Bookies in Britain have suspended betting on the “do” side of the proposition as to whether Greece leaves the Euro Zone.  Ladbrokes gave up cutting the odds on a Greek departure and has stopped taking action.  “It is safer for us to suspend betting than to keep cutting the odds,” a spokesman for Ladbrokes told CNBC. “We have been slashing the odds repeatedly over the last few days.”

“If we get some positive news we will open the book again,” he said.

Alexis Tsipras, the head Greece’s Radical Left Coalition (now that’s left), has been providing the sound bites that have punters hitting the windows hard, betting on a Greek euro exit stage left.  Mr. Tsipras says the Greek bailout agreement is “null and void.” He refers to the austerity program as “barbaric.”    “I fully disagree with what is at heart of the memorandum [austerity],” Tsipras said, adding that “further austerity will make us a third world country in the EU.”

Mr. Tsipras argues that the strong anti-austerity vote in Sunday’s election, which produced a hung parliament, stripped Greece’s bailout commitments of “political legitimacy.”

Michelle Caruso-Cabrera, CNBC’s goddess of all things Greek, reports, and Jennifer Parker writes,

Tsipras’s views are significant because a new poll on Thursday put him in first place to win snap elections if they are held in June. The elections may be necessary if none of the winners of Sunday’s elections are able to form a government so far.

For long-shot players, Ladbrokes is offering 33 to 1 odds that the euro ceases to exist by the end of this year.  For those wanting more time, the odds are a prohibitive 5/6 that the euro is gone by the end of 2015. Ladbrokes is offering 4 to 1 that two countries leave the euro by the end of this year.

It is unknown at this writing if Tragedy of the Euro author Philipp Baggus has money down on any of these propositions.

Not to worry 99 percenters, Ben Bernanke’s Fed policy of just-north-of-zero interest rates is starting to gain traction.  Sure, unemployment is still elevated, and the number of people on food stamps still enormous, but the news is out that the collateral loan obligation (CLO) market is starting to come alive.

Rest assured that more money rushing into CLOs won’t help unemployed and overendebted college graduates secure employment or make a dent in their student loans, but Grant’s Interest Rate Observer reports the sighting of a commercial mortgage-backed security sporting a loan-to-value ratio greater than 100%.  “It was the first such occurrence since credit went to the hospital in 2008,” says Grant’s.

Katy Burne and Matt Wirz make the point in the Wall Street Journal,

Left for dead after the financial crisis, the market for collateralized-loan obligations—pools of loans to “junk”-rated companies—is staging a comeback, driven by investors’ hunger for high-risk, high-return securities.

Sales of CLOs have topped $6.8 billion in the U.S. so far this year, according to S&P Capital IQ LCD. That is the busiest start to a year since 2008 and more than sales for the whole of 2009 and 2010 combined.

Axel Merk notes that it is Bernanke’s “humble” fixation with fighting deflation that creates a lot of debt–

whether that be out of thin air on the Fed’s balance sheet, or potentially across the economy as consumers, businesses and the government alike are enticed to borrow ever more money. So far, businesses are not taking the bait. But the government and some consumers are. What we consider monetary largess, as well as fiscal unsustainability, may ultimately lead to deterioration of the purchasing power of the U.S. dollar.

Businesses may well be taking the bait.  One CMBS professional told Grant’s “You’re seeing a re-leveraging of the market pretty quickly.”  It may not be 2007 again, but it’s not 2010 either.

While the Fed does all it can to make speaking of interest rates in percentage pointpassé, “Pensioners need to eat, and pension-plan managers must strive to provide them with the necessary income, the zero-percent funds rate notwithstanding,” writes Grant’s.

There is enough of an increase in the issuance of dodgy paper to lead Wall Street insider and CNBC favorite, Wilber Ross to say,  “It’s not unduly dangerous, but we’re moving in that direction.”

In a yieldless world, lemmings are enticed off the cliff looking for any sort of yield at all, with no thought to risk below.

As Mark Quinn explains,

Reaching foryield is dangerous for a number of reasons, but mostly because such straining is done at precisely the wrong time.   When people are fed up with low yields that the economy, or the profligacy rewarding Fed, provides them, they tend to do things…go out the curve at precisely the wrong time (when rates are low and headed higher) or take on more credit risk when the economy is slow and credit risk is therefore especially salient, as evidenced by the natural or Fed engineered low interest rate environment.   The current tidal wave of money into credit sensitive lending is, of course, an instance of the latter.

Some $5.07 billion of CLO paper was issued in April, reports Grant’s, the most active month since November of 2007.  It’s projected that CLO issuance may top $25 billion this year.  A far cry from 2006’s $97 billion, but more than double 2011’s $12.3 billion.

Here we go again.

The Bernanke Fed’s Jelly Donut force-feeding of the economy isn’t making a dent in the unemployment rate, but it’s inspiring a scream at the art auction.  Carol Vogel reports for The New York Times,

It took 12 nail-biting minutes and five eager bidders for Edvard Munch’s famed 1895 pastel of “The Scream” to sell for $119.9 million, becoming the world’s most expensive work of art ever to sell at auction.

Just a year ago this space considered the art market.  “The speed of the art market’s recovery is astonishing, but it’s a differently revived market,” said Michael Plummer, a principal of Artvest. “The lesson of the crash was to do your homework. Collectors feel wiser for the experience.”

The Scream’s price eclipsed the previous record, made two years ago at Christie’s in New York when Picasso’s “Nude, Green Leaves and Bust” brought $106.5 million.

While the crowd inside was gasping and applauding as the price of Munch’s work worked its way upward, the 99%ers outside were expressing their outrage.  According to the Times, demonstrators were protesting the company’s longtime lockout of art handlers by waving placards with the image of “The Scream” along with the motto, “Sotheby’s: Bad for Art. The  mix of union members and Occupy Wall Street protesters let out screams when the Munch went on the block. One protester, Yates McKee said, Munch’s work “exemplifies the ways in which objects of artistic creativity become the exclusive province of the 1 percent.”

But of course, as zero rate money finds its way into leveraged finance, the new robust junk bond market, and other walks outward on the risk curve, like say, the art market, it’s a sign Bernanke’s policies are working just as he planned.

In fiat currency, fractionalized banking systems, those who get the money first benefit at the expense of the rest.  Or, put another way, the 1% get the jelly, the 99% get the crumbs.

There is word of more capital destruction in South America.  It’s hard to keep up with the Chavzes, but down Argentina way, President Cristina Kirchner announced that her government is seizing a majority stake in oil company YPF SA, owned by Repsol YPF of Spain, the largest oil company in the world.  The New York Times reports from Rio De Janeiro,

The expropriation would reassert state control over an important pillar of Argentina’s economy, but it has already increased diplomatic tensions with Spain and the European Union. Mrs. Kirchner quickly ousted Sebastián Eskenazi as YPF’s chief executive, naming two top aides, Julio de Vido and Axel Kicillof, to run the company.

Argentina’s government founded the company in the 1920s and it was then privatized in the 1990s.  She says the taking of YPF is a “recovery of sovereignty and control.” She said the move would allow Argentina to raise production, after the country recently became an energy importer.

The people of Argentina are all about the seizing.  Because of price caps and other regulatory uncertainty, supply is not keeping up with demand.  The government has pressured YPF to increase production and threatened to revoke its oil field concessions, but the price caps make increased production uneconomic.

However, Kirchner’s deputy economy minister, Axel Kicillof, told the Senate, “It’s a common practice of the producer [or] exporter that he holds back production, the treasure, because they have a chance to obtain a higher price,”

Kicillof has a doctorate in economics from the University of Buenos Aires, where he won a faculty prize in 2006 for his thesis on John Maynard Keynes’s famous work, “The General Theory of Employment, Interest and Money.”

So it’s not surprising that in his testimony to the Senate, he included,  ”When there’s a crisis, the worst thing that can be done is to say the state is the problem. The state is the solution. When there is recession and economic crisis, the state becomes a key actor to revitalize demand and investment.”

There’s already too much government mucking things up in Argentina, but the 40-year-old minister, described as  ”Attractive, good dad, geek and brain behind the expropriation of YPF,” provides the thinking behind  Kirchner’s imposition of new restrictions on foreign-currency transactions and tightening of import controls. In her prior term, she nationalized private pension funds and the flagship airline.  “We’re giving YPF to the same kids who bankrupted Aerolineas,” quips Congressman Omar de Marchi.

YPF thinks it’s only fair that the government pay $10 billion for the majority stake, but Mr. Kicillof, according to the Wall Street Journal, “scoffed at that figure, saying compensation determines on what a federal tribunal decides after it evaluates YPF, including possible environmental damage. ‘Let’s see what we will find when we open the black box,’ he said.”

So what are the prospects for investment in Argentina?

“I worry less about Apache’s operations in Egypt than in Argentina,” said Fadel Gheit, a senior oil analyst at Oppenheimer & Company in New York.  “The oil industry in Argentina is just getting ready to take off, but this may be a way to kill it in its infancy.”

“You have to be clever to do business in Argentina,” Federico MacDougall, an economist at the University of Belgrano in Buenos Aires told the NYT. “It was hard to do business in Argentina before. Now it is even harder.”

Capital goes where it’s treated best.  When the capital leaves, the people are left to starve.

A year ago the Treasury Department bragged about an analysis that claimed the government’s massive bank bailout in response to the 2008 financial crisis (TARP) would actually end up turning a $24 million profit.

At the time, Treasury Secretary Timothy Geithner said that while the government’s overriding objective was to “break the back of the financial crisis and save American jobs,” it didn’t hurt that the TARP investments in U.S. banks “delivered a significant profit for taxpayers.”

But TARP watchdogs disagree.   A report by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) estimates TARP’s losses at $60 billion.  “Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost),” and the SIG makes the point that nothing has really changed, no lessons have been learned, and this poses the possibility “of rushing out another massive bailout of the financial industry, i.e., TARP 2.0.”

The focus of the Wall Street Journal’s story on the TARP report is that 351 small banks still owe a total of $15 billion in TARP funds and these banks’ prospects for raising the money to payoff the government is dim.   This is significant because the cost of TARP money increases from 5% to 9% after five years.

However, many of the small banks that did manage to pay back the TARP capital, did so with funds from the Small Business Lending Fund, a pool of $4 billion made available by the Small Business Jobs Act of 2010.  Of course this Department of Treasury program was created to stimulate small business lending.  But the pricing of funds, looks like just an opportunity for the banks to buy time with the hopes that the capital markets will eventually be friendlier.  In other words another bail out.  According to the Treasury website,

The initial rate payable on SBLF capital is, at most, five percent, and the rate falls to one percent if a bank’s small business lending increases by ten percent or more. Banks that increase their lending by less than ten percent pay rates between two percent and four percent. If a bank’s lending does not increase in the first two years, however, the rate increases to seven percent, and after 4.5 years total, the rate for all banks increases to nine percent (if the bank has not already repaid the SBLF funding).

Treasury received 935 applications for SBLF money and funded 332 institutions.  Of those 332 institutions, 137 banks used the SBLF funds to pay back the TARP money they owed.  There were a few relatively large institutions that used the SBLF exit strategy.  For instance, Western Alliance Bancorporation, a nearly $7 billion bank holding company traded on the NYSE, paid off $140 million in TARP plus a little more for warrants with complete funding from SBLF.

The SBLF program was closed on September 27 of last year and at that time 390 banks still owed TARP.  Of those 390, 178 had applied for SBLF but were turned down.  Many of these banks were turned down because they were delinquent on their TARP payments.

The report concluded that SBLF “culled a large number of the healthier community banks from TARP, leaving less-healthy banks in TARP that had less capital, had missed dividends, or, in many cases, were subject to enforcement actions by their regulators.”

Of the remaining 351 banks in TARP, a full 46% or 163 of them were delinquent on their payments to the Treasury.  Of the 163, the vast majority, 116, had missed five or more payments.

So the “healthy” banks were able to secure a new bail out from Uncle Sam, to pay off the old bail out money, while the unhealthy banks, many that can’t pay the 5% coupons, will be expected to pay 9%.

SIGTARP knows these banks can’t make it without more government help and has recommended that possibly Treasury should renegotiate the TARP terms or that a clear TARP exit path be developed (presumably like SBLF).

Only a Treasury Secretary could call this a successful, profitable operation.

In the modern world, a country’s natural resources have very little to do whether goods are on the nation’s shelves for people to buy.  Singapore isn’t rich in resources, neither is Hong Kong, but both have vibrant market economies and shoppers can find whatever their collective heart’s desire on the shelves of stores in these two cities.

On the other hand, there is Venezuela, a country rich in resources.  It is one the world’s top oil producers at the same time gas prices are soaring.  The rich soil and temperate climate allow for productive agriculture and the country is rich in gold and other minerals.

One could only imagine that high tides would be lifting all boats, but yet the cupboards are bare.  There are shortages of staples like milk, meat and toilet paper.  In the country’s largest city, Caracas, residents must arrange their calendars around the once-a-week deliveries made to government-subsidized stores.

This is not a matter of rich or poor, the shortages affect everyone.  William Neuman describes for The New York Times,

The shortages affect both the poor and the well-off, in surprising ways. A supermarket in the upscale La Castellana neighborhood recently had plenty of chicken and cheese — even quail eggs — but not a single roll of toilet paper. Only a few bags of coffee remained on a bottom shelf.

Asked where a shopper could get milk on a day when that, too, was out of stock, a manager said with sarcasm, “At Chávez’s house.”

Money printing has created chronic price inflation in Venezuela and last year the office rate was 27.6 percent.  According to Hugo Chávez’s socialist government, these price increases were caused by runaway capitalism.  So in response, Chávez instituted price controls, which like night turns to day, created shortages.

But, of course, goods would appear on the black market at higher prices, so Chávez’s government blames speculators for causing the shortages.

As the Times points out, there is no reason that shoppers shouldn’t be able to buy staples in a city and surrounding area of over four million people.

Venezuela was long one of the most prosperous countries in the region, with sophisticated manufacturing, vibrant agriculture and strong businesses, making it hard for many residents to accept such widespread scarcities.

Mr. Chávez and his ministers say “companies cause shortages on purpose, holding products off the market to push up prices. This month, the government required price cuts on fruit juice, toothpaste, disposable diapers and more than a dozen other products.”

El Presidente must believe that somehow suppliers make money by not supplying.

“We are not asking them to lose money, just that they make money in a rational way, that they don’t rob the people,” Mr. Chávez said recently, presumably with a straight face.

Clearly Chávez’s prices are too low for companies to make money so they either curtail production or stop all together.  And, as the Times mentions, “some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest.”

Chávez is up for election in the fall and he is threatening to nationalize companies that stop production.  And the Venezuelan media is also under fire with the government accusing them of frightening the public into hoarding. “Government advertisements urge consumers not to succumb to panic buying, using a proverbial admonition: Bread for today is hunger for tomorrow.”

Only three years ago, the country was a coffee exporter.  Now, Venezuelans can’t find it on the shelves.  The government price is too low, driving planters and roasters to stop production and not invest in new plantings or fertilizer.

It is incredible that in this day and age, a government could be so blind, stupid, and cruel toward its own people.  It’s one thing to teach this sort of nonsense at expensive universities, but another to put it in practice and ruin people’s lives.

In a wonderful piece for the Wall Street Journal’s editorial page, hedge fund CIO Mark Spitznagel explains how the 1% receive the money first and benefit from the Federal Reserve’s policies.

The Fed, having gone on an unprecedented credit expansion spree, has benefited the recipients who were first in line at the trough: banks (imagine borrowing for free and then buying up assets that you know the Fed is aggressively buying with you) and those favored entities and individuals deemed most creditworthy. Flush with capital, these recipients have proceeded to bid up the prices of assets and resources, while everyone else has watched their purchasing power decline.

President Obama thinks he knows how to soothe everyone’s pain at the pump.  The White House will unveil a $52 million proposal Tuesday at the White House, where he will be joined by Attorney General Eric Holder.  According to the Associated Press,

the proposal said it aims to detect and deter illegal manipulation by energy speculators, the type of practices that many Democrats blame for the high cost of gasoline. The officials spoke on the condition of anonymity to discuss the plan ahead of Obama’s announcement.

The President’s $52 million proposal will reportedly “curtail the ability of speculators to take unlawful advantage of oil price volatility.”

The Obama plan will, again, according to the AP,

— Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.

— Increase spending on technology to provide better oversight and surveillance of energy markets.

— Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.

— Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.

And if all that isn’t enough, the President will turn the White House Council of Economic Advisers loose on the CFTC’s data.

Speculators are convenient scapegoats for all governments.  In August 1971, President Nixon told the nation that he was “temporarily”  closing the gold window. The amount of gold held in Fort Knox as a percentage of outstanding paper dollar claims against it — had declined from 55% to 22% — leaving the Treasury desperately close to default.  So the Nixon Treasury either had to quit borrowing and quit printing money, or snip the dollar’s link to gold.

Of course, the conservative Nixon couldn’t admit that his big-spending policies were wrecking the dollar.  No, it was those speculators, he claimed.

In the past seven years, there has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them.

In other speculator bashing news today, The Zimbabwe Mail reports that the Zimbabwe government is ordering 109 companies to make new applications for mineral titles.

The order follows the ministry of mines’ decision in January to hike pre-exploration fees for most minerals by as much as 8,000 percent in a move the ministry said was meant to curb the speculative holding of mine titles.

The Ministry of the Mines is requiring companies and individuals to use the titles or lose them, and a number of titles have been surrendered to the Ministry.

Despite the policy, Ministry officials believe there will be a nearly 16% growth in registering titles this year.

“The new mining fees are not meant to discourage indigenous players, rather they seek to do away with the speculative tendencies in the mining sector. Over the past few months, we have seen a number of claims being surrendered to the Ministry following the adoption of the policy as well as the implementation of the Use It or Lose It Policy,” said Dr Obert Mpofu, Mines and Mining Development Minister.

Despite the directive, it’s hard to imagine miners lining up to register for mining titles in Zimbabwe, and, as for Obama’s plan, Zero Hedge is  “100% confident that just like every failed attempt at central planning, all Obama will achieve is another spike in crude prices, just in time for the next global reliquification cycle, just in time for 2012′s debt ceiling scandal, and just in time for the reelection.”

In the Tulipmania crash the common Witte Croonen bulb, that rose in price twenty-six times in January 1637, fell to one-twentieth of its peak price a week later

From 1717 to 1720, shares of John Law’s Mississippi Company were bid up by frenzied Frenchmen from 500 livres to a high of 10,100 livres, before Law was run out of France and the shares crashed along with the value of Law’s banknotes.

In the late 1980’s, golf memberships in Japan were bid as high as $4 million apiece.  The Nihon Keizai daily even came up with a golf membership price index that was followed as closely as stock tables.  But by 2003, the Keizai golf index had dropped by 95% and many course owners were bankrupted.

Japan’s  Nikkei 225 hit its all-time high of 38,957.44 on December 29, 1989, after increasing sixfold during the decade. After the crash, it lost nearly all these gains, closing at 7,054.98 on March 10, 2009—81.9% below its peak twenty years earlier.

The NASDAQ composite index poked its head above 5,000 at the end of 1999 and feel to almost 1,000 two years later.

In 2001, with the Federal Reserve stepping on the monetary gas, the average price of an acre of land in Las Vegas was $158,000.   By the fourth quarter of 2007, the average land price (excluding resort properties) peaked at $900,000 per acre.

According to Applied Analysis, Q4 2011 land sales in Sin City averaged $102,491 per acre, meaning Las Vegas land prices have now fallen nearly 90% from their peak in 2007.  There’s talk of Vegas coming back, but home builders already have too much dirt and vacancies in retail, office and industrial space remain high.

Hubble Smith writes for the LVRJ,

It’s worth noting that only 54 percent of land deed transfers during the fourth quarter were regular “arm’s-length” transactions between private parties that did not involve a lender, he said. Trustee deeds represented 32.6 percent of activity.

So most of the action for land is lenders seizing their collateral.

However, the greatest bubble in financial history is currently stretching its seams and has been for years.  The bubble in U.S. Treasury securities rivals any mania the world has ever seen.

Lending the U.S. government money yields all of 5 basis points for a 1-month loan.  For six months, 14 basis points.  For a year, 18bp. Two years 33bp, 10 years 2.22% and lending the U.S. government money for 30 years denominated in a currency the Federal Reserve constantly and systematically depreciates yields an investor all of 3.35%.

How on earth could this be?  The creditor in this case owes at a minimum $15+ trillion.   This operation is currently running an annual deficit of $1.4 trillion.  The management of the entity has problems controlling its spending, so the fiscal problems will persist.  Yet, Uncle Sam can borrow money essentially for free.

The largest holder of U.S. Treasuries is America’s central bank. This is not money that’s been saved and looking for the best return, but money conjured up conveniently from the ether for the express purpose of buying Treasury debt, because no other buyers exist that will pay the same price.

When the U.S. Treasury bubble pops, it’ll be a doozie.