June 5/ Jobs report adds 280,000 fictitious jobs/210,000 B/D plug gives most of the job gains/Greece misses IMF payment/Ambrose Evans Pritchard explains why/Transnistria blockaded by Ukraine/

Good evening Ladies and Gentlemen:

 

Here are the following closes for gold and silver today:

Gold:  $1167.80 down $7.10 (comex closing time)

Silver $15.98 down 12 cents (comex closing time)

 

In the access market 5:15 pm

Gold $1171.50

Silver: $16.13

 

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

 

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

Gold and especially silver rose sharply in the access market. Thus it looks like the raid on gold/silver is over and both of these metals will advance on Monday.

At the gold comex today, we had a poor delivery day, registering 0 notices serviced for nil oz.  Silver comex filed with 9 notices for 45,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.25 tonnes for a loss of 57 tonnes over that period.

 

In silver, the open interest rose by 2539 contracts despite the fact that Thursday’s silver price was down by 38 cents.   The total silver OI continues to remain extremely high with today’s reading at 182,677 contracts now at multi-year highs 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.

In silver we had 9 notices served upon for 45,000 oz.

 

In gold,  the total comex gold OI rests tonight at 406,111 for a gain of 3,565 contracts despite the fact that gold was down $9.80 on Thursday. We had 0 notices filed for nil oz.

 

Late last night, we had no change in gold inventory at the GLD,  thus the inventory rests tonight at 709.89 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold.

 

In silver, /we had a huge addition of 1.433 million oz in silver inventory at the SLV/Inventory rests at 319.608 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 2539 contracts despite the fact that silver was down in price by 38 cents yesterday.  The OI for gold rose by 3565 contracts up to 406,111 contracts despite the fact that  the price of gold was down by $9.80 yesterday.

(report Harvey)

2,COT report on gold and silver positions of our major players
(Harvey)

3. Today, 4 important commentaries on Greece  Greece

zero hedge/Bloomberg/Ambrose Evans Pritchard)

4. The enclave, Transnistria, is  being blockaded by the Ukraine. Vladimir is not a happy camper today

(Eurasianet.org)

5, Today 6 commentaries on the USA jobs report

(zero hedge/Dave Kranzler/IRD)

6. Michael Snyder on the crumbling finances throughout the globe

(Michael Snyder/EconomicCollapseBlog)

7. Greg Hunter/weekly wrap of events.

(Greg Hunter/USAWatchdog)

8 Bill Holter’s topic for today:

“One step forward and one step back… towards a break in confidence!”

 

8. Precious metals trading overnight from Asia/Europe

(Goldcore)

9. Trading from Asia and Europe overnight

(zero hedge)

10. Trading of equities/ New York

(zero hedge)

 

 

we have these plus other stories to bring your way tonight. But first……..

 

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 3565 contracts from  402,546 up to 406,111 despite the fact that  gold was down $9.80 yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 218 contracts down to 1263. We had 10 notices served upon yesterday.  Thus we lost 271 contracts or an additional 27,100 oz will not stand for delivery.  No doubt, again, we had a huge number of cash settlements.  The next contract month is July and here the OI rose by 95 contracts up to 576.  The next big delivery month after June will be August and here the OI rose by 3,204 contracts  to 268,631. No doubt that the cash settled June contracts, having been bought out for fiat, rolled into August. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 99,340. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was poor at 162,167 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI rose by 2539 contracts from  180,138 up to 182,677 despite the fact that the price of silver was down in price by 38 cents, with respect to Thursday’s trading.  The front non active  delivery month of June saw it’s OI rise by 7 contracts rising to 40. We had 0 contracts delivered upon yesterday.  Thus we  gained 7 silver contracts standing or an additional 35,000 ounces of silver will stand in this non active June contract month. The estimated volume today was poor at 27,722 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 63,687 contracts which is very good in volume. We had 9 notices filed for 45,000 oz today.

June initial standing

June 5.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz  10,023.324  oz (Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  10,987.824 oz (HSBC,Manfra)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 1263 contracts (126,300 oz)
Total monthly oz gold served (contracts) so far this month 2598 contracts(259,800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  80,965.2 oz

Today, we had 0 dealer transactions

total Dealer withdrawals: nil oz

 

we had 0 dealer deposit

total dealer deposit: nil oz
we had 1 customer withdrawals

i) Out of Scotia 10,023.324 oz  (this landed as a deposit to HSBC)

total customer withdrawal: 10,023.324 oz

 

We had 2 customer deposits:

i) Into HSBC:  10,023.324 oz

ii) Into Manfra: 964.5 oz (30 kilobars)

Total customer deposit: 10,987.824 oz

 

We had 1  adjustment:

i) Out of HSBC:  12,019.158 oz was adjusted out of the dealer and this landed into the customer of HSBC

 

Today, 0 notices was issued from JPMorgan dealer account and 10 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the May contract month, we take the total number of notices filed so far for the month (2598) x 100 oz  or 258,900 oz , to which we add the difference between the open interest for the front month of June ( 1263) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2598) x 100 oz  or ounces + {OI for the front month (xxx) – the number of  notices served upon today (1263) x 100 oz which equals 386,100 oz standing so far in this month of June (12.009 tonnes of gold).  Thus we have 12.009 tonnes of gold standing and only 17.04 tonnes of registered or for sale gold is available:

 

Total dealer inventory 548,848.592 or 17.07 tonnes

Total gold inventory (dealer and customer) = 7,884,908.758 (245.25 tonnes)

 

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.25 tonnes for a loss of 57 tonnes over that period.

 

end

 

And now for silver

June silver initial standings

June 5 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,204,482.140 oz (Scotia,CNT)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  35,915.000 oz (Delaware)
No of oz served (contracts) 9 contracts  (45,000 oz)
No of oz to be served (notices) 31 contracts(155,000 oz)
Total monthly oz silver served (contracts) 208 contracts (1,040,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 526,732.4  oz
Total accumulative withdrawal  of silver from the Customer inventory this month 2,446,709.9 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 0 dealer withdrawals:

 

total dealer withdrawal: nil oz

 

We had 1 customer deposit:

i) Into Delaware:  35,915.700 oz

 

total customer deposit: 35,915.700  oz

 

We had 2 customer withdrawal:

i) Out of Scotia:  600,240,630 oz

ii) Out of CNT: 604,241.510 oz

total withdrawals from customer;  1,204,482.14 oz

 

we had 1 adjustment

i) Out of the CNT vault:  38,229.700 oz was adjusted out of the customer and this landed into the dealer account of CNT

Total dealer inventory: 57.816 million oz

Total of all silver inventory (dealer and customer) 178,639 million oz

The total number of notices filed today is represented by 9 contracts for 45,000 oz. To calculate the number of silver ounces that will stand for delivery in June, we take the total number of notices filed for the month so far at (208) x 5,000 oz  = 1,040,000 oz to which we add the difference between the open interest for the front month of June (40) and the number of notices served upon today (9) x 5000 oz equals the number of ounces standing.

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

208 (notices served so far) + { OI for front month of June (40) -number of notices served upon today (9} x 5000 oz = 1,240,000 oz of silver standing for the June contract month.

we gained 35,000 ounces of silver that will stand for delivery in this month of June.

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

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

 

 

end

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:

June 5/no change in gold inventory at the GLD/Inventory rests at 709.89 tonnes

June 4/ no change in gold inventory at the GLD/Inventory rests at 709.89 tonnes

June 3/late last night: a huge withdrawal of 4.18 tonnes. Tonight’s inventory rests at 709.89

June 2/no change in gold inventory at the GLD/Inventory rests at 714.07 tonnes

June 1/ we had a huge withdrawal of 1.79 tonnes of gold from the GLD/Inventory rests tonight at 714.07 tonnes

May 29/ no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

May 28/ no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

may 27: no changes in gold inventory at the GLD/Inventory rests at 715.86 tonnes

may 26.2015/we had a slight addition of .600 tonnes of gold to the GLD inventory/inventory rests at 715.86 tonnes

May 22.2015: no changes in gold inventory at the GLD/Inventory rests at 715.26 tonnes

May 21./no changes in gold inventory at the GLD/Inventory rests at 715.26 tonnes

May 20./we had another withdrawal of 2.98 tonnes of gold leaving the GLD. Inventory rests tonight at 715.26 tonnes

May 19/no changes in gold inventory at the GLD/Inventory at 718.24 tonnes

June 5 GLD : 709.89  tonnes.

end

 

And now for silver (SLV)

June 5 a huge addition of 1.433 million oz of silver added to the SLV/Inventory at 319.608 million oz

June 4/no change in silver inventory/rests tonight at 318.175 million oz

June 3/ we had a small withdrawal of 138,000 oz of silver inventory/Inventory rests at 318.175 million oz

June 2/ we had a huge addition of 1.243 million oz of silver inventory at the SLV./Inventory rests at 318.313 million oz

June 1/no change in inventory at the SLV/Inventory rests at 317.07 million oz

May 29/no changes in inventory at the SLV/Inventory rests at 317.07 million oz

May 28/a small deposit of 143,000 oz of silver added to the SLV/Inventory rests at 317.070 million oz

May 27/we had another 1.003 million oz withdrawn from the SLV/Inventory rests tonight at 316.927 million oz

May 26.2015: no change in SLV /Inventory rests at 317.93 million oz

May 22.2015: no changes in SLV/Inventory rests at 317.93 million oz

May 21.no changes at the SLV/Inventory rests at 317.93 million oz

May 20/no changes at the SLV. Inventory rests at 317.93 million oz/

 

June 5/2015: a huge addition of 1.433 million oz of silver /SLV inventory at 319.608 million oz/

 

end

 

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

 

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 7.3% percent to NAV in usa funds and Negative 7.8% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.1%

Percentage of fund in silver:38.5%

cash .4%

( June 5/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV rises to +.83%!!!!! NAV (June 5/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .41% to NAV(June 5/2015

Note: Sprott silver trust back  into positive territory at +.83%.

Sprott physical gold trust is back into negative territory at -.41%

Central fund of Canada’s is still in jail.

 

Last week Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to Central GoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *

end

At 3:30 pm the CME sends down the COT report so we can get a good handle on how the crooks are going to beat up on gold and silver.

 

First the gold COT report.

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
194,299 89,889 32,798 138,423 246,573 365,520 369,260
Change from Prior Reporting Period
2,348 2,632 -5,611 -6,117 -7,687 -9,380 -10,666
Traders
128 96 69 52 46 215 185
 
Small Speculators  
Long Short Open Interest  
33,204 29,464 398,724  
-3,857 -2,571 -13,237  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, June 02, 2015

 

Our large specs:

Those large specs that have been long in gold added 2348 contracts to their long side.

Those large specs that have been short in gold added 2632 contracts to their short side.

And now our illustrious crooks, the commercials:

Those commercials that have been long in gold pitched 6117 contracts from their long side.

Those commercials that have been short in gold covered 7687 contracts from their short side.  (thus the commercials go net long)

Our small specs;
Those small specs that have been long in gold pitched 3857 contracts from their long side.

Those small specs that have been short in gold covered 2571 contracts from their short side.

Conclusion; commercials go net long this week but they still raid.

 

And now for our silver COT:

seems our bankers are having a tough time trying to extricate themselves from their huge shorts

 

 

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
63,573 16,728 24,931 67,193 124,762
-3,019 1,117 3,595 3,872 -61
Traders
85 47 46 39 45
Small Speculators Open Interest Total
Long Short 178,343 Long Short
22,646 11,922 155,697 166,421
266 63 4,714 4,448 4,651
non reportable positions Positions as of: 149 119
Tuesday, June 02, 2015

Our large specs:

Those large specs that have been long in silver pitched a rather large 3019 contracts from their long side.

Those large specs that have been short in silver added 1117 contracts to their long side.

Our commercials;

Those commercials that have been long in silver added 3872 contracts to their long side.

Those commercials that have been short in silver pitched a tiny 61 contracts from their short side.

Our small specs:

Those small specs that have been long in silver added a tiny 266 contracts to their long side.

Those small specs that have been short in silver added a tiny 63 contracts to their short side.

end

 

Early morning trading from Asia and Europe last night:

 

Gold and silver trading from Europe overnight/and important physical

stories

 

(courtesy Mark O’Byrne/Goldcore)

Gold At $64,000 – Bloomberg’s ‘China Gold Price’

– Bloomberg Intelligence suggest gold-backed yuan see gold at $64,000 per ounce
– “Chinese gold standard would need a rate 50 times bullion’s price”
– As China-U.S. relations deteriorate, gold-backed yuan possible
– Dollar and financial and monetary dominance of U.S. at risk
– U.S. and China war of words continues to escalate
– China rejects U.S. hegemony in Southeast Asia
– Currency war to escalate

If China were to partially back its yuan with gold it would require a gold price of $64,000 per ounce, 50 times gold bullion’s price today, according to a recent article from respected Bloomberg Intelligence.

goldcore_chart4_05-06-15
It seems like an outlandish forecast. However, as tensions between the U.S. and China continue to escalate such a scenario is not actually as implausible as it may first appear.

If China were to back its yuan with gold it would require a price of $64,000 per ounce according to a recent report from Bloomberg.

While Bloomberg give no details as to how they arrive at this figure, our “back of envelope” calculations would confirm that at its current value relative to the dollar the yuan would indeed require gold – priced in dollars – to be priced in the tens of thousands of dollars.

Chinese M1 money supply is roughly 33.64 trillion yuan which at todays exchange rate equates to around $5.4 trillion.

Bloomberg conservatively estimate China’s gold reserves at around 3150 tonnes although many analysts believe the figure to be much higher.

In order to back $5.4 trillion yuan with 3150 tonnes of gold, the gold price would need to be in the region of $48,600 per ounce.

Bloomberg conclude that, at today’s prices, it would be “basically impossible” for China to fully back its yuan with gold. Indeed, at $1,200 per ounce, it would require over 126,000 tonnes to back $5.4 trillion.

Bloomberg states that “there’s no evidence” that China seeks to adopt a traditional gold standard. However, China’s appetite for gold in recent years has been voracious and it is clear that they and the People’s Bank of China (PBOC) place great strategic importance on the precious metal.

The Chinese have been quite overt in recent months in their ambition to establish the yuan as a rival reserve currency and it is likely that they intend gold to play a role in that ambition.

If China were to even partially back its currency with gold it would gain further favour across the world as a reliable reserve currency when viewed against the increasingly debased U.S. dollar. In order to maintain some semblance of credibility the U.S. would likely be forced to follow suit.

For the U.S. to back its gargantuan M1 with its stated, and almost certainly grossly overstated, gold reserves of 8,500 tonnes it would push gold prices to multiples of their current price.

goldcore_chart5_5-06-15

There has been a definite heating of tone in the war of words between the U.S. and China in recent months. Only this morning, the Wall Street Journal reports on how details of 4 million federal employees were hacked in April. While the FBI have not directly accused China, the WSJ suggests that China is the prime suspect.

At the end of last month a Chinese state-controlled newspaper stated that if the U.S. continued to interfere with its activities in the South China Sea, war was “inevitable”. China are clearly not intimidated by the prospect of war with the U.S.

China rejects what it sees as U.S. “meddling” in South East Asia. At last years APEC conference, China’s president Xi had President Obama pointedly placed at the peripheries of the stage for the official photograph. President Putin was by his side. The message was subtle but quite clear – China views the U.S. as a peripheral nation in Southeast Asian affairs whereas Russia is at the centre.

If tensions continue to escalate – and with that the prospect of a “hot war” as recently warned of by many including George Soros – each side will seek to weaken its rival in a variety of ways. In January, Russia’s Prime Minister Medvedev stated that if his country were cut out of the SWIFT system, the “Russian response – economically and otherwise – will know no limits.”

In the event of an escalation in economic warfare it seems obvious that the achilles heal of the U.S. is the dollar and its erstwhile global reserve currency status. Many analysts believe that China would be reluctant to sink the dollar given it would undermine the value of their vast holdings of U.S. Treasuries and foreign exchange reserves.

However, there will be a tipping point where the advantage to be gained by badly impacting the dollar and positioning the yuan as new reserve currency will be greater than the disadvantage suffered by a collapse in the value of the dollar.

The tipping point is closer than many believe.

Must-read Guides:
Essential Guide To Storing Gold In Singapore
Essential Guide To Gold Storage In Switzerland


MARKET UPDATE

Today’s  AM LBMA Gold Price was USD 1,175.90, EUR 1,044.25 and GBP 767.82 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,182.45, EUR 1,041.76  and GBP 766.55  per ounce. 

Gold looks on track for its third weekly decline in all major currencies (see charts). Gold fell $8.30 or 0.07 percent yesterday to $1,177.00 an ounce. Silver slid $0.37 or 2.24 percent to $16.18 an ounce.

Gold in USD - 1 Week

Gold in Singapore for immediate delivery was unchanged at $1,176.70 an ounce near the end of the day,  while gold in Switzerland also moved slightly lower. Gold is lower despite market developments that are bullish and ordinarily would have seen gold receive a safe haven bid.

Gold should have seen gains after the IMF warned that the Federal Reserve should delay a rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation,  and after Greece did not give in to the Troika and delayed the latest IMF repayment and vowed not to leave the euro.

Gold in Euros - 1 Week

In its annual assessment of the economy, the IMF’s report comes amid signs that some rate setters at the U.S. central bank are also pushing for rate hikes to be delayed until there are clearer signs of a real recovery. U.S. data has been quite poor and the economy shrank 0.7 percent in the first quarter.

“Based on the missions macroeconomic forecast, and barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016,” the fund said.

Greece has delayed its payment of 300 million euros, which was due today. Instead the country said it will bundle all four of its June payments together, with a payment of 1.5 billion euros scheduled for June 30th.

Gold in British Pounds - 1 Week

The Perth Mint said their gold and silver sales fell to a three year low in May on the stagnant price outlook for precious metals and poor sentiment. From a contrarian perspective this weakness remains bullish and suggests the bottoming process continues.

A key U.S. economic indicator is the non-farm payrolls number published at 1330 GMT. It is expected to have grown to 225,000 in May from 223,000 in April.

In late European trading gold in dollars is down 0.19 percent at $1,175.51 an ounce. Silver is up 0.04 percent at $16.18 an ounce and platinum is off 0.07% at $1,098.20 an ounce.

end

 

Posted on 5 Jun 2015 by

Media Failure On Russia’s Official Gold Reserves

Last week I wrote how I can disagree with other media, be it mainstream or alternative, Chinese, Russian or English, on the reporting of the gold market. This week another perfect example came by, from Russian news outlet Sputnik International. According to this press agency the Russian Central Bank (CBR) currently holds 360 billion US dollars in official gold reserves and Elvira Nabiullina, head of the CBR, is determined to raise this amount to 500 billion US dollars. This is not true.

Sputnik wrote (click for link):

Russia to Increase Its Gold Reserves – Central Bank Head

The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion.

Russia will increase its gold reserves by up to $500 billion, said Elvira Nabiullina, the head of Russia’s Central Bank,…

…Currently, Russia owns $360.5 billion worth of gold reserves.

Let’s do some math:

Sputnik International states Russia currently owns 360 billion US dollars in gold. At a gold price of 1,200 USD an ounce this equals to

360,000,000,000/1,200 = 300,000,000 ounces

300,000,000/32151 = 9,331 metric tonnes

However, Russia currently does not own 9,331 tonnes in official gold reserves. Instead, it currently holds 1,247 tonnes – a difference of 8,084 tonnes – according to the website of the CBR and the IMF.

According to Sputnik the CBR will raise its official gold holdings from 360 billion USD to 500 billion USD. Or, converted to weight, from 9,331 tonnes to 12,960 tonnes. Suggesting the CBR is about to buy 3,629 tonnes in the coming years.

The misunderstanding can be easily cleared. Sputnik, for whatever reason, used Russia’s total International Reserves, which are currently 360 billion USD. If we head over to the (English) website of the CBR, we can see:

Screen Shot 2015-06-05 at 1.42.22 PM

International Reserves are the sum of Foreign Exchange (FX) Reserves and Gold. As of April 2015, Russia’s International Reserves stand at 356 billion USD, FX reserves are 308 billion USD and Gold is at 48 billion USD (1,247 tonnes). In Sputnik’s article total International Reserves have been mixed up with Gold Reserves.

The error can be confirmed by looking at the International Reserves level in 2012-2013, when it was about 500 billion USD. Sputnik wrote, “The head of Russia’s Central Bank is determined to increase the country’s gold reserves to its previous levels in 2012-2013, from $360.5 billion up to $500 billion”. If we look at Russia’s Gold Reserves in tonnes these were far lower in 2012-2013 than they are today (while the price of gold was much higher back then). It’s impossible Russia had more gold in reserve in 2012-2013 then today.

Russia's International Reserves

What Elvira Nabiullina actually said (June 4, 2015, St. Petersburg) we can read at Bloomberg:

Reserves should reach a “comfortable” level of about $500 billion within the next few years from about $357 billion now, Bank of Russia Governor Elvira Nabiullina told the International Banking Congress in St. Petersburg on Thursday.

This quote makes sense. Russia’s International Reserves are currently at 357 billion USD and Elvira Nabiullina is aiming to boost reserves to 500 billion USD (which Russia owned in 2012-2013, see last chart).

If we replace “Gold Reserves” in Sputnik’s article by “International Reserves”, all the numbers match up with the most recent data from the CBR and IMF. Case closed.

Sputnik’s article on a mirror server.

Stepping Up to the Plate

Theodore Butler

|

June 4, 2015 – 8:43am

I was originally going to title this piece “Doin’ the Right Thing” after the old Spike Lee movie. I had used that title once before, back in early 2008 in an article complimenting Barclays Global Investors for deciding to publish the serial numbers and weights of the all the bars held in its then-sponsored silver ETF, SLV (now sponsored by BlackRock). I had written several public articles exhorting Barclays to publish the data and was gratified that it did so.http://news.silverseek.com/TedButler/1199736334.php

While I lauded Barclays for providing greater transparency to the silver trust, it brought them on a par with what had already been a practice in place for the big gold ETF, GLD, sponsored by State Street. As such, while it was completely proper and laudable for Barclays to list all the silver bars it held for the SLV, it wasn’t precedent setting. Therefore, I decided to use a different title today, to highlight an action that was both the right thing to do and precedent setting.

Following last Wednesday’s article suggesting that silver mining companies write to the CFTC (which I did make public at the urging of subscribers), one mining company (befitting of its name) became the first to do so. The CEO of First Majestic Silver Corp, Keith Neumeyer, became the first miner to write to the CFTC concerning the massive historic one-week repositioning of speculative positions on the COMEX that far exceeded anything occurring in the real world of silver production or consumption. http://www.firstmajestic.com/s/RelatedArticles.asp

While I hope additional mining companies take the matter up with the agency, Neumeyer not only did the right thing, he set a precedent that, to my knowledge, had not previously occurred in the 30 years that I have closely followed the silver market and, most likely, long before that. Much to my puzzlement over the decades in alleging a silver price manipulation on the COMEX, was the lack of questioning of the price discovery process on that exchange by those most damaged by it – the mining companies.

US Government data unquestionably prove speculators are setting the price of silver on the COMEX to the exclusion of actual silver producers and consumers and that is so far from the intent and spirit of US commodity law as to be inexplicable. There is no reason to expect silver industrial consumers and fabricators to complain about artificially depressed prices because they have benefitted from the existing price-setting regime. But, it’s about time that silver producers questioned the single most important factor to their financial health – the price of their principle product. For being first to step up to the plate, here’s a tip of the hat to Keith Neumeyer.

Rather than an end, Neumeyer’s petition to the regulator is a start to a process that should have begun long ago. Will it play out as I hope it will? Who knows? But it certainly could. First and foremost, it will do no harm in bringing the question of manipulation to a potentially broader audience. After all, it’s not as if speculators on the COMEX can control and dictate prices any more than they do already, so First Majestic’s petition can’t be considered as emboldening the speculators further.

The big potential payoff is that First Majestic’s petition may set off a process that heretofore has not been allowed to exist, namely, an open and honest debate as to how prices are set on the COMEX. Specifically, how can the price discovery process on the COMEX be considered fair and within the spirit of commodity law if it, effectively, excludes actual producers and consists of only speculators? And how can there be a legitimate economic explanation for why COMEX silver has the largest concentrated short position of all regulated commodities, particularly with prices at or below the average primary cost of production?

If Mr. Neumeyer’s petition results in an open and honest debate on these and related questions, the effect on the silver manipulation and prices could and should prove to be profound. And it’s somewhat unbelievable, in this supposed day and age of transparency, that silver investors and mining companies even have to petition for an open and honest debate on these substantive issues. A fair and open debate is also more likely to attract outside investor interest to silver than any other single factor I can think of. To those who did take the time to write to various silver mining companies at my request, thank you. To those still considering it, please don’t delay.

Finally, in the giving credit where credit is due department, I want to openly thank Ed Steer for consistently bugging me to write a sample letter for what a mining company might include in a letter to the CFTC. His prodding extended back for many months and I’m sorry I procrastinated.

This was excerpted from an article to subscribers June 3, 2015.

Ted Butler

 

June 4, 2015

For subscription information, please go to www.butlerresearch.com

end

(courtesy Alasdair Macleod)

 

Alasdair Macleod: China’s five-year plan and the end of an era

Section:

11:50a ET Friday, June 5, 2015

Dear Friend of GATA and Gold:

Led by China, Asia countries are acquiring gold to remove risk from their currencies as the world moves away from the U.S. dollar, GoldMoney researcher Alasdair Macleod writes today. His commentary is headlined “China’s Five-Year Plan and the End of an Era” and it’s posted at GoldMoney here:

https://www.goldmoney.com/research/analysis/1407-chinas-five-year-plan?g…

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

end

(courtesy Prisco/Bitcoin magazine/Huntsville Alabama/GATA)

 

HayekGold from Anthem Vault represents physical gold on the bitcoin blockchain

Section:

By Giulio Prisco
Bitcoin Magazine, Huntsville, Alabama
Thursday, June 4, 2015

Financial technology company Anthem Vault today launched HayekGold (the “hayek”), a digital token that enables more people to own and spend gold. Each hayek represents 1 gram of gold stored in the secure, world-class vaulting facility in Salt Lake City, Utah, and will be purchased at the market value at the time of the transaction.

“We use the latest, most secure technology — the bitcoin blockchain — that fuels hundreds of other crypto-related platforms,” said Anthem Vault founder and CEO Anthem Blanchard. “The hayek coalesces the most trusted store of value in history — gold — with the world’s most secure exchange network, bitcoin. Gold is hardly volatile and can help create a more anchored currency and savings plan.”

Blanchard, a lifelong advocate of decentralized sound money, is the son of James U. Blanchard III, who helped restore Americans’ right to own gold bullion. The Hayek name leaves no doubts about Blanchard’s political leanings. “First of all, we love F.A. Hayek, one of the greatest contributors to the Austrian School of Economics,” the HayekGold website says. “He wrote a number of valuable books and articles about the free market, price theory, and more throughout the 20th century. Second, Anthem Vault’s CEO is named Anthem Hayek Blanchard. His parents loved F.A. Hayek’s work so much that they named their son after him!” …

… For the remainder of the report:

https://bitcoinmagazine.com/20682/hayekgold-anthem-vault-represents-phys…

 

end

(courtesy David Keys/The Independent/London England/GATA)

Southwest England was scene of prehistoric gold rush, new research says

Section:

By David Keys
The Independent, London
Thursday, June 4, 2015

New archaeological research is revealing that southwest Britain was the scene of a prehistoric gold rush.

A detailed analysis of some of Western Europe’s most beautiful gold artifacts suggests that Cornwall was a miniature Klondyke in the Early Bronze Age.

Geological estimates now indicate that up to 200 kilos of gold, worth in modern terms almost L5 million, was extracted in the Early Bronze Age from Cornwall and West Devon’s rivers — mainly between the 22nd and 17th centuries BC. …

… For the remainder of the report:

http://www.independent.co.uk/news/science/archaeology/news/cornwall-was-..

end

 

(courtesy Bill Holter/Holter/Sinclair collaboration)

 

One step forward and one step back… towards a break in confidence!

 

Jim suggested a big picture topic to write about.  Each step forward by the Chinese to make a foothold for the yuan is one step backwards for the grip the dollar has held over the globe.  This topic has several nuances to it, let’s take a look from several vantage points.  As a spoiler, any “steps back” in today’s fiat currency world are steps toward a break in confidence.  Call it deflation or hyperinflation, a break in the confidence of fiat currency will end with many currencies being replaced, this is a major part of your coming “re-set”.

  The first and most obvious is we live in a world with an economic and financial pie of a given size at any point in time.  Each deal, each transaction and each “platform” that is done or created by the Chinese for using yuan instead of dollars means the size of the of the pie “slices” change.  Any increase in the usage of yuan means a smaller slice for the use of dollars.  Yes, theoretically the pie gets larger over time and we’ll get to this shortly, I am simply saying here that in a static system, more yuan usage means less dollar usage.
  The next logical step is to equate the usage of a country’s currency with “power”.  As any currency becomes more popular for usage, the confidence in that country also increases and vice versa.  In today’s world (but not for long?), fiat currencies with no backing are free to create.  In the case of the dollar since 1971, more usage (via petro-dollar reinvestment) allowed for more “creation” of dollars and thus the power generated from the “privilege” to print.  This so far is simple logic and merely a description of how our monetary world works.
  China has done many things over the last several years with an eye to moving their currency, the yuan forward.  They have purchased massive amounts of gold to be held as reserves, we will very soon find out how much they have accumulated as they announce for their entrance into the SDR.  China has also set up two dozen “currency hubs” all over the world in major cities.  They have done this to aid in the conversion of local currencies into and out of yuan.  Clearly this move will aid and grease the gears for trade done with China.  It will also aid in currency movements looking to “buy” yuan if deals are contracted to settle in yuan.  In essence, China is simply “making it easy” to purchase and use their currency.  They have also set up credit facilities such as the AIIB and new exchanges for gold, the SGEI.  China is actively seeking “new customers” and trade partners along the “Old Silk Road” as they can see the writing on the wall …as well they should since they are the ones doing the writing!
  If you look at nearly everything China has done in recent years from a financial and economic standpoint, it can be seen they are preparing the yuan to become a “major” and international currency.  They have requested the yuan to become part of the IMF’s SDR which gives us an approximate time guideline.   Whatever percentage the yuan gains of the SDR pie will come at the expense of the dollar’s piece.  The flip side of the coin is the U.S., what exactly has the U.S. done in recent years to “promote” or make it easier to use dollars?  This is a simple case of losing market share!
  Now, let’s look from a different angle.  Any economic (financial) system is either increasing in size or decreasing.  It may be increasing at an increasing rate or the rate is slowing.  The system may also be decreasing at an increasing rate, or the contraction is slowing.  In a fiat system where debt is the underlying asset holding up values and ultimately the currency itself, debt outstanding (growth) by definition MUST increase in the long run and it must grow at an increasing rate.  This is an “absolute” because there does not exist the “dollars” today to pay future interest, they simply do not exist …”yet”.  The only way they will ever come into creation is by creating more debt or using the electronic printing press.  In the words of Richard Russell, “it is either inflate or die!”.
  Let us now look at the “die” part.  If (when) China makes the yuan convertible and international, this will immediately take “market share” away from the dollar.  This is where it gets interesting because there is a major fork in the road, it is called the debate between the “inflationists and the deflationists”.  One theory is that any decrease in dollars outstanding (and being used) will cause existing debt to default and create an unending cycle of default.  This the deflationists say will actually make “dollars” worth more.  The inflationists say this can never happen because the Fed will simply “print” more dollars and thus ruin the value of existing dollars via common hyperinflation.
  Let me say this, I disagree with both arguments!  First, as for the deflationists, let’s assume (and I do) we have hundreds of trillions in defaults.  What, if anything will be left standing of the financial markets?  With the derivatives outstanding, which banks exactly will still have their doors open for you to retrieve your now “more valuable dollars”?  Will ANY financial institution still be solvent?  And going one step further, when this collapse comes, won’t the business climate turn highly negative …which will slow tax receipts to a trickle …and make it impossible for the Treasury and other agencies to make good on their debts and other promises (unless they just conjure up more out of thin air)?  Finally, aren’t “dollars” ultimately backed by the “full faith and credit” of the United States”?  Aren’t dollars now “used” based on the “confidence” in the U.S. Treasury since they are not convertible into anything else?  Flipping to the inflationist side, they say the Fed will simply print more and create hyperinflation.  I say they have ALREADY hyperinflated the currency by allowing the system to reach, and pass the “debt saturation” level.  They have already put the seeds into the system!
  What I believe we will see is what we have always seen as a final result of fiat currencies, a collapse of confidence.  Call it what you want, call it a deflationary collapse or call it hyperinflation, the end result will be “confidence” in the U.S. dollar will collapse.  It will be shunned in international trade and will take MANY more dollars (if at all) to conduct transactions.  What is coming is a “monetary event” triggered by a very human emotion, “fear”.  Fear that the dollars you hold will not be accepted when you go to spend them!
  To finish, let’s add gold into the equation.  We have only seen true “deflation” once in the last 100 years in the U.S..  We entered deflation in the 1930’s and if you listen to Harry Dent, owning dollars was the number one place to have money.  This is simply NOT SO.  Yes, having dollars was “good”, having dollars in a bank was “not so good” because many banks simply closed their doors and the dollars were lost … the insolvencies occurred BECAUSE of the deflation.  Going one step further, FDR devalued the dollar versus gold from $20.67 to $35 per ounce.  Please remember, back then dollars did not have value because they “were dollars”, they had value because they were RECEIPTS FOR GOLD.  Gold was the asset, gold was “the money”, dollars were the derivative of gold!
  As it was in the 1930’s, ever before and ever since, gold is money.  Any future “deflation” that occurs will be “against” or IN terms of gold!  Ask yourself this, in a financial collapse, “what will be safe”?  Will your bank, broker or insurance company be safe, or even still solvent?  Will our over indebted government be safe?  Will the pieces of paper or digital credits issued by this “safe” government and held by your “safe” institution …really be safe?  Or, will gold, which is readily accepted and even HOARDED by the rest of the world be accepted, sought after and thus both liquid AND safe?  This is THE most important question and one that will affect the rest of your entire financial life!  It’s not that hard of a question, only a little common sense and a small dose of logic will get you there!
Regards,  Bill Holter
Holter-Sinclair collaboration

end

 

 

And now overnight trading in stocks and currency in Europe and Asia

 

1 Chinese yuan vs USA dollar/yuan weakens to 6.2025/Shanghai bourse green and Hang Sang: red

2 Nikkei closed down by 27.29  points or .13%

3. Europe stocks all in the red/USA dollar index up to 95.60/Euro rises to 1.1228

3b Japan 10 year bond yield: fall to .48% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.81/very ominous to see the Japanese bond yield rise so fast!!

3c Nikkei still just above 20,000

3d USA/Yen rate now well above the 124 barrier this morning

3e WTI 57.69 and Brent:  61.85

3f Gold down/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 83 basis points. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate rise  to 24.84%/Greek stocks down 4.75%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield rises to: 10.78%

3k Gold at 1174.60 dollars/silver $16.15

3l USA vs Russian rouble; (Russian rouble flat in  roubles/dollar in value) 56.17 ,

3m oil into the 57 dollar handle for WTI and 61 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!!

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9345 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0489 well above the floor set by the Swiss Finance Minister.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 3 year German bund remains in negative territory with the 10 year moving closer to negativity at +.83/

3s Six weeks ago, the ECB increased the ELA to Greece by another large 2.0 billion euros.Four weeks ago, they raised it another 1.1 billion and then two weeks ago they raised it another tiny 200 million euros to a maximum of 80.2 billion euros. Last week, the limit was not raised. Yesterday, the ECB raised the ELA by 1/2 billion euros to 80.7 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  paid the 700 million plus payment to the IMF last Wednesday but with IMF reserve funds.  It must be paid back in on June 9.

3 u. If the ECB cuts off Greece’s ELA they would have very little money left to function. So far, they have decided not to cut the ELA

4. USA 10 year treasury bond at 2.33% early this morning. Thirty year rate just above 3% at 3.06% / yield curve flatten/foreshadowing recession.

 

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

 

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Futures Slump, Bund Selling Resumes With All Eyes On The Jobs Number

After yesterday’s unprecedented volatility fireworks across all markets and continents, today so far has been a modest disappointment, with no crashes and subsequent surges in China, where the Politburo’s only achievement was keeping the bubble dream alive by pushing the Shanghai Composite over 5,000 for the first time since January 2008, closing the index 1.5% higher on the day – a very modest gain by China’s recent blow-off top standards.  Europe, too, has been relatively tame with the 10 Year Bund starting off on the wrong foot, the yield rising back above 0.91% before once again dipping to the upper 0.8% range, tracking the move in the EURUSD tick for tick, which also is a tractor beam for the US 10 Year.

On the equity, front, things are just as muted, with futures at the Low of Day as of this moment, despite yesterday’s last minute manic buying spree, the S&P set to open below 2100 as a result. Oil is likewise weaker with an OPEC announcement imminent, one which will be neutral at best and quite bearish at worst as fundamentals are once again gaining the upper hand over margin, leverage and positioning.

In any event, all of the above will promptly change at 8:30:00:00001 today when the NFP payroll is announced (or leaked a few milliseconds earlier): a very strong number and it will be risk off across the board driven by EUR strength; a sub-200K print and the shorts will be trampled yet again.

A closer look at equity markets, reveals the Shanghai Comp (+1.5%) surged to its highest level since Jan’08 in what was once again a volatile session for the index. The Hang Seng (-1.1%) fell with the 50 DMA capping further downside. Nikkei 225 (-0.1%) traded in the red after breaking below yesterday’s low. JGBs rose lifted by short-covering following yesterday’s global bond market rebound, which saw the 10yr yield retreat back below 0.5%.

In Europe, Bunds initially continued their  decline with the 10y yield failing to consolidate above 0.9% with prices finding support at the 150.00 handle. Meanwhile, developments from Greece have suppressed European fixed income products as Greek Interior Minister Stathakis stated that the debt-stricken nation are to bundle their June IMF payments to the end of the month, which will in turn provide Greece with more time to reach an agreement with its creditors.

Furthermore, Greek 2y and 4y bonds are substantially pressured and their yields have surged 207bps and 176bps respectively. Separately, in a rather tentative session ahead of risk events in today’s data slate, European equities (-0.9%) have followed on from the negative closes in Asia and Wall Street. In terms of stock specific news, Vodafone were under renewed merger speculation involving Liberty Global and initially opened higher, however later fell into negative territory after a Vodafone (- 2.0%) representative later clarified that they are in early discussions with Liberty Global over a potential asset swap deal and not a merger.

In FX markets, EUR/USD has held onto gains from the open with support stemming from updates on the Greek negotiations and higher European rates. USD/JPY has shown mild gains in the wake of comments from the GPIF head who said he does not see the immediate need to amend their investment strategies in the wake of the risk of a stronger JPY due to diverging
monetary policy of the BoJ and Fed. Furthermore, analysts at Standard Chartered suggested that the pair may surge above 127 if today’s US NFP data beats expectations and sees the pair trading between the range of 122-127 this month. Elsewhere, GBP underperforms other major currencies and GBP/USD near lowest levels driven by cross-related selling and  positive German data supporting EUR vs. GBP.

Despite the softer USD, WTI and Brent crude futures are mildly lower ahead of the OPEC meeting with several oil ministers from the cartel signalling that oil production will be kept unchanged. Precious metals have remained relatively range-bound ahead today’s key risk events, with Spot Gold drifting marginally lower in the session.

In Summary: European shares fall with the financial services and personal & household sectors underperforming and basic resources, utilities outperforming. Greece defers IMF payment. Bundesbank raises German economic growth outlook on consumption, German April manufacturing orders above estimates. Shanghai Composite rose above 5,000 for first time since 2008. The Swedish and Swiss markets are the worst-performing larger bourses, the Italian the best. The euro is stronger against the dollar. German 10yr bond yields rise; French yields increase. Commodities decline, with WTI crude, Brent crude underperforming and natural gas outperforming. U.S. consumer credit, nonfarm payrolls, unemployment, average earnings, labor force participation,  due later.

Market Wrap

  • S&P 500 futures down 0.2% to 2094
  • Stoxx 600 down 0.8% to 389.6
  • US 10Yr yield up 4bps to 2.34%
  • German 10Yr yield up 6bps to 0.9%
  • MSCI Asia Pacific down 0.5% to 148.5
  • Gold spot little changed at $1176.7/oz
  • Eurostoxx 50 -0.8%, FTSE 100 -0.5%, CAC 40 -0.8%, DAX -0.8%, IBEX -0.6%, FTSEMIB -0.5%, SMI -1%
  • Asian stocks fall with the Shanghai Composite outperforming and the Hang Seng underperforming. MSCI Asia Pacific down 0.5% to 148.5
  • Nikkei 225 down 0.1%, Hang Seng down 1.1%, Kospi down 0.2%, Shanghai Composite up 1.5%, ASX down 0.1%, Sensex up 0.4%
  • Euro up 0.33% to $1.1275
  • Dollar Index down 0.07% to 95.4
  • Italian 10Yr yield up 8bps to 2.22%
  • Spanish 10Yr yield up 6bps to 2.17%
  • French 10Yr yield up 8bps to 1.22%
  • S&P GSCI Index down 0.4% to 427.2
  • Brent Futures down 0.7% to $61.6/bbl, WTI Futures down 0.9% to $57.5/bbl
  • LME 3m Copper up 0% to $5917.5/MT
  • LME 3m Nickel down 0.3% to $12915/MT
  • Wheat futures down 0.6% to 520.5 USd/bu

Bulletin headline summary

  • Despite selling off in the early stages of European trade, Bunds have found support at the 150.00 level
  • EUR continues to be underpinned by higher European rates with the stronger EUR weighing on export names
  • Looking ahead, today sees the release of the US and Canadian jobs reports and the OPEC meeting in Vienna
  • Treasuries decline, 10Y yields +22.1bps on week amid EGB rout before report forecast to show U.S. economy added 226k jobs in May while the unemployment rate held at 5.4%.
  • Tsipras raised the stakes in Greece’s showdown with creditors, rejecting demands for more austerity to receive bailout funds and opting for an unconventional deferral of IMF payments
  • Tsipras should call a referendum to decide whether Greece should stay in the euro area, Christopher Pissarides, economics professor at LSE and Nobel Prize winner, said yday in Bloomberg interview
  • OPEC members signaled that there was little prospect of changing their oil-output target as the 12-nation group gathered in Vienna
  • Bundesbank raised forecasts for German economic growth, now sees GDP expanding 1.7% in 2015 and 1.8% in 2016 vs  December predictions of 1% and 1.6%, respectively
  • German Finance Minister Wolfgang Schaeuble wasn’t informed about a confidential meeting between Merkel, Lagarde and Draghi on June 1, Bild-Zeitung says
  • An EPA study that found fracking  had no widespread impact on drinking water, undercutting demands by environmentalists for more regulation
  • The disclosure by U.S. officials that Chinese hackers stole records of as many as 4m government workers is now being linked to the thefts of personal information from health-care companies
  • Sovereign 10Y bond yields surge. Asian stocks decline, European stocks fall, U.S. equity-index futures lower. Crude oil lower, copper and gold little changed

 

DB’s Jim Reid completes the overnight event summary

 

As we embark on what is another important payrolls Friday, this should have been the day when all was resolved with Greece and we could all have started the process of moving on with our lives. Alas no as Greece has finally asked the IMF to bundle its June repayments to month-end. Indeed the IMF was heavily in the news yesterday as they suggested that the Fed should delay lift-off until early 2016. This caused a ripple of excitement in markets.

The bundling of payments wasn’t the only development in Greece yesterday. News that the Greek Finance Ministry had rejected the Creditors bailout proposals added to what turned out to be a very busy day. A statement from the Finance Ministry said that ‘after four months of negotiations, creditor institutions submitted proposals which can’t solve the riddle of the economic crisis caused by the policies implemented in the last five years’. In a call between Tsipras, Merkel and Hollande, Tsipras was said to have told the Creditors that the proposal put in front of him could not be a basis for a deal and was not reflective of the progress made in talks in Brussels. Merkel’s comments last night that ‘we’re still far from reaching a conclusion’ and that ‘we still have to wait a bit’ is a clear sign that large gaps remain between the two sides. The announcement of the bundling of payments into a €1.6bn lump sum on June 30th meanwhile (which is also the first time such an option has been exercised since Zambia did in the 1980’s) also highlights what is a particularly fragile liquidity situation for the Greek government now, and suggestive that cash reserves are more or less exhausted. The moves yesterday are negative signals, but provides Greece with more time to come back with a response of its own. Pressure is mounting and in the meantime Tsipras is due to meet with Parliament today after cancelling a second round of talks in Brussels with the EC’s Juncker.

Elsewhere it was another day of high Bond market volatility. The intraday high to low range in 10y Bunds was 18.4bps. This week we’ve had ranges of 20.6bps, 19.7bps and 7.1bps on Wednesday, Tuesday and Monday respectively. In fact, with the exception of a 19.7bps range on May 7th, the ranges of the last three days are the largest we’ve seen this year and nearly 4x the average intraday range (5.8bps) YTD. Yesterday actually saw 10y Bunds eventually close 4.4bps lower at 0.835%. Earlier yields actually touched 0.994% before reversing course and trading steadily lower over the course of the day. It wasn’t clear what sparked the turnaround, although there was some market chatter that the psychological 1% level may have played a part. The news out of the IMF with regards to both Greece and Fed liftoff came much later in the day and in reality the bulk of the move tighter had already happened by then.

The moves in Bunds again filtered into the rest of bond markets. Other core European bond markets had similar moves intraday, while in the periphery Italy, Spain and Portugal finished 3.6bps, 2.5bps and 1.8bps tighter respectively. 10y Treasuries followed a similar pattern of trading, striking 2.424% intraday (we’ve not closed higher in yield since October 3rd last year), before then rallying into a closing level of 2.307% – a 5.7bps tightening but a 13bps high-to-low range. The brief move higher in Treasuries actually saw 5y, 10y and 30y yields all briefly touch YTD highs in yield.

The volatility in bonds wasn’t particularly kind to equity markets yesterday as the S&P 500 (-0.86%), Dow (-0.94%), Stoxx 600 (-0.83%) and DAX (-0.69%) all fell. A weaker performance for energy names didn’t help with the commodity complex softening yesterday. WTI (-2.75%) and Brent (-2.77%) both fell to $58.00/bbl and $62.03/bbl respectively after concerns that OPEC would refrain from cutting its production target today. Gold fell 0.70% while the Dollar index pared earlier losses to finish unchanged as the Euro moved higher with Bund yields.

It’s also interesting taking a look at what the moves in Bunds this week has done for credit spreads. Since Friday’s close, Euro IG spreads have widened 4.3bps, while HY spreads have actually tightened a very modest 0.3bps. This masks a more material weakening yesterday however when HY spreads actually widened 5bps and essentially wiped out the week’s move tighter. The move wider for IG was a lot more muted yesterday (+0.7bps), although spreads have been edging wider over the last couple of weeks. Interestingly this comes on the back of the largest weekly inflow for Western European HY funds in six weeks ($490m). It was a more muted week for Western European IG funds (+$47m) however, but it’s interesting to see that the rates sell-off hasn’t yet led to outflows.

Back to the IMF yesterday. The fund certainly added to a slightly more dovish tone from Fed speakers recently after saying that the Fed should wait until the first half of 2016 to raise rates. The IMF noted that the Fed should wait for ‘greater signs of wage or price inflation than are currently evident’ and that ‘based on the mission’s macroeconomic forecast, and barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016’. The Fund also downgraded their forecasts for US growth this year to 2.5%, from the previous 3.1% projection while taking their 2016 forecast down slightly to 3% (from 3.1%).

The comments yesterday from the IMF echoed a fairly dovish Fed Governor Tarullo, who said that ‘in a broader sense, there are more questions at this point in 2015 than there were at this point in 2014’. He then went on to say that the Q1 weakness cannot be blamed solely on seasonality and suggested that the US economy has now lost momentum. Tarullo’s comments have added to a run of more dovishly-biased comments of late, including from Evans, Brainard, Kocherlakota and Rosengren.

Data yesterday was more of a sideshow with the events elsewhere but was generally more or less in line with expectations. In the US we saw another solid initial jobless claims print, declining 8k to 276k (vs. 278k expected). Q1 unit labour costs were above market (+6.7% qoq vs. +6.1% expected) while nonfarm productivity was a touch weaker (-3.1% qoq vs. -3.0% expected). In Europe the French unemployment rate ticked down one-tenth of a percent to 10.0% as expected. Meanwhile in the UK the BoE offered no surprises leaving rates on hold at 0.5%

Yesterday’s bond market volatility actually came following what was also a highly volatile day for Chinese equities, once again coming after we went to print. Yesterday we saw the Shanghai Comp finish +0.76%, although this was after the index fell 5.2% intraday (-1.8% when we went to print) after the news that a brokerage was suspending margin financing for purchases of ChiNext shares. So a 12% round trip. This morning we’ve seen further volatility after the Shanghai Comp (-0.12%) and Shenzen (-0.06%) reversed earlier gains of as much as +2%. The Shanghai Comp did at one point top the 5000 level for the first time since early 2008. There’s a similar weakness elsewhere with the Nikkei (-0.44%), Hang Seng (-0.88%) and Kospi (-0.25%) trading down. 10y Treasuries have widened 1.3bps in early trading.

In terms of the calendar this morning, it’s relatively quiet in Europe with just French trade data and German factory orders being the highlights. The focus this afternoon will of course be on payrolls, with the market currently looking for a 226k print, +3k on April. DB’s Joe Lavorgna is more optimistic however, forecasting a 275k reading and noting in particular the supportive downward trend in initial jobless claims recently. Elsewhere in the US, we get the usual associated employment readings including unemployment and average hourly earnings. Consumer credit for May rounds off the releases while the Fed’s Dudley will be the latest Fed official to speak.

 

end

 

Early this morning after Greece left empty handed, Tsipras will address Parliament today.  Officials also started to use the Russian pivot card:

the building of the Turkish stream pipeline through Greece and onward to Europe.

Tsipras Plays Putin Pivot Card; Tests Parliament’s Patience On Troika Proposal

Greece was scheduled to pay the IMF around €300 million today. Athens will not make the payment.

On Thursday, the IMF acknowledged that Greece had indeed requested that its June payments to the Fund be bundled, buying PM Alexis Tsipras valuable time as he makes one final push to strike a deal with creditors that bears some vague resemblance to his party’s campaign promises. Whether or not he will be successful remains to be seen. It’s entirely possible that the PM’s defiant position on pension and VAT “red lines” is only possible due to the extra negotiating time afforded by the combined IMF payment option. The troika likely knows that if it can hold out for another few weeks, Tsipras will have no choice but to make painful concessions — the onus will then be on the PM to push the deal through parliament.

Speaking of parliament, Tsipras will address Greek lawmakers on Friday and as The New York Times notes, it is not likely to be a cordial affair:

[Creditors’] demands prompted angry reactions from several government officials in Athens on Thursday, underscoring the difficulty Mr. Tsipras will have in gaining parliamentary support for any deal that is reached.

 

Syriza party hard-liners have suggested in recent days that they may dissent if Mr. Tsipras strikes a deal that they consider a violation of the anti-austerity pledges that brought the party to power in January. The junior coalition partner, the right-wing Independent Greeks, has also said it would not back further austerity.

 

After details of the plan were leaked, the rhetoric in Athens got heated.

 

In Parliament, the labor minister, Panos Skourletis, referred to an “undeclared war” that he said was being waged “by modern capitalism.” In comments to Greek television on Thursday, Alexis Mitropoulos, the deputy speaker of Parliament and a prominent lawmaker of Syriza, accused Mr. Juncker — who is widely perceived as friendly to Greece — of “delivering the most vulgar, murderous and tough plan when everyone was looking toward the negotiations closing.”

As noted previously, some manner of political shakeup is still more likely than not in Athens as Tsipras will ultimately be forced to accept a deal that party hardliners will not concede to. RBS has more on the political risks associated with the negotiations:

Elections now appear very likely. Either PM Tsipras will opt to force through measures demanded by creditors, likely triggering a collapse in parliamentary majority, or go to polls now.

 

The risk is that Syriza may seek people’s mandate to return to drachma.

 

See 60% probability that deal is accepted, with elections likely after implementation, and 40% chance that govt goes to polls before a deal is signed.

 

In latter scenario, forecast 50/50 probability that events ultimately trigger euro exit.

And here’s some further color on the Greek counterproposal from Eurogroup chairman Jeroen Dijsselbloem:

“Apparently [bundling is] an option IMF has offered earlier. That’s  an example and that’s why this possibility is offered to Greece.  If they come up with alternatives on our proposal, it should be financially correct and wise from an economic perspective. We’re waiting for their reaction. We were hoping to get it by today, but I still can’t tell. I’m not sure either whether this meeting will go on today. We’re in a process of coming up with a plan to get Greece back on track which makes them stronger from a financial and economic point of view. They’re far away from that and they’re threatening to get even further away from that. This cannot be achieved with just nice measures but it also requires unpleasant measures, that’s something the Greek government will have to recognize.”

Meanwhile, in Berlin, Angela Merkel continues to face pressure from her Christian Democratic bloc to abandon support for Greece and there are now rumors that German FinMin Wolfgang Schaeuble and the Chancellor may have had a falling out over the course of the week, with Schaeuble only learning of emergency talks by accident through IMF chief Christine Lagarde.

Via Bloomberg:

German Finance Minister Wolfgang Schaeuble wasn’t informed about a confidential meeting between Chancellor Angela Merkel, IMF Managing Director Christine Lagarde and ECB President Mario Draghi on June 1, Bild-Zeitung says.

 

Schaeuble learned of the meeting by chance through Lagarde Bild cites unnamed high-ranking Finance Ministry official as saying that Merkel acted unilaterally.

 

Bild says there’s concern among lawmakers in Merkel’s Christian Union bloc that Schaeuble would quit if Merkel undermines his tough stance on Greece

 

Schaeuble would not agree to a “rotten compromise” on Greece as that would endanger his credibility, Bild cites CSU lawmaker Hans Michelbach as saying.

 


 

Without Schaeuble, the Christian Union bloc wouldn’t back any aid for Greece, Bild cites Michelbach as saying.

The German finance ministry has denied the split.

Finally, in what is perhaps the most definitive sign that talks between Athens and creditors have reached an outright stalemate, Tsipras is once again playing the only card he has left: the ‘Russian pivot.’

Via Bloomberg:

Greek PM Alexis Tsipras, Russian President Vladimir Putin to hold call at 1pm Athens time, a Greek govt official says in text message.

 

Tsipras, Putin to discuss Greek PM’s visit to Russia where he will attend St. Petersburg Economic Forum June 18-20: official

 


 

Leaders to discuss cooperation in business, energy: official

As a reminder, Greece has indicated it is prepared to sign an MOU regarding the construction of its portion of Gazprom’s Turkish Stream pipeline, and previous reports suggest it’s still possible that Athens can secure a loan from Moscow against expected future profits from the two countries’ energy partnership.

*  *  *

Ultimately, all eyes will be on Greek MPs as the market attempts to gauge how much leeway Tsipras has in terms of concessions he can make without throwing the country into political turmoil.

 end
Tspiras takes off the gloves as he addresses  the Greek Parliament;
(courtesy Bloomberg)

Tsipras Asks Greece’s Creditors to Withdraw Latest Proposal

Prime Minister Alexis Tsipras asked Greece’s international creditors to withdraw their conditions for giving more money in a defiant address to parliament.

“The proposals from the creditors are clearly unrealistic,” Tsipras told lawmakers in Athens late Friday. “The Greek government cannot consent to unreasonable proposals that call for devastating measures for pensioners and Greek families. I want to believe that it was a bad negotiating trick.”

The embattled Greek leader went on the attack after telling German Chancellor Angela Merkel and French President Francois Hollande on Thursday that a list of proposals set by creditors to unlock bailout funds can’t be the basis for a deal. German and French officials declined to comment on the contents of the call.

The latest proposal was an “unpleasant surprise,” Tsipras said, adding that voters are asking the government “not to succumb to the irrational, blackmailing demands of our creditors.”

Greece notified the International Monetary Fund on Thursday that a 300 million-euro ($337 million) payment due Friday would be deferred and bundled with three more payments at the end of June. The move was a 180-degree turn by the government and caught many by surprise. While bundling the transfers is permitted under IMF rules, the deviation from standard practice adds to signs that Greece may be readying for a potential breakdown of talks after a four-month-long impasse.

Troika Terms

“The surprise move shows that the troika can’t dictate the terms of an agreement,” Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, said in a statement, referring to the group of lenders including the IMF, European Commission and European Central Bank.

Tsipras said the IMF’s consent to the bundling means “it’s finally clear to everyone, and mostly understood by the markets themselves, no one wants a rift. And time now is running out not just for Greece, but for everyone.”

The government’s main targets for a deal with Greece’s creditors remain lower primary budget surpluses in coming years, on which the two sides have already agreed, as well as some kind of debt relief and the protection of pensions and wages, Tsipras said.

The benchmark Athens Stock Exchange plummeted 5 percent before Tsipras spoke on Friday, the most since January. The yield on Greek 10-year bonds added 31 basis points to 11.22 percent, the biggest increase since May 26. The 10-year yield is still down from this year’s high of 13.93 percent and a record 44.21 percent in 2012. The two-year yield rose 198 basis points to 25.22 percent.

Enough Cash

The IMF delay wasn’t related to a lack of funds, as Greece had enough cash reserves to make the payment due Friday, said a person familiar with the country’s financing position. The official asked not to be named as he wasn’t authorized to discuss the matter publicly.

“If they come up with alternatives on our proposal, it should be financially correct and wise from an economic perspective,” Jeroen Dijsselbloem, who leads the euro-area group of finance ministers, said in the Hague. “We’re waiting for their reaction. We were hoping to get it by today.”

Merkel and Hollande have spoken with Tsipras several times over the last week to try to resolve the standoff. The conversations “naturally are constructive,” Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin. He declined to comment on the substance of Thursday’s call.

‘Reasonable’ Plan

The IMF, European Commission and European Central Bank have “put on the table something which is very reasonable,” IMF chief economist Olivier Blanchard said earlier Friday at a conference in New York. A Greek agreement would require more financing from the IMF’s European partners and “probably some debt relief,” he said.

Even with the comments about the creditors’ plan, Tsipras said Greece is “closer to a deal than ever before” and that any agreement must end discussion about the nation leaving the euro. “It’s common knowledge that the Greek side has proposed a realistic framework for a solution,” he said.

As the stalemate drags on, the odds of Greece exiting the common currency have risen to about 20 percent from between 10 percent and 15 percent previously, Royal Bank of Scotland Group Plc estimates. “Elections now appear very likely,” RBS strategists including Marco Brancolini wrote in a note to clients Friday. “Either PM Tsipras will opt to force the measures through (likely triggering a collapse in his parliamentary majority) or go to new elections.”

Half of Greeks said the Syriza-led government should abandon its so-called red lines if creditors don’t accept them in order to have an agreement, according to a poll published Friday by the newsit.gr website. Almost the same number, 47 percent, said they disagree with the way the government is conducting negotiations. A large majority, 74 percent, of those polled said they wanted Greece to remain in the euro. The poll was conducted June 3 to June 4.

end

 

Then late tonight, just after Tsipras was addressing Parliament, we get this important story of a massive bank run in Greece:

As a background:

1.A few years ago, total Greek deposits were around 250 to 260 billion euros.

2. There is now almost 110 billion euros in bad debt sitting in all of the banks.

3. As of April 30, we had 133.7 billion euros (the last time the Greek authorities reported on this)

4. The emergency ELA provided by the ECB has now risen to 80.7 billion euros.

5. Today 700 million euros were withdrawn. In the last week: 3 to 4 billion withdrawn.

6. The Greek banks probably have no more than 120 billion euros against bad debt of 110 billion euros.

7. Most of the Greek depositors having deposits in excess of 100,000 euros have withdrawn their money.

8. Big corporates have engaged in loans as well as outright withdrawals and parked these euros in safe European havens such as Germany.  These show up as Target 2 balances.  The total ECB target 2 balances are in excess of 1 trillion euros.  Greece’s Target 2 debt (to Germany, Finland, Austria) alone is around 32 billion euros.

9. On a bankruptcy the entire 80.7 billion euros (lend by the ECB) will be lost as well as the target 2 balance of 32 billion euros)

 

(courtesy zero hedge)

Greek Banks On Verge Of Total Collapse: Bank Run Surges “Massively” As Depositors Yank €700 Million Today Alone

While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse.

As a reminder, Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced “bail in” deposit haircut a la Cyprus.

The problem is that a Greek deposit number as of a month and a half ago is hopefully inaccurate. It is also the biggest problem for Greece, which has been desperate to prevent an all out panic among those who still have money in the banking system.

Things got dangerously close to the edge last Friday (as noted before) when things for Greece suddenly looked very bleak ahead of this week’s IMF payment and politicians were forced to turn on the Hope Theory to the max, promising a deal with Europe had never been closer.

It wasn’t, and instead Greece admitted its sovereign coffers are totally empty this week when it “bundled” its modest €345 million payment to the IMF along with others, for a lump €1.5 billion payment, which may well never happen.

And the bigger problem for Greece is that after testing yesterday the faith and resolve of its depositors (not to mention the Troika, aka the Creditors) and found lacking, said depositors no longer believe in the full faith (ignore credit) of the Greek banking system.It may have been the Greek government’s final test.

Because according to banking sources cited by Intelligent News, things today went from bad to horrible for Greek banks, when Greeks “responded with massive outflows to the Greece’s government decision to bundle the four tranches to IMF into one by the end of the June.”

According to banking sources, the net outflows sharply increased on Friday and the available liquidity of the domestic banking system reduced at very low and dangerous levels.

The same sources estimate the outflows on Friday around 700 million Euros from 272 million Euros on Thursday. The available emergency liquidity assistance (ELA) for the Greek banks is estimated around 800 million Euros. In addition, the outstanding amount of the total deposits of the private sector (households and corporations) has declined under 130 billion Euros or lower than the levels at early 2004.

The total net outflows in the last 7 business days are estimated 3.4 billion Euros threatening the stability of the Greek banks.

This means 2.5% of all Greek deposits were pulled in just the past 5 days! Indicatively, this is the same as if US depositors had yanked $280 billion from US banks (where total deposits amount to about $10.7 trillion)

As further reported, the Bank of Greece is set to examine on Monday if Greece will urgently ask additional ELA. However, since one of the main conditions by the ECB to keep providing ELA to Greece is for its banks to be “solvent” (a condition which is only possible thanks to the ECB), one wonders at what point the Troika, whose clear intention it has been from day one to cause the Greek bank run in the process leading to the fall of the Tsipras government, will say “no more.”

For those interested, according to IN, the deposit (out)flows in the last 7 business days are as follows:

Finally, for those who missed it, here is the first hand account of the Greek bank run from precisely a week ago as retold by ZH contributor Tom Winnifrith:

Witnessing the great bank run first hand as I deposit money in Greece

Jim Mellon says that the Greeks should build a statue in my honour as on Friday I opened a bank account in Greece and made a deposit. Okay it was only 10 Euro, I need to put in another 3,990 Euro to get my residency papers so I can buy a car, a bike and a gun, but it was a start. But the scenes at the National Bank in Kalamata were of chaos, you could smell the panic and they were being replicated at banks across Greece.

For tomorrow is a Bank Holiday here and if you are going to default on your debts/ switch from Euros to New Drachmas a bank holiday weekend is the best time to do it. And with debt repayments that cannot be met due on June 5 (next Friday) Greece is clearly in the merde. If it defaults all its banks go bust.

But I had to open an account and make a deposit. Outside the bank in the main street of Kalamata there are two ATMs. The lines at both were ten deep when I arrived and when I left an hour later. Inside I was directed to the two desks marked “Deposit”. You go there to put in money, to open an account or if you are so senile that you cannot do basic admin of your account without assistance. As such it was me depositing cash and four octogenerians who had not got a clue about anything. Actually I lie. These folks may have been gaga but they were not so gaga that they were actually going to deposit cash, I was the sole depositer.

Friday was also the day when pensions are paid into bank accounts. On the Wednesday and Thursday it was reported that Greeks withdrew 800 million Euro from checking accounts. Friday’s number will dwarf that. Whe you go to a Greek bank you pull off a ticket and wait for your number to be called. The hall in my bank contains about 60 seats all of which were filled. There were folks standing behind the seats and in fact throughout the hall, all wanting to get their cash out before the bank closed at 2 PM.

At the side of the room, shielded by a glass screen sat a man behind a big desk. He tapped away at his screen and made phone calls. Ocassionally folks wandered over, shook papers in his face and harangued him having got no joy elsewhere. So I guess he was the bank manager. I rather expected him to end one phone call and stand up to say “That was Athens – all the money has gone, its game over folks.” But he didn’t. He may well do so at some stage soon.

Eventually I got the the front of my five person queue of the senile and opened my account. Passport, tax number, phone number all in order. I handed over a 10 Euro note and the polite – if somewhat stressed – young man gave me about ten pieces of paper to sign and stamped my passbook. I have done my bit for Greece and have given it 10 Euro which I will lose one way or another in due course. So Jim – time to lobby for that statue.

The Government did not put up a default notice on Friday as I half expected. The can kicking goes on. The ATMs will be emptied this weekend and on Tuesday and in the run up to a potential default day next Friday the banks will be packed again with folks taking out whatever money they can.

It is not just the bank coffers that are being emptied. To get to The Greek Hovel where I sit now from my local village of Kambos is a two mile drive. On my side of the valley there is some concrete track but it is mainly a mud road. On the other side of the valley there is a deserted monastery so to honour the Church – even if there are no actual monks there – a concrete road was built in the good times. By last summer it was more pothole than road.

By law, since I have water and electricity, I can demand that the road be mended and so last summer I went to the Kambos town hall (4 full time staff serving a population of 536) and did just that. They said “the steam roller is broken and we have no money but will try to do it in the Autumn.” They did not.

But last week a gang of men appeared and the road is now pothole free, indeed in some places we have a whole new concrete surface. And as I head towards Kalamta there are extensive road mending programmes. At Kitries, the village has found money to renovate its beach front. It is a hive of activity across the Mani.

Quite simply each little municipality is spending every cent it has as fast as it can. The Greek State asked all the town halls to hand over spare cash a few weeks ago to help with the debt repayment. The town halls know that next time it will not be a request but an order. But by then all the money they had hoarded will have been spent. That is Greekeconomics for you.

Everyone knows that something has to give and that it will probanly happen this summer. The signs are everywhere.

 

end

A terrific commentary from Ambrose Evans Pritchard on how the IMF fumbled the ball with its dealing with Greece:

a must read…

(courtesy Ambrose Evans Pritchard and special thanks to Robert H for alerting me on this)

 

Greece misses IMF payment in warning shot as showdown with Europe escalates

 

No developed country has ever skipped a payment to the IMF – but Greek sources say they were provoked

A pedestrian passes street graffiti depicting a 'zero' euro coin on the wall of a parking lot in Athens, Greece

Syriza had the money at hand. it chose not to pay as a conscious political choice Photo: Bloomberg

Greece is to take the drastic step of skipping a €300m payment to the International Monetary Fund on Friday, invoking an obscure mechanism in abeyance since the 1970s to bundle all debts due in June and pay them at the end of the month.

It is the first time that a developed country has ever missed a payment to the IMF since the creation of the Bretton Woods institutions at the end of the Second World War.

The news broke after the Athens stock exchange had closed but a bloodbath is feared when the bourse opens on Friday. Yields on two-year Greek bonds spiked 63 basis points to 21.8pc amid mounting fears of a deposit run on Greek banks and the imposition of capital controls as soon as this weekend.

The IMF said it had been notified by the Greek authorities that they would pay the entire €1.6bn due this month on June 30, dusting down a procedure last used by Zambia in the 1980s.

What happens if Greece defaults on the IMF?

The shock move came as leaders of the ruling Syriza movement were locked in a series of emergency meetings to vent their fury over the latest austerity demands by the European creditor powers.

Senior figures in the party lined up to denounce the “ultimatum” from Brussels as another wasted moment after four months of acrimonious talks. “It cannot form the basis of an agreement,” said Tassos Koronakis, the party secretary.

http://cloud.highcharts.com/embed/ovegow

Alexis Mitropoulos, the deputy speaker of parliament, called it “the most vulgar and murderous plan” that shattered hopes of a deal just as everybody was expecting a breakthrough. Others daubed their war paint and vowed angrily that there would be no “surrender”.

The skipped payment is the clearest sign to date that the crisis is escalating to a dangerous level as Syriza refuses to buckle. It will not be resolved without European statesmanship of a high order, so far lacking. While the authorities sought to play down the Greek decision, it was clearly intended as a warning shot. Syriza had the money at hand. It chose not to pay as a conscious political choice.

The Greeks accuse the IMF of violating its own rules by colluding in an EMU-led policy that leaves the country with unsustainable debts. Athens is implicity threatening to escalate the situation all the way to a full default to the IMF, setting off a grave institutional and political crisis within the Fund itself.

Syriza leaders say they are unwilling to burn any more of the country’s dwindling cash reserves to pay creditors until there is a credible offer on the table, insisting that their priority is to pay pensions and salaries and avoid default to their own people.

http://cloud.highcharts.com/embed/uzorez

One cabinet minister told The Telegraph that the proposals by creditors seemed designed to bring about a deliberate rupture. “They want to force us into a position where we can’t sign,” he said.

“In a strange way we are all breathing a sigh of relief. We were afraid of a bad deal that would split the party but this is so atrocious it makes life easier. None of us can accept it,” he said.

The decision to bundle the payments to the IMF brings forward a decision that was coming anyway. EU sources say the Greeks cannot meet a fresh deadline for €750m next week.

Christine Lagarde, the IMF’s managing director, was caught off guard by the move. Hours earlier she had expressed confidence that the Greeks would meet Friday’s deadline.

Greece is still a long way from formal default. If the country misses the payment on June 30 – a certainty unless one side or the other blinks – this will then set the clock ticking on a six-week process.

Yet events risk spinning out of control much sooner if there is a collapse of confidence. Analysts warn that deposit flight was already running at €400m a day earlier this week and may now set off a fast-moving chain of events, leading to the sort of deposit lockdown seen in Argentina during the peso crisis in 2001, followed by a parallel currency or IOUs, and a temporary nationalisation of the banking system – if the European Central Bank cuts off the liquidity lifeline.

Alexis Tsipras, the Greek prime minister, had hinted that Greece would cover Friday’s payment to the IMF after meeting top EU officials for five hours in Brussels on Wednesday night, saying “don’t worry about it”.

But events are taking on a life of their own in Athens as the party imposes its will, and Mr Tspiras himself has oscillated from emollience to defiance almost by the hour.

While promising that a deal with creditors was “within sight”, he then undercut this completely by insisting that the only “realistic proposals on the table” are the alternative measures put forward by the Greek government earlier this week in a 46-page document.

Syriza officials say his half-hearted efforts to talk up hopes of a deal in Brussels belie the real mood at the Maximus Mansion, where the prime minister is increasingly ready to contemplate rupture, as he hinted in a fiery editorial in Le Monde on Sunday.

The creditors have offered some leeway on austerity, lowering their demand for a primary surplus to 1pc of GDP this year, 2pc next year and 3pc in 2017, but even this now implies a major fiscal squeeze as the economy contracts again.

The demands include pension cuts and VAT raises that together amount to 1pc of GDP this year and 2pc in 2016, a fiscal shock that risks pushing Greece back into a seventh year of depression. “They want us to raise the tax on hotels to 23pc in the middle of the tourist season. These people are mad,” said one Syriza official.

Ashoka Mody, a former IMF bail-out chief in Europe, said the Greeks are right to resist the demands. “Everything that we have learned over the past five years is that it is stunningly bad economics to enforce austerity on a country in a deflationary cycle. Trauma patients have to heal their wounds before they can train for the 10K,” he said.

“I am frankly shocked that we are having any discussion about raising VAT in these circumstances. We have just seen a premature rise in VAT knock the wind out of a country as strong as Japan,” he said.

“Syriza should recruit the IMF’s research department to be their spokesman because they are saying almost exactly the same thing. The entire strategy of the creditors is wrong and the longer this goes on, the more it’s going to cost them, as well as Greece.”

Yet the IMF itself seems to have a split personality. Its officials on the ground in Greece have been taking the toughest line against Syriza, though they do support Greek demands for debt-relief.

EU sources say the Fund wishes to extricate itself as soon as possible and appears willing to precipitate a breakdown in order to force Greece and the EU creditors to find a modus vivendi.

Asian and Latin American members of the IMF board have long resented what they regard as misuse of the IMF’s resources to sort out an internal family dispute within a rich currency bloc, an anomaly that ropes some of the world’s poorest countries into bailing out Europe.

They insist that the EMU creditor powers have ample means to resolve the crisis at any time they choose but are dragging their feet because they have yet to face up to the implications of their own monetary union.

end

 

A blockade on Transnistria is surely enough to aggravate Vladimir Putin. Let us see how this plays out;

 

 

(courtesy Eurasianet.org) and special thanks to Robert H for sending this to us

With Ukrainian “Blockade,” Drums Of War Sounding In Transnistria

end
Michael Snyder of the Economic Collapse Blog puts in all together.
A very important read…
(courtesy Michael Snyder..)

The Central Banks Are Losing Control Of The Financial Markets

Dollars And Euros - Public DomainEvery great con game eventually comes to an end.  For years, global central banks have been manipulating the financial marketplace with their monetary voodoo.  Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation.  For quite a long time I have been insisting that this is highly irrational.  Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run?  And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation.  Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation.  Therefore, rational investors should respond by driving interest rates up.  Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened.  But now things have shifted.  Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.

And of course it isn’t just bond yields that are out of control.  No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well.  This week, Greece became the very first nation to miss a payment to the IMF since the 1980s.  We’ll discuss that some more in a moment.

Over in Asia, stocks are fluctuating very wildly.  The Shanghai Composite Index plunged by 5.4 percent on Thursday before regaining all of those losses and actually closing with a gain of 0.8 percent.  When we see this kind of extreme volatility, it is a very bad sign.  It is during times of extreme volatility that markets crash.

Remember, stocks generally tend to go up during calm markets, and they generally tend to go down during choppy markets.  So most investors do not want to see lots of volatility.  Unfortunately, that is precisely what we are witnessing all over the world right now.  The following comes from the Wall Street Journal

Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted.

The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.

Sometimes when bond yields go up, it is because investors are taking money out of bonds and putting it into stocks because they are feeling really good about where the stock market is heading.  This is not one of those times.  As Peter Tchir has noted, the huge moves in the bond market that we are now seeing are the result of “sheer panic in the market”

In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.” And Tom di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets, told Bloomberg, “This is sheer panic in the market from the standpoint of what’s been happening in Europe … Most of Wall Street is guarded here as far as taking on new positions.”

But this wasn’t supposed to happen.

After watching the Federal Reserve be able to successfully use quantitative easing to drive down interest rates, the European Central Bank decided to try the same thing.  Unfortunately for them, investors are starting to behave more rationally.  The central banks are starting to lose control of the financial markets, and bond yields are soaring.  I think that Peter Boockvar summarized where we are currently at very well when he stated the following…

I’ve said this before but I’m sorry, I need to say it again. What we are witnessing in global markets is the inherent contradiction writ large that is modern day monetary policy where dangerously ZIRP, NIRP and QE are considered conventional policies. The contradiction is simply this: the desire for higher inflation if fulfilled will result in higher interest rates that central banks are trying so hard and desperately to suppress.

Outside of the short end of the curve, markets will always win for better or worse and that is clearly evident now. The ECB is getting their first taste of the market talking back and in quite the violent way. In the US, the bond market is watching the Fed drag its feet (its never-ending) with wanting to raise interest rates and finally said enough is enough. The US Treasury market is tightening for them. Since mid April, the 5 yr note yield is higher by 40 bps, the 10 yr is up by 55 bps and the 30 yr yield is up by 65 bps.

And if global investors continue to move in a rational direction, this is just the beginning.  Bond yields all over the planet should be much, much higher than they are right now.  What that means is that bond prices potentially have a tremendous amount of room to go down.

One thing that could accelerate the global bond crash is the crisis in Greece. Negotiations between the Greeks and their creditors have been dragging on for four months, and no agreement has been reached.  Now, Greece has missed the loan payment that was due to the IMF on June 5th, and it is asking the IMF to bundle all of the payments that are due this month into one giant payment at the end of June

Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.

The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.

Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.

Of course that payment will not be made either if a deal does not happen by then.  And with each passing day, a deal seems less and less likely.  At this point, the package of “economic reforms” that the creditors are demanding from Greece is completely unacceptable to Syriza.  The following comes from an article in the Guardian

Fresh from talks in Brussels, Tsipras faced outrage on Thursday from highly skeptical members of his own Syriza party. A five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was variously described as shocking, provocative, disgraceful and dishonourable.

It will never pass,” said Greece’s deputy social security minister, Dimitris Stratoulis. “If they don’t back down, the country won’t be lost … there are alternatives that would cost less than our signing a disgraceful and dishonourable agreement.”

Ultimately, I don’t believe that we are going to see an agreement.

Why?

Well, I tend to agree with this bit of analysis from Andrew Lilico

The Eurozone does not want to make any compromise with the current Greek government because (a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro; (b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and (c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.

Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered.  Things have gone too far now for mere words to work.  They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back.  That is almost certainly not doable at all with the current Greek government.  The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.

On the Syriza side, I see no more appetite for a deal.  They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery.  From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.

You can read the rest of his excellent article right here.

Without a deal, the value of the euro is going to absolutely plummet and bond yields over in Europe will go through the roof.  I am fully convinced that this is the beginning of the end for the eurozone as it is currently constituted, and that we stand on the verge of a great European financial crisis.

And of course the financial crisis that is coming won’t just be in Europe.  The global financial system is more interconnected than ever, and there are tens of trillions of dollars in derivatives that are tied to foreign exchange rates and 505 trillion dollars in derivatives that are tied to interest rates.  When this giant house of cards collapses, the central banks won’t be able to stop it.

In the end, could we eventually see the entire central banking system itself totally collapse?

That is what Phoenix Capital Research believes is about to happen…

Last year (2014) will likely go down in history as the “beginning of the end” for the current global Central Banking system.

What will follow will be a gradual unfolding of the next crisis and very likely the collapse of the Central Banking system as we know it.

However, this process will not be fast by any means.

Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).

There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.

We stand at the precipice of the greatest economic transition that any of us have ever seen.

Even though things may seem very “normal” to most people right now, the truth is that the global financial system is fundamentally flawed, and cracks in the system are starting to appear all over the place.

When this system does collapse, it will take most people entirely by surprise.

But it shouldn’t.

All con games eventually fall apart in the end, and we are about to learn that lesson the hard way.

end

Your more important currency crosses early Friday morning:

 

Euro/USA 1.1228 up .0021

USA/JAPAN YEN 124.81 up .418

GBP/USA 1.5309 down .0049

USA/CAN 1.2518 up .0022

This morning in Europe, the Euro rose by a tiny 21 basis points, trading now just above the 1.12 level at 1.1228; 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, rising peripheral bond yields and today crumbling bourses.

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 42 basis points and trading well above the 124 level to 124.81 yen to the dollar.

The pound was well down this morning as it now trades well below the 1.54 level at 1.5309, 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 22 basis points at 1.2518 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 1.0489 to the Euro, trading well below 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 27.29 points or 0.13%

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

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

Gold very early morning trading: $1174.60

silver:$16.15

Early Friday morning USA 10 year bond yield: 2.35% !!! up 3 in basis points from Thursday night and it is trading above resistance at 2.27-2.32%.

 

USA dollar index early Friday morning: 95.60 up 14 cents from Thursday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Friday morning

And now for your closing numbers for Friday:

 

Closing Portuguese 10 year bond yield: 2.95%  up 10 in basis points from Thursday (getting ominous)

Closing Japanese 10 year bond yield: .49% !!! down 2 in basis points from Thursday/(getting ominous)

Your closing Spanish 10 year government bond, Friday, up 12 points in yield (very ominous)

Spanish 10 year bond yield: 2.23% !!!!!!

 

Your Friday closing Italian 10 year bond yield: 2.24% up 9 in basis points from Thursday: (very ominous)

trading 1 basis point higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

 

Euro/USA: 1.1114 down .0093 ( Euro down 93 basis points)

USA/Japan: 125.63 up  1.236 ( yen up 126 basis points)

Great Britain/USA: 1.5268 down .0090 (Pound down 90 basis points)

USA/Canada: 1.2449 down .0047 (Can dollar up 47 basis points)

The euro fell considerably today. It settled down 93 basis points against the dollar to 1.1114 as the dollar jolted northbound against most of the various major currencies . The yen was down by a huge 126 basis points and closing well above the 125 cross at 125.63. The British pound lost some ground today, 90 basis points, closing at 1.5268. The Canadian dollar gained some ground against the USA dollar, 47 basis points closing at 1.2449 reporting a good jobs growth.

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: 2.40% up 10 in basis point from Thursday// (well above  the resistance level of 2.27-2.32%)/

 

Your closing USA dollar index:

96.35 up 89 cents on the day.

 

European and Dow Jones stock index closes:

 

England FTSE down 54.64 points or 0.80%

Paris CAC down 66.39 points or 1.33%

German Dax down 143.45 points or 1.26%

Spain’s Ibex down 84.10 points or 0.75%

Italian FTSE-MIB down 489.16 or 2.10%

 

The Dow down 56.12  or 0.31%

Nasdaq;up 9.33  or 0.18%

 

OIL: WTI 58.95 !!!!!!!

Brent:63.18!!!!

 

Closing USA/Russian rouble cross: 56.37  down 1/8  roubles per dollar on the day

end

 

And now for your more important USA stories.

 

NY trading for today:

Week Of Epic Bond Volatility Ends With A Whimper

For all the talk and feverish anticipation of today’s payrolls number, which came in far stronger than expected on the headline assisted by a surge in self-employed Americans, some 370,000 to be exact, most of whom between the ages of 20 and 24 at least according to the BLS, the market reaction was largely a dud and after an initial spike lower, followed by a just as frenzied episode of BTFD, ES was locked in a trading range set by yesterday’s lows and VWAP of course.

 

The weekly chart shows that while the three main indexes all closed modestly lower, the Russell managed to outperform but the biggest winner this week was the trannies, assisted by the recent drop in crude.

 

However to see the real stock action catalyst one needs to step even further back, look at the one month volume chart, which shows a tale of two (volume) tapes: a rise on declining volume, and a drop from recent all time highs on ever higher volume. As the chart below shows, something snapped on May 26 when the trendline higher was broken, and selling on every higher volume has been the norm.

 

And yet, today’s relatively quiet stock tape masks the real tension in markets which is not so much about equities, where volatility remains artificially supressed as we showed yesterday…

…  but continued to be all about China, where the manic phase, punctuated by increasingly sharper, more frequent sell offs, clearly visible to all…

 

… and most of all the bond market, where we either are approaching an inflationary inflection point, confirmed by the 10Y closing at the highest yield of 2014…

… or are witnessing central banks slowly losing control, as shown in the following chart of MOVE, i.e., the Merrill bond market volatility index, which has been steadily rising in the past month…

… and leading to a doubling in German Bund yields in the past week alone.

 

Oil, on the other hand, was in its own world, trading according to the whims of stop-hunting algos and leading to the following perplexing monthly formation.

 

In any event, something here has to break: either yields will finally springboard higher, leading to a dramatic end in debt-funded stock buybacks which are no longer accretive at rising yield levels, thus leading to a drop in stocks, or today’s close encounter with economic growth is shown to be short-lived once again and yields resume their trek lower, cross-asset volatility normalizes, which in turn allows equities to resume their “wealth effect” climb ever higher.

Conveniently, with a number of key geopolitical events on the table, the resolution one way or another will reveal itself on very short notice.

end

The jobs report  official report: 280,000 jobs were added in May.

(courtesy zero hedge)

 

US Adds 280K Jobs In May, Much Higher Than Expected, Yellen Gets Green Light To Hike

Contrary to expectations of a modest 226K increase in nonfarm payrolls, according to the BLS in May the US added a whopping 280K jobs, with the April print revised from 223K to 221K, but March revised higher from 85K to 119K. This was the highest monthly increase in payrolls since December of 2014.  The unemployment rate rose from 5.4% to 5.5% on the number, as the number of employed Americans according to the Household Survey also rose by an almost equal 272K.

 

But while the strong number will surely grab Yellen’s attention, what is most notable is the jump in average hourly earnings, which rose by 0.3%, above the 0.2% expected, and well above the 0.1% in April, suggesting the slack in the labor force is indeed evaporating. Another way of showing the wage growth, is that it rose 2.3% in May from a year ago, which was the highest annual increase since 2009!

 

Another way of seeing the wage growth is comparing it to the civilian employment-to-population rate, traditionally the best correlation, which rose from 59.3% to 59.4%, while wages grew by 2.3% in May, the biggest annual increase since 2009.

 

Judging by the kneejerk market reaction, the data is strong enough to give Yellen a green light not only for a September rate hike, but even potentially keeps June in play.

* * *

More details from the report:

Total nonfarm payroll employment rose by 280,000 in May, compared with an average monthly gain of 251,000 over the prior 12 months. In May, job gains occurred in professional and business services, leisure and hospitality, and health care. Employment in mining continued to decline. (See table B-1.)

 

Professional and business services added 63,000 jobs in May and 671,000 jobs over the year. In May, employment increased in computer systems design and related services (+10,000). Employment continued to trend up in temporary help services (+20,000), in management and technical consulting services (+7,000), and in architectural and engineering services (+5,000).

 

Employment in leisure and hospitality increased by 57,000 in May, following little change in the prior 2 months. In May, employment edged up in arts, entertainment, and recreation (+29,000). Employment in food services and drinking places has shown little net change over the past 3 months.

 

Health care added 47,000 jobs in May. Within the industry, employment in ambulatory care services (which includes home health care services and outpatient care centers) rose by 28,000. Hospitals added 16,000 jobs over the month. Over the past year, health care has added 408,000 jobs.

 

Employment in retail trade edged up in May (+31,000). Over the prior 12 months, the industry had added an average of 24,000 jobs per month. Within retail trade, automobile dealers added 8,000 jobs in May.

 

Construction employment continued to trend up over the month (+17,000) and has increased by 273,000 over the past year.

 

In May, employment continued on an upward trend in transportation and warehousing (+13,000). Truck transportation added 9,000 jobs over the month.

 

In May, employment continued to trend up in financial activities (+13,000). Over the past 12 months, the industry has added 160,000 jobs, with about half of the gain in insurance carriers and related activities.

 

Employment in mining fell for the fifth month in a row, with a decline of 17,000 in May. The loss was in support activities for mining. Employment in mining has decreased by 68,000 thus far this year, after increasing by 41,000 in 2014.

 

Employment in other major industries, including manufacturing, wholesale trade, information, and government, showed little change over the month.

 

The average workweek for all employees on private nonfarm payrolls remained at 34.5 hours in May. The manufacturing workweek was unchanged at 40.7 hours, and factory overtime remained at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.7 hours. (See tables B-2 and B-7.)

 

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 percent. Average hourly earnings of private- sector production and nonsupervisory employees rose by 6 cents to $20.97 in May. (See tables B-3 and B-8.)

 

The change in total nonfarm payroll employment for March was revised from +85,000 to +119,000, and the change for April was revised from +223,000 to +221,000. With these revisions, employment gains in March and April combined were 32,000 more than previously reported. Over the past 3 months, job gains have averaged 207,000 per month.

 
end
The market reaction to the report:  bond yields rise, stocks drop, gold and silver drop:
(courtesy zero hedge)

“Good” Jobs Reports Sparks Market Turmoil As Rate Hike Draws Closer

Despite the rise in the unemployment rate – which by now become nothing more than a joke – the jobs report (at the headline level) was too good for the bulls demanding moar for longer. The kneejerk reaction was a selloff in bonds, commodities, and stocks as the dollar surged amid rate hike delay hopes. As time passed stocks bounced back a little but bond yields and the dollar continue to press notably higher.

The entire Treasury curve surged higher…

 

The Dollar gapped higher and is holding gains…

 

which sent gold and commodities slumping…

 

And stocks bounced back modestly from a kneejerk tumble but are fading again now…

 

Charts: Bloomberg

 

end
Still we have 93 million Americans remain out of the labour force:
(courtesy zero hedge)

93 Million Americans Remain Out Of The Labor Force Despite Nearly 400K Work Pool Increase

The reason why despite the better than expected increase in jobs the US unemployment rate rose from 5.4% to 5.5% even as the number of Unemployed workers rose by 125K to 8,674MM was due to the 397K influx into the civilian labor force which rose to 157.459MM, a new record high in the series, which on the surface would suggest declining slack as more people who have been traditionally left out of the employment calculation go back into the labor pool.

Which aslo meant that since the total US civilian non-institutional population rose by half this number, the number of Americans not in the labor force declined by 208K to just about 93 million.

And, as a result, the biggest malady affecting the US economy today, is still in place: as the chart below shows, the labor force participation rate rose just barely from 62.8% to 62.9%, a range it has been for the past year. Indicatively, the last time the US labor force was here, was in mid-1978.

 
 end
Again, most of the job gained were of the lower end: teachers, waiters retail and temporary help:  two reports
(courtesy zero hedge)
 

Where The May Jobs Were: Teachers, Waiters, Retail, And Temp Help

One of the defining features of jobs “recovery” and the main reason why wage growth has been so far below the Fed’s expectations for years it has prevented wage inflation from appearing despite years of QE, is that the quality of jobs added month after month has disappointing. May was no difference.

Yes, the headline print of 280K job additions was great, but a quick look at how the BLS got there shows that nothing has changed because four of the five main job additions were, as usual for the lowest paid jobs.

Here is the breakdown:

  • Education and Health (i.e., teachers): +74,000
  • Leisure and Hospitality (i.e., waiters): +57,000
  • Retail Trade (i.e., minimum wage store clerks): +31,400
  • Temp Help: +20,100

In fact, these lowest quality jobs accounted for two-thirds of all jobs gains in May.

As for the well paid jobs: Mining and logging (energy workers): down 18,000, Information: down: 3,000, Financial services: up 13,000, and Construction workers: up 17,000 which is not bad, however it is down more than half from April’s +35,000.

Incidentally, by consistently adding the lowest quality jobs, not only is the conundrum of America’s missing wage growth resolved, but so is the quandary of why US labor productivity has gone nowhere in the past 5 years.

 end

May Wage Growth Concentrated Among “Supervisors, Bosses”; Full-Time Jobs Still Below 2007 Peak

While the markets digest the far stronger than expected May jobs number, one thing sticks out: the wages for non-supervisory workers continue to stagnate, and while overall annual wage growth of 2.3% was the strongest monthly increase since the financial crisis, it was once again skewed toward the higher end of the labor market, with supervisors, and bosses once again taking the bulk of wage growth, or about 3.5%…

… with non-supervisory workers which comprise some 82% of the US labor force, remain stuck with nominal wage growth which barely covers inflation at about 2.0%.

 

And the other data point which may generate some skepticism about an imminent rate hike is that while full-time jobs did grow at a brisk 630K pace in May as part-time jobs this month tumbled, the total number of full-time jobs at 121.4 million is still about half a million below their pre-recession peak of 121.9 million reached in November 2007.

 

end

 

And now the real truth behind the numbers, we bring you Dave Kranzler.

Just a little teaser:  the B/D plug came in at 213,000 additional jobs.

Thus of the 280,000 job gains, this one number accounted for the majority of the gain.

such garbage that the BLS reports

(courtesy Dave Kranzler/IRD)

Non-Farm Payroll: “Something Must Be Horribly Wrong For Them To Be This Blatant”

When the propaganda gets so bad that Wall St. Journal readers respond with threats of violence [to the Hilsenrath editorial], you know the lies are getting extreme. Regarding today’s NFP, the numbers are beyond absurd. 57k jobs added in hospitality and leisure? No one has money spend and everyone knows that. We used to laugh at the propaganda numbers coming from the old Soviet Union. The numbers coming from the U.S. Government are a bigger farce than the old Soviet Union’s propaganda…Don’t hold your breath waiting for the Fed to raise rates.  –  John Titus, Best Evidence

The title quote comes from John Embry.  I was going to do a detailed dissection of the Bureau of Labor Statistics non-farm payroll data to show why the numbers are simply can not be believed.  But it’s become a pointless and repetitive exercise.

A colleague of mine thought that next to the October 2012 pre-election NFP, this was the most fraudulent report ever released.  I disagreed because at least back then the GDP reports, for as rigged as they are, were at least showing “growth” would could be used to “justify” reported employment gains.

Today’s report was far more fraudulent than the October 2012 fairy-tale for two reasons. First, we expected the pre-election 2012 fictitious report for obvious reasons.  But second, by the Government’s own numbers the economy contracted in Q1 2015.  Moreover, almost all of the economic data released in April and May showed not only further economic contraction but also that the rate contraction increased.   In Q1 2015 corporate profits dropped by the most amount since 2008 .   Companies DO NOT hire people when their business is contracting.   The non-farm payroll report is a complete fraud.

The non-farm payroll report is the poster-child for everything that is wrong with our country.  The banks have been announcing 10’s of thousands of layoffs coming.  Banks are downsizing because lending activity of all sorts is declining.  When there is no economic activity to finance, it means that the economy is contracting and businesses fire – not hire – workers.  Hewlett Packard, one of the countries largest business services companies announced yesterday that “more layoffs are coming”  LINK.  That means the same holds true for every other large technology/business services company.   These companies did not hire 63,000 people in May only to turnaround and fire them in June.

The Government wants us to believe that the construction industry hired 17k new workers in May.  Yes, construction spending showed a slight bounce in April but this was 110% driven by Government spending, which has been in a downtrend.  Private residential construction spending continued its 3-month decline.  As John Williams of Shadowstats.com summarizes:

The aggregate construction series remained near the recent low of a down-trending pattern of stagnation, with the real series holding at 32.9% below its pre-recession peak of March 2006.  The private-residential series remained down-trending both before and after adjustment for inflation.

This implies that there were not any construction workers added in May.  If anything homebuilders kept their payrolls flat or down-sized.

The BLS claims Financial services added 13k in May.  But sadly, we know just the opposite is true from disclosures by HSBC and JP Morgan.  My friend who works on Wall Street in NYC told me last week that fixed income trading floors all over the Street are like a morgue. Banks and finance companies fired, not hired, in May.

Leisure and hospitality reportedly added 57k workers in May.  Again, this is a complete fairy-tale – an outright fraudulent data-point.  Consumer spending has been declining for the better part of the last year.  Every major consumer sentiment index reported the consumer sentiment and outlook crashed in May.  This means that, to the extent that any consumers might have some disposable income to spend, they are NOT going to spend it. This means the leisure and hospitality companies – at best – kept payrolls flat.  It is a lie of epic proportions to report that this sector was responsible to 57k in jobs added to the economy.

You don’t need me to explain just how fictitious today’s employment report is.  Just look at the graphic below and decide for yourself if the numbers are justified by the economic reports released in May and by your observations in your surrounding environment:

NFPdata

One last point. The Birth/Death model showed 213k jobs created in May from new businesses being started minus businesses that closed. It is not a seasonally adjusted number so it is not mathematically accurate to simply subtract it from the headline 280k number. However, the likelihood is that, even seasonally adjusted, the B/D number was a source of at least 200k of the 280k headline report. By the Government statisticians own admissions, the B/D model is highly overstated when the economy is contracting. The more probable likelihood is that more businesses died than were born in May. This fits with the “for lease” signs I’m seeing in strip malls all over Denver. If anything, this component of payroll measurement likely should caused a decline in employment during May.

But this brings up the question:  why does the Government report its payroll numbers on a seasonally adjusted basis but then releases the B/D model not adjusted?   Of course it’s obvious:  the Government wants its economic reports to be as opaque and misleading as possible.

end

 

I will leave you with this wrap of the week’s event courtesy of Greg Hunter of USAWatchdog

(courtesy Greg Hunter/USAWatchdog)

 

WNW 193-Greek Debt Crisis Conclusion, Economic Propaganda, Iraq Finger Pointing

Well that about does it for tonight
I will see you Monday night
Harvey
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