april 27/Fitch lowers debt rating on Japan/China will now begin QE which sends gold and silver skyrocketing/Greece becomes soft capital controls/Greece municipalities refuse to give their cash to Sovereign Greece/Silver OI rises again setting up a potential silver squeeze/Huge withdrawal of gold at the GLD (heading straight to Shanghai) /huge addition of 2.976 million oz into the SLV/

Good evening Ladies and Gentlemen:




Here are the following closes for gold and silver today:


Gold:  $1203.30 up $28.10 (comex closing time)

Silver: $16.39 up 76 cents (comex closing time)


In the access market 5:15 pm

Gold $1202.00

Silver: $16.39



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

Today is options expiry on the comex.  On Thursday we will have options expiry on the LBMA in London and on the OTC market as well. Today was a welcomed change from our bankers normal behaviour of whacking silver and gold during options expiry week. However we still have 3 more days before first day notice.


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


At the gold comex today,  we had a good delivery day, registering 25 notices served for 2500 oz.  Silver comex filed with 0 notices for nil  oz .


Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.13 tonnes for a loss of 62 tonnes over that period. Lately the removals have been rising!




In silver, the open interest rose by another 1886 contracts despite the fact that Friday’s silver price was down by 19 cents. The total silver OI continues to remain extremely high with today’s reading at 188,004 contracts rising to multi-year record highs. The front April month has an OI of 22 contracts for a loss of 0 contracts. We are now at 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. There is no doubt that the silver situation is scaring our bankers to no end. The COT report on Friday in silver showed the commercials going long in silver in a big way and the large specs going short.  Is a short squeeze coming?



In silver had 0 notices served upon for nil oz.



In gold,  the total comex gold OI rests tonight at 418,813 for a gain of 13,249 contracts despite the fact that gold was up by $18.90 on Friday. We had 25 notices served upon for 2500 oz.



Today, we lost 3.29 tonnes of  gold inventory at the GLD heading straight to Shanghai/  Gold Inventory rests at 739.06  tonnes.


In silver, /  /we had a huge addition of 2.976 million oz of  silver inventory to the SLV/ and thus the inventory tonight is 329.202 million oz


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


1. Today we had the open interest in silver rise by another huge 1,840, contracts despite the fall in price on Friday (19 cents). Not only that but the OI for the front month of May fell by only 11,430 contracts as we have only 4 trading days left before first day notice.  The OI for gold rose by 13,249 contracts up to 418,813 contracts despite the fact that the price of gold was down by $18.90 on Friday.

(report Harvey)


2,Three important commentaries on Greece today:

i) Last week, we reported that sovereign Greece will raid the pension fund as well as municipality funds as they hope to garner around 2.5 billion euros.  Payroll for federal employees is on Thursday.  Today we learn that at most there is only 500 million euros that can be transferred and then late in the day, the municipalities voted to not send the money over

ii) Varoufakis is being removed as head of the negotiating committee dealing with the EU

iii) the beginnings of capital controls as the Greek government confiscated funds on debtors.

(zero hedge)

3. On Tuesday we reported on the arrest of a single trader who acted alone on that famous flash crash in May of 2010.  This trader resides in England.   The trader, Sarao will fight the extradition as he cites that many others are doing the same thing. Zero hedge writes his promised open letter to the CFTC on how spoofing and layering are manipulating the prices of commodities and stocks and he will document these illegal activities on a daily basis to the CFTC. ON Friday Michael Lewis, author of the Crash Boys ridicules the CFTC.  Also zero hedge alleges that the reason the CFTC went after Sarao was due to the fact that he was eating into the HFT profits. The HFT crooks wanted Sarao removed..so they asked the CFTC to arrest him and they obliged. Today zero hedge describes spoofing and layering in the soya bean market.

(zero hedge)

4. Sovereign Japan just had its debt rating lowered by Fitch

(zero hedge)

5. The big story of the day:  China set to do its own QE.  This was the rocket that propelled silver and gold today.

(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 13,249 contracts from 405,564 up to 418,813 despite the fact that gold was down by $18.90 on Friday (at the comex close). We are now in the active delivery month of April and here the OI rose by 1 contract up to 441. We had 0 contracts filed upon on Friday so we gained 1 gold contract or  an additional 100 ounces  will stand for delivery in April. The next non active delivery month is May and here the OI fell by 56 contracts down to 380.  The next big active delivery contract month is June and here the OI rose by 9,103 contracts up to 273,964. June is the second biggest delivery month on the comex gold calendar. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 90,765. The confirmed volume yesterday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 169,786 contracts. Today we had 25 notices filed for 2500 oz.


And now for the wild silver comex results.  Silver OI rose by another 1840 contracts from 186,164 up to 188,004 despite the fact that the price of silver was down by 19 cents, with respect to Friday’s trading.  Somebody big is willing to take on JPMorgan.  We are now in the non active delivery month of April and here the OI remained constant at 22 contracts.  We had 1 notice filed on Friday so we gained  1 silver contract or an additional 5,000 ounces will stand in this delivery month of April. The next big active delivery month is May and here the OI fell by only 11,430 contracts down to 41,615.  We have 4 trading days left before first day notice on Thursday, April 30.2015. The estimated volume today was good at 46,220 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 98,685 contracts which is excellent in volume except we had many rollovers. We had 0 notices filed for nil oz today.



April initial standings

April 27.2015



Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz  131.98 (Manfra, Brinks)
Deposits to the Dealer Inventory in oz 699.99 oz (Brinks)
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 25 contracts (2,500 oz)
No of oz to be served (notices)  416 contracts(41,600) oz
Total monthly oz gold served (contracts) so far this month 2386 contracts(238,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   oz

Total accumulative withdrawal of gold from the Customer inventory this month

  556,799.6 oz

Today, we had 1 dealer transaction

total Dealer withdrawals: nil oz

we had 1 dealer deposit

i) Into Brinks: 699.99 oz

total dealer deposit: 699.99 oz


we had 2 customer withdrawals

 i) Out of Manfra:  32.15 oz (1 kilobars)

ii) Out of Brinks: 99.83 oz

total customer withdrawal: 131.98 oz


we had 0 customer deposits:

total customer deposit: nil oz


We had 0 adjustment:


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 25 contracts of which 13 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 (2386) x 100 oz  or  238,600 oz , to which we add the difference between the open interest for the front month of April (441) and the number of notices served upon today (25) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2386) x 100 oz  or ounces + {OI for the front month (441) – the number of  notices served upon today (25) x 100 oz which equal 280,200 oz or 8.715 tonnes of gold.



we gained 1 contract or an additional 100 oz will stand for delivery in this April contract month.


This has been the lowest amount of gold ounces standing in an active month in quite some time.





Total dealer inventory: 603,795.373 or 18.78 tonnes

Total gold inventory (dealer and customer) = 7,752,541.181  oz. (241.13) tonnes)



Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.13 tonnes for a loss of 62 tonnes over that period. Lately the removals  have been rising!





And now for silver


April silver initial standings

April 27 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 259,426.72 oz (Brinks,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 300,322.500 oz (Brinks)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 22 contracts(110,000 oz)
Total monthly oz silver served (contracts) 494 contracts (2,470,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  884,245.2 oz
Total accumulative withdrawal  of silver from the Customer inventory this month  11,436,314.6 oz


Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 1 customer deposits:

i) Into Brinks:  300,322.500 oz



total customer deposits: 300,322.500  oz


We had 2 customer withdrawals:

i) Out of Brinks:  8891.400

ii) Out of Scotia; 250,535.32


total withdrawals;  259,426.72 oz


we had 0 adjustments:


Total dealer inventory: 62.635 million oz

Total of all silver inventory (dealer and customer) 175.231 million oz


The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in April, we take the total number of notices filed for the month so far at (494) x 5,000 oz    = 2,470,000 oz to which we add the difference between the open interest for the front month of April (22) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.

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

494 (notices served so far) + { OI for front month of April(22) -number of notices served upon today (0} x 5000 oz =  2,580,000 oz standing for the April contract month.


we neither gained nor lost any silver ounces standing.


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

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:

April 27. we lost 3.29 tonnes of gold inventory at the GLD/Inventory rests tonight at 739.06 tonnes

April 24. no changes in gold inventory at the GLD/Inventory at 742.35 tonnes

April 23. no changes in gold inventory at the GLD/inventory at 742.35 tonnes

April 22. no changes in gold inventory at the GLD/inventory at 742.35 tonnes

April 21.2015: a huge addition of 3.26 tonnes of gold inventory at the GLD/Inventory rests at 742.35 tonnes

April 20.2015: no change in gold inventory at the GLD/Inventory rests at 739.06 tonnes

April 17.2015/ we had a huge addition of 3.01 tonnes of gold inventory at the GLD.  It looks like the raids at the GLD have stopped.

April 16.2015: no change in inventory at the GLD/total inventory at 736.08 tonnes

April 15/ a huge addition of 1.79 tonnes of gold inventory added to the GLD/ Inventory tonight at 736.08 tonnes

April 14/ no change in gold inventory at the GLD/Inventory rests at 734.29 tonnes

April 13.2015: we had a withdrawal of 1.75 tonnes of GLD/Inventory at 734.29 tonnes

April 10/we had no change in inventory at the GLD/Inventory at 736.04 tonnes

April 9.2015 we have a huge addition of 2.98 tonnes of gold inventory/GLD inventory tonight stands at 736.04 tonnes

April 8.2015:no changes in the GLD/Inventory 733.06 tonnes

April 7. we had another withdrawal of 4.18 tonnes of gold at the GLD/Inventory rests at 733.06 tonnes



April 27/2015 /  we hada withdrawal of 3.29 tonnes of gold inventory at the GLD/Inventory stands at 739.06 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 : 739.06 tonnes.



And now for silver (SLV):  April 27.we had a huge addition of 2.976 million oz to the SLV/Inventory stands tonight at 329.202 million oz

April 24/ we had a small withdrawal of 88,000 oz of silver at the SLV/326.226 million oz

April 23.no changes in silver inventory at the SLV/326.334 million oz of inventory

 April 22/no changes in silver inventory at the SLV/326.334 million oz of inventory

April 21.2015/we had another huge addition of 1.434 million oz of silver into the SLV

April 20/ no change in silver inventory tonight/SLV 324.900 million oz.

April 17.2015: no change in silver inventory tonight at the SLV.324.900 million oz

April 16.2015: no change in silver inventory tonight at the SLV/324.900 million oz

April 15.2015: no change in silver inventory tonight at the SLV/324.900 million oz is the inventory tonight.

April 14. we had another addition of .67 million oz of silver at the SLV/Inventory rests at 324.900 million oz

April 13.2015: a huge addition of 2.391 million oz of silver at the SLV/Inventory rests at 324.230 million oz

April 10/ no changes in silver inventory at the SLV/Inventory rests at 321.839 million oz

April 9/2015 no changes in inventory at the SLV/Inventory rests at 321.839 million oz/

April 8.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz

April 7.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz



April 27/2015 we had a huge addition (deposit) in inventory at the SLV / inventory rests at 329.202 million oz





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


Central fund of Canada data not available today/

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

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

1. Central Fund of Canada: traded at Negative 5.7% percent to NAV in usa funds and Negative 5.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.3%

Percentage of fund in silver:37.30%

cash .4%

( April 27/2015)



Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV falls to + 0.83%!!!!! NAV (April 27/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to -.17% to NAV(April 27/2015

Note: Sprott silver trust back  into positive territory at +0.83%.

Sprott physical gold trust is back into negative territory at -.17%

Central fund of Canada’s is still in jail.




India and China Import Massive Quantities of Gold from Switzerland

– Singapore, India and China continue to import staggering volumes of gold from the West
– U.K. exports of bullion to Switzerland increase 6 fold to a very large 97 tonnes
– Gold exports from Switzerland to both China and India doubled in March
– Shanghai Gold Exchange (SGE) becoming most important centre for physical gold trade
– LBMA says London gold trade will not move to exchange
– Gold price languishes at all time inflation adjusted lows despite robust demand …
– Gold will protect Asian peasants and western middle classes …


In what future generations will likely see as a major, potentially catastrophic blunder of monetary policy, the West and particularly the City of London continues to hemorrhage huge volumes of gold which is flowing Eastwards to Singapore, India and China from London via Switzerland.

“Gold exports to China from the refining hub of Switzerland almost doubled to 46.4 metric tons in March”, up from 23.6 tonnes in February” according to Bloomberg. India’s gold imports from Switzerland doubled to 72.5 tonnes in the same period.

The increasingly affluent masses in China and India continue to have a voracious appetite for gold as a store of value.
Policy makers in China and Russia have also made gold a cornerstone of their monetary policy.

Bloomberg reported the following:

“Flows to India rose before this month’s Akshaya Tritiya festival, which is considered a traditional day to buy precious metals.”


The Asian demand for Swiss refined gold was met in part by very large gold imports from the U.K. Bloomberg states that Swiss imports from the U.K.  rose sixfold in the same period to 97.2 tonnes.

This figure dwarfs Swiss imports from other nations. The U.S. and Turkey exported just over 18 tonnes and 15 tonnes respectively and these figures greatly exceed the amounts coming from all the other countries from whom Switzerland imports gold.

It is likely that London good delivery bars (400 troy ounces) favoured by western institutions including bullion banks and central banks are being imported into Switzerland. They go to the Swiss refineries to be smelted and refined into kilobar format which is increasingly popular in Asia and traded on the Shanghai Gold Exchange (SGE).

Bloomberg also reports that “Global sales from gold-backed funds totaled 55.7 tons in March.” This would indicate that the gold making its way to Asia is coming from official holdings and or liquidation of gold ETFs. Some of those selling the ETFs are opting to acquire physical, allocated bullion and storing in vaults in Zurich, Hong Kong and of course Singapore.

Singapore is fast becoming an important gold hub and a favourite location for allocated bullion storage among risk conscious bullion buyers. Hong Kong saw a decline in its share of the market as Chinese investors increasingly opt to use the Shanghai Gold Exchange (SGE) for buying and trading in general.

Bloomberg reports that “Shipments to Hong Kong fell 26 percent to 30 tons”, whereas “Trading volume for bullion … jumped about 60 percent from the previous month to a record in March, Shanghai Gold Exchange data show.”

The SGE deals solely in physical gold bars and not paper contracts or unallocated bullion bank accounts which can be used to divert and reduce actual demand for physical gold and cap gold prices.

Between them China and India and Singapore – who imported almost 29 tonnes from Switzerland – imported almost 150 tonnes of the 223.3 tonne total of gold exported from Switzerland in March which Bloomberg said are “the highest since at least 2013”.

While sentiment towards gold in the West is abysmal – even as gold languishes at record lows when adjusted for inflation – Asian demand remains insatiable.


It would be wise for investors to inform themselves as to why this should be so. Demand for gold in Asia is often written off by Westerners as an irrational impulse of uneducated Asian peasant farmers and workers.

This is unfair to gold buyers in Asia – many of whom have experience of currency devaluation and therefore opt to own gold as a savings mechanism and a superior store of value.

However irrational holding gold may appear, the alternative – holding paper currencies which are continually being devalued through QE and inflation in various sectors of the economy – is even more irrational.

The fact that it is a matter of Chinese state policy to continuously accumulate vast volumes of gold and that the Chinese government has encouraged its citizens to own gold shows that bullion is not the fringe asset of irrational ‘gold bugs’ as it is often suggested in some western media.

The fact that Western central banks continue to hold, consolidate and repatriate gold shows the strategic importance placed on gold by the very entities who issue the currencies we use.

People need to protect themselves from potential economic and monetary crises where existing currencies may be devalued. In the event of serious problems or even the collapse of the unsustainable debt-based international  monetary system, an allocation to gold will protect wealth. Both the savings of peasants in India and those of the middle classes and high net worths in the western world.

Separately, this morning the LBMA have said that gold bullion trading in London isn’t likely to move to an exchange because it would increase costs and reduce liquidity, the LBMA told Bloomberg.

The London Bullion Market Association on Monday said it has commissioned Ernst & Young LLP to conduct a study and prepare recommendations on how to develop the market. In the future, there may be more regular transaction reporting and a return of publishing gold forward offered rates and the forward curve, said Ruth Crowell, the association’s chief executive.

The World Gold Council began gathering views from banks and traders, including potentially moving over-the-counter trading to an exchange, three people with knowledge of the matter said in February. Contracts change hands through an exchange in New York, Singapore and Shanghai, while London relies on banks and other companies to manage counterparty risks.

“It is unlikely that the Ernst & Young review will recommend moving the existing business from OTC to an exchange, given a move would increase costs for OTC clients and diminish liquidity,” Crowell said by phone on Monday. “We have also had a lot of changes happening in the market. Recently, the market has needed a lot more from the LBMA …”.

Important guides to storage in Singapore and Switzerland:
Essential Guide to Storing Gold In Singapore
Essential Guide to Storing Gold In Switzerland


Today’s AM LBMA Gold Price was USD 1,182.75, EUR 1,090.52 and GBP 780.85 per ounce.
Friday’s AM LBMA Gold Price was USD 1,192.15, EUR 1,097.49 and GBP 788.04 per ounce.

Gold fell 1.35 percent or $16.10 and closed at $1,178.60 an ounce Friday, while silver slipped 1.07 percent or $0.17 closing at $15.72 an ounce. Gold and silver both fell for the week – down 2.15 percent and 3.32 percent respectively.

Spot gold in Singapore  was up 0.1 percent to $1,180 an ounce by end of day trading and gold continued to eke out meager gains in dollars in London trading – and had better gains in euros and particularly sterling due to UK election jitters.

Gold in GBP - 24 Hours

Investors will be cautious due to the Greek default risk and the U.S. FOMC meeting that begins tomorrow. This has impacted European stock markets this morning which are seeing losses.

Greek bond yields edged higher today as investors reacted to fruitless debt relief talks between eurozone finance ministers on Friday which only served to highlight the gulf between Greece and its creditors.

No deal was reached between the Eurozone finance ministers and Greece after meetings on Friday. On Saturday, Wolfgang Schaeuble hinted that Berlin was preparing for a possible Greek default.

This week local Greek governments are scouring for cash in order to help pay out its pensioners and employees, while  households and businesses withdrew 1.3 billion in another run on Greek banks last week.


Germany’s Bild newspaper reported today that Tsipras asked Merkel to convene an emergency European Union leaders’ summit. Yesterday, Bloomberg reported that Greek Prime Minister Alexis Tsipras held a call with German Chancellor Angela Merkel and Eurogroup President Jeroen Dijsselbloem to discuss progress in negotiations, said a government source from Athens.

Greece is still hanging onto its membership in the Eurozone by its fingertips but we are nearing the end of the saga.

Gold in late morning European trading is up 0.30% or $1,183.78 an ounce. Silver is up 0.69 percent at $15.83 an ounce and platinum is also up 0.02 percent at $1,120.00 an ounce.




(courtesy Reuters/GATA)

El Salvador sells 80 percent of its gold reserves for U.S. dollars


By Nelson Renteria
Friday, April 24, 2015

El Salvador’s central bank sold about 80 percent of its gold reserves last month to diversify risk and take advantage of the metal’s appreciation, a central bank official said on Friday.

The country, which has been dollarized since 2001, sold 5.412 tons of gold for $206 million, which will go into the bank’s reserve portfolios to protect it against market volatility. …

… For the remainder of the report:



Ronan Manly: El Salvador’s gold reserves, the BIS, and the bullion banks


7:34a ET Monday, April 27, 2015

Dear Friend of GATA and Gold:

Gold market researcher and GATA consultant Ronan Manly has studied El Salvador’s recent liquidation of most of its gold reserves and concludes that it is likely a small example of what the governments of bigger countries are doing surreptitiously in the gold market.

Manly writes: “The case of the El Salvador gold sales demonstrates that central banks can and do use the gold depositing facilities of the Bank for International Settlements and the gold-lending services of London Bullion Market Association commercial bullion banks such as Barclays, the Bank of Scotia, and Standard Chartered among many others. The case of El Salvador also shows that central banks actively use derivatives such as put options within the management of the gold component of their reserve portfolios.

“It would be naive to think that the bullion banks and the BIS are just providing these services to small emerging-market central banks in Central America. It would be more realistic to suggest that the bullion banks and the BIS are providing these gold reserve portfolio services (with scale) to many central banks.”

Manly’s research is headlined “El Salvador’s Gold Reserves, the BIS, and the Bullion Banks” and it’s posted at Bullion Star here:


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

(courtesy Mike Kosares/GATA)

Mike Kosares: 2001 — A gold Odyssey


8:30p ET Saturday, April 25, 2015

Dear Friend of GATA and Gold:

Gold investors, USAGold’s Mike Kosares writes tonight, possess “a healthy skepticism, insight, belief, and courage,” and with them they will be rewarded, while “those who believe that the authorities are in full control of the situation and that all will end well” may be left asking, as Queen Elizabeth II did a few years ago, why nobody saw disaster coming. Kosares’ commentary is headlined “2001 — A Gold Odyssey” and it’s posted at USAGold here:


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



TF Metals Report interviews founder of Allocated Bullion Exchange


4:24p ET Friday, April 24, 2015

Dear Friend of GATA and Gold:

Tom Coughlin, the founder of a new physical gold exchange, the Allocated Bullion Exchange, which aims to compete with the paper pushers in London and New York, is interviewed today by the TF Metals Report:


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



(courtesy Chris Powell/GATA)

Marveling without curiosity at an all-time inflation-adjusted low for gold


4:49p ET Friday, April 24, 2015

Dear Friend of GATA and Gold:

Jeff Clark of Casey Research today reports that John Williams of Shadows Stats has concluded that the gold price, adjusted by the U.S. government’s Consumer Price Index formula from 1980 (before the index was constantly recalibrated to conceal inflation), is actually near an all-time historical low, even as worldwide debt levels have exploded.

This, Clark writes, shows that gold is “dramatically undervalued.”

No, it doesn’t. It shows that the gold price is a spectacular anomaly that must be caused by something, a phenomenon that Clark and Casey Research apparently will leave for another day.

For if, for example, the inflation-adjusted gold price is at a historic low because central banks have created infinite supplies of imaginary gold in a fractional-reserve gold banking system and rig the futures markets with derivatives, and if such imaginary supplies can be created forever, the market rigged forever, and the gold price suppressed forever, gold is not “dramatically undervalued” at all but actually practically worthless — at least when held by ordinary investors.

In such circumstances gold would have value only to governments — as their primary mechanism for rigging all markets.

Clark’s marveling without curiosity is headlined “Gold Is Near an All-Time Inflation-Adjusted Low” and is posted at the Casey Research Internet site here:


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



(courtesy Lawrence Williams/Mineweb)

What happens to gold when the yuan floats free of the dollar?

To become part of the IMF’s SDR basket, China will almost certainly have to unpeg its currency from the US dollar. A massive increase in its gold reserve may be an integral part of this process.

There has been much speculation in recent weeks regarding the likelihood of China announcing a much bigger gold reserve as a prerequisite for possible inclusion of the RMB (renminbi – or yuan the words are effectively interchangeable in terms of the Chinese currency) into a reset Special Drawing Right as a preliminary move towards recognition of the yuan as a global reserve currency.  China has gone on record as suggesting that this should happen.  Discussions within the IMF on a possible revision to the SDR will commence next month.  But it is also apparent that there is little point in the yuan being brought into the SDR while it remains pegged to the US dollar.  The idea of the composition of the SDR basket of currencies is that it should represent broad currency stability and having two significant components pegged directly to each other would rather defeat the point behind it.

So, if we assume that a prerequisite for the inclusion of the yuan in a revised SDR basket will be an unpegging of the yuan from the dollar this opens up all kinds of interesting prospects and theories and I am indebted to Dr Fraser Murrell in Australia for pointing me to a fascinating, and apparently little read so far, article on the subject by J.C. Collins entitled:  When Will China End The Dollar Peg which sets out all these factors in detail.  I would commend anyone following this subject to click on the link and read it.

Dr Murrell goes further himself with a suggestion that the recent strength in the US dollar may not be quite what it seems, but given the peg to the yuan it actually represents strength in the yuan dragging the Dollar up with it ahead of the unpegging of the currencies and a resultant sharp rise in the global valuation of the yuan.  Who knows?

But the ramifications of the above are that an announcement that China now holds gold reserves considerably in excess of the 1,054 tonnes it has reported since 2009, the possible inclusion of the yuan in a revised SDR, and the unpegging of the yuan from the Dollar are all inextricably linked  and the countdown to this is already under way.

The IMF will be holding a meeting in May which will start to discuss formally any revisions to the composition of the SDR.  A second meeting will be held in October which will confirm any new changes and the revised SDR basket will come into operation on January 1st 2016.  If the yuan is to form part of the new SDR, then the announcement of its unpegging from the Dollar would have to take place prior to the October announcement – or so the theory goes.

Where does gold fit into this equation?  Again it is widely believed that China has been building its gold reserves to a much more substantial level – See:Does any nation hold the gold it says it does?  The theory is that the Chinese believe that even a partial gold backing of the yuan will hugely enhance the global financial credibility of its currency in moving it to the next level in global trade.  Its inclusion in the SDR basket would be a part of this and, with the size of its economy set to overtake that of the US, its unpegging from the dollar would further improve its global convertibility and help make it a de facto reserve currency as far as global trade is concerned.  If all this falls into place this year, as some believe, then January 1, 2016, would be the beginning of the end for US global financial hegemony!

Given the announcement of a major increase in Chinese gold reserves may all be a prerequisite for these changes all coming together, then there would an undoubted impact on the price of gold.  Once China has built its gold reserve to the required level it would have no interest in helping to maintain a depressed gold price level – indeed it may feel that it is better suited to command higher prices and could utilise its huge forex reserves to cement its global position in this respect.

Now maybe we give China too much credit in planning such a path to global financial dominance, but as a centrally planned economy with enormous foreign exchange reserves it certainly has the capability of following such a path.  With a rapidly growing middle class, which it has been actively encouraging to invest in precious metals, a steadily rising gold price to help keep this key part of its population content, might seem to be very much in its best interests.  Again this is something it would seem to be able to accomplish if it so wishes. One can’t but believe that this path has not been in the thoughts of its leadership and it could soon be coming to reality.

Gold really does matter in “polite company”!


Every once in a while it is good to go back to basics.  We have looked at the topic of whether gold even matters several times in the past.  Charles Hugh Smith undertook the exercise of “re hypothecation” process last week and can be read here, http://charleshughsmith.blogspot.com/2015/04/the-rehypothecation-of-gold-and-why-it.html .  He ends this article with a common sense question that asks “if gold is such a useless relic then why don’t they just charge the public for tours to see the gold in Ft. Knox?  What’s the danger?”.

  Actor after actor has been paraded forth to tell the public. “gold is a useless and barbaric relic”.  We are told daily “it doesn’t pay any interest, it costs money to store it, you can’t eat it and Walmart won’t take it.  It’s pretty for jewelry but that’s about it”.  I ask the questions, why then do central banks bother to hold gold?  Why the secrecy of our own gold holdings?  We are told that no audit can or will take place because it would cost too much?  Why not sell a few of the “useless bars” to pay for the audit?
  The answers of course are all so obvious.  Gold is badmouthed because it is the direct competitor of the U.S. dollar.  We haven’t had an audit because the numbers would not match up and it would be discovered we do not have the gold we claim(ed) to have.  Put simply, the “danger” is the U.S. will be discovered as a fraud, a thief and a liar if an audit took place.  This is why we are bombarded daily with negative psyops regarding gold and why for the last couple of years the price suppression has been so openly blatant and fierce.  It is ALL about the dollar and the privilege of issuing the reserve currency, namely the U.S. ability to hang on to this privilege.
  The above is “U.S. centric”, the view or perception is far different in the rest of the world.  China and Russia are openly buying gold for their coffers.  They even encourage their citizens to buy gold for themselves.  The Indians even smuggle gold into their country while being discouraged by a pro U.S. government.  My point is this, the rest of the world knows what gold really is, it is money.  I would even say many Western governments understand the game as proven by their requests to repatriate gold from N.Y. vaults, “trust” is waning.
  You see, gold is “trust” itself.  Gold is not “issued” by any country,  the reality is, any country who has gold is seen to have “wealth”.  Ask yourself this question, which is more important, whether the U.S. considers gold to be wealth or whether the rest of the world does?  I have been asked the question “what if the U.S. decides to outlaw gold and make it illegal to own”?  THIS is why you should own some or even the majority of your metal OUTSIDE of the U.S..  The rest of the world clearly views gold as valuable, you would have wealth outside where this wealth could either remain or be brought back in the form of another currency.
  It should be clear to you by now that power is moving away from the U.S..  “Trust” is also moving away from the U.S., this is evidenced by the various actions of nations over the last several years, an alternative clearing system to SWIFT, currency hubs, the AIIB and other banking systems… AND their buildup of gold reserves.  All of these measures have progressed as the U.S. has lost more and more trust.  The world sees the U.S. in a very poor light for what we do and how we act.  They no longer see us as a “model citizen” who follows the rule of law and will “call us” on this shortly.
  As I have said previously, the “we’ll show you our gold and we demand to see yours” moment is close at hand.  What exactly do you think will happen in this event?  Can the U.S. get by with “trust us, the gold is there”?  Can an audit demanded by the rest of the world be denied?  And what if an audit is done and the U.S. turns out to have less than 1,000 tons and a bunch of custodial gold is missing?
  Back to the top and the title, does gold really matter?  I guess I can answer this with another question, “does trust really matter”?  “Trust” matters in everything we do, from daily life to financial affairs.  Trade depends entirely on trust and living standards depend on trade.  The endgame of the Bretton Woods agreement is upon us because the leader, the U.S., has done so many dirty deals, twisted so many arms and abrogates the rule of law at will.
  I believe the defining moment will be when either China formally applies for inclusion into the SDR http://www.china.org.cn/video/2015-04/18/content_35356202.htm

or, when they outright announce what their gold holdings are.  If China does apply for SDR inclusion, as I understand it they will need to provide audited figures for their gold holdings.  They are a very polite and proper people but not the third world fools our press would have you believe.  The intelligent move on their part would be to ask for an audit of the others included in the SDR.  By requesting an audit of “all” they would be asking for an audit of Britain and of course the U.S..  They know full well these audits will not add up because they know they have purchased more gold than has been produced, it had to come from “someone’s vault”.  In my opinion, this is the most likely way to “politely” expose the issuer of the world’s reserve currency as fraudulently abusing their power.  Gold really does matter to the rest of the world which means when all is said and done, it will also matter in the U.S. whether we like it or not!  Regards,  Bill Holter



As an added bonus where is an interview of Bill Holter and  Greg Hunter where Bill takes on Harry Dent and demolishes him:



  A link https://www.youtube.com/watch?v=QR9NAim3Ke4  to my latest interview if you care to watch, forward or post the link.  I refute Harry Dent’s assertion to sell your gold before the coming crisis.  The meat of taking his logic apart begins just after the 27 minute mark.  Regards,  Bill Holter


Greece Debt Crisis Cannot Be Contained-Bill Holter

By Greg Hunter On April 26, 2015

Financial writer Bill Holter says you can forget what the experts says about “containing” the Greek debt crisis. Holter contends, “Contained is famous last words. This cannot be”contained.” Greece is the canary for the entire world. The western world is Greece. The western world is massively in debt. There are derivative losses all over that place that are being hidden, and Greece is what sets off the realization that there are losses and the chain has broken.”

Holter goes on to say, “You have to understand that there are layers to this. The German banks, the French banks, the Greek banks and many of the various European countries’ banks hold Greek debt. They also hold Spanish debt, Italian, debt, Portuguese debt and etcetera. . . . It’s carried on the books of these banks at 100 cents on the dollar. . . . The problem arises if Greece defaults and truth comes out that, oh my gosh, the debt is only worth 50 cents on the dollar or 50% or 10%. Then these banks have to write down the loss, and that blows a hole in their balance sheet. . . .Greece is broke, and they are going to down sooner or later. Greece is insolvent and broke and when their bonds get valued in portfolios . . . those loses are going to have to be realized. That’s what this has all been about and not realizing the losses.”

As far as the value of the dollar, well, it all comes down to trust. Holter says, “The U.S. is no longer trusted. Can you imagine . . . the AIIB (Asian Infrastructure Investment Bank) being formed and Israel, France, Germany, and the biggest one is Britain, and them joining in 2008? No way. . . . It’s self-preservation, but I also believe that our allies are choosing sides.”

Holter warns there is a big reset for the U.S. dollar coming sooner than later. Holter says, “You have to ask yourself, what is the dollar going to be reset against? My thought is the Chinese have every reason to argue to reset gold higher because they have gold. . . . Any country that had gold, their gold would be revalued higher. If they hold gold in reserve means their reserves would be revalued higher. If everybody else is showing their gold, it would force the U.S. to show its gold. Mathematically, I don’t see any way the U.S. does have the gold. . . . I do know that, at some point, there will be a massive short squeeze in gold once the derivatives chain breaks. Once Greece defaults, or some bank defaults and the derivatives chain breaks, there is going to be a massive outburst of I want my gold, and I want it now. This will be the biggest short squeeze in the history of history.”

On what Harry Dent said about gold recently, Holter says, “The danger is that he’s scaring people into selling their insurance. He’s scaring people into selling gold, and that is your insurance and gold is money. I think Dent is right, that we will have a $100 trillion plus of wealth evaporate. Walmart and Target will not even be open. Try going to Walmart with your dollars, there won’t be anything on the shelves.”

Holter predicts, “We will be in marshal law by this time next year,” and adds, “There is something wrong and there is a storm out there, and the historical safe haven for all-time has been gold. The hope is to reset the system without crashing it, but I am not sure it can be done. There is just too much debt outstanding. I think everything will be reset, and China will lead the reset.”

Join Greg Hunter as he goes One-on-One with precious metals expert Bill Holter ofMilesFranklin.com.

(There is much more in the in-depth interview.)






Early morning trading from Asia and Europe last night:

1. Stocks up on major Chinese bourses as bubblemania is the name of the game in Shanghai (down) but Hong Kong up  /Japan bourse lower /yen lowers to 119.63/Shanghai to allow short selling to stop their bubble/China then cuts RRR by 1% and Chinese authorities sooth fears that they want to prick that huge bubble.  Friday’s lower Chinese  HSBC flash PMI manufacturing numbers  spells trouble for the Chinese economy/hints at QE!!.


1b Chinese yuan vs USA dollar/yuan weakens to 6.2042

2 Nikkei down by 36.72  or 0.18%

3. Europe stocks all up/USA dollar index up to 97.11/Euro falls to 1.0863/

3b Japan 10 year bond yield .31% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.63/

3c Nikkei still  above 20,000

3d USA/Yen rate now just below the 120 barrier this morning

3e WTI  57.01  Brent 65.24

3f Gold up/Yen down

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 WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to 14.6 basis points. German bunds in negative yields from 8 years out.

Except Greece which sees its 2 year rate rises quite a bit to 26.07%/Greek stocks up 1.46%/ still expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  12.71% (up 30 in basis point in yield)

3k Gold at 1183.00 dollars/silver $15.84

3l USA vs Russian rouble;  (Russian rouble down 1/4  rouble/dollar in value) 51.59 , the rouble is still the best acting currency this year!!

3m oil into the 57 dollar handle for WTI and 65 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation.  This can spell financial disaster for the rest of the world/China may be forced to do QE!! (last Monday they lowered its RRR it is effectively doing QE)

30  SNB (Swiss National Bank) still intervening again in the markets driving down the SF.  It is not working:  USA/SF this morning 95.68 as the Swiss Franc is still rising against most currencies.  Euro vs SF is 1.0364 well below the floor set by the Swiss Finance Minister.

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

3r the 8 year German bund remains in negative territory with the 10 year close to negativity at +.146/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s Last week the ECB increased the ELA to Greece  by another large 1.5 billion euros.  The new maximum is 75.5 billion euros.  The ELA is used to replace depositors fleeing the Greek banking system.  The bank runs are increasing exponentially. The ECB is contemplating cutting off the ELA which would be a death sentence to Greece and they are as well considering a 50% haircut to all Greek sovereign collateral which will totally wipe out the entire Gr. banking and financial sector.


3t Greece informally asked the IMF to delay its payment for May 1 and they refused.

3 u. With the big meeting in Riga a failure on Friday,sheer anger developed between the Finance Ministers and the Greek contingent. There was no substance in the meetings to suggest that Greece was going to reform. Greece will not reform its public pensions.

If the ECB cuts off Greece’s ELA they would have very little money left to function.

4.  USA 10 year treasury bond at 1.92% early this morning. Thirty year rate well below 3% at 2.62%/yield curve flatten/foreshadowing recession.


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



(courtesy zero hedge/Jim Reid Deutsche bank)




Equity Futures At Session Highs Following Chinese QE Hints; Europe Lags On Greek Jitters

It has been a story of two markets so far, with China’s Shanghai Composite up another 3% in today’s continuation of the most ridiculous, banana-stand driven move of the New Normal (and there have been many ridiculous moves in the past 6 years) on the previously reported hints that the PBOC is gearing up to start its own QE, while Europe and the Eurostoxx are lagging, if only for the time being until Citadel and Virtu engage in today’s preapproved risk-on momentum ignition, on Greek jitters, the same jitters that last week were “fixed”and sent Greek stocks and bonds soaring. Needless to say, neither Greek bonds nor stocks aren’t soaring following what has been the worst weeked for Greece in months.

As for US futures, just keep a track of the increase in the USDJPY once the math PhDs wake up and activate their Yen correlation algos: that’s all you need to know if the S&P will hit another all time high, with GAAP EPS now solidly above 21x. At last check, futs were up 0.2%, at the highs of the overnight session.  Expect the now standard zero volume levitation ramp as the Fed now seems to have moved to 2200 on the S&P as its next “fair value” target.

A more detailed look at Asia shows equities mostly rose led by Chinese bourses with both Shanghai Comp (+3%) and Hang Seng (+1.4%) extending last week’s gains to touch fresh 7yr highs. The latter was lifted by financials after HSBC (+5%) surged on news of a planned GBP 20bln spin-off. Talk also did the rounds overnight that the PBoC could consider a QE programme, although a PBoC economist has stated that China does not need strong stimulus. ASX 200 (+0.7%) neared 6,000 amid strength in miners with iron ore technically in a bull market, after gaining over 20% since April 2nd. Nikkei 225 (-0.2%) bucked the overall trend after falling below 20,000 amid profit taking, ahead of Thursday’s BoJ meeting.

Japan cut to `A` from `A+` by Fitch, Outlook stable with Fitch citing insufficient fiscal measures in the FY budget in replacement of a deferred rise in consumption tax.

Despite European equities opening higher, markets reside in negative territory with participants now focusing on Greece, due in part to the today’s light economic calendar. In stock specific news, Deutsche Bank is the worst performing stock in Europe after reporting earnings and adding that profits were negatively impacted by litigation fees of USD 1.5bln with its CFO warning over heavy litigation before the end of 2015. Elsewhere, Volkswagen are among the leading gainers in Europe after Chairman Piech was dismissed consequently ending the boardroom rift in the DAX heavyweight which has taken focus in recent weeks.

Bunds have edged higher alongside UST’s with dampened sentiment emanating throughout the Eurozone on Greek worries after Friday’s disappointing meeting in Riga, while this week provides substantial increase in redemptions at around EUR 65bln. This week also sees supply in the Eurozone move back to a more typical figure of EUR 13bln from the modest EUR 2.8bln last week as Italy kicked off proceedings today when they came to market with a CTZ and two inflation-linked offerings.

The USD index sits comfortably above 97.00 with mild weakness observed in EUR and GBP with political uncertainty continuing to take hold. Separately, rumours surrounding that the PBoC could conduct a QE programme has resulted in CNY set for its largest fall since late February against the USD with short covering in USD/CNY citing Asian trading sources as the economy attempts to combat stifling growth. Volatility was observed in USD/JPY after Fitch downgraded Japan which saw the pair spike higher by 27 pips above 119.40, only to pare those all of those gains. Of note, the BoJ rate decision is scheduled on Thursday.

WTI and Brent crude futures erased its earlier gains with the USD exhibiting strength heading into the North American crossover as Brent falls below its 65.00 handle. Spot gold retraced some of Friday’s losses after US stocks reached fresh record highs with concern over Greece aiding the yellow metal. Furthermore, precious metals remain tentative ahead of Wednesday’s FOMC meeting.

Bulletin headline summary from RanSquawk and Bloomberg

  • Market focus turns to Greek uncertainty, due in part to today’s light economic calendar thus weighing on European equities
  • Looking ahead sees the release of US Services PMI and large cap earnings after-market including the world’s largest company Apple
  • Treasuries steady before week’s auctions begin with $26b 2Y notes, WI yield 0.54% vs 0.598% in March; 10Y yields have spent nearly a month spent between 1.800% and 2.01% as weaker-than-forecast eco reports call timing of Fed liftoff into question; FOMC statement due Wednesday.
  • Greece is counting on deposits of local governments, cities and other funds to meet end-of month payments of over EU1.5b ($1.6b) after euro area finance ministers on Friday said they won’t disburse more aid until bailout terms are met
  • The PBOC is discussing adopting unconventional policies to rebuild its balance sheet and reinvigorate economy, including making direct purchases of local government bonds from market, MNI reports, citing unidentified people
  • China may cut the number of centrally administered SOEs to 40 from the current 112 through mergers and restructuring, the Economic Information Daily reported
  • As authorities show a newfound tolerance for defaults and debt levels at Shanghai Composite Index members climb to all-time highs, Chinese companies are increasingly tapping the equity market for funds to pay down liabilities and invest in growth
  • Fitch lowered Japan’s sovereign-credit rating to A from A+, citing a lack of steps by the government to offset effects from a delayed sales-tax increase
  • Japan’s central bank appears to be wavering in its commitment to QE, said Kozo Yamamoto, an adviser to Prime Minister Shinzo Abe and advocate of reflationary policies
  • The Bank of Japan shouldn’t expand monetary stimulus, as such a move would fail to spur growth and make prospects for an eventual exit from the policy harder, the new head of a business lobby said
  • India’s smallest capital infusion for state banks since 2009 should boost corporate bond sales as lenders have less room to fund businesses, ratings companies say
  • Hopes for finding survivors trapped under rubble began to fade 48 hours after Nepal’s worst earthquake in decades even as rescuers ferried scores of climbers trapped on Mount Everest to safety
  • Sovereign bond yields mostly lower. Asian stocks decline, European stocks fall, U.S. equity-index futures rise. Crude oil lower, gold and copper gain


DB’s Jim Reid concludes the overnight recap


Q1 US GDP and the April FOMC are two of the key events this week. With regards to GDP (Wednesday), consensus is at 1% YoY with DB lowering its forecast to 0.7% from 1.7% following the weaker-than-expected core durable goods shipments and inventory figures. The ‘trendy’ Atlanta Fed GDPNow is currently at 0.1% and has been below 1% since early March, well ahead of the street. Assuming a weak reading, the bulls will point to the weather impact, the West Coast port disruptions and the recent strange pattern of weak Q1s relative to the rest of the year. The bears will suggest the dollar and a sluggish global economy is having an impact and that the secular stagnation theory is still alive. We continue to have sympathy for the latter arguments but it wouldn’t be a surprise to see some bounce in the data as Q2 progresses which may be as confusing to the market as weak data has been in Q1. Trying to assess the trend will be tough for several weeks if not months. This could cause volatility as the market over-interprets the real-time data.

How the Fed interprets this will be far more important though and this week’s low key FOMC meeting (Wednesday conclusion) will be interesting in so far as how much they acknowledge weak Q1 growth and inflation and how confident they are that its temporary. There is no press conference or economic update, just a statement.

Moving on to markets, the Asian session is faring pretty well overnight with key equity benchmarks higher across the board. Greater China markets are leading the gains as we type with Hong Kong and Shanghai up +1.3% and +1.8%, respectively. Asia credit spreads are holding firm overnight and are not really being affected by developments around the first SOE default in China. There are some new developments on the story though as Caixin reported that Baoding Tianwei will get loans from China Construction Bank to repay the CNY85.5m missed coupon after co-ordination by the PBOC. CCB is said to be the underwriter and creditor of the bonds. Staying in China, the MNI overnight reported that the PBOC is discussing adopting unconventional policies to rebuild balance sheet and reinvigorate the economy, including market direct purchases of local government bonds from the market. Sounds a bit like QE to us! Finally in overnight terms, the EUR is fairly stable at around 1.085 against the Dollar despite stalled Greek negotiations over the weekend.

In terms of the latest on Greece key EU stakeholders are still in a deadlock after the meeting at Riga last Friday. Indeed there are also signs that Greek finance minister Yanis Varoufakis is increasingly being isolated both in Brussels and in Athens which has prompted officials to bypass the finance minister in upcoming debt talks. Merkel and Tsipras agreed on a phone call on Sunday to maintain contact during talks in order to reach a debt deal and the tone of the call was apparently positive. Negotiations are said to resume today over a call and the leaders will also meet in person on Wednesday. Separately the Bild has reported that Tsipras tried to convince Merkel and Dijsselbloem to hold an EU emergency summit this week so still plenty of Greek headlines to come.

With month-end approaching Greece is faced with payments of over EUR1.5bn in pensions and salaries. Bloomberg has said that Greece will use the deposits of local governments, cities and other funds to meet them. Greek deputy Finance Minister last week said that the country is about EUR400m short of the amount needed for meeting salaries and pension obligations. Beyond that there is also EUR201m of interest payment due on its IMF loan on 6th May and a principal repayment of EUR766m due on the 12th May (ekathimerini). Recent local polls are showing that a majority of Greeks are concerned about a sovereign default and if talks over a new deal fail the government would consider the options of snap elections or a referendum according to the deputy Prime Minister (Bloomberg). Greek 10yr bond yields were up 40bps on Friday to around 12.7%.

Taking a quick look at Friday’s trading session we saw the S&P 500 (+0.23%) and NASDAQ (+0.71%) close at record highs. For the S&P 500, Friday’s strength was led by Consumer Discretionary (+1.3%), IT (+1.0%), Utilities (+1.0%) and Materials (+0.8%). Good corporate earnings were said to be a key driver behind the rally. Interestingly the risk-on tone failed to deter buyers of Treasuries with the 10yr yield closing 5bps lower at 1.909% on weak data. The headline durable goods orders for March rose 4.0% but the core report was weak once we adjusted for the stronger aircraft orders. The February numbers were also marked down materially. Nondefense capital goods orders were down -0.5% mom after a downward revision to February from -1.4% to -2.2%. The Dollar fell again on Friday to round off its second consecutive weekly decline.

Speaking of corporate earnings, we do have a very busy week of company results ahead in the US with over 160 firms (or 31% of the S&P 500’s market cap) lined up for Q1 announcements. We’ll highlight some of the key earnings to watch later, but first let’s take a quick look at the performance so far. About two weeks into the earnings season, we’ve seen over 180 companies release their Q1 results. So far the beat/miss ratio has been fairly strong for earnings but fairly disappointing for sales. Indeed just over three quarters of US firms have exceeded consensus EPS estimates but just less than half of those have beaten sales forecasts. Lower sales beats (relative to EPS) have been a familiar sight in a post crisis world but the current run rate is still lower than the average beat of 59% since 2010. Things are quite different on the other side of the pond with more sales revenue beats than EPS beats. It is still early days for European earnings but two thirds of firms have come ahead of analysts’ sales target whereas only around 56% have managed to do the same for earnings.




Monday morning: Fitch downgrades Japan and the yen rises.  Go figure!!

(courtesy zero hedge)


Fitch Downgrades Japan To A From A+

With the USDJPY’s ascent to 125, 150 and higher having seemingly stalled just under 120, with concerns that the BOJ may not monetize more than 100% of its net debt issuance suddenly surfacing, the BOJ and the Nikkei would take any help they could get. They got just that an hour ago when Fitch downgraded Japan’s credit rating from A+ to A, citing lack of sufficient structural fiscal measures in FY15 budget to replace deferred consumption tax increase. 

But don’t panic, Fitch says: it expects Japan’s gross debt to GDP ratio to “stabilize around 250% of GDP in 2020.” Perhaps the fact that Fitch did not predict the complete collapse of the Japanese economy is why the USDJPY spiked then promptly reversed and is trading almost unchanged, the same as Nikkei futures.

See, if Fitch had predicted a stabilization level of 2,500%, then Japanese stocks would be limit up today. Because remember: in the New Normal, only a completely socio-economic collapse and terminal currency devaluation leads to limit up in regional stock markets.

As to what really prompted the downgrade, which the BOJ was hoping would lead to a far more negative reaction for the JPY, here it is:

Full Fitch note:

Fitch Ratings-Hong Kong-27 April 2015: Fitch Ratings has downgraded Japan’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘A’ from ‘A+’.

  •  The issue ratings on Japan’s senior unsecured foreign and local currency bonds are also downgraded to ‘A’ from ‘A+’.
  • The Outlooks on the Long-Term IDRs are Stable.
  • The Country Ceiling is downgraded to ‘AA’ from ‘AA+’ and the Short-Term Foreign Currency IDR is downgraded to ‘F1’ from ‘F1+’.


The downgrade of Japan’s IDRs reflects the following key rating drivers:-

  • Fitch’s downgrade reflects the fact that the Japanese government did not include sufficient structural fiscal measures in its budget for the fiscal year April 2015-March 2016 (FY15) to replace a deferred consumption tax increase. The agency had placed Japan’s IDRs on Rating Watch Negative on 9 December 2014 following the government’s decision to delay the scheduled consumption tax increase that was the centrepiece of its medium-term fiscal consolidation effort. At that time, Fitch said the ratings would be downgraded in the absence of broadly equivalent fiscal measures to replace the deferred consumption tax increase in the FY15 budget.
  • The FY15 budget cut corporate tax rates, although the base was broadened, making the measure’s impact broadly neutral overall. However, the government has said it wants to cut corporate tax rates again in FY16. The government also introduced a supplementary budget for FY14 in January 2015 that essentially spent an unexpected increase in revenue. These developments increase Fitch’s uncertainty over the degree of political commitment to fiscal consolidation. The government is set to unveil a new fiscal strategy in the summer of 2015. The details of the strategy will be important, but the strength of the government’s commitment to implement it will be even more important and will only become clearer over time.
  • The government may still achieve its interim fiscal target of a 3.3% of GDP primary budget deficit (excluding earthquake reconstruction spending) in FY15. Corporate tax receipts are rising strongly, despite the rate cut, driven by buoyant corporate profits. High dividend payments are also boosting personal income tax receipts. The government expects these items, together with the lagged effect of the 2014 consumption tax hike, to generate about 0.6% of GDP in additional revenue in FY15. However, corporate profits are being boosted partly by the 8% trade-weighted depreciation of the Japanese yen in the twelve months to end-March 2015. This is unlikely to be sustainable. Pressure on the budget could rise in FY16 if corporate profits fell back.
  • Japan’s main sovereign credit and rating weakness is the high and rising level of government debt. Fitch projects the gross general government (GG) debt to GDP ratio to rise to 244% of GDP by end-2015, by far the highest ratio of any rated sovereign. The Japanese sovereign also has a large stock of assets. The GG held financial assets worth 113% of GDP at end-2014, including foreign reserves worth about 27% of GDP. However, the agency focuses on gross indebtedness in assessing sovereign solvency, as described in our sovereign rating criteria. Japan’s net GG financial liabilities are still the highest in the OECD (143% of GDP at end-2014). The rise in Japan’s net GG financial liability ratio (62pp) over the period 2007-2014 was the second-highest in the OECD behind Ireland (83pp), suggesting the net position is also deteriorating relatively rapidly.
  • Japan’s gross GG debt to GDP ratio is projected to stabilise around 250% of GDP in 2020 under Fitch’s baseline fiscal projection.However, Fitch’s analysis indicates that the debt dynamics are highly vulnerable to variations in parameters such as economic growth, the budget deficit, or yields. This vulnerability is a negative factor for the ratings.
  • The Japanese sovereign’s exceptionally strong financing flexibility supports the ratings, despite weaknesses and vulnerabilities elsewhere in the public finances. The ten-year Japanese government bond (JGB) yield has averaged 0.34% year-to-date (as of 23 April 2015), down from 0.55% in 2014. The average maturity of the JGB stock has gradually lengthened to 7 years and 10 months by December 2014, from 5 years and 1 month in March 2005.
  • Sovereign funding flexibility rests mainly on the massive stock of savings of the Japanese private sector and the strong “home bias” with which these savings are invested. The Japanese domestic non-financial sector had 689% of GDP in assets at end-2014, up from 564% at end-2008. The Japanese household sector ran a financial surplus of 4.2% of GDP in 2014, above the five-year average of 3.8%. About half of the JGB stock is held in the broader public sector, which reduces the possibility of a self-fulfilling loss of confidence in the JGB market.
  • High private-sector savings also support the external finances, which are a credit strength. The sovereign had USD1.26trn in foreign reserves at end-2014, underpinning a net sovereign foreign-currency creditor position worth 29% of GDP at end-2014, stronger than the ‘A’ or ‘AA’ medians. Fitch projects the Japanese economy as a whole to hold a net creditor position in debt-like assets worth about 76% of GDP by end-2015. The overall international investment position recorded net assets worth about 66% of GDP by end-September 2014 (latest available), up from 33% at end-2005.
  • Sovereign financing flexibility is currently being supported by the Bank of Japan’s (BoJ’s) quantitative and qualitative easing policies. The BoJ’s holdings of government securities rose to 27.3% of the stock at end-March 2015, from 12.1% at end-2012 (according to BoJ data). The role of the BoJ as supplier of a global reserve currency endows Japan with exceptional policy flexibility and supports the sovereign’s funding position. These factors are strengths in the credit profile. However, the BoJ will face a challenge in eventually unwinding the expansion of its balance sheet without triggering a sharp rise in financial-market volatility.
  • Japan’s macroeconomic performance is a rating weakness. Fitch cut its forecast for 2015 growth to 1.3% in March 2015 from 1.5% in December 2014, driven by the weaker-than-expected recovery in domestic demand following the April 2014 consumption tax hike. The five-year-average growth rate (2011-2015) of 0.8% is well below the medians for the ‘A’ range (3.1%) or for the Organisation for Economic Co-operation and Development group of richer countries (1.6%). Inflation excluding the effects of the April 2014 consumption tax hike was around zero in February. Prospects for success in permanently lifting the economy’s real and nominal GDP growth rates remain in doubt, two years after the launch of “Abenomics”. Progress on growth-enhancing structural reform remains limited.
  • Japan’s ratings are supported by strong credit fundamentals including a high-income, wealthy economy; high governance standards; strong core public institutions; and deeply-entrenched social and political stability.


The Stable Outlooks reflect Fitch’s assessment that upside and downside risks to the ratings are currently broadly balanced.

  • The main factors that could, individually or collectively, lead to a negative rating action are:
  • Evidence that the authorities’ commitment to fiscal consolidation was weakening, such as failure to articulate a clear and credible strategy for stabilising public debt ratios, or slippage relative to targets
  • Weaker macroeconomic performance than Fitch expects for a sustained period, intensifying the challenge in stabilising the public finances
  • A sharp and sustained rise in real interest rates demanded by investors to hold government debt

The main factors that could, individually or collectively, lead to a positive rating action, are:

  • Stabilisation of public debt ratios; growing confidence that public indebtedness could achieve a sustainable downwards path that was reasonably robust to cyclical economic volatility
  • Sustained and broad-based economic recovery, including acceleration in nominal GDP growth


Fitch assumes that the confidence of the Japanese public in the country’s basic economic and financial stability is maintained, such that the Japanese sovereign’s exceptional funding flexibility remains intact

Fitch further assumes that there is no significant escalation of global or regional geopolitical risks, for example Japan’s maritime territorial disputes with China, to a level that could disrupt economic activity




The big story of the day:  China is now considering to launch its own QE.  That sent gold/silver flying!!

(courtesy zero hedge)

China Considers Launching QE; Shanghai Stocks Soar

Nearly two months ago we explained “How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable” in which we cited Cornerstone who reminded us “that from 2007 to late 2008, U.S. fed funds dropped 500 bp, and then the Fed still needed to do QE? The backdrop for China looks a bit similar. We had a credit bubble, they have a credit bubble. We had a housing bubble, they have a housing/investment bubble. Will China eventually have to go down the same path as the U.S., and the Eurozone? … The PBoC will first cut rates to 0%, before contemplating QE.”

To this we added that “once China, that final quasi-Western nation, proceeds to engage in outright monetization of its debt, then and only then will the terminal phase of the global currency wars start: a phase which will, because global economic growth and that all important lifeblood of a globalized economy – trade – at that point will be zero if not negatve, will see an unprecedented crescendo of money printing by absolutely everyone, before coordinated devaluations mutate into uncoordinated, and when central bank actions morph from “all for one” to “each man for himself.

We may not have long to wait because just hours ago, MarketNews first among the wire services hinted at what we suggested was the endgame.


Bloomberg adds more, citing MNI as saying that the Chinese central bank discussing “adopting unconventional policies to rebuild its balance sheet and reinvigorate economy, including making direct purchases of local government bonds from market.”

Of just as we predicted.

MNI continues that “although wide range of possibilities tabled about how PBOC operations could change,common thread of discussion involves need to expand balance sheet to ensure supply of liquidity meets economy’s demands, report says.”

In other words, China is about to engage in the biggest QE of them all, and drown the world with exported deflation as the global supply glut which we explained yesterday, hits unprecedented levels and ultimately leads to the biggest inventory dumping phase in global history which central bankers will have no choice but to offset with Friedman’s infamous “helicopter drop” of money, finally leading to the terminal phase for fiat currencies.

MNI continues:

PBOC discussed quantitative easing, which would tie in with aim of having local governments sell CNY1t in bonds this year to lower interest costs, mitigating systemic risk and boosting economies at local level.


PBOC could buy assets directly from the banks, freeing them up to purchase local government bonds, or buy local government bonds directly from the market, according to sources who have been briefed on discussions.


Unlike reserve-requirement cuts, which involve funding already in PBOC accounts,these operations would expand bank’s balance sheet, helping it to counter impact of sustained capital outflows.

Because apparently $22 trillion in global central bank assets is not enough to show the world’s Keynesians, who are now eager to push the world to war just to avoid being proven wrong, that QE does not work.

To be sure others promptly jumped on the report: according to Shanghai Pudong Development Bank, the “possibility exists for PBOC to adopt unconventional policy such as bond purchases as onshore commercial banks may have limited appetite for such notes.”

Move will help fund infrastructure projects more smoothly at a time when growth is slowing, Shanghai-based senior analyst Cao Yang says, adding that the Yuan will continue to be stabilized as authorities keen to promote currency internationalization

And while no decision has been made and China is clearly unsure if this is the correct policy…


… the market has already made up its mind, with the Yuan falling 0.14%, set for biggest drop since March 23, to 6.2036 per dollar, while the Shanghai Composite was up 3% in overnight trading, rising above 4,500 for the first time since the last financial crisis, and up 40%since we first predicted in the beginning of March precisely what the Chinese endgame is.



And now major events with respect to Greece:

Saturday morning:


If Greece is to increase the amount of Greek bank collateral that the Bank of Greece holds on behalf of the ECB for their swap loans for euros, then the game is over. Greece has a trump card and that is Vladimir Putin and the Blue Stream pipeline.  If Greece turns towards Moscow, the event will be a game changer.

(courtesy zero hedge)



Germany Prepares For “Plan B”, Says Greece Would “Need Not Only A Third Bailout, But Fourth, Fifth Or Even More”

It has been a very disturbing 24 hours for Greece.

It all started during yesterday’s surprisingly short, just one hour long Eurozone finmin meeting in Riga, where Yanis Varoufakis not only got the most “hostile” reception yet being called “a time-waster, gambler, and amateur“, but for the first time one minister openly said that maybe it was time governments prepared for the plan B of a Greek default. This happened after Jeroen Dijsselbloem slammed the door on Varoufakis’ proposal for early cash after partial reforms.

“A comprehensive and detailed list of reforms is needed,” Dijsselbloem told a news conference following a meeting in Riga. “A comprehensive deal is necessary before any disbursement can take place … We are all aware that time is running out.”

And so, what was once anathema, namely the official hints that a Grexit is being contemplated at the highest ranks, has now become almost commonplace, courtesy of the backstop provided by the ECB’s QE, which has lulled everyone into a sense of calm because somehow the hope has been kindled that the ECB (which is rapidly running out of government bonds to buy) can offset the realization that what was once an “unbreakable union” is suddenly not only breakable, but no longer a union. As such the trillions in deposit outflows that will sweep the periphery are somehow to be ignored because, well, “Draghi.”

This continued earlier today, when none other than German Finance Minister Schaeuble hinted that Berlin was preparing for a possible Greek default, drawing a parallel with the secrecy of German reunification plans in 1989.

As Reuters reports, at a briefing with reporters after a tense meeting of euro zone finance ministers on Greece on Friday, Schaeuble was asked if euro zone finance ministers were working on a “Plan B” in case negotiations on funding with cash-strapped Athens fail.

“You shouldn’t ask responsible politicians about alternatives,” Schaeuble answered, adding one only need to use one’s imagination to envisage what could happen.

He indicated that if he were to answer in the affirmative that ministers were working on a Plan B — what to do when Greece runs out of money and cannot pay back its debt — he could trigger panic.


To explain his position, he drew a parallel with the secrecy that was necessary during the initial stage of planning for German reunification in 1989.


“If back then a minister in charge — I was one of them — would have said beforehand, we have a plan for reunification, then the whole world probably would have said: ‘The Germans have gone completely crazy.'”

He is correct, but what is left unsaid is that the mere suggestion that Grexit no longer not being contemplated is a major escalation in Europe’s attempts to launch a bank run, which they have done an admirable job at so far, leading to more than half of total Greek deposits being funded by the ECB’s ELA as of this moment.

In other words, should the ECB boost the haircut on Greek bank collateral, and both a depositor bail-in and capital controls become inevitable.

Which incidentally, is what was also touched upon today, when the head of the Bundesbank and ECB governing council member Jens Weidmann said at a press conference in Riga, Latvia, that officials will discuss haircuts on collateral for emergency funding for Greek banks.

“As you know I have doubts about the provision of this emergency liquidity, because the banks are not doing all they can to improve their liquidity position, which I would expect from banks that avail of this assistance.”


Instead, they are extending their loans — so-called T-bills — to the Greek state, which is each time a new credit decision. As these T-bills aren’t liquid, this means that in comparision with the alternatives, this is a deterioration of the liquidity situation which I find unacceptable.”


“The haircuts are designed according to the quality of the collateral — which in this case is mostly government debt securities — and that depends on the  outlook for debt sustainability which is connected to a successful conclusion of the aid program.”


“From my point of view it is clear: time is running out, the solution cannot come from the central banks, we have a clearly limited task, a clearly limited mandate, and must abide by our rules.”

He, too, is of course correct, and yet his statement is also quite hypocritical, considering it is precisely the check-kiting scheme that Greek banks are engaged in and which the ECB “suddenly” finds objectionably, that has been the norm across Italy, Spain and Portugal for years: all countries whose reform efforst are laughable, and the only reason they haven’t imploded in the same pile of rubble as Greece is because the ECB has remained ss a buyer of last resort of their sovereign debt.

For now: because should Podemos or Beppe Grillo take charge in Spain or Italy, all bets are off, and the Greek “contagion”, which is really just the realization that there is no ECB bid into insolvent paper, will spread overnight.

Which brings us to the final reason why it has been a very nerve-wracking 24 hours for Greece.

In an interview with Bild, Mark Hauptmann, a lawmaker from German Chancellor Angela Merkel’s political party said that “if Greece stays in the euro, it will need not only a third bailout, but also a fourth, fifth or even more.”

He added that a Greek euro exit would be good in the long term because European contracts would regain their validity and Greece could regain its competitiveness.

He, too is correct.

Still, even with three “correct” statements laying out clearly why Greece should Grexit, somehow we doubt that anything will happen even as the posturing on all sides reaches a fever pitch, because while Europe may have Q€ as recourse to a Greek contagion, Greece now has a Putin threat as its final trump card. Because the second Greece is kicked out (or is forced to leave), the construction of the Turkish Stream begins, and with it the cementing of Russian energy dominance for the next decade, as well as the collapse of Ukraine (and the billions of western aid flowing into Kiev over the past year) into irrelevance.

Sunday morning; now Goldman Sachs is very worried on a Greek default.  It is now becoming more difficult to predict how negative the market reaction will be to a GREXIT:
(courtesy zero hedge)

Goldman Gets Cold Feet:”It Is Difficult To Predict How Negative The Market Reaction To Grexit Would Be”

On Friday, courtesy of Bloomberg, we showed a very detailed Greek repayment schedule which laid out just how difficult the next few months will be for the bankrupt, in the words of its finance minister, country.

Below is a far simpler calendar this time courtesy of Goldman, which nonetheless captures vividly why Goldman thinks that “the ride over the next several weeks is likely to be bumpy.”

Some more details on how Goldman, which as a reminder aided and abetted the Greek entry into the Eurozone by masking its unacceptably large budget deficit as well as its non-compliant debt/GDP ratio over a decade ago and whose former partner now is in charge of the ECB and is threatening with causing a terminal bank run in Greece any day now, sees the Greek calendar over the next three months, and why for Greece, now July 20 is the “hard deadline.

We believe negotiations could drag on likely through May and possibly into June. A ‘hard’ deadline could be July 20, when Greece faces a payment of €3.6 bn to the ECB, for which, we think, the country will not have sufficient cash. Exhibit 5 shows the timeline of cash disbursements Greece faces until August and the scheduled meetings of European policymakers. Peripheral spread volatility is likely to increase as time goes by, as investors will associate a higher probability of default to a higher probability of Grexit, although this association will depend on what conditions have led to the credit event.

We believe that peripheral markets would sell-off as the July 20 deadline approaches but, as long as the dialogue is still ongoing, spreads between Italy and Spain versus Germany are unlikely to widen more than to around 200-250bp. The tightening trend would resume upon Greece and its creditors finding a solution on the pace of reforms, how to fill the new funding gap and, eventually, also how to reduce the debt stock.

As a follow up, Goldman asks “where do peripheral bonds trade in the case of a Grexit.” Here is its answer.

If Greece defaults on the official sector and negotiations were to break down leading to Grexit, instead, we would view this as a systemic event for markets. On its occurrence, we believe peripheral bond yields spreads to ‘core’ would widen significantly. Yield curves would steepen due to the possibility that an activation of OMT would skew the ECB bonds’ purchases toward short-dated maturities. The length and size of the sell-off would depend on how long it would take for policymakers to respond to the shock.

Respond to the shock? As in threaten to buy even more bonds which the ECB can’t procure, and cause a terminal liquidity crisis across the entire fixed income market? We thought the launch of Q€ was precisely the pre-emptive response to the “shock”- or is Goldman hinting that the ECB’s monetization of debt will be insufficient to keep Europe in a state of orderly insolvency? Of course, the ECB can always threaten to buy even more debt, although at this point not even tenured economists believe that this leads to any economic improvements.

During the Euro-area sovereign crisis, the spread between 10-year Bonos-Bunds and BTPs-Bunds peaked at 470bp and 512bp, respectively. This time around, the Euro area is better equipped to react to a large negative shock via the ESM and OMT and the ECB QE should provide a first line of defense. Also, in the periphery, a larger share of sovereign debt is now held by domestics,which should reduce the probability of a very sharp sell-off. Finally, economic activity is picking up and, after the fall-out post Greece’s debt restructuring in 2012, policymakers should be more aware of the negative consequences that a ‘credit crunch’ would have on the real economy, speeding-up their policy response. All this said, we think that, at the 10-year tenor, the spread between Spanish and Italian bonds yield versus Bunds yield could still widen to around 350-400bp before a policy response is enacted. We stress that the departure of a country from the ‘irrevocable’ monetary arrangements of the EMU would take us into unchartered waters and it is difficult to predict how negative the market reaction could be.

Needless to say if anyone knows whether Greece is “in” or “out”, it’s Goldman. Oh, and by now we hope it is all too clear which outcome Goldman and its banking peers would prefer: the one where the ECB doesn’t do more monetization of risk assets, or the one where it does…





Now we have finger pointing as to who is to blame for Greece going under!!

(courtesy zero hedge)

Greek Blame Game: At Whom Will History Point The Finger?

Greek Blame Game: At Whom Will History Point The Finger?

Will they default or will they not? Are they out of cash or can they scrape together another half billion by tapping some heretofore untouched pocket of the public purse? Did they just institute capital controls? Because that’s what it looks like. What was Varoufakis thinking? Is an advance from Gazprom on the way?

These are just of few of the many questions which seem to get asked and re-asked on an almost daily basis as the crisis in Greece plays out like a slow motion car crash that no one can take their eyes off of even though everyone (the market, the creditors, Athens … everyone) is exhausted, exasperated (“Gratigue” maybe?), and ready for some manner of resolution. Unfortunately, as Citi noted last week, the most scenario will be a kind of euro purgatory characterized by capital controls, defaults, and prolonged pain and suffering for the populace. This state of affairs is known as “Grimbo,” and as Reuters notes, no one involved in the ordeal wants history to remember them as the villain. Here’s more:

The game of chicken between Greece and its international creditors is turning into a vicious blame game as Athens lurches closer to bankruptcy with no cash-for-reform agreement in sight.

Europe’s political leaders and central bankers and Greek politicians agree on only one thing: if Greece goes down, they don’t want their fingerprints on the murder weapon…

Greece’s leftist government has already identified its culprit of choice – Germany, Europe’s main paymaster, accused of having inflicted toxic austerity policies on Greeks, causing a “humanitarian crisis”.

Euro zone governments are preparing the ground to blame the novice government of Prime Minister Alexis Tsipras for having blustered, obstructed, failed to meet commitments and evaded hard choices while Athens burned.

“We are doing everything we can to save Greece from itself, but in the end, it’s up to them,” is the message pouring out of Berlin, Brussels and IMF headquarters in Washington.

And then there’s FinMin Yanis Varoufakis who, over the past three months, has put together a SportsCenter-like highlight reel of what he would likely call “kerfuffles” including a speech wherein he references “sticking the finger” to Germany, a very unaustere ParisMatch photoshoot, and a performance at the negotiating table in Riga on Friday that led his peers to describe him as an amateurish time-wasting gambler.

In Varoufakis’ narrative, euro zone countries did not lend all that money to save Greece in the first place but to protect their own banks, which had imprudently lent Athens billions.


Varoufakis has widened the circle of blame to the ECB, accusing it of “asphyxiating”Greece by starving its banks of liquidity and severely limiting their short-term lending to the government.


That prompted an indignant response from ECB President Mario Draghi, who told the European Parliament the central bank’s support for Greece amounted to some 110 billion euros, but it was barred by treaty from monetary funding of governments.

It now appears that everyone — including Athens — has grown weary of the Varoufakis narrative because as we reported earlier today, Tsipras looks to have replaced the outspoken FinMin as lead negotiator amid pleas from eurozone officials and complaints about Varoufakis’ tendency to “lecture” his EU counterparts rather than engage in serious discussions about reforms.

Relations between Varoufakis and Mario Draghi are reportedly so icey that the two avoided eye contact at the breakfast buffet in Latvia last week which sets up an interesting situation going forward, because as Mohamed El-Erian observes, the worse the cash situation gets in Greece, the more critical the ECB’s ELA determinations become:

The most potentially decisive discussions will be taking place in a different venue: Decision makers at the European Central Bank’s will hold their weekly consideration of how much “emergency liquidity” they should extend to Greek banks and on what terms.


At its weekly meeting, on April 29, the ECB will be under tremendous pressure to keep Greece on its life support system. But without progress elsewhere, this powerful monetary institution is at risk of joining other actors in the Greek drama that are unintentionally transitioning from being a major part of the solution to a big part of the problem now and in the future…

El-Erian outlines three alternative scenarios, noting that the existing arrangement whereby the central bank strings Greek banks along even as they become ever more dependent on ELA for their very survival is nothing more than an exercise in can-kicking while pulling the proverbial plug would, in short order lead to capital controls and perhaps to “even more draconian steps to gain control of any idle cash balances” (such as freezing small debtors’ accounts perhaps?).

1. Pretend and extend. The ECB, through the Emergency Liquidity Assistance operated by its network of national central banks, would continue to extend exceptional funding to Greece. This would be done under the pretense that it is helping Greece deal with a liquidity problem instead of acknowledging the country’s true predicament, deep economic and solvency deficiencies…


2. Pull the plug. Under this scenario, the ECB … would limit any further financing to Greece, raising not only the legitimate burden-sharing issues but also rightly noting that liquidity support would continue to prove ineffective without accompanying measures to improve growth and financial solvency… If such conditions failed to be met, the ECB decision would likely lead to even greater capital and deposit flight from Greece. And this, under most realistic scenarios, would prompt the Greek government to impose capital controls, default on payments and take even more draconian steps to gain control of any idle cash balances in the country…


3. Pull the plug as part of a comprehensive Plan B. In this case, the ECB’s refusal to extend additional liquidity support would be part of an attempt (albeit a risky one) at an orderly pivot for both the euro zone and Greece. The ECB would seek to minimize the risk of Greekcontagion and disorderly spillovers to other economies (such as Cyprus, Italy, Portugal and Spain) by expanding its funding windows for both governments and financial institutions. It would also step up its large-scale program of security purchases (known as quantitative easing). 

And finally, El-Erian echoes Reuters’, noting that at the end of the day, no one wants to take them blame for a disaster:

One of the big lessons of the last few years is that, regardless of the facts on the ground, no one — whether on the Greek side or among its official national, regional and international creditors — wishes to go down in history as the cause of the first exit from the single currency. 

*  *  *

And speaking of the ECB, ELA, and capital controls, consider the following from HSBC:

“Hard deadline” is July 20, when bond held by ECB comes up for redemption.


If payment isn’t made, ECB would likely have little choice but to declare Greek debt ineligible for ELA as collateral.


Capital controls would then be almost inevitable, while solvency of Greek banks could be called into question.




We now have the beginnings of capital controls as Greece seizes upon bank accounts of citizens who are debtors to the country.  We have many sectors objecting to the government moves this weekend among them mayors of major cities and major universities.  If citizens start to rebel the game is over.
(courtesy zero hedge)

Capital Controls Arrive: Greece Begins Confiscating Deposits Of “Small Debtors”

Last week, the Greek government issued a decree which called for local governments to transfer excess cash to the central bank so that Athens would be able to pay pensions, salaries, and the IMF. The move is expected to raise as much as €2 billion to help keep the country afloat while the country’s “amateurish, time-wasting gambler” of a FinMin feebly attempts to find some kind of middle ground with his EU counterparts and as PM Tsipras pulls out all the stops including the old EU Summit sideline end-around with Merkel and the wild card energy gas pipeline advance from Gazprom (which may portend the dreaded “Russian pivot”).

If the “temporary” local government reserve sweep constitutes what we have brandedsoft” capital controls, we now have the first evidence that the “hard” variety may have arrived because as Kathimerini reports, Greek debtors are having their deposits seized in lieu of payment. Here’s more:

As the country’s finances reach a critical point, tax authorities have started seizing the deposits of small debtors, Kathimerini understands.


No figures were available regarding the new crackdown but cases of debtors targeted included a citizen with a debt of just 200 euros.


The bank account of the man in question was frozen and then reopened once it was established that he had paid his dues. In several cases, including that of a citizen with a debt of 24,000 euros, bailiffs are said to have used threats to secure the cash. The initiative comes as efforts to crack down on rich Greeks with tax debts make slow progress.

So there it is: the first indication that Greeks may soon be Cyprus’d. As a reminder, Citi now says capital controls will likely play a part in whatever the “resolution” (if you want to call it that) to the Greek situation turns out to be, barring a best case scenario outcome which seems exceedingly unlikely. As a reminder, here’s what happens under “Grimbo“:

In theory a run on banks could trigger capital controls tomorrow. 


The lack of an agreement would also at some point be associated with capital controls and binding limits on ELA access (ZH: the writing is already on the wall for ELA restrictions as well). Compared to the previous scenario, the capital controls (a mix of bank holidays, deposit withdrawal restrictions, restrictions on external transactions) are likely to be more extensive and longer-lived…

Meanwhile, not every local governor is particularly enthusiastic about turning over reserves to the state. Here’s Kathimerini again:

But many local authority leaders stood their ground.


The mayor of Aristoteli in Halkidiki, northern Greece, resigned late on Friday, citing personal reasons.


According to the controversial decree, local authority reserves will be used to “cover
the state’s urgent needs, amounting to 3 billion euros over the next 15 days.” 
The motion passed with 156 votes from coalition MPs following a furious session in Parliament on Friday night.


Tsipras is to meet on Tuesday with Attica Governor Rena Dourou, who was on a visit to the US last week.


Last month the Attica Regional Authority donated 80 million euros to the state.


Universities also object to the decree and rectors met on the weekend to discuss their response. Technical college directors are to meet Monday.

If the students become restless, it’s truly all over.




Today, the Greek Finance Minister Varoufakis is being replaced at the negotiating table with the EU:

(courtesy zero hedge)

Under Pressure From Europe, Tsipras Prepares To Show Varoufakis The Door

On Friday, Greece’s embattled FinMin Yanis Varoufakis added to his highlight reel of “kerfuffles” when he put on a performance at the negotiating table in Riga that prompted his peers to describe him as an amateurish time-wasting, gambler. As talks with creditors drag on under the constant threat of a Greek default and a disorderly euro exit, it appears Varoufakis’ antics may have finally gone too far, for as Reuters reports, PM Tsipras looks to have effectively replaced the FinMin as lead negotiator. Here’s more:

Greek Prime Minister Alexis Tsipras on Monday reshuffled his team handling talks with European and IMF lenders, after his finance minister was sharply criticized for his performance at a euro zone meeting last week…


Tsipras and senior aides expressed support for Yanis Varoufakis and agreed the finance minister would supervise a new team negotiating a reforms deal with lenders, but appointed deputy Foreign Minister Euclid Tsakalotos as coordinator of the group, a government official said.


The appointment suggested Tsakalatos, an Oxford-educated economist and professor who is soft-spoken and well-liked by officials representing creditors, would have a more active role in face-to-face talks from now on.

And here are more details via Bloomberg:

Greek representative at Euro Working Group George Chouliarakis will be responsible for Greek delegation in Brussels Group meetings.


General secretary of Greek govt Spyros Sagias will assume coordination of technical work in Athens.


General secretary of finance ministry Nikos Theoharakis will focus on drafting a growth plan for Greek economy, which will be basis for June agreement with creditors.

The move comes on the heels of reports that eurozone negotiators had finally become so exhausted with Varoufakis that they had sought to bypass him altogether after the Greek FinMin apparently adopted a stance so contentious on Friday that talks never even progressed to the point where divisions over reforms could be discussed. Meanwhile, Varoufakis was busy playing the martyr, tweeting out FDR quotes and having dinner by himself. Here’s FT:

Greece’s dire financial position is forcing eurozone authorities to look beyond

Mr Varoufakis to Alexis Tsipras, prime minister, much like in February when Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, brokered an extension of the current bailout programme.


According to two eurozone officials, Mr Dijsselbloem phoned Mr Tsipras from Riga in an effort to mend fences after Friday’s feisty eurogroup meeting, where Mr Varoufakis was rounded on by his eurozone colleagues.


In a sign that Mr Varoufakis’s combative approach is prompting concern in Greece as well, a senior Athens official said the Riga meeting was likely to lead to him being sidelined as Mr Tsipras and his deputy Yannis Dragasakis take a more hands-on role…


Mr Varoufakis shrugged off criticism from his eurozone colleagues, comparing his situation to that of US President Franklin D. Roosevelt as he pushed through the New Deal. “They are unanimous in their hatred for me and I welcome their hatred,” he tweeted.


Some eurozone and Greek officials believe divisions between Mr Varoufakis and Mr Tsipras are deepening and that a concerted appeal to the prime minister could still produce a deal by late May, the time many feel an agreement has to be reached if any aid disbursement can be made before the current bailout expires at the end of June.


“There is an element of cognitive dissonance here,” said one official involved in the talks. “Varoufakis does not comprehend that at the political level one just does not negotiate every item. Other people do that.”

*  *  *

And when it comes to dinner plans, Varoufakis was not interested in joining his fellow European officials at the gala…

As the buses carrying European finance ministers left for a gala dinner in the Latvian capital on Friday night, one of the party hung back at the hotel and then wandered off alone into the dusk.

…because he does not like “boring dinners.”

We suppose that’s a good thing, because it now appears he’ll be invited to a lot less of them.



Late this afternoon: we learn that the union of municipalities have just refused to hand over the supposed 2.5 billion euros to the Central Bank of Greece.  Earlier today, Reuters reports that the total amount that could be transferred or confiscated is not 2.5 billion euros but only 500 million euros.  Thus Greece is broke and does not have the 2.0 billion euros to pay its pensioners on Friday.

very important

(courtesy zero hedge0

Greek Municipal Union Refuses To Hand Over “Confiscated” Cash To Central Bank

A week ago the world and Greece alike were stunned to learn that the financial situation in Athens is so atrocious, the government, through an emergency decree, was forced to not only “borrow” funds from pensioners, but would also confiscate any available cash held by municipal entities such as mayor’s offices, the national opera, the art gallery and even hospitals and kindergartens, in order to make its upcoming payments to the Troika, as well as to help with rolling over debt maturities, of which as a reminder there are many.



The government had hoped this act of desperation would raise up to €2.5 billion in funding, carrying Greece though the end of May, however according to initial media reports the practical limits of this action would lead to at most €500-600 million in new funds raised, not nearly enough to cover the €1 billion in Greek payments due to the IMF in May alone.

Earlier today, while the European markets were caught in the latest myopic buying frenzy resulting from the hope that an imminent termination of Yanis Varoufakis may mean a Greek debt deal is imminent, the Central Union of Municipalities and Communities of Greece (“KEDE”) held a meeting in which it said that while it “declares it support for the national negotiating effort“, it would not transfer any funds to the Bank of Greece.

As Bloomberg confirms, the union said “they won’t transfer cash reserves to Bank of Greece until PM’s promises to them are passed into law, according to statement today on Athens-based body’s website. Govt must also make clear how the Bank of Greece will manage these funds.”

On its website, the Union added that it would consider whether it would change its position on Thursday, May 7, one day ahead of a €1.4 billion T-Bill maturity, and five days ahead of a €760 million payment to the IMF.

Not unexpectedly, the municipalities are less than excited by the prospect of handing over their rainy day slush fund just so the IMF can pay its muppet regime in Ukraine for a few more months. As a result, they have objected to the government’s emergency decree, and have come up with conditions of their own before they hand over the funds (if ever):

the exclusion of compensatory fees from the current law, the exclusion of the municipalities budgets have financial commitments, the assumption by the State’s liability to cover legal issues for payment of clauses or Municipalities responsibilities and Mayors, to clarify the mechanism by which it will be managing our money through the Bank of Greece once submitted, to ensure immediate cash management from commercial banks.

Kathimerini has more:

An attempt by Education Minister Aristides Baltas (photo) to convince rectors to transfer their reserves to a Bank of Greece account and help the central government pay its dues was met with resistance as the rectors insisted on a meeting with Prime Minister Alexis Tsipras to discuss the demand in detail.


The decree, issued last week, obliges all state organizations ranging from local authorities to universities to transfer their cash reserves to the government, noting that the money will earn a generous interest rate and can be returned to the organizations if necessary.


Baltas sought to win over the rectors during an emergency meeting on Monday by promising that funding set aside for research would be exempted from the transfer. But the academics appeared unmoved, insisting on an audience with the premier.


Meanwhile, the country’s secondary school teachers’ union (OLME) lashed out against the government’s attempt to take the reserves of municipalities and regional authorities. It accused the government of “grabbing money” and “instead of providing relief for the the working classes, it uses it to satisfy the needs of creditors.”


* * *


The country’s mayors have been divided over whether to follow suit. Following a long meeting on Monday, Greek mayors agreed not to transfer any cash reserves to the Bank of Greece until certain exemptions that they said Tsipras’s has agreed to have been voted through Parliament.

Long story short, what was originally supposed to be an emergency rainy day fund collection of €2.5 billion will be €0.0 billion instead, at least for the next 10 days, and probably beyond.

Which, in a world where Greece’s obligations to the Troika can not be simply met with a Yanis Varoufakis resignation, means that the latest bout of Greek risk asset optimism will be very short-lived.

Which brings us to the flowchart of the day: what UBS dubs the “likely consequences of non-payment by the Greek government.” It is relevant, because unless Varoufakis can come up with another plan to “confiscate” a few billion from some Greek entity, it is precisely what next steps fore Greece are.


Oh this is not good!!.  China will be fuming as the Senkakus islands will fall under USA protection.  Japan is now going to take more assertive military role in state affairs.

(courtesy zero hedge)


Officials Warn Senkakus Fall Under US Protection; Japan To Take “More Assertive” Military Role

Following meetings with Sec. of State John Kerry, Defense Sec. Ashton Carter, Japanese officials, it appears, have been shown the endgame now that the Keynesian farce is over… As AFP reports, Japan’s military to take on more assertive role, according to Japanese officials as Japan and US bolster their alliance for the first time in 18 years. Noting the alliance “serves as the cornerstone of peace in AsiaPac,” and that the Senkakus will fall under protection of this new treaty, we suspect the Chinese will have more than a few things to say about this.

As AP reports,

The United States and Japan are boosting their defence relationship to allow a greater Japanese role in global military operations with an eye on potential threats from China and North Korea.


Before Japan’s prime minister visits Washington this week, the two countries’ foreign and defence ministers on Monday signed off on revisions to the U.S.-Japan defence guidelines. They are the first changes to the treaty allies’ joint strategy in 18 years. Any changes are subject to security legislation pending in Japan’s parliament.


The revisions boost Japan’s role in missile defence, mine sweeping and ship inspections amid growing Chinese assertiveness. The new arrangements also allow Japan to dispatch its armed forces beyond the region for logistical backup of U.S. military’s global operations, in distant areas including the Middle East.

*  *  *

Bloomberg adds



U.S., Japan announce new alliance guidelines after mtg of U.S. Sec. of State John Kerry, Defense Sec. Ashton Carter and Japanese counterparts Fumio Kishida and Gen Nakatani.


Guidelines for U.S.-Japan Defense Cooperation revised for first time since 1997: joint U.S.-Japan statement


Guidelines enable greater alliance contributions to intl security initiatives including peacekeeping operations, maritime security, logistical support


U.S.-Japan to set up standing alliance coordination mechanism


U.S.-Japan alliance cooperation to be expanded to cover space and cyberspace


Guidelines outline ways to improve alliance response to disaster in Japan or elsewhere


Guidelines describe cooperation on defense equipment and technology, intelligence and information security


U.S.-Japan alliance serves as cornerstone of peace and security in Asia-Pacific


Ministers reaffirm that Senkaku Islands are under Japanese administration and therefore fall under U.S.-Japan Security Treaty

*  *  *

It appears clear this is an indirect jab at China which will likely see a response soon enough.

*  *  *

We leave it to Peter Van Buren (via today’s Reuters Op-Ed) to ask- and answer – how far is Japan willing to go to back the United States?

Japan is weighing whether it needs to be a major military power in the Pacific again, 70 years after World War Two.

Since the end the war, Japan has interacted with its neighbors through the lens of a bilateral relationship with the United States. Japanese domestic politics either benefited from the arrangement (through a lucrative domestic arms industry that caters to the U.S. military) or were subservient to it (by providing military bases). However, a multi-polar East Asia and new homeland pressures are challenging how Prime Minister Shinzo Abe views his loyalty to the United States.

Behind the scenes of the April 28 Obama-Abe White House summit — which will include a state dinner and a congressional address by Abe — the leaders will wrestle with changes in what has been the strongest bilateral relationship in Asia.

Security issues loom over the U.S.-Japan relationship, particularly each country’s stance toward North Korea. The Japanese public believe that Japanese Cold War-era hostages are still alive in North Korea; returning them home is an emotional issue (think American POWs “left-behind” in Vietnam) and has always moderated the country’s stance toward Pyongyang.

Negotiations with North Korea on the issue have been troublesome for Abe, and he has already been pressed to loosen sanctions. The North Koreans are demanding that ferry service between the two nations resume, after Tokyo shut it down in 2006, in part under U.S. pressure. Abe is faced with American desire for harsher rhetoric against Pyongyang, but fearful of jeopardizing progress on the hostage issue.

The implicit understanding of the broader U.S.-Japan security relationship has been that Japan’s “contribution” would be almost completely financial; Japan pays out billions of dollars to support, operate and maintain the American military bases on its own territory, in addition to land grants and sweetheart leases for military bases. In this context, Abe and his predecessors have for years managed domestic friction, particularly on Okinawa, over the expansion of U.S. bases, and that is not expected to be a major issue when he meets Obama.

Washington now wants Abe to agree to a “collective defense” arrangement similar to NATO, which would see Japan strike back at an enemy that attacks the United States. (The inverse has been true for some seven decades.) If Abe goes along with this arrangement, he would place Japan at even greater loggerheads with China and North Korea, making his own nation subject to retaliation in response to American military actions throughout the region.

Abe would also suffer domestically if he consented to the United States’ demands for collective defense. In mid-March Abe’s own Liberal Democratic Party convened a conference during which party members challenged the wisdom and constitutionality of the policy. Even conservatives who welcome American military support if China moves toward any of the disputed islands in the Pacific are wary of being drawn into some greater U.S.-China regional tussle.

Japan’s economic priorities are also at stake. Abe must decide whether to join China’s new Asian Infrastructure Investment Bank (AIIB). The United States has opposed the bank, arguing that it will undermine the World Bank and Asian Development Bank. But the White House failed to keep allies South Korea, Taiwan and Australia from signing on. Only Japan has so far stood aside, at the cost of further weakening its relations with China.

Japan’s business community, seeking access to the funds and the Chinese markets that AIIB membership will provide, turned up the heat on Abe. “The business community woke up late, but now they have mounted a big campaign for the AIIB which appears to be very effective,” Japanese Ambassador to China Masato Kitera told the Financial Times. Abe will have to choose between disappointing the United States or his own business community.

Some Japanese media are stating Japan “has not yet decided” whether or not to join the AIIB, as opposed to a common line just a few months ago that the country gave a firm “no.” There is speculation that Japan may announce its participation in the new bank as early as this summer.

The U.S.-Japan relationship is also being tested over the Trans-Pacific Partnership (TPP), one of the biggest trade deals in history. The White House is pushing Japan to sign on; doing so would provide significantly higher gains for the United States by busting open Asian markets, freeing some 40 percent of American imports and exports from tariff and non-tariff barriers, and thus weakening the economic power of China in the region. Abe is stuck between pressure to uphold the relationship, and angry opposition from Japanese farmers who enjoy high tariff protection and are desperate to keep the country’s markets closed. Without opting out altogether, the only way for Abe to please his constituents is to carve out an exception for Japanese agriculture. This decision, however, would upset other signatories and chip away at the American desire to create a free trade zone in the Pacific.

A departure from the bilateral relationship presents risks for Japan. Not getting along better with China has benefited Abe and his predecessors, and the dysfunctional nature of the relationship has been made easier by American support. For Tokyo, barely acknowledging hyper-sensitive issues involving other Asian countries — such as the Rape of Nanjing in China, and the so-called “Comfort Women” in Korea — has helped keep a small, rotating group of Japanese political elites in power practically uninterrupted for 70 years.

Hyper-conservative voters are a mainstay of support for Abe and his party. These supporters see apologies for World War Two crimes as pandering to the demands of Japan’s Asian neighbors. What outsiders may see as leftover issues from a distant war are red meat to Japan’s conservative voters, and to the powerful corporate heads who support them.

Japan has also benefited from the bilateral relationship by developing a lucrative domestic arms industry that caters to American needs. For example, Japan is building a $1 billion facility for final assembly of Lockheed Martin’s F-35 fighters, and will play a large role in the maintenance of those jets in Asia.

On the U.S. side, America maintains significant military bases across the Japanese archipelago. These facilities served as staging areas during the Cold War, and today help the United States counter China. Japan supports the American position in most international forums (Japan votes with the United States at the United Nations about as often as most European allies), donates cash to development efforts in Afghanistan, and even sent a symbolic clutch of troops into Iraq in 2004.

Navigating these issues may force America to accept less than what it wants out of Japan. Doing so would avoid putting Abe in so many no-win situations that he loses domestic support, and thus becomes ineffectual. Obama would do well to understand this, and to carefully choose which issues to press.

What was once America’s most stable relationship in Asia is moving into the category of “it’s complicated.”

Where spoofing and layering occurred today:
(courtesy zero hedge)

Machines Shift To “Spoofing” Soybeans & Oats Today

Amid too close scrutiny in the equity markets, it appears the “spoofing” machines have turned their attention to the Soybean complex. As Nanex’s Eric Hunsader exposes, a series of 200-lot sell-order-spoofs has sparked a pump-and-dump roundtrip in Soybean futures today. Oat futures have been monkey-hammered down almost 10% today and ripped back higher.

Oats Futures continue to get clubbed (in odd ways according to traders) strongly suggesting more spoofing…

And Soybean futures pump-and-dump…

As machines shift their spoofing attention…

Charts: Bloomberg, @NanexLLC

Your more important currency crosses early Monday morning:


Euro/USA 1.0863 down .0008

USA/JAPAN YEN 119.15 up .327

GBP/USA 1.5161 down .0026

USA/CAN 1.2177 up  .0010

This morning in Europe, the Euro fell a little by 8 basis points, trading now well above the 1.08  level at 1.0863; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war,   and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 33 basis points and trading well below the 120 level to 119.15 yen to the dollar.

The pound was well down this morning as it now trades just above the 1.51 level at 1.5161  ( still 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 down by 10 basis points at 1.2177 to the dollar

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 rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc.  This has partly blown up (see  Hypo bank failure). Swiss franc is now 1.0280 to the Euro, trading well above the floor 1.05.  This will continue to create havoc with the Hypo bank failure.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) 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: this morning : down by 36.72  points or 0.18%

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

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

Gold very early morning trading: $1183.00



Early Monday morning USA 10 year bond yield: 1.92% !!!  up 1  in basis points from Friday night/


USA dollar index early Monday morning: 97.11 up 19 cents from Friday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Monday morning


And now for your closing numbers for Monday:


Closing Portuguese 10 year bond yield: 1.90% down 9 in basis points from Friday


Closing Japanese 10 year bond yield: .31% !!! up 2 in basis points from Friday


Your closing Spanish 10 year government bond,  Monday, down 9 in basis points in yield from Friday night.


Spanish 10 year bond yield: 1.30% !!!!!!


Your Monday closing Italian 10 year bond yield: 1.36% down 8  in basis points from Friday:

trading 6 basis points above Spain.





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


Euro/USA: 1.0886 up .0013  ( Euro up 13 basis points)

USA/Japan: 119.09 down .649  ( yen down 26 basis points)

Great Britain/USA: 1.5223 up .0035   (Pound up 35 basis points)

USA/Canada: 1.2100 down .0067 (Can dollar up 67 basis points)


The euro rose today.   It settled up 13 basis points against the dollar to 1.0870. The yen was down only 26 basis points despite Fitch’s lowering its investment grade, and closing just above the 119 cross at 119.09. The British pound gained considerable  ground today, 35 basis points, closing at 1.5223. The Canadian dollar gained a lot of ground to the USA dollar, up 67 basis points closing at 1.2100.

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.




Your closing 10 yr USA bond yield: 1.92% up 1 in basis points from Friday



Your closing USA dollar index:

96.73  down 19 cents on the day.


European and Dow Jones stock index closes:


England FTSE up 33.28 or 0.47%

Paris CAC up 67.46 or 1.30%

German Dax up 228.31 or 1.93%

Spain’s Ibex up 134.80 or 1.17%

Italian FTSE-MIB up 378.92 or 1.62%


The Dow: down 41.17 or 0.23%

Nasdaq; down 31.84 or 0.63%


OIL: WTI 56.71 !!!!!!!

Brent: 64.64!!!!


Closing USA/Russian rouble cross: 51.84 down 1 1/3 rouble per dollar on the day.






And now your important USA stories:


NYSE trading for today.

Biotechs Battered Most In Over A Year; Bullion Bid As Stocks Skid

What every Biotech bubble-owner, Greek FinMin, and Chinese housewife is asking right now… it seems everybody is shaking down everybody, creditors shaking down Greece, Greece shaking down local governments; and “markets” shaking down their central planners with these brief reminders of what happens if they don’t get their money…

It all started early…with a pump off the China QE news and a dump seemingly triggered on USD weakness post-Greek FinMin Varoufakis “containement”…

The cash indices just could not hold any BTFD ramps… 7 Dips bought and failed… Dow outperformed (AAPL), Small Caps underperformed…

Nasdaq was Knackered by a breakdown in Biotechs… down 7.5% from Friday highs and back below its 50DMA…

This is the first close below the 50DMA since October…and worst day in over a year… when Janet Yellen warned! (not we mnade a lower high before this dip for the first time)

And The Dow was saved by AAPL.. ahead of earnings…

Treasury yields held a fairly narrow range – higher yields into the US open, then a rip lower as the dollar dropped.. then weakness again after Europe closed…

The Dollar dumped when news of Varoufakis ‘containment’ hit but bounced a little after Europe closed… (note CAD and AUD strength around 10ET… as commodities soared)

The Dollar Index touch ed a one-month low before bouncing…

Commodities surged as the dollar dumped then stabilized…

Notice the pattern in silver around the US open…. didn’t quite worj that way today…

Whether the catalyst was Varoufakis knock on efgfects into the dollar or this was driven by a realization that China QE means hard assets get bought next as China’s Mo> suggests is unclear… but for sure the flows were heavy and aggressive.

Charts: Bloomberg




USA services PMI falter again. Markit says that the FOMC should normalize policy sooner ie. raise rates.

(courtesy zero hedge)


Despite US Services PMI Miss, Markit Says “FOMC Should Normalize Policy Sooner”

Tyler Durden's picture


After 3 months of somewhat surprising strength (given the background of disastrous hard data), US Services PMI dropped in April by the most since December, missing expectations by the most on record. Against serial extrapolators’ expectations of a rise to 58.9, PMI fell to 57.8 with cost inflation jumping to a six-month high and the biggest rise in the jobs index suggests to Markit that “the FOMC to consider starting the process of normalising monetary policy sooner rather than later at its meeting later this week..”

A miss – but under the covers Market is excited…

As Markit concludes,

Greater optimism regarding future business activity, alongside sustained growth of incoming new work in April, contributed to robust job hiring across the service economy. The latest increase in payroll numbers was the steepest since June 2014.

“The improvement in second quarter economic growth, rising price pressures and strong job creation signalled by the PMI surveys adds to pressure on the FOMC to consider starting the process of normalising monetary policy sooner rather than later at its meeting later this week.”


Dallas Fed Extends Miss Streak To Record 5 Months, Hovers Near 6-Year Low

Despite all of Dick Fisher’s promises, The Dallas Fed Manufacturing Outlook had collapsed in the last 4 months (and is down for 6 months in a row – the longest losing streak in history) and April did not disappoint.Against expectations of -12, Dallas Fed printed -16 (the 5th large miss in a row). Silver-lining enthusiasts will note this is a slight rise from 2-year lows at -17.4 in March but remains close to 6-year lows. Of the 15 sub-cmponents only wages and employment were positive (sure why not) as capacity utilization and new order growth rates slowing further. Prices Paid are at their most negative since Lehman.

Prices Paid and “Hope” Collapsed…

It appears low oil prices are not a net positive to the Texas economy after all.

Charts: Bloomberg




The default of Chinese developer Kaisa is now spreading to New York real estate.  here is why!!

(courtesy zero hedge)

Why A Chinese Developer’s Default Means Trouble For New York Real Estate

Following the default on major Chinese developer Kaisa this week, and with the continued softness in the Chinese property market, many are asking who’s next among the highly-leveraged firms. However, as The Real Deal’s Konrad Putzier notes, Kaisa’s default carries significance for New York’s real estate industry. Chinese investors spent $3 billion on New York properties in 2014. Many in New York continue to associate Chinese real estate companies with limitless funds and a never-ending ability to invest… But what if they are wrong?

As the NY Times reported:

Kaisa’s debt problems underscore the slump in China’s property sector, which has been hit by the slowing economy and a series of cooling measures instituted by Beijing to avoid a bubble in what had been an overheated housing market. Government data released this week showed that average new-home prices fell in February at the fastest pace on record.

Under Kaisa’s current restructuring proposal, about $800 million of bonds originally due in 2018 would instead come due in 2023, and the interest would be cut to 5.2 percent from 8.875 percent.

Things only got worse in March when housing prices dropped to a new record low:

Which puts even more pressure on the so-called megadevelopers…

“Some developers that have overborrowed in the expansion are going to be in trouble,” David Dollar, an economist at the Brookings Institution and former U.S. Treasury emissary to China, told The Real Deal. “We are now going to see some of them default or reschedule their debts.”

As somehow these firms need to find liquidty… and face a massive wall of debt…

Chinese developers currently have $66 billion in dollar (or offshore) bonds outstanding, according to Dealogic data. The recent strengthening of the dollar has made these bonds harder to service, since these firms make the vast majority of their income in Chinese Yuan. It’s no coincidence that Kaisa defaulted on a dollar bond.

Chinese developers that have invested in New York are among the most active issuers of dollar bonds, according to Dealogic data.

Greenland Holdings, which bought a majority stake in Forest City Ratner’s Pacific Park (formerly Atlantic Yards) project in late 2013, issued $2.7 billion in dollar bonds in 2014. Soho China, a stakeholder in the GM building, issued $1 billion in 2012. China Vanke, China’s largest publicly-traded developer, has issued another $1 billion to-date. The firm has partnered with Aby Rosen’s RFR Realty to develop a 61-story condo tower at 610 Lexington Avenue. Finally, Xinyuan Real Estate, whose subsidiary XIN is developing the Oosten condo project in Williamsburg, has issued $475 million in dollar bonds.

And if cashflow coverage gets as tight as expected (and priced in by the firms’ bonds),  then the following developments may see asset liquidations…

Xinyuan Real Estate NYC investments:  Oosten at 429 Kent Avenue

Among Chinese developers active in New York, Xinyuan Real Estate appears to be most vulnerable to a market shock at home. Fitch rates the firm’s bonds as highly speculative (B+) and last August revised its outlook down to negative. “Xinyuan spent substantial amounts on land acquisitions in 1H14 to expand its business scale in 2014, but sales failed to keep pace amid negative sentiment in the sector and its selling,” the agency wrote, explaining the revision. The firm’s debt grew by more than a third in the first half of 2014 alone while earnings fell from 91 cents to 20 cents per share, according to Seeking Alpha.

China Vanke NYC investments: 610 Lexington Avenue (also known as One Hundred East Fifty Third Street)

China Vanke is rated investment grade by Moody’s and Fitch. Despite the slowing market, Vanke managed to increase profits by 8 percent last year and its total debt of 69 million Yuan ($11.1 billion) stood at a manageable 46.7 percent of capitalization (the sum of a company’s debt and equity) in 2014, according to Moody’s.

Greenland Group NYC investments: Pacific Park

Greenland is also rated investment grade, though it received slightly lower ratings than Vanke, and its debt level was much higher at 70 percent of capitalization. Still, Moody’s expects the firm “to manage its debt leverage down from the current level through contracted sales growth.”

Soho China NYC investments: The GM Building at 767 Fifth Avenue, Park Avenue Plaza at 55 East 52nd Street

Soho China appears to be in even better shape than Vanke and Greenland with a debt-to-capitalization ratio of 27.7 percent in 2014. Moody’s gave the firm a rating of Baa1, ahead of Vanke’s Baa2 and Greenland’s Baa3.

Source: The Real Deal

*  *  *
Still – keep buying the $40 million apartments because China’s problems are “contained” and there’s always a greater fool than you right?





Falling oil revenues have now hurt Louisiana state University( L.S.U.) such that they have a deficit of 1.6 billion USA and are now drawing up bankruptcy plans; Moody’s has cut its rating on the University from stable to positive (??? bankruptcy is positive??)

(courtesy zero hedge)


It’s Not Just The Students Who Are Broke: LSU Draws Up Bankruptcy Plan

We’ve spent quite a bit of time documenting the student loan bubble which has now ballooned to $1.3 trillion and has recently led The White House to reexamine how student debt is handled in bankruptcy. Further, we’ve taken an in-depth look at delinquency rates in an effort to determine just how dire the situation has become. As it turns out, nearly one in three students in repayment is 30 days or more past due and recent data out of the St. Louis Fed indicates that far more delinquent borrowers are becoming “seriously” delinquent (i.e. never going to pay) now than in the past. Meanwhile, Moody’s recently warned on some $3 billion in student loan-backed ABS noting that increased use of IBR combined with deferment and forbearance make it increasingly likely that some paper will not be fully paid down at maturity.

Now, it appears that it’s not just students that are in dire financial straits, but schools as well because as Bloombergreports, Louisiana State University is now drawing up bankruptcy plans in the wake of funding cuts from the state:

Louisiana State University will draw up a financial exigency plan, equivalent to college bankruptcy, as budget cuts proposed by Governor Bobby Jindal threaten to cripple the higher-education system.


Exigency, declared when schools face insolvency, would allow the state’s flagship institution to restructure and fire tenured faculty.


“We know the worst-case scenario, we know the timeframe, and we know what’s at stake,” President F. King Alexander said in a statement. He said he wants legislators to “mitigate the devastation these budget cuts promise.”


State cuts to higher education have sent tuition soaring across the U.S., adding to the more than $1.2 trillion in student-loan debt. While public subsidies covered almost three-quarters of operating costs in the 1980s, the share is now closer to half and falling every year, according to the State Higher Education Executive Officers Association.


Louisiana faces a $1.6 billion budget shortfall in the coming fiscal year, a result of both plunging oil-tax revenue and the state’s failure to enact adequate tax increases or spending cuts after the economic downturn in 2009…


The latest plans would mean an 82 percent cut to the state’s public colleges and universities. Per-student funding would plummet from $3,500 to $660,according to the New Orleans Times-Picayune, causing concern at Baton Rouge-based LSU. The school may be running out of time to find a solution, as the state’s legislative session ends June 11.

According to Alexander, those last figures are indeed as bad as they sound. “States around the country spend more than that on their community colleges,” he told the New Orleans Times-Picayun. The President went on to note that if the university opts for financial exigency it will “never get any more faculty.”

The school recently cut its planned new hire count by more than 50% from 125 to just 60 and says that in the event the worst case budget cut scenario plays out, it will have to cut 2,500 courses, an eventuality which the school says is simply not tenable.

Of course what all of this means is that tuition will rise, burying students under still more loans, a third of which will be delinquent once they go into repayment. Here’sNBC:

But without a rescue from lawmakers, Alexander said programs could be dropped or entire departments shuttered under a worst-case scenario. “Specifically, we don’t know which programs or departments we’re talking about [but] it would require us to utilize every tool possible,” he said.


Even if the worst-case scenario doesn’t come to pass, it’s possible students could find themselves paying more, through increases in tuition and fees or decreases in the state’s TOPS scholarship program. Lawmakers have historically been reluctant to raise tuition — currently $8,758 for tuition and fees for in-state students at LSU — but there is discussion about giving schools themselves more freedom to do so…


“We’ve gone from being very state funded-intensive to being tuition-dependent, and we’ve got 40 percent of our students that are Pell [grant] eligible,” said Sandra Woodley, president of the University of Louisiana system, which consists of nine universities throughout the state. Since 2009, tuition and fees have climbed by 61 percent while state funding has dropped by 55 percent, a drop of $90 million.


“We’ve already shifted to mostly being funded by tuition revenue in a state that has a relatively low income population,” Woodley said. Further cuts would just hurt the most vulnerable.

Meanwhile, Moody’s has cut its outlook on the university from stable to positive (apparently being bankrupt counts as “stable”) citing “limited prospects for sustained revenue growth due to potential reductions in state operating funding, tight state control of tuition pricing, and pricing sensitivity limiting out-of-state enrollment revenue growth.” LSU then pulled a $114 million bond offering which would have financed the construction of a new residential hall, family housing and a student health center.

*  *  *

So in the end, the decline in oil and gas prices which has been partially driven by QE-fueled deflation has helped to blow a hole in the state’s budget (taxes on oil extraction account for some 15% of Louisiana’s revenue), which is in turn set to trigger budget cuts that will cripple LSU, possibly causing the university to raise tuition which will encourage students to accumulate still more federally-backed debt. Yet another virtuous circle.



Things are getting out of control in Baltimore with respect to the Freddie Gray death:


(courtesy zero hedge)

Baltimore Swat Team Attacked By Raging Mob, Tear Gas And Rubber Bullets Deployed – Live Webcast

he situation is escalating quickly in Baltimore after police said they received “credible” threats from street gangs who have promised to ban together to “take out” cops in the wake of protests surrounding the funeral of Freddie Gray who died after suffering a spinal injury while being taken into custody by authorities.

Now, the SWAT team has been called out to confront protesters

Live feeds below:






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