june 9/Huge rise in comex silver OI/huge rise in inventory at the SLV (3.393 million oz)/Gazprom switches to yuan instead of dollars for its gas sales to China/Deutsche bank headquarters raided/

Good evening Ladies and Gentlemen:


Here are the following closes for gold and silver today:

Gold:  $1177.30 up $4.10 (comex closing time)

Silver $15.95  unchanged (comex closing time)


In the access market 5:15 pm

Gold $1176.30

Silver: $15.97


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:


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

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.82 tonnes for a loss of 57 tonnes over that period.


In silver, the open interest rose by 2351 contracts even though Monday’s silver price was down by 3 cents.   The total silver OI continues to remain extremely high with today’s reading at 186,356 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 0 notices served upon for nil oz.


In gold,  the total comex gold OI rests tonight at 407,893 for a loss of  contracts despite the fact that gold was up $5.40 on Monday. 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 708.70 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 3.393 million oz in silver inventory at the SLV/Inventory rests at 323.001 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  contracts despite the fact that silver was down in price by 3 cents on Monday.  The OI for gold fell by 512 contracts down to 407 contracts despite the fact that  the price of gold was up by $5.40 on Monday.

(report Harvey)

2,TF Metals (Craig Hemke) talks about the latest banking participation report

(Turd Ferguson TF Metals report)

3. Today, 2 important commentaries on Greece

zero hedge, Bloomberg)

4. Dave Kranzler of IRD believes that the huge rise in global interest rates has already caused credit derivatives (interest rate swaps) to blow up.

(Dave Kranzler iRD)

5.  The rise in bond yields is now causing huge problems with the junk bond market as many flee the ETF’s

(courtesy Bloomberg)

6.Russia’s Gazprom is now settling in yuan for gas purchases to China instead of dollars.

(zero hedge)

7. The two co CEO’s of Deutsche bank were canned leaving one to believe they have some serious derivative problems.  Today, prosecutors from the city of Wiesbaden raided the central offices of Deutsche bank in Frankfurt.

(/zero hedge)

8. Saudi Minister warns that the Saudis may have to obtain nuclear weapons if they are not satisfied with the Iran nuclear deal

(zero hedge)


9. Precious metals trading overnight from Asia/Europe


10. Trading from Asia and Europe overnight

(zero hedge)

11. Trading of equities/ New York

(zero hedge)


12. HSBC lays off 50,000 workers globally as the economy contracts

(zero hedge)

13.  3 commentaries on the USA housing problems

(Dave Kranzler, IRD,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 fell by 512 contracts from 408,405  up to 407,893 despite the fact that  gold was up $5.40 yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 23 contracts down to 1074. We had 1 notice served upon yesterday.  Thus we lost 22 contracts or an additional 2200 oz will not stand for delivery.  No doubt, again, we had a huge number of cash settlements and the farce continues.  The next contract month is July and here the OI rose by 266 contracts up to 8.  The next big delivery month after June will be August and here the OI fell slightly by 2 contracts  to 269,770. 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 61,209. The confirmed volume on Monday (which includes the volume during regular business hours + access market sales the previous day) was poor at 113,882 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI rose by 2351 contracts from 184,005 up to 186,356 despite the fact that the price of silver was down in price by 3 cents, with respect to Monday’s trading.  The front non active  delivery month of June saw it’s OI fall by 6 contract to 35 . We had 6 contracts delivered upon yesterday.  Thus we neither gained nor lost any ounces of silver standing in this non active June contract month. The estimated volume today was poor at 25,82 contracts (just comex sales during regular business hours. The confirmed volume on Monday (regular plus access market) came in at 56,956 contracts which is very good in volume. We had 0 notices filed for nil oz today.

June initial standing

June 9.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz  nil
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 18,212.757 oz (Delaware,Scotia) includes 500 kilobars
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 1074 contracts (107,400 oz)
Total monthly oz gold served (contracts) so far this month 2599 contracts(259,900 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  81,065.2 oz

Today, we had 0 dealer transaction


total Dealer withdrawals: nil oz


we had 0 dealer deposit

total dealer deposit: nil oz
we had 0 customer withdrawals


total customer withdrawal: nil oz


We had 2 customer deposits:

i) Into Delaware:  2137.757 oz

ii) Into Scotia:  16,075.000 oz

Total customer deposit: 18,212.757 oz


We had 0  adjustments:



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 (2599) x 100 oz  or 259,900 oz , to which we add the difference between the open interest for the front month of June ( 107) 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 (2599) x 100 oz  or ounces + {OI for the front month (1077) – the number of  notices served upon today (0) x 100 oz which equals 367,300 oz standing so far in this month of June (11.42 tonnes of gold).  Thus we have 11.42 tonnes of gold standing and only 17.07 tonnes of registered or for sale gold is available:


Total dealer inventory 548,748.592 or 17.06 tonnes

Total gold inventory (dealer and customer) = 7,903,214.415 (245.82 tonnes)


Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.82 tonnes for a loss of 57 tonnes over that period.




And now for silver

June silver initial standings

June 9 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 777,491.910 oz (CNT,Brinks)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  1,013,127.78 oz (CNT,JPM,Scotia)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 35 contracts(175,000 oz)
Total monthly oz silver served (contracts) 214 contracts (1,070,000 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 2 customer deposits:

i) Into Delaware:  4003.38 oz

ii) Into JPMorgan: 606,844.100 oz



total customer deposit: 610,847.48  oz


We had 2 customer withdrawal:

i) Out of Scotia:  122,372.63 oz

ii) Out of CNT: 634,138.98 oz

total withdrawals from customer;  756,511.610 oz


we had 0 adjustment


Total dealer inventory: 57.845 million oz

Total of all silver inventory (dealer and customer) 178.729 million oz

The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in June, we take the total number of notices filed for the month so far at (214) x 5,000 oz  = 1,070,000 oz to which we add the difference between the open interest for the front month of June (35) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.

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

214 (notices served so far) + { OI for front month of June (35) -number of notices served upon today (0} x 5000 oz ,= 10,875,000 oz of silver standing for the June contract month.

we neither gained nor lost any silver ounces in this non active delivery month of June.

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

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:


June 9/ no change in gold inventory at the GLD/Inventory rests at 708.70 tonnes

June 8/ a big withdrawal of 1.19 tonnes of gold from the GLD/Inventory rests at 708.70 tonnes

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


June 9 GLD : 708.70  tonnes.




And now for silver (SLV)

June 9/ a monster of an addition to the tune of 3.393 million oz/inventory rests at 323.001 million oz.

June 8/no change in inventory/SLV inventory rests at 319.608 milion oz.

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


June 9/2015:a huge addition of 3.393 million oz of silver/ inventory at the SLV now rests at 323.001 million oz/ lately silver has been rising at the SLV with a constant price of silver!!




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 8.1% percent to NAV in usa funds and Negative 7.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.4%

Percentage of fund in silver:38.2%

cash .4%


( June 9/2015)


2. Sprott silver fund (PSLV): Premium to NAV falls to +.28%!!!!! NAV (June 9/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .24% to NAV(June 9/2015

Note: Sprott silver trust back  into positive territory at +.28%.

Sprott physical gold trust is back into negative territory at -.24%

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.
* * * * *




Early morning trading from Asia and Europe last night:


Gold and silver trading from Europe overnight/and important physical



(courtesy Mark O’Byrne/Goldcore)


U.S. State Finances – Lack “Truth and Integrity” – Volcker Warns

U.S. state budgets rely on “faulty practices” – Volcker
– Shoddy budget practices push costs to future generations
– Faulty budget practices lead to poor policy making
– “Problems hidden by lack of truth and integrity” – Volcker
– No common definition of balanced budget allows for gimmicks

The highly regarded former chairman of the Federal Reserve, Paul Volcker, has severely criticized the State Governments in the U.S. over “faulty practices” used to devise budgets which mask the true financial position of those states.

Mr. Volcker, who as Fed chair reined in escalating inflation and stabilised the economy during Ronald Reagan’s tenure, announced in 2013 his intention to form the Volcker Alliance to focus on reforming democracy in the U.S.

It was in a report from the Volcker Alliance that the criticisms were published.

“The palpable erosion of trust in our democratic institutions of government demands a response,” he was quoted as saying.

Mounting fiscal problems in Obama’s Illinois, Detroit’s bankruptcy and the financial troubles coming to a head in Puerto Rico demonstrate the importance of developing better financial policies according to the report.

The dire state of finances in many states has intensified in recent years due to drastic cuts in federal funding following the recession. As a result state budgets are recklessly pushing the costs of current expenditure onto future generations.

“The continued fiscal stress is tempting states to continue, and even intensify, budgeting and accounting practices that obscure their true financial position, shift current costs on to future generations, and push off the need to make hard choices on spending priorities and revenue practices,” the report states.

States are on a constant emergency footing where their budgets are concerned as they try to fund current expenditure with transient sources of revenue. As a result policy making is haphazard and short-sighted.

“The never-ending sense of crisis leads to stop-and-go funding of vital programmes and stifles the need for serious discussions about policy,” according to the report.

As a consequence infrastructure is crumbling, public schools and state lack funding, “rainy day” funds are being depleted, and public workers rely on pension plans that may evaporate.

Volcker believes that there is a lack of honesty in budgeting. “There are problems hidden by a lack of truth and integrity”, he said. The absence of an agreed definition of “balanced budget” allowed States to engage in gimmicks that gave the appearance that spending had not exceeded revenue.

“Techniques include shifting the timing of receipts and expenditures across years, borrowing long-term to pay for current bills, using non-recurring revenues to cover recurring costs and delaying funding of pension and healthcare retirement benefits,” reported the FT.

The report paid particular attention to three states selected at random. They were Virginia, California and New Jersey. Volcker believes that Virginia’s methodology is good, using impartial outside economists. It was still heavily reliant on federal funding however.

The current governor of California has acknowledged the “wall of debt” that was hidden behind budgetary gimmicks and has reduced the debt significantly since 2010.

New Jersey, however, is a case study in bad budgetary practices. The New York Times reports,

“In contrast to California, New Jersey is still producing structural imbalances, according to the report. It has been struggling from year to year by, among other things, taking money out of special dedicated funds and spending it on unrelated activities.”

“For instance, the state has raided hundreds of millions of dollars in toll revenue from the New Jersey Turnpike Authority and used the money to pay for the day-to-day operations of New Jersey Transit. The toll money was supposed to pay for highway construction and maintenance, not mass transit.”

The NY Times adds

“One factor that appeared to make such raids possible is that New Jersey’s official budgeting process is centralized in the governor’s office, giving the executive branch almost sole control over revenue forecasts and spending decisions.”

Mr. Volcker hopes that by identifying various problem areas in state budgets, a common approach may be developed across the U.S. which would help nurse the ailing states back to good health. If improvements are not made an unpleasant day of reckoning may be approaching.

“It’s like termites eating at a structure,” said Mr. Volcker, “The building hasn’t fallen down yet. But if you get enough termites, the building’s going to get pretty rickety.”

How true. Indeed, the problem with the U.S. finances is not just at a state level but also at a national level where there is a similar “lack of truth and integrity.”

The national fiscal position of the U.S. is dire – with a National Debt or Federal Debt of $18.2 trillion and a real national debt and “unfunded liabilities” alone of over $100 trillion.

See Global Debt Now $200 Trillion! & Goldman Sachs Warns “Too Much Debt” Threatens World Economy


Today’s AM LBMA Gold Price was USD 1,181.00, EUR 1,046.75 and GBP 772.40 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,173.40, EUR 1,053.32 and GBP 769.85 per ounce.

Gold in USD - 1 Week

Gold climbed $3.10 or 0.26% percent yesterday to $1,174.00 an ounce. Silver slipped $0.08 or 0.5 percent to $16.02 an ounce.

Gold in Singapore for immediate delivery inched up 0.4 percent to $1,177.60 an ounce near the end of the day,  while gold in Switzerland saw a rise to touch $1,182 an ounce.

Gold is higher today on what appears to be a safe haven bid after equities in Asia and Europe sold off today.

Concerns about the slowing U.S. and Chinese economy and their impact on the global economy are causing jitters.

Gold may also be seeing more safe haven bids from the uncertainty of the ongoing Greece crisis. German Chancellor Angela Merkel warned yesterday that Greece’s time was running out to negotiate a reform-for-aid deal to stay in the eurozone.

Oil prices are 1.2% higher today and that is likely supporting gold. Higher seasonal demand in developed markets and geopolitical risk in the Middle East is offsetting the impact of the global supply overhang.

Shanghai Gold Exchange premiums were almost $2.50 an ounce over the global benchmark, up slightly from $1.50-$2 last week, suggesting Chinese demand remains robust.

In late morning trading gold is up 0.70 percent at $1,182.55 an ounce. Silver is up 1.3 percent at $16.22 an ounce, while platinum is up 1.05 percent at $1,113.20 an ounce.


Craig Hemke discusses the criminal actions of the uSA banks as we get our monthly Banking Participation Report


(courtesy Turd Ferguson/Craig Hemke/TFMetals Report)


Another Criminal Bank Participation Report

I like that title. Why call this the BPR when you can, instead, be more accurate and call it the CBPR…The Criminal Bank Participation Report.

Before we begin, the usual background:

  • The CFTC’s Bank Participation Report is issued monthly from a survey taken at the Comex close on the first Tuesday of every month. The report summarizes thecombined positions of the four largest U.S. banks (primarily JPM, MorganStanley, Citi, Goldman but occasionally others) and the twenty largest non-U.S. banks (Scotia, HSBC, DeutscheBank, UBS, Barclays and others).
  • These reports might be utter nonsense and complete falsifications, designed to mislead you and get you leaning the wrong way. Just last year, JPMorgan was fined by the CFTC for “repeatedly submitting inaccurate reports relating to the required reporting of positions”. See here:http://www.cftc.gov/PressRoom/PressReleases/pr6968-14

I will leave it up to you, dear reader, to assign or withhold legitimacy to/from the data. My job is simply to report to you on what the data shows…and, once again, it’s sickening.

As we’ve often reported, most recently with these three posts…

…the Bullion Bank fingerprints are now so obvious that it seems they hardly care if anyone notices anymore. The Banks apply heavy, naked shorts to any rally and they then use the price weakness that inevitably follows their capping to cover their tracks. And what has happened over the past four weeks? Just more of the same. Another “wash cycle” and full price suppression move by The Bullion Banks. Why are they so desperate to cap at these levels? Please go back and review the first link above entitled “How They Did It” for your explanation. For today, let’s just concentrate on this latest travesty and blatant price suppression/manipulation.

Recall, first, the price action over the past month. In case you’ve forgotten, below is a visual aid:

As you can see, for the CBPR period, price was almost completely unchanged. However, during the month, price actually spiked by nearly $40 or 3.5% to a high of $1232.80 on May 18. After being effectively capped near the 200-day moving average and $1225, it has been nearly straight down since.

We know from the Commitment of Traders Report, published by the criminally-complicit CFTC on May 22, that the “Gold Commercials” were active in capping that $40 rally. The report, linked here (http://news.goldseek.com/COT/1432323507.php) shows these “commercials” added a record 50,754 naked short contracts in just one week (between May 12 and May 19) in their effort to cap and contain price below $1225. That’s the paper equivalent of over 5MM ounces of gold or about 158 metric tonnes…more than the total holdings of Thailand and about 5% of total annual global mine supply.

Until last Friday, we didn’t know how much of this criminal manipulation could be laid at the feet of The Banks trading desks and how much could be assigned instead to their hedge funds and offshore shell accounts. Well, here you go. Back on May 5, and again with price at $1194, here’s how the CBPR looked:

5/5/15                                 GROSS LONG               GROSS SHORT                  TOTAL NET

U.S. Banks                                 6,966                                   29,851                                   -22,885

non-U.S. Banks                        29,748                                 63,682                                   -33,934

TOTAL  -56,819

And now, one month later, with price having round-tripped $40 and closing back at $1194, here’s your current CBPR:

6/2/15                                  GROSS LONG               GROSS SHORT                  TOTAL NET

U.S. Banks                                  8,246                                   45,090                                  -36,844

non-U.S. Banks                         30,194                                  78,300                                  -48,106


So, there you have it. While price was rallying, The Bullion Banks were desperately issuing and selling naked paper gold contracts in their attempts to cap and contain price. Even after undoubtedly using the price weakness on the way back down to cover some of these ill begotten contracts, The Banks still show an increase in their NET SHORT position of over 28,000 contracts…ALL WHILE PRICE RALLIED, WAS CAPPED, AND THEn CLOSED UNCHANGED.


Of course, the standard Cartel Shills and Apologists will argue that these altruistic Banks are just performing a public service. They’re “making an orderly market” and simply “providing needed services” for miners wishing to “hedge and forward sell future production”.

Eh bien, excusez-moi pour mon mauvais français. Ce sont des conneries complète.

At $1200, which miners suddenly decided to sell forward 160 metric tonnes of future production at $1200/ounce? And don’t give me this garbage about “making a market”. No other “markets” in the world operate this way…where extra paper supply is created from thin air whenever paper demand materializes.

But that’s what we have to deal with as long as paper gold and silver trading is allowed to set “price”. The Criminal Bullion Banks, aided by the criminally-complicit CFTC and supported by the central banks and BIS, will continue to actively and severely manage, manipulate and suppress precious metal prices until the simply no longer can. When and how this moment arrives remains a mystery. Perhaps a renewed financial crisis. Maybe the Chinese announce a new gold-backed trading system. Maybe someday, the leveraged and rehypothecated London system simply collapses.

I don’t know what it will take to finally crush and destroy this current, fraudulent system. I just know that the day is coming…and not a moment too soon.



(courtesy John Embry/Kingworldnews/Eric King)

Embry on gold’s threat to bonds

At King World News, Sprott Asset Management’s John Embry says central banks and their bullion bank agents are ruthlessly suppressing monetary metals prices to support the bond market, which needs enormous help as interest rates are essentially zero. Embry’s comments are excerpted at the KWN blog here:


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




(courtesy Jessie’s Amercaine Cafe)


The global monetary phenomenon that almost no one is seriously discussing


4:51p ET Monday, June 8, 2015

Dear Friend of GATA and Gold:

In “The Global Monetary Phenomenon That Almost No One Is Seriously Discussing,” Jesse’s Café Americain” today examines the conversion of central banks from net sellers to net buyers as part of a “currency war” that is a little bigger than the one reported in the mainstream financial news media. That “currency war,” Jesse writes, is not merely competitive devaluation but rather a challenge to the U.S. dollar as the world reserve currency. Jesse’s analysis is posted here:


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


James Turk discusses how derivatives will bring down the financial system:

(James Turk/Kingworldnews/Eric King)

Derivatives crash threatens financial system, Turk tells KWN


7:32p ET Monday, July 8, 2015

Dear Friend of GATA and Gold:

Losses from the looming insolvency of Greece are being socialized, placed on the backs of taxpayers, GoldMoney founder and GATA consultant James Turk tells King World News tonight, adding that as interest-rate derivatives start losing value, crushing the banks that hold them, another world financial crisis nears. An excerpt from the interview is posted at the KWN blog here:


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




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


1 Chinese yuan vs USA dollar/yuan weakens to 6.2051/Shanghai bourse red and Hang Sang: red

2 Nikkei closed down by 360.89  points or 1.76%

3. Europe stocks all in the red/USA dollar index up to 95.31/Euro falls to 1.12.56

3b Japan 10 year bond yield: falls to .46% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.03/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 59.14 and Brent:  64.06

3f Gold up/Yen up

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

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil up for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to 87 basis points. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate rise  to 25.16%/Greek stocks up 1.78%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield rises to: 11.48%

3k Gold at 1181.00 dollars/silver $16.12

3l USA vs Russian rouble; (Russian rouble up 1/4 in  roubles/dollar in value) 55.88,

3m oil into the 59 dollar handle for WTI and 64 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 .9276 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0457 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 further to negativity at +.87/

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.  The funds are deferred to June 30.

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 2.37% early this morning. Thirty year rate just above 3% at 3.11% / yield curve flatten/foreshadowing recession.


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


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


European Stocks Suffer Longest Losing Stretch In 2015; US Futures Down

After a quiet Asian session, where not even the latest Chinese CPI miss was enough to push the SHCOMP to new multi-year highs, all eyes were on Europe where a few hours ago the European Commission announced it had received not one but two new proposals from Greece according to EU Commissioner for Economic Affairs Pierre Moscovici, with the Greek government adding that it considers proposals submitted last week as remain basis for political negotiations. According to Bloomberg, the freshly submitted documents contains alternative proposals to close differences with creditors on fiscal gap with; proposals to create a debt viable sustainability plan for country. What they do not contain is an agreement to engage in pension cuts as the Troika demands so this is most likely another dead end path.

“Diverse proposals are being circulated including new suggestions which were received earlier this morning,” spokesman Margaritis Schinas said, noting that Economics Commissioner Pierre Moscovici had met Greek delegates in Brussels on Monday. “The three institutions are currently assessing these suggestions with diligence and care,” Schinas added.

However, barely had Europe received the Greek addenda when it nein’ed all over them, with BBG citing an international official directly involved in talks saying that the “Greek government’s revised proposal to unlock bailout funds is vague rehash of earlier plans, not considered credible.”

Also overnight, as reported previously, the headquarters of Deutsche Bank was raided earlier this morning and while no details were initially available, Reuters said that investigators were “looking for evidence related to client transactions” with a DB spokesperson saying the raid was in relation to “security deals made by clients.” It was initially unclear what deals and what clients, but the raid may explain the sudden departure of DB’s co-CEOs over the weekend.

In any case, the excitement from all the events did not stay well with European stocks or risk, and as of this moment the EuroStoxx 600 is down again, on pace for its first 6 day losing streak in 2015, down about 5%.

A closer look at Asian equities shows a drop following a negative Wall Street close, which saw the DJIA shed its YTD gains and S&P 500 close below its 100 DMA for the first time in a month. Chinese bourses led the slump weighed on by soft Chinese inflation data, helping cap recent gains across the Shanghai Comp (-0.4 %) and Hang Seng (-1.2%); Y/Y 1.2% vs. Exp. 1.3% (Prev. 1.5%). The ASX (0.5%) and Nikkei 225 (-0.7%) remain in the red, the latter weighed on by a strong JPY.

European equities are broadly weaker following on from the negative closes seen in Asia and the US in what has been a subdued session so far. The technology sector is the notable laggard in Europe in the wake of a downbeat note from JP  Morgan coupled with the selloff seen in the NASDAQ yesterday. From a stocks specific perspective, HSBC (-0.8%) stole the headlines after announcing that they were to embark on EUR 5bln cost cutting measure and will slash over 25K jobs globally. However, shares in HSBC shares trade downside was limited as their cost cutting measures may cost the bank GBP 4.5bln. The DAX index has continued to slide following an earlier technical break below 11,000, with concerns over Greece weighing on the index.

Bunds have remained unnerved and trade flat following the recent developments in Greece after the EU Commission confirmed that they have received an updated version of the troubled nation’s reforms. Thereafter, an international official later stated that Greece’s revised proposal was not sufficient and is merely a vague rehash of the previous proposal.

In FX markets, GBP continues to trade weaker against the EUR with cross-buying in EUR/GBP supporting the EUR despite continued concerns over Greece. Meanwhile, the USD-index (+0.02%) has remained flat with a lack of fundamental catalysts dictating price action. AUD was unable to hold on to some of its earlier gains after AU business confidence surged to a 9-month high and slipped into negative territory. This was amid soft Chinese inflation data which saw consumer prices rise at their slowest pace in 5-months.

Tomorrows DoE crude inventories are expected to post its sixth consecutive drawdown which is supporting WTI and Brent crude as they inch higher, while precious metals markets also remain firmer following the global selloff in equities.  Separately, iron ore continued its recent rally following the decline seen in port inventories and as Chinese steel mills   undergo seasonal maintenance.

In summary: European shares fall for sixth day with the tech and financial services sectors underperforming and real estate, media outperforming. HSBC to Cut as Many as 50,000 Jobs in Gulliver Assault on Costs. Greece Said to Submit Revised Budget Plan in Bid for Funding. China Said to Weigh Margin Finance Rule Change Amid Stock Boom. The German and Spanish markets are the worst-performing larger bourses, the U.K. the best. The euro is weaker against the dollar. Japanese 10yr bond yields fall; Greek yields increase. Commodities gain, with corn , wheat underperforming and Brent crude outperforming. U.S. wholesale inventories, small business optimism, JOLT job openings due later.

Market Wrap

  • S&P 500 futures down 0.4% to 2070.5
  • Stoxx 600 down 1.2% to 380.7
  • US 10Yr yield down 2bps to 2.37%
  • German 10Yr yield up 1bps to 0.89%
  • MSCI Asia Pacific down 0.8% to 146.2
  • Gold spot up 0.6% to $1180.7/oz
  • All 19 Stoxx 600 sectors drop; real estate, media outperform, tech, financial services underperform
  • Asian stocks fall with the Kospi outperforming and the Nikkei underperforming; MSCI Asia Pacific down 0.8% to 146.2
  • Nikkei 225 down 1.8%, Hang Seng down 1.2%, Kospi down 0.1%, Shanghai Composite down 0.4%, ASX down 0.5%, Sensex down 0.2%
  • Bradesco Said to Be Most Likely Buyer of HSBC’s Brazil Unit
  • Newmont to Buy AngloGold Mine in Colorado for $820m
  • Elliott Seeks Injunction to Stop Merger Plans by Samsung’s Lees
  • Euro down 0.11% to $1.1279
  • Dollar Index down 0.03% to 95.27
  • Italian 10Yr yield down 2bps to 2.24%
  • Spanish 10Yr yield down 2bps to 2.23%
  • French 10Yr yield little changed at 1.21%
  • S&P GSCI Index up 0.9% to 436.1
  • Brent Futures up 1.4% to $63.6/bbl, WTI Futures up 1.2% to $58.8/bbl
  • LME 3m Copper up 0.6% to $5983.5/MT
  • LME 3m Nickel up 0.9% to $13565/MT
  • Wheat futures down 0.1% to 527.5 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • European equities (Eurostoxx50 -0.7%) are broadly weaker following on from the negative closes seen in Asia and the US in a session shy of market moving fundamental news.
  • The stalemate between Greek and its creditors continues after reports that the EU are unsatisfied with Greece’s latest reform submission.
  • Looking ahead, today provides a rather light economic calendar with US Wholesale Inventories, API Crude Inventories and possible comments from ECB’s Makuch (Neutral) and ECB’s Lautenschlaeger (Hawk)
  • Treasuries gain for second day as global equities plunge; auctions begin today with $24b 3Y notes, WI yield 1.095%, highest since March, vs. 1.00% in May; drew 0.865% in April.
  • The Greek government submitted a three-page budget proposal to its creditors in Brussels in a bid to unlock bailout funds, two international officials with direct knowledge of the discussions said
  • China’s consumer prices rose at a slower pace in May and factory-gate deflation extended a record stretch of declines, underscoring tepid demand at home and abroad
  • China’s securities regulator is considering a change to its margin finance rules in a move that could quell volatility should the country’s world-beating stock-market rally falter
  • China stock exchanges have created $6.5t of value in just 12 months, surpassing the headiest days of the U.S. Internet bubble
  • Euro-area GDP rose 0.4% in in 1Q, the three months through March after expanding a revised 0.4 percent in the previous three months, confirming May 13 estimate
  • David Cameron said comments he’d made suggesting U.K. government ministers would have to support continued EU membership were “misinterpreted,” after protests from lawmakers in his Conservative Party
  • HSBC Holdings Plc will eliminate as many as 50,000 jobs through 2017 by shrinking its global reach as CEO Stuart Gulliver seeks to cut annual costs by about $5b to restore profit growth
  • Deutsche Bank AG said its offices in Frankfurt were searched on Tuesday as part of an investigation into securities transactions by clients; bank employees are not accused of wrongdoing, a spokesman said
  • Sovereign 10Y bond yields mostly lower. Asian and European stocks slide, U.S. equity-index futures fall. Crude oil, copper and unchanged, gold higher


DB’s Jim Reid concludes the overnight event summary


Headlines continue to fly around with regards to Greece and it was amusing to read in the Economist that the crisis has now gone on longer than 10% of marriages. Although to be honest that sounds too low. It’ll be interesting to see where that number is by the time it’s properly resolved!!

Before we delve into dissecting the action, it’s been an important morning for Chinese data with the latest inflation numbers out. The numbers make for slightly disappointing reading with both the CPI (+1.2% yoy vs. +1.3% expected) and PPI (-4.6% yoy vs. -4.5% expected) prints coming in below market expectations for May. The inflation reading in particular is down from +1.5% last month and now back at its lowest level since January while the deflation at factory gates marks the 39th consecutive monthly negative print, underlying the overcapacity and weak demand both domestically and abroad and furthering the case for more stimulus.

China equity markets have sold off following the data. The Shanghai Comp (-1.23%), CSI 300 (-1.20%) and Shenzen (-0.62%) are all lower as we go to print. It could be a big day for Chinese equities as MSCI Inc. opines on whether to include mainland securities in some of its widely used global indices. This could easily help propel or prick the bubble. Bourses elsewhere are showing a similar trend to China. The Hang Seng (-1.02%), Nikkei (-0.76%) and ASX (-0.06%) are all currently trading down. Treasuries are 1.4bps lower in yield while Asia credit markets are a basis point wider. The tightening in Treasuries this morning has dragged most other Asia bond yields lower.

Back to markets yesterday. As mentioned it was a reasonably dull day for the most part, with equity markets in the US declining for the third consecutive session as the S&P 500 in particular fell 0.65% and to the lowest level since April 7th. Losses were relatively broad-based, although led by a fall for higher beta sectors including Technology (-1.22%) and Industrials (-0.74%) names. The recent leg up in US Treasury yields to the highest levels since October appeared to attract some demand yesterday at the 10y benchmark ended 2.5bps lower in yield at 2.383% and recovered some of Friday’s post-payrolls sell off, while 5y (-3.5bps) yields also tightened although 30y yields remained broadly unchanged at 3.115%. The commodity complex was relatively mixed for the most part. Brent (-0.98%) and WTI (-1.67%) both declined while Gold (+0.18%) ended up a touch. There was a notable move in the Dollar yesterday meanwhile. The DXY eventually closed down 1.05% to wipe out all of Friday’s gains. Reports that US President Obama had suggested that the stronger Dollar was a problem (although later denied by the White House) appeared to play its part, although the bulk of the weakness was largely as a result of a stronger day for the Euro.

With little in the way of data or news flow, it was all eyes on Greece which once again dominated headlines. A WSJ article in particular attracted much of the attention with the article suggesting that Greece and its Creditors are in discussions over an extension of the current bailout program until the end of March 2016. The article suggested that the proposal was first presented to Greece last week at Greek PM Tsipras and the EC’s Juncker meeting on Wednesday. The article notes that the idea is to convert financing set aside for propping up Greek banks at the EFSF into usable money, with the program then aligning the existing EFSF program with the IMF which also expires in March 2016. Although this would mean no new program needs to be passed through European parliament, the sticking point would likely still be the issue of passing through Greek parliament should this be seen as the Troika staying for longer, as well as the chance that it would be unlikely that there is any debt relief up front. The article aside, there was little material news yesterday and talks continue to remain in deadlock. German Chancellor Merkel, French PM Hollande and US President Obama were among the leaders urging progress and swift action yesterday. Greek spokesman Sakellaridis, meanwhile, reiterated that ‘our proposal is the starting point’ in relation to negotiations, while Greek press Ekathimerini noted that a delegation of Greek officials is in Brussels continuing talks.

It was a quiet day data-wise in the US yesterday with just a modest rise for the May Labour Market Conditions Index (1.3 from -0.5 previously). Meanwhile there was some focus on a NY Fed survey which showed consumer expectations for inflation rebounding in May. The survey showed that the median expectation for price rises is 3% in the year through next May, which is up from 2.7% in April.

Markets in Europe were again characterized by higher bond yields. 10y Bunds ended 3.5bps higher in yield at 0.879%, just off last Wednesday’s closing highs while in the periphery Spain (+3.0bps), Portugal (+3.6bps) and Italy (+2.0bps) also rose. With 10y Greek yields also finishing +24.6bps higher, Greek concerns were likely to have played a part, while comments from the ECB’s Nowotny describing higher yields as a ‘success story’ may well have supported the move higher. Yesterday’s industrial production data out of Germany was better than expected. The April reading of +0.9% mom came in above +0.6% expected, helping to push the annualized rate up to +1.4% yoy. Trade data for the region also showed a larger than expected surplus (€22.1bn vs. €19.4 expected), driven primarily by higher exports. Our colleagues in Germany noted that based on yesterday’s IP report, along with the April retail sales and unemployment data, the model points towards +0.6% qoq GDP growth, while the composite PMI and IFO expectations survey point towards +0.4%-0.5% qoq growth. Our colleagues currently sit at the lower end of estimates at +0.4% qoq. Elsewhere, data flow was mixed in Europe. French business sentiment (99 vs. 98 expected) was a touch ahead of consensus while the Euro area Sentix investor confidence print (17.1 vs. 18.7 expected) was a miss. Equity markets in Europe closed lower yesterday. The Stoxx 600 finished -0.93% while the DAX (-1.18%) and CAC (-1.28%) both declined. Greek equities finished -2.73% for their third consecutive day of declines.

We’ve got a busier calendar to look forward to today and we start in the UK this morning where we get the April trade balance before we get the preliminary Q1 GDP release for the Euro area. Across the pond this afternoon, we’ve got the NFIB small business optimism survey for May to look forward to before we get April wholesale inventories and trade sales data and also the JOLTS job openings (one of Fed Yellen’s important dashboard indicators) expected.



Greece is stalling. I believe that they know how harmful a derivative implosion result if there is a GREXIT:

(courtesy zero hedge)


“Not Credible” Is Europe’s Response To Latest Greek 3-Page Proposals


In attempt to bridge the gap between a proposal submitted by Greek PM Alexis Tsipras last Monday and a draft agreement devised by creditors the following day, Athens has reportedly submitted a new three-page plan focused on fiscal sustainability.

A second document was also submitted in which Greece has apparently proposed borrowing from the ESM to cover its obligations to the ECB in July and August. Those payments amount to around €7 billion.

Here’s Bloomberg:

The Greek government submitted a three-page budget proposal to its creditors in Brussels in a bid to unlock bailout funds, two international officials with direct knowledge of the discussions said.

The document covered only fiscal targets, one of the people said. Greece gave its creditors a separate note, also three pages long, on how to address the country’s financing needs, in which the government asked to use funds from the European Stability Mechanism to repay about 6.7 billions euros ($7.6 billion) of bonds held by the European Central Bank that come due in July and August, the people said.

Greece has already received €129 billion from the EFSF. Borrowing from the ESM to pay the ECB is essentially borrowing from Europe to pay Europe, much as the country tapped its IMF SDR to pay the IMF in May. As an aside, May’s IMF end-around depleted Greece’s SDR to the tune of 95%. Its SDR holdings now amount to just €30 million. Greece’s ESM paid in capital is around €2.2 billion. 

At least one unnamed official who spoke to Bloomberg isn’t optimistic:

Greek govt’s revised proposal to unlock bailout funds is vague rehash of earlier plans, not considered credible, an international official directly involved in talks says.

Meanwhile, Greek islanders are restless over the VAT hike proposed by creditors (and so far rejected by Athens) and have moved to hold a referendum with the support of FinMin Varoufakis.

Via Reuters:

Greek islanders are threatening to hold a referendum on whether to veto proposals by the country’s international lenders to scrap a reduced rate of value added tax for the islands, a regional governor said on Tuesday.


Plans to increase VAT have been a sticking point in talks between the Greek government and its European and International Monetary Fund creditors, as the two sides try to hammer out a cash-for-reforms deal to unlock further aid. Athens argues the hike would hit tourism, its main source of revenue.


Yorgos Hatzimarkos, governor of a south Aegean cluster of islands that includes popular destinations such as Mykonos and Santorini, said his region had decided to hold a referendum with the backing of Finance Minister Yanis Varoufakis.

Greece contends that hiking VAT by 23% would spell disaster for tourism which, according to the country’s tourism chief, is the “one sector that’s doing well.”

Speaking of ‘sticking points’ and “red lines”, Tsipras is still holding on to the idea that he can strike a deal that doesn’t include pension reform, something that’s come up time and again throughout the fractious negotiations. It’s unclear whether the PM’s hardline stance on pensions will soften as June 30 approaches, but it seems clear that until Tsipras is willing to discuss the issue, any proposal out of Athens will be a non-starter, which is why the following quote from an interview with Corriere della Sera is largely meaningless:


“I think we’re very close to an agreement on the primary surplus for the next few years. There just needs to be a positive attitude on alternative proposals to cuts to pensions or the imposition of recessionary measures.”

In Germany, tensions are said to be rising between Chancellor Angela Merkel and FinMin Wolfgang Schaeuble. Fed up with what he perceives to be belligerence and, frankly, naiveté on the part of Syriza party officials, Schaeuble is ready to cut Greece loose, while Merkel, conscious of the ‘Russian pivot’ and wary of unknowable geopolitical ramifications, prefers concessions. Kathimerini has more:

A split between German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble is widening over Greece as the funding standoff goes down to the wire, said people familiar with the matter.

Merkel is ready to make concessions to keep Greece in the euro because of geopolitical concerns, while Schaeuble is willing to let the country exit the euro unless its government takes measures to ensure the country’s long-term survival in the monetary union, said the people, who asked not be identified speaking about internal party discussions.

That divide is also reflected in Merkel’s parliamentary caucus, which is increasingly uneasy with letting the 41-member budget committee decide on disbursing any aid to Greece and is looking instead at a vote of the lower house of parliament on a deal that includes changes to previous agreements, they said. The Finance Ministry declined to comment on the internal deliberations and referred to a statement last week by spokesmen for Merkel and Schaeuble said the two are working closely on the crisis…

Many lawmakers in Merkel’s 311-strong caucus made up of the Christian Democratic Union and Bavarian Christian Social Union are finding it difficult to support the chancellor’s position and would side with Schaeuble if forced to choose, the people said.

In sum, it looks as though the Greeks have essentially submitted the same proposal they submitted last week. That is, the “red lines” on VAT and pension cuts have not changed and as such, creditors won’t likely budge. This was to be expected given that Athens has bought itself a bit more time by going the so-called “Zambian” route with its June IMF payments.

Political discussions are reportedly “ongoing” in Greece, which presumably means Tsipras is attempting to negotiate with Syriza party hardliners in an effort to determine if any further concessions to creditors would be acceptable in terms of passing an agreement through the Greek parliament. In other words, this latest “proposal” is likely nothing more than a token submission in lieu of a more serious effort later this month.




Bloomberg’s Bershidsky’s take on what the Greeks are up to:


Greece Pretends to Negotiate
UN 9, 2015 9:30AM EDT
 (courtesy Bloomberg/Bershidsky)

The Greek government has provided its creditors with two new, three-page proposals outlining its fiscal goals and another one calling again for debt relief. The creditors, unimpressed, say the new documents merely rehashed previous Greek proposals. The submissions apparently weren’t really meant to advance the talks. “The Greek government will continue this exchange of view with the institutions on a political level and awaits with interest their formal response,” the government said in a statement.

Greece appears to have stopped negotiating in earnest, probably expecting the creditors to cave at the last moment. It’s hard to say how justified those expectations are. Austrian Finance Minister Hans Joerg Schelling said today they aren’t, because the institutions have already made so many concessions that further ones are unimaginable. Greek bonds fell today as traders failed to find a straw to grasp.


(courtesy Craig Hemke {Turd Ferguson}/TFMetals)


TF Metals Report: The ‘war on cash’


1:20p ET Tuesday, June 9, 2015

Dear Friend of GATA and Gold:

Political and banking elites increasingly are urging the elimination of cash and the conversion to an entirely electronic monetary system, the TF Metals Report’s Turd Ferguson notes today, warning that a “cashless society” would be an authoritarian if not a totalitarian one. His commentary is headlined “The ‘War on Cash'” and it’s posted at the TF Metals Report here:


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


Interesting!!! Two days after our two co CEO’s were removed:

(courtesy zero hedge)

Deutsche Bank Offices Raided By Authorities

Just two days after Deutsche Bank co-CEOs Anshu Jain and Jürgen Fitschen announced their resignations, the bank’s offices in Germany, France, and the UK have been searched by authorities.


Deutsche says the searches are related to “security deals by clients” and apparently do not involve allegations of wrogndoing by the employees.

From Reuters:

Deutsche Bank confirmed its offices in Frankfurt had been searched on Tuesday and said investigators were looking for evidence related to client transactions,with no Deutsche Bank employees accused of wrong-doing.

A spokesman for Germany’s largest lender said the raid had been conducted on behalf of prosecutors in the German city of Wiesbaden, who were seeking evidence of securities transactions by the bank’s clients.

Statement from the bank:

Today the offices of Deutsche Bank in Frankfurt are being searched by the Public Prosecutor’s Office. The search relates to an investigation into securities transactions by clients. Employees of Deutsche Bank are not accused of any wrongdoing.

From Spiegel (via Google translate):

The specific allegations, the Attorney General’s Office Frankfurt declined to comment first. Introduce “in an ongoing process procedural coercion” by a judiciary spokesman said on Tuesday in Frankfurt.

To subject and scope of the investigation, the authority could not say anything because “operational phase” nor walk. However, the spokesman said no one associated with the procedure for VAT fraud in the trading of pollution rights (CO2 allowances).

According to a German bank spokesman, the raid directed against shady business of individual customers. “I can confirm that there is on behalf of the prosecutor’s office in Wiesbaden today searches offices of Deutsche Bank in Frankfurt,” the spokesman said. “The search aims to ensure evidence in connection with investigations against customers with respect to certain securities transactions. There are no employees of the bank accused.” More details – about the shops the customer – did not want to call the speaker.

*  *  *

Over the past several years, Deutsche Bank has paid out some $9 billion in connection with legacy litigation and may settle with the DoJ in the coming months over the bank’s role in selling shoddy MBS in the pre-crisis years. Here’s more on the bank’s various legal troubles.

From DB annual report:

We are currently the subject of regulatory and criminal industry-wide investigations relating to interbank offered rates, as well as civil actions. Due to a number of uncertainties, including those related to the high profile of the matters and other banks’ settlement negotiations, the eventual outcome of these matters is unpredictable, and may materially and adversely affect our results of operations, financial condition and reputation.

A number of regulatory and law enforcement agencies globally are currently investigating us in connection with misconduct relating to manipulation of foreign exchange rates. The extent of our financial exposure to these matters could be material, and our reputation may suffer material harm as a result.

A number of regulatory authorities are currently investigating or seeking information from us in connection with transactions with Monte dei Paschi di Siena. The extent of our financial exposure to these matters could be material, and our reputation may be harmed.

Regulatory and law enforcement agencies in the United States are investigating whether our historical processing of certain U.S. dollar payment orders for parties from countries subject to U.S. embargo laws complied with U.S. federal and state laws.

We have been subject to contractual claims, litigation and governmental investigations in respect of our U.S. residential mortgage loan business that may materially and adversely affect our results of operations, financial condition or reputation.




Your most important commentary of the day.  Both Bill Holter and I agree that the speed from which bond yields have risen has no doubt caused severe damage to our underwriting banks.  Now Dave Kranzler provides data which suggests that maybe a few of the major titans have had a  “nuclear” derivative explode on them, especially with the news that two CEO’s from Deutsche bank, the world’s biggest derivative player have been canned.


(courtesy Dave Kranzler/IRD)


A Derivatives Bomb Exploded Within The Last Two Weeks

I’ve never seen so many sophisticated Wall Street’ers this scared in my entire career.  – This comment comes from a very well-connected Wall Street/DC insider and is in reference to how illiquid the bond markets have become

Something deep and dark has transpired behind the Orwellian “curtain”  used by the elitists to hide the inner workings of the financial markets, especially with regard to big bank balance sheets and OTC derivatives.  What’s happening right now reminds of the movie “Jurassic Park.”  You can hear and feel the monster coming but you can’t see it yet and you don’t know it will pop up in your face or how big it is.

It was the sudden firing of Deutche Bank’s co-CEOs this past weekend – The Brown Stuff Is About To Hit The Fan – that prompted me to spend more time analyzing a sequence of events which indicate to me some sort of derivatives position, possibly at Deutsche Bank, has exploded.  In addition, the stock and bond markets have been emitting some curious signals which reflect that fact that something happened in the global economic and financial system.

Let’s look at some charts first (click on any chart to enlarge).  The first graph below shows a 1-yr plot Dow Jones Transportation Average vs. the S&P 500:


As you can see, the DJ Transports and the S&P 500 were tightly correlated until the end of April 2015. The Transports hit an all-time high on October 25, 2014, which is about when the Fed formally ended its QE program.  The DJT began to underperform the S&P 500 at the end of April.  Since then it began to diverge quite negatively from the S&P 500.   The DJ Transports are largely made up of trucking, railroad and delivery services stocks.  This sector of the market reflects the heart-beat of economic activity, especially as it relates to consumer spending in the United States.  The Transports are down 9.4% from its all-time high.  I wrote about the collapsing U.S. economy a week ago:   LINK  The behavior of the Dow Jones Transports is the market’s confirmation that the U.S. economy is contracting.

A collapsing global economic system will exert an unanticipated and extreme amount of stress on highly leveraged financial systems.  This stress is “magnified” by the enormous amount of derivatives which are connected to the disastrous amount of global debt.

An even more curious chart is the relationship between the yield on the 10yr Treasury bond and the DJ Transports:


As you can see, the yield on the 10yr Treasury bond has been trending higher since the beginning of February while the DJ Transports has been trending lower.  Notice a problem?   In a “clean” market – i.e. a market free from Central Bank and Government interventions, interest rates and the DJ Transports should be positively correlated.  If the economy is contracting, as reflected by the direction in the DJ Transports, the yield on the 10yr Treasury should be declining – not rising.  You can see that when the DJ Transports ran up to an all-time high, the 10yr yield spiked up, reflecting the markets perception that the U.S. economy might be strengthening.

It does not make sense that the 10-yr Treasury yield is moving higher – quite rapidly – while the DJ Transports are tanking – quite rapidly.  In the first week of June, the yield on the 10yr Treasury bond spiked up from 2.09 to 2.40, a 14.8% move.  This is a big move for yields in just 5 trading days, especially in the context of a rapidly weakening economy.   Worst case, 10yr yields should have remained flat.

I believe the illogical movement in 10yr Treasury yields reflects the fact the Fed is losing control of its tight grip on the bond market and longer term interest rates. Note that German bunds have also experienced a similar spike up in interest rates and volatilty.  In the context of my view that there was a derivatives accident somewhere in the global banking system in the last two weeks, it could well have been an OTC interest rate swap bomb that detonated. 

As of the latest OCC quarterly report on bank derivatives activity (Q4 2014), JP Morgan held $63.7 trillion notional amount of derivatives, $40 trillion of which were various interest rate derivatives.  If you look at the ratio of interest rate derivatives to total holdings for the top 4 U.S. banks, they all own roughly same proportion of interest rate derivatives as percent of total holdings.   Deutsche Bank is reported to have about a  $73 trillion derivatives book. If we assume that ratio of interest rate derivatives is likely similar to JP Morgan’s, it means that DB’s potential derivatives exposure to interest rates is around $46 trillion.  I will elaborate on this below.

But first, one more graph related to interest rates:


This graph shows the price of the 10yr Treasury bond futures contract going back to May 2014.  Interestingly, the price of the 10yr moved abruptly higher after the Fed ended QE. This is the opposite of what many of us would have expected.  It wasn’t until early February that 10yr bond price began to decline (yields move higher).  As you can see on the right side of the graph above, the 10yr bond price plunged below the blue uptrend line. The 10yr bond price also crashed through its 200 day moving average – an ominous technical signal.  Both of these events happened within the last week.

Again, I believe that this action in the bond market is pointing to the fact that the Fed is losing control of the markets. I also believe that the catalyst for this loss of control is a big derivatives accident of some sort in the last two weeks.

Another clear indication that something has melted down “behind the scenes” recently is an ominous market call by self-made hedge fund billionaire Paul Singer, founder and CEO of Elliott Management.  In his latest letter to investors, released the last week of May, he stated that the best trade in a generation is to short “long term claims on paper money.”

A savvy investor like Paul Singer would not make a public market call like that unless 1)  he had already positioned his fund accordingly  2)  he had some sort of insight about what was happening “behind the scenes” either first-hand or from insiders who were in a position to give him information and 3) he was 99% certain that his insight and information was correct.  In other words, it highly likely Singer had already made huge position bets for his fund and his own money which would capitalize on a systemic disruption of some sort (Elliott Management was one of the hedge funds with which I dealt when I traded junk bonds in the 1990’s. I knew them to be methodical and always looking for inside information).

Finally, I believe that whatever type of financial explosion occurred is related to the sudden firing of Deutsche Bank’s co-CEOs, Anshu Jain and Jurgen Fitschen.  Fitschen is the equivalent of corporate executive abortion.  He’s under investigation for tax evasion and on trial for giving false testimony in a long-running legal battle related to the collapse of the Kirch media conglomerate (one of Germany’s biggest media empires.  It’s incredulous to me that he wasn’t fired a long time ago.  It tells us just how recklessly this bank is managed by the Board of Directors.  It also suggests a grand failure by German bank regulators.

It’s the firing of Jain that caught my interest.  In a management shake-up a little over two weeks ago, Jain was given more power by the Board and shareholders.   So why was Jain suddenly and unexpectedly fired less than three weeks after having been given more control over the bank?

As I wrote yesterday, Jain’s raison d’etre was to build Deutsche Bank into the world’s largest derivatives dealer.  On May 26, it was announced that Deutsche Bank had reached a settlement with the SEC for improperly valuing its its risk exposure to its Leveraged Super Senior trades book of business (credit derivatives).   This in and of itself was not the cause of the Bank’s reversal on Jain.  But  I can guarantee that this is just the tip of the iceberg with regard to fraud and risk exposure connected to Deutsche Bank’s derivatives business under Jain’s stewardship. We found out in 2008 that bank CEOs and CFOs not only lie to each other and their employees, they also lie to regulators.

I referenced Deutsche Bank above in connection to big bank interest rate derivatives exposure.  I believe that the high volatility in the global fixed income markets has triggered some kind of derivatives blow-up at Deutsche Bank.   While the smoking gun points to some kind of interest rate-related derivatives melt-down, it could also have been related to Greece sovereign debt credit default swaps or energy-related derivatives.

While I’m fairly certain that all the evidence points to Deutsche Bank as the source of what I believe is a derivatives accident that has occurred in the last two weeks, don’t forget that the majority of banks and hedge funds globally are linked directly or indirectly through the “magic” of OTC derivatives and counter-party default risk.  We saw this “natural” law of derivatives risk in action in 2008 and recently when a small German bank blew up from its exposure to an Austrian bank which choked to death of Greece-connected credit default swaps.

There’s other signals which I didn’t cover, like the fact that the S&P 500 is has dropped 2.5% in the last 10 trading days since hitting an all-time high May 21.  In addition, the US dollar index has plunged 170 basis points in the last six trading days.  This is a huge move for a currency in such a short time period.  Having said that, regardless of which bank and what “flavor” of derivative may have blown up, I believe that something big and hidden melted down in global financial system during the last two weeks.

This could be the start of the big financial markets inferno that many of us have been expecting for quite some time.

My best advice for anyone who wants to protect themselves financially is to get as much money OUT of the system as you can.  It’s up to you whether or not you convert your cash into physical gold and silver, but I think at this point only an idiot would leave his money in the system and denominated in paper dollars.




The rise in yields is causing the investors to flee the junk bond market. They will be fleeing the sovereign bond market shortly:

(courtesy Bloomberg)

Bond Market’s Storm Finally Hits Junk Debt as Buyers Flee ETFs

Suddenly, junk bonds have lost their luster.

After providing a haven from the global bond-market selloff, speculative-grade securities have now joined the rout, tumbling almost 1 percent since the end of May. Investors are starting to flee, yanking $1.5 billion from the two biggest high-yield bond exchange-traded funds over the past week, according to data compiled by Bloomberg.

This is a reversal in fate for bonds that had gained 4.8 percent in the first five months of 2015 and suggests that junk-bond investors will only tolerate rising benchmark yields for so long before they, too, bail.

“Price action was miserable across risk assets yesterday,” Peter Tchir, head of macro credit strategy at Brean Capital LLC, wrote in a note Tuesday. “It was the first time since yields shot higher that credit markets felt weak.”

Indeed, high-yield bonds were remarkably stable in May as German government bonds led the world’s bond market down 0.5 percent, according to Bank of America Merrill Lynch index data. That same month, global junk notes gained 0.4 percent.

And in April, as global bonds fell 0.6 percent, speculative-grade securities handed buyers 1.6 percent.

Part of the risky debt’s erstwhile resilience had to do with oil prices as the rebound in that market bolstered energy-company bonds that had been hammered at the end of 2014.

Yield Cushion

Also, speculative-grade notes tend to have shorter maturities and fatter cushions of extra yield over benchmarks than higher-rated bonds, features that can protect the market in periods of rising rates and climbing inflation.

High-yield debt markets have “shown a degree of resiliency here to the shift in the inflation outlook,” Jeffrey Rosenberg, a managing director at BlackRock Inc.’s, said in a Bloomberg radio interview Tuesday. “That resilience could be challenged if we follow up this bout of higher rates with a shift in” expectations for when the Federal Reserve will lift rates.

Case in point: BlackRock’s $14.3 billion high-yield bond ETF plunged 1.6 percent in the six days through Monday as $940.5 million exited the fund, Bloomberg data show. State Street Corp.’s $10.7 billion junk-debt ETF dropped 1.7 percent, with $571.7 million of withdrawals.

Sentiment Gauge

While ETFs are a small slice of the junk-bond market, they’re usually a telling gauge of sentiment, and the outflows are significant compared with the $6.7 billion of total deposits into these funds so far in 2015, Bloomberg data show.

Government yields in Europe and the U.S. are rising in the face of improving economic data and signs inflation is picking up (or, in Europe’s case, that there’s any inflation at all.) Yields on 10-year Treasuries have surged past 2.4 percent, reaching the highest level since Oct. 6, from 1.8 percent in April.

And now the $2.2 trillion world junk-bond market is losing steam, at a time of growing questions about how long stocks can keep rallying. The debt tends to be a leading indicator, and its deterioration bodes poorly for stock investors, Tchir said.

While the selloff is short-lived enough that it may just prove a blip in a market propped up by central-bank stimulus, it may also portend broader pain ahead.




The death knell of the USA dollar:

(courtesy zero hedge)

The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi

Two topics we’ve deemed critically important to a thorough understanding of both global finance and the shifting geopolitical landscape are the death of the petrodollar and the idea of yuan hegemony.

Last November, in “How The Petrodollar Quietly Died And No One Noticed,” we said the following about the slow motion demise of the system that has served to perpetuate decades of dollar dominance:

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.



The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, “developed world” status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements.

Falling crude prices served to accelerate the petrodollar’s demise and in 2014, OPEC nations drained liquidity from financial markets for the first time in nearly two decades:

By Goldman’s estimates, a new oil price “equilibrium” (i.e. a sustained downturn) could result in a net petrodollar drain of $24 billion per month on the way to nearly $900 billion in total by 2018. The implications, BofAML notes, are far reaching: “…the end of the Petrodollar recycling chain is said to impact everything from Russian geopolitics, to global capital market liquidity, to safe-haven demand for Treasurys, to social tensions in developing nations, to the Fed’s exit strategy.”

Shifting to the idea of yuan hegemony, China is aggressively pushing its Silk Road Fund and Asian Infrastructure Investment Bank.

The $40 billion Silk Road Fund is backed by China’s FX reserves, the Export-Import Bank of China, and China Development Bank and seeks to increase ROIC for Chinese SOEs by investing in infrastructure projects across the developing world, while the $50 billion AIIB is funded by 57 founding member countries (the US and Japan have not joined) and will serve to upend traditionally dominant multilateral institutions which have failed to respond to the rising influence and economic clout of their EM membership. China will push for the yuan to play a prominent role in the settlement of AIIB transactions and may look to establish special reserves in both the AIIB and Silk Road fund to issue yuan-denominated loans.

Back in early November, SWIFT data showed that 15 new countries had joined a list of nations settling more than 10% of their trade deals with China in yuan. “This is a good sign for [yuan] adoption rates and internationalisation. In particular, Canada’s [yuan] usage for payments, which has increased greatly over this period, is very interesting since we have not seen strong adoption of the [yuan] from North America to date,” Astrid Thorsen, Swift’s head of business intelligence said.

Earlier that month, China and Russia indicated that going forward, more trade between the two countries would be settled in yuan. From Reuters, last November:

Russia and China intend to increase the amount of trade settled in the yuan, President Vladimir Putin said in remarks that would be welcomed by Chinese authorities who want the currency to be used more widely around the world.Spurred on by their often testy relations with the United States, Russia and China have long advocated reducing the role of the dollar in international trade.Curtailing the dollar’s influence fits well with China’s ambitions to increase the influence of the yuan and eventually turn it into a global reserve currency. With 32 percent of its $4 trillion foreign exchange reserves invested in U.S. government debt, China wants to curb investment risks in dollar.The quest to limit the dollar’s dominance became more urgent for Moscow this year when U.S. and European governments imposed sanctions on Russia over its support for separatist rebels in Ukraine.

“As part of our cooperation with this country (China), we intend to use national currencies in mutual transactions.The initial deals for rouble and yuan are taking place. I want to note that we are ready to expand these opportunities in (our) energy resources trade,” Putin said at the time, suggesting that going forward, Russia may look to settle sales of oil in yuan.

Sure enough, Gazprom has confirmed that since the beginning of the year, all oil sales to China have been settled in renminbi. From FT:

Russia’s third-largest oil producer, is now settling all of its crude sales to China in renminbi, in the most clear sign yet that western sanctions have driven an increase in the use of the Chinese currency by Russian companies.


Russian executives have talked up the possibility of a shift from the US dollar to renminbi as the Kremlin launched a “pivot to Asia” foreign policy partly in response to the western sanctions against Moscow over its intervention in Ukraine, but until now there has been little clarity over how much trade is being settled in the Chinese currency.


Gazprom Neft, the oil arm of state gas giant Gazprom, said on Friday that since the start of 2015 it had been selling in renminbi all of its oil for export down the East Siberia Pacific Ocean pipeline to China.


Russian companies’ crude exports were largely settled in dollars until the summer of last year, when the US and Europe imposed sanctions on the Russian energy sector over the Ukraine crisis…


Gazprom Neft responded more rapidly than most, with Alexander Dyukov, chief executive, announcing in April last year that the company had secured agreement from 95 per cent of its customers to settle transactions in euros rather than dollars, should the need to do so arise.


Mr Dyukov later said the company had started selling oil for export in roubles and renminbi, but he did not specify whether the sales were significant in scale.


According to Gazprom Neft’s first-quarter results issued last month, the East Siberian Pacific Ocean pipeline accounted for 37.2 per cent of the company’s crude oil exports of 1.6m tonnes in the three months to March 31.

With that, the “PetroYuan” has officially been born and while FT notes that “other Russian energy groups have been more reluctant to drop the dollar for settlement of oil sales,” the fact that Russian producers are now openly considering a shift at the same time that officials in the US and Europe are openly discussing stepped up economic sanctions suggests renminbi settlements may become more commonplace going forward.

To understand why and to what extent this is significant in the current environment, consider the following from WSJ:

Officials of the Organization of the Petroleum Exporting Countries, which declined to cut oil production last year, reasoned that maintaining high production levels would protect market share in crucial importing nations.;


But Chinese customs data released Friday show that China’s crude imports from some big OPEC nations have plummeted, while imports from Russia surged 36% in 2014. Meanwhile, imports from Saudi Arabia fell 8% and those from Venezuela dropped 11%.



To summarize: Western economic sanctions on Russia have pushed domestic oil producers to settle crude exports to China in yuan just as Russian oil is rising as a percentage of total Chinese crude imports. Meanwhile, the collapse in crude prices led to the first net outflow of petrodollars from financial markets in 18 years, and if Goldman’s projections prove correct, the net supply of petrodollars could fall by nearly $900 billion over the next three years. All of this comes as China is making a concerted push to settle loans from its newly-created infrastructure funds in renminbi.

Putting it all together, the PetroYuan represents the intersection of a dying petrodollar and an ascendant renminbi.





This is a major escalation:  THE SAUDIS will obtain nuclear weapons if the Iran deal proceeds:

(courtesy zero hedge)

Saudi Ambassador Warns West On Iran Deal: “All Options On Table…” Including Nukes

We previously warned of the risks of escalation in The Middle East to something much more dangerous, but, as the Saudi ambassador to UK confirmed today, the risk of Wahhabis going nuclear is even higher than many expected, “…if [Iran will not offer assurances it will not pursue nuclear weapons], then all options will be on the table for Saudi Arabia… Iran’s nuclear program poses a direct threat to the entire region and constitutes a major source and incentive for nuclear proliferation across the Middle East, including Israel.”


Saudi Arabia is ready to acquire nuclear weapons if diplomatic talks aimed at halting Iran’s nuclear ambitions break down, the Saudi ambassador to the UK has said. As RT reports,


Prince Mohammed bin Nawwaf bin Abdulaziz al-Saud said the oil-rich Gulf kingdom hoped negotiations being led by US President Barack Obama would result in a “watertight” deal with Iran.

However if does not happen, then “all options are on the table,” he said.

Prince Mohammad told The Telegraph: “We have always expressed our support for resolving the Iranian nuclear file in a diplomatic way and through negotiation.”

“We commend the American president’s effort in this regard, provided that any deal reached is watertight and is not the kind of deal that offers Iran a license to continue its destabilizing foreign policies in the region. The proof is in the pudding.

The Saudi ambassador said the kingdom hopes Iran will offer assurances it will not pursue nuclear weapons.

But if this does not happen, then all options will be on the table for Saudi Arabia.

“Iran’s nuclear program poses a direct threat to the entire region and constitutes a major source and incentive for nuclear proliferation across the Middle East, including Israel,” he added.

Saudi Arabia is believed to have funded up to 60 percent of Pakistan’s nuclear program, on the condition it could buy warheads at short notice.

If the Gulf state were to activate the deal, it would see Saudi Arabia become the first nuclear power in the Arab world.

Finally, if this ‘threat’ were to become true… what would be the Saudi catalyst of the hair-trigger big red button of doom? This perhaps?

In Major Escalation, Yemen Rebels Fire Scud Missile Into Saudi Arabia

This won’t end well…

Source: Townhall via Sunday Funnies

This should give us a big clue as to how the global finances are shaping up!!
(courtesy zero hedge)

HSBC To Fire 50,000, One In Five Jobs, To Fund Dividends To Shareholders

Just days after JPMorgan revealed it would fire another 5,000 by the end of the year in a “scalpel” headcount reduction, overnight the world’s favorite drug money laundering bank HSBC unleashed the machete and announced it would cut almost 50,000 workers, or one in five bankers, a move which would shrink the investment bank division by one-third. The reason: the same as that given by US corporations who are laying off tens of thousands so they can fund record stock buybacks and enrich their shareholders – to boost profits so that more monay can be channeled in the form of dividends.

According to Reuters, the bank’s second big overhaul since the financial crisis “will speed up a cull of unprofitable units and countries by cutting almost 50,000 jobs – half of them from selling businesses in Brazil and Turkey.” Gulliver warned that its decision to sell its businesses in Turkey and Brazil, where it had failed to gain scale, showed that HSBC “had no sacred cows”.

Considering these countries are either deeply in recession or on the cusp, the massively layoffs will likely have a profound macro impact on the regional economies.

It will cut its assets by a quarter, or $290 billion on a risk adjusted basis (RWA) by 2017, and slice $140 billion from its investment bank which will subsequently make up less than a third of HSBC’s balance sheet from 40 percent now.

But while the pink slips galore, shareholders will be happy:

Gulliver also pledged higher payouts for investors. “I believe that we are in the foothills of another prolonged period of dividend growth for the firm,” he said. He noted that the bank’s dividend had grown from 17 years from 1991 to 2008.

Still, some are getting skeptical that one can grow cash flows by massive attrition:

But investors were cautious about how HSBC would translate job cuts into meaningful savings given the higher cost of doing business in a tougher post-crisis business environment marked by new rules on risk and compliance.

“Slaughtering the staff is not necessarily the solution unless management makes the bank considerably less complex,” said James Antos, analyst at Mizuho Securities Asia.

The stock suggested as much when HSBC shares dipped 0.1% in the aftermath of the announcement, pressured also by disappointment about the bank’s decision to lower its target for return on equity to greater than 10 percent by 2017, down from a previous target of 12-15 percent by 2016.

Some more details on who gets the machete, or rather, the axe:

In addition to the jobs lost through disposals, others will be cut by consolidating IT and back office operations, and closing branches.

Gulliver said about 7,000-8,000 job cuts would be in Britain, or one in six UK staff. The UK retail banking business would also be rebranded to meet new rules designed to ringfence customer deposits from riskier investment banking operations.

Gulliver said it was too early to say whether the group would keep the ring-fenced bank, which will be headquartered in the English city of Birmingham and account for about two thirds of UK revenues, or $11 billion.

Finally, on a very sensitive topic to the UK in recent months, HSBC also set out 11 criteria for helping it decide whether to move its headquarters from London to Asia, likely Hong Kong. “They include factors such as economic growth, the tax system, government support for the growth of the banking system, long-term stability and an ability to attract good staff. HSBC said it would complete the review of the possible move by the end of the year.”

The bottom line: HSBC will push through annual cost savings of up to $5 billion by 2017. It will cost up to $4.5 billion in the next three years to achieve the savings. In other words, HSBC will report massive GAAP losses and hope analysts give it credit for billions in non-GAAP addbacks.

The problem is that even this practice of endless adjustments to bottom line EPS is getting increasingly more scrutinty as explained in “The Non-GAAP Revulsion Arrives: Experts Throw Up All Over “Made Up, Phony, Smoke And Mirrors” Numbers” because sooner or later someone will realize that when “one-time, non-recurring” charges, settlements and costs are recurring and non one-time, then it is merely ordinary course of business, which also means that what on paper are record profits are in GAAP reality massive losses.


This is where some of the Chinese gains from their stock market surge landed:
(courtesy zero hedge)

60 Year Old Vancouver House Sells For 40% Above Asking As Chinese Buyers Go Full Tilt

While the US housing bubble may have made its triumphal return particularly among the ultra-luxury segment in select cities on the east and west coast (making bothowning and renting unaffordable for most Americans), it pales in comparison to what is going on in Canada.

Case in point, this 60-year-old, 4-bedroom, 3-bathroom rancher in West Vancouver:


The house, according to the Vancouver Sun, was originally listed with an asking price of $2.98 million. A few days later, the house is in contract at a price of $4.1 million, 40% above asking.

“We got nine offers with the majority of bids from local buyers, ranging from full price to $4.1 million,” said Royal LePage Sussex listing agent Viv Harvey.

Is the buyer some retired Wall Street vet, or a local energy tycoon who needs to park some cash away from the former safety of a Swiss bank account? Neither. The buyer, as has been the case in the luxury segment in the US, is none other than a Chinese buyer gone full tilt with hot money to dump abroad before the authorities find out.

As a reminder, China has “soft” capital controls for individuals which cap outflows at $50,000 a year. Needless to say, the army of Chinese buyers has found a way to circumvent say limitations, and as soon as some of China’s hot money, of which there is now roughly $25 trillion in Chinese mainland deposits which are leaking ever faster abroad, makes its way to the US or Canada, it is immediately parked in real estate.

Such as this house.

“There is huge demand for view properties from Chinese and Middle Eastern investors,” said Bell. “They are willing to pay a bit more of a premium and look at the long term for trophy properties with larger lots, views, and (that are on) good streets.”


“You can’t really gauge what people are willing to pay,” said RE/MAX Masters Realty agent Shahin Behroyan, who represented the buyer. “The view properties have become quite rare.”


He added with more developers and builders also active in the market — buying, renovating or rebuilding homes and then selling them for a premium — other buyers are feeling more motivated than ever to “pay more for the land” and build themselves.

It’s not just Canada. As we reported last July, Chinese buyers have become the largest source of foreign cash in the U.S. residential real estate market, accounting for nearly one in four dollars spent by foreigners on American housing last year, the National Association of Realtors said in its annual survey of international property sales. China accounted for $22 billion in international sales for the 12 month period ending March 2014, or 24% of all foreign sales, up from $12.8 billion, or 19%, during the year-earlier period.

So Chinese buyers buy up in bulk, renovate, upgrade, and sell to other Chinese buyers for a mark up, as the original seller uses the proceeds to buy up even more US real estate. Because with the Chinese housing bubble now burst, China’s wealthiest are making sure housing is unaffordable for anyone but the wealthiest Americans and Canadians.

And since the risk is that the Politburo (which continues to be on an anti-corruption campaign, at least as far as non-Politburo members are concerned) can halt this capital exodus at any moments by demonstratively executing several of the offenders on primetime TV, home builders in the US are unwilling to take the risk, or rather plunge, and invest millions in housing on spec just to see demand cut off overnight due to some regulatory intervention.

Not convinced? Then go through the Hovnanian earningscall transcript in which one of the top US homebuilders just admitted it was “too aggressive” in producing homes on spec. So just imagine what will happen to the housing market in Canada (and the US) when this final source of high-end demand is finally “tapered”, something China will inevitably have to do to reflate its all important domestic housing bubble.


Your more important currency crosses early Tuesday morning:


Euro/USA 1.1256 down .0025

USA/JAPAN YEN 124.03 down .534

GBP/USA 1.5292 down .0049

USA/CAN 1.2390 down .0024

This morning in Europe, the Euro fell by a tiny 25 basis points, trading now just above the 1.11 level at 1.1135; 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 up again in Japan by 54 basis points and trading just above the 124 level to 124.03 yen to the dollar.

The pound was  down this morning as it now trades well below the 1.53 level at 1.5292, 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 up by 24 basis points at 1.2390 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 360.89 points or 1.76%

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

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

Gold very early morning trading: $1181.00


Early Tuesday morning USA 10 year bond yield: 2.37% !!! down 1 in basis points from Monday night and it is trading above resistance at 2.27-2.32%.

USA dollar index early Tuesday morning: 95.31 up 2 cents from Monday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Tuesday morning

And now for your closing numbers for Tuesday:


Closing Portuguese 10 year bond yield: 3.00%  up 1 in basis points from Monday (getting ominous)

Closing Japanese 10 year bond yield: .46% !!! down 4 in basis points from Monday/(central bank intervention)

Your closing Spanish 10 year government bond, Tuesday, up 3 points in yield (very ominous)

Spanish 10 year bond yield: 2.28% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 2.29% up 3 in basis points from Monday: (very ominous)

trading 1 basis point higher than Spain.



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

Euro/USA: 1.1277 down .0001 ( Euro down 1 basis points)

USA/Japan: 124.32 down  0.258 ( yen up 26 basis points)

Great Britain/USA: 1.5380 up .0039 (Pound up 39 basis points)

USA/Canada: 1.2338 down .0074 (Can dollar up 74 basis points)

The euro fell slightly today. It settled down 1 basis points against the dollar to 1.1277 as the dollar jolted southbound against most of the various major currencies. The yen was up by  26 basis points and closing well below the 125 cross at 124.32. The British pound gained some ground today, 39 basis points, closing at 1.5380. The Canadian dollar gained huge ground against the USA dollar, 74 basis points closing at 1.2338.

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: 2.42% up 3 in basis point from Monday// (well above  the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

95.18 down 12 cents on the day.


European and Dow Jones stock index closes:


England FTSE down 34.24 points or 0.53%

Paris CAC down 7.44 points or 0.15%

German Dax down 63.63 points or 0.58%

Spain’s Ibex up 20.80 points or 0.19%

Italian FTSE-MIB down 114.83 or 0.51%


The Dow down 2.51  or 0.01%

Nasdaq; down 7.76 or 0.15%


OIL: WTI 59.92 !!!!!!!


Closing USA/Russian rouble cross: 55.59  up 5/8  roubles per dollar on the day




And now for your more important USA stories.

NY trading for today:

(courtesy zero hedge)

Stocks Slide To Weakest Consecutive Close Since October’s Bullard Bounce

Summing up today (and every day) on the AAPL infotainment channel, we thought the following brief clip would clarify our perspective…


Before we start, something just does not add up here… Stocks (admittedly starting to catch down) have decoupled from relative volume pressures…

h/t @Not_Jim_Cramer

And Stocks have broken the uptrend heading back towards fundamentals…


but still CNBC claims “you have nothing to worry about in the equity markets, credit is the bubble”


*  *  *

Having got that off our chests…

Trannies were suffering more than the rest until late in the day panic buying lifted them up to Small Caps… S&P managed a tiny gain…


Futures markets show the V-Shaped recovery from early Europe-driven losses… (this is post Payrolls)


Since Friday’s close, Trannies are ugly but notably the higher beta stock indices are not generasting the kind of momo oomph one would expect…


Notably, the S&P rallied all the way back up to its 100DMA then sold off again – this is the first consecutive close below the 100DMA since October’s Bullard bounce…


AAPL’s ramp was all about stop runs from yesterday’s WWDC presentation...(AAPL bounced perfectly off its 100DMA at 125.37 and tested up to its 50DMA at 128.06 also)


The Dollar had a modestly volatile day but ended unch…


Treasury yields rose notably into the European close then rallied modestly into the US close…


Gold and Copper rose gently, silver was flat, but crude just did its thing…


Another day in the quiet world of crude oil… MidEast re-turmoiled – Saudi airstrikes in Yemen (and some claim that China will uptick its imports… because it just plunged them?)…


Charts: Bloomberg

Bonus Chart: Target was buyback spoofed…

1. Issue press release about massive buyback
2. Watch stock.
3. If stock does not surge, retract press release


An excellent commentary on the uSA housing problem

(courtesy zero hedge)

America’s Housing Problem: Buying And Renting Are Both Unaffordable

In Q1, the average down payment on single family homes, condos, and townhomes fell to just 14.8% — the lowest level since Q1 2012.

As discussed here on Sunday, this is the inevitable result of a move by FHFA to lower the minimum down payment on loans backed by Fannie and Freddie to 3% from 5%. This had the knock-on effect of prompting FHA to cut premiums in order to retain market share. The idea, of course, is to make the homeownership dream a reality for as many Americans as possible irrespective of whether or not they can actually afford their mortgage payments. After all, “it’s only right.”

As it turns out, the FHFA’s best efforts at resurrecting the same type of underwriting standards which precipitated the housing bubble haven’t been enough to transform what has become a nation of renters back into a nation of owners. Leaving aside — for now anyway — the issue of whether the homeownership rates that persisted pre-crisis were realistic, the factors impeding new home buying in America will be familiar to those who frequent these pages: student debt and lackluster wage growth. Meanwhile, rising rents are squeezing renters, making it even more difficult to scrape together enough for a down payment. WSJ has more:

Last decade’s housing crisis has given way to a new one in which many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing.


The U.S. homeownership rate is now below where it stood 20 years ago when President Bill Clinton launched a national campaign to encourage more Americans to buy homes. Conventional wisdom says the rate, now at 63.7%, is leveling off to where it was for decades before the housing-market peak.


But this is probably wrong, according to research from the Urban Institute, which predicts homeownership will continue to slip for at least the next 15 years.


Demographics tell the story. The Urban Institute researchers predict that more than 3 in 4 new households this decade, and 7 of 8 in the next, will be formed by minorities. These new households—nearly half of which will be Hispanic—have lower incomes, less wealth and lower homeownership rates than the U.S. average..


Fewer than half of new households formed this decade and next will actually own homes. By contrast, almost three-quarters of new households in the 1990s became homeowners. The downtrend would push the homeownership rate below 62% in 2020, and it would hold the rate near 61% in 2030, below the lowest level since records began in 1965.


The declines reflect a surge of new renter households, which is boosting rents. Together with tougher mortgage-qualification rules, this will leave households stuck between homes they can’t qualify to purchase and rentals they can’t afford,says Ron Terwilliger, who spent two decades running Trammell Crow Residential, one of the nation’s largest apartment developers..


A related concern is that qualified households will be unable to move from renting to owning as housing-cost burdens, slow wage growth and student debt make it harder to cobble together even a modest down payment.


“America is blissfully unaware of this,” says Lewis Ranieri, the financier who co-invented the mortgage-backed security, which allowed large numbers of baby boomers to become homeowners beginning in the 1980s. “We’re rapidly running to a crisis in less than 10 years.”


In other words, between Fannie, Freddie, the Fed, and Wall Street’s securitization machine, the US created a bubble which drove the homeownership rate to levels not commensurate with economic realities (i.e. incomes, FICOs, etc). Invariably, the bubble burst, turning a nation of homeowners to a nation of renters and demand for rentals has naturally driven up rents.

Meanwhile, Fed policy has failed to boost aggregate demand and in turn, wage growth remains in the doldrums for the vast majority of workers…

…while new graduates are unable to buy homes because 1) the “strong” jobs market is a BLS fabrication, and 2) they are weighed down by record student debt…

…and homes purchased by flippers are increasingly being sold not to new occupants, but to landlords…

*  *  *

What the above suggests is that for many Americans, buying is out of the question and renting is becoming increasingly unaffordable as the entire household formation “upside case” is now collapsing on itself, something we’ve discussed on a number of occasions. Recall the rise in “parental co-residence rates“:

Note that this situation has the potential to become self-fullfilling. That is, as homeownership becomes increasingly unrealistic, demand for rentals will only increase, driving further increases in the cost of rental housing. The question then becomes this: what happens when a family that can’t afford a down payment can no longer afford to pay the rent?



This morning home builder Hovanian shocked investors with this:

(courtesy zero hedge)

Homebuilder Plunges 12% After CEO Admits They Were Over-Optimistic

Hovnanian shares are down 13% this morning (the most since 2011) after a worse than expected loss and drop in margins stunned shareholders. In a 2007-esque reflection, Hovnanian’s CEO appears to be admitting things are not as rosy as homebuilders have all been projecting:


However, the CEO added 2016 will be the breakout year… so that’s nice.



Is this the first chink in the armor of Homebuilder optimism?



Dave Kranzler comments that this may have ushered in the next housing market collapse:

(courtesy Dave Kranzler/IRD)

Hovnanian Ushers In The Next Housing Market Collapse

As we discussed on our first quarter conference call, we expected our second quarter gross margin to be adversely affected by incentives and concessions on started unsold homes. However, the impact was greater than we anticipated and we are disappointed with our second quarter results.  – Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer,  HOV 2nd Qtr 8-k

There’s a reason Ara Hovnanian dumped 315,000 shares of HOV stock on April 16th, 2015 – Insider stock selling ahead of an earnings disaster.

Hovnanian greeted the stock market this morning with a big earnings miss.  It’s stock plunged as much as 15%:

HOVI may have been a bit early in forecasting my demise of the housing market, but I know I’m right.  HOV is the 7th largest homebuilder in the country.  It sells homes in 18 States, including the largest housing markets for new homes like California, Texas and Florida.   HOV primarily sells into the first-time and move-up buyer market.  In other words, it’s Q2 results are a good barometer of the market for new home sales in general.

Although it’s revenues were higher thanks to the bubble in new home prices, HOV’s gross margins plunged 400 basis points from 20.1% last year in Q2 to 16.1% in its latest quarter. This is due to the expense associated with started but unsold homes. A feature that is endemic to every homebuilder I research.  It’s total unit home deliveries dropped 3.2% vs. the Q2 2014.

It’s Cost of Sales also includes over $4 million inventory and land option write-offs vs. $522k in Q2 2014. While not large relative to its total cost of sales, inventory and land write-offs are going to become a recurring feature with every homebuilder going forward.

Despite a decline in home deliveries, HOV ballooned its inventory by $200 million in the last six months ($1.3 billion in Oct 2014 vs. 1.5 billion at the end of the most recent quarter). Inventories at all of the homebuilders have swelled up to record levels – even highher than at the peak of the big housing bubble. This is despite the fact that unit sales volume is roughly 1/3 of peak unit sales volume.

An even more shocking fact is that the amount of debt per housing unit sold at EVERY homebuilder is several times higher than it was at the peak of the housing bubble. For instance, at $1.95 billion HOV’s debt load has increased $259 million in the last six months. On a trailing 12 month basis, HOV has delivered 5,836 homes. This translates into $333,790 of debt per home unit delivered.

I have always predicted that HOV would be the first homebuilder to hit the wall.  This is why I have not published a research report on the Company: It’s stock has been below $10 since late 2007. It’s not worth shorting.

However, I have published in-depth research reports on the two stocks that I think are most likely to follow HOV into the bankruptcy abyss.  Both of these companies have operating and financial profiles which are quite similar to that of HOV.  Both of these stocks plunged and then rebounded about six months ago.  I believe that we will see them plunge and stay down at some point in the next 3-6 months.  The problem is, you have to positioned ahead of the plunge or you will miss it.



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

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