the debt must be clearly understood...A number of reasons they do this:

1) kicking the can in the hope some visionary guides us to economic enlightenment before the global economy implodes in it's entirety

2) this is simply a response to the US' decision not to raise rates as well as the Yuan's devaluation a number of months ago. Given the Euro depends on exports, a weaker Euro will prop up the currency. Make no mistake, we're at war, a currency war

3) this is also being pushed as a solution by those who seek to gain the most, ie banks and investment funds. Governments in the aforementioned states are too large and expensive, too inefficient, too prone to spend without consideration of how the debt is affected by the deficits and too prone to call for more taxation in every case where they run short of money.So now it is completely safe to say that the relationship between stocks and underlying fundamentals now NO LONGER EXISTS.

No if's, no maybe's, just absolute fact. Stock valuations are entire fiction. The entire purpose of the Fed / ECB / BoE/ BoJ is to make something levitate. What they cannot do is make anyone with a brain believe a word of it. It is almost game over, pension fund over, banking system over, savings over.  Quantitative easing is not the answer, reality is the answer. Let's just accept that our standard of living is going to fall. QE will delay it and make matters worse, facing reality on the other hand will ensure that the fall in our standard of living will happen now, but won't be as painful in the future when compared to the QE option. The reality is - Too much debt

One of the three following options are open to the central planners.

1. QE for as long as possible - outcome - Dreadful economic future.

2. Attempt to reduce the deficit to zero by the end of this Parliament. - outcome - significant reduction of our standard of living and civil unrest.

3. Attempt to reduce the deficit over a long period of time, bearing in mind the paradox of thrift will make this a slow and relatively painful process, but from my point of view, this is the best option open to us.  A tipping point passed many years ago, we needed brave politicians dealing with the debt issue. However. I can understand why politicians did not grasp the nettle, a fickle public would not vote for them, after all, who wants harsh reality.

Russia - "Experts estimate that some 400,000 to 500,000 citizens could apply for bankruptcy,".  So Putin is like Great Britain in the Suez Crisis, his economy is falling and when more sanctions hit he will have to make a choice. Plus new travel bans and his financial empire (purchased by Russian Taxpayers) exposed. The Oil prices is falling and set to remain low. His population is falling and people leaving Russian for their Human Rights. The cost of running a foreign war will hit the Soviet budget.  Russia like Britain is no longer an Empire, get over it Mr. Putin. Russia has previously allowed companies to declare themselves bankrupt but not individuals.

Russian banks encouraged people to take out loans and mortgages during the boom years of high oil prices and many are now struggling to make the repayments, particularly those who took out loans denominated in foreign currency before the ruble plummeted last year on the back of low oil prices and Western sanctions over the Ukraine crisis. Some experts have questioned how many will actually be able to do so, due to the relatively high cost of the procedure. Banks, however, fear that a large number of lenders will use the law to avoid paying back loans, with the number of delayed payments already soaring over the past year. "I receive many such letters [on the issue] and behind each is a personal tragedy," said the deputy president of Russia's central bank, Vasily Pozdyshev. "Experts estimate that some 400,000 to 500,000 citizens could apply for bankruptcy," Mr Pozdyshev said. "The law is entering force at an inconvenient moment," wrote Vedomosti business daily. "Debts on consumer loans today total six trillion rubles, while mortgage debts total three trillion rubles."  "Formally, just under 600,000 Russians fall under the terms of the law."

“The real pr0blem Despite the incessant jawboning to the contrary by Fed and central bank mouthpieces - who under an honest system would be charged with currency manipulation - there is zero possibility of a rate rise. You can't taper a Ponzi scheme, and central bankers are not about to give up their most effective tools for asset-stripping the 99% and transferring their wealth to the .1% in the financial sector. The City of London and Wall Street must keep luring in new suckers and new money, and since the supply of Greater Fools is running out and the retail investor herd is starting to get spooked, the Fed has no option but to maintain ZIRP. Moreover, it will need to print new trillions in QE4/helicopter money and shower them on its TBTF banker cohorts to keep the Ponzi levitated long enough to lure in the last of the retail bag-holders before the pump & dump. So on Thursday Yellen will announce continued ZIRP and foreshadow a new round of "stimulus." No other outcome is possible. The con game is becoming more brazen even as people are finally waking up and rejecting the crony capitalist status quo, as seen by the meteoric rise of anti-establishment political contenders in the US and UK. problem isn’t what the Fed may do, but the ultimately unavoidable consequences of what the Fed has already done. The cost of reckless Fed-induced yield seeking will likely be felt first in the financial markets as  previous paper gains evaporate, while defaults on excessive low-quality covenant-lite credit will emerge over the course of the economic cycle, and the  impact of investment will be to limit productivity and economic growth over the longer run. This is all rather inevitable except in the eyes of those who haven’t watched and memorized a dozen adaptations of the same movie…my view is that activist Fed policy is both ineffective and reckless (and the historical data bears this out), and that the Federal Reserve has pushed the financial markets to a precipice from which no gentle retreat is ultimately likely. Similar precipices, such as 1929 and 2000, and even lesser precipices like 1906, 1937, 1973 and 2007 have always had unfortunate endings... A quarter-point hike will not cause anything. The causes are already baked in the cake. A rate hike may
be a trigger with respect to timing, but that’s all. History suggests we should place our attention on valuations and market internals in any event.”

The slowdown in China sent shockwaves on the commodity markets. The Bloomberg Global Commodity Index, which measures the evolution of 22 commodities, reached levels that have never been reached since the beginning of this century. The price of oil is the best barometer of the growth of the global economy, as this commodity fuels almost every industry and manufacturing sector of the global markets. The price of oil has dropped by more than half in a year, now getting closer to 40 dollars / barrel on the US market.   Also, the price of iron ore, an essential commodity for the Chinese foundries and the construction sector, has reached 56 dollars a ton, from 140 dollars a ton in January 2014.   The crisis of investing in resources - In the context of the decline of the price of oil and metals, many mining projects which have major loans have been taken out for are now in the red, and investors may never get profits from them...the most affected are the American exploitations of shale gas.  As the needs for refinancing in the sector are increasing, in the future there is the risk of quick contagion.  The domino effect - The pillars of the world's economy are beginning to fall. China is weakening, and the emerging markets that have consumed such huge volumes of commodities are being affected by the weakening of currencies. Brazil, Russia, India, China and South Africa, the BRICS which seemed that they were going to uphold the growth of the world's economy, are now in "disarray".  Central banks are quickly losing control.  The stock market in China has already crashed, and a real disaster was avoided only through the government's intervention, which bought billions of shares. In Greece, the markets are having problems, amid the turbulences in the country. In the currency sector, investors have flocked to the Swiss franc in the beginning of the year, but the quantitative easing of 1,100 billion Euros announced by the Central Bank (ECB) has devalued the Euro, causing the Swiss National Bank to drop peg it had imposed four years ago on the EUR/CHF exchange rate.

Searching for support and "handouts" (from the US) as usual ...

German Chancellor (Merkel) arrives in Washington late  this sunday for upcoming  meetings with President Obama that start Monday..."We think it's wise to have an (...) accord tied to achievements and bench marks,"  = this is a funny statement though.  Anyway,  here's what they will talk about ( this is the "public agenda" - background talks about further economic support from the FED not made public by neither of the participants - Germany needs help for sure):

 

UKRAINE

"One of the most pressing issues is the crisis in Ukraine," said Peter Wittig, Germany's ambassador to Washington. "All of us are concerned this is a spiraling military conflict. We want to explore the diplomatic options."  Merkel's visit comes as Obama considers providing modern weapons to Ukraine, which has been losing territory in the country's eastern regions to pro-Russian separatists armed with tanks and personnel carriers sporting Russia's most advanced armor.

Ukrainian President Petro Poroshenko on Saturday asked Western leaders at the Munich Security Conference to push for a quick cease-fire and defensive weapons capable of countering the separatists' armored assaults... Merkel, French President Francois Hollande and Russian President Vladimir Putin agreed Friday during a meeting in Moscow to draft a peace plan for Ukraine based on ideas proposed by Putin and Poroshenko, but previous agreements have fallen apart even as the conflict has resulted in more than 5,300 dead in Ukraine.  Merkel has opposed sending weapons to Ukraine. On Saturday, she said she "cannot imagine any situation in which improved equipment for the Ukrainian army leads to President Putin being so impressed that he believes he will lose militarily," according to the Associated Press.  Wittig, who briefed reporters in Washington in advance of Merkel's visit, said that if the West delivered weapons to Ukraine, "Moscow would probably reciprocate" by providing separatists with more weapons.  "How far are we willing to escalate that military spiral? I'm not sure that we are," Wittig said.

TRADE

Finally, the two leaders will discuss a thorny trade pact, the Transatlantic Trade and Investment Partnership (TTIP), which would unite the economies of the USA and the 28-nations of the European Union. The deal would eliminate most trade barriers for many products and financial services.

Backers say it could produce free-market prosperity, but the negotiations have also been controversial because the pact would increase competition. Greece's new leftist ruling party, Syriza, has said it opposes the plan.

THE ISLAMIC "STATE"

Obama and Merkel will also discuss a training center Germany is setting up in Erbil, in Kurdish-controlled Iraq, to train and provide arms to Kurdish Peshmerga forces fighting against the Islamic State, which has seized territory in Iraq and Syria. Merkel will also discuss German interest in pursuing other tracks of destabilizing the militant group, including counter-financing and supporting messages that de-legitimize the group's claims that its actions, including the murder by fire last month of a captured Jordanian pilot, are backed by Muslim religious ideals.
Source - USA Today

Greece’s finance minister, Gikas Hardouvelis, argued in talks with the IMF boss, Christine Lagarde, that Athens can do without further loans from the Washington-based lender of last resort. Emergency bailout funds have propped up the Greek economy since it came close to crashing on a mountain of deficit and debt in 2010.

“Not only do we not need a new memorandum [loan agreement],” said prime minister Antonis Samaras, addressing parliament hours before his government survived a crucial vote of confidence early on Saturday. “We don’t need the rest of the money that from the start of next year we were on course to get from the current memorandum. We can leave it one and a half years earlier … that is our goal.”

Funding from the IMF had been due to expire in March 2016, while funds from the eurozone end this year. At €240bn (£188bn), the lifeline was the largest rescue programme in global financial history and was aimed at preventing the debt crisis that affected Athens from spreading to the rest of the eurozone.

Samaras denies that Greece wants an acrimonious break from the IMF. The organisation, perhaps more than the EU, has insisted on tough reforms and austerity measures in return for the rescue funds. These have exacerbated a six-year recession, the worst on record, left a quarter of the workforce unemployed, and seen support for Samaras’s fragile coalition plummet.

Hardouvelis, who met Lagarde with his predecessor, the governor of the Bank of Greece, Yannis Stournaras, is thought to have presented a plan detailing the country’s ability to cover its financing needs from bond markets. But the IMF chief has already signalled that she does not share such confidence. Although the IMF is also keen to disengage from the programme – and is under pressure from member states to focus on countries in the developing world – Greece is faced with a financing gap of about €15bn next year.

Today is the anniversary of German reunification in 1990. Merkel's speech, on Austrian TV, contains the following (my translate). "I know I repeat and repeat this issue and many thing it is insignificant, but I will keep repeating it because only by doing what we do are we showing how to resolve our European problems. If we do not continue with our method we, here in Europe, will soon not be taken very seriously. We Europeans must stick to the principles and treaties we have founded and put in place for ourselves, including the Growth and Stability Pact."

I think those remarks, the frankest I've heard from Angie, are directed at France, the other throne in the dual monarchy, and to some growing extent Italy. Interesting times ahead, especially as the ECB is empty and we are going to discover quite a few banks are void too, and not just in the GIPIS group.

LATE EDIT - I found this too!

French 2015 budget statement -“No further effort will be demanded of the French, because the government – while taking the fiscal responsibility needed to put the country on the right track – rejects austerity.” This was yesterday...."European companies continued to struggle this September, as continued weakness in France took a turn for the worse.

Key gauges of private sector strength slipped, failing to meet the expectations of analysts. The composite purchasing managers’ index (PMI) reading for the euro area as a whole dropped to 52, from 52.5 in August.  While above 50, and thus implying private sector growth across the currency bloc on average, the data suggest that the pace of growth fell.  A consensus poll of economy watchers suggested that the headline reading would only deteriorate to 52.3 in September. 

"The PMI suggests the eurozone economy remained stuck in a rut in the third quarter", said Chris Williamson, of Markit, who compiled the report. "

Ukraine has launched an "anti-terrorist" operation against pro-Russian separatists occupying government buildings in many of its eastern cities

Police arrested 70 pro-Russian demonstrators in Kharkiv on Tuesday, as protesters in two other cities held similar standoffs. Ukrainian authorities gave few details of the "operation that cleared the building in Kharkiv but said two police had been wounded by a grenade.

Ukrainian special forces in combat gear, helmets and balaclavas and carrying machine guns stood guard outside the building early on Tuesday. A partly destroyed sign near the main door read: "Avakov – to jail", a reference to the Ukrainian interior minister, Arsen Avakov.

Avakov made mention of the operation to clear the buildings on his Facebook page: "An anti-terrorist operation has been launched. The city center is blocked along with metro stations. Do not worry. Once we finish, we will open them again."

The Interfax-Ukraine news agency quoted the interior ministry saying those detained were suspected of "illegal activity related to separatism, the organization of mass disorder, damage to human health" and breaking other laws.

Ukraine's acting president, Oleksander Turchinov, made a televised address to the nation in which he accused Moscow of orchestrating the protests in an attempt to repeat "the Crimea scenario".

Russia has denied Ukrainian charges of involvement but warned Kiev against any use of force against Russian-speakers. On Tuesday, Russia's foreign ministry called on Kiev to stop massing military forces it said were tasked with suppressing anti-government protests in the south-east of the country.

"We call for an immediate halt to military preparations which could lead to an outbreak of civil war," the ministry said in a statement.

The pro-Russian protesters still barricaded inside official buildings in Luhansk and Donetsk demanded that referendums be held on whether to join Russia, similar to the one that preceded Moscow's annexation of Crimea.

The troika of lenders - the EU, European Central Bank and IMF - helped four countries through the financial crisis but had a flawed structure and a negative impact on employment, according to the European Parliament. After a vote on two resolutions on the troika, a European Parliament statement said: [The troika] helped four EU countries through the crisis and prevented it from getting worse. But its flawed structure and working methods hindered national “ownership” and compromised transparency and accountability, says a resolution on the EP inquiry findings. A second resolution deplores the widespread negative impacts that Troika-inspired reforms had on employment and advocates revising the measures put in place. Both resolutions were voted on Thursday. The one on the Economic and Monetary Affairs Committee’s inquiry into the workings of the Troika, drafted by Othmar Karas (EPP, AT) and Liem Hoang-Ngoc (S&D, FR), was approved by 448 votes to 140, with 27 abstentions. The Employment and Social Affairs Committee’s resolution, authored by Alejandro Cercas (S&D, ES) was approved by 408 votes to 135, with 63 abstentions. The Troika system is... criticised for taking a “one-size fits all” approach from which it was often reluctant to depart. EU finance ministers, particularly in the Eurogroup, are blamed for failing to give clear and consistent political pointers to the Commission and for failing to shoulder their share of responsibility in their capacity as final decision-taker.  As a first step, there should be clear, transparent and binding rules of procedure for the interaction of the Troika institutions which regulate the allocation of tasks between them. An improved communication strategy is also an “utmost priority”, says the Economic Affairs Committee text. For the medium term, the inquiry resolution recommends a radical overhaul of the troika, in which IMF involvement would become “optional”, the ECB would be present only as a “silent observer”, and the European Commission’s role would be taken over by a “European Monetary Fund” (EMF). The second resolution calls on the Commission and the Council to give the same attention to social imbalances as to macroeconomic ones. Member states and the EU should put in place a job recovery plan once the worst of the financial crisis has passed, taking particular account of the need to create favourable conditions for small firms, for instance by repairing the credit system.

When German Finance Minister Wolfgang Schäuble, a trained lawyer, announced an agreement on Wednesday night in Brussels on the long negotiated EU banking union, observers might have been left thinking that he is precisely this type of lawyer.

On paper, Schäuble and his negotiators are right about very many points. They succeeded in ensuring that in 2016, the Single Resolution Mechanism will go into effect alongside the European Union banking supervisory authority. The provision will mean that failing banks inside the euro zone can be liquidated in the future without requiring German taxpayers to cover the costs of mountains of debt built up by Italian or Spanish institutes.

They also backed the European Commission, which wanted to become the top decision-maker when it comes to liquidating banks. The Commission will now be allowed to make formal decisions, but only in close coordination with national ministers from the member states.

But it goes even farther. Negotiators from Berlin have also created an intergovernmental treaty, to be negotiated by the start of 2014, that they believe will protect Germany from any challenges at its Constitutional Court that might arise out of the banking union.

They also established a very strict "liability cascade" that will require bank shareholders, bond holders and depositors with assets of over €100,000 ($137,000) to cover the costs of a bank's liquidation before any other aid kicks in. The banks are also required to pay around €55 billion into an emergency fund over the next 10 years. Until that fund has been filled, in addition to national safeguards, the permanent euro bailout fund, the European Stability Mechanism, will also be available for aid. However, any funds would have to be borrowed by a national government on behalf of banks, and that country would also be liable for the loan. This provision is expected to be in place at least until 2026.

The government in Berlin put a strong emphasis on preventing the ESM, with its billions in funding, from being used to recapitalize debt-ridden European banks. Schäuble was alone with this position during negotiations, completely isolating himself from the other 16 finance ministers from euro-zone countries. Brussels insiders report that it was "extremely unusual because normally at least a few countries share Germany's position."

WSJ - Ireland's economy slid into crisis in 2008 when the bursting of its property bubble wrecked the country's banks and brought the euro-zone member close to bankruptcy. In late 2010, the government secured €67.5 billion ($91.54 billion) in loans from the EU and IMF, the last of which will be disbursed over the next two months. From next year, the government will have to finance itself exclusively through the bond markets. Finance Minister Michael Noonan told lawmakers that the budget will introduce up to €2.5 billion in new tax increases and spending cuts, saying that Ireland will better the deficit target for 2014 that was set under its bailout agreement. The proposed cuts are the smallest since 2008. Under the budget, the deficit is planned to fall to 4.8% of gross domestic product in 2014 from 7.3% this year. The government is committed to reducing its deficit to below 3% of GDP in 2015. Required to keep cutting its deficit over the next two years, Ireland's government will then be obliged to endure a tight regime of fiscal oversight for many more years to cut its towering national debt.  Despite those constraints, Mr. Noonan told lawmakers that in ending its dependence on EU and IMF loans, the nation would regain control over its own destiny.

"We have a fair wind at our backs to achieve our objectives and to restore our sovereignty," he said.

After the long years of sacrifice, the government is seeking to shore up faltering public support for austerity, describing its 2014 budget as one of the last of the big painful efforts to move the country out of crisis and into recovery. The leaders of the two parties in the coalition government have said there is now clear evidence that the country is emerging from its "national emergency."

There is much at stake for the euro zone, which has also provided bailouts to Greece, Portugal, Cyprus and Spain. A successful return to the bond markets for Ireland would offer euro-zone policy makers a rare opportunity to claim a success for their much-criticized strategy for confronting the currency area's fiscal and banking crisis, one that has relied heavily on austerity.

Mr. Noonan said that for the first time since the onset of the financial crisis, the government will post a primary budget surplus next year. That would mean that excluding interest payments, its tax revenues would exceed its spending, helping to cap its huge debts.

Tuesday's budget means that since 2008, Ireland has detailed cuts to its budget totaling a cumulative €30 billion, representing about 18.5% of the country's annual economic output and making it one of the largest austerity programs undertaken anywhere in the aftermath of the financial crisis.

The EU and IMF and other institutions, such as the Irish Fiscal Advisory Council and the Irish central bank, had urged the government to go further and meet in full a proposed €3.1 billion in deficit cuts, to safeguard its finances. But the coalition projects that it will still meet its bailout budget targets in 2014 and 2015, and help promote jobs.

THE "ISLANDERS" - The Prime Minister was warned by Jose Manuel Barroso that his attempts to negotiate a new relationship with the EU would be vetoed by other member states.

As a war of words raged, Downing Street insisted the Prime Minister will go ahead with his plans to get a better deal.

A Number 10 spokesman said: “As the Prime Minister made clear in January, he will negotiate a new deal in the EU and then put the choice of staying in or leaving the EU to the British people in a referendum by the end of 2017.”

Mr Barroso, an unelected Portuguese politician who comes to the end of his presidency next year, had dismissed claims by Mr Cameron that there is wider European support for his agenda to “repatriate” powers on social, employment and environmental legislation back to Westminster....

He said in an interview “there will be others, many, who oppose” Mr Cameron’s call for treaty changes which must be agreed unanimously by all 28 member states.

He said: “Britain wants to again consider the option of opting out. Fine, let’s discuss it. What is difficult, or even impossible, is if we go for the exercise of repatriation of competences because that means revising the treaties and revision means unanimity. I don’t believe it will work.”

He added: “I am for a stronger EU not a weaker EU.”

The row will add to calls for Britain to quit the EU, as championed by the Daily Express.

Last night Ukip leader Nigel Farage said: “Barroso describes Cameron’s plans as ‘doomed to failure’. So they are. It is about time the pro- European establishment of this country was honest with us. There will be no change in our relationship with the EU before, during or after Cameron’s futile renegotiations.

“The EU knows this, Cameron knows this and the people of this country need to know this, too. This country needs a choice now.”

Bank of America’s monthly survey of investors showed a dramatic rise in confidence in August, with a net 72pc expecting growth to accelerate over the next year. It is the highest in reading since 2009. Almost everybody expects bond yields to rise as deflation fears evaporate, with just 3pc still worried about the risk of an economic relapse. Managers have slashed their bond allocation to a 28-month low.

The survey is watched by veterans as a "contrarian indicator", tracking herd mentality at key moments. Michael Hartnett, the bank’s investment strategist, advised clients to take the opposite trade and buy US Treasury bonds.

The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis. Since the first of the year, retail investors (unsophisticated sheep) have shoveled a bit south of 100B into stock mutual funds. You can always rely on the middle class investor to identify the proper time to exit equities.

This new stampede of sheep is contrasted with the sheep pulling out a little south of 200B in first six months of last year.

Sell Low, Buy High - the operative slogan of those late to party, drinking the dregs from the punch bowl. A likely apocryphal story about Bernard Baruch, a legendary Wall Street trader, expressed that he knew that it was time to get out of the market when his shoe shine boy offered him hot stock tips.

Professional investors and hedge fund managers are holding unprecedented levels of cash (30-40%) and are awaiting the sheep's perfect timing of the market top. They know better than to try and game central banks. There is no underlying strength in just about any economy - just central bank roulette.

• You may ask yourself, how do I work this?
• You may ask yourself, where is that large automobile?
• You may tell yourself, this is not my beautiful house
• You may tell yourself, this is not my beautiful wife
•  
• Letting the days go by, let the water hold me down
• Letting the days go by, water flowing underground
• Into the blue again, after the money's gone
• Once in a lifetime, water flowing underground
•  
• Same as it ever was, same as it ever was,
• same as it ever was, same as it ever was

Total eurozone debt as a proportion of annual gross domestic product (GDP) stood at a record €8.75 trillion (£7.5 trillion) in the three months to the end of March, or 92.2pc of GDP, up from €8.6 trillion in the previous quarter and €8.34 trillion the year before.

Bailed-out nations Greece, Portugal and Ireland saw some of the biggest rises, even after implementing austerity measures imposed by Brussels in an attempt to balance the books.

Greece's debt rose to 160.5pc of GDP from 156.9pc in the first quarter compared with the final three months of 2012, while Portugal's debt burden rose to 127.2pc from 123.8pc. Germany and Estonia were the only countries to reduce their public debt.

Meanwhile, Portuguese prime minister Pedro Passos Coelho ruled out a snap election and confirmed he would make junior coalition party leader Paulo Portas his deputy, sending the country's benchmark borrowing costs down 0.5 percentage points, to 6.31pc. Total eurozone debt as a proportion of annual gross domestic product (GDP) stood at a record €8.75 trillion (£7.5 trillion) in the three months to the end of March, or 92.2pc of GDP, up from €8.6 trillion in the previous quarter and €8.34 trillion the year before.

Bailed-out nations Greece, Portugal and Ireland saw some of the biggest rises, even after implementing austerity measures imposed by Brussels in an attempt to balance the books.

Greece's debt rose to 160.5pc of GDP from 156.9pc in the first quarter compared with the final three months of 2012, while Portugal's debt burden rose to 127.2pc from 123.8pc. Germany and Estonia were the only countries to reduce their public debt.

Meanwhile, Portuguese prime minister Pedro Passos Coelho ruled out a snap election and confirmed he would make junior coalition party leader Paulo Portas his deputy, sending the country's benchmark borrowing costs down 0.5 percentage points, to 6.31pc.

Initially the €Z and EU were the major players when Greek problems started in 2010.  DSK offered quite meaningful assistance in terms of liquidity from what he now called BRICS whom he had previously helped progress in the global economy. DSK had also indicated that a larger BRIC role in IMF should be put in place such that European directorship should not be automatic within 10 years. DSK even promised to renegotiate the World Bank = USA; IMF = Europe convention as best he could and to ensure that there would be at least 1 BRIC deputy director ASAP and the First Deputy director would be a BRICie within 5 years along with non-Europeanization of senior posts like Chief Economist and Head of Research and Statistics as quickly as possible. DSK made quick progress as China’s ZhiMin was appointed one of the 3 deputy directors and the stage set for the appointment of a second from Japan, I think, but forget – something like Saratonago. Needless to say BRIC investment was really useful as although all the money is promissory notes to the IMF, BRIC money is the result of growing economies not governmental borrowing at more and more punitive rates. DSK was a private and I believe seriously mentally ill, disaster but probably the best IMF director in 2 decades.  So DSK had ensured IMF power through new BRIC money and in return increased BRIC power and influence.  Then lots of things happened together. Sokrazy realized his UMP candidacy for 2012 presidency was endangered by his FinMin – Laggard. The size of the French exposure to Greece, around 80bn was seen. Clever semantics on the reporting request and use of French banks outside France allowed a much less €40-50bn to be reported, but it was clear that Greek default could not be allowed or France would fail. DSK had to go. May 2011. An opportunity to get rid of an election threat and relieve pressure on EU institutions and on the basis of exhibited Greek ‘attitude’ shown already, ‘une carte blanche’ to drive a country to an economic wasteland and political slavery exactly what the € was devised for, whilst defending France and perhaps persuading Germany to pay for the economically protectionist, anti-democratic, utterly globally non-competitive paradigm again.  Sarkozy sowed the seed and got what he wanted even to the point of getting agreement that an €Z director was the logical European choice. Next: Laggard insults and threatens RSA’s brilliant Trevor Manuel out of directorship contest, then gets Mexico’s Carsten disbarred through NAFTA links and David Lipton the first deputy because he’s American. Laggard installed June 2011. Olivier Blanchard becomes chief economist as well as his existing job of Head of Research and Statistics which gives him both dataflow and data interpretation control throughout the IMF – no need for anybody else. Laggard now able to impose her troika dominance over a blackened EU duo. She picks AH Thomsen, already versed in Ireland, to lead in Greece. She promises to furnish lots of BRIC money – much more than the ECB and EU and thus gets voting control of the Greek troika. She fails to get most of the BRIC money for Greece and has managed to divide a global rescue actor called the IMF into BRICS and mates like OZ versus the rest with a USA in the inert middle. She must go.  In summary all three troikista have failed the Greeks and others. The ECB and EU started it: the Laggard IMF has finished it in truly feudal robber baron fashion.

Jens Weidmann, the Bundesbank’s hard-line chief, testified that the ECB’s bond rescue plan for Spain and Italy risks “significant losses” for Germany’s central bank and grave damage to its credibility. “Ultimately, it is the German taxpayer who carries the risk,” he said. Mr Weidmann said the bond scheme, known as Outright Monetary Transactions (OMT), blurs the line between fiscal and monetary policy and encroaches on the terrain of parliaments. It leaves the ECB with the task of carrying out rescue operations that is the proper responsibility of the euro bail-out fund and compromises the bank’s independence. The two-day hearings at the constitutional court in Karlsruhe will investigate the legality of the OMT, the “game-changer” that defused the EMU debt crisis last July and has been so successful that no country has yet needed to use it. The case stems from complaints by 37,000 citizens, including the Left Party, More Democracy and eurosceptic professors, most arguing that the ECB is financing bankrupt states.

While the court has no jurisdiction over the ECB, it could prohibit the Bundesbank from taking part in bond purchases. This amounts to the same thing, since the OMT would collapse if Germany stepped aside. Chief Justice Andreas Vosskuhle said the court would adhere strictly to the law, regardless of whether ECB actions have been successful, “otherwise the end would justify the means – such an idea would go against the central tenets of a democratic state grounded in constitutional law"...

SECO argues that Europe's financial crisis "cannot be regarded as addressed" because countries in southern Europe are still "relatively far from a significant economic improvement".

I agree. A chain is only as strong as its weakest link. The EZ chain is Germany-France-Italy-Spain.

Until Spain and Italy are on a firm footing, I don't think we can consider the problems "solved"....

Here's what Spiegel thinks about the German CC ruling on OMT:http://www.spiegel.de/wirtschaft/soziales/politik-der-ezb-vor-dem-verfassungsgericht-vier-szenarien-a-904828.html

They see for possible outcomes:
1) The court rejects the ruling on a European institution => unlikely
2) The CC sees a violation of the ECB charter and refers the case to the ECJ. In that case an approval of OMT is seen likely, but it would take a long time to get the ruling
3) The CC could rule that the participation of German institutions (such as the Bundesbank) is in violation with the German constitutions => chaos
4) The CC dismisses the complaints but defines rules and proceedings that teh German side has to adhere to, to avoid being in violation of the Constitution. That had been the case for the previous lawsuit against the ESM in which the CC demanded parliamentary participation in the decision process. => This is seen as the most likely outcome.

Who gives these people the right to change the rules that many signed up for years ago? Nothing is sacred anymore and no one can be sure that their investment in making provision for retirement and their families is safe. Unelected mad men hell bent on creating more and more regulation and more and more control of the individuals rights to care for themselves. This one might have been stopped or delayed but you just know they are working on other ways to screw the little man.  I am in the US but more than half of my retirement funds are in UK investments that I toiled for, for years and its already been f####d over by the Brown government. Worse that it's my money but I can't take it out of the UK because of punitive rules it is still vulnerable to these  idiots in Brussels. Where did the people give the right to have this controlled outside of British sovereignty? The rules, known as "Solvency II", would have required schemes to hold more much money in reserve. Experts say that their introduction would have caused every remaining pension scheme in the private sector to close.  The European Commission announced today that it would not include solvency rules in a new pensions directive, effectively kicking Solvency II into the long grass.  It said: "Commissioner Barnier has indicated his intention to come forward with a proposal for a directive to improve the governance and transparency of occupational pension funds in the autumn of 2013.  "At this stage, and as long as more comprehensive data is needed and Solvency II is not in force, the proposal for a directive will not cover the issue of the solvency of pension funds. In light of the differing situations in member states regarding retirement products and pension funds, it is necessary to continue technical work on the issue of solvency."  The National Association of Pension Funds (NAPF) said this meant the Solvency rules had been postponed indefinitely and would become a task for the next commissioner, who will take office in November 2014.

The writing is on the wall! With Weidermann's  Bundesbank opening battle lines against Draghi's ECB its now clear that further state bail-outs, debt  naturalization and fiscal transfers are off the menu. Spain and other debtor EMU nations are obviously being lined up for the ultimate solution; a Cyprus style write-down of private bank deposits. Watch the Spanish Euro denominated money supply collapse as funds deluge northwards  into Deutche Euros and Sterling, the latter possibly becoming an alternative currency for individuals and business fleeing from monetary persecution and financial ruin.  Germany’s constitutional court will rule on the legality of the bond rescue plan on June 12. It gave a provisional go-ahead last September for other parts of the EMU rescue machinery, but limited Germany’s bail-out share to €190bn (£160bn). Crucially, it warned that the Bundestag may not alienate its tax and spending powers to any supra-national body or be exposed to “unlimited” liabilities.  “If the court rules against OMT, it means the end of the euro. The stakes are so high that I don’t see how they could just pull the trigger,” said Mats Persson from Open Europe.  He said the Draghi plan is a legal hot potato because it is, by definition, unlimited. “The previous rulings by the court have all been predicated on this point.”  German historian Michael Stürmer said the tough report is a bid by the Bundesbank to “reassert its primacy”. “They have told the ECB in no uncertain terms that it is exceeding its mandate. Angela Merkel may be smiling because this helps her set limits in Europe.” Prof Sturmer said the forthcoming ruling - wider than just the Draghi plan - is “much more serious” than last September’s judgment, limited to an injunction brought by eurosceptic groups. “This is about issues of sovereignty. I don't think the Court will dare to issue a ruling before the elections in September. They will procrastinate,” he said. The court has some jurisdiction over ECB policy because it intrudes on the German Grundgesetz, or Basic Law. “Once the ECB starts bailing out states it is moving into dangerous waters,” he said. The court made a glancing reference to OMT in September, stating that ECB bond purchases “aimed at financing the members budgets is prohibited, as it would circumvent the ban on monetary financing”. The bond markets ignored the leaked report on Friday, confident that the court will once again find some formula to avert a crisis. It could cite a clause in the Lisbon Treaty stating that the ECB has a duty to “support the general economic policies in the Union”, which would include saving the euro. “They might refer the case to the European Court but that would leave the Sword of Damocles hanging over the market for another two years,” said David Marsh, author of books on the Bundesbank and EMU. “I think use of OMT is practically impossible until this is resolved.”   Sovereign bond strategist Nicholas Spiro said markets are “sick and tired” of the eurozone debt crisis and have stopped paying attention to the detail. “There is this ravenous hunt for yield and they think there is all this money coming from Japan. But it has long been unclear whether OMT is real or just a myth, and the eurozone’s underlying economic crisis is still getting worse. The window of opportunity created by Draghi has been wasted.  “If the court sides with the Bundesbank in any way the whole house of cards could come crashing down.”  “If the court sides with the Bundesbank in any way the whole house of cards could come crashing down.”   Although I believe the Court should do so, in no way means that it will, far more likely the can gets kicked farther down the road, such is the nature of the beast we are dealing with. Drahgi, Rumpoy and Barosso sit there smugly in their ivory towers secure in the knowledge that they have the world by the short hairs so to speak, well I fear the world has had enough of the troublesome eu and it will all end sometime soon, for my part the sooner the better......Kill the euro and the EU !!!!