feb 3/GLD loses 1.79 tonnes of gold/SLV gains 1.149 million oz/Back to square one with respect to the Greek situation as the west claims Greek New deal as half baked/Oil surges/gold and silver raided/gold/silver equity shares hold their own today/


Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1258.70 down $16.50   (comex closing time)
Silver: $17.31 up 8 cents  (comex closing time)



In the access market 5:15 pm


Gold $1260.12
silver $17.31



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


The big story today is the fact that we are back to square one with the Greek situation as Germany considers the Greek proposals on debt reduction, “half baked”.  Three of the 4 major Greek banks again went to the well for another 2 billion euros as depositors remove their money from Greek banks and place the said money in their mattresses. The Australia central bank surprised the world with another cut in their key interest rate.  This morning, for the first time ever, the 10 year German bund is lower in yield than the 10 year Japanese bond.


There are two commentaries that should be read carefully:


the first:  Bill Holter is ringing alarm bells as to how these markets are going to implode.


the second:  David Stockman who gives a terrific account on what is going on inside Greece these past few days.  He gives a good history of how Greece has got to the position it is in today.  He offers great advise to the leaders of Greece as to the real quantity of bonds that should be subject to a haircut as the bailout in 2012 with additional debt added to the already struggling country was nothing but a fraudulent conveyance of funds.  It is a must read..


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


The gold comex today had a poor delivery day, registering 6 notices served for 600 oz. We have now seen two weak consecutive delivery notice days . Silver comex registered 16 notices for 80,000 oz .


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 248.83 tonnes for a loss of 54 tonnes over that period.

In silver, the open interest surprisingly rose by a surprising 1,139 contracts as Monday’s silver price was up by only 4 cents. The total silver OI continues to  remain relatively high with today’s reading at 164,380 contracts.

We had a very small 16 notices filed  for 80,000 oz

In gold we finally had a small drop in OI as gold was down by $2.30 yesterday.  The total comex gold OI rests tonight at 422,491 for a loss of 303 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. On this third day, only 6 notices.  It seems that the boys are having trouble locating some physical gold.



Today, we had a small withdrawal 0f 1.79 tonnes of gold inventory at the GLD/Inventory at 764.94 tonnes


In silver, /SLV  adds a rather large 1.149 million oz of silver inventory to the SLV/Inventory 320.463



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 fell today by a rather small 303 contracts from 422,794 down to 422,491 with gold down by $2.30 yesterday (at the comex close).  We are now in the big delivery month of the active February contract  and here the OI fell by 675 contracts  from 2,779 all the way down to 2,104 ,with all of these guys rolling into other future months. We had only 16 contracts served yesterday.  Thus we lost 659 contracts or 65,900 oz which were no doubt bought out with fiat.  The next contract month of March saw it’s OI fall by 46 contracts down to 1219.  The next big active delivery month is April and here the OI fall by only 588 contracts down to 294,668. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est)  was awful at 107,615. The confirmed volume yesterday ( which includes the volume during regular business hours  + access market sales the previous day) was also poor at 126,691 contracts. Today we had 6 notices filed for 600 oz .

And now for the wild silver comex results. Silver OI surprisingly rose by 1139 contracts from  163,241 up to 164,380 despite the fact that silver was only up by 4 cents yesterday.   We are now in the non active contract month of February and here the OI fell by 7 contracts down to 37.   We had 5 notices filed yesterday so we lost  contracts or 10,000  additional oz will not  stand.   The next big active contract month is March and here the OI fell by 1,896 contracts down to 96,725. The estimated volume today was fair at 29,346 contracts  (just comex sales during regular business hours). The confirmed volume yesterday was excellent (regular plus access market)  at 42,594 contracts. We had 16 notices filed for 80,000 oz today.

February initial standings


Feb 3.2015



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)JPMorgan
No of oz served (contracts) today 6 contracts(600 oz)
No of oz to be served (notices)  2098 contracts 209,800 oz)
Total monthly oz gold served (contracts) so far this month  77 contracts(7700 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 JPMorgan:  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 6 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 3 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 (77) x 100 oz  or 7700 oz , to which we add the difference between the OI for the front month of February (2104 contracts)  minus the number of notices served today x 100 oz (6 contracts) x 100 oz = 217,500 oz, the amount of gold oz standing for the February contract month. 6.765 tonnes)


Thus the initial standings:


77 (notices filed for the month x( 100 oz) or 7700 oz + { 2104 (OI for the front month of Feb)- 6 (number of notices served upon today) x 100 oz per contract} = 217,500 oz total number of ounces standing for the February contract month. (6.765 tonnes)




Total dealer inventory: 769,022.858 oz or 23.91 tonnes

Total gold inventory (dealer and customer) = 7.999 million oz. (248.80) 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 3 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 7,560.100  oz (Scotia,CNT )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 16 contracts  (80,000 oz)
No of oz to be served (notices) 21 contracts (105,000 oz)
Total monthly oz silver served (contracts) 309 contracts (1,545,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  173,169.4 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:  4,255.600 oz

ii) Out of Delaware: 3304.50 oz

total customer withdrawal: 7560.100 oz


we had 1 adjustments

i) out of Delaware: 60,044.92 oz was adjusted out of the customer and this landed into the dealer account of Delaware


Total dealer inventory: 67.786 million oz

Total of all silver inventory (dealer and customer) 178.045 million oz


The total number of notices filed today is represented by 16 contracts for 80,000 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 (309) x 5,000 oz    = 1,545,000 oz  to which we add the difference between the OI for the front month of February (37)- the number of notices served upon today (16) x 5,000 oz per contract = 1,650,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

309 contracts x 5000 oz= 1,545,000 oz + (37) OI for the front month – (16) number of notices served upon x 5000 oz per contract =  1,650,000 oz, the number of silver ounces standing.


we lost  contracts or 10,000 oz of additional silver  will not 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 3.2015: today a withdrawal  of 1.79 tonnes of  gold inventory removed from the GLD/Inventory at  764.94



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 3/2015 / we had a small withdrawal of 1.79  tonnes of   gold inventory at the GLD/

inventory: 764.94 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 : 764.94 tonnes.









And now for silver (SLV):


feb 3.2015: we had a good addition of 1.149 million oz of silver inventory/inventory 320.463 million oz

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 3/2015 we had a good addition  in silver inventory of 1.149 million oz

SLV inventory registers: 320.463 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  6.4% percent to NAV in usa funds and Negative 6.9 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.0%

Percentage of fund in silver:38.6%

cash .4%


( feb 3/2015)



2. Sprott silver fund (PSLV): Premium to NAV falls to + 3.23%!!!!! NAV (Feb 3/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to +.08% to NAV(feb 3 /2015)

Note: Sprott silver trust back  into positive territory at +3.23%.

Sprott physical gold trust is back in positive territory at +.08%

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 Tuesday  morning:



(courtesy Mark O’Byrne)



New Gold Fix To Be Run By Western and Chinese Banks – Still Not Transparent



  • Replacement for the near-century-old London gold fix will start in March
  • London gold fix to Shanghai gold fix – still not transparent
  • Stealth run on the London bullion market continuing?
  • Oil surges 11%; deflation deepening
  • Increasing signs of a slowdown of the U.S. economy is supporting gold

The overhaul of the gold fixing benchmark formally known as the London Gold Fix is due to begin in March. Participants are hoping that there is less disorder than was seen for the messy launch of the London Silver Price (LSP) last August.

The Queen inspecting gold reserves in the Bank of England

Although the new system is set to go into operation at the start of next month, the London Bullion Market Association (LBMA) has complained to Britain’s financial regulator, the FCA, that it still has not received guidelines as to how the new system will be regulated.

From the Financial Times

Without clear guidance from the FCA now and forthcoming final rules, participants will be unable to gain internal approval to take part in the new process,” the LBMA said in a letter to the FCA. “If a significant number of participants cannot get approval to take part due to lack of regulatory clarity, there will be a disruption.

The FCA responded bluntly

We announced a consultation on 22nd December into the seven benchmarks we would be regulating, which included the gold fix. That consultation closed on 30th January and we have said we intend to come forward with final rules before the end of the first quarter 2015.

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

The new system is set to replace the current one which is currently being run by just four western bullion banks, one of whom – Barclay’s – were fined for manipulation of the gold price last year. A second one, UBS, was found guilty by Switzerland’s financial regulator (FINMA) of “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks,” particularly with silver.

The new system is set to expand participation to at least 11 members including some Chinese banks for the first time. Given that China is now the largest producer and buyer of gold in the world, it is significant that Chinese interests will have a say in determining the daily price fix along with the current British, Canadian and French banks.

The change in weighting at the London Gold Fix to give the Chinese representation of over 25% appears to be driven by fear that the Shanghai Gold Exchange (SGE) may soon supersede London as the hub of the global gold market and location where the daily gold price is determined.

This may explain the apparent rush by the LBMA to implement the new system instead of waiting an extra month to get the necessary guidelines from the FCA.

The current process, where the daily gold price is determined by telephone calls from the four participant banks has been in place since 1919. It is set to be replaced by an electronic system.

It appears that the same level of transparency, or lack thereof, will continue to prevail under the new system – as is the case with the LSP, established last year.

The vast bulk of decision making will still be made by banks, who generally view gold with antipathy, and apparently only members of the LBMA will have a role in fixing the price.

This lack of transparency will likely undermine the new system. It will likely be viewed as more or less an extension of the current system with which many market participants are currently dissatisfied.

If London is to maintain supremacy over Shanghai and indeed Singapore as a gold trading and settlement hub, it will need to do a lot more to convince the gold trading community of its bona fides and it would appear that time is not on its side.

Is There a Run on the Fractional Reserve Gold Banking System?

Beyond The Smoke And Mirrors of LBMA  Gold Data – See GuideHere



Today’s AM fix was USD 1,281, EUR 1,128.93 and GBP 851.84 per ounce.
Friday’s AM fix was USD 1,274.25, EUR 1,122.69 and GBP 847.92 per ounce.

Yesterday, gold lost 0.76% or $9.70 yesterday, closing at $1,274.60. Silver dropped 0.35% or $0.06, closing at $17.20.


In Asia, gold bullion in Singapore for immediate delivery edged lower in early trade on Tuesday, outshone by equities that got a boost from expectations that Greece may be nearing a debt deal with international creditors.

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.

Greece’s new government has proposed ending a standoff with its international creditors by swapping its outstanding debt for new growth-linked bonds, Finance Minister Yanis Varoufakis was quoted by the Financial Times as saying yesterday.  However, it is far too soon to say that the crisis has been resolved.

Increasing signs of a slowdown of the U.S. economy is supporting gold. U.S. consumer spending recorded its biggest decline since late 2009 in December with households using the extra cash from cheaper gasoline to pay down debt, while factory activity also cooled in January. Those numbers released on Monday followed data last week that showed a sharp slowdown in economic expansion to 2.6 percent in the fourth quarter from 5 percent in July-September.

Oil prices rose strongly again on Monday, tacking on a total of 11 percent over two straight sessions, as some investors bet that a bottom had formed to the seven-month long rout on the market

Gold in U.S. dollars – 1 month (Thomson Reuters)

Elsewhere, European and Chinese factories slashed prices in January as production flatlined, heightening global deflation risks that point to another wave of central bank stimulus in the coming year.

The world’s largest gold exchange traded fund, SPDR Gold Trust, said its holdings rose to 24.65 million ounces on Monday, the highest since October.

Get Breaking News and Updates On Markets Here





James Turk talks about the Greek situation with Eric King of Kingworldnews.  This interview was done just before the 180 degree turn by Greek’s Fin Min


(courtesy James Turk/Kingworldnews)




D-Day for insolvent West may be Feb. 28, Turk tells KWN


5p ET Monday, February 2, 2015

Dear Friend of GATA and Gold:

Greece’s election of a new government may be the first step in the Western world’s recognition that it is insolvent and that its debts cannot be paid at current values, GoldMoney founder and GATA consultant James Turk tells King World News today. February 28 may be decision day, Turk says, because that is when another big loan to Greece is scheduled to be delivered even as the new government is rejecting the loan’s terms. The debt bust, Turk says, will boost the monetary metals, as they have no counterparty risk. Turk’s interview is excerpted at the KWN blog here:


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





John Embry talks with Eric King stating that the USA cannot prop up the world any longer:


(courtesy John Embry/Kingworldnews)


Fed is out of ammo, Embry tells King World News


4:45p ET Monday, February 2, 2015

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World News today that the monetary metals markets have a strengthening tone to them and that the U.S. Federal Reserve is out of ammunition for propping up the equity markets. An excerpt from Embry’s interview is posted at the KWN blog here:


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




For your interest…


(London’s Financial times/GATA)



Campaign to audit Federal Reserve gathers pace


Sam Fleming and Barney Jopson
Financial Times, London
Monday, February 2, 2015


The US Federal Reserve is coming under the most political pressure it has faced since the financial crisis, as Republicans who say it lacks transparency attempt to subject its monetary policy deliberations to external audit.

Republicans who took control of both houses of Congress this year want to use their new power to push for laws that would expose the Fed’s rate-setting and quantitative easing policies to formal review.


The Fed has long been a whipping boy of anti-government conservatives who dislike its power and perceived opacity. But interest in reforming the central bank is now spreading to the Republican establishment.

Janet Yellen, who chairs the US central bank, is likely to face questions on the topic this month in congressional testimony. Bill Huizenga, the Republican vice-chairman of the House subcommittee on monetary policy and trade, said the Fed was a “massive labyrinth of very opaque gears and levers” and that “very few people understand the why; the how.”

He said: “There is this walled-off area — this is a no fly-zone. In an open society when you are making significant decisions that impact a lot of people, why would we have this opaqueness on purpose?”

Last week, the conservative senators Rand Paul and Ted Cruz — both 2016 presidential aspirants — jointly introduced a bill to force the Fed to open its books.

Its co-sponsors include the Republican Senate majority leader Mitch McConnell, whose spokesman said: “The leader believes we should have more transparency.”

Some Republicans are also renewing a longstanding push for the central bank to follow mechanical rules in setting monetary policy, drawing on the work of the economist John Taylor.

Some economists say this sort of constraint would be hazardous, with Paul Krugman, the Nobel prize-winning economist, writing last week that it was a “really terrible idea”.

Ted Truman, a former Fed official and now a senior fellow at the Peterson Institute for International Economics in Washington, said the idea would remove “a substantial amount of the operational independence of the Federal Reserve”. He said Ms Yellen could be forced to spend a lot of time debating the Republican reform proposals in the coming two years, even though any bill would probably be vetoed by President Barack Obama.

Ms Yellen said last year that she would “forcefully” oppose efforts to advance the “audit the Fed” legislation, saying it was important that her institution was free from short-term political interference.

Auditing the Fed was long the signature issue of Ron Paul, the libertarian former Republican presidential candidate and father of Rand Paul, who blamed the central bank for contributing to the financial crisis. But his lone campaign has now evolved into a broader populist movement.

Richard Shelby, who as chairman of the Senate banking committee controls which bills it sends for votes on the floor, told Bloomberg news agency last week that he was “very interested in some type of audited Fed, especially the portfolio”.

“We should make sure that what they do, they’re doing right — and there are a lot of questions about the portfolio of the Fed coming from [quantitative easing],” he said.

Democrats are opposed to the Republican push. Sherrod Brown, the top Democrat on the Senate banking committee, had supported previous initiatives to make the Fed more transparent, said a spokeswoman. “But he does not see how this [new Republican ‘audit the Fed’] legislation will benefit working Americans, which he thinks should be a top priority of the Fed at this time.”

However, the Fed’s cause in Congress is being complicated amid discontent among Democrats over the performance of the New York Federal Reserve. In November, Jack Reed, a Rhode Island Democratic senator, introduced legislation that would require the New York Fed’s president to undergo a public confirmation process, including appointment by the president and approval by the Senate.

Calls to audit the Fed are jostling for the attention of Republican leaders with a host of issues, ranging from energy liberalisation to healthcare reform, now that the party controls both houses of Congress for the first time since 2006.

When Republicans in the House of Representatives advanced “audit the Fed” legislation last year, it was attacked by Maxine Waters, the senior Democrat on the House financial services committee, who said it would revoke the Fed’s independence, shake confidence in its decision-making and create unnecessary uncertainty in monetary policy.





As oil rebounds today so does the commodity currencies:


(courtesy zero hedge)



Commodity Currencies Are Soaring

As Crude’s bounce gathers pace so the world’s beaten-down commodity-currencies are exploding higher.Aussie Dollar has given back all its RBA rate curt losses, The Russian Ruble is soaring, and the Canadian Dollar isd back under 1.24 against the USDollar… The USD Index is now down 1.3% since Friday.

What’s good for oil is good for Russia… and the rest of the commodity currencies…


Draghi will not be pleased…


Charts: Bloomberg







As the Greek situation becomes more dire, citizens do not want to wait for more clarification…they just remove Euros from their bank account and stuff it in the mattress.  Today 3 out of 4 major Greek banks tapped the emergency ELA for another 2 billion euros.  In simple English, a definition of a bank run!!


(courtesy Reuters/GATA)


Three Greek banks tap 2 billion euros in emergency funding, sources tell Reuters


By George Georgiopoulos
Tuesday, February 3, 2015

ATHENS, Greece — Three of Greece’s four major banks have started to tap emergency funding from the Greek central bank as some depositors have withdrawn their money due to political uncertainty, two sources familiar with the situation told Reuters on Tuesday.

Greek banks are facing a new crisis after Prime Minister Alexis Tsipras’s left-wing government stormed to power last week with a pledge to abandon a bailout lifeline keeping the country afloat.

Tightening liquidity conditions ahead of a Jan. 25 election prompted the Bank of Greece to ask the European Central Bank to approve the emergency liquidity line for all the country’s top lenders — National, Piraeus, Alpha, and Eurobank. …

… For the remainder of the report:





(courtesy Dan Popescu/GATA)

Dan Popescu: Five reasons to buy gold and silver in 2015


4:15p ET Tuesday, February 3, 2015

Dear Friend of GATA and Gold:

Goldbroker’s Dan Popescu today offers five reasons to buy the monetary metals, with the best ones perhaps being that central banks are increasingly at odds with each other and that the developed world’s debt has reached unsustainable levels and can only be repudiated directly or inflated away. Popescu’s analysis is headlined “Five Reasons to Buy Gold and Silver in 2015” and it’s posted at Goldbroker here:


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







You will enjoy this offering from Bill Holter


(courtesy Bill Holter/Miles Franklin)



“Gaps” will lead to the Truth!



As mentioned in my previous piece, the last hour of trading on Friday was ominous and leads me to believe we will see “gap” openings in all directions very soon.  Since then, the markets have bounced back but unconfirmed on extremely low volume.  Zerohedge had a neat chart depicting the dichotomy of the markets http://www.zerohedge.com/news/2015-02-03/do-not-show-jim-bullard-chart versus the real economy, ignore this at your own risk!

  First, what are “gap” openings and why should they occur?  A gap is when a market opens up and begins with a higher price than the previous day’s high, or in reverse, it opens down and lower than the previous day’s low.  We saw this in spades when the Swiss just two weeks ago removed their peg with the euro.  In this instance, the Swiss rose and the euro fell in the neighborhood of 30% within minutes, NO trading even occurred for the first 15% or more of the move.
  Before speaking of what I believe we are about to see, please keep in mind some of the ramifications of these “gap openings” should or when they occur.  A gap opening means there is NO TRADING between “here and there”, meaning you are stuck with your position until the market actually opens and you have no way to correct a mistaken position.  Gaps will lead to huge gains for some and huge losses for others.  Think of it if you will as a transfer of wealth with a caveat.  As I have mentioned so many times before and as we just recently saw with the franc/euro cross, sometimes the moves are so big that some participants go bankrupt.  If you have traded with a partner who is bankrupted …you will not be able to collect YOUR winnings!  It is just this phenomenon which I believe is about to take over …everywhere and in all markets!
  Because the system is now more leveraged than ever before in history, “volatility” will spawn more volatility.  This is because everything financial on the planet is being carried with margin (leverage).  Margin is a good thing if you are positioned correctly, it is a killer if you are not.  If a market goes against you (especially if it “gaps” against you) while you only have 1% or 2% margin carrying a position, you can lose EVERYTHING and then some (maybe even your net worth) without even being able to trade!  Market participants on the wrong side will be “forced” into either buying or selling to close their positions.
  Leverage (derivatives) have been used to “price” markets and “make” the reality.  Derivatives have been used to push interest rates down (many even negative), hold up stock markets, and in general paint a picture that all is well.  What if “all isn’t really well” and assets, currencies, etc. are all mispriced?  What if Mother Nature’s pricing of assets is really far away from current pricing?  I believe this to be the case.  In a recent interview of Jim Willie,   https://www.youtube.com/watch?x-yt-ts=1422503916&feature=player_embedded&x-yt-cl=85027636&v=oUWr52bPV9A       he speaks for an hour about this and other topics.  He sees the dollar dropping 30% or more, gold moving higher by five or sixfold moves.  He sees some bonds going bidless until much higher interest rates are found.  He also believes that banks, brokers and insurance companies will fail …with your savings and investments going down the drain with them!  This barely scratches the surface of what he spoke of.
  OK, some of you may say “none of that can ever happen, Jim Willie is a sensationalist with no evidence whatsoever”.  Well, I personally believe most of what he says is correct.  I do believe we will have major gaps, market and banking closures, new currencies and massive defaults.  Most of what he is predicting stands to reason because of the leverage and lack of collateral in the system.  Geopolitically speaking, the world is already fracturing away from the U.S., the dollar and “non settlement” …and toward real settlement, toward truth and toward gold.
Maybe he (and I) are not 100% or even 80% correct.  What if we are mostly wrong and only 20% of what we see coming actually does come to pass?  What then?  In my opinion, if only 20% of what we see coming does actually come to pass, it will be the equivalent of the Great Depression of the 1930’s.  If what comes to pass is only 50% of what I expect, it will be hell on Earth and for quite a long time.
  We have already seen one major “reset” between the euro and Swiss franc come in the form of a gap.  I firmly believe we will see a huge gap higher in both gold and silver in reaction to what is to come.  I believe we are about to find out “it has all been one big and all encompassing lie”!  The economic numbers are clearly a lie.  The stock and bond markets are where they are because of freely printed money leveraged by derivatives to force pricing.  GATA has provided reams of evidence that central banks are in all markets, all the time.  Using simple 2+2 math tells us that Western gold cannot be anything close to what is claimed because the East is importing too much of it.  What do you think this “truth” would spawn?
  The East only wants “truth”.  They want fair trade and real settlement which is why they are converting dollars into gold.  Whether it be Greece or some other trigger to uncover the truth, it’s coming and may already be knocking on the door.  Puny Greece is only $350 billion worth of debt but levered it is in the $ trillions yet it will not take even a fraction of this to tip the system over.  We have gone 6+ years where “mark to market” has been abolished, this is truly what Greece is all about.  If their bonds were to become marked to reality, the banking system implodes.  Currently, Greek bonds are considered tier one capital, clearly this collateral is bottom shelf swill which cannot and will not ever perform.
  Once the process of re set comes to pass, Gold and silver will be seen as the ultimate tier one capital with no risk whatsoever of default.  The West either has the gold or we do not.  Betting that we do and finding out this is also part of the lie (it is the very core of the lie!) will be a disaster.  The most important “gap” to your well being is not “being” in a position where you nor any of your assets can default.  The truth, when it does come out will come quickly, most likely faster than you can move.  The world has seen “lies” in the form of fiat currencies and asset bubbles many times before, but never one that completely encompasses the entire world.  Each and every single time the truth came out, “honest money” was the ONLY place to be for safety.  I assure you, “this time is not any different”!  Markets beginning to gap in various directions will be your guide that the re set is in progress!  Regards,  Bill Holter
Attachments area
Preview YouTube video Jim Willie January 26 2015 (part 2) – fixed

Jim Willie January 26 2015 (part 2) – fixed



And now for the important paper stories for today:



Early Tuesday morning trading from Europe/Asia



1. Stocks mainly up on major Asian bourses  / the  yen rises  to 117.34

1b Chinese yuan vs USA dollar/ yuan strengthens  to 6.2584 ( hits upper level of peg)
2 Nikkei down 222.19 points or 1.27%

3. Europe stocks all in green   // USA dollar index down to 94.41/

3b Japan 10 year yield back up to .37%/ huge move !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.34/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets.

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 51.18 Brent: 56.81 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen up;

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 and get an oil strike

3k Australia as expected cuts its interest rate/world beginning to worry about the global economy sputtering/stoking again fears of currency wars


3m Gold at $1279.00. dollars/ Silver: $1754

3n USA vs Russian rouble:  ( Russian rouble  up 1/2 in roubles per dollar in value)  66.57!!!!!!

3 0  oil rises into the 51 dollar handle for WTI and 56 handle for Brent

3p Greek Fin Min now states that he has been misquoted (see below)

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 German 10 year bund (31%) now below Japan’s 10 year bond level!!!

3s oil rises despite rig counts again faltering (90 rigs)/oil will still be produced with existing wells.

4. USA 10 yr treasury bond at 1.71% early this morning. Thirty year rate well below 3%  (2.30%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid


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


Futures Rebound Continues As “Greece Concession” Story Picked Up By European Desks, Oil Rises


The rally that was sparked by yesterday’s late-day FT report had all but fizzled overnight, replaced by more concerns about the state of the global economy when Austrialia’s central bank surprised the world (just 9 of 29 analysts had expected this move) by becoming the 15th in a row to ease in 2015 (the list: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and now Australia), cutting the cash rate to an all-time low of 2.25%, and sparking more concerns about a global currency war or rather USD war against every other currency, when the USDJPY algos woke up again, and did everything they could to re-defend the critical 117.20 level in the USDJPY which has proven critical in supporting the market in recent weeks, once again using the Greek “softening tone” story as the basis for the ramp as Europe woke up, which in turn sent the DAX promptly to new all time highs, while the Athens stock market surged by 9% at last check.

How long this narrative will sustain today is unclear, especially with Varoufakis explicitly said earlier that he had been misinterpreted once again as we reported earlier. However, it is assured that if not for the Greek “broken telephone”, then some other intervention will step in to keep the S&P above the all important 2000 level.

The second most important news overnight comes from the bond where following a surprisingly weak 10 Year auction in Japan, where the Bid to Cover came in the weakest since 2013, “Germany became Japan“, as the 10 Year Bund yield (0.31%) is now below that of the sliding 10 Year JGB (0.37%) for the first time ever.

The third main overnight story involves commodity complex, and specifically oil where the surge of the last several days continues, and sees both energy and metals trade higher, with energy WTI and Brent crude futures trade higher for the fourth consecutive day, above USD 51 and USD 56 handles respectively. This comes as an extension of gains seen since Friday following the latest Baker Hughes rig count, which fell by over 90 rigs, the most since 1987, to see WTI finish 8.3% higher as a consequence. The ongoing strike by the United Steelworkers Association is also adding to the upside for prices. This comes as WTI crude futures settled higher yesterday by over 1% for the second consecutive trading day for the first time since two weeks prior to OPEC’s November meeting.

Back to equities, Asian stocks trade mixed with notable strength observed across energy stocks following the continued rebound in oil prices. ASX 200 (+1.6%) was the outperformer after surging to a new 7yr high, as the RBA cut its benchmark rate lower by 25 bps. Shanghai Comp (+2.5%) halted its 5-day slide as Chinese money market rates fell stoking speculation that the PBOC will ease in the form of a RRR cut, this comes after the Chinese manufacturing PMI came in at its lowest reading since September 2012 over the weekend, with the HSBC reading printing its second consecutive contraction. The Nikkei 225 (-1.3%) reversed earlier gains, the latter slumping to a 1-week low weighed on by a strong JPY.

This morning has seen equities open in the green (Euro Stoxx +1.42%) amid positive sentiment stemming from Asia, commodities and news on Greek debt. This saw the DAX (+1.15%) touch record highs, resulting in weakness in Bunds (-38 ticks) after Greece’s new finance minister Varoufakis stated he is not looking to write off Greece’s debt but prefers a ‘menu` of debt swaps, easing the tension anticipated last week. This also saw the Athens Stock Exchange rally over 9% throughout the morning and the GR/GE 10Y spread tightened by over 90bps, with the sentiment further underpinned across Europe the surprise 25 bps rate cut from the RBA overnight and the aforementioned speculation that the PBOC will ease in the form of a RRR cut.

On a sector specific basis, energy has been the outperformer of the session so far after positive earnings from BP (+2.5%), which saw the Co. cut CAPEX to USD 20bln vs. Prev. USD 24-26bln to become the latest Co. to cut expenditure in the wake of falling all prices with BG, joining Shell, Total and ConocoPhillips in their cost cutting. The bout of strength seen in oil prices have also aided the energy sector, while materials have also outperformed, benefitting from AUD weakness. The underperforming sector of the European session has been utilities after an EU court aide said German nuclear fuel tax is in line with European law in a non-binding opinion, meaning RWE (-4.3%) and EON (-3.7%) will not be refunded the EUR 2.2bln in nuclear tax fuel that they had applied for, leading to the DAX underperforming.

Ahead of the Wall Street open, there are a host of US earnings including UPS, with Walt Disney and Gilead reporting after market.

In FX, the surprise 25 bps rate cut by RBA saw AUD/USD fall over 120 pips, with CAD and NZD weakening in sympathy to the commodity currency, particularly against JPY. Analysts at UBS, JPMorgan and Standard Chartered all suggest that 2.25% may not be the lowest rate and the RBA may cut again in either March or May. CAD however rebounded from this weakness throughout the European morning, in tandem with strength seen in the energy complex. Elsewhere, Turkish CPI printed higher than expected (7.24% vs. Exp. 6.80%, Prev. 8.17%), which saw the Turkish Central Bank dismiss speculation that there will be an extraordinary monetary policy meeting tomorrow, while the UK Construction PMI saw a 23rd month of expansion, leading to an aggressive pull back in GBP/USD after the pair earlier fell below 1.5000 to the downside.

In summary:  European shares rise, though off intraday highs, with the basic resources and oil & gas sectors outperforming and utilities, food & beverage underperforming. Greek bond yields fall, ASE index rises for second day after govt proposals late Monday for a debt exchange. German 10-year yield falls below Japan’s for first time on record. Australian dollar fell after central bank cut interest rates. The Italian and Spanish markets are the best-performing larger bourses, Swiss the worst. The euro is little changed against the dollar. Commodities gain, with natural gas, gold underperforming and Brent crude outperforming. U.S. ISM New York, vehicle sales, factory orders due later.

Market Wrap

  • &P 500 futures up 0.4% 2025
  • Stoxx 600 up 1%
    to 370.9
  • US 10Yr yield
    up 4bps to 1.7%
  • German 10Yr
    yield up 2bps to 0.33%
  • MSCI Asia
    Pacific down 0.4% to 139.8
  • Gold spot up
    0.6% to $1281.5/oz
  • Euro up 0.03% to $1.1344
  • Dollar Index down 0% to 94.5
  • Italian 10Yr yield down 6bps to 1.57%
  • Spanish 10Yr yield down 5bps to 1.44%
  • French 10Yr yield up 1bps to 0.55%
    S&P GSCI Index up 2.1% to 404.9
  • Brent Futures up 3.3% to $56.6/bbl, WTI Futures up 3% to $51.1/bbl
  • LME 3m Copper up 2.9% to $5660.5/MT
  • LME 3m Nickel up 0.9% to $15460/MT
  • Wheat futures up 1% to 497.5 USd/bu


Bulletin Headline Summary from RanSquawk and Bloomberg:

  • RBA cut its benchmark rate lower by 25bps, surprising some analysts and leading to a fall in AUD/USD of 120 pips
  • The European morning has seen equities trade firmly in the green after Greece’s new finance minister Varoufakis stated he is not looking to write off Greece’s debt but prefers a ‘menu` of debt swaps
  • Looking ahead, this afternoon sees the release of US Factory orders, Durable Revisions and IBD/TIPP Economic Optimism, with a host of US earnings, including UPS and Fed speakers in the form of Bullard (Non-voter, Soft Hawk) and Kocherlakota (Non-Voter, Dove)
  • Treasury benchmark yields rise overnight as Greece retreated from its call for a debt writedown; Fed’s Bullard and Kocherlakota will speak on the economy today.
  • Greece retreated from its call on the euro area to write down its debt, and instead proposed to exchange existing borrowings for new bonds linked to the country’s growth
  • The Reserve Bank of Australia cut its benchmark interest rate 25bps to a new record low 2.25%, joining a dozen global counterparts in easing policy over the past month to stave off a wave of deflation enveloping the world
  • India must maintain fiscal discipline and the government should consider establishing independent institutions to examine its annual budget, central bank Governor Raghuram Rajan said before he reviews monetary policy
  • Nomura Holdings Inc. is retreating from U.S. investment- grade trading after last year’s bout of volatility in fixed- income markets, according to two people with knowledge of the decision
  • Obama’s $4t budget plan lays out a wish list for populist Democrats, but it also does something more subtle: It tries to drive a wedge between Republicans on taxes and spending
  • Islamic State extremists are expanding their international footprint in the Mideast and North Africa, the U.S. military’s top intelligence official said, offering a far bleaker security assessment than Obama and his political appointees
  • Ukraine evacuated civilians from a strategically important juncture in the country’s east as the worsening fighting with pro-Russian rebels led to calls for a military buildup on both sides
  • Sovereign yields mixed, Greece 10Y falls ~96bps to 9.99% Portugal, Spain and Italy also lower. Asian stocks mixed; European stocks rise, U.S. equity-index futures  gain. Brent, WTI and copper rise; gold rallies

* * *

DB’s Jim Reid concludes the overnight summary



After nearly a week of playing hard ball, the weekend’s more conciliatory stance from Syriza continued last night as the new finance minister Mr Varoufakis was reported as telling the FT that they would no longer call for a headline write-off of Greece’s debt. Whether the combination of growth linked and perpetual bonds that have been proposed are workable is open to question but it does seem that Syriza have blinked first in this stand-off after a very feisty week one of their new administration.

According to the FT, Varoufakis has proposed a ‘debt swap’ where by the European rescue loans issued to Greece would be replaced by bonds indexed to nominal growth for the region whilst ECB-owned Greek bonds would be swapped into perpetual bonds. The plan would therefore leave Greek debt at the IMF and private sector intact and in effect the restructuring would remove the risk of any haircuts to the current debt load which Eurozone officials have verbally pushed back on.

Markets reacted positively to the article. The S&P 500 rallied into the close to finish +1.30% after having been as low as -0.7% in early trading. The vast majority of the gains came in the last hour of trading following the Greece headlines. This morning equity markets in Asia are trading mixed however with the Shanghai Composite (+0.75%) higher but the Nikkei (-1.58%) and Hang Seng (-0.51%) softer. The ASX (+1.46%) has rallied following the RBA’s decision to ease the benchmark interest rate by 25bps to 2.25%. 7 out of 29 economists surveyed on Bloomberg expected the cut. So they join the ever growing club of ‘easy’ central banks in 2015. The AUD has weakened nearly 2% versus the Dollar on the back of the cut.

Other than the FT article it was a fairly quiet day as far as Greek news was concerned yesterday. Earlier in the day Varoufakis met with the UK Chancellor Osborne with the outcomes appearing to yield similar results to other recent regional meetings with Varoufakis quoted on Bloomberg saying that the meeting was ‘a breath of fresh air’ and that ‘despite our difference we’re highly tuned to finding common ground’. Meanwhile Osborne took an understandably cautious stance, commenting that ‘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’. Greek equities (+4.64%) rallied yesterday following the more conciliatory tone over the weekend whilst 10y yields fell 17bps to 0.62%. The shorter end of the curve however continues to remain under pressure with 3y yields climbing another 80bps to 18.90%. Both Varoufakis and Tsipras continue their European tour today and are due to meet Italian finance minister Padoan in Rome today followed by France’s Hollande and the EC president Juncker on Wednesday.

Back to markets in the US yesterday, the late rally in the S&P 500 masked what was a fairly volatile day for equities as markets traded between gains and losses as oil markets rallied and macro data was generally mixed. Starting with oil, both WTI (+2.76%) and Brent (+3.32%) firmed for the third consecutive day to $49.57/bbl and $54.75/bbl respectively lending support to energy stocks which finished 3% higher. Both markets are up around 11% since Thursday’s close and back to levels we last saw nearly a month ago. The gains appear to be a continuation of the rally we saw on Friday with expectations building that the US could be closer to cutting production following the latest rig count and also news that the United Steelworkers union strike had entered a second day. The better tone caused Treasuries to widen modestly with the yield on the 10y benchmark finishing 2.4bps wider at 1.664% – although at one stage it hit an intraday high of 1.71%.

A softer manufacturing picture was the notable data highlight yesterday with the ISM manufacturing print dropping nearly two points in January to 53.5 and a point below expectations. The reading was the lowest since June 2013 whilst prices paid declined 3.5pts to 35 (well below expectations of 39.5) which was the lowest level since April 2009 and no doubt buoyed by the decline in energy prices. Elsewhere, construction spending improved to +0.4% mom (from -0.2%) although it still came in a touch lower than expected. Lower energy prices were also to blame for a fall in the PCE deflator (-0.2% mom). Finally personal income for December was a modest beat (+0.3% mom versus +0.2% expected) although personal spending dropped to -0.3% mom from +0.6% previously, the lowest level since 2009. The Dollar softened for the first time in four sessions, with the DXY finishing 0.32% lower.

Before all this in European markets away from Greece were largely mixed with developed regions outperforming the periphery. Indeed the Stoxx 600 closed relatively unchanged (+0.06%) whilst the DAX (+1.25%) and CAC (+0.51%) firmed although the IBEX (-0.72%) and FTSE MIB (-0.09%) closed down. Yields in the periphery also finished some 3-7bps wider with Spain in particular appearing to trade weaker on the back of the Podemos rally over the weekend which we highlighted in yesterdays EMR. There was some supportive chatter out of ECB officials yesterday. Firstly the ECB’s Coeure was quoted on Reuters in a meeting in Budapest saying that ‘It (QE) is an open-ended programme’ and that ‘it will be reassessed when we come closer to September 2016, and if this aim of achieving sustained convergence towards 2% inflation in the medium term is not reached, we will do more’. Coeure also played down there being any immediate impact from the programme which was also backed up by the ECB’s Nowotny who was quoted at the same meeting saying that ‘I think in the summer we should get the first indications, because the first things to be overlooked at will be the volume of bonds offered to the ECB either by the banks of other investors’. In terms of the inflation picture Nowotny said that he sees some ‘deflationary impulses’ in H1 this year but ‘then later on the effect of the reduction of oil prices will get much less’. Wrapping up yesterday, it was fairly quiet on the data front. The final Euro-area manufacturing PMI was as expected at 51 and regionally a better than expected reading for Italy (49.9 vs. 48.8 expected) offset the modestly softer readings in France (49.2 vs. 49.5 expected) and Germany (50.9 vs. 51 expected). The UK reading improved to 53.0 from 52.7 previously.

With political risk likely to be high in Europe for years to come it’s worth pointing out that over the weekend Italy appointed Sergio Matarella (of the ruling Democratic Party) as Italy’s new President of the Republic which was as expected. DB’s Marco Stringa points out that although the President role is mainly a formal one, he can steer the formation of a new government at least until the new electoral law and Senate Constitutional reforms are approved. Marco doesn’t think there will be any major changes to the status quo and that going forward Prime Minister Renzi will likely have to be slightly more thoughtful of the demands of the Democratic Party minority to implement its economic reform programme.

With regards to today’s calendar, it’s a fairly quiet morning in Europe with just PPI for the Euro-area along with inflation data out of Italy and the construction PMI for the UK. Over in the US this afternoon we’ve got the ISM New York due along with factory orders, auto sales and the IBD/TIPP economic optimism survey. Comments from the Fed’s Bullard and Kocherlakota who are due to speak today could be of more interest whilst elsewhere the earnings season continues to kick on.




Greece FinMin: “No U-Turn” In Our Position; “Write-Off Can Occur In Several Methods” Spokesman Adds


Yesterday, when we reported on the FT’s take of the supposed Greek flip-flop, we said that contrary to the official interpretation of Greece ending its demands for a hard debt write-down and replacing it with a proposal for a debt exchange, we stated that “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.”

For the benefit of the kneejerk algos we even highlighted the key section, noting that all Varoufakis had done, was engage in semantics for the “benefit” of German taxpayers:

And not only was the Greet gambit merely a verbal paliation, the proposed alternative was in itself a non-starter, “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” as well as is seen as ECB monetary financing of a sovereign state (the ECB does that with QE as well, but we’ll let that slide for the time being).

This was confirmed moments ago by David Schnautz, strategist at Commerzbank who said that “the starting point of Greek negotiations on debt restructuring doesn’t look very promising” adding that “ECB, at least directly, won’t be able to swap its holdings of Greek bonds into other maturities due to the ban of monetary financing. The Timeline also doesn’t look very convincing, as asking or rather leaning on ECB for bridge-financing until June/July also probably borders on the ban of monetary financing.”

We bring all this up because less than a day after the FT report sent futures soaring and has been responsible for the jump in European stocks this morning, the Greek finance minister made it quite clear that, as has been happening on pretty much every day since his ascent to power, he has been misinterpreted and that as Bloomberg noted a little over na hour ago, “there has been no “U-turn” on the Greek debt position, adding that “Our promise is solid, debt will be rendered sustainable even if haircut replaced with euphemisms, swaps” Greece’s Finance Minister Yanis Varoufakis comments in Twitter post.

Euphemisms being the key word, because he just confirmed all he was doing was engaging in verbal acrobatics.

In other words, precisely what we said yesterday: no change in the Greek position at all, and certainly not yet because the last thing the Greek population is to realize that they replaced one European muppet government with another within days of the “hope for change” election.

The local press confirmed as much:

The government’s firm position is that the Greek debt is not sustainable and that is the reason why its write-off is required,government spokesman Gavriil Sakellaridis on Tuesday told ANT1 TV.


Sakellaridis stressed that the government has not changed its stance, which may have disappointed some people.


He underlined that the write-off can occur in several technical methods and one of them is “the technical method presented by (Finance Minister Yanis) Varoufakis to British investors”. However, he said, the government is concerned with rendering the debt sustainable, to help the Greek society breathe.


Referring to Prime Minister Alexis Tsipras’ contacts with Europeans, Sakellaridis said that the government has strengthened Greece’s negotiation position.


As for the candidate President of Republic, he said that the government’s proposal will soon be announced. “When the prime minister returns and the parliament opens, there will be an announcement of the candidate and we will smoothly proceed with the election of the President of Republic,” Sakellaridis noted.


Regarding the possibility of a meeting between the Greek prime minister and German Chancellor Angela Merkel, he said that the Greek side has not made any moves yet. “This has not been finalised, the Greek side has not done any moves in order to plan a meeting between Tsipras and Merkel. If there is such a meeting, you will be informed. It is a long time until February 12,” he concluded.

Nonetheless, all this took place only after Varoufakis was seen as backing off not only internationally, but in his native country. From Reuters:

Greek bond yields fell sharply on Tuesday as the new government in Athens appeared to soften its stance on a debt writedown with proposals for a new debt swap.


Meeting investors in London on Monday, Finance Minister Yanis Varoufakis proposed ending a standoff with creditors by swapping the debt for growth-linked bonds, and reassured private investors that they would not face losses.


While Varoufakis later issued a statement saying that his comments had been misinterpreted, he was widely reported in Greek media to be backing down from the anti-austerity government’s plan to reduce their debt.

The bottom line is that Varoufakis has just been introduced to the modern media’s version of broken telephone where attempts at diplomacy are immediately taken as a sign of weakness, and misstated to impact risk levels around the globe (higher naturally) which – after the past 5 years of flashing red headlines at key market inflection points – should have been all too clear: namely that by now the “independent” media merely serves not only its corporate advertising masters but their stock prices as well.

As for Varoufakis, perhaps he can be a little more careful to avoid having to explain and re-explain every single statement: granted, it is clear to most that he is simply doing everything in his power to avoid a bank run ahead of the February 28 D-Day and thus playing as much as possible for both sides, but he must also try to stick to Syriza’s party program which is what got him elected in the first place. How he resolves the two clearly irreconcilable positions, will be the biggest problem.





DAX Rolls Over After Merkel Says Greek Talks To “Drag On For Months”


Angela Merkel just upst the narrative in a major way. After 24 hours or so of “well Greece is fixed” chatter about compromises – that wer later rebuked by Greece’s Varoufakis, no lesser uberlord of Europe than Angela Merkel just dropped the following tapebomb:


Which means the crucial Feb 28th date looks like a problem – unless the ECB folds (diplomatically based on assumptions that Greece will fold in the future). The DAX (and for that matter all risk assets) is rolling over on the news…


As we explained previously, Feb 28th is D-Day…

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.





Throughout the night we had turmoil in the Asian markets as equities fell badly.  Also for some strange reason, we had a very weak Japanese bond auction where supposedly the government is buying all of the entire Japanese issuance. The Aussies did a surprising rate cut and India does a reserve cut.  All of this indicates the need of additional stimulus as the economic scene deteriorates (as witnessed by the plunge in the Baltic Dry Index yesterday)



Asian Markets In Turmoil – Weak Japanese Bond Auction; Surprise Aussie Rate Cut; India Holds Rates, Cuts Reserve Ratio


India’s Currency and Bonds are dumping…


UPDATE: Dow Futs -80 points, S&P Futs -9pts

Following the 15th surprise rate cut of 2015(Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and now Australia), the Aussie Dollar has cratered to its lowest since May 2009 against the US Dollar at 0.7650 (and bond yields crashed by the most since 1997 to record lows). Aussie stocks kneejerked higher (on an extremely dovish RBA statement) but are fading (as are Chinese stocks). Perhaps even more concerningly indicative of the central banks losing control, following this morning’s weak Japanese auction (or more properly expressed – BoJ monetization farce), USDJPY (under 117), Japanese stocks (down 350 points from US session highs), and JGBs (yields up 6-8bps) are all being sold.

Rate cuts and dovish statement…

  • RBA says further fall in a$ likely to be needed to balance economy

And so…Aussie Dollar collapsed on the RBA surprise cut –biggest drop since June 2013


Dropping it to May 2009 lows…


Aussie Bond yields plunged by the most (on a percentage basis) since 1997…


Japanese stocks and USDJPY in trouble post-auction…


and more worryingly the BoJ is losing control of JGBs…


As Demand was very much absent:

  • JGB 10-Year Auction Draws Lowest Bid-to-Cover Ratio in 19 Mos.

Japan sold 2.191t yen ($18.69b) in 10-year govt bonds at average yield of 0.313%, up from 0.295% at prior auction on Jan. 6

Today’s sale draws bid-to-cover ratio of 2.68, lowest since July 2013, down from 3.42 at previous auction

Charts: Bloomberg




This morning for the first time ever we see the German Bund 10 year yield lower than the Japanese 10 year bond as the Bank of Japan is losing control.



(courtesy zero hedge)



German Bund Yields Below Japanese Bonds For First Time Ever As BoJ Loses Control


Well that escalated quickly… while the trend of Bund yield collapse continues, the biggest driver of this unprecedented shift. For the first time ever, German 10Y bund yields are trading below (3bps below) Japanese 10Y bond yields as since Q€ the spread has collapsed 35bps. A very weak JGB auction overnight suggests the BoJ is losing control of the world’s biggest bond market…



Accelerating since Q€…


Charts: Bloomberg





Your big story of the day. It now seems that we are now back to square one with respect to the Greek crisis as Yanis V claims he was “misunderstood”.  The Germans basically stated that the new Greek formula for debt restructuring is “half baked” and is a non starter:


(courtesy zero hedge)

Back To Square One: Germany Throws Up All Over Varoufakis Proposal, Calls Greek Plan “Half-Baked”


If there was any confusion how Germany would react to the latest Greek plan, even though as we explicitly stated yesterday, the “new” Greek plan is really the “old” Greek plan but repackaged semantically for appeal to German taxpayers, even as the proposal to involve Europe’s public entities in a distressed debt restructuring is a non-starter, all confusion can be now abandoned following remarks by Merkel’s ally Kauder in which he not only called the Greek debt plan “half-baked” saying he will no longer respond to new proposals from Athens “every day”, but making it clear that there will be no renegotiation of the existing bailout proposal saying “we have agreements with Greece and not with a government – and these agreements have to be adhered to.

From Bloomberg:

  • Volker Kauder, the caucus leader for Chancellor Angela Merkel’s Christian Democratic-led bloc in German parliament, calls Greek debt recommendation “half-baked” demands a refrain from new proposals “every day.”
  • “We’re not going to play this game,” Kauder tells reporters in Berlin ahead of CDU/CSU caucus meeting. “I’m not ready to comment on half-baked plans every day. The fact remains that we have agreements with Greece and not with a government — and these agreements have to be adhered to.”
  • Greek Prime Minister Alexis Tsipras’s new government has a right to make proposals, though must bear consequences
  • “The German tax payer mustn’t be held liable for the decisions of this leftist-populist government,” Kauder says. “It’s up to Greece to decide.”
  • Troika of ECB, IMF and Commission must remain as negotiating partner with Greece: Kauder
  • “I don’t like the tone of voice out of Athens at all,” Kauder says. “That’s not the way to talk to one another in Europe.”
  • “There are new proposals and new reports coming out of Greece all the time and all of Europe and beyond seems to be holding its breath,” Kauder says
  • “A government should first of all reflect, should make concrete proposals and not present something new every day,” Kauder says
  • “The new Greek government doesn’t create any trust this way,” Kauder says

All of this takes place after moments ago Merkel made the record-high DAX unhappy when she said the Greek talks would likely drag on for months.

And just like that, we are back to square one, even though futures are now almost 60 points higher form where they were this time yesterday.

Mission accomplished.

the following gives a clear picture as to the total outstanding debt of Greece, most of which is in official sector hands:
(courtesy zero hedge)

Who Owns Greek Debt And When Is It Due?

Amid all the headline hockey and confirmation biases of every utterance by Varoufakis, the only important thing is the following 2 charts… how much pain… and when!!



As Goldman previously warned,

  • It will be politics rather than economics that drives the shorter-term outlook in Greece. Our base case remains that, eventually, some accommodation will be found between the new Greek government and Greece’s official creditors. This view has led us, so far, to expect modest spillovers from financial tensions in Greece to other Euro area markets. Thus far, this has proven correct.
  • But the new Greek government’s position is turning more Eurosceptic and confrontational than we anticipated ahead of last weekend’s election. This increases the risk of a political miscalculation leading to an economic and financial accident and, possibly, Greek exit from the Euro area (“Grexit”). While the European authorities now have better tools to address market dislocations in general (and the re-emergence of convertibility risk in particular), these are unlikely to be activated in a manner that entirely pre-empts market tension should Grexit risks intensify or materialise. We would expect significant market volatility surrounding an event of such systemic nature as Grexit. The intensity and persistence of such volatility would depend on the process by which Grexit occurred, and on the nature of the policy and political response to it in other Euro area countries.

Funding needs and repayment schedules for Greek sovereign debt

  • Greece owes EUR 315bn.
  • There are three large blocks of officially held debt still outstanding: (1) the Greek loan facility (EUR 53bn, at EURIBOR+50bp, which matures from 2027 onwards); (2) EFSF / ESM loans (EUR 142bn disbursed, EUR 2bn committed; at EFSF funding plus small administrative fee, maturing in 30 years or after); and (3) IMF loans (EUR 20bn, maturing currently).
  • There is also EUR 66bn of marketable debt outstanding, of which EUR 27bn is held by the ECB as a result of purchases under the Securities Markets Programme (SMP). There are EUR 15bn of outstanding Treasury bills. The remaining obligations are government and government-backed loans.
  • Between 2016 and 2022, total debt servicing costs (both redemptions and interest payments) are small – between EUR 6 and EUR 10 bn.
  • In 2015 financing requirements are more substantial. Core funding needs are about EUR 19bn. We have little information on available cash reserves.
  • Key upcoming maturities are: (a) bonds held by the ECB in July and August (Table 2); (b) IMF loans in February and March of around EUR 3.5bn (Table 3); and (c) Treasury bills (most of which will be rolled by domestic banks, but a small portion of which are held by foreigners with a likely failure to roll resulting in a drain on government cash reserves).
The following is a must read…David Stockman does a thorough analysis of what has happened to Greece over these past 10 years.  He rightfully claims that Greece was already hopelessly bankrupt in 2010 and to pile on more debt is nothing more than a fraudulent conveyance on the backs of Greek citizens.  His formula to re-boot Greece is the right way.  However it blows up the European banks and the ECB!!
(courtesy David Stockman)

History In The Balance: Why Greece Must Repudiate Its “Banker Bailout” Debts And Exit The Euro


Submitted by David Stockman via Contra Corner blog,

Now and again history reaches an inflection point.Statesman and mere politicians, as the case may be, find themselves confronted with fraught circumstances and stark choices. February 2015 is one such moment.

For its part, Greece stands at a fork in the road. Syriza can move aggressively to recover Greece’s democratic sovereignty or it can desperately cling to the faltering currency and financial machinery of the Euro zone. But it can’t do both.

So by the time the current onerous bailout agreement expires at month end, Greece must have repudiated its “bailout debt” and be on the off-ramp from the euro. Otherwise, it will have no hope of economic recovery or restoration of self-governance, and Syriza will have betrayed its mandate.

Moreover, the stakes extend far beyond its own borders. If the Greeks do not take a stand for their own dignity and independence at what amounts to a financial Thermopylae, neither will the rest of Europe ever escape from the dysfunctional, autocratic, impoverishing superstate regime that has metastasized in Brussels and Frankfurt under cover of the “European Project”.

Indeed, the crony capitalist corruption and craven appeasement of the banks and financial markets that have become the modus operandi there are inexorably destroying the EU and single currency. By fleeing the euro and ECB with all deliberate speed, therefore, the Greeks will give-up nothing except the opportunity to be lashed to the greatest monetary train wreak ever recorded.

So Greek Finance Minister Yanis Varoufakis has the weight of history on his shoulders as he makes the rounds of European capitals this week.His task in not merely to renounce the ham-handed “austerity” dictated by the Troika. Apparently even the French are prepared to acknowledge that the hideous suffering that has been imposed on Greece’s less fortunate citizens must be alleviated. Yet the latter is only a symptom of what’s wrong and what stands in the way of a real solution. 

The true evil started with the bailouts themselves and the resulting usurpation by the EU politicians and apparatchiks of both financial market price discovery and discipline and sovereign democratic prerogatives.  Accordingly, the terms of Greece’s current servitude can’t be tweaked and “restructured” within the Brussels bailout framework.

Instead, Varoufakis must firmly brace his interlocutors on the true history and the condition precedent that stands before them. Namely, that the Greek state was effectively bankrupt even before the 2010 bailout, and that the massive amounts of debt piled upon it thereafter was essentially a fraudulent conveyance by the EU. 

Accordingly, Greece’s legitimate debt is perhaps $175 billion based on the pre-crisis euro debt outstanding at today’s exchange rate. Greece’s new government has every right to repudiate the vast amount beyond that because it arose not from the actions of the Greek people, but from the treachery of EU politicians and the Troika apparatchiks—-along with the unfaithful stooges in the Greek parliament and ministries which executed their fraudulent conveyance.

Indeed, the purpose of the massive EU, ECB and IMF loans to Greece was just plain ignoble and corrupt. The European superstate deployed its vast fiscal and monetary powers to make whole the German, French, and Italian banks and other financial institutions which had gorged on Greece’s sovereign debt. For more than a decade, heedless gamblers and lazy money managers and bankers had loaded up on Greek debt bearing yields that superficially bore a premium relative to the German and US treasury benchmarks, but in fact did not remotely compensate for the self-evident credit risk embedded in Greece’s budgetary profligacy. 

All of this was plainly evident. During the years before the crisis and especially under the oligarchy dominated Karamanlis government, Greece’s spending relative to GDP soared. Yet Athens didn’t bother to impose the taxes necessary to pay for its public spectacles, such as the 2004 Olympics, or its vast expansion of the state bureaucracy, its wasteful gorging on German defense equipment or the ever-rising subventions to special interest groups.

Historical Data Chart

Historical Data Chart

Moreover, it was also plainly evident at the time that even as Greece was sinking into public insolvency, its overall economy was on a fast track to crisis, as measured by a soaring current account deficit. In effect, northern European banks were flooding it with radically mis-priced debt, causing a orgy of unsustainable domestic borrowing and spending.

Historical Data Chart

Indeed, during the 10-year run-up to the crisis, loans to private households and businesses soared by 5X. But in the standard Keynesian fashion, the booming investment and consumption spending financed by this debt eruption was not real or sustainable. It just temporarily flattered the GDP figures, making Greece’s actual public debt burden even more onerous than the reported figures—especially after Goldman and other bankers bearing illicit accounting schemes and predatory derivative deals had perfumed the fiscal pig.

Historical Data Chart

The resulting untoward impact of this entire, phony EU financial regime could not be more starkly evident than in the two graphs below. They contrast what was happening to Greece’s true, permanent public debt burden—-with the ability of its profligate politicians to access international debt markets at super-cheap rates.

In fact, Greece had been on a steady path toward bankruptcy for 25 years, but as the EU monetary boom accelerated after the turn of the century and the false yields on its euro denominated debt continued to fall, the nation’s public debt to GDP ratio was soon in terminal territory. The jig was up on its mad-cap leap into phony euro prosperity.

Greek 10-Year Bond Yield

Historical Data Chart

Historical Data Chart

But when the crisis came, it was all about saving the rotten regime that had enabled imprudent risk-taking and gross missing pricing of sovereign debt throughout the European financial system. EU apparatchiks never cared a wit about the plight of the Greek people. Their desperate machinations were only for the purpose of appeasing the financial market speculators who would have otherwise caused debt service to soar throughout the EU, thereby generating an existential crisis that would have brought down the failing machinery of the euro and the EU’s superstate rulers in Brussels.

So five years of false history needs to be aired and purged. The baleful truth is that widows and children, among others, are starving in Athens today in order that financial speculators would not have a hissy fit and that the apparatchiks of the EU could hang on to their power, privileges and cushy sinecures.  

 Varoufakis himself recently made this crystal clear:

 Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders, the Greek taxpayer. What we’ve been having ever since is a kind of fiscal waterboarding that has turned this nation into a debt colony.”

The real assault on Greece and the common people of every other European country stems from central bank corruption of the sovereign debt market; and from the associated crony capitalist regime of bank bailouts. By effectively eliminating credit risk and by artificially driving the yield on public debt to essentially zero, the European superstate has supplanted old fashioned price discovery, accountability and honesty in the entire multi-trillion market in sovereign European debt with the destructive “whatever it takes” writ of its financial apparatchiks.

Consequently, and as exemplified by today yields of 160 bps, 54 bps and 26 bps, respectively, on the Italian, French  and German 10-year bonds, the European government debt market has become a financial freak show. These insane prices have nothing to do with “deflation”; they are pure gifts to front running speculators, who, after five-years of bailouts and ZIRP, have every reason to believe that the craven fools running the European superstate will never permit a dime of losses.

Needless to say, exempting bankers and investors from the consequence of their own folly and greed is fatally inimical to democratic self-governance. As is now so evident in Europe’s mounting economic stupor and gathering political fractures, it inexorably leads to unaccountable, centralized rule of fiscal life and financial markets, alike; it is the reason why the Greek people have been stripped of their sovereignty and turned into debt slaves of the EU apparatchiks. 

So the status quo ante must be restored, and it is not hard to imagine how it would have played out.Had the actual parties to Greece’s prior spree of fiscal profligacy been allowed to step up to the plate and to shoulder the unpleasant consequences of their previous feckless actions, the outcome would have been a painful bankruptcy—but one which would have cleared the decks of the real culprits and paved the way for a constructive revival of the Greek economy.

First and foremost, the foolish European banks and bond speculators who ignored the self-evident risks of Greece’s runaway finances would have taken the deep haircuts needed to put Greece’s debt back on a sustainable basis. There would have been no new debt to bailout the culpable financial operators who lured Greece’s government into unsustainable borrowing at artificially cheap yields in the first place; and no fraudulent conveyance of losses from these financial institutions to the common folk of Greece. Rather than soaring to its present crushing total of $350 billion, Greece’s debt would have actually been rolled back sharply from the $230 billion level it was approaching in 2010.

Moreover, had the crisis been allowed to run its course to bankruptcy when it came to a head in 2010, the resulting massive losses to banks and speculators would have conveyed two essential messages— without which neither political democracy nor honest financial markets can survive.

The first message would have been to mind the financial condition, policies and politics of each and every sovereign issuer within the EU; there was never any mutualization of debt anywhere in the documents and treaties of the EU and no reason to believe that markets could simply command it when it became convenient.

The second, even more crucial message, would have been that there is an inherent, huge risk factor embedded in euro denominated sovereign debt because unless the German army is to occupy Europe, there is no basis, ultimately, for compelling any member country to abide by the fiscal limits of the treaty or even to stay in the EU.

Would that the punters in London and Zurich and the complacent bankers in Munich and Paris have suddenly found that they had been issued new bonds denominated in drachma at 20 cents on the dollar. The current crop of self-serving crony capitalist who run these institutions would have been forced to find a new line of work long ago.

And let us not mince words. Governments will always be tempted to issue way too much debt. The only way to restrain them is to allow the bankers and investors who buy their paper to face the risk of ruinous losses—both in their financial statements and their career prospects.

Let me tell you something else. Had Greece been allowed to go bust in 2010, then and there real “price discovery” would have commenced in the European sovereign debt markets. And there would have been a two-way therapy as a result. The bankers and investors who bought Greece’s junk would have been flushed, and Greece’s politicians would have faced their own day of reckoning.

In fact, in the wake of a bankruptcy, it would have been the Greek people and their government—- not the officious bureaucrats of the Troika—-who would have been obliged to formulate and impose the requisite measures of austerity. Needless to say, the calamity and embarrassment of a national bankruptcy five years ago would have caused the Greek electorate to throw-out the corrupt, incumbent politicians and the crony capitalist oligarchs that brought the nation to ruin in the first place.

And notwithstanding the tough choices that would have confronted a new post-bankruptcy government, the resulting period of austerity and fiscal self-discipline would have had a therapeutic purpose. That is, to enable the Greek state to function without new borrowings and to eventually restore its credit in the international capital markets. 

Had Greece been forced into bankruptcy and the drachma, it would have been required to endure a brutal regime of “austerity” as it cut its primary deficit to zero; and it would not have had the easy escape option to run the drachma printing presses red hot and monetize its fiscal debt. That would have caused a plunging exchange rate and massive flight of domestic capital and savings.

Stated differently, Greek democracy would have been forced to make tough choices, including deep cuts to pensions, curtailment of subsidies to domestic industries and interest groups, wholesale firings at its bloated public bureaucracies, and painful tax increases on millions of citizens. But the “memorandum” laying out this plan of austerity would not have been written in Brussels and delivered by officious bureaucrats speaking in French, German and English tongues.

Instead, the sacrifices and pain would have been hammered out in the halls of Greece’s parliament and its government ministries. Had the politicians and officials who run these institutions attempted to cheat, kick-the-can and otherwise indulge in budgetary self-delusion, they would have been quickly cut short for lack of cash.

Likewise, any attempt to make ends meet by monetizing the debt would have instantly imposed pain on the Greek citizenry in the form of a plummeting Drachma and prohibitive cost of imports. In short, the public’s ire would have been directed where it belongs—-at its own politicians in nearby Athens, not Frau Merkel and  the faceless bureaucrats who had been sent to Greece to do her bidding.

So if the task at hand is to turn the clock back to 2009, what is the math involved in repudiating the $175 billion fraudulent conveyance by the EU and how can the new Greek government get it done?

The first part is straight forward. Based on the widely circulated Bruegal numbers, Greece purportedly owes the IMF $35 billion. It should repudiate all of its IMF debt because never again should any Greek government go hat-in-hand to the IMF. The latter is a loathsome institution—-a gigantic fount of moral hazard and hand-maiden of the world’s crony capitalist bankers. During the last four decades it has done little except rescue the soured bets of bankers and bond managers and impose destructive shock therapies on fiscally impaired supplicants, thereby stripping these sovereign nation’s of the obligation to rectify their own excesses and formulate their own plans of austerity and recovery.

Indeed, the Greeks could do the world an immense favor by not only defaulting on the debts fraudulently conveyed by the IMF, but perhaps it could also threaten to arrest any IMF bureaucrat who crosses its border. Clueless mountebanks like Ms. Lagarde need to understand they are not doing gods work after all; and legislators in Washington, London and Tokyo who keep sending multi-hundred billion blank checks to the IMF need to explain to their constituents why their tax dollars are being lost bailing out the bad bets of international bankers.

Likewise, if a 50% haircut was good enough for Germany in 1953, it ought to suffice for the settlement of Greece’s obligations to the EU institutions today. According to Bruegal’s estimates, the combined amount owed to the Eurozone countries and the ECB is about $230 billion, meaning that $115 billion could be sliced off that total.

Finally, the $25 billion balance of the $175 billion haircut needed to repudiate Greece “bailout debt” would have to come from the approximate $70 billion owed to private banks and bond investors outside of Greece. In practice that would amount to no hair cut at all from the current blown-out market value of these obligations. Indeed, the hedge fund speculators and other punters which scooped up this paper during the illusionary Draghi recovery of the past year would be more than lucky to recover 67 cents on the dollar.

So the issue is not the math—its how to get the job done. The answer is that it needs to be done by way of announcement, not negotiations. The debt involved here is not legitimate; it is a fraudulent conveyance foisted upon the Greek people by the bureaucracy and politicians of the European superstate.

In announcing that it is leaving the Euro, therefore, Greece only needs to enumerate how much it intends to pay on its EU/ECB outstandings and over what period of time. About a century ago even the vengeful French were willing to give an impoverished Germany 50 years to make it reparations. Today’s prosperous statesman in Berlin should be happy to receive the same.

So history is at an inflection point. Hopefully the disparate coalition of leftist politicians and anti-establishment rebels that the Greek people have turned to in sheer desperation will not be bamboozled by the present chorus of Keynesian apologists for the EU’s rogue regime of banker bailouts and printing press monetarism.

Greece does not need to borrow new money from any one, and by announcing that it will refuse the next installment of the bailout it has already embraced that cardinal principle. Moreover, after a 2-3 year debt service suspension needed to stabilize its economy and public finances, it can live with a modest primary budget surplus for years to come in order to devote perhaps 4% of GDP to servicing its $175 billion of legitimate external debt. Except this time the required fiscal surpluses would be thrashed out in the democratic forum where the very idea of rule by the people first arose.

Likewise, Greece can re-establish its own central bank, currency and international credit if it is willing to abide by a second cardinal rule. Namely, its reconstituted central bank must be constitutionally prohibited from monetizing the debt of the Greek state or receiving government subsidies after its initial capitalization to create a Drachma based monetary system.

Let its central bank own RMB, USD and gold. Under that central banking arrangement, domestic interest rates would be set by market forces. Reckless printing of Drachma to buy any of these global assets would be self-evidently futile—even to central bankers. And a financial system and currency which strictly shackled its central bankers would in no time become a haven for domestic savers and capital inflows, alike.

Finally, if Greece’s new leftist regime actually believes that it can restore economic growth and prosperity through public investment—a belief that does not remotely hold up under the evidence—- it need only adhere to a third cardinal rule. That is, it must find an efficient, equitable and politically sustainable way to raise the money through current taxation.

Greece has been borrowing its way to disaster long enough.





The key aspect that we have to pay attention to is the warning to the world’s largest derivative player:  Deutsche bank:


(courtesy zero hedge)




S&P Downgrades Numerous European Banks, Warns Deutsche Bank May Be Next


Just hours after apparently settling its suit with the USA (not at all retaliation for downgrading them), S&P has taken the big red marker out on a slew of European banks:

  • Downgrades: Credit Suisse, Barclays, Lloyds, Bank of Scotland, RBS, HSBC, and Ulster Bank
  • On Watch Negative: Raiffeisen Zentralbank, MBank, Unicredit, Commerzbank, and Deutsche Bank

The driver of the shift in perspective is the apparent removal of the ‘bailout put’, as the prospect of “extraordinary government support” appeared less likely under recently passed bail-in legislation.




Outlook Neg:





For those who are following this story from Argentina:


(courtesy zero hedge)





Argentine President Arrest Warrant Discovered At Dead Prosecutor’s Home


“It would have provoked a crisis without precedents in Argentina,” exclaims a political analyst after, as The NYTimes reports, a draft of a warrant for the arrest of President Cristina Fernández de Kirchner – accusing her of trying to shield Iranian officials from responsibility in the 1994 bombing of a Jewish center – was found at dead prosecutor Alberto Nisman’s home. The new revelation has further inflamed theories regarding the heightened tensions between him and the government before he was found dead, as “it would have been a scandal on a level previously unseen.”



A day after family and friends paid final respects Thursday to the Argentine prosecutor who was found dead after alleging that President Cristina Fernandez agreed to protect those responsible for a 1994 bombing, the worst terrorist attack in the country’s history; more details are emerging of just how far Nisman was willing to go.

Despite, her disbandment of the intelligence agencies, following Fernandez suggestions that rogue intelligence agents orchestrated Nisman’s death to destabilize her administration, but she has not provided details, as The NY Times reports,

Alberto Nisman, the prosecutor whose mysterious death has gripped Argentina, haddrafted a warrant for the arrest of President Cristina Fernández de Kirchner,accusing her of trying to shield Iranian officials from responsibility in the 1994 bombing of a Jewish center here, the lead investigator into his death said on Tuesday.


The 26-page document, which was found in the garbage at Mr. Nisman’s apartment, also requested the arrest of Héctor Timerman, Argentina’s foreign minister. Both Mrs. Kirchner and Mr. Timerman have repeatedly denied Mr. Nisman’s accusation that they tried to reach a secret deal with Iran to lift international arrest warrants for Iranian officials wanted in connection with the bombing.


The new revelation that Mr. Nisman had drafted arrest warrants for the president and the foreign minister further illustrates the heightened tensions between him and the government before he was found dead on Jan. 18 at his apartment with a gunshot wound to his head. He had been scheduled the next day to provide details before Congress about his accusations against Mrs. Kirchner.


“It would have provoked a crisis without precedents in Argentina,” said Sergio Berensztein, a political analyst, about the impact of the warrants if they had been issued. He acknowledged that previous legal cases had shaken Argentina’s political establishment, but he emphasized that this case involved a request to arrest a sitting president.


“It would have been a scandal on a level previously unseen,” Mr. Berensztein said.

*  *  *

Some color on the warrant from Clarin.com (via Google Translate)

On folio 65 reads the title “Order of arrest and banned from leaving the country” .


And at page 67 the prosecutor asks “Mr. Justice” available “the CRISTINA FERNANDEZ DE KIRCHNER ELISABET, Héctor Marcos Timerman, of ANDREW LARROQUE (prior processes impeachment, removal or impeachment, as appropriate, under of their conditions of President’s Office, Minister of Foreign Affairs and National Deputy -arts. 53, 59, 68, 69 and 70 of the Constitution) “ .


And then ordered “the immediate arrest of LUIS ANGEL D’Elia, JORGE ALEJANDRO KHALIL, HECTOR LUIS YRIMIA, FERNANDO esteche and the man known as ‘Allan’, once it is properly identified” .



Nisman gave more information on the latter accused: “… according to the evidence obtained so far, could be Ramón ‘Allan’ Hector Bogado” , who was linked to the Ministry of Intelligence.


The draft complaint fiscal gives several indications that his accusations against the President was not written at the last moment, as the government tries to install: it is dated, for example, “June 2014”.


In the letter which appeared in the household trash, Nisman alert several times about the pressure that could put the accused on the Judiciary.


The prosecutor had advised the judge in this version of your complaint should “exercise extreme precautions” to prevent “maneuvers or stratagems” of the investigation, which described as “affected legal subjects” with a “total lack of scruples” .

*  *  *

Oil trading today:


WTI Squeezes Above $52 As Gasoline Prices Start 2015 With Biggest Surge In A Decade

Great news!! Oil prices have “bottomed” and WTI is up over $52 now… from under $44 just last week. But…gasoline prices have surged almost 24% in the last 3 weeks… the biggest seasonal rise in over a decade.


Oil prices are rising and saving stocks…


But gasoline prices are soaring…


Does the US consumer want rising or falling oil prices?


Charts: Bloomberg





Not only have we witnessed the Baltic Dry Index falter and today we see lease rates for oil cargo freight trains falter as well


(courtesy zero hedge)



Despite CSX CEO’s Confidence, US Oil Railcar Rates Have Crashed To 3 Year Lows



Two weeks ago, rail freight transportation company CSX’s CEO Michael Ward stated ‘unequivocally’ that as far as the movement of crude by rail he has “not seen any changes,” suggesting everything’s fine down to $30-35 oil and “expected no impact on crude shipments.” It appears he may have been somewhat careful with the truth as Reuters reports, while overall oil-train traffic remains near record highs, the shadowy industry that deals in the specialized 87-tonne crude carriers has seen monthly lease rates plunge to $1,300 late last month from a high of $2,450 about year earlier with the rates at their lowest in about three years. Even worse, railcar construction has surged amid the mal-investment boom exaggerating the over-supply, with one trader noting brokers were offering cars at spot rates of as little as $500 a month compared with $4,000 a year ago.


CSX CEO giving the all-clear 2 weeks ago…

Visit NBCNews.com for breaking news, world news, and news about the economy



And now, as Reuters reports, prices are plunging…

While overall oil-train traffic remains near record highs, the shadowy industry that deals in the specialized 87-tonne crude carriers is getting the taste of the wild swings that define the global oil market.


The sudden slump in the tank car market has more to do with narrowing crude oil spreads and ample tank car supply from manufacturers such as Greenbrier and American Railcar Industries than with more than 50 percent dive in U.S. crude prices over the past seven months.


But it may be an early warning for rail companies such as CSX, BNSF and Union Pacific, which have been resolutely upbeat despite growing expectations that booming U.S. oil production will begin to slow as soon as this summer.


Monthly lease rates for the most common of oil rail cars fell to $1,300 late last month from a high of $2,450 about year earlier, according to data obtained by Reuters from energy industry intelligence service Genscape.


The rates for cars, used to transport more than half of North Dakota’s crude, are at their lowest in about three years, said Tom Williamson, owner of Transportation Consultants.


“It wasn’t that long ago that you couldn’t find a car to lease, now I’m getting calls from brokers offering the cars,” he said, adding that he has received offers for 1,500 cars since late October.

And in the usual mal-investment-driven exuberance manner, supply has got ahead of ‘real’ sustainable demand…

The latest weekly Genscape data shows crude rail deliveries to East Coast refineries were down significantly.


As a result, the spot market for rail cars has all but dried up, prompting their owners to park about 15 unit trains in a Midwest facility until demand picks up, according to several industry insiders. The actual number of trains sidelined or converted for other uses is much higher, especially if Canada is included, sources said.


One trader said brokers were offering cars at spot rates of as little as $500 a month compared with $4,000 a year ago.


The slump comes while manufacturers are still working through orders for new cars that were placed during the surge in traffic. At the end of December, the backlog stood at 142,837 units, according to the Railway Supply Institute data, released Thursday.


New freight-car orders, however, fell to 37,431 in the fourth quarter, down 13 percent from last year’s highs, the data showed. Macquarie estimates that new orders for tank cars will drop by 70 percent this year.

*  *  *

Not unambiguously good at all…







Your more important currency crosses early Tuesday morning:



Eur/USA 1.1353 up  .0014

USA/JAPAN YEN 117.34  down .254

GBP/USA 1.5079 up .0053

USA/CAN 1.2561 down .0021

This morning in Europe, the euro is up, trading   now just above the 1.13 level at 1.1353 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  up again in Japan by 25 basis points and settling well below the 118 barrier to 117.34 yen to the dollar. The pound was up this morning as it now trades well below the 1.51 level at 1.5079.(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 1.2561 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: Tuesday morning : down 222.19 points or 1.27%

Trading from Europe and Asia:
1. Europe stocks all in the green

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

Gold very early morning trading: $1279.00




Early Tuesday morning USA 10 year bond yield: 1.71% !!!  up  5  in basis points from Monday night/

USA dollar index early Tuesday morning: 94.41  down 9 cents from Monday’s close.



This ends the early morning numbers.




And now for your closing numbers for Tuesday:




Closing Portuguese 10 year bond yield: 2.59% down 9 in basis points from Monday

Closing Japanese 10 year bond yield: .37% !!! up 8 in basis points from Monday (disastrous auction)

Your closing Spanish 10 year government bond,  Tuesday down 1 in basis points in yield from Monday night.

Spanish 10 year bond yield: 1.48% !!!!!!
Your Tuesday closing Italian 10 year bond yield: 1.59% down 4 in basis points from Monday:

trading 11 basis points higher than Spain.





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

Euro/USA: 1.1485  up .0146

USA/Japan: 117.46 down .133

Great Britain/USA: 1.5169 up .0143

USA/Canada: 1.2398 down .0189

The euro rose quite a bit this afternoon and it closed up by .0146  points finishing the day just above  the 1.14 level to 1.1485. The yen was up in the afternoon, and it was up by closing  to the tune of 13 basis points and closing well below  the 118 cross at 117.46 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound gained a little  ground during the afternoon session and was up on  the day closing at 1.5169. The Canadian dollar recovered hugely from the massive hits the past few days.  It closed at 1.2398 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: 1.78 up 12 basis points


Your closing USA dollar index: 93.60 down 90 cents on the day.


European and Dow Jones stock index closes:


England FTSE  up 89.25 points or 1.32%

Paris CAC up 50.23 or 1.09%

German Dax up 62.94 or 0.58%

Spain’s Ibex up  270.10 or 2.62%

Italian FTSE-MIB up 525.86 or 2.57%



The Dow:up 305.36 or 1.76%

Nasdaq; up 50.72 or 1.08%



OIL: WTI 52.38 !!!!!!!

Brent: 57.58!!!!



Closing USA/Russian rouble cross: 65.80  up 2 3/4  roubles per dollar on the day.



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


Your New York trading for today:


Stocks Soar On “Higher Gas Prices Are Good” Narrative; Bonds & Greenback Battered

After the last few days in Crude, The Dollar, Greek markets, and Stocks… we thought this approproate


Ok everyone take a breath. Just remember that low oil prices are a massive tax cut for consumers and businesses alike and you should buy stocks… and higher oil prices mean demand must be amazing, allow energy firms to massively beat expectations, and you should buy stocks…

The Dow is up 600 points in the last 2 days.


Since Friday’s close… Trannies love higher oil prices!!??


From The FOMC, everything’s awesome…


Stocks remain red for 2015 (so far)…


WTI Crude is up well over 20% in the last 4 days…$43.58 to $54.24 in 4 days


The biggest 3-day spike in oil in 6 years



Once again the ripfest stopped almost perfectly as NYMEX closed…


As the curve flattens dramatically…


Of course we have seen this kind of bounce before…


Of course – buy energy stocks though!!


The Dollar was also a major story today, following through from yesterday’s losses…


This is the Dollar’s worst 2-day drop in 16 months…


As EURUSD follows a well-trodden path post QE…


Treasury yields exploded higher as the dollar was sold… yields up 10-12bps (2nd biggest 5Y yield spike in a year, 2nd biggest 10Y yield spike in 18 months, 30Y biggest yield spike since July 2013)


And despite the USD weakness, gold and silver were sold while copper and even more so crude was ripped…


With copper’s biggest 3 day jump in 18 months… but here is some context…


Charts: Bloomberg

Bonus Chart: Bwuahahahaha!!!

USA factory orders plunge. This is the 5th consecutive fall in a row
for USA factory orders.
(courtesy zero hedge/)


Factory Orders Plunge 5th Month In A Row As ISM New York Crashes Most Since 2007


On the heels of the biggest crash in ISM New York since May 2007 (swinging from 9 year highs at 70.8 to 6 year lows at 44.5 in one month), Factory Orders plunged 3.4% in December (against an expectation of a 2.4% drop) – the biggest drop since Mar 2013 (ex last year’s Boeing swing). Factory Orders 3.6% YoY drop is the largest since Nov09. Which explains why stocks are soaring… (despite Fed’s Bullard saying “there is a lot of momentum in the US economy.”)


ISM New York Crashed…


and factory orders plunged…


The biggest YoY drop in Factory Orders since Nov 2009.


Charts: Bloomberg




I thought that USA auto sales were rising?


guess again…


(courtesy zero hedge)





US Domestic Vehicle Sales Disappoint In January, Drop For 2nd Month


All day mainstream media has been crowing about Auto sales being mind-blowing… record-breaking… colossal… so we have a simple question… when Ward’s released its US Domestic Auto Sales (SAAR) data this afternoon… why did it miss expectations and show a 2nd monthly drop in a row? January printed 13.31 million cars SAAR, missing expectations of 13.5 million and dropping from December’s 13.46 million SAAR.



Paging Phil LeBeau?


Charts: Bloomberg

We  will see you on Wednesday.



bye for now


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