Feb 2/Greek Fin Min changes position and will not ask for Greek haircut/GLD rises a gigantic 8.36 tonnes/no change in SLV inventory/French tanks land in Poland/Conditions between Ukraine and Rebels worsen/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1276.20 down $2.30   (comex closing time)
Silver: $17.23 up 4 cents  (comex closing time)

In the access market 5:15 pm

Gold $1274.00
silver $17.22

Gold/silver trading:  see kitco charts on right side of the commentary.


Following is a brief outline on gold and silver figures for today:


The gold comex today had a poor delivery day, registering 16 notices served for 1600 oz. We have now seen two weak consecutive delivery notice days . Silver comex registered 5 notices for 25,000 oz which is excellent for a non delivery month.


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 248.33 tonnes for a loss of 55 tonnes over that period.

In silver, the open interest surprisingly fell by a tiny 228 contracts despite Friday’s silver price being well up $0.47. The total silver OI continues to  remain relatively high with today’s reading at 163,241 contracts.

We had a very small 5 notices filed on this second day notice for 25,000 oz

In gold we finally had an increase in OI as we enter an active delivery month of February The rise in OI occurred with a huge increase   in the price of gold on Friday to the tune of $27.90. The total comex gold OI rests tonight at 422,794 for a gain of  5,676 contracts. On the first day notice, we have a shocking surprise in that only 55 notices were filed upon.  On this second day notice we again received a tiny 16 notices for 1600 oz.

The Greek story turned on a dime this evening as it looks like the EU and ECB told the Greeks the true state of affairs, that is what would happen if haircuts are asked for. It looks like they told them that the entire global finances would evaporate in smoke.  I have provided all stories from Saturday to today and you will see a complete 180 degree turn from the Greek side.

Denmark is desperate to keep the peg at 7.46 kroners per euro.  The past few days has seen them go to negative interest rates.  On Friday it was negative mortgage rates.   Today they announced that they were going to suspend debt offerings.  You can lower the value of the Kroner by increasing debt supply or by lowering demand.  They chose the later.

This will end badly for the Danes.


Today, we had another huge paper addition of 8.36 tonnes 0f gold inventory at the GLD/Inventory at 758.37 tonnes

In silver, /SLV inventory remains constant at 319.314 million oz



We have a few important stories to bring to your attention today…


Let’s head immediately to see the major data points for today


First: GOFO rates: the crooks are no longer reporting.



Let us now head over to the comex and assess trading over there today.

Here are today’s comex results:

The total gold comex open interest rose today by a rather large 4,623 contracts from 418,171 all the way up to 422,794 with gold up by $27.90 on Friday (at the comex close).  We are now in the big delivery month of the active February contract  and here the OI fell by 5,676 contracts  from 8,455 all the way down to 2,779,with all of these guys exiting their contracts outright. We had only 55 contracts served on Friday,  Thus we lost 5621 contracts or 562,100 oz which were no doubt bought out with fiat.  The next contract month of March saw it’s OI rise by 208 contracts up to 1265.  The next big active delivery month is April and here the OI rose by only 6023 contracts up to 295,256. The estimated volume today was awful at 62,712. The confirmed volume yesterday was fair at 190,339 contracts. Today we had 16 notices filed for 1600 oz .

And now for the wild silver comex results. Silver OI surprisingly fell by 228 contracts from 163,469 down to 163,241 despite the fact that silver was up by 47 cents on Friday.   We are now in the non active contract month of February and here the OI fell by 273 contracts down to 43.   We had 288 notices filed on Friday so we gained 15 contracts or 75,000  additional oz will  stand.   The next big active contract month is March and here the OI fell by 1,421 contracts down to 98,621. The estimated volume today was awful at 19,403. The confirmed volume on Friday was excellent  at 52,998. We had 5 notices filed for 25,000 oz today.

February initial standings


Feb 2.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz nil
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 16,075.000  oz(500 kilobars)
No of oz served (contracts) today 16 contracts(1600 oz)
No of oz to be served (notices)  2763 contracts 276,300 oz)
Total monthly oz gold served (contracts) so far this month  71 contracts(7100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 92.90 oz

Today, we had 0 dealer transactions

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz


we had 0 dealer deposits:

total dealer deposit: nil oz


we had 0 customer withdrawal


total customer withdrawal: nil  oz



we had 1 customer deposit:


i) Into Scotia:  16,075.00  (500  kilobars)

total customer deposits;  16,075.00 oz

We had 0 adjustments


Today, 0 notices was issued from JPMorgan dealer account and 0  notices were issued from their client or customer account. The total of all issuance by all participants equates to 16 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 6 notices were stopped (received) by JPMorgan customer account.

To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (71) x 100 oz  or 7100 oz , to which we add the difference between the OI for the front month of February ( 2779 contracts)  minus the number of notices served today x 100 oz (16 contracts) x 100 oz = 283,900 oz, the amount of gold oz standing for the February contract month. (8.83 tonnes)

Thus the initial standings:

71 (notices filed for the month x( 100 oz) or 7100 oz + { 2779 (OI for the front month of Feb)- 16 (number of notices served upon today) x 100 oz per contract} = 283,900 oz total number of ounces standing for the February contract month. (8.83 tonnes)




Total dealer inventory: 769,022.858 oz or 23.91 tonnes

Total gold inventory (dealer and customer) = 7.983 million oz. (248.33) tonnes)



Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 54 tonnes have been net transferred out. We will be watching this closely!





And now for silver

 February silver: initial standings

feb 2 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 65,598.16  oz (Scotia,CNT )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 5 contracts  (25,000 oz)
No of oz to be served (notices) 38 contracts (190,000 oz)
Total monthly oz silver served (contracts) 293 contracts (1,465,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  165,609.3 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz



We had 0 customer deposits:


total customer deposit nil oz



We had 2 customer withdrawals:

i) Out of CNT:  50,003.300 oz

ii) Out of Scotia: 15,594.860 o

total customer withdrawal: 65,598.16 oz


we had 0 adjustments



Total dealer inventory: 67.726 million oz

Total of all silver inventory (dealer and customer) 178.052 million oz


The total number of notices filed today is represented by 5 contracts for 25,000 oz. To calculate the number of silver ounces that will stand for delivery in January, we take the total number of notices filed for the month (293) x 5,000 oz    = 1,465,000 oz  to which we add the difference between the OI for the front month of February (43)- the number of notices served upon today (5) x 5,000 oz per contract = 1,655,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

293 contracts x 5000 oz= 1,465,000 oz + (43) OI for the front month – (5) number of notices served upon x 5000 oz per contract =  1,655,000 oz, the number of silver ounces standing.


we gained 75,000 oz of additional silver standing for this February contract month

for those wishing to see the rest of data today see:

http://www.harveyorgan.wordpress.com or http://www.harveyorganblog.com





The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders

ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:



feb 2/ a huge addition of 8.36 tonnes of “paper” gold inventory/Inventory tonight at 766.73 tonnes



jan 30. we had no change in gold inventory/Inventory at 758/37 tonnes

Jan 29/we had an addition of 5.67 tonnes of gold inventory at the GLD/Inventory at 758.37 tonnes

Jan 28/no changes in gold inventory at the GLD/Inventory at 952.44 tonnes

Jan 27.we had a monstrous “paper” addition of 9.26 tonnes of gold into the GLD tonight/Inventory at 952.44 tonnes

Jan 26.2015: another volatile day as they added  1.79 tonnes/743.44 tonnes of gold.

Jan 23/the action at the GLD is very volatile:  today they added 1.20 tonnes of gold to their inventory/Inventory 741.65

Jan 22 no change in gold inventory at the GLD/Inventory 740.45 tonnes

Jan 21.2015: Tonight, we lost 1.79 tonnes of gold from the GLD/Inventory 740.45 tonnes

Jan 20.2015:

Late Friday night, we had another addition of 13.74 tonnes of gold on top of the earlier amount of 9.56 tonnes which were added to inventory.

Tonight another 11.45 tonnes was added to inventory

Thus so far inventory rests at 742.24 tonnes of gold.

There is no chance that these guys could have assembled 34.65 tonnes over the weekend. The addition is nothing but a paper entry!! No real physical has been received.

Jan 16.2015 we had a huge addition of 9.56 tonnes of gold into the GLD/New inventory 717.15 tonnes.  (where on earth did they obtain that quantity of physical gold??)





Feb 2/2015 / we had a huge addition of 8.69 tonnes of   gold inventory at the GLD/

inventory: 766.73 tonnes.




The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).

GLD : 766.73 tonnes.







And now for silver (SLV):

Feb 2 no change in silver inventory at the SLV/inventory at 319.314

million oz.

jan 30  no change in silver inventory at the SLV/inventory at 319.314

million oz

Jan 29/no change in silver inventory/SLV inventory at 319.314 million oz

Jan 28/no changes in silver inventory/SLV inventory at 319.314 million oz

Jan 27/no change in silver inventory/SLV inventory at 319.314 million oz

Jan 26.2015: no change in silver inventory/SLV inventory at 319.314 million oz

jan 23/2015/ a  huge addition of 1.053 million oz.  This entity is also being quite volatile/Inventory at SLV 319.314 million oz.

Jan 22 a huge reduction of 6.75 million oz/Inventory at 318.261 million oz

Jan 21 no change in silver inventory/Inventory at 325.011 million oz

Jan 20.2015: no change in silver inventory so far tonight/Inventory at 325.011 million oz

Jan 16.2015: we had another withdrawal of 1.34 million oz of silver inventory/Inventory 325.011 million oz

(something is up!!)

Jan 15.2015 we had a huge withdrawal of 1.628 million oz/Inventory 326.391 million oz

feb 2/2015 no change in silver inventory

registers: 319.314 million oz







And now for our premiums to NAV for the funds I follow:

Note: Sprott silver fund now for the first time into the negative to NAV

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)


1. Central Fund of Canada: traded at Negative  4.3% percent to NAV in usa funds and Negative 4.1 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.7%

Percentage of fund in silver:37.9%

cash .4%


( feb 2/2015)



2. Sprott silver fund (PSLV): Premium to NAV rises to + 3.477%!!!!! NAV (Feb 2/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to +.12% to NAV(feb 2 /2015)

Note: Sprott silver trust back  into positive territory at +3.47%.

Sprott physical gold trust is back in positive territory at +.12%

Central fund of Canada’s is still in jail.








And now for your most important physical stories on gold and silver today:




Early gold trading from Europe early Monday  morning:



(courtesy Mark O’Byrne)



Gold and Silver Surge Over 8 Per Cent In January On Reignited Global Risks



In January, gold surged 8 per cent in dollar terms, 11 per cent in pound terms and a very large 16 per cent in euro terms.January’s 8.4% gain for gold in dollar terms was the best month in terms of price gains in three years.

Thus once again, gold bullion performed its role as a hedging instrument and a safe haven asset in January as the outlook became decidedly more uncertain – particularly in the Eurozone.

Gold in Euros – 1 Month (Thomson Reuters)

Gold’s 8.4% gain in January is its largest single month rise since 2012. Figures released on Friday indicate that US GDP was down sharply to 2.6% in the fourth quarter of 2014, following a 3rd quarter surge at 5% as low oil prices begin to take their toll on the shale oil industry and the sectors that depend on it.

Unless the U.S. economy begins to grow more robustly, it is unlikely that the Federal Reserve will be able to raise rates any time soon. This should support sentiment towards gold and lead to further demand.

Meanwhile, this morning came further confirmation that Europe as a whole has sunk into deflation – year on year prices declined by 0.6%. The chronically fragile European banking system cannot afford a prolonged bout of deflation.

Gold in British Pounds – 1 Month (Thomson Reuters)

Central banks, including the Bank of England, have been fighting this process since 2008 – with very mixed success. We now appear to have reached a tipping point.

If the economies of Europe cannot reverse the trend and generate sustainable economic growth, the process will begin to feed on itself leading to company failures, bank failures and contagion – the ramifications of which will almost certainly include bail-ins.

However, given the intensification of currency wars, where countries devalue their currencies to gain a competitive advantage for their exports, it is difficult to envision a scenario where European prices will rise in the short term.

Gold is fulfilling its important role as safe haven in this environment. The toxic global macroeconomic picture, the overtly hostile language between the NATO and Russia, monetary uncertainty and currency debasement is boosting the appeal of gold and silver bullion.

The most dramatic exemplification of macroeconomic stress was the capitulation by the Swiss National Bank in removing its peg to the euro, followed by Mario Draghi’s announcement of a larger than expected ECB QE program.


Syriza have earned the hostility of the Troika while encouraging politicians and governments in the struggling European periphery. France have now given their backing to the new Greek government – a move which is bound to generate tension between France and German hawks and France and the IMF and ECB.

The warming Cold War has seen an intensification in brutality in the civil war in Ukraine. The future of the euro is in doubt with the accession to power of the new government in Greece. It appears intent and determined to looking after the interests of the Greek people and nation – rather than banks, and sections of the EU, the IMF and the ECB.

Bullion dealers, mints and refineries we spoke to at the World Money Fair in Berlin at the weekend all confirmed a marked increase in demand for gold and silver bullion in January.

Most expect this to continue in 2015 as the risks outlined are not going to abate anytime soon. Indeed, they are likely to deepen and intensify.

Diversification remains vitally important. Now is the time to reduce weightings to over valued risk assets such as equities and bonds, and increase allocations to undervalued safe havengold bullion.



Today’s AM fix was USD 1,274.25, EUR 1,122.69 and GBP 847.92 per ounce.
Friday’s AM fix was USD 1,263.50, EUR 1,114.98 and GBP 837.42 per ounce.

Silver’s down 1% today, meanwhile, platinum’s down 0.5%,and palladium is marginally higher.

Gold in US Dollars – 3 Months (Thomson Reuters)

In Singapore, gold for immediate delivery steadied above $1,275 an ounce on Monday after posting its biggest monthly gain in three years in the prior session following weaker-than-expected U.S. economic growth in the fourth quarter. Bullion is likely to maintain its safe-haven appeal amid renewed concerns over the Eurozone and the global economy.

Gold prices have fallen marginally in early European trading, touching a session low just below the $1,275/oz mark, around 0.5% below where they ended Friday.

Gold and silver both rose on Friday but were lower for the week – gold by 0.7 per cent and silver by 5.7 per cent. Even after the falls last week, the precious metals had impressive gains for the month of January – gold surged 8 per cent and silver by 10.3 per cent in dollar terms and by more in other currencies.

Get Breaking News and Updates Here





Koos Jansen reports that the FRBNY reported that only 10.31 tonnes f gold leaves its vaults in December. The figures do not match what Germany reported in December.  I wrote to Koos suggesting a possible explaination:


(courtesy Koos Jansen)




Posted on 31 Jan 2015 by

Federal Reserve New York Gold Withdrawal Numbers 2014 Don’t Match Dutch-German Repatriation Claims

From January to December 2014 the Federal Reserve Bank Of New York (FRBNY) has been drained from 176.81 tonnes of physical gold out of the foreign deposit accounts. A drop from 6,195.60 tonnes to 6,018.79 tonnes over 12 months, FRBNY data published on Friday showed. The FRBNY doesn’t disclose how much is withdrawn by which central bank.

FRBNY foreign gold deposits table 2014

FRBNY foreign gold deposits

These numbers do not match the claims made in Europe about gold repatriated from the US. This is bad news.

On November 21, 2014, the Dutch central bank, De Nederlandsche Bank (DNB), surprised the world by stating they had in utmost secret repatriated 122.5 tonnes from their gold deposit at the FRBNY. Although not specifically disclosed by DNB, all the gold must have been repatriated in 2014.

January 19, 2015, the German central bank, the Bundesbank, announced they had successfully repatriated 85 tonnes from New York and 35 tonnes from Paris in 2014. Of the 85 tonnes from the FRBNY 50 tonnes were recast according to the London Good Delivery (LGD) standard.

Some simple math: 122.5 tonnes plus 85 tonnes is 207.5 tonnes; this is the amount DNB and the Bundesbank claim to have withdrawn from the vaults in New York. The FRBNY states it only delivered 176.81 tonnes to their European allies across the pond. The gap accounts for 30.69 tonnes; this is “the problem” the three central banks are now facing.

“The problem” adds to a range of events that happened since 2011 and fueled speculation about whether the FRBNY can fulfill all their gold obligations to foreign depositors.

  1. Repatriating gold from New York in itself means the Europeans don’t trust the FRBNY as the custodian for their gold.
  2. Allegedly a delegation from the Bundesbank was obstructed by the FRBNY when they came to the New York vaults in 2011 to audit their gold.
  3. The Bundesbank refuses to publish a bar list of their official gold reserves. Just as the Netherlands, even after aDutch FOIA request.
  4. In 2012 the Bundesbank presented a schedule to ship home 150 tonnes from the US in three years (ending in 2015). In 2013 the Bundesbank changed their schedule to repatriate 674 tonnes from New York (300) and Paris (374) over seven years. Why did they change their initial schedule and why would it take seven years to hire a few planes to ship the gold from New York to Germany?
  5. In 2013 the Bundesbank only received 5 tonnes from New York. That is very little gold given Germany shouldhave safely stored more than 1,400 tonnes in nine compartments at the FRBNY. How hard can it be for the FRBNY to process a withdrawal request by a customer?
  6. The first batch from New York, the 5 tonnes, was said to be recast into LGD bars before stored in Frankfurt, but the Bundesbank refused to disclose why. In any case, the origin of newly cast bars can’t be traced, that makes it impossible to know if it came from New York or someplace else.
  7. During the recasting of the bars no independent external auditors were present.
  8. In 2014 DNB stated to have repatriated 122.5 tonnes from New York – presumably in less than 10 months. Why can’t the Bundesbank repatriate in this tempo?
  9. 50 of the 85 tonnes Germany repatriated from New York in 2014 were recast in LGD bars before stored in the vaults in Frankfurt. Again, no details were disclosed by the Bundesbank about bar numbers, nor was any independent party allowed to audit and assay the gold. For some reason the Bundesbank did mention the BIS was involved in an audit: “We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities” 
  10. Late January 2015 the IMF published an update of the foreign exchange reserves of the Netherlands that showed DNB had bought 10 tonnes of gold in December 2014. A few hours later DNB denied it had bought any gold, without elaborating on how the IMF got the false numbers. Kind of adventitious given everything mentioned above. Perhaps DNB did buy gold in 2014 because there was something wrong with the gold they repatriated from the FRBNY or they wanted to repatriate more, but weren’t allowed? Of course, this had to be carefully covered up. Any problem that would have occurred from repatriating gold from the FRBNY can never be openly discussed for it would destabilize the international monetary order.

The list goes on and on. Perhaps the latest data released by the FRBNY is a typo, perhaps 30.69 tonnes was shipped to Germany early January 2015 and the Bundesbank counted this as repatriated in 2014 to make the tonnage shipped home in 2014 look less worrisome compared to the tonnage DNB got back, perhaps there is a explanation for the gap in tonnage reported by both sides of the Atlantic. I surely hope so. In any case it’s very alarming the three central banks didn’t even take the simple effort to make it seem all the numbers add up.

I will call and email all three central banks on Monday to confront them with the current situation, although I doubt either will change any of their numbers. In my opinion there can only be three causes for “the problem”:

  1. Someone is lying. That can be DNB, the FRBNY or the Bundesbank.
  2. There has been a gold swap between the FRBNY and some other central bank. This other central bank (or BIS) would than have delivered 30.69 tonnes to Germany, in return it got a claim on gold at the FRBNY. But why? Such a scenario wouldn’t lift any concerns regarding the FRBNY’s gold obligations, au contraire. Besides, both DNB and the Bundesbank specifically meant to repatriate gold from New York, where according to official sources their gold is supposed to be.
  3. UPDATE 8 PM GMT+1: Commenter “awgee” (read below) asked me if I failed to consider if a central bank, other than DNB or the Bundesbank, added gold to their stock at the FRBNY in 2014 which could explain the gap. The answer is I didn’t consider this, though it’s a very good point. If any central bank deposited approximately 31 tonnes in 2014 this would actually be the most obvious explanation for “the problem”. As far as my data goes back (1995), the last time a deposit was visibly made was in October 2011 (4 tonnes), and before that in February 1999 (3 tonnes). It doesn’t happen often, but it can happen. (as the FRBNY only discloses the total amount of gold in foreign accounts, we can only see deposits being made during a month with no withdrawals or during a month when deposits transcend withdrawals).  

To be continued…

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

and this is my response to Koos:


Harvey Organ <harveyorgan@gmail.com>

5:32 PM (20 hours ago)

to Koos, Bill
Gold from the FRBNY:

Total gold shipped in December figures for November  47.15 tonnes
amount of gold accounted for in FRBNY figures in December for November belonging to Dutch National Bank:  3.5 tonnes
Total of gold projected by us in December for Germany to be released on Jan 31.2015:  43.65 tonnes
(47.15 tonnes -3.5 tonnes of Holland =  43.65 tonnes)
Germany states that 85.00 tonnes of gold received in 2014 from FRBNY
Thus 85.00 tonnes –  43.65 tonnes or 41.35 tonnes is owing:
Shipped: 10.31 tonnes in December and belonging to the January figures
Deficit:  31.04 tonnes of gold
My bet:  the Ukrainian gold never entered the FRBNY so it was not shipped out from there
it was shipped from Kiev straight to  Frankfurt




Bron Suchecki offers his version on the repatriation.


(courtesy Bron Suchecki/GATA)



Bron Suchecki: Repatriation update


3:04p ET Saturday, January 31, 2015

Dear Friend of GATA and Gold:

Gold market analyst Bron Suchecki of the Perth Mint today notes the seeming discrepancies around the recent repatriations of German and Dutch gold reserves from the Federal Reserve Bank of New York and concludes that the discrepancies may be best explained by unannounced gold swaps.

Indeed, in 2009 a member of the Board of Governors of the U.S. Federal Reserve confirmed to GATA that the Fed has secret gold swap arrangements with foreign banks:


Why should central bank gold transactions be so secretive and mysterious? Is it to prevent Doug Casey from realizing that central banks are a little more relevant to the markets than he thinks? Is it to avoid hurting the feelings of CPM Group’s Jeff Christian, who portrays himself as a consultant to most central banks and affects that he knows everything they do with gold? Or might it be because disclosure of gold transactions by central banks would impair their surreptitious market interventions and manipulations, as the secret March 1999 report of the staff of the International Monetary Fund concluded?:


Suchecki’s detective work is headlined “Repatriation Update” and is posted at his Internet site, Gold Chat, here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.






Koos corrects the GFMS gold volume:


(courtesy Koos Jansen)




Posted on 31 Jan 2015 by

GFMS Reports Chinese Gold Trade Volume Incorrect By 100%

Thomson Reuters GFMS, one of the leading consultancy firms regarding precious metals supply and demand data has recently released the GFMS Gold Survey 2014 – Update 2. From the report:

Thomson Reuters’ supply and demand data are collected and collated by our team of research analysts based in Australia, China, Europe, India and the USA within an extensive field research programme which involves interviewing stakeholders across the supply chain in every market and utilizing the unique data sets available to us after researching the market continuously since 1967.

… [etc]

All this information, including mine cost profiles, analysts “view of the field”, disaggregated supply and demand data back to 2000, as well as base case and two alternative scenarios underpin price forecast for one, three, and ten year periods and are now available on Thomson Reuters Eikon.

For the ones that don’t know, Thomson Reuters Eikon is a data terminal that costs you something in between $800 and $1,800 a month, depending on how many bells and whistles you prefer.

In a previous post I noted I didn’t agree with GFMS on Chinese gold demand 2014, disclosed by them at 866 tonnes while supply in China was 1,833 tonnes (import 1,200 + mine 451 + scrap 182), resulting in a gap of 967 tonnes. But I would like to save the demand discussion for another post to expand upon.

The section in the GFMS report that shows gold trading volume on the largest exchanges of the planet looks like this:

Screen Shot 2015-01-31 at 9.51.43 PM

The table is obviously meant so readers can compare the gold volumes traded on the major exchanges; all data is computed into metric tonnes. The COMEX data is correct, the CME publishes gold futures volume as number of contracts, when I multiply all contracts traded in 2014 by 100 ounce, which is the size of one contract, and divide the total amount of ounces by 32151, the total tonnage is 126,007. (Just about the same as GFMS reports.)

Then, the Shanghai Futures Exchange (SHFE), the primary gold futures exchange in China. One gold contract/lot on the SHFE equals 1 Kg. The SHFE publishes gold futures volume as number of contracts, when I add all contracts traded in 2014 and divide the total amount by 1,000, the total tonnage is 47,500 tonnes. Seemingly the same as GFMS reported.However, volume on the SHFE is counted double-sided, or bilaterally. From the SHFE:

  1. The unit for trading volume, open interest and the change of open interest is lot, herein are double-side counted; trading value herein is double-side counted.

There for the total tonnage has to be divided by 2 if compared to COMEX volumes. The actual total tonnage traded on the SHFE in 2014 was 23,750 – counted unilaterally. GFMS has effectively double counted SHFE gold trading volume. This way GFMS has also disclosed all data from the SGE incorrect – Au(T+D) and the spot contract. Fromthe SGE

The Volume [Kg] and Amount are calculated bilaterally.

The open interest and turnover on the SHFE and SGE are counted bilaterally as well. Additionally, take note I’ve written on August 27, 2014, GFMS was making exactly the same mistake on their silver numbers, in the World Silver Survey 2014:


Imagine you pay $1,800 a month for an Eikon terminal that feeds you inaccurate Chinese volume and open interest data. Previously I noticed an error in the Bloomberg terminal that discloses the Chinese price of silver including 17 % VAT, and thus feeding false data.

Of course it’s anyone’s choice to decide what data to use or how to interpreted data, this post is merely meant to share my view on Chinese precious metals trade data in a effort to help investors to get a better perspective on global markets.

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com







(courtesy Alasdair Macleod)



Alasdair Macleod: More euro-tragedy


3:05p ET Friday, January 30, 2015

Dear Friend of GATA and Gold:

“Quantitative easing,” GoldMoney research director Alasdair Macleod writes today, “transfers wealth from savers to financial speculators and other early receivers of the new money. Somehow, the impoverishment of the working and saving masses for the benefit of the central bankers’ chosen few is meant to be good for the economy.”

And now that “QE” is being internationalized through competitive devaluations, Macleod adds, gold demand is likely to rise in the advanced Western economies, even as demand lately has been high in Asia.

Macleod’s commentary is headlined “More Euro-Tragedy” and it’s posted at GoldMoney here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.






(courtesy Andrew Maguire/Kingworldnews/Eric King)






Maguire says deadly challenge to London gold market is imminent


10:34p ET Friday, January 30, 2015

Dear Friend of GATA and Gold:

Interviewed by King World News, London metals trader Andrew Maguire predicts that a deadly challenge to the London gold market and London Bullion Market Association is only days away from being announced. Maguire’s interview is excerpted in two parts at the KWN blog here:



And Swiss gold fund manager Egon von Greyerz tells KWN that gold has broken upward in nearly every currency and is about to leave them all in the dust:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




Interesting:  Chinese banks to join in the new gold fix in March:


(courtesy London’s Financial times/GATA)





Chinese banks to join new gold fix in March


By Henry Sanderson
Financial Times, London
Monday, February 2, 2015

The replacement for the near-century old London gold fix will start in March, with the hope of attracting at least 11 members, including Chinese banks for the first time.

UK financial authorities are undertaking an assessment of financial benchmarks in the wake of a series of scandals, including the gold fix.

The presence of Chinese banks would give the world’s second-largest consumer of the yellow metal a greater say in the global gold price. Participants in the fix aggregate orders from clients on to a platform to determine the price. …

… For the remainder of the report:






With all the turmoil on Friday and then again today, Bill Holter puts it all together:


(courtesy Bill Holter/Miles Franklin)




Choosing sides.



This past week was filled with geopolitics 24/7 until Friday, when they finally spilled all over the markets.  The market action was extremely ominous in my opinion and especially the last hour into the close.  Very shortly I believe we will be faced with huge market “gaps” which will be the topic for tomorrow, today let’s discuss how the current geopolitical situation will detonate the leverage.
  It’s not as if the geopolitical situation wasn’t already hot enough before the Greek vote, now the world has a polarizing event to deal with.  This past week was a sparring match between the Syriza party of Greece and the EU, a line in the sand has now been drawn, Feb. 28.  Before looking at all of the sides being chosen and alliances being formed, it is important to understand that “lines in the sand” are a very VERY bad thing indeed …especially when we are talking about “nations”.  Drawing a line in the sand and placing a date on it means someone must lose face on one side or the other.  Don’t get me wrong, one way or the other Greece will implode financially, it will open the floodgates for other weak southern European nations and ultimately destroy the Eurozone as we know it, but, now there is a hard date for all of this to occur by.  A Greek failure or exit will also set off a derivatives chain reaction, this is what I believe Friday’smarket action was portending.
  The Euro/Greek fracas is not all there is, there is much more including the Russia/China/India meeting and the Russia/Iran allegiance, I will bring them in later, for now,  let’s focus on Greece since the Eurozone has now declared them the “firing pin”.  Greece is a financial wreck.  They have national debt at a rate of 175% of GDP and rising, especially as GDP continues to collapse.  They also experienced bank runs by the public over the last several weeks and saw outflows of more than 10% of total deposits.  Their stock and bond markets crashed this week as interest rates approached 20%, Greece will mathematically go down one way or the other.
  Over the next 25 days, some “philosophical” decisions will need to be made, none of them will be pleasant.  In a nutshell, Greece wants its debt balances lowered in a “haircut fashion”, the ECB cannot agree to this as they would then have to admit losses and no longer be able to price Greek debt at the ridiculous price of “par”.  The Troika wants to offer 7 billion euros as an extension package to prolong the game, Mr. Tsipras flat out rejected this on Friday (thus the market action) and does not want to accept it, he is steadfast in lowering the amounts owed rather than taking more handouts and increasing the debt balances.
  This is a true showdown and one where no matter what happens, no one wins because the losses have already taken place.  Greece has already borrowed too much and cannot pay it back so the losses are already in place whether admitted and acknowledged or not.  Please understand that Greek bonds act as “collateral” within the derivatives daisy chain.  Any write down or writeoff will be considered a “default trigger” where margin calls are issued to an already illiquid and undercapitalized derivatives chain.  The financial system is in a position where calling a spade a spade will cause the roof to cave in, not calling it a spade and ignoring the reality is the only thing keeping the game alive to this point!
  Enter Mr. Putin and the Russians, they have offered aid to Greece should they turn East.  This would be a disaster for Europe herself as the next question would be “who’s next?”.  The bottom line is this, as I said “the losses have already taken place”, are they recognized now or later?  One last point about Greece, should they lean East, but stay as a member of the Eurozone and NATO, they can now veto any sanctions the U.S. would like to place on Russia …ironic in a very dark way don’t you think?  Greece would be a huge win for Russia in so many ways and an even bigger loss for the West in every fashion imaginable.
  China, Russia and India will meet on Monday in Beijing, can you imagine what will be discussed?  Especially after Mr. Obama just visited India last week?  Will it go something like “whatever they offered you is either not best for you …or an outright deception”?  Will India be offered a spot at the Eastern monetary table, the future “big” table if you will?  Are they being given a heads up on any timing issues or even requested to lower their gold tariffs to put a further squeeze on Western vaults?  Interesting stuff!
  Switching to the Middle East but again including Russia and by extension China, Iran and Russia seem to be dancing partners!  This has very big ramifications when you look at it from the religious/allegiance standpoint.  Iran is Shia which means they have a natural allegiance toward Syria, Russia also has reason to back Syria as they do not want to see a pipeline built as competition to their own gas.  Just a week back, Russia and Iran signed a military agreement,  Russia is also discussing constructing nuclear plants within Iran.  Iran has also been invited to join Russia’s new clearing system which will compete (be an alternative to) with the SWIFT system.  All BIG news and now coming day after day after day.
  Before wrapping up, we should mention that China has ratcheted up her imports of gold.  The final two weeks of January were 70 tons and 71 tons.  Should this be their new run rate, they will be importing 40% more gold annually than the world produces.  Why?  Why are they ramping up imports just now?  My personal guess is they know something is about to happen and want everything they can get their hands on as fast as they can.  To put this in perspective, in just two weeks, China has imported six times more gold than the COMEX even claims to have as deliverable inventory!  In my opinion, COMEX will very shortly be relegated into irrelevance as they simply do not have the product available for delivery.  A “two tier market” will result and it is very possible to see large down days on the COMEX and huge up days in physical metal as traders begin to understand the true dichotomy between paper gold and physical gold.
  We have watched over the last several months as countries jockey for position.  Allegiances of trade, military and finance have been created and “sides” are being chosen.  The key to understand here is that those announcing deals have nearly ALL been toward the East and away from the West.  Clearly, gold is also moving to the East from the West.  Once the sides are fully chosen, who do you believe will be making the rules?  “Gold” and whomever owns it will have a voice, got gold?
  To finish, I believe Friday’s closing action is merely a preview to “gap” openings in all directions one day in the near future.  The world has been in the process of choosing sides for several years and it is now coming to a head.  Many deals and alliances have been formed and in case you had not noticed, the West, led by the U.S. is losing influence as each new deal is signed.  This is because the world wants fairness in trade, they want true and real settlement which has not been the case since 1971.  We are moving toward gold being remonetized into the financial system because this is what the world is demanding.  Below, and capitalized because it is so very true, is a quote from my mentor which sums up the attitudes of most, if not the entire world excluding Britain and the U.S..  Please read this several times and let it sink in thoroughly because this quote will be the basis for what I write tomorrow.
Regards, Bill Holter



And now for the important paper stories for today:

Early Monday morning trading from Europe/Asia

1. Stocks mainly down on major Asian bourses  / the  yen falls  to 117.60

1b Chinese yuan vs USA dollar/ yuan weakens  to 6.26 ( hits upper level of peg)
2 Nikkei up 116.35 points or 0.66%

3. Europe stocks  mostly in the red   // USA dollar index down to 94.75/

3b Japan 10 year yield back up to .29% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.72/

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 49.05 Brent: 54.31 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold down /yen down;

3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion

Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP

3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)

3j Oil rises this morning for  WTI and rises for  Brent/USA unions call for an oil strike this morning.

3k deflation forces in full swing last night throughout Europe and USA

3l  Australia’s central bank looks to join 12 other central banks in lowering interest rates.

3m Gold at $1273.00. dollars/ Silver: $1710

3n USA vs Russian rouble:  ( Russian rouble  down 1/2 in roubles per dollar in value)  68.97!!!!!!

3 0  oil rises into the 49 dollar handle for WTI and 54 handle for Brent

3p Markets react to Greece being serious about leaving the euro/worries about spread of “Greek virus”  to other peripheral European nations/Greek finance minister not interested in the final release of 7 billion euros of bailout money/France supports Greece for a “debt haircut”/Tsipras calms the markets as he states that a deal is imminent.

3Q  SNB (Swiss National Bank) intervening again driving down the SF/window dressing/Swiss rumours of a soft peg at 1.05 Swiss Francs/euro. /plunge in Swiss PMI from 53 handle down to 48 handle.

3r European PMI as expected.

3s  Poor Chinese data/poor PMI etc

4. USA 10 yr treasury bond at 1.72% early this morning. Thirty year rate well below 3%  (2.29%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid

(courtesy zero hedge)/your early morning trading from Asia and Europe)



Market Wrap: Futures Attempt Bounce On Sudden Rebound In Crude


The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today’s highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.

A little more on the biggest move of today, when WTI rallied more than $2 in 10 minutes as the focus returned to record drop in weekly U.S. rig use amid strike at refineries that may cut oil-product supply. The problem for now is that while the US rig count is plunging, US production has yet to show even the smallest downturn, however headline reacting algos have yet to be programmed to pay attention to the difference. Violence in Iraq boosts Brent as premium to WTI expands to more than $5. “It looks to be driven by products –gasoil is up ~10%, gasoline 4%– which is related to the strike in the U.S, driving up the crack spreads and pulling up crude as well.” Ole Hansen Saxo Bank head of commodity strategy was quotes by Bloomberg. “It is an extension of Friday, when we really saw shorts on the run, now the products have started to move they have started to go for safety.”

It remains to be seen if the NYMEX session “banging the close” forced short squeeze from Friday can withstand the global deflationary wave. Look for Exxon’s earnings to set the mood when it reports at 8 am today, a mood which judging by the collapse in energy company earnings expectations will not be euphoric.

Meanwhile, going back to Switzerland, while Europe overall reported a final PMI of 51.0, in line with the Flash estimate (the monthly rise is largely attributable to Manufacturing PMIs for France and Italy — which increased by 1.7pt (to 49.2) and 1.5pt (to 49.9) respectively — and, to a lesser extent, by the 0.9pt rise in the Spanish Manufacturing PMI (to 54.7) even as both the German and French Manufacturing PMIs undershot their flash estimate by 0.1pt and 0.3pt respectively), it was the plunge in the Swiss manufacturing PMI which tumbled in January, declining from 53.6 in December to 48.2 in January, its lowest reading since October 2012. The “backlog of orders” sub index dropped almost 10 points to 44.2 after 53.6.

Goldman said this reflects “the sharp appreciation of the CHF after the end of the minimum exchange rate” and it is right. But there’s more:

The SNB ended its policy of a minimum exchange rate against the Euro, which led to a sharp appreciation of the CHF, only in the middle of January. Today’s decline in the manufacturing PMI therefore only partially reflects the adverse effects of the appreciation of the exchange rate and we would expect a further weakening in sentiment in the manufacturing sector going forward. The KOF index had recorded a less pronounced decline in January (97.0 after 98.8). But the KOF index also includes more domestic-oriented sectors and is therefore less responsive to exchange rate movements.

That’s ok though: with Switzerland about to join the global recession, surely a few momentum-ignition algos will save global crude demand post-haste.

And speaking of global recession, with every passing day China is getting closer to one: Asian equities traded mostly lower taking the lead from a negative Wall Street close on Friday with sentiment further weighed on by poor Chinese data. Chinese Mfg. PMI reading saw its first contraction since Sept’12 (49.8 vs. Exp. 50.2 (Prev. 50.1), while the HSBC reading saw a consecutive month of contraction (49.7 vs. Exp. 49.8 (Prev. 49.8). Hang Seng (-0.1%) and Shanghai Comp (-2.6%) remain in the red, the latter having posted its biggest fall in 2-weeks. Nikkei 225 (-0.6%) recovered some earlier weakness underpinned by a weak JPY.

The first European session of the week sees equities open in relative calm after an easing of tensions between Greece and Europe. This comes as Greek PM Tsipras commented over the weekend that a debt deal is imminent and Greece will fulfil obligations to the Troika, adding that talks with European nations is in early stages but he is confident they will reach an agreement that benefits everyone. This has seen the ASE retrace some of its losses from last week, and the GR/GE 10Y spread is tighter by over 35bps. Greek banks are also outperforming as ECB’s Constancio commented over the weekend that ELA (Emergency Liquidity Assistance) is ultimately up to the ECB’s governing council so will be available for Greek banks even if Greece fails to agree on further support from the European Union and the IMF. The IBEX is the underperformer of the European indices after Santander (-2.9%) opened the session Ex-div and Telefonica (-3.4%) fell amid reports of a share sale plan worth EUR 4-5bln. European PMIs this morning showed a mixed picture and failed to move the market.

Both T-Notes and Bunds have traded range bound this morning, with little news flow during the European mornings to move the US and European benchmark. However, looking ahead, there are a host of tier one data this afternoon coming out of the US, including personal income, PCE deflator and manufacturing PMI, while market participants will also be looking out for Exxon earnings, due at 1300GMT.

In FX, EUR/CHF has spent the European morning extending on gains following weekend source comments suggesting that the SNB is unofficially targeting EUR/CHF at 1.05-1.10 which will cost CHF 10bln, with the cross spending the morning above the 1.05 handle. Elsewhere, AUD has strengthened this morning amid short covering ahead of tomorrow’s RBA rate decision, despite RBA watcher McCrann heightening expectations for a rate cut. This comes as Goldman Sachs suggest that if the RBA do not cut their key rate, AUD/USD may bounce back above the 0.8000 handle.

The energy complex sees Brent and WTI trade higher today, erasing overnight losses after originally coming off Friday’s highs which saw WTI close 5% higher in the wake of the Baker Hughes rig count fell by over 90 rigs, the biggest fall since 1987. One piece of news of note is the strike by the United Steelworkers Union, which represents employees at more than 200 US oil refineries, terminals, pipelines and chemical plants. The strike takes place at 9 sites and is the biggest walkout called since 1980.

In Summary: European shares trade mixed, off intraday lows, with the travel & leisure and banks sectors underperforming and oil & gas, autos outperforming. Greek banks rise, Spanish banks fall. Merkel said unlikely to agree to bilateral meeting with Tsipras at EU summit next week. Greek finance minister said late yesterday country needs ECB’s help to keep its banks afloat. Euro-area January manufacturing PMI in line with estimates, Chinese manufacturing PMI below, U.K. above. The Spanish and Italian markets are the worst-performing larger bourses, the German the best. The euro is stronger against the dollar. Japanese 10yr bond yields rise; Greek yields decline. Commodities gain, with gold, silver underperforming and Brent crude outperforming. S&P futures rise. U.S. Markit manufacturing PMI, ISM manufacturing, construction spending, personal income, personal spending due later.

Market Wrap

  • S&P 500 futures up 0.4% to 1997
  • Stoxx 600 down 0.3% to 366.1
  • US 10Yr yield up 4bps to 1.68%
  • German 10Yr yield up 1bps to 0.31%
  • MSCI Asia Pacific down 0.2% to 140.2
  • Gold spot down 0.6% to $1275.9/oz
  • Euro up 0.4% to $1.1336
  • Dollar Index down 0.13% to 94.68
  • Italian 10Yr yield down 3bps to 1.57%
  • Spanish 10Yr yield up 1bps to 1.43%
  • French 10Yr yield down 0bps to 0.54%
  • S&P GSCI Index up 1.9% to 397
  • Brent Futures up 3% to $54.6/bbl, WTI Futures up 2.2% to $49.3/bbl
  • LME 3m Copper up 0.8% to $5540/MT
  • LME 3m Nickel up 0.9% to $15305/MT
  • Wheat futures down 0.2% to 501.5 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

  • EUR/CHF has spent the European morning extending on gains following weekend source comments suggesting that the SNB is unofficially targeting EUR/CHF at 1.05-1.10 which will cost CHF 10bln
  • Greek PM Tsipras stated over the weekend that a debt deal is imminent and Greece will fulfil obligations to the Troika, adding that talks with European nations is in early stages but he is confident they will reach an agreement that benefits everyone
  • Looking ahead, there are a host of tier one data this afternoon coming out of the US, including personal income, PCE deflator and manufacturing PMI, while market participants will also be looking out for Exxon earnings, due at 1300GMT/0700CST
  • Treasuries fall in overnight trading after last week saw fifth straight weekly drop for U.S. 10Y yield, which closed at lowest since May 2013, while 30Y yield closed at record low 2.252%.
  • China’s official PMI fell to 49.8 last month from 50.1 in December, missing the median estimate of 50.2 in a Bloomberg survey of analysts
  • U.K. manufacturing growth accelerated in January as factories saw a pickup in domestic orders and the biggest decline in raw-material costs in almost six years
  • Australia’s central bank is seen joining at least 12 monetary authorities that have eased policy since the New Year, as even a nation that has grown for more than 23 consecutive years catches the global disinflation bug
  • Greek Prime Minister Alexis Tsipras began the hunt for allies against German demands for austerity as his week-old government appealed to the ECB not to shut off the money tap
  • French Finance Minister Michel Sapin said he wants to facilitate a new deal for Greece with its official creditors after hearing the country’s plans for economic revival
  • Merkel wants to avoid being drawn into a direct confrontation with Tsipras and is unlikely to agree to a bilateral meeting with him at an EU summit next week, a German government official said
  • Julius Baer Group Ltd. said it plans to reduce costs by CHF100m ($108m), including 200 job cuts, as a surge in Switzerland’s currency may crimp profit at the nation’s third-largest wealth manager
  • President Obama will send a $4t budget blueprint to Congress today that would raise taxes on corporations and the nation’s top earners, fund projects in infrastructure and education. Proposes that U.S.-based companies pay a minimum 19% tax on their future foreign earnings, capturing profits that are now often beyond the government’s reach
  • The Justice Department is seeking to advance a more-than-five-year probe into whether Moody’s inflated ratings during the U.S. housing boom, according to three people familiar with matter
  • The New England Patriots collected their fourth Super Bowl title as the Seattle Seahawks’ quest for a second straight championship ended with a goal-line interception in the final minute of the game
  • Sovereign yields mostly lower, Greece 10Y falls 44bps to 10.74%  Portugal and Italy also lower. Asian stocks mixed; European stocks mostly lower, U.S. equity-index futures gain. Brent, WTI and copper rise; gold drops

* * *

DB’s Jim Reid concludes the weekend event recap



Welcome to February, a month that may ultimately seal Greece’s fate within the EU and tell us more about how permanent the Euro might be longer-term. We’ll review a wild and volatile January at the end – a month that saw a wide range of returns across our global pool of assets. With regards to Greece, last week’s new Government certainly hit the ground running in a very aggressive manner scaring the international community with their rhetoric. They also scared their own banking sector with the sector’s equity down around 38% post election. The official EU response has been pretty strong too suggesting limited desire to cede to the new Government’s approach. The current program Greece is under expires on February 28th so this will be a month of high stake negotiations with Greek banks seen as vulnerable to collapse if a compromise can’t be found. There was perhaps some hint of a softer stance over the weekend with the Greek PM Tsipras issuing a statement that suggested he was confident “we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole” and that he was not “seeking conflict”.

The softer stance over the weekend was also helped by Finance Minister Varoufakis saying that Greece will not ask for any more aid under its current agreement and that ‘during this period, it is perfectly possible in conjunction with the ECB to establish the liquidity provisions that are necessary’ after being quoted on Bloomberg. Comments out of the French finance minister Sapin were also probably more encouraging. Specifically Sapin was quoted on Reuters as saying that ‘given the government would like to discuss ways to reduce the weight of this debt and the reimbursement of this debt, that appears (to be) legitimate to me’ whilst also reinforcing the view that it’s beneficial for Greece to stay in the Eurozone. Meanwhile, Merkel, in an interview with Hamburger Abendblatt over the weekend noted that ‘I do not envisage fresh debt cancellation’. The hire of Lazard Bank to advise on Greece’s debt burden is evidence that developments are moving quickly and over the next few days we see Varoufakis meet with UK and Italian counterparts as well as getting the ECB bi-weekly decision on Greek ELA on Wednesday which we expect to have come under greater demand lately and most probably under greater scrutiny by the ECB as well. Wednesday also sees a likely t-bill auction for the government to cover the upcoming redemption and on Thursday we see the Greek parliament reopen. Next weekend we see the Greek government present legislative agenda to parliament with a vote of confidence due on Monday. So all eyes on Greece once again this week.

Another political event worth keeping an eye on is in Spain where tens of thousands of people descended on Madrid for a rally organized by the upstart leftist party Podemos. The anti-austerity rally was used as a sign of political strength ahead of the local elections this spring and general elections later in the year with the event popularity likely buoyed by the recent Syriza victory. Podemos leader Iglesias was quoted in the WSJ telling the crowd that ‘the Greek people have won in Greece’ and that ‘we need dreamers who dare to defend the poor to fight the rich’. Politics is a huge threat to the Euro over the years ahead and how the Greece situation is handled might have big consequences elsewhere so its certainly a big month ahead.

In terms of the market reaction in Asia this morning, bourses have declined sharply with the Nikkei (-0.75%), Shanghai Composite (-1.79%) and Hang Seng (-0.46%) all lower. With regards to China, over the weekend the nation released its official manufacturing PMI for January with the print coming in below 50 at 49.8 and down 0.3pts from the previous reading. The print was the first below 50 since September 2012 whilst business expectations in particular dropped to the lowest level on record. Our China economist Zhiwei Zhang noted that the recent print reinforces the view that growth will slow sharply in Q1 following a cut to the GDP forecast from 7.2% to 6.8% earlier this month as the economy faces headwinds from a property slowdown and a fiscal slide. Our China team expects the government to loosen monetary policy aggressively in H1 with two interest rate cuts and two RRR cuts expected over the full year.

Coming back to markets on Friday, in the US the S&P 500 finished -1.30% to close just shy of its lows for the month. Credit markets also finished softer with the CDX IG finishing 2.5bps wider. Treasuries on the other hand saw a firm bid with the broad risk-off tone. 10y benchmark yields tightened 11.1bps to close at their lows for the day at 1.641% – the lowest level since early May 2013. 30y yields meanwhile struck a fresh record low at 2.222%, down 9.3bps on the day. The rally in Treasuries was no doubt helped by a softer than expected Q4 GDP report with the annualized 2.6% print coming in both below expectations (3.0%) and down from 5.0% previously. Our US colleagues in particular noted that net exports dragged the reading lower which subtracted 100bps from real GDP. In fact it was a busy day data-wise on Friday. The employment cost index offered few surprises with the +0.6% coming in as expected whilst personal consumption rose 4.3% (annualized) over Q4 which was the largest gain since Q1 2006, buoyed by lower energy prices. Elsewhere the ISM Milwaukee declined 6pts to 51.6 although the Chicago purchasing manager index was a beat (59.4 vs. 57.5 expected). The University of Michigan sentiment index was largely unchanged at 98.1 for January.

With Friday’s data perhaps more in favour of the doves, the Fed’s Bullard lent some support to the hawks when he was quoted on Bloomberg saying that the ‘market has a more dovish view of what the Fed is going to do than the Fed itself’. The Fed official went on to say that ‘if I were going to play it strategically, I’d rather get off zero sooner and then have more flexibility to go slower and react to data’. Bullard did however acknowledge the moves in oil saying that ‘we’re going to have to let the oil markets settle down (and) stabilize at some level’. Just on oil, with much of the focus on Greece and US data, an +8% rally in WTI and Brent was somewhat overshadowed on Friday. The moves came about following the latest Baker Hughes rig count which showed the number of operating rigs decreasing by 94 last week to a fresh three year low. Reuters reported that the latest fall in rigs was a lot greater than expected and prompted short-covering over concerns that slowing US oil production could be closer than expected. Chevron meanwhile reported better than expected results on Friday although they continued the trend of cutting capex after noting that it would cut it by 13% this year. In fact staying on oil, one thing to potentially keep an eye on in the near term is the news over the weekend that the United Steelworkers union had told its workers at nine US refineries and chemical plants to strike yesterday over issues on pay and benefits. As per Bloomberg, the strike is the first of its kind since the 1980s and the refineries currently on strike can produce about 10% of total US capacity. Significantly however, the Union covers 64% of total US fuel production.

Wrapping up Friday’s price action, it was also a weaker day in Europe with both the Stoxx 600 (-0.46%) and DAX (-0.41%) trading lower, not helped by the decline in Greek equities (-1.6%). It was a strong day for government bonds in Europe with 10y yields in Germany (-5.6bps) and France (-6.1bps) rallying. The Euro was modestly weaker (-0.26%) versus the Dollar at $1.129. In terms of data, Euro-area headline inflation dropped to -0.6% yoy in January, down from -0.2% previously and lower than the -0.5% expected. Although energy prices were to blame for the drop there was also a fall for the core rate which declined to +0.6% yoy from +0.7%. Meanwhile the unemployment rate fell one-tenth to 11.4% and German retail sales surprised to the upside (+4.0% yoy vs. +3.6% expected). The theme of Central Bank easing continued with Russia surprising markets and announcing a 200bps cut to their benchmark rate to 15%. The move comes after a 650bps hike in December with the Central Bank shifting its focus from inflation to ‘the sizeable decline in economic activity’. Having hit an intraday high of 71.8 versus the Dollar, the Rouble closed at 69.5, still 0.72% weaker on the day.

In terms of the week ahead, we kick off this morning in Europe with the final manufacturing PMI prints for the Euro-area, Germany and France as well as the preliminary reading out of the UK. It’s a busy day data-wise in the US this afternoon kicking off with price deflator data and following up with the personal income and spending readings, final manufacturing PMI, construction spending and then rounding off with the ISM manufacturing and prices paid. Turning to Tuesday we’ve got PPI for the Euro-area as well as inflation data out of Italy and the construction PMI for the UK. Across the pond on Tuesday we’ve got the ISM New York, factory orders and the IBD/TIPP economic optimism reading. Kicking off Wednesday we’ve got early services PMI’s readings out of Japan and China along with cash earnings data in the former. Closer to home on Wednesday we’ve got the final PMI services readings for January due out of the Euro-area, France and Germany. Also due out of the Euro-area is retail sales for the December period. In the US on Wednesday we’ve got the ADP employment change print which should be a decent precursor into Friday’s payrolls. The ISM non-manufacturing and services prints round off the releases for the US on Wednesday. Turning to Thursday, we’ve got the BoE decision due in the UK as well as factory orders out of Germany. Over in the US on Thursday we’ve got more employment data with Challenger job cuts and jobless claims prints along with nonfarm productivity, unit labour costs and trade data. We round off the end of the week with the leading index print out of Japan followed by German industrial production and trade data out of the UK. Friday afternoon will no doubt be highlighted by the nonfarm payrolls print in the US with the market looking for a 235k reading and our US colleagues looking for an above consensus 240k gain. Average earnings, unemployment and consumer credit round off the week.





Overnight, Chinese stocks tumble with terrible PMi numbers as the yuan plunges to 7.26 yuan to the dollar. It has reached its upper limit on the peg.


(courtesy zero hedge)


Chinese Stocks Tumble To Worst 3-Week Slump In A Year As Yuan Plunges To Record Discount



On the heels of worse than expected Manufacturing PMIs (both indicating economic contraction) and the “taking away” of Minsheng Bank’s CEO in a clear signal that the corruption probe is refocusing on the banking industry, Chinese stocks and currency are tumbling. Retail investors dreams are going up in smoke as the Shanghai Composite suffers its biggest 3-week loss in over a year and tumbles to a 3.8% loss year-to-date – not what the gambling ‘investors’ were expecting. But perhaps more worryingly for Chinese officials is the continued selling pressure on the Yuan – now at a record 1.94% discount to PBOC’s fixing – very close to forcing intervention of decision time on a wider peg-band or even more free-floating currency.


Chinese stocks down over 2% at the open – lost all 2015 gains…


With the biggest 3-week loss since early 2014…


As the Yuan keeps getting sold…


In spite of the government’s warning to NOT BUY DOLLARS.


Charts: Bloomberg





Saturday afternoon, the ECB threatens Athens that if there is no deal, Feb 28 is the last day for funding:


(courtesy zero hedge)



ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece

As Deutsche Bank’s George Saravelos politely puts it, “Developments since the Greek election on Sunday have moved very fast.” And indeed, so far the new Tsipras cabinet, and here we focus on the words and deeds of the new finance minister Yanis Varoufakis, has shown that the market’s greatest hope – that the status quo in Greece will continue – has been crushed into a pulp (and so have Greek stock and bond prices) especially following yesterday’s most recent comments by the finmin in which he said that Greece “does not want the $7 billion” from the Troika agreement and that it wants to “rethink the whole program”, culminating with an epic exchange with Eurogroup chief Jeroen Dijsselbloem in which Greece made it clear that the “constructive talks” are over.

And suddenly the Eurozone is stunned, because what had until now been its greatest carrot when it comes to dealing with Greece, has become completely useless when the impoverished, insolvent nation itself says it no longer needs a bailout, seemingly blissfully unaware of the consequences.

So earlier today the ECB’s Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a massive defection by Greece in the European “prisoner’s dilemma”, and which while leading to a Greek financial collapse and Grexit – both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro –would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector.

And since only the ECB backstop has prevented a banking sector panic, the ECB is essentially betting the house, and the sanctity of the Eurozone (because after a Grexit all bets are off which peripheral leaves next) that the threat, and soon reality, of a bank run (at last check Greece had about €145 billion in deposits still left in its bank after JPM’s latest estimate of €15 billion in outflows in January) will finally force Varoufakis and Tsipras to sit at the negotiating table with the understanding that not they but the Troika has all the leverage.

Reuters explains:

A deal on extending Greece’s bailout deal must be found by the end of February or the European Central Bank will not be able to continue lending to its banks, ECB council member Erkki Liikanen said on Saturday. Europe’s bailout programme for Greece, part of a 240-billion-euro ($270 billion) rescue package along with the International Monetary Fund, expires on Feb. 28 and a failure to renew it could leave Athens unable to meet its financing needs and cut its banks off from ECB liquidity support.

Greece’s new leftist government, which aims to ease the strict terms of the bailout that have imposed harsh austerity, opened talks with European partners on Friday by flatly refusing to extend the current programme or to cooperate with the international inspectors overseeing it.

“We (ECB) have our own legislation and we will act according to that… Now, Greece’s programme extension will expire in the end of February so some kind of solution must be found, otherwise we can’t continue lending,”Liikanen, also the governor of Finland’s central bank, told public broadcaster YLE.

“I don’t believe that one can hide from the realities in the economy,” he said in an interview.

The question arose why when Greece already has undergone a Private Sector Involvement restructuring, i.e. a bankruptcy that however only impacted private entities and not official ones, such as the ECB, can’t Greece have another debt haircut to which Liikanen responded that: “A significant debt restructuring has been carried out with private investors. The ECB cannot fund a state directly, which is what it would mean in this case.”

Odd: because that is precisely what the ECB is doing with QE, when it monetizes any of a number of Eurozone deficits. To this Liikanen also had a quick response:


Well, it is, but we’ll let that slide for the time being. The bigger issue is that since the ECB directly holds tens of billions of Greek debt, any impairment on this debt would crush what the ECB has been saying from day one: that it can not suffer losses on the debt it has monetized or otherwise transferred over to its balance sheet. Such an impairment would immediately destroy Draghi’s credibility, and promptly lead to furious screams from around the Eurozone as taxpayers suddenly realize all too well they are on the hook for funding the Eurozone’s most insolvent members, first Greece and then everyone else who has already entered a toxic deflationary spiral. And since the ECB would finally be exposed for being Europe’s “bad bank”, the scramble to dump as much toxic exposure on Draghi would begin in earnest in the process launching the beginning of the end of the Eurozone.

One can almost see why Greece does think it has all the leverage.

That said, Greece now also has a countdown in which it can and will have to make a decision what to do with its leverage, and precisely 28 days until its very own D-Day which is now February 28, 2015 as per today’s ECB threat.

So with February now shaping up to be an even more volatile month for Europe, and thus the world, than January and December (both of which closed red) here is the full schedule of events and what the “known unknowns are” in the next 4 weeks, courtesy of Deutsche Bank.

From George Saravelos’ Update on Greece

It is worth bearing in mind that the timing, scope and commitment to the policy changes announced by Greek ministers is highly uncertain, not least because the legislative agenda is likely to be directed by the leadership team of the new government rather than individual line ministries. This still leaves plenty of uncertainty on the new government’s intentions. On the more negative side, the breadth of statements was so wide and the speed with which they were made so quick, that we now consider an extension of the February 28th program expiry date as a key datewithin the negotiation process:Europe and the Troika are very likely to request an explicit commitment from the Greek government to close the current mission review and not reverse previous policy. The precise form such a commitment would take is unclear at this stage, but our underlying assumption is that uncertainty around the new government’s policy intentions is so high, that Europeans will request assurances before proceeding with more in-depth negotiations over the program in Q2.

In turn, the above developments will likely have important implications for Greek bank financing at the ECB. Termination of the program on February 28th renders GGB-based collateral ineligible at Eurosystem refinancing operations, but still allows Greek banks to shift funding to Emerency Liquidity Assistance.However, ELA usage is under bi-weekly ECB review and is very likely to be on a rising trend over the next few weeks: to accommodate potential deposit flight; to absorb foreigners’ refusal to roll-over t-bills that are maturing; and to absorb fresh government t-bill issuance to finance upcoming debt repayments to the IMF and other obligations. These large needs make it likely that the availability of ELA usage is itself linked to program extension above.

All of the above then leaves three things that need to be clarified over the next few weeks.

First, under what conditions would the Troika be willing to extend the program and what form would this extension take? Our initial expectation was that a technical extension would have been offered to July followed by a successor ECCL program. Recent market developments and poor budget execution leave Greece’s ECCL eligibility an open question however, and it is possible that the Troika now only accepts program extension by a full year to coincide with the conclusion of the IMF program in March 2016. Such a large extension would be more difficult for the Greek government to manage domestically.

Second, does the ECB link Greek bank ELA provision to program extension as well? Given rising usage over the next few months, we would consider this an increasing possibility.

Third, what will the Greek government’s response to these conditions be? Public statements over the last 48-hours make it particularly difficult to envisage the government’s reaction function. On the one hand an offer of a one year extension and a written commitment to close the review would be particularly difficult for the government to manage domestically. On the other hand, the suspension of ECB financing of Greek banks would be exceptionally damaging to the economy.

Here is an indicative timeline of key events that will likely provide answers to these questions:

  • Friday January 30th – Eurogroup President Dijsselbloem meets with the Greek finance minister Varoufakis and Deputy PM Dragasakis in Athens. A press conference will follow, with the meeting likely setting the tone of negotiations to follow.
  • Sunday February 1st – Greek finance minister Varoufakis meets UK finance minister Osborne in London
  • Monday February 2nd – Greek finance minister Varoufakis meets French finance minister Sapin in Paris Tuesday
  • February 2nd – Greek finance minister Varoufakis meets Italian finance minister Padoan in Rome
  • Wednesday February 4th-5th – Bi-weekly ECB review of ELA
  • Wednesday February 4th – Likely t-bill auction to cover 1bn redemption on 6th
  • Thursday February 5th – Greek parliament opens, elects new speaker of the House
  • Saturday February 7-9th Government presents legislative agenda to parliament, vote of confidence midnight Monday 9th
  • Wednesday February 11th – Likely tbill auction to cover 1.4bn maturity on 13th
  • Thursday February 12th – European Council of EU Leaders, Tsipras likely to meet Merkel on sidelines
  • Friday February 13th – Voting for new Greek President begins, EC Commissioner Avramopoulos most likely candidate as per various media reports, originating from New Democracy. Likely completed by second round on the following day requiring 151 MP majority
  • Monday February 16th – Eurogroup where Greece likely to be top of agenda, conditions for extension of program to be made explicit by now
  • Wednesday February 18th-19th- – Bi-weekly ELA review
  • Saturday February 28th – Current EFSF program expires

In sum, developments and pressure on Greece have accelerated over the last few days, with a very large degree of uncertainty around both the Greek government’s and Troika’s position on how negotiations will proceed. We expect this to be ultimately resolved by a Troika request from the Greek side to commit to program completion and the broad contours of previously committed policy, particularly with regard to structural reform. In turn, program extension may itself be linked to ongoing ECB/ELA financing of Greek banks. The precise form this request takes and the Greek government’s reaction will ultimately determine the path Greece takes in coming weeks and months.







Just take a look at the following sequence of events which occurred on Saturday with the meeting between Dijsselbloem and Yanis V. the finance minister of Greece.  The youtube interview at the conclusion of this post between the BBC and Yanis V. is important for you to see.


(courtesy zero hedge)







Caught On Tape: Dijsselbloem To Varoufakis: “You Just Killed Troika”

Amid ‘turmoiling’ stock markets on Friday, CNBC’s Simon Hobbs summed up the status quo’s thinking on the new Greek leadership when he noted, somewhat angrily and shocked, “The Greeks are not even trying to reassure the markets,” seeming to have entirely forgotten (and who can blame him in this new normal the world has been force-fed for 6 years) that political leaders are elected for the good of the people (by the people) not for the markets. Yesterday saw the clearest example yet of Europe’s anger that the Greeks may choose their own path as opposed to following the EU’s non-sovereign leadership’s demands when the most uncomfortable moment ever caught on tape – the moment when Eurogroup chief Jeroen Dijsselbloem(he of the “template” foot in mouth disease) stood up at the end of the EU-Greece press conference,awkwardly shook hands with Greece’s new finance minister, and whispered…”you have just killed the Troika,” to which Varoufakis responded… “wow!”

As Keep Talking Greece reports,

The joint press conference was concluding, when Greek Finance Minister Yanis Varoufakis droped a last bombshell.  “…and with this if you want – and according to European Parliament – flimsily-constructed committee we have no aim to cooperate. Thank you.” Varoufakis was referring to the famous Troika, the country’s official creditors consisting of the European Union, the International Monetary Fund and the European Central Bank..

After concluding with a “Thank you” Varoufakis gives the word to Eurogroup Chief Jeroen Dijsselbloem, who wants to hear the translation first. Then he takes off the ear phones, he stands up and sets to leave. An enforced-looking shaking of hands delays the  departure of the Dutch FinMin.

Dijsselbloem quickly whispers something to Varoufakis’ ear, he briefly replies back and the Eurogroup chief leaves the press conference hall as soon as it was possible.

Video: the Awkward Greek-Eurogroup Moment

The whole afternoon, Greek and international media were trying to find out “What the hell did they two men said to each other!?”

Private Mega TV reported short before 9 pm on Friday.

Eurogroup chief whispered to Greek FinMin’s  ear “You just killed the Troika” and that Varoufakis replied with a simple “WOW!”

Dijsselbloem: Whisper…whisper…

Varoufakis: Whisper….

Dijsselbloom slides his hand away

Back remains Varoufakis with one palm open and the left hand stuck in his pocket – relaxed Greek style

The two men talk for a couple of minutes with lips hidden from the cameras.

Dijsselbloem leaves without turning back to watch his interlocutor.

I don’t quite understand why Dijsselbloem is sour. I’m sure that Varoufakis told him the same things when they had their 2-hour face-to-face talks.

Unless they were talking about Gouda and Feta and the Greek FinMin surprised him when he said at the press conference, that the Greek government will not negotiate with the Troika.

And furthermore, why is he offended? He is chief of the Eurogroup, he does not represent the Troika…

Most probably he was expecting a Yes-Man behavior like in the past with HOHOHO-jocker Jean-Claude Juncker, when he was Eurogroup head.

juncker venizelos

Juncker – FinMin Venizelos


Juncker – Spanish FinMin

*  *  *

Later that evening Yanis Varoufakis gave an excellent more in depth interview with BBC’s Newsnight… to explain why Greece will not accept more debt from the EU…






From one of our experts on the Greek default situation:


(courtesy Meijer/Automatic Earth Blog)


It’s Greece Vs Wall Street

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

On the one hand, I’ve written so much about Greece lately I fear I’m reaching overkill. On the other hand, there’s so much going on with Greece, and so fast, that I wouldn’t know where to begin. Moreover, I’m thinking and trying to figure what is what and what is actually happening so much it’s hard to stay focused for more than a short while before something else happens again and it all starts all over. And I’m thinking it must feel that way for the Syriza guys as well.

One thing I do increasingly ponder is that it gets ever harder to see the eurozone survive. In its present shape and form, that is. Damned if you do, doomed if you don’t, is an expression I’ve used before. It’s like this big experiment that a bunch of power hungry Europeans really get off on, that now all of a sudden is confronted with the democracy they all only thought existed in books of history anymore.

But if you take your blind hunger far enough to kill people, or ‘only’ condemn them to lives of misery, they will eventually try to speak up, even if not nearly soon enough. It’s like a law of physics, or like Icarus in, yes, Greek mythology: try to reach too high, and you’ll find you can’t.

What is Brussels supposed to do now? Throw Athens off a cliff? Not respect the voice of the Greek people? That doesn’t really rhyme with the ideals of the union, does it? If they want to keep the euro going, they’re going to have to give in to a probably substantial part of what Syriza is looking for. Or Greece will leave the eurozone, and bust it wide open, exposing its failures, its lack of coherence, and especially its lack of democratic and moral values.

The problem with giving in, though, is that there are large protest demonstrations in Spain and Italy too. Give anything at all to Greece, and the EU won’t be able to avoid giving it to others as well. And by then you’re talking real money.

They called it upon themselves. They got too greedy. They thought those starving Greek grannies would not be noticed enough to derail their big schemes. That claiming “much progress has been made”, as Eurogroup head Dijsselbloem did again this week, would be considered more important than the fact that an entire eurozone member nation has been thrown into despair.

That’s a big oversight no matter how you put it. The leadership can be plush and comfy in Berlin, Paris, Helsinki, but that doesn’t excuse them sporting blinders. And now they know. Or, let’s say, are beginning to know, because they still think they can ‘win this battle’, ostensibly with the aim of deepening the Greek misery even further, while continuing to proclaim that “much progress has been made”.

Not very smart. At least that much is obvious. But what else is? Greek Finance Minister Varoufakis declares in front of a camera that Greece ever paying back its full debt is akin to the Santa Claus story. Less than 24 hours later, PM Tsipras says of course Greece will pay back its debt. Varoufakis lashed out about Syriza not being consulted on EU sanctions against Russia, but shortly after their own Foreign Minister was reported to have said he reached a satisfactory compromise on the sanctions with his EU peers.

Discontent, confusion, or something worse, in the ranks? Hard to tell. What we can tell, however, is that the obvious discomfort with Dijsselbloem, Draghi, and the entire apparatus in Brussels – and Frankfurt – is a fake move. Either that or it’s only foreplay. If Yanis and Alexis want to get anywhere, they’ll need to take on Wall Street and its international, American, French, German, TBTF banks, primary dealers. And if there’s one thing those guys don’t like, it’s democracy.

Syriza is not really up against the EU or ECB, or the Troika, that’s a sideshow. They’re taking the battle to the IMF, a sort of silent partner in the Troika, and the organization that rules the world for the rich and the banks they own. And that, if they had paid a bit more attention and a bit less hubris, could have gone on the way they have, small squeeze after small squeeze, without hardly anyone noticing, until the end of – this – civilization. But no. It had to be more.

It’s going to be a bloody battle. And it hasn’t even started yet. But kudos to all Greeks for starting it. It has to be done. And I don’t see how the euro could possibly survive it.






All of sudden, late Sunday Europe fractures as France is prepared to support Greece (maybe another Greek haircut???)


(courtesy zero hedge)





Europe Fractures: France “Prepared To Support Greece” In Debt Renegotiations

Despite Angela Merkel’s insistence on numerous occasions this past week that there will be “no debt renegotiations,” it appears a schism at the core of Europe is opening. As France24 reports, following a meeting between France’s finance minister Michel Sapin and Greece’s finance minister Yanis Varoufakis, the press conference had a considerably more amicable tone that Friday’s Dijsselbloem dissing. “France is more than prepared to support Greece,” Sapin said adding that Greece’s efforts to renegotiate were “legitimate.” Sapin urged a “new contract between Greece and its partners.”


As France24 reports,

France’s Socialist government offered support Sunday for Greece’s efforts to renegotiate debt for its huge bailout plan, amid renewed fears about Europe’s economic stability.


The backing was a victory for Greek Finance Minister Yanis Varoufakis, holding talks with European officials to push for new conditions on debt from creditors who rescued Greece’s economy to save the shared euro currency. Worries have mounted that Greece’s new far left government might not pay back its debts.


Varoufakis is also visiting London and Rome – and said Sunday that he would visit Berlin. The German government has been particularly angry at the new Greek government’s position and bluntly rejected suggestions that Greece should be forgiven part of its rescue loans.


Varoufakis insisted that Greece wants to pay the money back, but said he wants new terms and new negotiating partners, arguing that “it’s not worth” discussing with the so-called “troika” of creditors who set the strict terms for Greece’s rescue.


France’s Socialist leadership, whose president has campaigned against austerity, presented itself Sunday as a possible mediator between Greece and creditors.


French Finance Minister Michel Sapin insisted his country wouldn’t support canceling the debt, but offered support for a new timeframe or terms.


“France is more than prepared to support Greece,” Sapin said after meeting Varoufakis, saying Greece’s efforts to renegotiate were “legitimate.” Sapin urged a “new contract between Greece and its partners.”

*  *  *

Perhaps Merkel should remember her nation’s own history?

Marina Prentoulis, a senior lecturer at the University of East Anglia and Syriza’s London spokesman, said that Europe’s austerity drive had left an entire generation in Greece with “no future”.


“We are not going to enforce the austerity programmes, what we call the memoranda, it created a huge humanitarian crisis, she said. People have been working all their lives and their pensions have been slashed to 40pc,” she told the BBC’s Andrew Marr Show.


“We have huge unemployment – 27pc. And 60pc for young people. This means that they have created a generation that has effectively no future. They have destroyed any employment rights. So this has to stop. This programme Syriza has pledged is not going to be enforced any more.”


Angela Merkel, the German Chancellor, has ruled-out cancelling more of Greece’s national debt, which has climbed to more than 175pc of gross domestic product (GDP). However, Ms Prentoulis said Germany should “remember it’s own history”.


“In 1953 a big part of the German debt was written off and then the repayments were associated with growth. This is what Syriza is asking for Greece as well,” she said.

*  *  *

European Dis-Union once again!!!




Now Obama joins into the fray and expresses support for Greece.

Greece hires Lazard who states that a 50% Greek haircut is reasonable


(courtesy zero hedge)




The Tide Is Turning: Obama “Expresses Sympathy” For Greece; Lazard Says 50% Greek Haircut “Reasonable”


he newsflow over the past several days was progressing much as expected: any time Greece demanded a bailout renegotiation (or termination), and an end to the Troika, Germany just said “Nein”, most recently on Saturday when Merkel told Hamburger Abendblatt‘s “that banks and creditors had already forgiven a considerable amount of Greece’s debt and that she rejected any further concessions. “There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece’s debt,” Merkel told the paper, adding: “I do not envisage fresh debt cancellation.” She added that “Europe will continue to show its solidarity with Greece, as with other countries hard hit by the crisis, if these countries carry out reforms and cost-saving measures.”

As a reminder, the contentious topic at the heart of the latest scandal rocking Europe is that the new Greek government has said it wants to negotiate to halve the country’s debt, which still amounts to more than 315 billion euros despite a debt restructuring at the start of 2012 that cut the burden by some 100 billion euros.

Of course, Germany’s position has been known for a long time because despite all the posturing, Germany’s interest are quite aligned with those of the ECB: because while German politicians can posture all they want about the specter of hyperinflation due to money printing, they know full well that without the ECB backstop, not only is the Deutsche Mark coming back with a bang, but Deutsche Bank, perhaps the world’s TBTF bank, would promptly topple over in the process crushing the Germany economy. Which is why when it comes to Greece, Merkel’s interest are identically aligned with those of the ECB, which in turn are dictated by Goldman and the rest of the banking cartel as well as the BIS/MIT diaspora.

And then something unexpected happened: the socialists came to the rescue when they voiced their support to their ideological peers in Greece. First, it was France whose finance minister said that France is “more than prepared to support Greece.” And now it is Obama’s turn who as the WSJ reported, has “expressed sympathy for the new Greek government as it seeks to rollback its strict bailout regime, saying there are limits to how far its European creditors can press Athens to repay its debts while restructuring the economy.


You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits,” Mr. Obama said in an interview with CNN’s Fareed Zakaria aired Sunday.


He said Athens needs to restructure its economy to boost its competitiveness, “but it’s very hard to initiate those changes if people’s standards of livings are dropping by 25%. Over time, eventually the political system, the society can’t sustain it.

“More broadly, I’m concerned about growth in Europe, ” he added. He said fiscal prudence and structural changes are important in many eurozone countries, but “what we’ve learned in the U.S. experience…is that the best way to reduce deficits and to restore fiscal soundness is to grow. And when you have an economy that is in a free-fall there has to be a growth strategy and not simply the effort to squeeze more and more from a population that is hurting worse and worse.”

What he means, of course, is that it is easy to issue trillions in debt – as a reminder, under Obama total US debt has risen well over 70% in just 6 short years,rising above $18 trillion – when i) one is the reserve currency and ii) when central banks, first the Fed and then every other one, have sworn to monetize government debt across the globe, leading to 16% of global government debt trading with a negative yield. It will be the task of another president to put together the pieces of this unprecedented debt splurge when one day, inevitably, the USD no longer is the world reserve or, inevitably, when first then another, then all central banks lose credibility, and instead of bonds trading with negative yields, said yields hit positive infinity once the long deferred hyperinflation finally strikes.

Lessons in economics and finance aside, what the president who in early March 2009 was impressed by the low, low “profit and earning ratios” of the S&P just said, is that suddenly not only France, but the US itself is not only giving Europe, i.e., Germany, lessons on how to handle its “fiscal prudence”, but to also concede to Greek demands, something which the new Greek parliament will promptly leverage on and use for further political gains.

And where it gets truly interesting is that as Bloomberg reported earlier, not only is France also on board with “alleviating” Greek debt – a word which is extremely flexible in a diplomatic context – as we noted earlier, but none other than Matthieu Pigasse, the head of Lazard’s Paris office who has advised Greece in the past and who was hired over the weekend to advise the Greek government on its next round of debt reductions, just admitted to Bloomberg TV something startling:

“There is a range of possible solutions: extending the maturities, lowering interests rates, and the much more radical solution, the haircut. If we could cut the debt by 50 percent” he said, “it would allow Greece to return to a reasonable debt to GDP ratio.”

And just like that the “bogey” for the Greek debt haircut has been set, and at this point it is only a matter of finding where the bid and ask of the two negotiating parties end up crossing several days, or hours before the clock strikes midnight on February 28.

The only question is what happens to the ECB holdings of Greek debt which will inevitably get impaired in even a modest debt restructuring. There is of course the private-sector route: give the ECB and/or Troika a part of the post-petition equity of Greece in exchange for their impaired debt. After all they already controll all of it everywhere but on paper. Why not just formalize it. And after all, if Greece is set on never exiting the Eurozone as even the current government has implied, it may as well sell some equity to the ECB or any other interested party and just make it official.




And this morning, Yanis V. visits the UK Prime Minister.  Cameron comments :


“We had a constructive discussion, and it is clear that the stand-off between Greece and the eurozone is the greatest risk to the global economy. I urge the Greek finance minister to act responsibly but it’s also important that the eurozone has a better plan for jobs and growth.”


(courtesy zero hedge)



Mr. Varoufakis Arrives In London


The new Greek PM has a thing against ties; The new Greek finmin, on the other hand, has a thing for boots and barbour jackets as seen in this series of photos of him arriving from Paris (where he secured French support for the Greek debt “renegotiation“) for a meeting with UK chancellor George Osborne.

Spot the suit:

What did they talk about? Here is the UK side of things via the FT:

Mr Osborne said: “We had a constructive discussion, and it is clear that the stand-off between Greece and the eurozone is the greatest risk to the global economy. I urge the Greek finance minister to act responsibly but it’s also important that the eurozone has a better plan for jobs and growth.


“It is a rising threat to the British economy. And we have got to make sure that in Europe as in Britain, we choose competence over chaos.”


Mr Varoufakis, who was wearing a wax jacket over his suit and sporting the trademark tieless look of the new Greek cabinet, met George Osborne, the chancellor, in Downing Street, where he was told that the UK expected Athens to honour its obligations.


Downing Street had earlier said that Mr Osborne would tell his Greek counterpart the UK would not be sympathetic towards a wholesale restructuring of Greece’s debt.







The Eurozone is quite alarmed at the brinkmanship of Greece over their refusal to receive bailout money.


(courtesy London’s Financial Times)



Eurozone alarm grows over Greek bailout brinkmanship

Eurozone officials are increasingly worried that Greece’s brinkmanship over its bailout will plunge the country into financial chaos after its finance minister said on Sunday that it would take up to four months to agree to a “new contract” with creditors.

Yanis Varoufakis, Greece’s newly appointed finance minister, said Athens would reject any further loans under its international rescue plan, despite Greece’s €172bn bailout expiring at the end of the month. He also said he expected the European Central Bank to prop up the country’s weakened banking system until a longer-term settlement could be reached.

Mr Varoufakis said Greece had been living for the next loan tranche for the past five years. “We have resembled drug addicts craving the next dose. What this government is all about is ending the addiction,” he said, noting it was time to go “cold turkey”.

His comments on Sunday underscored the fears of eurozone officials that the Greek government was unaware of the precariousness of its financial situation.

“Everybody [in the eurozone] wants a deal,” said one senior eurozone official. “But through their actions and their rhetoric, the new government is making a lot of people upset. They are putting themselves in an impossible situation.”

Mr Varoufakis was speaking in Paris on the first leg of a European tour intended to garner support for a renegotiation of its debt burden. Greece’s anti-austerity government roiled markets during a tumultuous first week in power with 40 per cent being wiped off the value of Greek banks following announcements to reverse spending cuts and privatisations.

Despite a more emollient tone from Alexis Tsipras, Greece’s radical leftwing prime minister, over the weekend, EU officials have been dismayed by Athens’ repeated rejection of a bailout extension — and refusal to co-operate with the troika of international creditors. German officials were also irritated at its refusal to engage with Berlin, although Mr Varoufakis said he had now been invited to the German capital.

The finance chief said Athens would make proposals within a month for a “new contract” with the eurozone, which would be in place by the end of May. “We are not going to ask for any loans during this period. It is perfectly possible to establish liquidity provisions with the ECB.”

However, it is unclear whether the ECB will agree to support Greek lenders under such conditions.

Officials familiar with the conversations between eurozone policy makers and Athens said they had little idea of the sort of international financial help Greece was seeking or how it intended to negotiate. Eurozone finance ministers want to discuss Greece’s needs at their next meeting on February 16 — if not sooner, by telephone.

Michel Sapin, French finance minister, urged Athens to come forward with its plans “calmly and quickly”.

The bailout programme is due to expire on February 28. If it is not renewed, Greece will for the first time in five years be left without an EU financial backstop. Because the International Monetary Fund is unlikely to distribute funds without the EU’s participation, Athens could lack access to emergency funding to repay billions of euros in debt due in the coming months.

EU officials believe the country could eke out €4.3bn in payments owed to the IMF next month, but will run into a wall at the beginning of June when the first of two bonds worth more than €3bn must be paid. Without bailout funding, and an ongoing sell-off in the private bond markets, Athens would be forced to default.

Of more concern to many officials is the Greek banking system, which after massive outflows of deposits is relying on cheap ECB loans to fund day-to-day operations. ECB officials over the weekend made it clear that if the programme expires at the end of February, the central bank would be forced to cut off their liquidity loans.

But they have not clarified whether Greek banks could still access back-up central bank financing, known as emergency liquidity assistance. Although technically loaned by the Greek central bank, it must be approved by the ECB, which has been cagey on whether such lending would be allowed.

Since the outbreak of the eurozone crisis, Greece’s banking system has always been seen as the most likely route to an “accidental” Greek exit from the euro. Without ELA lending, Athens would probably have to print its own currency to keep its banking system running.

ECB president Mario Draghi has told colleagues he is planning to drive a hard bargain on bank liquidity — a similar strategy used with Cyprus in March 2013, which forced Nicosia to accept onerous bailout terms. But Mr Draghi is also wary of unelected central bankers taking a decision that would force Greece from the euro.

Additional reporting by Stefan Wagstyl in Berlin







Another important article written by Charles Hugh on how Greece got itself into its financial mess and what is going to happen in the very near future:

(courtesy Charles Hugh Smith/)


Greece Just Blew Up The Empire’s Death Star Of Debt

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Greek Elites and kleptocrats are terrified of the discipline that leaving the euro will impose, but the general public should welcome the transition to an economy and society that has been freed from the shackles of Imperial debt and the kleptocracy that has bled the nation dry.

Although the financial media is blathering about negotiations and gamesmanship, the truth is Greece just blew up the Empire’s Death Star of debt. There’s nothing left to negotiate except the official admission that the Imperial Death Star of debt, the most fearsome threat in the galaxy, has been blown to smithereens.
There are three fundamental points that need to be emphasized, mostly because they’ve been lost in handwringing, fearmongering and the ceaseless chatter of propaganda shills.
1. Impaired debt and defaults result from imprudent underwriting and lender incompetence/ greed. Since when did it become accepted policy to reward imprudent lending, incompetence and greed?
Classical Capitalism is very clear on what should happen to lenders who ignored risk management; they get destroyed. As imprudently issued loans default, the losses pile up and the lender become insolvent. At that point, Capitalism kicks in and the management is fired, the stock goes to zero, the lender’s assets are auctioned off and the creditors are issued whatever remains after wages, taxes, accounts payable, etc. are paid.
There’s nothing complicated about it: Capitalism requires the discipline of losses being taken by those responsible, the firing of incompetents and the destruction of imprudent lenders.
Yet somehow the dominant narrative has reversed this essential core of Capitalism into blaming the borrower for the losses.
Look, if someone offers to loan me a billion dollars with no collateral and no assessment of the risks that I might not be able to pay the interest or principal, then who’s the fool? The idiot who wants to give me $1 billion without any risk assessment, or the borrower who takes the “free money” being offered?
Yes, no one should borrow money that they can’t pay back, blah blah blah, but the primary fiduciary responsibility is on the lender to not offer loans to marginal borrowers and those at high risk of defaulting on their debts.
Yet the official line on debt is “the lenders are blameless, the borrowers are at fault and should pay.” The borrowers were imprudent to take on debt they couldn’t service, but it is the lenders who made the bad loans who are ultimately are at fault and who should suck all the losses.
Let’s set aside the propaganda for a moment and get real: anyone with the slightest knowledge of Greek finances and the power structure of the Greek economy/society knew it was insanely risky to loan Greece billions of euros. No one can deny this, yet somehow the lenders deserve to be paid for their avarice, stupidity, incompetence and total disregard for the standards of prudent lending? No, they deserve to be destroyed–closed down and their assets auctioned off.
2. Greece will not be wiped out by leaving the euro currency–it will be freed to rebuilt itself with prudent fiscal management and policies that reward investment and penalize risky borrowing, speculation and corruption.
Here’s the thing about Greece issuing its own fiat currency–it will force fiscal discipline in a way that the euro did not and could not. This is why the Greek Status Quo is quivering with fear–the gravy train of irresponsibility enabled by the euro is ending, and they are terrified of living within their means and having to face the discipline that the market will impose on the Greek fiat currency.
If there’s one thing Greece needs more than anything, it’s the discipline and the rewards of the market. Any nation that issues its own fiat currency has a choice: it can exercise fiscal prudence and enforce policies that reward entrepreneurism, prudent lending, savings, wise investments, fair taxation, etc., or it can try to prop up its bloated, corrupt kleptocracy by printing rivers of fiat money.
If it chooses the Dark Side and prints money in excess, it will soon drive the value of that currency to near-zero. The kleptocracy that hoped to benefit from money-printing is impoverished or forced to move their capital elsewhere.
In other words, Greece returning to being responsible for its own currency is a good thing. The new currency will be valued cheaply relative to other currencies at first, and this is also a good thing, as imports will be unaffordable for all but the wealthy (kiss BMW sales in Greece good-bye) and everything produced in Greece becomes a bargain globally.
This will attract capital seeking places where it can make a profit and is treated fairly, and it will enable Greece to rebuild its export sector and boost its substantial tourist trade.
The promise that marginal borrowers would be transformed into sterling-credit borrowers by adopting the euro was always a fantasy–and a painfully visible fantasy at that. Anyone with their eyes even partially open could see that the vast differences in productivity, credit, risk and culture between the eurozone nations made the euro unworkable from the start.
It was equally visible that the eurozone’s inept policies and loose lending standards would obscure these fundamental differences until the damage would be too great to hide–which is exactly what transpired.
3. The hundreds of billions of euros in so-called bailouts did not help Greece–all they did was bail out imprudent lenders and Euroland Elites. Virtually none of these vast sums helped the Greek nation or its people; what little did stay in Greece flowed to the kleptocrats that continued to rule Greece.
The harsh reality of misrule and corruption was recently spelled out in Misrule of the Few: How the Oligarchs Ruined Greece:

“Greece has failed to address (rising wealth/income inequality) because the country’s elites have a vested interest in keeping things as they are. Since the early 1990s, a handful of wealthy families — an oligarchy in all but name — has dominated Greek politics. These elites have preserved their positions through control of the media and through old-fashioned favoritism, sharing the spoils of power with the country’s politicians. Greek legislators, in turn, have held on to power by rewarding a small number of professional associations and public-sector unions that support the status quo. Even as European lenders have put the country’s finances under a microscope, this arrangement has held.”

Greece just blew up the Death Star of debt, and now the threat has been lifted from other debtor nations suffering from the yoke of Imperial misrule. The Greek Elites and kleptocrats are terrified of the discipline that leaving the euro will impose, but the general public should welcome the transition to an economy and society that has been freed from the shackles of Imperial debt and the kleptocracy that has bled the nation dry.
Tsipras is playing his cards perfectly.  He does not rule out Russian aid.
Chancellor of the UK calls Greece, the “greatest risk to the global economy” and he should know.

(courtesy zero hedge)




Tsipras Does Not Rule Out Russian Aid As UK Chancellor Calls Greece “Greatest Risk To Global Economy”


“It is clear that the stand-off between Greece and the eurozone is the greatest risk to the global economy,” warns UK Chancellor George Osborne adding that he hopes Greece’s new finance minister “acts responsibly,” as Varoufakis toured Europe to discuss Greece’s ‘demands’. Mainstream media’s attention, however, is not focused on this warning (remember, Greece is small and contained is the meme to pay attention to), but instead proclaimed Greece’s pivot to Russia over when in fact, Tsipras words did anything but ‘rule out’ Russian aid as he said – specifically – “we are in substantial negotiations with our partners in Europe and those that have lent to us,” adding that with regards Russia, “right now, there are no other thoughts on the table.” Hardly the definitive “ruling out” that US media spins.


As Reuters reports, Varoufakis also met British officials, seeking more European allies, although Britain is not a member of the euro zone.

It is clear that the stand-off between Greece and the euro zone is the greatest risk to the global economy,” Britain’s finance minister, George Osborne, said after their meeting.


“I urge the Greek finance minister to act responsibly but it’s also important that the euro zone has a better plan for jobs and growth,” Osborne said.

*  *  *

And this follows France’s “support for debt renegotiation” and Germany’s dismissal of any changes to the current plan:

It has so far met a tough line from European partners, above all from Germany. German Finance Minister Wolfgang Schaeuble told Reuters in an interview on Monday that Berlinwould not accept any unilateral changes to Greece’s debt program.


“We want Greece to continue going down this successful path in the interests of Greece and the Greeks but we will not accept one-sided changes to the program,” he said at the Reuters Euro Zone Summit.

*  *  *

But it is the US media spin of the Russian pivot that is notable…

Here is Reuters’ headline…


And here is what Tsipras actually said…

“We are in substantial negotiations with our partners in Europe and those that have lent to us. We have obligations towards them,” Tsipras said at a news conference in Cyprus during his first foreign visit as prime minister.


“Right now, there are no other thoughts on the table,” he said, when asked whether Greece would seek aid from Russia, which has suggested it could be willing to listen to a request for support from Athens.

*  *  *

Hardly the definitive ruling out of Russian aid that the headline proclaims.







Then finally the Greek FinMin changes everything and basically states that he would be willing to play ball with the EU. This ought to anger its its citizens:


Greece Changes Strategy: No Longer Demands Debt Write Off, Ask For Debt Exchange Instead



Update, and in line with the FT report, here’s Bloomberg:


So all it took for Greece to withdraw its demands was “opposition”?

* * *

Over a week after the new Greek government came to power, it has presented its first actual proposal of how it hopes to negotiate with Europe that does not involve the infamous “debt write off”, which as both Germany and the ECB have made clear, is a non-starter as it impairs the ECB’s balance sheet and leads to a loss of “faith” in the money printer, the legacy monetary system and so on. So instead of yet another debt restructuring, the FT reports that Yanis Varoufakis “would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.” Actually he still does, only he is not calling it as such.

The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

Of course, the problem immediately emerges when one considers what we explained a long time ago: namely that a distressed debt exchange, such as what Greece is proposing, is what the rating agencies have always deemed an Event of Default, and thus something which the ECB will never agree with as it once again impairs an ECB-held security.

To be sure, the Greeks themselves realize that this proposal is nothing but a debt haircut under a different name, but hope that Europe will pull an Obamacare and bet on the “stupidity of their own taxpayers” to let it slide without anyone noticing. To wit: “[Varoufakis] said his proposal for a debt swap would be a form of “smart debt engineering” that would avoid the need to use a term such as a debt “haircut”, politically unacceptable in Germany and other creditor countries because it sounds to taxpayers like an outright loss. This would mean that in order for such a deal to be successful, the Troika would have to bribe Moody’s and S&P to keep their mouths shut and to “exclude” Greece from their traditional event of default definition (something which the recent DOJ “settlements” could provide assistance with).

Another aspect of the proposal is the Greek desire to link debt, or rather interest, to GDP, which begs the question: what happens if Greek GDP continues to decline – does Europe pay the Greeks a negative interest? Sarcasm aside, there are two problems with the Greek GDP-linked proposal. The first, and most important one, is that it won’t work. As Reuters explained over a year ago:

Some of the world’s leading economists have united behind the concept of bonds linked to GDP, which they say could prevent painful debt restructurings like those in Argentina and Greece.


The Bank of England last month published a paper on GDP-linked bonds, joining Yale University and the International Monetary Fund, which have also pushed the idea in recent years. “Return on these bonds varies in proportion to the country’s GDP,” the bank wrote.


But investors say the idea will never fly.


“This is an interesting academic exercise, but I believe it is unlikely that we will ever see widespread issuance of GDP-linked bonds,” said Mark Dowding, a senior portfolio manager at Bluebay, one of Europe’s largest bond funds.


In theory, GDP bonds would allow countries to manage debt-servicing costs depending on their economic cycles, in essence providing a form of recession insurance. At the same time investors could take comfort knowing that they would not be subject to a Greek bond-style haircut on their sovereign holdings.


Yet purchasers of the debt would likely demand a return high enough to nullify a sovereign’s other benefits in issuing such an instrument.

“I know investors who would buy these kind of products,” said Gabriel Sterne, an economist at distressed debt brokerage Exotix.


“But I don’t know any who would accept them unless they were compensated significantly for the uncertainty of income streams.”

And the second one is that Greece already has GDP-linked securities: warrants, as does Argentina. And in the case of the latter, it failed miserable to avoid a re-default.

Both Argentina and Greece offered GDP-linked warrants as a sweetener to encourage bondholders to take drastic writedowns on their sovereign holdings.


“It’s the equivalent of receiving equity in a corporate restructuring,” said a debt specialist at an investment manager with over US$100bn under management.


“If things really turn around, you get exposure to the performance.”


In the case of Greece, investors attributed little value to the warrants at first. But as the country’s economic outlook has improved, trading in these securities has ratcheted up. The warrants, which slumped to a low of 25 cents in the first months after Greece’s restructuring, are now worth more than five times that amount.



Furthermore, governments would be less willing to build a significant buffer of GDP-linked bonds in a good economic climate, as it would then be more expensive to service them.


And once the GDP-linked warrants became a significant part of Argentina’s debt-servicing costs, for example, investors feared the country would be unable to pay them.


Greece learnt from Argentina’s experience and capped the coupon payments on its warrants at 1% of the notional amount annually, with a call option from 2020.

Then, in addition to the “haircut that is not a haircut“, the new FinMin has proposed that the government would “maintain a primary budget surplus — after interest payments — of 1 to 1.5 per cent of gross domestic product, even if this meant Syriza, the leftwing party that dominates the ruling coalition, would not fulfil all the public spending promises on which it was elected.”

This also is confusing since the only time a nation should maintain a budget surplus is if no longer needs external funding or, if it intends to defaults as the CFR explained over a year ago.

primary balance and default

Ironically, by promising to preserve a primary budget surplus, Greece is warning the Troika that it can default at any moment, and thus intends to preserve its bargaining leverage.

And then there is the last aspect of the Greek proposal, that the “government would target wealthy Greeks who had not paid their fair share of taxes during the nation’s six-year economic slump. “We want to prioritise going for the head of the fish, then go down to the tail,” he said.”

We wish them good luck, especially since it was not just the wealthy Greeks but everyone who decided to stop paying all taxes heading into the dramatic Syriza election. And if there is one thing taxpayers are loathe to do once they stop paying their taxes, it is to resume paying their taxes.

Still, while the proposal is surely another non-starter for Europe, what is most substantial in the FT report is that, like it or not, the Greek government has decided to play ball with Europe and is slowly but surely willing to concede to the Troika’s demands. Which means that any expectations of a sharp standoff between Greece and the ECB can now be written off, as the new Gree finmin has just made it clear that despite the bluster and rhetoric, he will ultimately accept whatever terms Europe offers him.

Perhaps most ironic, while Greece has proposed a debt haircut in all but name, what it now seems almost assured to end up with is a continuation of the currentstatus quo. In all but name.







Contagion spreading now to Spain who over the weekend had massive rallies in support of Podemos who are now leading in the polls.  These guys are anti austerity equal to the Syriza party in Greece.


(courtesy zero hedge)



Greek Social Contagion: Tens Of Thousands Rally In Support Of Spain’s Anti-Austerity Podemos Party

Less than a week ago we warned, “today Athens, tomorrow Madrid,” and sure enough, emboldened by the success of Syriza in Greece, the people of Spain have turned out in their tens of thousands in Madrid at a demonstration called by the insurgent Spanish leftist party Podemos. As The Independent reports, Podemos, which means “we can”, has surged into first place in opinion polls in the few months since it was set up in the summer of 2014. It is now ahead of the centre-right Popular Party and centre-left Spanish Socialist Workers’ Party in many opinion polls. Podemos’s policies include a universal basic income, increased democracy, crackdowns on tax avoidance, and increased public control over the economy. Most worrying for the status-quo huggers in Brussels, Podemos has alsowants to reform the European Union, describing the current euro arrangement as a “trap.” 

As we noted earlier this week, while Alexis Tsipras name (and face) are now well known, we suspect few are yet fully aware of Pablo Iglesias, general secretary of Spain’s left-wing Podemos party…

Winds of democratic change are blowing in Europe.

The change in Greece is called Syriza, in Spain it’s called Podemos.

The Hope is coming.

Hasta La Victoria. SYRIZA – PODEMOS … Venceremos! ” (Until victory – We will win!“

*  *  *

And sure enough, here are the winds of social change…

One marcher, Jose Maria Jacobo, told the Reuters news agency that  Podemos supporters wanted to fight back against the country’s political class.

“It is the only way to kick out all of those politicians who are taking everything from us. They even try to take our dignity away from us. But that they won’t take that from us.”

*  *  *

As Bloomberg reports today,

Pablo Iglesias, the leader of Spanish anti-austerity party Podemos,pledged to restructure the nation’s debt if he can convert his opinion-poll lead into election victory, following the example of his ally, Greek Prime Minister Alexis Tsipras. “It has to be a rigorous restructuring,” Iglesias, 36, told thousands of supporters at a rally in Madrid on Saturday. The deal “should be appropriate for the fourth-largest euro economy,” he added.

The party has also pledged to take on Spain’s highly entrenched establishment, dubbed “la casta”, which has dominated politics in the country since the fall of fascism there.







Denmark just did a back door QE, by halting supply.  You can lower your currency by either increasing supply of issuance of bonds or decreasing its demand. Denmark choose the latter.  This too in end in failure.


(courtesy zero hedge)





Denmark Launches “Back-Door QE”, Halts Treasury Issuance: Why DKKEUR Could Be The “Trade Of 2015”



While much has been said about last week’s third in two weeks rate cut by the Danish Central Bank, one which brought the deposit rate to -0.50%, having previously cut it to -0.35% and -0.2% in the aftermath of the ECB Q€ and the SNB’s abandoning of the Franc ceiling – the latest move of desperation to preserve the peg of the DKK to the plunging Euro and one which as reported previously has led to such strange financial abominations as negative interest rate mortgages – few noticed an even more important announcement by the Denmarks Nationalbank. On Friday the Danish central bank said it would halt all government bond issuance “until further notice”!

Suspension of government bond issuance


Upon the recommendation of Danmarks Nationalbank, the Ministry of Finance has decided to suspend the issuance of domestic and foreign bonds until further notice.


The large surplus on the government finances in 2014 implies that the sale of government bonds has been greater than the funding requirement. Given the foreign currency situation, it is no longer appropriate to reduce the issuance of government bonds over several years. The balance on the central government’s account at Danmarks Nationalbank is more than sufficient to cover the financing requirement in 2015.


Danmarks Nationalbank has purchased foreign exchange in the market and reduced the monetary-policy interest rates. This has resulted in a widening of the negative spread between money market rates in Denmark and the euro area. The interest rate spreads for government bonds, however, have remained positive in the longer maturity segments.


Danmarks Nationalbank expects that stopping the issuance of government bonds will contribute to reducing the interest-rate spreads in the longer maturity segments and thereby limit the inflow of foreign exchange.

What Denmark just did, in addition to going further into NIRP, is to try and halt the appreciation of its currency by preventing more inflows not only on the short end but across the Treasury curve, and by halting supply of government bonds – the government had been due to issue 75 billion Danish crowns ($11 billion) worth of domestic debt to cover its 2015 financing needs – it hopes to not only lower long-end rates further, but to further weaken the Danish Krone, whose recent strength as a result of offshore inflows is the chief reason why many are increasingly saying the DEK peg to the EUR is in jeopardy.

And stated even simpler, paraphrasing Jan Storup Nielsen of Nordea, what Denmark has done is “back-door QE”, because as some forget, there are two ways to push the price of an asset higher (thus pushing its yield lower in the case of a bond): increase demand, which is what conventional QE does when central banks buy bonds, or reduce supply. Which is what Denmark just did by completely cutting off all Treasury issuance “until further notice“.

“We had not expected this,” said Jes Asmussen, Chief Economist at Handelsbanken. “Everything that happens now is surprising. We had expected the central bank to start to use other instruments if the pressure on the crown continued, but we did not consider it would be this exactly.”

But why, when with every passing day it is becoming clearer that the facade of central bank omnipotence is falling away, and central banks will, out of sheer desperation, do anything to delay the moments which as at least the SNB has admitted, is now inevitable?

Some more from Reuters:

While unexpected and unconventional, the Danish move underscores a commitment to its decades-long fixed currency policy and is aimed at weakening the crown to keep it within a tight range to the euro.


Pressure had been building on the crown since the Swiss National Bank abandoned its cap on Jan. 15, letting the franc surge against the euro, and the European Central Bank adopted a bond-buying scheme that helped weaken the euro more broadly.


“They have been successful with pushing the short rates down but not the longer rates and that has been the catalyst for continued inflow into the Danish asset market,” Kamal Sharma, G10 FX Strategy Director at Bank of America Merrill Lynch, told Reuters.


“They are obviously looking at the full extent of the policy tool kit.”

They sure are, and the central bank “now hopes that removing the option of buying new Danish government bonds will reduce demand for the crown while pushing investors towards existing longer-dated bonds, which would lower borrowing costs more broadly.”

That’s great, there is only one problem: what was until recently a “central bank put” has now become a “global speculator call” option. Why? Because the as the SNB just showed, there are very specific and defined limits to what banks with non-reserve currencies can do to defend their monetary policy.  As a result, the Danmarks Nationalbank can thank its Swiss peers for not only crushing any hopes it may have of defending its currency peg, but essentially assuring that it will suffer massive losses on any and all strategies it implements to avoid a fate similar to that of the Swiss.

Which means one thing: in the aftermath of the EURCHF devastation, where virtually unilimited stops were triggered under 1.20 sending the pair some 30% lower in milliseconds as HFTs and other traders were carried out feet first, increasingly more speculators are betting that the “Trade of 2015 could be doing precisely theopposite of what the Danish central bank is hoping will happen: i.e., shorting the EURDKK (or going long the DKKEUR) in hopes that when the Danish peg finally does break, it too will result in long Swiss France-type profits.


Of course, those who bet against the Danish Central Bank also get the benefit of being hedged against further European risk implosion, because should the Greek situation deteriorate even more resulting in inflows into safe-haven currencies such as the CHF and DKK (now that Draghi will do everything in his power to crush the Euro), then the cost of defending the Danish peg will become insurmountable and Denmark will, like Switzerland, have no choice but to give all those who are now on the other side of the trade the profit that will make many speculators’ year in the blink of an eye.

They say “don’t fight the Fed”, and in this case – at least until Janet Yellen capitulates on the Fed’s stubborn insistence of pushing the USD every higher – this meansexplicitly to keep fighting the Danish Central Bank until its peg finally breaks.






Important stories on Ukraine/Russia


Ukrainian fighting continues on the weekend:


( courtesy Sarah Lazare/common dreams blog? and special thanks to Robert H for sending this to us)

Bloodshed and Humanitarian Crisis in Eastern Ukraine As Fighting Continues

‘There are many terrible things about this conflict, but one of the hardest things is that people feel abandoned.’

A man comforts a wife of a killed civilian in shelling in Donetsk, eastern Ukraine, Friday, Jan. 30, 2015. (Photo: AP/Vadim Braydov)

A man comforts a wife of a killed civilian in shelling in Donetsk, eastern Ukraine, Friday, Jan. 30, 2015. (Photo: AP/Vadim Braydov)

Numerous civilians are reported dead and wounded Friday from heavy fighting in eastern Ukraine, as aid workers warn that the situation is growing increasingly dire for non-combatants—especially children—following the disintegration of a ceasefire between Ukraine and opponents of Kiev earlier this month.

In one incident on Friday, a bomb hit a cultural center in Donetsk, killing five people waiting in line for humanitarian aid, The Independent reports. Another shelling struck a bus shelter in the same city, killing two more people.

According to The Independent, “The self-titled Donetsk People’s Republic, which has administered the city since April, blamed the government for killing civilians with indiscriminate shelling, while Kiev officials accused the separatists of firing on their own stronghold to ruin the chance of peace talks.”

However, the U.S.-backed Kiev government, and pro-government militias, were linked to previous indiscriminate bombings against heavily populated areas in and near Donetsk, killing civilians, asdocumented by Human Rights Watch.

In an article published earlier this week, Emilie Rouvroy, Médecins sans Frontières (MSF) coordinator for Luhansk, in eastern Ukraine, described growing trauma and desperation as homes and medical institutions are destroyed in shelling and medical supplies run low.

“There are many terrible things about this conflict, but one of the hardest things is that people feel abandoned,” Rouvroy wrote. “They’re grateful that we’re here, but wherever we go they ask us: ‘Where is everybody? Where are the journalists? Where is the international community?’ People are dying here every day.”

Furthermore, UNICEF warns that “continuous fighting is having a devastating impact on the lives of children.” As of early December, 42 children have died in the conflict, and the number of displaced people has surpassed half a million, over 130,000 of them children.

According to the global body, 5.2 million people are affected by ongoing violence, including 1.7 million children, and 1.4 people are in immediate need of aid.





Tanks rolling into Poland (French tanks) and NATO plans permanent Eastern European bases.  Putin is not amused:


(courtesy zero hedge)


Ukraine “Truce”? Tanks Are Rolling In Poland As NATO Plans Permanent Eastern European Bases



With Ukraine, Germany, and France all expressing theirconcern this morning about “conflict escalation”between pro-Russian separatists and the Ukraine military, the so-called “truce” appears to be hanging by a thread of semanticism (despite OSCE’s please for respect of the cease-fire and the demarcation line). Today’s triple whammy of ‘escalation’ appears more focused on the non-Russian side as first, France begins sending tanks into Poland; second, Ukraine shifts its tanks to the front-line; and third – and potentially most inflammatory for Putin – NATO has confirmed plans to create permanent command centers in Eastern Europe. Putin has not responded yet but reports of ‘nuclear bombers’ flying above the English Channel “with transponders turned off,” suggests the sabre rattling continues.


Ukrainian civilians are being evacuated:


The OSCE is calling for the truce to stand…


Everyone is “concerned”


Leaders call for immediate “cease-fire” to fighting in east Ukraine after speaking on the phone today, AFP says, citing the French president’s staff.

So the following takes place:

1) France starts sending tanks into Poland…



France is pledging tanks and armored vehicles to bolster NATO forces in Poland, where leaders are increasingly uneasy about Russia.


In a joint statement Friday after a meeting between French President Francois Hollande and Polish Prime Minister Eva Kopacz, the two governments also called for a cease-fire in eastern Ukraine, where fighting has intensified between pro-Russia separatists and government troops.


NATO has no permanent presence in Eastern Europe but since last April members have been cycling forces and military equipment through the region in response to Russia’s actions in Ukraine.


The French military equipment is expected to remain in Poland for two months.

2) Ukraine begins moving its tanks to the front-line in Eastern Ukraine

and 3) NATO Plans New Permanent Command Centers in Eastern Europe

NATO said Friday it will deploy small units in six eastern European nations to help coordinate a spearhead force set up in response to Russia’s actions in Ukraine.


NATO Secretary General Jens Stoltenberg said the units in Estonia, Latvia, Lithuania, Poland, Bulgaria and Romania will be the first of their kind there.


Defense ministers from the 28-nation military alliance will discuss the full force, which can react quickly to any hotspots in Europe, when they meet on Feb. 5.


Stoltenberg said countries responsible for providing the several thousand troops should be known next week.


The forward units will comprise a few dozen troops only. They will plan and organize military exercises, and provide command and control for any reinforcements the force might require.


“They’re going to plan, they’re going to organize exercises, to provide … some key command elements for reinforcements,” Stoltenberg said.

*  *  *

Russia has been very quiet today as all of this has occurred but we suspect the last move – NATO bases so close to Russia’s border – will warrant some response very rapidly… or perhaps Putin already pre-empted it…

Putin Sends Nuclear Bombers Over English Channel: “Transponders Turned Off… Invisible to Air Traffic Control”


The U.K.’s Royal Air Force scrambled fighter jets on Thursday after a pair of nuclear-capable Russian bombers flew across a busy civilian air traffic corridor above the English Channel. The bombers had their transponders turned off, British officials said, making them invisible to many air traffic control systems. The incident disrupted multiple flights – and ended with the U.K. government demanding the Russian ambassador appear at the Foreign Office to explain the actions.

*  *  *

This is not going to end well.





(courtesy Reuters/the Guardian)


US considers providing arms to Ukraine as rebels step up attacks, says report

  • John Kerry and military ‘open to arming Kiev forces’, says New York Times
  • Washington concerned by renewed fighting after breakdown of truce

At least two dozen dead in renewed fighting in Ukraine


President Barack Obama’s administration is considering providing Ukrainian forces with defensive weapons and equipment in the face of a rebel offensive that has shattered a five-month truce, according to the New York Times.

The newspaper quoted US officials as saying secretary of state John Kerry and US joint chiefs chairman Martin Dempsey were open to discussions of the idea and that Nato military commander General Philip Breedlove supported providing such lethal aid.

One official was quoted as saying that US national security adviser Susan Rice was also prepared to reconsider her previous resistance to providing such assistance.

Kerry will visit Kiev on Thursday for talks with president Petro Poroshenko and other Ukrainian officials. Obama voiced concern last week about renewed fighting between Russian-backed separatist and government forces in easternUkraine and said the United States was considering all options short of military action to isolate Russia.

The White House has stopped short of providing military aid to Ukraine in order to avoid provoking Russia. Months of sanctions against Russia have not so far convinced Russia to cease arming the rebels, convincing some in theObama administration that military support for Ukraine is required.

The Times said eight former senior US officials would issue an independent report on Monday urging Washington to send $3bn in defensive arms and equipment to Ukraine, including anti-armour missiles and reconnaissance drones.

Fighting raged in eastern Ukraine on Sunday as pro-Russian separatists used artillery fire to try to dislodge government forces from a strategic rail hub after peace talks collapsed.

Nato and Kiev accuse Russia of sending thousands of troops to support the rebel advance with heavy weapons and tanks. Moscow denies it is directly involved in fighting over territory that the Kremlin refers to as “New Russia.“

European Union foreign ministers agreed on Thursday to extend for another six months economic sanctions against Russia that had been due to expire soon. Washington has promised to tighten its own sanctions, which have helped feed an economic crisis in Russia.






And now on the oil front:


Unions in the USA called for a strike on oil refiners:


(courtesy zero hedge)




10% Of US Refining Capacity Offline After US Oil Workers Stage Largest National Strike Since 1980


It’s not exactly the same as if Wall Street were to unionize and demand higher wages, but when US energy workers – supposedly the best paid profession away from those who BTFD or BTFATH for a living – go on strike, it is time to pay attention, which is precisely what happened yesterday afternoon, when US union leaders launched a large-scale strike at nine refineries after failing to agree on a new national contract with major oil companies. It marks the first nationwide walkout since 1980 and impacts plants that together account for more than 10% of US refining capacity. The United Steelworkers Union (USW) began the strike on Sunday, after their current contract expired and no deal was reached despite five proposals.

As quoted by the BBC, USW International Vice President of Administration Tom Conway said in a statement that it “had no choice. This industry is the richest in the world and can afford to make the changes we offered in bargaining,” 

Of course this is precisely what Saudi Arabia was hoping for, because unless crude prices soar, these “rich” energy companies will have no choice but to engage in pink-slipping many of these workers in the coming months, leading to a permanent mothballing of numerous facilities around the US, which in turn will dramatically reduce supply, finally leading to an organic increase in oil prices. Just as the Saudis had envisioned, however at a cost of hundreds of thousands of best-paid US jobs.


“The problem is that oil companies are too greedy to make a positive change in the workplace and they continue to value production and profit over health and safety, workers and the community.”


Royal Dutch Shell, the lead industry negotiator, said it “hopes to resume negotiations as early as possible”.


The move comes at a tough time for oil companies, which have been cutting costs and reining in spending following a collapse in crude prices.


A large part of this is due to an increase in oil volumes extracted from shale formations, adding to a global supply glut.


USW said it represents workers at 65 US refineries that produce approximately 64% of the oil in the US.


The union has been renegotiating a three-year national contract since 21 January. The latest offer was the fifth proposal rejected by the union.


It wants to double the size of the annual pay increases from the previous agreement, increased healthcare coverage and reduced use of non-union contract workers.

Good luck with those wage hike demands at a time when the majors are crushing executive management by halting stock buybacks.

Here are some more details on the strike from Bloomberg:

United Steelworkers union continues strike at 7 oil refineries and 2 other sites that began Sunday after failing to agree on labor contract renewal. Co. contingency plans in effect to keep most plants running. Union ready for more talks w/ lead co. negotiator Shell this wk.

Strike includes Lyondell, Marathon, Shell, Tesoro plants; full list below (co; location; b/d refining capacity)

  • LYB; Houston, Tx.; 264k
  • MPC; Galveston Bay, Tx.; 451k
  • MPC; Houston Green cogeneration plant in Texas; n/a
  • MPC; Catlettsburg, Ky. 242k
  • Shell; Deer Park, Tx.; 327k
  • Shell; Deer Park Chemical Plant, Tx.; n/a
  • TSO; Anacortes, Wash.; 120k
  • TSO; Golden Eagle, Martinez, Ca.; 166k; plant shutting
  • TSO; Carson, Ca.; 251k

Combined capacity for 7 refineries listed above ~1.8m b/d, or ~10% of U.S. operable capacity, according to data compiled by Bloomberg

More U.S. refineries standing by to join those already on strike

Strike note rescinded at TSO’s Mandan, N.D. refinery (70k b/d)

Local USW at BP Whiting agreed to rolling 24-hr extension

Some cos. yday said operations normal at refineries affected by USW notice, including: Shell Deer Park, Exxon Beaumont, LyondellBasell Houston

* * *

Expect more sudden and dramatic short squeeze in oil today as this information trickles down through the momentum-igniting algos that, much more than actual supply and demand, determine the price of the black gold.







With earning reports flowing from 8 am, here is the expected earnings growth as projected by all the companies over the last 4 months:


quite a shocker!!




(courtesy zero hedge)




Q1 Energy Earnings Shocker: Then And Now


In a few minutes, Exxon (first, then all other energy companies) will confirm if the earnings collapse so manyhad predicted to take place in Q1 as a result of plunging crude prices will materialize. Wait, did we say “so many”, make that nobody. Here is what Factset has to say about forecast Q1 energy earnings: “On September 30, the estimated
earnings growth rate for the Energy sector for Q1 2015 was 3.3%.
By December 31, the estimated
growth rate fell to -28.9%. Today, it stands at -53.8%.” Just a little off.

This is what a difference 4 months makes.

Source: Factset








And now Exxon reports:  earnings tumble 21%/Sales miss by 5 billion usa and stock buy backs almost grind to a halt. This is not good for the USA stock market:


(courtesy zero hedge)





Exxon Revenues, Earnings Tumble 21% From Year Ago, Sales Miss Expectations By $5 Billion; Stock Buyback Grinds To Near Halt



Moments ago, following our chart showing the devastation in Q1 earning forecasts, Exxon Mobil came out with its Q4 earnings, and – as tends to happen when analysts take a butcher knife to estimates – beat EPS handily, when it reported $1.56 in EPS, above the $1.34 expected, if still 18% below the $1.91 Q4 EPS print from a year earlier. A primary contributing factor to this beat was surely the $3 billion in Q4 stock buybacks, with another $2.9 billion distributed to shareholders mostly in the form of dividends.  Overall, XOM distributed $23.6 billion to shareholders in 2014 through dividends and share purchases to reduce shares outstanding.

This number masks the 29% plunge in upstream non-US earnings which were smashed by the perfect storm double whammy of not only plunging oil prices but also by the strong dollar. Curiously, all this happened even as XOM actually saw its Q4 worldwide CapEx rise from $9.9 billion a year ago to $10.5 billion, even though capital and exploration expenditures were $38.5 billion in the full year, down 9% from 2013.

However, while XOM did the best with margins and accounting gimmickry it could under the circumstances, there was little it could do to halt the collapse in revenues, which printed at $87.3 billion, well below the $92.7 billion expected, and down a whopping 21% from a year ago. And this is just in Q4 – the Q1 slaughter has yet to be unveiled!

Some of the Q4 highlights from the report:

  • Upstream earnings were $5.5 billion in the fourth quarter of 2014, down $1.3 billion from the fourth quarter of 2013. Lower liquids realizations decreased earnings by $2.4 billion, while favorable volume effects increased earnings by $400 million. All other items increased earnings by a net $640 million, including U.S. deferred income tax effects and the recognition of a favorable arbitration ruling for expropriated Venezuela assets.
  • On an oil-equivalent basis, production decreased 3.8 percent from the fourth quarter of 2013. Excluding the impact of the expiry of the Abu Dhabi onshore concession, production decreased 0.7 percent.
  • Liquids production totaled 2.2 million barrels per day, down 53,000 barrels per day from the fourth quarter of 2013. The Abu Dhabi onshore concession expiry reduced volumes by 133,000 barrels per day. Excluding this impact, liquids production was up 80,000 barrels per day as project and work program contributions more than offset field decline and divestment impacts.
  • Fourth quarter natural gas production was 11.2 billion cubic feet per day, down 653 million cubic feet per day from 2013. Field decline, lower demand, and reduced entitlement volumes were partly offset by higher volumes from Papua New Guinea and work programs.
  • Earnings from U.S. Upstream operations were $1.5 billion, $317 million higher than the fourth quarter of 2013. Non-U.S. Upstream earnings were $4.0 billion, down $1.6 billion from the prior year.
  • Downstream earnings were $497 million, down $419 million from the fourth quarter of 2013. Stronger marketing and non-U.S. refining margins, mostly offset by weaker U.S. refining margins, increased earnings by a net $40 million. Volume and mix effects increased earnings by $20 million. All other items, primarily higher expenses and unfavorable tax effects, decreased earnings by $480 million. Petroleum product sales of 5.8 million barrels per day were 149,000 barrels per day lower than the prior year’s fourth quarter.
  • The U.S. Downstream recorded a loss of $1 million, down $598 million from the fourth quarter of 2013. Non-U.S. Downstream earnings of $498 million were $179 million higher than the prior year.

But the biggest surprise, and what everyone will be focused on, is the sharp slowdown in CapEx: while XOM did $3 billion in stock buybacks in Q4, this number is set to slow to a trickle in Q1, with the company announcing it would repurchase only $1 billion in stock in Q1 2015. It is not quite a stock buyback halt… yet… but one or two more quarters of $45 oil and it will be, because as XOM notes, “Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased, or discontinued at any time without prior notice.





The devastation in the USA oil patch revealed:


(courtesy zero hedge)



When “Rumor Becomes Reality” – This Is The Devastation Across The US Oil Patch


This is going to hurt, no question,” fears a landowner in Santa Barbara with a dozen oil wells. Layoffs are “kind of like a death in the family,” exclaims a geophysicist in the Permian Basin. Houstonians were hoping for a hiccup, says one restauranteir, but now“they’re getting more cautious.” As WSJ reports,rumor is becoming reality across America as “unambiguously good” news of low oil prices turns from a trickle to a deluge of job losses and insecurity. Cutbacks aren’t yet reflected in broad data on employment, home sales or tax collections. But fallout is beginning to affect people, starting with the legions working as suppliers to the energy industry.


The pain is just starting…


As The Wall Street Journal reports,

Trouble has been looming over the oil patch since crude prices began falling last summer, from over $100 a barrel to under $50 today. But only now are the long-feared effects of a bust starting to ripple through the complex energy ecosystem, affecting Houston executives, California landowners and oil old-timers in Oklahoma.

Chevron is not alone in mass layoffs…

Eric Herschap is chief operations officer at Exclusive Energy Services LLC, a private company in Orange Grove, Texas, that offers services, including equipment rentals, to exploration companies.

His customers are demanding price cuts of 15% to 25%, and Exclusive offers additional discounts beyond that, he says.


So the company laid off 10 of its 45 employees and is cutting bonuses for those who remain.


Mr. Herschap says his brightest engineers are now fielding phone calls from customers with technical questions.


Nonenergy companies that rely on roughnecks are also pulling in their horns.

Laredo, the company that closed its Dallas office, said it was laying off 75 employees, about 20% of the workforce at the company, which has a stock-market value of about $1.3 billion.

“While it is a necessary step due to the substantial drop in commodity prices and the resultant reduction in the company’s drilling activities, we do not take such actions lightly,” it said.


Mr. Silver, the geophysicist, says that after living through oil busts, he has saved for the bad times and could retire—though he doesn’t want to.


“Probably the scariest thing out there is all of a sudden being without health insurance,” Mr. Silver says. “Just being thrown in the marketplace, that’s tough.”

Danny and Kim Gallo moved from Connecticut to tiny Runge, Texas, last February to open Boom Town Food Trucks to serve the Eagle Ford Shale.

But the company operates just one truck and a kitchen in a trailer at the moment, and the Gallos, who have backgrounds in the hospitality industry, have decided against adding another truck for a while.


“You’re sitting there and saying, ‘Wow, did we miss the party?’” says Mr. Gallo, whose most expensive item is an $11 double chorizo burger.


Fancier establishments that cater to energy executives are taking action, too. Steve Zimmerman has owned a restaurant and boutique hotel in Houston for decades and remembers the oil crash of 1986. Back then, he began offering an “Oil Barrel Special,” a multicourse meal with a price pegged to the (falling) cost of crude.


This month, he resurrected the special in an effort to attract customers while showing that he feels their pain.


Menus like escargot, salmon and bread pudding are on offer for about $50, depending on the closing price of West Texas Intermediate.


As oil prices started to fall, Houstonians were hoping for a hiccup, he says. Now, “they’re getting more cautious.”

*  *  *

Not ‘unambiguously good’ at all!!








Oil rig counts fall and crude after breaking into the 50 handle retreats and now down to the 47 handle. Oil has a roller coaster ride today.


(courtesy zero hedge)



Exuberant Crude Bounce Reverses, WTI Tests $47 Handle As ‘Rig Count-Production Link’ Meme Breaks


It appears the new narrative for why oil prices surged Friday and this morning is that a record-breaking drop in the US Rig Count means production levels will drop (and thus Saudi Arabia wins). This was enough to spark a melt-up squeeze on Friday which extended this morning running stops above $50.50. However, since that stop-run was exhausted, prices have tumbled back lower – testing a $47 handle – as investors realize the link between production and rig count is spurious at best and anti-correlated at worst.


The last time rig count tumbled… production rose!?


and markets are starting to realize that…




Charts: Bloomberg





The Baltic Dry index falls to lows not seen in decades (590)


(courtesy zero hedge)





Baltic Dry Plunges At Fastest Pace Since Lehman, Hits New 29 Year Low


The Baltic Dry Index dropped another 3% today to 590 – its first time below 600 since 1986 and not far from the all-time record low of 554 in July 1986. Of course, the absolute level is shrugged off by the over-supply-ists and the ‘well fuel prices are down’-ists but the velocity of collapse (now over 60% in the last 3 months) suggests this far more than some ‘blip’ discrepancy between supply and demand – this is a structural convergence of massive mal-investment meets economic reality.

The Baltic Dry Index drops even more… new 29 year lows…


The fastest 3-month plunge since Lehman…




Or under-demand…


Charts: Bloomberg


Your more important currency crosses early Monday morning:

Eur/USA 1.1322 up  .0040

USA/JAPAN YEN 117.60  up ..133

GBP/USA 1.5006 down .0038

USA/CAN 1.2685 down .0045

This morning in Europe, the euro is up, trading   now just above the 1.13 level at 1.1322 as Europe reacts to deflation,   announcements of massive stimulation.   In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31.  He now wishes to give gift cards to poor people in order to spend. The yen continues to trade in yoyo fashion as this morning it settled  down again in Japan by 13 basis points and settling well below the 118 barrier to 117.60 yen to the dollar. The pound was down this morning as it now trades well below the 1.51 level at 1.5006.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation/Dec  12 a new separate criminal investigation on gold,silver oil manipulation). The Canadian dollar stopped its descent and is now up  and is trading  at 1.2685 to the dollar. It seems that the 4 major global carry  trades are being unwound. (1) The total dollar global short is 9 trillion USA, and as such we now witness a sea of red blood on the streets as derivatives blow up with the massive rise in the dollar against all paper currencies.We also have the second big yen carry trade unwind as the yen refuses to blow past the 120 level.(3) the Nikkei vs gold carry trade. (4) short Swiss Franc/long assets  (European housing), the Nikkei, etc. These massive carry trades are terribly offside as they are being unwound. It is  causing deflation as the world reacts to a lack of demand. Bourses around the globe are reacting in kind to these events.

The NIKKEI: Monday morning : down 116.35 points or 0.66%

Trading from Europe and Asia:
1. Europe stocks all in the red (except London, and Germany)

2/ Asian bourses all in the red  Australia  … Chinese bourses: Hang Sang in the red ,Shanghai in the red,  Australia in the green: /Nikkei (Japan) red/India’s Sensex in the red/

Gold very early morning trading: $1272.00




Early Monday morning USA 10 year bond yield: 1.67% !!!  up  3  in basis points from Friday night/

USA dollar index early Monday morning: 94.75  down 6 cents from Friday’s close.



This ends the early morning numbers.




And now for your closing numbers for Monday:




Closing Portuguese 10 year bond yield: 2.68% up 4 in basis points from Friday

Closing Japanese 10 year bond yield: .29% !!! up 1 in basis points from Friday

Your closing Spanish 10 year government bond,  Monday up 7 in basis points in yield from Friday night.

Spanish 10 year bond yield: 1.49% !!!!!!
Your Monday closing Italian 10 year bond yield: 1.63% up 4 in basis points from Friday:

trading 15 basis points higher than Spain.



Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond:

Euro/USA: 1.1338  up .0056

USA/Japan: 117.54 up .059

Great Britain/USA: 1.5034 down .0035

USA/Canada: 1.2569 down .0160

The euro rose quite a bit this afternoon and it closed up by .0056  points finishing the day just above  the 1.13 level to 1.1338. The yen was down in the afternoon, and it was down by closing  to the tune of 6 basis points and closing well below  the 118 cross at 117.54 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound lost a little  ground during the afternoon session and was down on  the day closing at 1.5034. The Canadian dollar recovered from the massive hits the past few days.  It closed at 1.2569 to the uSA dollar


As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front will no doubt produce many dead bodies.



Your closing 10 yr USA bond yield: 1.67 up 3 basis points


Your closing USA dollar index: 94.60 down 21 cents on the day.


European and Dow Jones stock index closes:


England FTSE  up 33.15 points or 0.49%

Paris CAC up 23.42 or 0.51%

German Dax up 133.69 or 1.25%

Spain’s Ibex down  75.20 or 0.72%

Italian FTSE-MIB down 17.69 or 0.09%

The Dow:up 196.09 or 1.14%

Nasdaq; up 41.45 or 0.89%

OIL: WTI 49.75 !!!!!!!

Brent: 54.89!!!!

Closing USA/Russian rouble cross: 68.32  up 1 1/4  rouble per dollar on the day.



And now for your more important USA economic stories for today:


Your New York trading for today:

Early Dip Becomes Manic Rip After FT’s “Greek Non-Haircut Haircut” Article


Anyone trying to trade today’s equity, bond, or crude markets likely feels like this now…


An epic day of intraday volatility in almost every asset class (except precious metals) as shitty macro data in the US was trumped by ‘hope’ that an FT article on a Greece solution would save the world (but is in fact a non-starter).

To translate – this afternoon’s manic buying panic was because Greece requests a debt reduction under a more palatable name…


Wild swings today…



Managed to scramble S&P 500 cash index back above the crucial 100DMA…


S&P tops 2,000 and the 100DMA


Were stocks trying to catch up to oil’s meltup?


Bonds were not buying the exuberance at all…


Energy stocks led the day… from the NYMEX close yesterday stocks are mostly flat…


All thanks to the USDJPY ramp


But Energy credit was not falling for it again


On the day, Treasury yields ended modestly higher…


And thanks to the late-day exuberance, the USDollar rallied back to almost unchanged… thanks to USDJPY’s surge


and commodities were relatiovely well behaved apart from crude…


which was total craziness…


Charts: Bloomberg






The consumer is 70% of GDP.  When USA households stops spending the economy is in trouble:


(zero hedge)



US Household Spending Tumbles Most Since 2009; Salaries Have Smallest Monthly Increase In 7 Months


After last month’s epic Personal Income and Spending data manipulation revision by the BEA, when, as we explained in detail, the household saving rate (i.e., income less spending ) was revised lower not once but twice, in the process eliminating $140 billion, or some 20% in household savings…

… there was only one possible thing for household spending to do in December: tumble.

And tumble it did, when as moments ago we learned that Personal Spending dropped in the month of December by a whopping 0.3%, the biggest miss of expectations since January 2014 and the biggest monthly drop since September 2009!


As a result, this is what the US income and spending picture looked like:


And, as we predicted last month, the savings rate surged from 4.3% to 4.9% in December, as the spending spree, all of which took place simply in Department of Truth seasonally-adjusted models, had to be normalized out.


But wait, there’s more. Because while spending cratered the most in 6 years (but.. but… gas-savings boost spending), the income picture was just as dire, and while Personal Income rose by 0.3% in December, above the 0.2% expected, the key component that everyone is, or should be, looking at, Wages and Salaries increased by a tiny 0.1%: the smallest monthly increase since May, and what’s worse, Goods-producing wages actually declined by 0.2% in December, driven by a drop in Manufacturing sector wages.


Some recovery; some “plunging gas price” spending spree.








the key USA manufacturing sector still in low gear:


(courtesy zero hedge)



US Manufacturing “Remains In Low Gear” – Hovers Near One-Year Lows



Having fallen 4 months in a row in December to its lowest since last January, one could have been forgiuven for expecting the ubiquitous hope-driven bounce we so often see in soft-survey-based data and sure enough, Markit’sUS Manufacturing PMI eked out a very small (53.9 vs 53.7 previous) rise in January – hovering at practically one-year lows. On the heels of China’s disappointment, it appears the cleanest dirty short of America is not decoupling too much (if at all). This is not the “crisis has passed”, “economy is strong” narrative-confirming data that Obama and The Fed would have everyone believe and as markit notes, “Manufacturing remains in a lower gear compared to that seen last summer… adding to the suspicion that the pace of economic expansion in the first quarter could even fall below the 2.6% rate seen in the final quarter of last year.”


Chart: Bloomberg

As Markit explains,

“Manufacturing continued to expand in January, but the sector remains in a lower gear compared to that seen last summer.Factory output growth and job creation remain well below last year’s peaks, adding to the suspicion that the pace of economic expansion in the first quarter could even fall below the 2.6% rate seen in the final quarter of last year.


“The fear is that the economy will become increasingly reliant on the consumer to sustain growth, which is another reason besides the economic slowdown to believe thatpolicymakers will be wary of raising household’s borrowing costs via rate hikes any time soon.”

*  *  *

Moar stimulus, moar free money oir wecannay hold it Jim…








USA ISM manufacturing index tumbles to one year low/Construction disappoints


(courtesy zero hedge)




ISM Manufacturing Tumbles To One-Year Lows As New Orders Crater; Construction Spending Disappoints


Amid a plunge in new orders to Jan 2014 lows, the ISM Manufacturing index slid to 53.5 (missing expectations of 54.5) to its lowest since Jan 2014 – confirming Markit’s US PMI. New export orders contracted. employment growth slumped to 7 month lows, and inventories surged. In addition, after December’s tumble in construction spending, January’s bounce was only half as much as expected (+0.4% MoM vs +0.7% expected) missing for the 6th month in the last 7.


ISM Manufacturing hits one-year low…


Construction spending misses 6th of last 7 months…


Charts: Bloomberg






We  will see you on Tuesday.


On a personal note, I would like to inform everyone of the same arrival

of our newest granddaughter born to our proud children Aaron and Dani. This is our 6th grandchild.


bye for now




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