March 18/ECB prepares for a GREXIT/FOMC gives a very dovish report/no immediate interest rate rise/European bond yields rise on GREXIT concerns/






Good evening Ladies and Gentlemen:



Here are the following closes for gold and silver today:



Gold:  $1151.40 up $3.10 (comex closing time)

Silver: $15.52 down 4  cents (comex closing time)



In the access market 5:15 pm



Gold $1166.50

Silver: $15.90



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



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



The gold comex today had a poor delivery day, registering 2 notices served for 200 oz.  Silver comex registered 118 notices for 590,000 oz .



Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 246.84 tonnes for a loss of 56 tonnes over that period. Lately the removals  have been rising!



In silver, the open interest fell by a tiny 24 contracts as yesterday’s silver price was down by 4 cents. The total silver OI continues to remain extremely high with today’s reading at 178,524 contracts. The front month of March fell by 0 contracts remaining at 692 contracts. We are now at a multi year high in the total OI complex despite a record low price. This dichotomy has been happening now for quite a while and defies logic.What is also strange today again is the fact that the OI went up with a very tiny volume yesterday.  This must be scaring our bankers to no end.



We had  118 notices served upon for 590,000 oz.



In gold we had a huge rise in OI despite the fact that gold was down by $5.00 yesterday. The total comex gold OI rests tonight at 429,738 for a gain of 3,995 contracts. Today, surprisingly we again had 2 notices served upon for 200 oz.



Today, we had a withdrawal of .9 tonnes of gold at the GLD/ inventory at  the  GLD/Inventory rests at 749.77  tonnes



In silver, /SLV  we had no change in inventory at the SLV/Inventory, remaining at 327.332 million oz



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


1, A tiny decrease in silver despite lower prices/silver OI at multi year highs and yet silver is extremely low in price. Gold OI surprisingly rises by close to 4,000 contracts despite gold’s fall in price of $5.00 yesterday. (harvey)

2,Greece scrambles to raise 2 billion euros. The IMF basically is giving up on these guys.  The European Minister is basically calling for capital controls but this can only be orchestrated by Greece itself. Then finally late in the day, the ECB is now preparing for a GREXIT and a loss of 320 billion euros. If you factor in the derivative losses, one can visualize a total meltdown in the trillions

(zero hedge/Phoenix Research Capital)

3. The big news was the dovish report from the FOMC/gold and commodities rose on the news as well as the Dow

(zero hedge/Goldman Sachs/Hilsenrath/Dave Kranzler/IRD)

4. European sovereign bond risks rise (yields rise) due to potential GREXIT:

(Bloomberg/zero hedge)



we have these and other stories for you tonight.



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

Here are today’s comex results:



The total gold comex open interest rose by 3,995 contracts from 425,743 up to 429,738 even though gold was down by $5.00 yesterday (at the comex close). We are now in the contract month of March which saw it’s OI remain constant at 110 for a loss of 0 contracts. We had 0 notices filed upon yesterday so we neither lost nor gained any gold contracts standing for delivery in this delivery month of March. The next big active delivery month is April and here the OI fell by 531 contracts down to 208,779. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 48,737.  (Where on earth are the high frequency boys?). The confirmed volume on yesterday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 175,805 contracts.   It seems that our HFT boys did not show up for work today. Today we had 2 notices filed for 200 oz.



And now for the wild silver comex results.  Silver OI fell slightly by 24 contracts from 178,548 down to 178,524 despite the fact that silver was down by only 4 cents with respect yesterday’s trading and equally astonishing that the volume yesterday was extremely light. We are now in the active contract month of March and here the OI fell by 0 contracts remaining at 692. We had 0 contracts served upon yesterday. Thus we neither lost nor gained any silver contracts standing in this March delivery month. The estimated volume today was simply awful at 9,840 contracts  (just comex sales during regular business hours.  The confirmed volume yesterday (regular plus access market) came in at 40,219 contracts which is poor in volume. We had 118 notices filed for 590,00 oz today.



March initial standings

March 18.2015





Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz   96,450.000  oz  (Scotia) 3,000 kilobars
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 2 contracts (200 oz)
No of oz to be served (notices)  110 contracts (11,000 oz)
Total monthly oz gold served (contracts) so far this month 8 contracts(800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month  114,790.651 oz

Total accumulative withdrawal of gold from the Customer inventory this month

 494,421.0 oz

Today, we had 0 dealer transaction


total Dealer withdrawals: nil oz


we had 0 dealer deposit



total dealer deposit: nil oz



we had 1 customer withdrawals

i) Out of Scotia: 96,450.000 oz (3,000 kilobars)



total customer withdrawal: 96,450.000 oz



we had 0 customer deposits:

total customer deposits;  nil  oz



We had 1 adjustment


i) Out of Brinks:


192.90 oz was adjusted out of the customer and this landed into the dealer account of Brinks:



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 2 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.



To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (8) x 100 oz  or  800 oz , to which we add the difference between the open interest for the front month of March (110) and the number of notices served upon today (2) x 100 oz equals the number of ounces standing.


Thus the initial standings for gold for the March contract month:

No of notices served so far (8) x 100 oz  or ounces + {OI for the front month (110) – the number of  notices served upon today (2) x 100 oz} =  11,600 oz or.3608 tonnes


we neither lost nor gained any gold ounces standing for delivery in this March contract month.


Total dealer inventory: 658,344.514 oz or 20.477 tonnes

Total gold inventory (dealer and customer) = 7.936 million oz. (246.84) tonnes)

Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 56.0 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real.  I cannot see continual additions of strictly kilobars.







And now for silver




March silver initial standings

March 18 2015:





Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 111,502.700 oz (CNT,HSBC)
Deposits to the Dealer Inventory   594,239.30 oz (CNT)
Deposits to the Customer Inventory 10,003.80  oz (CNT)
No of oz served (contracts) 118 contracts  (590,000 oz)
No of oz to be served (notices) 574 contracts (2,870,000)
Total monthly oz silver served (contracts) 2001 contracts (10,005,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  4,389,317.8 oz

Today, we had 1 deposit into the dealer account:


i) Into CNT:  594,239.300 oz

total dealer deposit: 594,239.300   oz



we had 0 dealer withdrawal:

total dealer withdrawal: nil oz



We had 1 customer deposits:


i) Into CNT:  10,003.800 oz

total customer deposit: 10,003.800 oz



We had 2 customer withdrawals:


i) Out of HSBC: 101,498.900 oz

ii) Out of CNT: 10,003.800 oz



total withdrawals;  111,502.700 oz



we had 0 adjustment



Total dealer inventory: 70.027 million oz

Total of all silver inventory (dealer and customer) 176.825 million oz


The total number of notices filed today is represented by 118 contracts for 590,000 oz. To calculate the number of silver ounces that will stand for delivery in March, we take the total number of notices filed for the month so far at (2001) x 5,000 oz    = 10,005,000 oz to which we add the difference between the open interest for the front month of March (692) and the number of notices served upon today (118) x 5000 oz  equals the number of ounces standing.

Thus the initial standings for silver for the March contract month:

2001 (notices served so far) + { OI for front month of March(692) -number of notices served upon today (118} x 5000 oz =  12,875,000 oz standing for the March contract month.

we neither gained nor lost any silver ounces standing in this March delivery month.


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






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:



March 18/ we had a withdrawal of .9 tonnes of gold from the GLD/Inventory at 749.77 tonnes


March 17.2015: no change in gold inventory at the GLD/Inventory 750.67 tonnes


March 16/no change in gold inventory at the GLD/Inventory 750.67 tonnes



March 13/ we had a small change in gold inventory at the GLD (small withdrawal/probably to pay for fees)/Inventory at 750.67 tonnes

March 12.we had a withdrawal of 2.09 tonnes of gold at the GLD/Inventory at 750.95 tonnes

March 11.2015: no changes in gold inventory at the GLD/Inventory at 753.04 tonnes

March 10 no report on the GLD tonight/computer down/inventory remains 753.04 tonnes

March 9/ we had another huge withdrawal of 3.38 tonnes of gold from the GLD, no doubt heading for Shanghai/Inventory 753.04 tonnes

March 6/we had a huge withdrawal of 4.48 tonnes of gold from the GLD/inventory rests tonight at 756.32/Also HSBC is getting out of the gold business in London and is giving up all of its 7 vaults.

March 5 no change in gold inventory at the GLD/760.80 tonnnes

March 4/ no change/inventory 760.80 tonnes

March 3 we had another 2.69 tonnes of gold withdrawn from the GLD. Inventory is now 760.80 tonnes.

March 2  we had 7.76 tonnes of withdrawal from the GLD today and this physical gold landed in Shanghai/Inventory 763.49 tonnes





March 18/2015 /  we had a 0.9 tonnes withdrawal from GLD/Inventory at 749.77 tonnes

inventory: 749.77 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 : 749.77 tonnes.








And now for silver (SLV):


March 18/ no change in silver inventory/327.332 million oz


March 17/ no change in silver inventory/327.332 million oz


March 16/no change in silver inventory/327.332 million oz



March 13.2015: no change in silver inventory/327.332 million oz

March 12: no changes in silver inventory/327.332 million oz

March 11/no changes in silver inventory/327.332 million oz

March 10/ no change in silver inventory/327.332 million oz

March 9/ no change in silver inventory at the SLV/327.332 million oz

March 6: huge addition of 1.34 million oz of silver into the SLV/Inventory 727.332 million oz

March 5 no change in inventory/725.992 million oz

March 4 a slight reduction of  126,000 oz of silver/SLV inventory at 725.992 (probably to pay for fees)

March 3 a small deposit of 328,000 oz of silver into the SLV/Inventory at 726.118 million oz.

March 2/ no change in silver inventory tonight; 725.734 million oz

Feb 27.2015 no change in silver inventory tonight: 725.734 million oz

Feb 26. no change in silver inventory at the SLV/Inventory at 725.734 million oz

Feb 25. no changes in silver inventory/SLV inventory at 725.734 million oz






March 18/2015 no change in    silver inventory at the SLV/ SLV inventory rests tonight at 327.332 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)

Not available tonight

1. Central Fund of Canada: traded at Negative  6.1% percent to NAV in usa funds and Negative 7.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.7%

Percentage of fund in silver:37.8%

cash .5%

( March 18/2015)



Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV falls to + 2.28%!!!!! NAV (March 18/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.03% to NAV(March 18  /2015)

Note: Sprott silver trust back  into positive territory at +2.28%.

Sprott physical gold trust is back into negative territory at -03%

Central fund of Canada’s is still in jail.








And now for your more important physical gold/silver stories:



Gold and silver trading early this morning



(courtesy Mark O’Byrne)


Gold Price to Surge Over $2,400 Per Ounce – Doubling Asian Demand in “Asian Century”

– Gold price set to soar to new records in ‘Asian century’
– Gold price to double by 2030: ANZ
– Gold to exceed $2,400 per ounce
– Gold demand in Asia set to double
– “Greater demand from investors and central banks will see gold prices rise materially over the long-term”
– “Most of the time you don’t want to pay for it. But if you need it, you’re glad you have it”

The price of gold is forecast to double in the next 15 years, and growing wealth across Asia, particularly in China and India, will lead to demand for gold bullion and send its value soaring, a new study from ANZ predicts.

Gold in US Dollars - 5 Years (GoldCore)

 ANZ’s just released report `East to El Dorado: Asia and the Future of Gold’ says the price of gold could exceed $2,400 per ounce by 2030, more than double its current value of around $1,150.

“Asia’s rise will have profound implications for the gold market,” ANZ chief economist Warren Hogan said. As incomes rise across Asia, so will the appetite for gold rings and necklaces, the report predicts. “A growing middle class will buy more jewellery,” Hogan said.

There will also be an increasing appetite for gold coins and bars as stores of value.

Gold holds cultural significance in China, India and across much of Asia, where gold is considered an ideal gift for weddings in the hope it can bring luck and happiness.

Difficulty in obtaining gold in China and India in the past also adds to the allure, according to the report. The Chinese government has a history of nationalizing gold stores and prohibiting gold ownership, while in India gold imports were largely banned until 1990.

Developments in money management practices in Asia, and rising demand for diverse financial products, will also help fuel demand for physical gold, the report says.

“A larger body of professional money managers will drive investment demand,” Mr Hogan said.

“And regional central banks will purchase more gold to provide confidence in newly floated currencies  …  These factors will support a long term and significant increase in the gold price.”

ANZ’s report predicts annual gold demand from 10 key Asian countries – including China, India, Japan, Indonesia and South Korea – will double from 2,500 tonnes to 5,000 tonnes.

ANZ said it believes the gold price will  rise above $2,000/oz by 2025.

“While the near-term could see prices trade only marginally higher over the next few years, we believe the combined effect of greater demand from investors and central banks will see gold prices rise materially over the long-term,” it said.

“Beyond its role as the world’s largest producer and consumer of physical gold, we believe China will eventually dominate the price discovery process too, as Asia’s financial centres gradually open up. There is no reason why Shanghai should not become a major centre for gold trading provided the appropriate institutional and legal reforms take place.”

A climbing US dollar has dampened investor demand for gold so far in 2015, but investors still see gold as a safe haven during periods of share market and economic decline the report says.

“One things that’s never changed for the gold market in the last 30 or 40 years is its safe haven appeal,” he said.

“Most of the time you don’t want to pay for it. But if you need it, you’re glad you have it.”


Must Read Guide: 7 Gold Must Haves



Today’s AM fix was USD 1,149.00, EUR 1,080.50 and GBP 782.91 per ounce.
Yesterday’s AM fix was USD 1,154.75, EUR 1,087.54 and GBP 781.50 per ounce.

Gold fell 0.55% percent or $6.40 and closed at $1,148.50 an ounce yesterday, while silver slipped 0.58% or $0.09 at $15.56 an ounce.

Gold in US Dollars - 1 Year (GoldCore)

In Singapore, bullion for immediate delivery ticked down  0.2 percent at $1,146.20 an ounce near the end of day. Comex U.S. gold futures for April delivery inched down 0.2 percent to $1,145.40 an ounce.

Gold is holding above yesterday’s 3-1/2 month low at $1,142.86/oz. Its 14-day relative strength index (RSI) remains in oversold territory at 25.5. Gold’s RSI has been below 30 for the best part of a fortnight.

Yesterday, SPDR Gold Trust ETF saw further liquidations and holdings fell 0.4 percent to 747.98 tonnes.

The Dubai Gold and Commodities Exchange (DGCX) is in an advanced stage of talks with a local bank on its plans to launch a spot gold contract, a senior executive at the exchange said. DGCX had said early last year that it planned to introduce a spot gold contract as part of its growth as a top trading centre for the precious metal. The launch had originally been scheduled for last June, but has been delayed. “We are in advanced stages of talks with a local entity,” Ian Wright, chief business officer at DGCX, told Reuters. He did not disclose the name of the local bank, but said the contract should be launched in the “near future”.

Thousands of anti-austerity protesters clashed with riot police near the new headquarters of the European Central Bank (ECB) in Frankfurt on today, hours before the ceremonial opening of the 1.3 billion euro ($1.4 billion) building.

Several cars were set on fire and streets were blocked by burning stacks of tires and rubbish bins. At least one police officer was injured, police said. Police used water cannon to try to make a path through the mass of protesters to the entrance of the building, which is blocked off from the street by police barricades.

ECB President Mario Draghi was due to make a speech there this morning

Gold fell to its lowest in nearly four months, as markets await the outcome of the U.S. Federal Reserve meeting today.

As always language from the FOMC’s policy statement will be used to infer any hints on when interest rates might be raised. Analysts are focusing on the word, “patient” to determine whether the rate hike will come in June or September or be delayed again.

If the word “patient” is absent from the statement, some analysts predict further price falls for the precious metals.

In London, spot gold in the late morning is trading at $1,150.47 or up 0.07 percent. Silver is trading at $15.56 or up 0.12 percent and platinum is trading at $1,094.46 or up 0.05 percent, at a five and a half year low.

 Updates and Award Winning Research Here



Low rates will trigger civil unrest and they lose control according to the BIS
(courtesy UKTelegraph/Chan/GATA)

Low rates will trigger civil unrest as central banks lose control, BIS says


By Szu Ping Chan
The Telegraph, London
Wednesday, March 18, 2015

Low inflation, bond yields, and interest rates around the world will push the boundaries of economic and political stability to breaking point if they continue on their downward trajectory, the Bank for International Settlements has warned.

The Swiss-based “bank of central banks” said the “sinking trend” of global rates would push countries further into uncharted territory.

It highlighted that $2.4 trillion (L1.6 trillion) of long-term global sovereign debt was now trading at negative yields, with an increasing number of investors willing to pay governments for the privilege of lending to them.

“As bond markets show us day after day, the boundaries of the unthinkable are exceptionally elastic,” said Claudio Borio, head of the Monetary and Economic department at the BIS. …

… For the remainder of the report:…





Koos Jansen discusses in depth by SGE withdrawals equals Chinese demand for gold ex sovereign purchases!


(courtesy Koos Jansen)


Posted on 18 Mar 2015 by

SGE Withdrawals In Perspective

Chinese gold market essentials

In 2014 SGE withdrawals, which can be used as a proxy for Chinese wholesale gold demand, have lost their accuracy since the Shanghai International Gold Exchange (SGEI) was launched in September, providing foreign enterprises to trade gold in renminbi, take delivery and export the gold from the Shanghai Free Trade Zone (FTZ). SGE and SGEI withdrawals are not published separately and thus SGEI activity can distort SGE withdrawals (being a proxy for Chinese wholesale demand). This post is about what we know at this stage about SGEI activity in relation to SGE withdrawals. It’s not exact science, but it’s the best we have right now.

It’s recommended reading The Mechanics Of The Chinese Gold Market, Chinese Gold Financing Deals Explained and The Workings Of The Shanghai International Gold Exchange for a better understanding of this post.

The SGEI facilitates gold trading in the Shanghai Free Trade Zone (FTZ). The physical gold flows through the FTZ arecompletely separated form the Chinese domestic gold market, which is a closed market. Would we get our clear view back if SGE and SGEI withdrawals would be disclosed separately? Unfortunately not. This is because Chinese domestic banks are also trading on the SGEI, when they withdrawal from the vaults in the FTZ they can import this gold into the Chinese domestic gold market (without it being required to be sold through the SGE).

The trading volume/purchases on the SGEI (contracts iAu100g, iAu99.99 and iAu99.5) can be:

  1. Not withdrawn at all and thus not distorting SGE withdrawals – our view on Chinese wholesale demand.
  2. Withdrawn by Chinese domestic banks to be imported into the mainland and thus being part of Chinese wholesale demand.
  3. Withdrawn by foreign traders and exported from the FTZ; distorting SGE withdrawals. If we knew how much these withdrawals accounted for we could subtract them from total SGE withdrawals to have a clear view on Chinese wholesale demand. Unfortunately we don’t know these numbers.

Technically, as I’ve reasoned previously,  Chinese wholesale gold demand is at most equal to SGE withdrawals, at least equal to SGE withdrawals minus SGEI trading volume. Because, it can be every contract traded on the SGEI is bought by a foreign trader that takes delivery, withdraws and exports the gold out of the FTZ.

For example, in week 50, 2014, total SGE withdrawals accounted for 50,027.5 Kg. SGEI trading volume over this period accounted for 6,159 Kg. We could argue Chinese wholesale gold demand must have been somewhere in between 50,027.5 Kg and 43,868.5 Kg (50,027.5 – 6,159).

More clarity was provided by chairman of the SGE, Xu Luode, which recently disclosed useful SGEI data in an article he wrote for Bullion Bulletin. Xu confirmed we don’t have to use the most extreme scenario (total SGEI volume) as a base.  In February 2015 he noted:

As of November 2014, international members have traded more than 100 metric tons of gold in aggregate with a total turnover of around RMB 25 billion; imported gold tipped in at around 12 metric tons, and a total of 15 metric tons of gold have been deposited into the International Board Certified Vault.

With the numbers from Xu we can make a far better estimate of Chinese wholesale demand in relation to SGEI activity.

The SGEI was launched September 18, 2014. From the end of November until February SGEI trading volume was 122 tonnes. Before November SGEI volume was weaker, which makes me think Xu neglects this period, as the SGEI was merely making its first steps.

From November until February SGEI volume was 122 tonnes, total SGEI deposits accounted for 15 tonnes of which 12 tonnes had been imported into the Chinese domestic gold market. SGE withdrawals reached 859 tonnes over these four months.

Concluding, most of SGEI withdrawals (at most 15 tonnes) were imported into the Chinese domestic gold market (12 tonnes); the SGEI is primarily used by Chinese banks to import gold, instead of through consignmentnot distorting SGE withdrawals (Chinese wholesale gold demand).

Furthermore, SGE withdrawals (Chinese wholesale gold demand) at 859 tonnes were at most distorted by 3 tonnes – though it was likely less than 3 tonnes. If a volume of 122 tonnes could have distorted SGE withdrawals at most by 3 tonnes, SGE withdrawals are still a fairly accurate proxy for Chinese wholesale gold demand. Until new evidence comes out that would proof otherwise, that is.

For now, the SGE withdrawal distortion ratio is at most 0.0246 (3/122). Measuring Chinese wholesale gold demand conservatively would be

SGE withdrawals (0.0246 X SGEI volume)

This post is part of the Chinese gold market essentials series. Previously published posts are:


Koos Jansen
E-mail Koos Jansen on:






Prior to the release of the FOMC statement today, Bill Holter discusses

the fact that the Fed really has no options.  And Bill was proven correct


(courtesy Bill Holter/Miles Franklin)

“Damned” whatever they do … and little time to do it.
  Wednesday is yet another Fed meeting where we get to hear “policy” from them.  So many times in the past, the upcoming meeting has been called “THE” most important meeting ever.  This one is being called the same thing.  I have mentioned more than a few times in the past six years “what can they really say?”.  I’ve done this because the Fed never had any choices.
  Do they have any choices now and for this meeting?  Let’s look at what they can do, what they cannot do and what they shouldn’t do.  The first option is for the Fed to do nothing and not even change what their mantra has been for so long by remaining “patient”.  If this is their choice and I suspect it should be, the question then begs whether the markets will remain patient with the Fed?  An impatient market place would presumably cast their vote in the Treasury and dollar markets amongst others.
  Another option and the one the press wants you to believe is the Fed will do nothing, but with a caveat being the Fed actually hints at the June meeting as their target date to begin tightening.  I am not sure about this one because the markets will react by front running the Fed.  Let me sidetrack for a moment and point out how front running was initialized during Alan Greenspan’s era.  It used to be the Fed would meet and decide policy, and then implement it.  Market participants needed to decipher by Fed actions whether they were tightening, loosening or what the policy decision was, and then place their bets.  (Mr. Greenspan changed this deciding to “spoon feed” the markets and actually say what their policy was).  It was in this manner the Fed truly kept people guessing and more “cautious”.  Caution was thrown to the wind when the Fed began making policy statements after each meeting.  I am convinced they did this because they knew by announcing an easing of credit, it would be “front run” by the markets and thus the heavy lifting done by the market.  In other words, the Fed could jawbone and let the market do their work for them.
  This works (worked) quite well during the easing cycles, it doesn’t work so well if the Fed needs to tighten.  You see, the markets are now so levered, any front running of a tightening cycle will turn into an outright panic overnight.  This is the problem.  The Fed CANNOT actually tighten, they cannot even put a date on a tightening.  The only thing they can do is say “we are gonna gonna gonna tighten” but never say when.  They have well over a $4 trillion balance sheet that must, but can never be wound down or liquidated.  The financial markets have been a one way street where the Fed could either do nothing, or accommodate more, tightening has been off the table for nearly 10 years.
  Were the Fed to tighten to any extent now, the dollar will move even higher, setting losing carry trade positions even further offside.  Another reason tightening is no option is the following chart.

  Consumer consumption represents about 2/3rds of the U.S. economy.  No matter what you look at, actual consumption, inventories or new orders, they are all in decline.  The last two times all three series went negative in unison the U.S. was already well into recession.  Tightening credit now will not only blow up the financial markets but also take the real economy with it.  You see, the real economy need help, not a headwind.  Were the Fed operating with a clean slate and the Treasury a clean balance sheet, the argument today would not be whether or not the Fed was going to tighten, it would be the reverse, whether they were going to or already EASING!  The Fed is cornered …and it is of their OWN DOING!
  Lastly, this meeting has a lot to do with “credibility”, or in this case, the lack of.  This meeting is important because the Fed stands to lose ALL credibility because of the space they have painted themselves into.  They need to actually ease and begin QE4 to soothe the markets (more importantly the real economy) but all they have done is talk about “when” they will begin to tighten.  Six years worth of “medicine” has clearly not worked, can the Fed really admit this?  They surely cannot reverse their talk of tightening and instead dispense more medicine  …can they?
  Clearly the recent economic numbers argue the economy at best is treading water and is flat lined.   Even the Fed’s own growth model shows a .3% growth rate for the first quarter.  Add on top of this the dollar’s strength as the euro implodes and European banks begin to fail (two in just the last 10 days in Austria which were AAA rated).  Does the Fed really believe they can tighten and press the dollar even higher?  Without blowing up markets and derivatives?  Can they really believe blown up derivatives will not affect our own banks …which are not exactly healthy?  While I am not saying the Fed “cannot” tighten, because they can do anything they choose, if they do put a date on it we will not reach that day without a panic.  The markets will front run any tightening because in effect it will be a margin call …ON EVERYTHING!  A margin call with no free margin available I might add.
  To finish I would like to mention Eric Sprott’s latest interview with King World News.  He is concerned about the markets going into collapse where we see a “no bid” scenario.  In my opinion he is quite correct, but this is only half of the equation.  The other half will be gold and silver going “no offer”.  The danger with this scenario is your avenue for insurance will be closed.  As I’ve mentioned over the last couple of days, and since we are discussing “options”, I believe the Chinese will ultimately have no other option than to re mark gold into the stratosphere in order to recapitalize themselves and their banks.  Any such action will put the no offer scenario front and center even if you are able to afford the new price of gold.
  The Fed is now faced with the scenario of not having any options left, yet they must make a choice.  They are damned whatever they do… and little time to do it.   Hopefully this is something you calculated into your own actions before arriving at such a “choice”!  Regards,  Bill Holter

And now for the important paper stories for today:



Early Wednesday morning trading from Europe/Asia



1. Stocks generally higher on major Chinese bourses (only India’s Sensex lower)/yen rises to 121.13

1b Chinese yuan vs USA dollar/yuan strengthens to 6.2459

2 Nikkei up 107.48 or 0.55%

3. Europe stocks mostly in the red/USA dollar index down to 99.57/Euro rises to 1.0613

3b Japan 10 year bond yield .38% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 121.13/

3c Nikkei still above 19,000

3d USA/Yen rate now above 121 barrier this morning

3e WTI  42.20  Brent 53.06

3f Gold up/Yen slightly up

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion.  Japan’s GDP equals 5 trillion usa.

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.

3h  Oil down for both WTI and Brent this morning.

3i European bond buying continues to push yields lower on all fronts in the EMU

Except Greece which sees its 2 year rate rise to 20.69%/Greek stocks down again by a huge 4.31% today/expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  10.81% (up slightly by 2 basis point in yield)

Greece needs another 2 million euros raiding their pension fund.

3k Gold at 1151.00 dollars/silver $15.52

3l USA vs Russian rouble;  (Russian rouble up  1/2 rouble/dollar in value) 61.14 despite lower oil prices

3m oil into the 42 dollar handle for WTI and 53 handle for Brent

3n Higher foreign deposits out of China sees hugh risk of outflows and a currency depreciation.  This scan spell financial disaster for the rest of the world/China may be forced to do QE!!

30  SNB (Swiss National Bank) still intervening again in the markets driving down the SF

3p Britain’s serious fraud squad investigating the Bank of England/ the British pound is suffering

3r the 7 year German bund still is  in negative territory/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s  Netanyahu wins Israeli election/direction is to the right/drops negotiations with Palestinians to form a Palestinian state

3t Greece to auction 1 billion euros to cover Friday’s treasuries expiry.

3u World awaits the USA Fed decision on “patience” to see if wording is removed



4.  USA 10 year treasury bond at 2.02% early this morning. Thirty year rate well below 3% at 2.58%/yield curve flatten/foreshadowing recession.

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.


Futures Weak Ahead Of “Impatient” Fed, Oil Slide Continues; China Stocks Go Berserk


The only news that matters to algos today is whether Janet Yellen will include the word “patient” in the FOMC statement as a hint of a June rate hike, even though the phrase “international developments” is far more important in a world in which everyone (such as the 25 or so central banks who have cut rates in the past 80 days) is now scrambling to export deflation to everyone else. And with carbon-based traders recuperating from St. Patrick’s day, few will notice that the oil tumble continues as WTI touches new 6 year highs after yesterday’s shocking 10MM+ API build, and is now openly eyeing a collapse into the $30s.

Just as nobody will notice that even as futures in the US and European stocks are looking a little hungover ahead of the Fed and perhaps on the latest bout of anti-austerity out of Europe, the China levitation has gone full retard, with the SHCOMP up another 2.1% yesterday and now in full-blown parabolic mode as housing data – new property prices down 5.7% Y/Y and the sharpest drop on record – confirms the Chinese housing bubble has well and truly burst, and as shadow bankers dump all their funds into stocks in hopes of making up for losses due to regulatory intervention.

Unlike recent price action, the USD-index has also fell victim to the lack of overall price action with many participants firmly awaiting the FOMC statement and summary of economic projections and whether the Fed will drop the widely-watched ‘patient’ phrase. The biggest mover this morning has been GBP which was weighed on by the already discussed UK employment data and BoE minutes. In antipodean currencies, NZD has continued to be weighed on by yesterday’s particularly disappointing GDT auction and wider than expected trade deficit overnight. Finally, commodity related currencies including AUD and CAD have also been weighed on by the fall in energy and iron prices.

European equities have seen a relatively directionless start to the session with opening broad-based gains trimmed after the DAX made a technical break back below 12,000. Once again the FTSE 100 has bucked the trend and leads the way higher for Europe, this time with outperformance in Standard Chartered shares after positive broker moves at Barclays and Bernstein. Nonetheless, European equities have failed to capitalise from the positive sentiment seen overnight for Chinese equities amid expectations of further easing with macro newsflow relatively muted for Europe ahead of upcoming key risk events. Gilts trade 50 ticks higher following a miss in expectations for UK wage data (3M/Y 1.8% vs. Exp. 2.2%) and BoE minutes which revealed a 9-0 vote as expected but warned the stronger GBP could lead inflation to be lower for longer. This also comes ahead of the UK budget statement which is expected to see Gilt issuance at GBP 140bln from the 2014/15 total of GBP 125.9bln.

Chinese bourses outperformed amid expectations of further easing measures after February property prices fell at a record pace (New Home Prices -5.7% Y/Y vs. Prev. -5.1%). Shanghai Comp (+2.1%) rose to its highest level since May’08 while the Hang Seng (+0.9%) climbed to its best level in over a week. Nikkei 225 (+0.6%) swung between gains and losses while the ASX 200 (flat) was the session’s laggard weighed on by miners after iron ore fell to a record low. JGBs rallied with the curve notably flatter following today’s JPY 1.2trl 20yr auction, which despite a lower than prev. b/c and the widest tail since Nov’14, attracted a higher than prev. average price.

Israeli PM Benjamin Netanyahu claimed victory in Israel’s election after exit polls put him ahead of his centre-left rivals with a hard rightward shift in which he abandoned a commitment to negotiate a Palestinian state. (RTRS)

In the commodity complex, today has been another one of losses so far for energy prices with WTI and Brent both feeling the squeeze from the latest API data which showed a build in oil stockpiles against a previous drawdown (+10.5mln vs. Prev. -404K). Of note, a close today at USD 42.82 or lower would drive prices back into a bear market (20% decline from this year’s peak). Elsewhere, given the lack of direction in the USD-index and lack of metals specific newsflow, both spot gold and spot silver trade relatively unchanged for the session. Overnight, Dalian Iron ore futures fell nearly 4% to a contract low after China’s property prices declined for the 9th consecutive month and also at a faster pace, while sentiment in China’s steel sector remains subdued with China also said to be seeking policies to reduce surplus steel capacity.

In summary: European stocks little changed after giving up earlier gains, Asian stocks rise ahead of Fed policy decision. U.S. stocks index futures also gain, dollar weakens against the euro. BOE Says U.K. Strength, Divergent Policy Could Boost Pound. Netanyahu Sweeps Aside Herzog’s Challenge to Win Israel Vote. Inditex Sales Growth Accelerates as Zara Owner Adds Stores. ECB Besieged by Protests as Draghi Fetes New $1.4b Tower.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • FTSE 100 leads the way higher following positive broker moves for Standard Chartered while Europe trades modestly lower ahead of key risk events
  • GBP lower and Gilts higher following a miss in expectations for UK wage data and BoE minutes which warned the stronger GBP could lead inflation to be lower for longer
  • Treasuries gain as market awaits Fed statement and updated Summary of Economic Projections at 2pm ET, Yellen press conference at 2:30pm; FOMC seen dropping reference to “patient,” moving closer to rate increase.
  • Bank of England policy makers said the continued strength of the U.K. economy could strengthen the pound further and increase the chance that low inflation will persist
  • U.K. unemployment fell to its lowest level in more than six years and real pay growth accelerated in a boost for Chancellor of the Exchequer George Osborne as he prepares to announce his final budget before the election
  • Oil extended losses from a six-year low with U.S. government data projected to show crude stockpiles rose to a fresh record
  • China’s home prices dropped in more cities last month as an economic slowdown weighed on demand even after the government removed  property curbs and reduced borrowing costs
  • Japan’s $1.1t GPIF and its smaller peers almost doubled net sales of JGBs to JPY5.56b ($46b) in 4Q, the most in BOJ figures dating back to 1998, and bought an unprecedented JPY2.39t of foreign stocks and bonds
  • IMF officials told their euro-area colleagues that Greece is the most unhelpful client their organization has dealt with in its 70-year history, according to two people familiar with the talks
  • Anti-austerity protesters seeking to spoil the inauguration of the ECB’s new headquarters in Frankfurt set several cars alight and left a trail of destruction across the city in clashes with police before the opening ceremony at 11 a.m.
  • Kaisa Group Holdings Ltd., the Chinese developer tied to a graft probe that’s trying to restructure its debt, will likely miss deadlines Wednesday and Thursday on bond coupons, a person familiar with the matter said
  • Iran’s Foreign Minister Mohammad Javad Zarif signaled that talks over his country’s nuclear program are unlikely to reach an agreement this week, even as the two sides said unmistakable progress had been made
  • Sovereign 10Y yields mixed; EU peripheral yields higher. Asian stocks gain, European stocks mostly lower, U.S. equity-index futures steady. Crude and copper slide, gold declines

Market Wrap

  • S&P 500 futures little changed at 2067.2
  • Stoxx Europe 600 little changed at 397.36
  • US 10Y yield down 2bps to 2.03%
  • German 10Y yield down 2bps to 0.26%
  • MSCI Asia Pacific up 0.6% to 145.68
  • Gold spot down 0.2% to $1147.71/oz
  • Asian stocks gain, led by the Shanghai Composite.
  • Nikkei 225 up 0.55%, Hang Seng up 0.91%, Kospi down 0.07%, Shanghai Composite up 2.13%, ASX up 0%, Sensex down 0.29%; MSCI Asia Pacific up 0.6% to 145.68
  • Euro up 0.1% to $1.0612
  • Dollar Index little changed at 99.55
  • Italian 10Y yield up 8bps to 1.35%
  • Spanish 10Y yield up 7bps to 1.32%
  • 3m Euribor/OIS little changed at 10.28bps
  • S&P GSCI index down 0.6% to 384.49
  • Brent futures down 0.7% to $53.16/bbl, WTI futures down 2.5% to $42.39/bbl
  • LME 3m copper down 2% to $5667.5/MT
  • LME 3m nickel down 0.7% to $13630/MT
  • Wheat futures up 0.1% to $504.25/bu


DB’s Jim Reid as usual wraps up the wrap up



It is looking increasingly likely that the ‘patience’ language will be removed today in order to give more flexibility, but we expect that the Fed will want to stress data dependency as to if and when they raise rates. The updated economic and financial projections could well offer some clues on potential timing whilst it’s likely that the dot plots will take up a decent amount of attention. Can the profile of expected hikes ahead really stay this high given current inflation trends and other central bank actions? We remain sceptical as to whether the Fed will be able to raise rates this year but we probably won’t know too much about whether we’ll be right or wrong from this meeting.

The official DB view from Peter Hooper is that he expects the key development to be either the removal or substantial modification of the ‘patient’ language. Peter thinks that the Fed will move fully into a data-dependent mode and that although June will be open for liftoff, it’s not necessarily the most likely date and that the rate of ascent after liftoff will likely be cautious and dependent on data and also on how the market and economy responds. So an interesting meeting ahead.

Peter also thinks that when Yellen is inevitably asked about the dollar, she will likely say that they will be monitoring developments in that area as well as others, but without expressing serious concern. He thinks that while there are limits to how far and how fast the Fed will be comfortable with seeing the dollar go, those limits have not been reached yet.

Ahead of this big event it’s been a reasonably quiet 24 hours news-flow wise yesterday with markets a touch weaker. The S&P 500 continues to trade between gains and losses having finished -0.33% lower at the end of the session. The Dollar was little changed at the close with the broader DXY finishing +0.02% and the US Treasury curve flattening with 2y yields 2.2bps higher and 10y and 30y yields falling 2.1bps and 4.2bps respectively. Data continues to disappoint after yesterday’s housing starts posted a significant weather-related downside miss. The -17.0% mom reading for February was below market expectations of -2.4% and was the largest monthly decline since February 2011. The weather impact was made more obvious given the contrast to the building permits data which rose +3.0% mom (vs. +0.5% expected) in February. As well as a further fall for the US economic surprise index – extending its 6-year low – the Atlanta Fed GDPNow forecast ticked down once more to 0.3% for Q1 from 0.6% previously. The latest revision comes following the weaker industrial production numbers out on Monday.

Commodity markets also took another leg lower yesterday. WTI finished -0.96% and has in fact traded some 2% lower overnight taking it to $42.74/bbl. Brent closed 0.80% weaker yesterday. It was a softer day for Gold also (notwithstanding Tony Hadley’s appreciation of it) with it closing 0.45% at $1,149/oz – the lowest level since November last year. The weakness in oil is clearly being seen in the US breakevens with the 10y now down at 1.653% (a six week low) having touched 1.88% earlier this month.

Before this in Europe, it was a weaker day for risk assets as the Stoxx (-0.71%) and DAX (-1.54%) closed back below the 400 and 12,000 level respectively and Crossover ended 7bps wider. It was another soft day for the bond market also. 10y yields in France (+2.0bps) and Germany (+0.3bps) finished wider and yields in the periphery sold off some 7-9bps. The move yesterday now takes Italian and Spanish 10y yields 23bps and 21bps off Thursday’s intraday low in yields now. The Euro meanwhile strengthened for the second successive day versus the Dollar to finish 0.27% higher at $1.0597.

With news flow relatively quiet, much of the focus was on what was a mixed German ZEW survey. The March current situations print rose an impressive 9.6pts to 55.1pts (and ahead of expectations of 52.0) – which was the highest since July last year. The survey expectations printed well below consensus however at 54.8 (versus 59.4), although was still up from the February reading of 53.0. Elsewhere we got the final February CPI reading for the Euro-area which delivered no real surprises. The headline print was unchanged at -0.3% yoy while the core reading was revised up a touch to +0.7% yoy (from +0.6%).

Despite lagging most major European equity markets year-to-date, the FTSE (+0.49%) enjoyed a better day yesterday ahead of the Budget due out around lunch time today. DB’s George Buckley does not expect much material alteration to the fiscal plans announced three months ago. However, given that the Budget is the last before the general election of May 7th, George notes that it would not be a surprise to hear the Chancellor make much of the continued recovery and the rise in earnings growth and at the same time laud previously announced policies to raise the personal income tax allowance and cut stamp duty for most home transactions. The positive news on the public finances will likely allow the Chancellor to provide some modest electoral sweeteners more than anything else.

Onto the latest in Greece, the government will today look to auction around €1bn in T-Bills to cover Friday’s maturity. According to Reuters, yesterday’s call between Greece and Euro-area deputy finance ministers ended in something of a frustrating state with Greece refusing to update on its reform progress and instead signalled that the talks should be moved to this Thursday’s EU summit. Despite an agreement from Greece to start talks on implementing reform measures, we are yet to hear of any significant progress. The two-day EU summit, which begins tomorrow, appears to be the next key date in the ongoing Greece saga.

In terms of the early morning trading in Asia, bourses are largely in the green with the Hang Seng (+1.08%), Shanghai Composite (+1.28%) and Nikkei (+0.46%) all firmer. The latter in particular helped by better than expected trade data out of Japan which showed a shrinking trade deficit last month supported by a strong exports (+2.4% yoy vs. +0.3% expected) print in particular. Treasuries are more or less unchanged heading into this morning and the Dollar (+0.1%) is trading in a tight range.

Taking a look at today’s calendar, as well as the Budget in the UK this morning we’ve also got the release of the BoE minutes and various employment indicators including unemployment, the claimant count and weekly earnings. Elsewhere in Europe we have trade data for the Euro-area. With no other data releases in the US, focus this afternoon will of course be on the outcome of the FOMC.






The European Finance Minister has now suggested Greek capital controls to prevent Greece from leaving the Euro. This brought anger from Athens.


(courtesy zero hedge)


Are Greek Capital Controls Now Inevitable?



While the trading algos are blissfully honing their headline-scanning skills (it should take no longer than a few nanoseconds to find whether “patient” and “international” are in the FOMC statement) ahead of tomorrow’s Fed announcement and avoiding any macro developments from around the globe, the biggest international news hit earlier today when Greece came one step closer to if not a Grexit, then a full blown bank run and capital controls when none other than the chair of the Eurogroup Jeroen Dijsselbloem became the first European Union official to suggest the possibility of capital controls to prevent Greece leaving the euro, which in turn drew a furious reaction from Athens, which accused him of “blackmail.”

Quoted by Bloomberg, Dijsselbloem  said that “It’s been explored what should happen if a country gets into deep trouble — that doesn’t immediately have to be an exit scenario,” he said. For Cyprus, “we had to take radical measures, banks were closed for a while and capital flows within and out of the country were tied to all kinds of conditions, but you can think of all kinds of scenarios.”

In Athens, the insolvent but proud government issued an angry reply: cited by Kathimerini, spokesman Gavriil Sakellaridis said “It would be useful for everyone and for Mr Dijsselbloem to respect his institutional role in the eurozone. We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with. Everything else is a fantasy scenario. We find it superfluous to remind him that Greece will not be blackmailed.”

Considering Greece has been blackmailed from day one of the new Syriza government with the only motive that matters money, thus forcing the government to not only give up on all of its pre-election promises, but to soon implement even more “austerity” than the much hated Samaras regime, that statement in itself is superfluous.

But is Greece truly on the verge of capital controls, especially the kind that has the blessing of the very man who created the Cyprus “blueprint”? For the answer we go to ISI, which discussed just that in a flash note issued earlier today:

Greece Capital Controls?

Dangerous talk today about the possibility that capital controls may be needed in Greece from Dutch Finance Minister Dijsselbloem who heads the Eurogroup of finance ministers. We have repeatedly highlighted this risk. But for a senior eurozone official to do so is striking as it could easily become a self-fulfilling prophecy. Small wonder there was sharp push-back from the Greeks.

The risk of capital controls is indeed elevated for a simple reason: in the absence of substantive progress by Athens in implementing measures that will lead its creditors to release additional bail-out funds, the ECB cannot plausibly provide fully elastic lender of last resort support for Greek banks facing runs through ELA.

In the absence of a credibly elastic lender of last resort, it would be rational – in the sense of the classic Diamond / Dybvig model of a rational bank run – for Greek depositors to pull out their deposits rather than risk being the last to do so. In the event of such a run the imposition of capital controls may be viewed as the least bad available option to stabilize the financial sector.

In the real world deposits can be surprisingly sticky, particularly when as in the Greek case depositors with easy access to overseas banks and alternative financial products left a long time ago. And, the bank stabilization fund remains in place with substantial committed funds to support bank solvency.

The Eurogroup cannot impose capital controls on Greece. Our understanding is that only the Greek government can impose capital controls (restrictions on bank withdrawals, cross-border transfers) and this would require the consent of the European Commission, as guardians of the single market.

Tsipras knows how unpopular this move would be and has no desire to be driven into it. The ECB could force Greece by making capital controls a condition for continued ELA, but is trying hard to avoid becoming an active player in the Greek drama.

Still, a resumption of accelerated deposit drain as the conflict between Greece and its creditors continues seems quite plausible. And if this happens the list of options is very thin.

The fact that Dijsselbloem has highlighted the possibility of capital controls makes this outcome more likely. Depositors may now withdraw funds to avoid restrictions on their bank accounts and end up forcing the very imposition of capital controls their individual actions were intended to preempt.

What is going on? One possibility is that Dijsselbloem made a rookie mistake at a time when he is deeply frustrated with Athens. Another is that he fully intended to ramp up pressure on the Greek government to move forward with program implementation by raising the specter of Greek citizens being unable to access their bank accounts. Neither is particularly encouraging.

We continue to worry a) about the capacity of the Greek government to implement at home without a rupture in the ruling coalition and b) that the eurozone authorities are complacent about the degree to which they can retain control of the situation while allowing stress to mount in Greece as much as needed to ensure the domestic politics yields to program implementation.

Loose talk about how capital controls worked in Cyprus understates major differences in the political and economic context. Capital controls would be much more damaging and difficult to implement in Greece, which has an economy much larger and more complex than that of Cyprus with vastly greater payments and settlements needs.

Moreover if capital controls were imposed as a product of a stand-off between Greece and its creditors rather than in the context of agreement as to the way forward (as ultimately in Cyprus), Greek politics could lurch towards the need for a parallel / substitute currency rather than as hoped towards commitment to the euro at all costs.

Raising the prospect of capital controls does pile the pressure on Greece and may ultimately be part of the forcing mechanism that delivers implementation and funding. But this is playing with fire.





The IMF not happy with Greece and we may have a “frozen conflict”

i.e. Greece delays paying suppliers and the iMF.  Depositors flee from Greek banks which in turn will force Greece in capital controls.  Interest on the debt owed by Greece to the ECB will also be delayed.



Grexit Contagion Resumes After IMF Slams “Most Unhelpful Client Ever”



Draghi, we have a problem. Despite the omnipotent buying power of the all-knowing ECB, peripheral European bond spreads are blowing out again (and stocks dropping) as Grexit fears start to spread contagiously across the continent. As Greece’s cash crunch looms ever closer (with capital controls looming) and bulls “throw in the towel” on the “nuts” Greeks, the IMF has come out and rubbed Mediterranean salt into that wound by telling the Eurogroup that Greece is the most unhelpful country the organization has dealt with in its 70-year history. As Bloomberg reports, in a short and bad-tempered conference call on Tuesday, officials from the ‘Troika’ complained that Greek officials aren’t adhering to a bailout extension deal leaving Dijsselbloem hinting at Cypriot templates for Greece.


The ‘Troika’ is not happy… International Monetary Fund officials told their euro-area colleagues that Greece is the most unhelpful country the organization has dealt with in its 70-year history, according to two people familiar with the talks. As Bloomberg reports,

In a short and bad-tempered conference call on Tuesday, officials from the IMF, the European Central Bank and the European Commission complained that Greek officials aren’t adhering to a bailout extension deal reached in February or cooperating with creditors, said the people, who asked not to be identified because the call was private.


German finance officials said trying to persuade the Greek government to draw up a rigorous economic policy program is like riding a dead horse, the people said, while the IMF team said Greece’s attitude to its official creditors was unacceptable. The German Finance Ministry didn’t respond to multiple requests seeking comment.


Concern is growing among officials that the recalcitrance of Prime Minister Alexis Tsipras’s government may end up forcing Greece out of the euro, as the cash-strapped country refuses to take the action needed to trigger more financial support. Tsipras is pinning his hopes for a breakthrough on a meeting with ECB President Mario Draghi, German Chancellor Angela Merkel, French President Francois Hollande and European Commission head Jean-Claude Juncker this week in Brussels.



Euro-region finance ministers are urging Greece to draw up a plan to fix the economy in exchange for emergency loans to keep the country afloat. As Tsipras challenges his creditors to blink first, his government’s money is running out, raising the prospect of a cash crunch as early as this month. The country faces more than 2 billion euros in debt payments Friday, and government salaries and pensions must be at the end of March.



The call with euro-area finance officials came after the group’s chairman, Dutch Finance Minister Jeroen Dijsselbloem, said the country could use capital controls to remain in the currency union.


“It’s been explored what should happen if a country gets into deep trouble — that doesn’t immediately have to be an exit scenario,” Dijsselbloem told BNR Nieuwsradio. For the 2013 Cypriot bailout, “we had to take radical measures, banks were closed for a while and capital flows within and out of the country were tied to all kinds of conditions, but you can think of all kinds of scenarios.”

*  *  *

As JPMorgan notes, Greece risks capital controls as it seems unlikely tomorrow’s meetings will solve the nation’s cash crunch. Their base case remains that Greece and the region will find a way to reach an agreement by end June, although the possibility of a “frozen conflict” scenario is growing. In the absence of external support, Greek authorities would likely continue to run up arrears to their suppliers and go into arrears on their payments to the IMF.

Although visibility on the exact liquidity position is low, reports continue to suggest that the Greek authorities’ ability to continue to meet their liabilities is measured in weeks. Indeed, the Greek authorities’ plan to allow tax debts to be paid in instalments appears to have been partly designed to encourage payments by the end of March. Despite the intensity of the cash flow pressure, we continue to think that Greece looking to the ECB for a solution via greater T-Bill issuance is simply not going to work. With Draghi having stated that such action would violate the prohibition on monetary financing, that route is effectively closed, and we are surprised that Tsipras continues to pursue it.


So where does this leave us? Our base case has been (and remains) that Greece and the region would find a way to work together and reach an agreement by end June. But the possibility of a “frozen conflict” scenario is growing. That runs as follows. In the absence of new external support, the Greek authorities will likely continue to run up arrears to their suppliers and go into arrears on their payments to the IMF. Our best guess is that, in conjunction with a broader sense that negotiations with the Eurogroup are very difficult, this would trigger renewed deposit outflows and the imposition of capital controls. With capital controls in place and Greece not making payments to either the IMF or the ECB, we could imagine a “frozen conflict” persisting for a number of months. During this perio,d discussions between Greece and the region would continue, but the economy would be hit by intensified uncertainty and the limitations on the ability of the banking system to function. An accommodation between Greece and the rest of the region may then be found. Alternatively, with growth weak and the primary position going into deficit, domestic political pressures within Greece would likely take us toward either a referendum on continued Eurozone membership or new elections.


Even Commissioner Moscovici has stated that the region will not act to keep Greece in the Eurozone “at any price”.

*  *  *

This is not supposed to happen… Grexit fears spreading across the PIIGS… in bonds…


and stocks (Spanish and Italian stocks practically unch, Greece monkey-hammered)


So much for ECB QE compressing risk premia…

Charts: Bloomberg




Then it got worse:


The ECB is now preparing for a GREXIT:  total loss 320 billion euros

And much of the debt is on the balance sheet of the ECB to which they must declare a huge loss.  They have very little “equity”.  Thus there must be margin calls to all nations to pony up money to make the ECB whole.  This is the reason why the peripheral bonds fell badly today in price and higher in yield;


(courtesy zero hedge)


ECB Prepares For Grexit, Anticipates 95% Loss On Greek Debt




Dear Greek readers: the writing is now on the wall, and it is in very clear 48-point, double bold, and underlined font: when the ECB “leaks” that it is modelling a Grexit, something Draghi lied about over and over in 2012 and directly in our face too, take it seriously, because it is time to start planning about what happens on “the day after.” And incidentally to all those curious what the fair value of peripheral European bonds is excluding ECB backstops, the ECB has a handy back of the envelope calculation: a 95% loss.

Which also is the punchline, because while the ECB is making it very clear what happens next in the case of a “Graccident“, it has yet to provide an explanation how it will resolve the billions of Greek debt held on its own balance sheet which are about to be “marked-to-default“…

… and on which it is prohibited from suffering a loss, or else Draghi will have to fabricate even more on the run rules about how the ECB balance sheet is loss-proof… expect in this case, or that, or the other.

From Manager Magazin, google-translated:

The European Central Bank (ECB) is preparing for a possible Greek exit from the euro zone. In internal model calculations, the central bank has already calculated the consequences of different scenarios on the prices of Greek government bonds.


Fernando González Miranda, head of risk analysis of the ECB, assumed for his model calculations three different developments of the Greek crisis, the magazine reports. These variants have also been presented to our colleagues from the Bundesbank few days ago.


Under this method, the value of Greek government debt – currently around € 320 billion – in the event of a sudden, “accident-like” Farewell to the Greeks from the Euro-zone (“Graccident”) shrink to around 5 percent of the principal amount. If it were the Greek Government, however, to complete the withdrawal on the basis of ordered negotiations (“Grexit”), the ECB expects a residual value of government bonds by nearly 14 percent. And should it even create the country to negotiate a recent haircut, without having to give up the single currency, the government securities could keep at least a quarter of its original value.


A central bankers feared compared with manager magazin especially the “Graccident”. The risk is high that the Greek government members “lose track and suddenly unable to settle their bills.” In such a case, the rating agencies Greece would classify as necessarily insolvent, with the result that the central bank should have stopped emergency loans.

Or summarized :

Take this opportunity to reread the Goldman piece on whether Greece “can just print Drachmas” because it is about to be revised by the author.





The following is your most important commentary of the day. Bill Holter and I have been pounding the table that sovereign bonds are used as collateral for much of the huge derivative plays orchestrated by our bankers. The ECB became the “proud owner” of a huge amount of Greek sovereign bonds courtesy of LTRO 1 and LTRO 2.  The big EU banks used much of these and other sovereigns to give collateral to their derivative trades.  When time came for the famous Greek haircut, these sovereign bonds were swapped out for new bonds such that no haircut would be placed on the real owners of the bonds ie. the EU banks.  The derivative plays value in number in the trillions.  A Greek default will no doubt blow up this collateral and thus the entire derivative mountain.


a must read…




(courtesy Phoenix Research)


Greece is Just the Tip of the Iceberg for the $100 Trillion Bond Bubble



Greece, as a country, represents 2% of Europe’s GDP.  The country lied in its financial to enter the EU. Since that time, it’s been officially bankrupt since 2010.


The country has since gone through a series of “bailouts” and experienced a 25% collapse in GDP (roughly equivalent to what Argentina experienced in its 2001 implosion).


And yet, despite all the bailouts and claims that Greece was “fixed,” the country is set to default on some of its debt this Friday.


How on earth does this farce continue? How can Greece be broke FIVE years after it was first allegedly “fixed”?


The answer is very simple. Greece was never fixed. The Greek bailout was about getting money to German and French banks, many of which would go broke if Greece defaulted on its debts.


This story has been completely ignored in the media. But if you read between the lines, you will begin to understand what really happened during the previous Greek bailouts.




1)   Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.

2)   Some 80% of the bailout money went to EU banks that were Greek bondholders, not the Greek economy.


Regarding #1, going into the second Greek bailout, the ECB had been allowing European nations and banks to dump sovereign bonds onto its balance sheet in exchange for cash. This occurred via two schemes called LTRO 1 and LTRO 2 which happened in December 2011 and February 2012 respectively. Collectively, these moves resulted in EU financial entities and nations dumping over €1 trillion in sovereign bonds onto the ECB’s balance sheet.


Quite a bit of this was Greek debt as everyone in Europe knew that Greece was totally bankrupt.


So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second Greek bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.


So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not have to put up new collateral on their trade portfolios.


Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.


Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.


Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.


Thus, the Greek situation is really all about one thing: the BOND BUBBLE… specifically the fact that sovereign bonds are posted as collateral for derivative trades by the big banks.


The ECB doesn’t care about Greece. If it did, this problem would have been resolved five years ago by simply kicking Greece out of the EU until it regained its financial footing.


And in fact, the whole issue is not even about Greece… the reality is that SPAIN, ITALY, and ultimately even FRANCE are in or approaching similar financial straits as Greece.


At that point you’re talking about well over $3 TRILLION in sovereign debt, which is likely posted as collateral on well over $100 trillion in derivatives trades


The ECB and every other Central Banker/ political leader in the EU knows that what happens with Greece will serve as the template for the much larger, unmanageable problems for Spain, Italy, and ultimately France down the road.


This is why the Greek debt crisis continues without end. The minute Greek bondholders have to take a REAL haircut, the wheels come off the EU.


That day is approaching. And it will change the investment landscape for the entire globe as the $100 trillion bond bubble finally blows up… triggering a chain-reaction in the $551 trillion derivatives market.








Violent clashes at new ECB headquarters in Frankfurt:


(courtesy zero hedge)




Violent Clashes Break Out Next To New ECB Headquarters In Frankfurt As Thousands Protest Austerity: Live Webcast


It’s not just Greece which is protesting the utter lack of reforms enabled by the ECB known as “austerity” – as of today so is Germany itself with the so-called #Blockupy movement. According to local media reports, the start of anti-austerity rallies in Frankfurt coincided with the European Central Bank opening its new headquarters, whose occupants are now besieged by tens of thousands of protesters, so perhaps #OccupyQ€ would have been more appropriate. Police said they expect around 10,000 anti-capitalist protesters, marching under the banner of leftist alliance Blockupy, to attend the rally, with a march through the city planned for later in the evening. The result is what according to a police spokesman “is one of the biggest deployments ever in the city.

As the photos below shows, several police cars have been set on fire, with windows being smashed and demonstrators throwing stones at police ahead of the massive demonstration on Wednesday, and as riots break out across Frankfurt even as thousands of police respond with water cannon, pepper spray and mass arrests.

Authorities say at least one officer has been injured by a stone hurled by an activist, near the city’s opera house.

Organizers have accused the police of sparking the violence, saying they set up a “civil war type scenario” to provoke demonstrators. “This is not what Blockupy planned,” spokesman Hendrik Wester told German news agency DPA.

Video footage has shown riot police running through the city, with at least one protester being dragged away.

Chairman of the German police union (GdP), Oliver Malchow, says the violence has gone far enough.

“We’re talking about serious crimes here,” he told broadcaster n-tv.

“The term ‘protest’ doesn’t fit in this case,” he said.

Activists are targeting the European Central Bank (ECB) as a symbol of capitalism, as well as over its part in restrictive austerity measures in financially-troubled countries such as Greece.

Meanwhile, around 100 guests, including ECB President Mario Draghi, are expected to attend the opening of the ECB’s new headquarters.

Authorities had erected a security zone around the 185-meter skyscraper, putting up barricades and barbed wire in preparation for the protest action.

A spokeswoman told news agency AFP “it is one of the biggest deployments ever in the city,” saying they expected the majority of demonstrators to be peaceful.

But they believed some violence-prone protesters could use the crowds as cover, and had placed helicopters and water cannons on standby.

A special train has been chartered by organizers to bring 800 people from Berlin, and 60 buses from 39 European countries are also heading to the financial hub.

According to Frankfurt police, seven police vehicles were set on fire, adding “there were peaceful demonstrators and there were criminals also here this morning.” The police said it deployed “upper-mid 4 figure number” of officers, but declined to comment on deployment of gas.

As for the ECB, demonstrators said they want to blockade the billion-dollar building, in an attempt to disrupt what they describe as “capitalist business as usual.”

A clip of the police using water cannon on protesters and some of the highlights of today’s protest so far:

The ECB, along with the European Commission and the International Monetary Fund, are part of the so-called “troika” monitoring countries’ compliance with the conditions of bailout loans.

These include lowering government spending and other debt-reduction methods, which have been blamed for increasing unemployment and stunting economic growth.

The ECB says it plans to remain “fully operational” despite the action, with some employees working from home. Because buying bonds only requires a computer stroke from anywhere in the world.

* * *

And here is a live webcast from Frankfurt:





Oil Related Stories:
 WTI inventory at Cushion Oklahoma hits record highs!!
(courtesy zero hedge)

WTI Slumps As Cushing Inventory & Production Hit New Record High

Following last night’s massive 10.5mm barrel build (according to API), this morning’s DOE inventories data was highly anticipated (with an expectation of just over 5 million barrels). It did not disappoint… printing at 9.622 million barrel inventory build, this is now the fastest inventory build on record… with record total inventory and record Supplies at Cushing. Storage concerns are growing. But, despite the collapse in rig counts, high-grading and cash-flow deparation remains as crude production also hit a new record high.


The reaction…


10th weekly inventory build in a row… the biggest in 10 weeks ever…


and Production continues to rise…


For a sense of just how crazy this level of inventory is…


*  *  *

Just as an FYI of how crazy the market has become – when the following Bloomberg hedline hit  at 1025ET


WTI exploded higher as the machines read it before realizing it was the expectation not the print…


Charts: Bloomberg





Today, European bond risks spike the most as many perceive a Greek accidental removal from the EMU:


(courtesy zero hedge)





European Bond Risk Spikes Most Since 2011 As “Graccident” Looms





Despite the constant blather of how cheap European stocks are (they are not) and how Draghi’s QE will create something positive (priced in?), the last 2 days have seen Italian, Spanish, and Portuguese bond risk explode higher. The 20%-plus surge in bond spreads is the biggest since the beginning of the EU crisis in 2011 as Grexit fears (and redenonimation risks) continue to spread.


Italy is the worst performer…


But Spain and Portugal are starting to blow..


Just don’t show Mario Draghi




Your more important currency crosses early Wednesday morning:



Eur/USA 1.0618 up  .0023

USA/JAPAN YEN 121.13  down .169

GBP/USA 1.4667  down .0082

USA/CAN 1.2797 up .0010

This morning in Europe, the Euro again temporarily stopped  its spiraling downward movement and reversed upwards by a small amount, 23 basis points, trading now just above the 1.06 level at 1.0618; Europe is still reacting to deflation, announcements of massive stimulation, crumbling bourses and the ramifications of a default at the Austrian Hypo bank, and possible defaults of Ukraine and Greece.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen form 70 trillion on Oct 31.  The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 17 basis points and trading just above the 121 level to 121.13 yen to the dollar.

The pound was well down this morning as it now trades well below the 1.47 level at 1.4667  (very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation).  The Canadian dollar is also down and is trading down by 10 basis points at 1.2797 to the dollar trading in sympathy in the lower oil price.

We are seeing that the 3 major global carry trades are being unwound.  The BIGGY is the first one:

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the dollar against all paper currencies  (see below)

2. the Nikkei average vs gold carry trade/still ongoing

3. Short Swiss Franc/long assets (European housing), the Nikkei etc. This has partly blown up (see Hypo bank failure)

These massive carry trades are terribly offside as they are being unwound.  It is causing global deflation (we are a debt saturation) as the world reacts to lack of demand and a scarcity of debt collateral.  Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: Wednesday morning : up 107.48 points or 0.55%

Trading from Europe and Asia:
1. Europe stocks mostly in the red except London (slightly in the green)

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

Gold very early morning trading: $1151.00



Early Wednesday morning USA 10 year bond yield: 2.02% !!! down 3 in basis points from Tuesday night/


USA dollar index early Wednesday morning: 99.53  down 11 cents from Tuesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning



And now for your closing numbers for Wednesday:




Closing Portuguese 10 year bond yield: 1.74% up 11 in basis points from Tuesday


Closing Japanese 10 year bond yield: .37% !!! down 6 in basis points from Tuesday/


Your closing Spanish 10 year government bond,  Wednesday up 4 in basis points in yield from Tuesday night.

Spanish 10 year bond yield: 1.29% !!!!!!


Your Wednesday closing Italian 10 year bond yield: 1.33% up 6 in basis points from Tuesday:

trading 4 basis points higher than  Spain.






Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond: 4 pm



Euro/USA: 1.0954 up .0354  (up a whopping 354 basis points)

USA/Japan: 119.52 down 1.708  (up a whopping 171 basis points)

Great Britain/USA: 1.5087 up .0318  (up 318 basis points)

USA/Canada: 1.2491 down .0292 (Can dollar up 292 basis points)



The euro skyrocketed  this afternoon, after the release of the FOMC meeting.  The Euro climbed by an amazing 354 basis points.  The yen was also up in monster fashion in the afternoon, and it was up by closing to the tune of 171 basis point and closing well below the 120 cross at 119.52. The British pound gained huge ground during the afternoon session and was up on the day closing at 1.5087. The Canadian dollar was also up hugely today joining the other currency rising against the dollar.  It closed at 1.2491 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 and huge losses on the USA dollar will no doubt produce many dead bodies.


Then after the close:  we had a flash crash on the dollar!!


Dollar Flash Crashes: Currency Market Pulverized As Dollar Implodes After Close


Complete Currency Carnage…


At 1604ET – the FX world went crazy…


Here is the close-up…


As The Dollar flash-crashed…


It wasn’t just the FOMC move – this something more right after the bell


led by JPY and EUR… 2 big figure collapse in JPY!!! 400 pips in EUR!!!!


And Swissy the biggest move of all…


Charts: Bloomberg








Your closing 10 yr USA bond yield: 1.92 down 13 in basis points from Tuesday



Your closing USA dollar index:

97.22 down $2.45  on the day.


European and Dow Jones stock index closes:



England FTSE  up 107.59 points or 1.57%

Paris CAC up 4.49 or 0.09%

German Dax down 58.08 or 0.48%

Spain’s Ibex up 21.90 or 0.20%

Italian FTSE-MIB down 157.87 or 0.69%



The Dow: up 227.11 or 1.27%

Nasdaq; up 41.75 or 0.85%



OIL: WTI 45.12 !!!!!!!

Brent: 56.62!!!!

Closing USA/Russian rouble cross: 59.44  up 3 roubles per dollar on the day.






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



Your New York trading for today:


Fed Growth Cut Unleashes Panic Buying Of Everything; Dollar Plunges Most Since 2009



Oil spiked 6% because “The Fed said the economy is slowing”; Stocks are up because “The Fed said the economy is slowing”; USD strength is a signal of the strength of the US economy which “The Fed said is now slowing”; Small Caps hit Record Highsbecause “The Fed said the economy is slowing”; andNasdaq Tops 5,000 because “The Fed said the economy is slowing” – really only one thing for it…

Where to begin… Here is best…


or perhaps…

But seriously – look at this idiocy…from the FOMC statement…


Financials lagged post FOMC…


With Nasdaq topping 5,000… (and Russell 2000 record highs)… and faded


Swinging stocks from red for 2015 to (near) record highs… (Trannies still red YTD)


VIX was clubbed like a baby seal


Bond yields collapsed (10Y under 2.0% again)… 10Y hit 1.92%


This is the biggest absolute drop in 2Y Yields since March 2009…


The USD was baumgartner’d… (led by EUR and Swissy strength)


This is the biggest percentage drop in the USDollar since March 2009…


Commodities smashed higher led by total insanity in crude


Think about it for a second… Fed enable lower rates for longer… which enables these forms to live longer than they should and produce more crude and this add to supply in a low demand world (Fed just said economy is slowing) which is merely exacerbating teh delfationary pressure on oil prices and the rest of the world.. So Buy WTI!!!!


Charts: Bloomberg

Bonus Chart: Pin the tailk on the donkey…



Prior to the FOMC statement, Hilsenrath, the mouthpiece for the Fed basically states that there will be no more frontrunning and no more promises.  Thus uncertainty is back into the market!!


Of course, the real reason is that it would be very difficult to front run a interest rate rise as this would destroy the entire stock markets;


(courtesy zero hedge)



Hilsenrath’s FOMC Preview: “No More Promises, Fed Is Injecting Uncertainty Back Into The Market”



There have been countless previews of the FOMC statement at 2pm today, all of them largely worthless and regurgitating the same exact stuff. The only one that matters, as it is the only one with the explicit blessing of the Fed (see “On The New York Fed’s Editorial Influence Over The WSJ“) in its attempt to manage expectations: that “drafted” by Jon Hilsenrath. And if what the WSJ economist writes in “Fed to Markets: No More Promises” is accurate, then fasten your seat belts, ladies and gentlemen, because we are about to enter some turbulence.

From Hilsenrath:

The Federal Reserve is about to inject uncertainty back into financial markets after spending years trying to calm investors’ nerves with explicit assurances that interest rates would remain low.


Ahead of their policy meeting that ends Wednesday, Fed officials have signaled they want to drop the latest iteration in a succession of low-rate promises—a line in their policy statement pledging to be “patient” before deciding to raise rates.


The move could be a test for investors. In theory, less-clear-cut interest-rate guidance from the Fed should lead to more volatility in financial markets. That’s because investors will be left less certain about a key variable in every asset-valuation model: the cost of funds.

Funds will “cost”? Unpossible. Clearly this will destroy the Fed’s Dow Jones-Data dependent mandate to push forward PEs to 20x to keep inflation at 2% while it reads manipulated payroll data that waiters and bartenders have never had it this good, and believing that the economy is firing on all 9 out of 6 seasonally adjusted cylinders.

Here is a history of all the Fed’s failed attempts to show it is now a plaything of a market with the emotional capacity of a 2 year old:

The IMF joins the warning that now may be a good time to buy VIX calls:

Christine Lagarde, managing director of the International Monetary Fund, warned Tuesday that markets could be heading for a repeat of the 2013 “taper tantrum,” in which stocks fell and interest rates rose around the world as the Fed considered winding down its “quantitative easing” bond-buying program.


“I am afraid this may not be a one-off episode,” she said of 2013 in a speech at India’s central bank. “The timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets.”

Here the WSJ contemplates yet another indicator which central planning has rendered utterly useless: the VIX.

Right now measures of market volatility are sending divergent signals. Stock-market volatility is relatively subdued.


The Chicago Board Option Exchange’s stock volatility index, for example, has averaged 17 this year, above last year’s 14 but below its average of 21 between 2009 and 2014. The higher the measure, known as the VIX, the more volatility.


At the same time, however, measures of short-term interest rate and currency volatility have picked up, a potential warning sign of tumult to come. Merrill Lynch’s MOVE index, which tracks expected interest-rate volatility, has risen to levels seen in 2013, when the taper tantrum started.


Torsten Slok, chief international economist at Deutsche Bank Securities, said this rate volatility portends broader turbulence. “The risk here is that when volatility goes up in rates it will be spilling over into other asset classes,” he said.


Such turmoil could affect other borrowing costs for U.S. households and businesses, such as rates on mortgages, credit cards and corporate bonds. It could also hit their stock portfolios and 401(k) saving accounts.

Wait… risk, in the market? Is that legal? Why will someone please think of the 17 year old hedge fund manager children in the Inland Empire? How can anyone make money with 0% chance of loss if there is something called “risk” in the market. Surely that is unacceptable.

And indeed it is, as any market tantrum will promptly push the Fed back to its accommodative ways, as Hilsenrath also seems to acknowledge:

Even when officials have in the past tried to move away from telegraphing their actions, they have found themselves drawn back to behaving in highly predictable ways.


In winding down the bond-buying program known as quantitative easing in 2014, for example, the Fed said the pace of its actions would depend on the performance of the economy. Economic output varied sharply in 2014—contracting in the first quarter and then expanding at an annual rate near 5% in the middle of the year—but the Fed reduced its monthly bond purchases in steady increments.

The box the Fed is in “almost” explains why former Fed governor Jeremy Stein, who saw the writing on the wall, got the hell out of Dodge when he had the chance:

Jeremy Stein, a Harvard University economics professor and former Fed governor, sees a conundrum brewing for officials. Even if the central bank says its actions will be less predictable, the market will infer a rate path from its actions. To avoid unsettling markets, he said, Fed officials have an incentive to stick to the path investors infer.


“It is a hard thing to manage. You almost have to psyche yourself up to not worry too much about spooking the bond market,” he said.

It almost makes one wonder when reflating and preserving asset bubbles became the Fed’s only mandate…





Dave Kranzler reports prior to the FOMC results:


The “Patient” Insanity

Here’s a prediction, highly educated/paid analysts and “economists” will spend more time debating whether or not the FOMC will remove the word “patient” this week than they spend collectively in an entire year researching and analyzing the actual data and fundamentals underpinning our entire Ponzi system.

Whether or not the FOMC removes one word from its “policy” statement is completely irrelevant to the discussion that should be occurring about whether or not our financial and economic system is collapsing  Which it is.

In fact, the issue of whether or not the Fed raises its Fed rate to .25 from zero – and it’s effectively a negative rate after real inflation is accounted for – is complete lunacy.  Zero-percent interest rates are not stimulating real economic growth.  Raising rates an insignificant amount after 72 months of ZIRP will not have a significant affect on the economy.   The Fed could take rates nominally negative and it won’t stimulate growth.  It will stimulate a bigger financial bubble, which seems to be all the Fed cares about.


Here’s my prediction:   Our system is at the beginning of a  massive collapse.  The early stages of Mises’ “crack-up boom.”   The Fed is entirely irrelevant anymore except to the extent that it enables the big banks and elitists to loot our system.   That’s why they put a useless piece flesh like Grandma Yellen at the helm.  She knows how to follow orders.






And now the sequence of events starting at 2:00 pm, the release of the FOMC meeting: they lose the word “patience” but also cut growth and inflation forecasts.


“Flexible” Fed Loses “Patience”; Cuts Growth, Inflation Forecasts: Redline Comparison


Evan as The “boxed-in” Fed nears the vinegar strokes of its easing cycle, today’s statement continued to offer something for everyone (hawks, doves, bulls, & bears) to hold onto:

  • *FED SEES 2015 GDP GROWTH OF 2.3%-2.7% VS 2.6%-3% DEC. EST. (dove)

So, despite previous Fed promises, we have seen dismal macro data, no consumption gain from low gas prices, and USD strength headwinds; and yet, as they shift growth expectations in their dot plot, we’re supposed to believe that. The bottom line: Fed to Markets: “you’re on your own”-ish: undertainty is back. Full redline below…

Pre-FOMC: S&P Futs 2059, EUR 1.0650, 10Y 2.05%, Gold $1152

Additional Headlines…

  • *FED SEES 2015 GDP GROWTH OF 2.3%-2.7% VS 2.6%-3% DEC. EST.
  • *FED SEES 2015 JOBLESS RATE 5%-5.2% VS 5.2%-5.3% IN DEC. EST.
  • *FED SEES 2015 PCE INFLATION 0.6%-0.8% VS 1%-1.6% IN DEC. EST.

Here is what the major changes are:

  • Fed notes that recent growth (no longer activity) has “moderated somewhat” instead of “expanding at a solid pace.”
  • Fed adds that “export growth has weakened”
  • Fed removes measures of inflation compensation “have declined substantially” and replaces with “remains low”
  • Fed changes “inflation is anticipated to decline further” with “remain near its recent low level”

And then when it comes to the patience language there is a whole lot of crazy stuff going on- for the full redline comparison see below.

*  *  *

Time to raise rates? Seems like the perfect time!!

*  *  *

This seemed to sum up The FOMC’s decision-making process perfectly…

*  *  *

Here is what the dot-plot looked (and market expectations) looked like before… (notice how much more dovish the market remains)


And after…


Word Count rise – bullish


*  *  *




The immediate reaction:


(courtesy zero hedge/Bloomberg)


FOMC Reaction: Buy Stocks, Buy Bonds, Buy Gold, Buy Crude Oil, Sell Dollars


“Moar Trade” On… 10Y under 2.00%, Gold Spiking…



And stocks are just loving it…


And Crude explodes… which makes perfect sense of course with The Fed slashing growth expectations…


Charts: Bloomberg





The market reacts to the” farewell to the recovery” and surprisingly it wasn’t the snow!!


(courtesy zero hedge)


Here Is The Reason Why Stocks Are Soaring, Or Farewell “Recovery”… Again


Why are stock soaring in response to the Fed statement and latest set of projections? Because, as Bloomberg promptly calculated, the FOMC revised down all forecasts for 2015 since the previous SEP was released on Dec. 17.

The median dot for year end 2015 falls to 0.625% from 1.125% in Dec: a whopping 0.50% cut.

And there goes not only the “recovery” but any imminent rate hike.

The details:

  • The central tendency for GDP this year is 2.3%-2.7% vs 2.6%-3%. But the real hammer was 2016 and 2017: these were just slashed from2.5%-3.0% and 2.3%-2.5% as of December, to 2.3-2.7% and 2.0-2.4%.
  • Unemployment rate 5.0-5.2% vs 5.2%-5.3%
  • The Fed now sees PCE inflation at 0.6%-0.8%. This was supposed to be 1%-1.6% just three months ago.
  • Core PCE 1.3%-1.4% vs 1.5%-1.8%
  • And the one that matters most, the “dot plot”,saw the median dot for 2016 fall to 1.875% vs 2.5%, and decline to 3.125% from 3.625% for 2017.


And here is a comparison of the dots since September 2014 courtesy of @Not_Jim_Cramer. The Fed: wrong as ever.

In other words, what the Fed just said is the following: “it wasn’t the snow, it was the economy.”

End Result: Goodbye recovery, hello stock surge.





And now the mouthpiece for the Fed discusses the FOMC result:


(courtesy Jan  Hatzius/Goldman Sachs/zero hedge)


Goldman’s FOMC Post-Mortem – “More Dovish Than Expected” But Hike Coming In September



Via Goldman Sachs’ Jan Hatzius,



The March FOMC statement and projections suggested thatSeptember rather than June appears to be the most likely date for the first hike of the fed funds rate. Although the change to the “patient” forward guidance was close to expectations, the shift in the “dot plot” was most consistent with two rather than three 25 basis point hikes to the target range occurring in 2015. In addition,changes to the Committee’s economic assessment were a bit more dovish.


1. As widely expected, the FOMC decided to drop its “patient” formulation in its forward guidance regarding the date of the first rate hike. It explicitly noted that a hike at the upcoming April meeting was unlikely, while stating that the Committee will hike “when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

2. Changes to the Committee’s assessment of economic activity were generally dovish, with growth at a “solid pace” downgraded to growth having “moderated somewhat.” In particular, “export growth weakened.”

3. The median projection for the fed funds rate (or “dot”) fell 50bp to 0.625% at end-2015, fell 62.5bp to 1.875% at end-2016, and fell 50bp to 3.125% at end-2017. Two participants again indicated that a hike would not be appropriate until 2016, while one indicated a target range of 25-50bp at end-2015 and seven indicated a target range of 50-75bp at end 2015 (a group that is highly likely to include the leadership of the Committee), most likely consistent with a first hike in September. The median longer run projection was unchanged at 3.75%, but many participants reduced their longer run dot by 25bp.

4. The FOMC also released a new Summary of Economic Projections. The mid-point of the central tendency of the unemployment rate fell 0.15pp to 5.1% in 2015Q4, 0.1pp to 5.0% in 2016Q4, and 0.15pp to 4.95% in 2017, implying a 0.15pp undershooting of the longer-run or “structural” rate, which declined 0.25pp to 5.1%. Real GDP growth declined 0.3pp to 2.5% in 2015, 0.25pp to 2.5% in 2016, and 0.2pp to 2.2% in 2017. Longer run growth was unchanged at 2.15%. Headline PCE inflation fell 0.6pp to 0.7% in 2015, but was little changed after that. Core inflation fell 0.3pp to 1.35% in 2015 and fell 0.15pp to 1.7% in 2016, but was unchanged at 1.9% in 2017.

5. There were no dissents.

6. Our forecast remains for a September hike, but the risks now appear slightly skewed toward a later liftoff.





And finally Dave Kranzler has the last word on the FOMC results:


“OH NO!” – The FOMC Forgot The Word “Patient”

Reader response:  “Dave, you are right. I just turned on Bloomberg TV and every 2nd word is “patient”. What a joke! (Michael P);    “This whole market is embarrassing”(Chris G)

I wonder if Grandma Yellen forgot her Depends today (play on an old undergrad economics class joke that the favorite phrase of economists in response to a question is, “well it depends”).

If measured in terms of manpower dollars/hour, the word “patient” is probably the most expensive word in history.   Think about – in terms of dollars paid per hour – all the extraordinarily overpaid Wall Street analysts and buy-side fund managers who spent the better part of the last month talking about the word “patient.”  How about the amount advertising dollars spent during the time used while idiots on financial tv blew hot air discussing the word “patient.”

And then there’s this (source: Marketwatch, edits are mine) – click to enlarge:


The above pic shows the 12 FOMC voting plus other sundry Fed “Einsteins.”  Perhaps collectively they might have the brainpower of Shakespeare.   21 Fed officials – probably about $10 million combined in annual compensation.   Think about, from a cost allocation standpoint, how many hours were spent by this brain trust determining whether or not to include the word “patient” in today’s FOMC policy statement and, if not, how to leave it out in a way which implies that we won’t raise rates any time soon.

And now the poor saps who have nothing better to do than watch CNBC, Bloomberg or Fox Business all day long are going to be subjected to another couple weeks of incessant squawking about what the removal of the word “patient” means and to grotesquely foolish forecasts for when the Fed might ever so slight nudge interest rates up one-quarter of one percent.

Here’s your answer – for free:  NEVER.   Not until the market forces the issue and by then the entire U.S. financial and political system will have collapsed.







It seems that our bankers will continue to manipulate despite the fact that they have been caught on earlier occasions.  Now the attorney general may revoke the settlement agreement in the currency rigging and press for our governmental kickbacks:


(courtesy Bloomberg)



U.S. May Revoke Settlement Agreements in Currency-Rigging Probes


(Bloomberg) — U.S. prosecutors investigating currency manipulation are considering revoking years-old settlements and prosecuting banks for rigging interest rates, according to people familiar with the matter.

The Justice Department is weighing whether evidence of wrongdoing in currency trading means banks violated old deals resolving probes into the rigging of benchmark interest rates, said two people, who asked not to be identified because final decisions haven’t been made.

Barclays Plc, Royal Bank of Scotland Group Plc and UBS Group AG, which are operating under such agreements, are among banks being investigated in the currency case, as is HSBC Holdings Plc. The Justice Department is also scrutinizing whether HSBC’s currency-trading practices violated a 2012 agreement settling a money-laundering probe, another person familiar with the matter said.

The Justice Department can tear up the deals and charge the banks if it finds they committed any crime after they were negotiated.

Deferred prosecution and non-prosecution agreements, as they are called, have been widely used by the Justice Department in recent years in investigations ranging from sanctions violations to market manipulation. A decision to revoke such a deal with a bank would be unprecedented.

Deals Overused

Such settlements require the banks to admit responsibility and cooperate with ongoing investigations. Critics including Securities and Exchange Commission Chair Mary Jo White, who pioneered such agreements, argue the deals have been overused and don’t curb misconduct. The Justice Department defends the settlements, saying they force banks to correct wrongdoing and allow oversight.

The Justice Department “now understands that these deferred-prosecution agreements don’t always work and there have to be serious consequences if companies don’t take them seriously,” said Brandon Garrett, a law professor at the University of Virginia who has studied the agreements. “I think DOJ understandably is frustrated and thinks enough is enough.”

UBS and Barclays reached their settlements with U.S. prosecutors in 2012 to resolve claims of rigging the London interbank offered rate, while RBS’s was finalized in 2013.

Violating Settlement

In the June 2014 agreement that extended Barclays’s non-prosecution agreement, the U.S. said it’s reviewing whether the bank’s trading in foreign-exchange markets between June 2012 and June 2014 violated the 2012 Libor settlement.

Spokesmen for UBS, RBS, Barclays and the Justice Department declined to comment. A spokewoman for HSBC didn’t immediately respond to a request for comment.

Leslie Caldwell, the head of the Justice Department’s criminal division, said in a speech Monday that the U.S. is prepared to tear up settlements and charge banks for conduct covered by the settlements.

“Where banks fail to live up to their commitments, we will hold them accountable,” Caldwell said. “The criminal division will not hesitate to tear up a DPA or NPA and file criminal charges.”

Caldwell, who didn’t name any banks at risk of having their agreements revoked, said that a breach could lead to additional monetary penalties and charges based on the conduct covered by the agreements.

The Justice Department has been investigating alleged manipulation of currency benchmarks for almost two years and is pressing to resolve the probe with settlements that include guilty pleas from some of the institutions and penalties of roughly $1 billion for each bank, with some being asked for more and some for less, people familiar with the negotiations have told Bloomberg News. The government also has said it is preparing cases against individuals.

To contact the reporters on this story: David McLaughlin in Washington; Tom Schoenberg in Washington




It looks like Fanny and Freddie need another bailout:


(courtesy Dave Kranzler/IRD)


Fannie And Freddie Are Headed For Another Bailout

Taxpayers pumped over $200 billion in to Fannie Mae and Freddie Mac after the financial collapse of 2008.   While the Obama Government used taxpayer subsidized loans to move  a large quantities of foreclosed housing inventory from the FNM/FRE and in to big investment funds, FNM/FRE were busy ballooning their mortgage holdings – again.

Now the Inspector General’s Federal Housing Finance Agency has issued a warning that both FNM/FRE are headed for another bailout, which is no surprise to me:

“Future profitability is far from assured,” Federal Housing Finance Agency Office of Inspector General said in a report, pointing out that the firms could again chalk up losses on their derivatives portfolios, similar to those they reported in the fourth quarter. “This increases the likelihood of additional Treasury investment,” the report stated.  Reuters (LINK)

Similar to when Fannie was plugged full of derivatives under former CEO Franklin Raines – who by the way had no clue how catastrophic the situation was and should be in jail but instead received a $100 million “you’re fired” severance agreement – the Government has once again looked the other way while Wall Street unloaded another avalanche of derivatives onto FNM/FRE.   Once again the Taxpayers will pay for this.

This is not a ‘warning” – this is a “get ready here it comes” statement.   The fact is that most of FNM/FRE’s “profitablity” has been driven by the same fraudulent “mark to model” accounting that has generated most the big bank profits since 2009.


And the Government used this fraudulent accounting to suck money out of FNM/FRE.   The “improved” balance sheet has enabled both FNM/FRE to issue debt to investors.  The money raised has been used reload their mortgage holdings and for dividend “payback” payments to the Treasury.

FNM’s CEO warned of the possibility of another bailout in February, after announcing FNM’s smallest dividend payment to the Treasury in more than four years.  This is not a warning – it’s an inevitability.  The housing market is set to re-collapse, which will blow-up both Fannie and Freddie – once again.





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