june 10/GLD loses another 3 tonnes of gold/SLV surprisingly adds another 1.124 million oz/The ECB provides another 2.5 billion euros of ELA to Greece/Huge lines up to withdraw cash from Greek banks

Good evening Ladies and Gentlemen:


Here are the following closes for gold and silver today:

Gold:  $1186.10 up $8.80 (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 6 notices for 30,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.44 tonnes for a loss of 58 tonnes over that period.


In silver, the open interest rose by another 3168 contracts even though Tuesday’s silver price was unchanged.   The total silver OI continues to remain extremely high with today’s reading at 189,524 contracts now at multi-year highs despite a record low price. In ounces, the OI is represented by 947 million oz or 118% of annual global silver production. 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 as they continue to raid as basically they have no other alternative.

In silver we had 6 notices served upon for 30,000 oz.


In gold,  the total comex gold OI rests tonight at 406,069 for a loss of 1824 contracts despite the fact that gold was up $4.10 yesterday. We had 0 notices filed for nil oz.


Late last night, we had a huge withdrawal in gold inventory at the GLD t the tune of 2.98 tonnes. Thus the inventory rests tonight at 705.72 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 another huge addition of 1.126 million oz in silver inventory at the SLV/Inventory rests at 324.127 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 3,168  contracts despite the fact that silver was unchanged in price.  The OI for gold fell by 1824 contracts down to 406,069 contracts despite the fact that the price of gold was up by $4.10 on Tuesday.

(report Harvey)


2. Today, 4 important commentaries on Greece

zero hedge, Bloomberg)

4. Dave Kranzler of IRD  and Avery Goodman comment on that huge increase in gold deposited by JPMorgan on June 1.2015


(Dave Kranzler iRD/Avery Goodman)

5. Bill Holter’s commentary tonight :

“We Are(nt) “the World”!”

6.  Koos Jansen reports on how gold will play a huge intricate part in the development of the Silk Road strategy of China

(Koos Jansen)


7. Precious metals trading overnight from Asia/Europe


8. Trading from Asia and Europe overnight

(zero hedge)

9. Trading of equities/ New York

(zero hedge)




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

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

Here are today’s comex results:

The total gold comex open interest fell by 512 contracts from 407,893 down to 406,069 despite the fact that  gold was up $4.10 yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 109 contracts down to 965. We had 0 notice served upon yesterday.  Thus we lost 109 contracts or an additional 10,900 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 fell by 1 contracts down to 897.  The next big delivery month after June will be August and here the OI fell slightly by 1795 contracts  to 267,985. 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 81,635. The confirmed volume on Tuesday (which includes the volume during regular business hours + access market sales the previous day) was poor at 97,035 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI rose by 3,168 contracts from  186,356 up to 189,524 despite the fact that the price of silver was unchanged, with respect to Tuesday’s trading.  The front non active  delivery month of June saw it’s OI fall by 1 contract to 34 . We had 6 contracts delivered upon yesterday.  Thus we gained 5 contracts or an additional 25,000 ounces of silver will stand for delivery in this non active June contract month. The estimated volume today was poor at 21,398 contracts (just comex sales during regular business hours. The confirmed volume on Tuesday (regular plus access market) came in at 58,355 contracts which is very good in volume. We had 6 notices filed for 30,000 oz today.

June initial standing

June 10.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz  12,099.523 oz (Brinks, HSBC)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 965 contracts (96,500 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  93,164.7 oz

Today, we had 0 dealer transaction


total Dealer withdrawals: nil oz


we had 0 dealer deposit

total dealer deposit: nil oz
we had 2 customer withdrawals

i) Out of HSBC: 11,030.893 oz

ii) Out of Brinks; 200.58 oz


total customer withdrawal: 12,099.523 oz


We had 0 customer deposits:


Total customer deposit: nil 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 June 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 (965) 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 (965) – the number of  notices served upon today (0) x 100 oz which equals 356,400 oz standing so far in this month of June (11.085 tonnes of gold).  Thus we have 11.085 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) = 7,891,114.892 (245.44 tonnes)


Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.44 tonnes for a loss of 58 tonnes over that period.




And now for silver

June silver initial standings

June 10 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 834,398.645 oz (CNT,Brinks,Delaware,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  1,205,610.300 oz (Delaware,JPM)
No of oz served (contracts) 6 contracts  (30,000 oz)
No of oz to be served (notices) 35 contracts(175,000 oz)
Total monthly oz silver served (contracts) 220 contracts (1,100,000)
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 3,281,108.9 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 6 contracts for 30,000 oz. To calculate the number of silver ounces that will stand for delivery in June, we take the total number of notices filed for the month so far at (220) x 5,000 oz  = 11,000,000 oz to which we add the difference between the open interest for the front month of June (34) and the number of notices served upon today (6) x 5000 oz equals the number of ounces standing.

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

220 (notices served so far) + { OI for front month of June (34) -number of notices served upon today (6} x 5000 oz ,= 11,140,000 oz of silver standing for the June contract month.


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 10/ we had a huge withdrawal of 2.98 tonnes of gold from the GLD/inventory rests at 705.72

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 : 705.72  tonnes.




And now for silver (SLV) Please note the difference between GLD and SLV.  GLD has been depleting of gold/SLV has been adding to its inventory.

June 10/another monster of an addition to the tune of 1.126 million oz/Inventory rests at 324.127

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 10/2015: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 7.9% percent to NAV in usa funds and Negative 7.9% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.6%

Percentage of fund in silver:38.0%

cash .4%


( June 10/2015)


2. Sprott silver fund (PSLV): Premium to NAV falls to +.13%!!!!! NAV (June 10/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .27% to NAV(June 10/2015

Note: Sprott silver trust back  into positive territory at +.13%.

Sprott physical gold trust is back into negative territory at -.27%

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)



A very important read…

(courtesy Avery Goodman and Dave Kranzler)

Avery Goodman: Morgan runs Fed’s gold operations at Comex, Fed guarantees exchange


10:06p ET Tuesday, July 9, 2015

Dear Friend of GATA and Gold:

Recent reports from the U.S. Commodity Futures Trading Commission and the CME Group, operator of the New York Commodity Exchange, indicate that JPMorganChase & Co. is administering the Federal Reserve’s gold swapping and lending operations and that for the time being the exchange’s gold contracts are being guaranteed by the U.S. government.

That analysis is published today by Colorado securities lawyer Avery B. Goodman, who draws heavily on GATA’s documentation of U.S. government intervention in the gold market.

Goodman’s conclusion arises largely from the unnecessarily disproportionate assignment to JPMorganChase of Comex gold deliveries, as recorded in the CFTC’s June 2 bank participation report for gold futures. Essentially, Goodman writes, last month the Fed rescued the Comex from a gold delivery deficiency, but the U.S. gold reserve, now guaranteeing the Comex, will not last forever.

Goodman’s may prove to be the most important analysis written about the gold “market” this year. If they meant to provide the world with any serious journalism, mainstream financial news organizations quickly would put questions about Goodman’s analysis to the Federal Reserve, CME Group, and JPMorgan Chase.

Goodman’s analysis is headlined “Did Comex Just Receive A Physical Gold Bailout from the Fed?” and it’s posted at Seeking Alpha here:


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


(courtesy Dave Kranzler/IRD)

The Fed Bailed Out The Comex With Hypothecated Gold

I’m not the only one who’s noticed a significant increase in the amount of anti-gold propaganda flooding the financial media.  Here’s a perfect example published by Bloomberg News just today:   Gold’s Technical/Fundamental Trend Is Down

Of course, nothing could be further from the truth.  You tell me, does this chart look “bearish:”


This graph does not reflect today’s spike higher in gold. The U.S. financial media has become disinformational in proportions that would make George Orwell or Joseph Goebbels blush with embarrassment.

Another critical fundamental variable ignored by the financial media – and even Koos Jansen for that matter – is deliveries onto the Shanghai Gold Exchange. Yes, withdrawals are the ultimate barometer of Chinese demand for gold – minus the PBoC’s demand, of course – and Koos has done brilliant work on that. But gold can not be withdrawn if it is not first delivered! As it turns out, just this week alone delivery volume onto the SGE has totaled 115.4 tonnes. John Brimelow of JB Gold Jottings describes this volume as “impressive.” Especially considering that the financial media and dolts like Scott Bauer would have us believe that seasonal demand in China is low. Clearly utter disinformation.

Avery Goodman has written a piece for Seeking Alpha that describes why it appears as it the Fed – via JP Morgan – bailed out the Comex from defaulting on gold deliveries under the June contract. I believe Avery’s article is 100% accurate based on my 15 years of researching, trading and analyzing precious metals trading on the Comex:

In an article dated June 1, 2015, I pointed out that COMEX clearing members had gotten themselves to the edge of a widespread default on physical gold delivery obligations. They faced net claims of 550,000 troy ounces against only 370,000 registered ounces left at the COMEX warehouses. That left a deficiency of 170,000 ounces, or 5.29 tons of gold.

That same day, JPMorgan Chase (NYSE:JPM) transferred 177,402 troy ounces of gold into COMEX registered gold stockpiles – just enough to cover the shortfall at maturity, plus some extra to cover the additional buying that always happens during an average delivery month. All this raises a question: Did JPMorgan Chase just engage in a bailout similar to John Pierpont Morgan’s 1907 bailout of the New York City banks?

You can read his entire article here – every assertion he makes is 100% accurate and verifiable:  The Fed Bailed Out The Comex

I wrote during the period just before first notice of deliveries that the open interest standing for delivery was unusually high.  I also suggested that the bullion banks would attack gold and coerce as many of those longs to sell as possible.  I also suggested that the Comex would find a way to avoid delivery default.   Both of my predictions were fulfilled.  Avery’s article explains how delivery default was avoided.

Posted on 9 Jun 2015 and courtesy by
(courtesy Koos Jansen)

The Redeployment of Asia’s Forex Reserves

China’s New Silk Road initiatives provide it with a way to use its huge pile of foreign exchange, and its gold-buying could lead to more balanced international monetary regime

By Miriam L. Campanella and Koos Jansen

Originally published on Caixin Online.

The New Silk Road initiatives, also known as the “One Belt, One Road” plan, proposed by President Xi Jinping in September 2013, have been joined by over 60 countries and will rebuild and amplify a network of land and sea routes from East Asia to the rest of Asia, Africa and Europe. The multiple projects aim to boost connectivity between Asia, Europe, the Middle East and Africa.

The initiatives include a cluster of finance approaches. Among others these are the Silk Road Investment Fund, Asian Infrastructure Investment Bank, Eurasian Economic Union, ASEAN Economic Community and Shanghai Cooperation Organization. Grounded on long-term finance capabilities, well-defined economic objectives, and the commitment of China and Russia, these projects and the Silk Road region overshadow multiple projects that share one common denominator and shake up the current lopsided global economy, creating a more multi-polar world.

Forex Redeployment

For the Silk Road project to fly, financial endowments should equal ambition. Indeed, many ideas for large transnational infrastructure investment are floating around in the post-crisis, low-growth environment. The U.S. Central Asian economic and infrastructure integration program in 2011 and recently the Investment Plan for Europe, or the Juncker Plan, seeks ways for infrastructure investment to revive the economy.

Yet, these projects run risks related to their confusing objectives, and their puny and uncertain finance capabilities exist only on paper.

The Silk Road initiatives stand out for their strong financing backdrop, namely Asia’s large foreign exchange reserves. The emerging Asian holdings of forex, the outcome of over 30 years of policies aimed at promoting export growth, amount to about US$ 5.5 trillion.

The total currency reserves in emerging markets have fallen recently. The International Monetary Fund reported foreign reserves in emerging markets in aggregate fell US$ 114.5 billion on a year-over-year basis to US$ 7.74 trillion in 2014, down from their peak of over US$ 8 trillion in the second quarter of last year.

The shrinking forex pie is likely due to the sharp weakening of the euro, but this development should not put the region’s economies at risk because emerging Asia remains the primary creditor of the world.

China – holding nearly US$ 4 trillion in forex as of June 2014 – is eager to make better use of this huge pile. In a matter of months, it slashed its forex reserves to US$ 3.7 trillion by May. With the priority of seeking investment opportunities and providing monetary services through the Silk Road initiatives, the People’s Bank of China plans to inject US$ 62 billion of its forex reserves into two state-owned policy banks, the China Development Bank (CDB) and Export-Import Bank of China (EXIM), to support the projects.

The capital injection will provide long-term foreign currency for the banks and will be carried out through converting entrusted loans into stakes. The PBOC will become the second-largest shareholder of the CDB and the biggest shareholder of the EXIM bank.

Gold and the New Silk Road

Part of the Silk Road initiative is the Silk Road Gold Fund, which aims to raise 100 billion yuan (US$ 16 billion) within five to seven years to invest in gold-related business and mining companies in countries along the Silk Road.

China is the world’s largest producer of gold, and also a major importer and consumer. Among the 60 countries along the Silk Road, numerous Asian countries are identified as important reserve bases and consumers of gold.

Two top Chinese gold producers, Shandong Gold Group and Shaanxi Gold Group, will own 35 percent and 25 percent of the new financing source, respectively. The fund may also include an exchange-traded fund for gold and investments in miners of the precious metal.

The gold fund will be run by a new company, under the umbrella of the Shanghai Gold Exchange, to be established by gold producers and financial institutions, and is expected to facilitate central banks’ redeployment of forex reserves into gold. The fund is to increase gold trading in yuan, internationalizing the yuan and increasing China’s pricing power over gold.

The New Silk Road Investment Fund and the Silk Road Gold Fund are not just a new paradigm of infrastructure finance. Designed to fill the gap of finance infrastructure, these two facilities will enable central banks to diversify and redeploy their excess forex reserves. The gold fund is particularly important to this objective because it will ease gold purchases by central banks in the countries that are part of the New Silk Road development project. In this way, forex reserve managers will benefit from portfolio diversification, and at the same time, they can convert excess reserves into a nearby institution, which guarantees rapid availability to help cool off currency disorders.

The Dollar’s Retreat

The buildup of emerging market reserves from US$ 1.7 trillion at the end of 2004 to US$ 7.7 trillion in 2014 underpinned the global economy. Much of the capital that Asia’s emerging markets absorbed from trade surpluses, portfolio inflows and direct investments was swapped into U.S. and European debt markets, fuelling low interest rates and debt growth in developed economies.

Countries along the New Silk Road are originating a new way to use their savings, and that is a game changer with relevant implications on developed economies, mainly on the U.S. Treasury bonds market.

Russia is swiftly unwinding its U.S. Treasury bond position, from US$ 171 billion in October 2012 to US$ 70 billion in April, down 59 percent. Since January, euro assets held by Russia’s central bank have transcended its dollar assets, at 46.1 percent of total forex reserves, versus 39.6 percent. Russia has also been steadily buying gold; official gold reserves jumped from 403 tons in January 2007 to 1,247 tons in April, up 209 percent.


China’s U.S. Treasury holdings have remained relatively flat, at around US$1.2 trillion, since 2010, according to Treasury International Capital estimates. The PBOC claims to have held 1,054 tons of gold since 2009, though it may have three times that amount; estimates vary wildly. It’s an open secret that the PBOC buys gold in the over-the-counter market. How much they have accumulated is anyone’s guess.

In 2014, Alan Greenspan, a former president of the Federal Reserve, said that by redeploying even a relatively modest part of China’s foreign exchange reserves into gold, the yuan could take on unexpected strength in today’s international currency system. Buying gold bullion to displace the U.S. from its position as the world’s largest holder of monetary gold, China would likely incur a penalty for being wrong, in terms of lost interest and the cost of storage. Yet it would be a modest cost, if in the end this clears the way to a multiple and more balanced international monetary regime, less at the mercy of U.S. domestic objectives.

Miriam L. Campanella is a senior fellow at ECIPE in Brussels and associate professor at the faculty of political sciences, University of Turin in Italy. Koos Jansen is a researcher at precious metals exchange BullionStar in Singapore

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com




(courtesy Peter Cooper/Arabian Money)

Is there a secret derivatives collapse now pushing up the gold price?

Posted on 10 June 2015 with no comments from readers

The sudden and probably involuntary resignation of two Deutsche Bank CEOs, Anshu Jain and Jurgen Fitschen last weekend has raised speculation about that bank’s epic $73 trillion derivatives mountain to fever pitch in global financial circles. Mr. Jain was specifically hired by the bank to build Deutsche Bank into the world’s largest derivatives dealer, a task he achieved.

The Securities and Exchange Commission announced that it had reached a settlement with the bank for improperly valuing its risk exposure to credit derivatives on May 26th. But that may not be the whole story of course. Only three weeks ago the bank’s board had given Mr. Jain more power.

Derivative problem

His sudden fall from grace just has to be linked to this SEC settlement. But does his departure and that of his colleague Herr Fitschen really close this book? What does it say about how one of Europe’s largest banks is managing its internal accounts and its exposure to derivatives?

Derivatives have placed leverage upon leverage in global financial markets. In theory they should all always net down to zero but that assumes some very complex math and no corruption in the system.

The only way to test this system is to put it under stress and see what happens when it breaks. The malfunctioning of the global bond system right now is doing just that.

Indeed, it is most likely that the recent massive gyrations in German bund yields is behind whatever is ailing the derivatives market right now. The two are joined at the hip and leverage in the derivatives market amplifies distortions.

Sub-prime crisis

The clear parallel is with the disruption caused by the miss-selling of mortgage-backed securities before the last global economic crisis. Lehman Brothers’ insolvency was the trigger that brought this house of cards falling down.

Are we about to see round two of the global financial crisis? Well one indicator is the recent strength of the gold price which seems reluctant to conclude the final phase of its four-year bear market. Why won’t it fall now when physical demand from China and India seems to have fallen and retail investors are so fascinated by stocks?

The most obvious answer would be that there is demand for gold but from insiders like the global central banks who really know what is going on behind the scenes.

Posted on 10 June 2015

We Are(nt) “the World”!


It is obvious to anyone with eyes to see, “power” is shifting from West to East.  China is the leader, the epicenter of the East and of course they are the ones “hoovering” up the lion’s share (along with India)of global gold production.  The following map was sent to me by a friend,

I guess I already knew this but what a stark shock to actually see it!
  More than 50% of the world’s population living in a land mass of 15% or less of the total.  What exactly does this mean other than having good odds of being able to spit on your neighbor’s house?  I believe it means much more today than it did years ago, let me explain.  Years ago, before we lived in an instant information age and before China/Asia had built up the world’s largest manufacturing capacity, “it meant less”.  I say this because our world today is so interdependent in every way.  Trade and commerce rules the day, and financially everyone is “in bed with everyone else”.  This is a recent development over the last 20 years or so prior, this was not the case.  I am not trying to say trade and finance were not international in the past, they were, what I am saying is instant information now makes “knowledge” (information) more available.  The “information” available has taken Asia from the backwoods and “brought them to the table” so to speak.
  The simple truth is we are now facing a “new world order”, not quite the NWO the neocons had envisioned at the turn of the century (or maybe this WAS the plan?)!  The seats at the table are about to change, the “head” of all tables since WWII has been occupied by the U.S..  This will certainly change.  The list of preparations by China to assume their new role is quite long and even the details now seem to be about ironed out.  For example, how do you explain this http://oilprice.com/Energy/Energy-General/China-Hopes-To-Setup-New-Oil-Futures-Contract-By-End-Of-Year.html ?  China plans to “trade” oil in yuan.  They are already conducting ALL energy commerce with Russia to the EXCLUSION of dollars!
  Please understand this, with these contracts, they are not going to just “pay” for oil in yuan, they will buy it, trade it, hedge it and speculate on it …in YUAN!  Does anything about this jump out at you?  It should.  Mohamar Qaddafi and Saddam Hussein lost their lives just “talking” about accepting something other than dollars for their oil.  Now, the Chinese are openly and publicly planning to take the world OFF of the petrodollar standard!
  Let’s take a quick peak at two recent pieces of Western news.  First, the EU has told 11 nations they must write into law “bail in” rules or face penalties.  Do you understand this?  The EU is demanding the savior of banks be at the expense of the people!  They are also trying to get this done quickly …can you guess why?  Another bit of news was the IMF urging the Federal Reserve NOT to tighten until next year.  Again, can you guess why?  Unsustainable debt …and interest rates of ANY consequence are not compatible.  The West is on its heels on almost every front and backing up while China/Asia prepares…
  To wrap this up and the reason for penning this piece, “he who has the gold makes the rules” will soon again be seen as the reality.  The U.S. had an intact industrial base and the largest hoard of gold in the world after WWII, we “made the rules”.  Now, China has built the world’s largest industrial base AND hold the largest hoard of gold in the world …they will soon be making the rules.  This will be felt in many many areas, the most acute I believe will be in the gold and silver markets themselves!  If you cannot see their price suppression or cannot bring yourself to admit it, what comes by way of China will either shock you wake you up.
  London and New York where paper contracts regularly substitute for the real thing will be relegated as jokes.  Watching the COT reports or the London “fix” will be useless (it already is).  Once China begins to price oil and gold in yuan, it will be more important to watch the cross currency rates of the yuan versus other currencies as asset prices may “re-set” and then trade in relatively stable “yuan ranges” …it will be foreign currency movements against the yuan which will cause the bulk of asset price swings in “local currencies”.  If China does in fact decide to back the yuan with gold at a new and greatly marked up price, it will then be a great asset to be able to read Chinese.  I say this because it will be their “COT reports” that matter!
  Please don’t get me wrong, China may very well start off on the right foot, however, it will only be a matter of time before human nature and greed take over.  Should China and the yuan ascend to a major or even THE reserve currency, I have no doubt whatsoever they will eventually abuse the privilege just as the U.S. has.  The one thing I believe most important is whatever level of gold holdings they “claim” will be far less than what they actually have.  This, the reverse of the “claims” by the West!
Regards,  Bill Holter
Holter-Sinclair collaboration

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


1 Chinese yuan vs USA dollar/yuan weakens to 6.2056/Shanghai bourse red and Hang Sang: red

2 Nikkei closed down by 49.94  points or 0.25%

3. Europe stocks all in the green/USA dollar index down to 94.79/Euro falls to 1.1252

3b Japan 10 year bond yield: rises to .51% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.21/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 123 barrier this morning

3e WTI 61.38 and Brent:  66.04

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 97 basis points. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate rise  to 25.61%/Greek stocks down 1.27%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield rises to: 11.59%

3k Gold at 1185.20 dollars/silver $16.14

3l USA vs Russian rouble; (Russian rouble up 1 1/2 in  roubles/dollar in value) 54.31,

3m oil into the 61 dollar handle for WTI and 66 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 .9294 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0490 just below 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 away from negativity at +.96/

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 2.49% early this morning. Thirty year rate well above 3% at 3.21% / yield curve flatten/foreshadowing recession.


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


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

Bond Rout Continues: Bunds Rise Above 1%; 30Y “Golden Crossed”; Kuroda Sends Yen Soaring

After a Chinese session which following the MSCI failureto include Chinese stocks in its EM index, if only for the time being, was largely a dud with Shanghai stocks actually dropping by 0.1% after a late day selloff, eyes turned to Europe, which once again did not disappoint and where the bond rout continued apace, with the 10Y Bund yield spiking just after the European open, and rising above 1.05%, the widest level since September 19, before recouping some losses and trading just around 1.00% at last check.

The German bond move continues to reverberate in the US, where the 30 Year bond just experienced a yield “Golden Cross” after the 50-DMA touched 2.826%, exceeding the 200-DMA at 2.824%, for the first time since March 2014. Back then the 30Y yield was about 3.60% when its 50-DMA crossed below its 200-DMA in March 2014; it declined by more than 100bps from that level, reaching record low 2.219% on Jan. 30, 2015.

Not helping matters was Pimco, which as reported last night on its website, slashed its US government-related debt holdings by two-thirds, from 23.4% to 8.5%. Cited byBloomberg, Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen said that  “we are seeing a bearish sentiment in the market and we are heading for higher yields as we approach the first” Federal Reserve interest-rate increase. “All of the fundamentals are pointing in a bearish direction for the bond market. There is a reflation theme building.”

As a reminder, the last time Pimco took its 10Y holdings to zero back in March 2011 as first reported on this website, 5 months later Treasury yields hit record lows, after an equity rout sent investors once again scrambling for the “protection” of government debt. Deja vu time? For now however, it’s this:


And speaking of routs, it wasn’t just Bunds – overnight during his latest (in what seems to be a daily thing now) speech before parliament, BOJ’s “Peter Pan” Kuroda sent the Yen soaring after he said that it is hard to see the currency dropping more as Japan’s real effective exchangerate is already very weak, adding that the yen has returned to levels it was at before collapse of Lehman Brothers.

“The yen is unlikely to weaken further in real effective terms if you think with common sense, given how far it has come,” he said in parliament Wednesday.

The result was a prompt 200 pip plunge from the recent range in the 124 level.

A closer look at global stocks, staring in Asia the Shanghai Comp (-0.15%) was the session laggard for a bulk of the session despite pulling off worst levels, after falling over 2.2% at one point. This was after the MSCI announced that it will defer China’s A-share inclusion in its USD 5trl emerging market index, disappointing some participants. Nikkei 225 (-0.25%) fluctuated between losses and gains as price action moved in tandem with JPY moves. JGBs came under heavy selling pressure in tandem with similar price action observed yesterday across German Bunds and USTs.

Despite pulling away from their worst levels, Bunds initially once again faced a heavy bout of selling pressure with the
German 10yr yield breaking above 1.0% for the first time since 4th June. In terms of the downside this morning, fundamental newsflow has been relatively light with technical plays driving price action after Sep’15 Bund futures tripped stops through 148.87 which was the low on the 4th of June; the last time the 1.0% yield was tested. Analysts at IFR also attributed the move lower to buying of put spreads with 15,000 at 149.00/154.00 going through.

From an equity standpoint, stocks have traded with no sustained direction throughout the session, with the FTSE 100 being provided some modest reprieve by UK supermarket names. On a sector breakdown, energy names lead the way after
the sector was upgraded by HSBC pre-market, while IT names are the laggards after the bank downgraded the sector.

In terms of the latest updates for Greece, according to German and Greek officials, German Chancellor Merkel, Greek PM Tsipras and French President Hollande will meet for discussions in Brussels today. Furthermore, a Greek government official has said that Greece has not yet received feedback from its creditors after submitting proposals.

PIMCO announced that it lowered its US government-related holdings to 8.5% from 23.4%. (BBG)

Doubleline’s Gundlach said that the odds of the Fed raising rates by December is less than 50%, and less than 30% in September. (BBG)

In FX as noted above, JPY soared overnight against its major counterparts in the wake of comments from BoJ Governor Kuroda, who said that the currency may not weaken any further on a real effective exchange (REER) rate basis. These comments came amid ongoing concerns of Japanese officials fretting on recent JPY weakness, with the 130.00 level in USD/JPY touted as the most likely inflection point. Consequently, major JPY pairs trade sharply lower across the board with USD/JPY down over a point, after breaking below 123.00. Elsewhere, AUD briefly weakened overnight amid jawboning from RBA Governor Stevens, who also hinted at further policy easing with an aim to maintain growth, however, losses were erased alongside the JPY-inspired weaker USD.

In the commodity complex, WTI and Brent crude futures continue to remain bid in the wake of yesterday’s API inventories which showed a drawdown in oil stockpiles of 6.7mln vs. Prev. build of 1.8mln. Furthermore, price action has also been supported by the weaker USD and yesterday’s EIA report which pointed to a further drop in US shale output next month. In
precious metals markets, spot gold and sport silver trade in the green alongside the softer USD with newsflow otherwise light.

In summary: European shares rise with the basic resources and oil & gas sectors outperforming and tech, insurance underperforming. U.K. industrial production above ests., manufacturing production below. China doubles local government  debt swap quota to ease risks. German bund yield rises above 1% on supply, signs of recovery. The Italian and Swiss markets are the best-performing larger bourses, Spanish the worst. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Commodities gain, with corn, natural gas underperforming and WTI crude outperforming. U.S. mortgage applications, monthly budget statement due later.

Market Wrap

  • S&P 500 futures up 0.3% to 2086.4
  • Stoxx 600 up 0.4% to 385.4
  • US 10Yr yield up 4bps to 2.48%
  • German 10Yr yield up 6bps to 1.01%
  • MSCI Asia Pacific up 0.6% to 146.9
  • Gold spot up 0.6% to $1184.4/oz
  • 15 out of 19 Stoxx 600 sectors rise; basic resources, oil & gas outperform, tech, insurance underperform
  • Asian stocks rise with the Sensex outperforming and the Hang Seng underperforming. MSCI Asia Pacific up 0.6% to 146.9
  • Nikkei 225 down 0.2%, Hang Seng down 1.1%, Kospi down 0.6%, Shanghai Composite down 0.1%, ASX up 0.1%, Sensex up 1.5%
  • Tokio Marine Buys HCC for $7.5b in Biggest Takeover
  • Euro up 0.17% to $1.1302
  • Dollar Index down 0.42% to 94.77
  • Italian 10Yr yield up 8bps to 2.37%
  • Spanish 10Yr yield up 8bps to 2.35%
  • French 10Yr yield up 7bps to 1.34%
  • S&P GSCI Index up 1.3% to 448.4
  • Brent Futures up 1.7% to $66/bbl, WTI Futures up 2.1% to $61.4/bbl
  • LME 3m Copper up 1.4% to $6050.5/MT
  • LME 3m Nickel up 0.2% to $13520/MT
  • Wheat futures up 0.2% to 533.5 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • Despite pulling away from their worst levels, Bunds faced another bout of selling pressure with the German 10yr yield breaking above 1.0% earlier in the session
  • FX markets were shaken overnight with JPY strengthening against its major counterparts after BoJ Governor Kuroda said the currency may not weaken any further on a real effective exchange rate basis
  • Looking ahead, today sees the release of the weekly DoE data and comments from BoE Governor Carney at his Mansion House speech with text to be released at 1700BST/1100CDT
  • Treasuries decline as rout in EGBs continues, 10Y bund above 1% for first time since Sept; U.S. auctions $21b 10Y notes in reopening today; WI yield 2.475%, highest since Sept., vs 2.237% in May
  • Talks between Greece and its creditors this week have failed to make progress after Greece submitted a budget-deficit plan that creditors considered unfit, according to two officials
  • With Greece’s safety net expiring on June 30, Tsipras aims to meet Merkel and Hollande on the sidelines of a summit today;  Merkel still hadn’t decided whether to attend, according to a German government official
  • A growing number of German lawmakers plans to break with Merkel and vote against another Greek aid package, Bild reported, not saying where it obtained the information
  • Economists see almost a 40% chance that the Fed will delay a rate increase beyond September if jobs gains stumble or inflation fails to move higher, according to a Bloomberg survey
  • The yen surged after BoJ’s Kuroda said it was hard to see his nation’s currency falling further
  • PBOC researchers lead by chief economist Ma Jun cut forecast for China FY GDP growth to 7% from 7.1%, according to research report posted on the central bank’s website Monday
  • The Justice Department has begun an examination of trading in the U.S. Treasury market, with investigators said to be probing whether information is being shared improperly by financial institutions
  • The Pentagon is preparing recommendations to send hundreds more U.S. troops to Iraq to speed training of the country’s military forces in response to a request from the White House, two U.S. officials said
  • Despite nine months and $2.44b in U.S. airstrikes against the fighters and their oil facilities and smuggling networks,  Islamic State has proven to be as resilient financially as it’s been militarily
  • The vulnerable Baltic nations, which have been nervously watching Russia’s aggression against Ukraine, have reason to worry about whether they can count on their NATO allies
  • Sovereign 10Y bond yields higher. Asian stocks mixed, European stocks gain, U.S. equity-index futures gain. Crude oil, copper and gold higher


DB’s Jim Reid as usual completes the overnight event wrap

It all feels like a low key version of the taper tantrum at the moment as markets generally feel soft. Core bond markets yields continue to edge relentlessly higher, European equities are into correction territory (DAX down 11.1% from April 10th peak) and US equities have been stuck in a low range all year and are only just in positive territory in 2015 (Dow lower YTD). Elsewhere EM (ex-China equities) is in defensive mode while EM bonds are worried about outflows gathering pace, Euro IG credit has moved from cycle tights a few weeks back to hovering around 12 month wides now, with US IG slowly creeping towards the wides of January and we’ve even started to see a bit of concern about HY which has so far been one of the out-performers in this recent softness in assets across the board. Bloomberg focused on the fact that certain HY ETFs have seen outflows pick up recently. Interestingly, oil has probably been the best behaved asset class, WTI in particularly more or less at the same level versus May 1st. So the slippage in asset performance is one to watch and is probably tied to the bond market sell-off. The FOMC with all its projections and possible rhetoric change is going to be a key focus next week.

China is proving to be the exception to the above with the Shanghai Comp and Shenzen +10.25% and +8.25% MTD so far, having risen +3.83% and +23.17% in the month of May respectively as record margin debt and stimulus measures supported a surge in demand for the asset class. Late last night we heard that the MSCI has deferred the decision to add China’s A-Shares to its indices given certain market-access and share ownership issues. The index provider did seemingly suggest that an inclusion in the future is likely however once the obstacle is overcome and said that a decision may come at any time. The Shanghai Comp (-0.45%) has fallen following the news, although it did pare losses of as much as 2.2% on the open. The Shenzen (+1.24%) has completely recovered earlier losses meanwhile. In Japan the Nikkei (+0.03%) has given up earlier gains made following a better than expected PPI print (+0.3% mom vs. +0.2% expected) after BoJ Governor Kuroda said that it is hard to see the Yen falling further given that the real effective exchange rate is already very weak. The Yen has strengthened 1.1% (vs. the Dollar) to ¥122.99 following the comments. Markets elsewhere are generally mixed. The Hang Seng (+0.21%) and ASX (+0.06%) are both higher while the Kospi (-0.66%) has fallen. Bond markets have followed much of yesterday’s sell off with yields generally 3-5bps across the bulk of the Asia region. 10y Treasuries are +0.6bps higher in yield at 2.444%.

The Greek saga rumbles on and yesterday we heard that the Greek government had submitted two supplementary reform proposals to its Creditors, focusing on the fiscal gap and also a plan for making the country’s debt sustainable. Once again European officials appear to have pushed back on the latest proposals with the EC’s Dombrovskis, Eurogroup President Dijsselbloem and Finnish PM Stubb all expressing concerns over the latest measures, while the FT ran a story saying that the mood of the cautious optimism of the last few weeks is rapidly giving way to ‘fear and suspicion’, suggesting that Athens is intentionally prolonging negotiations to the last minute in belief that creditors may well agree to grant wholesale debt relief. Worryingly, Greek press Ekathimerini reported PM Tsipras as saying that an accord would be possible if Creditors dropped pension cut demands, highlighting that large gaps are still very much present between the two sides. Focus today will be on the ECB’s review of the ELA facility, as well as a potential meeting between PM Tsipras, German Chancellor Merkel and French PM Hollande on the sidelines of the Brussels summit. With hopes that the meeting may result in taking an important step forward, the Eurogroup’s Dijsselbloem has warned that the meeting is not certain to go ahead yet, noting that technical teams are reviewing Greece’s latest proposals ‘and then we can see whether it can take place’.

Back to markets, moves in rates characterized the bulk of price action yet again yesterday as we saw core markets strike fresh new highs in yield. Indeed, 10y US Treasuries finished the day 5.6bps higher in yield at 2.439% and more or less at its highs for the day. The move means the 10y benchmark is now +31.7bps higher in yield through June already and now at the highest level since September 30th last year. There were some significant moves in Bunds also as the 10y yield closed +7.1bps higher at 0.947%, +46.3bps MTD and the highest yield since September 30th too. There were similar moves for other core European bond markets, while the peripherals were the notable outperformer yesterday as Spain (+2.3bps), Italy (+2.9bps) and Portugal (+1.2bps) saw relatively modest moves all things considered. Greek 10y yields meanwhile finished 18bps wider at 11.088%. Yesterday’s moves appear to have been contributed to a combination of factors including solid US data, a rally in oil markets and also concerns around the heavy supply of both Treasuries and corporate issuance expected this week.

Further volatility in rates markets as well as the Greece saga has kept equity markets in check as yesterday we saw the Stoxx 600 (-0.39%) and DAX (-0.58%) fall further, although in reality most bourses had opened weaker on the back of a soft Asian session. In the US the S&P 500 (+0.04%) and Dow (-0.01%) finished more or less unchanged having bounced about for most of the session. The moves in rates didn’t help utility stocks (-0.15%) while higher Beta technology stocks (-0.19%) also suffered. Interestingly energy (-0.05) names were fairly unmoved despite both WTI (+3.44%) and Brent (+3.49%) rising to $60.14/bbl and $64.88/bbl respectively after finding support from the latest EIA report which shows output from US shale oil producers is expected to fall through July to the lowest level since January.

In terms of the data yesterday, the May NFIB small business optimism survey rose 1.4pts to 98.3, ahead of market expectations of 97.2 and back to the highest level since December while the details showed a positive trend in wage growth. April’s wholesale inventories (+0.4% mom vs. +0.2% expected) and trade sales (+1.6% mom vs. +0.6% expected) were also encouraging, particularly in the context of Q2 GDP expectations. April’s JOLTS job openings data meanwhile came in above market (5.376m vs. 5.044m) and at a 14-year high, although a fall for both the hiring (3.5% from 3.6% in March) and quits rates (1.9% from 2.0%) did generate some modest disappointment. Meanwhile, yesterday’s 3y Treasury auction saw investors demand the highest yield (1.125%) since April 2011, at a bid to cover ratio of 3.33x – relatively consistent with what we’ve seen so far this year. A 10y auction is due today followed by a 30y auction on Thursday which could keep rates markets on its toes.

Despite the move higher in yields yesterday, the Dollar index ended 0.14% lower. There was some movement in Fed funds contracts however as Dec15, 16 and 17 contracts ended +0.5bps, +3bps and +4bps while a Bloomberg survey conducted last night showed that Economists see a roughly 40% chance that the Fed will delay liftoff beyond September this year (with a 50% probability that they will move in September). With timing still uncertain, along with the fairly mixed Fedspeak contributing to the debate, next week’s FOMC meeting will be a very closely watched affair.

There wasn’t a whole lot to report with regards to European data flow yesterday. The provisional Q1 GDP report for the Euro area was as expected at +0.4% qoq and +1.0% yoy. UK trade data meanwhile showed a narrowing of the deficit (£8.56bn vs. £9.95bn expected) in April, marking a better start to the quarter. Elsewhere, the ECB’s Liikanen noted that the ECB’s QE program will run longer than September 2016 if needs be and that officials at the last monetary policy meeting were ‘unanimous’ in looking through the recent reversal in financing conditions and agreed on the need for maintaining a steady monetary policy.

Looking at today’s calendar now, French and UK industrial and manufacturing production reports will be the main highlight this morning, while Italian industrial production is also due. It’s quiet in the US this afternoon meanwhile with just the May monthly budget statement due. Of course Greece will continue to remain much of a focus for markets and the potential meeting between Tsipras, Merkel and Hollande.

 A rising number of German lawmakers are threatening to vote against any 3rd Greek bailout, saying basically that Greece is stalling and not serious:
(courtesy zero hedge)

German Lawmakers To Vote Against Greek Bailout Saying Athens “Not Serious At All”

“What they are delivering at the moment is not serious at all.”

That’s Michael Fuchs, a senior lawmaker for German Chancellor Angela Merkel’s Christian Democratic bloc and it seems to accurately reflect the sentiments of Greece’s creditors with regard to the latest set of “proposals” submitted by Athens.

Indeed, some have suggested that Greek PM Alexis Tsipras’ latest ‘effort’ represents more a step back than a step forward. As a reminder, Greece handed in two three-page documents on Tuesday, one of which focused on fiscal targets and the other amounted to a request to tap the ESM in order to repay the ECB, which would amount to a similar (if not quite as egregious) circular funding scheme as that which the Greeks employed in May when they drew down their IMF SDR reserves to just €30 million in order to make a €750 million payment to the Fund.

On Tuesday, reports indicated that a rift between Merkel and German FinMin Wolfgang Schaeuble was growing wider, with many German lawmakers inclined to side with Schaeuble should it come to a decision between supporting Merkel’s inclinations towards concessions or the finance ministry’s less accommodative stance that implicitly sanctions cutting the Greeks loose.

Now, it would appear tensions are rising in Berlin with a growing number of German lawmakers committed to voting against a third bailout for Athens. Bloomberg has more:

Under the latest Greek plan, Tsipras wants access to bailout funds left in the European Financial Stability Facility and for the country’s banks to be allowed to buy more of the state’s short-term debt, an international official said. Greece also requested funds from the European Stability Mechanism to repay about 6.7 billion euros ($7.6 billion) of bonds held by the ECB that come due in July and August.


The official described the revised Greek plan as a vague rehash of earlier proposals and said it is not credible.


The Greek negotiating tactics are stoking frustration in Germany, where any changes in Greece’s bailout terms require backing by lawmakers. With legislators in her party bloc increasingly fed up, Merkel didn’t mention Greece during a speech Tuesday at a business conference in Berlin.


Tsipras’s government “hasn’t made a good impression on me in the last few days,” Thomas Oppermann, parliamentary leader of the Social Democrats, Merkel’s junior coalition ally, told reporters.

But it’s not just the Germans. Yesterday’s proposals from Athens have, by the looks of things, been roundly rejected by EU officials as a non-starter. Via Bloomberg again:

Impasse in talks between Greece and its creditors continues, no progress was achieved in Brussels talks on Tuesday, according to an international official directly involved in the negotiations. 


Disagreements persist on fiscal targets, measures needed to achieve them, the person said, asking not to be named, as he wasn’t authorized to speak publicly on the matter.

On Wednesday, Tsipras will reportedly meet with Angela Merkel and French President Francois Hollande in Brussels in yet another attempt to use summit sideline diplomacy as an end-around to break the stalemate.

What’s important to remember here is that the reason Tuesday’s draft proposals didn’t appear “serious at all” could be because they indeed were not serious. We’ve suggested on a number of occasions that Tsipras is simply buying time, submitting drafts to keep up appearances with the real negotiations taking place between the PM and hardline members of Syriza, whose support is critical if Tsipras hopes to pass any agreement with creditors through parliament.

Bundling June’s IMF payments effectively gave Tsipras an extra three weeks to try and figure out what (if any) concessions would be acceptable to party hardliners. If he can successfully secure their support for ‘modest’ pension cuts and/or VAT hikes, he may be able to come to the table with something that will appear immediately agreeable to the troika compared to what the Greeks have suggested thus far. That, of course, would mean abandoning the mandate which got Syriza elected and, by extension would represent the successful use of financial leverage by creditors to effect political change and undercut Greeks’ right to choose for themselves how they wish to be governed. It would also send a strong message to Podemos in Spain that reversing course on austerity could imperil the very existence of the party.

Still, it may already be too late to avoid a technical default on June 30. Here’s Reuters:

An EU official said no euro zone leader wanted to be the one who pulls the plug on Greece, and Athens knew that. On the other hand, there was no willingness either to accept the Greek terms, resulting in stalemate.


The official said it was already too late to release money from the current bailout by June 30. So the only way to avoid default was for the European Central Bank to raise the ceiling on how much the Greek government is allowed to borrow by issuing T-bills, short-term debt that is bought by local banks.


That way the government could raise the 1.6 billion euros it must repay the IMF by the end of the month to avoid default.

In the final estimation, a real ‘breakthrough’ (and by “breakthrough” we mean concessions from Greece to avoid economic collapse) won’t likely come until later this month. In the mean time, Tsipras is playing a dangerous game, because as Schaeuble famously said last month, “experiences elsewhere in the world have shown that a country can suddenly slip into insolvency.”


Greek Economy In “Doomsday” Tailspin: 59 Businesses, 613 Jobs Lost Each Day, Suppliers Demand Cash Up Front

While the Greek government has wasted the past 4 months experiment with game (and hope) theory-based negotiations with the Troika, debating what reforms it should implement, what the budget surplus should be, and how much of a pension and wage haircut the local workforce should undergo just to keep the trickle of European money flowing and “allow” the IMF to repay Greek IMF obligations and the ESM to repay the ECB, the Greek economy has slammed into a brick wall because according to Greece’s retailers association, about 59 businesses close down and some 613 jobs are being lost each day.

Unfortunately, that number does not give justice to the total economic collapse that has happened in Greece over the past 5 years, just so the myth of the doomed “common currency” could be maintained one day at a time.

It is not just the country’s domestic businesses that are shuttering down at a dramatic pace: even projects once funded by the European Union, such as motorway construction and which served as a source of jobs for many local contractors, have been mothballed.

When construction of four 6.5 billion euro toll roads across Greece resumed last year, Greek and foreign businesses rejoiced. The motorways, largely funded by the European Union and built by companies including Germany’s Hochtief, France’s Vinci and Greek firms Ellaktor and GEK Terna, had been halted in 2010. Last year, work resumed after the Greek government paid part of a fine to contractors for the four-year delay.


Now, work has slowed once more. With aid from its bailout programme frozen, the government has used its last cash to pay public sector wages and pensions, and service debt. That has left it without 230 million euros it needs to contribute its part of the financing for the road.


The hole has put the entire project at risk again, one of many business ventures suffering amid the uncertainty of four months of negotiations between Athens and its international creditors.

“As a country, we need to move as quickly as possible to strike a deal that will resolve issues being faced by big and small (infrastructure) projects,” says George Sirianos, head of the association for big Greek construction firms.

Reuters tells the story of Paul Arnaoutis, whose firm sells imported medical supplies to Greek hospitals, has been waiting four months to be paid 1.3 million euros the state owes, nearly as much as his company’s entire 2014 sales of 1.7 million.

The Greek insolvency, which had been masked with European liquidity, is finally being appreciated by the vendor chain, and as a result, Arnaoutis’ Chinese suppliers are now demanding cash up front because of the risk of doing business with Greece.  Previously they gave 30-60 day receivable terms. “He fears a doomsday scenario in which the government quits the euro and pays its bills with IOUs, which foreign suppliers will not accept.

“If there is no deal and the government decided to take Greece out of the euro, all Greek importers would be ruined.”


Meanwhile, his company is expected to pay tax on 335,000 euros in reported profit from last year, even though it still hasn’t received most of the money for the sales: “The profit is virtual”.

Ironically, in the US the bulk of non-GAAP profit is also “virtual”, however for the time being the generosity of capital markets allows money-losing US companies (if only on a GAAP basis) to fund themselves entirely courtesy of gullible investors who hope that any minute now, the cash flows will rain.

Unfortunately for Greece, it is now too late:

[E]ven if a deal is clinched and Greece survives as a euro zone member, many companies are so battered by the cancellation of contracts, delays in state payments and the steady outflow of bank deposits that they will struggle to make up for losses.


According to Greece’s retailers association, about 59 businesses close down and some 613 jobs are being lost each day.


It says about 95 percent of businesses’ applications for loans are being rejected by commercial banks. Many small and medium-sized firms have stopped even asking banks for credit.

All of this excludes an even more troubling development in the local banking system which, too, is on the verge of total collapse: as reported last Friday “Bank Run Surges “Massively” As Depositors Yank €700 Million Today Alone.”

And with people’s confidence in the banking system, the bedrock of every modern society, shaken, everything else follows:

Gaia Wines, which produces 350,000 bottles of wine a year and exports 65 percent to the United States, Britain and 22 other countries, was to begin selling in New Zealand in April, but the first client there cancelled its 4,000 euro order.


“Our wines are of good quality. But people get scared because of the turmoil. This is reasonable,” says co-owner Leon Karatsalos.


The company has been waiting nearly a year for the government to respond to a request for access 150,000 euros in EU funds to renew equipment at one of its plants. The response was supposed to come by January but never came, says Karatsalos.

Unfortunately the government response, if it ever comes, will be too late to save Gaia if not the entire domestic economy which now, in morbid irony, lies in ruins.

This is your most important story of the day.  The ECB raises the ELA to Greece up to 83 billion euros despite the long lines of depositors seeking to withdraw their cash.  On April 30.2015, Greece has 133.7 billion euros in deposits.  I would guess that the new totals would be south of 120 billion euros.  The question is why hasn’t the ECB undergone any currency controls? I would think that almost all of the Greeks with deposits in excess of 100,000 euros have already removed their funds for safe havens.  This l

Approaching The “Other” Parity: Greek Emergency Liquidity Surges After “Massive” Deposit Outflow

While we await for Germany to deny the latest “Greece is fixed” report which came out moments ago according to which Merkel “may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds” as Bloomberg reported earlier citing “two people familiar with Germany’s position” – a move which would be seen as Germany blinking to Greek demands and may well lead to Schauble’s resignation if confirmed – below is a quick update of what is going on with Greek bank liquidity.

It is not good.

As the chart below shows, following last week’s “massive” surge in Greek bank runs, which soared on Friday as pessimism returned with a bang that another “can kicking” deal may not get done after all, Greek Emergency Liquidity Assistance, or ELA, use soared by €2.3 billion according to Bloomberg, the single biggest weekly increase since February, rising to €83 billion. This, of course, is happening as Greek bank deposits continue their dramatic drop and which according to recent reports by Kathimerini had dipped under below €130 billion.


Which brings up the question of the “other” parity: while everyone has opined on when/if the EURUSD will hit 1.00, for Greece a far more relevant question is whether the ECB’s generous ELA funding of insolvent Greek banks will reach parity with the amount of Greek deposits in the bank system.

Below is a chart showing the history of Greek ELA increases.

Keep a close eye on the weekly increases in this series because once the amount of ELA eclipses all Greek deposits, that may be the point when the ECB finally cuts its losses, and leaves the Greeks with the total “bail-in” wipeout.


Now, reports indicate long lines in Greece to withdraw cash:
(courtesy zero hedge)

As Seen In Greece: “I Rushed To The Bank” And The Return Of ATM Lines?

Late last Friday, we reported what many had feared: the Greek population’s faith in its government’s negotiating skills evaporated last week amid a breakdown in talks with creditors, leading to what local sources dubbed a”massive” €700 million deposit outflow in one day (and over €3 billion for the week).

Now, courtesy of FT which confirmed just what we said, namely that “anxious Greeks [are] pulling money from banks amid fears of capital controls“, we get the visual confirmation of what happened and is still happening on the ground:

As FT goes on to note, Greeks are doing anything they can to store their euros outside the banking sector amid fears of capital controls. Here’s more:

Two weeks after Greece’s leftwing Syriza party won power at a general election in January, Panayotis Fotiades pulled his deposits from an Athens bank..


To protect his savings he bought a brand new Mercedes-Benz car, then took the advice of a financial consultant and invested the remainder in money market funds based in Luxembourg…


Many other Greeks appear to be taking similar precautions. Even as the economy has been sinking, new car registrations have soared this year as worried Greek depositors seek out alternative havens for their money. They rose 27.9 per cent in April on top of a 47.2 per cent increase in March..


Athens could eventually impose capital controls to stanch the bleeding of deposits but that would also risk turmoil for basic business and financial transactions and threaten devastating consequences for the wider economy.


“The continuation of these outflows significantly increases the risk that the local authorities will impose capital controls to limit deposit outflows, which in our view would be tantamount to a bank deposit default,” Moody’s, the rating agency, warned in a report this week..


Fears of a default last week drove another increase in withdrawals. More than €500m left the system on Friday, the day Greece missed a €300m payment due to the IMF, saying it would bundle up four separate loan instalments and instead make a single €1.5bn payment at the end of June.


“I was spooked. It looked at first like a real default so I rushed to the bank,” said Eleni Papageorgiou, a former finance ministry employee…


Areti Simopoulou, a retired store owner, said she heads for the cash machine at her local bank branch at the end of the month and withdraws all her pension money at once.


“I used to take out half and leave the rest for an emergency,” Mrs Simopoulou said. “Now I feel relieved it’s there and make sure I take out every last lepto [cent].”

We certainly can’t blame the Greeks, because as wementioned earlier today, a new kind of “parity” is near, and when it arrives, some folks may get ‘Cyrpus’d‘:
Which brings up the question of the “other” parity: while everyone has opined on when/if the EURUSD will hit 1.00, for Greece a far more relevant question is whether the ECB’s generous ELA funding of insolvent Greek banks will reach parity with the amount of Greek deposits in the bank system. 
Keep a close eye on the weekly increases in this series because once the amount of ELA eclipses all Greek deposits, that may be the point when the ECB finally cuts its losses, and leaves the Greeks with the total “bail-in” wipeout.
Paul Craig Roberts discusses the deterioration inside the Ukraine as they must deal with their debt to the IMF and a necessary new bailout.
The Prime Minister of Ukraine has now stopped all pensions to World War ii survivors, Chernobyl victims and others such that the iMF can be paid some of the money owed to them:
(courtesy Paul Craig Roberts)

“Ukrainians Have Been Dispossessed” Paul Craig Roberts Warns “Americans Are Next”


Submitted by Paul Craig Roberts,

Over the last 15 months Ukrainians have paid for Washington’s overthrow of their elected government in deaths, dismemberment of their country, and broken economic and political relationships with Russia that cost Ukraine its subsidized energy. Now Ukrainians are losing their pensions and traditional support payments. The Ukrainian population is headed for the graveyard.

On June 1 the TASS news agency reported that Ukraine has stopped payments to pensioners, World War II veterans, people with disabilities, and victims of Chernobyl. According to the report, Kiev has also “eliminated transport, healthcare, utilities and financial benefits for former prisoners of Nazi concentration camps and recipients of some Soviet-era orders and titles.Compensations to families with children living in the areas contaminated by radiation from the Chernobyl accident will be no longer paid either. Ukraine’s parliamentary opposition believes that the Prosecutor General’s Office should launch an investigation against Prime Minister Arseniy Yatsenyuk who actively promoted the law on the abolition of privileges.”

Notice that this is a yank of the blanket from under the elderly in Ukraine. “Useless eaters,” they are assigned to the trash can. How do the deceived Maiden student protesters feel now that they are culpable in the destruction of their grandparents’ support systems? Do these gullible fools still believe in the Washington-orchestrated Maiden Revolution? The crimes in which these stupid students are complicit are horrific.

Yatsenyuk, or Yats as Victoria Nuland calls him, is the Washington stooge that the US State Department selected to run the puppet government established by Washington. Yats sounds like a right-wing Republican when he refers to pensions, compensations, and social services as “privileges.” This is the Republican view of Social Security and Medicare, programs paid for by the payroll tax over the working lives of Americans. The Republicans stole the payroll revenues and spent them on their wars that enrich Wall Street and the military/security complex, and now blame “welfare handouts” for America’s fiscal plight.

Is Monsanto’s right to turn Ukraine into GMO food production a privilege? ls VP Biden’s son’s right to destroy Ukraine’s surface and underground water in fracking operations a privilege? Are the external costs imposed on Ukrainians by these looting activities a privilege? Of course not! These are not privileges. This is the operation of free market economics creating the greatest good for the greatest number. (As many Americans will not realize that I am engaging in satire, I would like to affirm that I am.)

The news report does not say whether the abolished “privileges” are one part of a reform that will replace the terminated “privileges” with a new social support system. Possibly this is the case, but as the termination of pensions and payments was triggered by the coming into effect of Yat’s law to “stabilize the financial condition of Ukraine,” the purpose of the termination of Ukraine’s social welfare system might be to free up money to hand over to the IMF and Western banks. In Ukraine, as in Greece, the gullible and naive population that saw salvation in unity with the West will be driven into the ground.

Russia, of course, will be blamed. I can already write the New York Times and Washington Post editorials and the words that will come from Obama, CNN, and Fox “News.” In fact, so can my intelligent readers.

The same looting is underway in Great Britain, Italy, Spain, Portugal, and the United States. In Great Britain everything achieved by the Labour Party over many decades has been taken away, and not only by the Conservatives but by Labour leader Tony Blair himself.

Tony Blair sold out his constituents for money and is now among the One Percent. Bill Clinton did the same thing. Bill and Hillary were able to spend $3 million on their daughter’s wedding, almost a world record, dwarfing many Hollywood weddings. Obama is not even out of office and is already rich. America’s faithful vassals–Merkel, Hollande, and Cameron–can look forward to equal riches.

Karl Marx was correct when he said that money corrupts all. Everything becomes a commodity that is bought and sold for money.

When money becomes the measure of a person, people have become corrupted. And that is the plight of the Western world.

Where in the West is your wealth, small or large, safe? Nowhere. Washington has destroyed financial privacy everywhere in the West. Washington even forced Switzerland to violate its own laws in order to comply with Washington’s insistence on the absence of any financial privacy.

For decades Americans with foreign bank accounts have been required to report them on their income tax returns. Now if an American owns a gold coin in a vault overseas, this must be reported to Washington.

Once Washington knows the location of your assets, the assets can be confiscated at will. Washington only has to make some declaration or accusation or the other, and your wealth is gone.

As Washington has run the printing presses hard in order to serve a handful of banks that control the US Treasury and the Federal Reserve, unless China and Russia acquiesce to becoming Washington’s vassals, at some point the dollar’s value is going to slide downward. When that happens, the Federal Reserve cannot continue to create new money to meet Washington’s needs.

Where will the money come from? It will come from Americans’ pensions.

Pensions accumulate tax free, and this accumulation will be confiscated in whole or part to make up for the failure to tax, another “privilege.”

That confiscation works that year. But what happens the next year when the dollar is reeling on foreign exchange markets from over-supply?

The answer is that another chunk of American pensions, and I am speaking of private pensions, will be confiscated “in order to stabilize the financial system.” Social Security will be long gone by this time.

Alicia Munnel, who was my replacement as Assistant Secretary of the Treasury for Economic Policy in the Clinton regime, advocated many years ago a confiscation of private pensions, including your IRAs and 401Ks, in order to compensate the US government for their non-taxed status.

Alicia has a sinecure at an Eastern university where she continues to advocate against your pension. The joint attack by Clinton Democrats on private pensions and by Conservative Republicans on public pensions means that no American can look forward to having a pension. Americans are only one presidential election away from the loss of their pensions, and it doesn’t matter who they vote for.

Economic security is a thing of the past. Security was a product of the US being the only extant economy following World War II. In those days corporations believed, as did Washington, that companies had obligations not only to shareholders but to employees, customers, and the communities in which they were located.

This meant prosperity for all, not merely, as is the case today, for corporate management and shareholders.

Apologists for exploitation claim that the rich are richer because they are smarter. But the stupidity of the rich is everywhere visible. The greedy fools have destroyed their domestic US market. Really, how stupid can you be? How do Americans buy when they are forced by offshoring out of well paid manufacturing and software engineering jobs into being waitresses, bartenders, retail clerks and part-time Walmart workers in order that corporate bottom lines improve? Who buys the stuff that sustains the profits? Not Americans who no longer have the incomes to do so.

The belief spread by Wall Street and “shareholder advocates” that corporations only have responsibility to their owners and managers has destroyed the American economy.
By locating production offshore, corporations have destroyed the incomes that supported the American consumer market. For example, the incomes associated with the production of Apple computers, I-Pads, and I-Phones are in China. Apple’s American customers do not have the incomes associated with the production of the products that Apple markets to them.

Americans are already dispossessed of their livelihoods and careers and their pensions are next.Wherever we look, the fate of populations under Western influence are the same. The Ukrainians are exploited, the Greeks, the British, the Americans.

Wherever the West has an imprint, the populations are exploited. Exploitation of the many for the few is the Hallmark of the West, a decrepit, corrupt, and collapsing entity.




USA will send in 400 more troops to combat ISIS:
(courtesy zero hedge)

US Will Send 400 More Troops To Iraq Bringing Total To 3,500; Open New Military Base

As reported yesterday, in the latest escalation of the “war on ISIS”, Obama – winner of the Nobel peace prize for pulling US soldiers out of Iraq – was said to be sending even more US soldiers, pardon military advisors, to Iraq to halt the inexplicable, constant expansion of ISIS, now deep in Syrian territory. Earlier today, this was confirmed when Reuters reported that, as expected, the US will announce on Wednesday plans for a new military base in Iraq’s Anbar province and the deployment of around 400 additional U.S. trainers to help Iraqi forces in the fight against Islamic State, citing an unnamed U.S. official.

From Reuters:

The plan would expand the 3,100-strong U.S. contingent of trainers and advisers in Iraq and would mark an adjustment in strategy for President Barack Obama, who is facing mounting criticism for not being tougher in combating Islamic State.


U.S. officials, speaking on condition of anonymity, expressed hope that even a modestly strengthened U.S. presence could help Iraqi forces plan and carry out a counter-attack to retake Anbar’s capital Ramadi, which insurgents seized last month.

The expected troop announcement was unlikely to silence Obama’s critics, who say the modest contingent of U.S. forces is far from enough to turn the tide of battle.

In an administration in which the aptly named US Freedom Act does precisely the opposite of what its name suggests, it was good to see that the semantic games continue: as Reuters further notes, “Obama was expected to stick to his stance against sending U.S. troops into combat or even close to the front lines, officials said.” And yet, he is doing just that.

So Obama is not sending troops, even as there are about to be 3,500 US troops, pardon, military trainers and advisors in Iraq. Is anyone truly fooled by this sad attempt at verbal sleight of hand?

But while soldiers are better known as “advisors”, a base is still a base, and as such the US is about to open its 5th military base in Iraq. According to AP, “the extra U.S. training site will be at al-Taqqadum, a desert air base that was a U.S. military hub during the 2003-2011 war. Establishing the training camp will require between 400 and 500 U.S. troops, including trainers, logisticians and security personnel, the official said, speaking on condition of anonymity because a final administration decision had not been announced.

The U.S. already is training Iraqi troops at four sites — two in the vicinity of Baghdad, one at al-Asad air base in Anbar province and one near Irbil in northern Iraq.

A base which puts not only Syria, but Damascus within easy reach once the Assad regime is overthrown, an outcome which now seems to be just a matter of time.

What is the official explanation for the latest troop, pardon “advisor” surge?

Dempsey said there will be no radical change to the U.S. approach in Iraq. Rather, it is a recognition that the effort has either been too slow or has allowed setbacks where “certain units have not stood and fought.” He did not mention the Ramadi rout specifically, but Dempsey previously has said the Iraqis drove out of the city on their own.


“Are there ways to give them more confidence?” This, he said, is among the questions Obama wanted Dempsey and others to answer.

In reality what is really taking place is what we explained yesterday:

it appears the US doesn’t know whether it wants to stick with what was probably the original plan (i.e. wait until ISIS overruns Assad and then storm in with 10,000 marines to ‘liberate’ the country before installing a more ‘agreeable’ leader after some farce of an election) or speed up the process by claiming that Assad is in fact working with ISIS and using the imaginary unholy alliance as an excuse to invade now.


If Washington tends to go with Plan A, it would certainly make sense why Obama told leaders at the G-7 that this US doesn’t “yet have a complete strategy because it requires commitments on the part of the Iraqis.” The strategy probably goes something like this: 1) bide time until Assad’s army is decimated, 2) issue burn notice on black-flag waving former CIA asset, 3) announce Syria’s liberation, 4) install puppet government, 5) send “you’re welcome” note to Saudi Arabia and Qatar.


The only thing “incomplete” here is securing public support for ground troops. Lately, the US has begun to float a few “boots on the ground” trial balloons, with some hawks suggesting that forward “spotters” may be necessary in order to make the aerial assault on ISIS more ‘effective’ and today, we get a few more feelers from The White House, as the President is reportedly considering sending additional troops to Iraq “for training.

We can now scratch out the “reportedly” because slowly but surely, the endgame vis-a-vis Syria, and that long overdue Qatari natgas pipeline to Europe, is taking place.

This is interesting;  first Stanley Fischer Vice Chairman of the Fed and now Mark Carney, head of the Bank of England:

One week ago we took delight in one particular headline in which Fed vice-chair Stanley Fischer was quoted as saying that bankers “should be punished for financial crimes.”


We doubt we need to explain the virtually infinite circularity of irony contained in this quote, suffice to say that for the Fed to admit that the US judicial system is broken and that not a single banker has gone to prison following years of abuse, nearly a third of a trillion in legal settlements and charges by US commercial banks many of which have been now found to criminally manipulate markets (of which none more so than JPMorgan, whose CEO Jamie Dimon is now a billionaire as a result), and that the Fed has enabled and encouragedall of this with its policies, is… well, frankly we don’t even have the right word for it.

Today, the irony goes a notch higher when another central banker, this time former Goldman partner and current Bank of England head, Mark Carney doubled down on Fischer’s commentary.

Moments ago Carney said that prison sentences for market manipulating traders and bankers should be extended from 7 to 10 years. He added that so-called “rolling bad apples” or individuals who are fired from financial firms would no longer be able to move to another job without their new employer knowing about their history.

The punchline: “Carney said real markets were essential to guarantee prosperity.”

“Not markets that collapse when there is a shock from abroad. Not markets where transactions occur in chat rooms. Not markets where no one appears accountable for anything,” he said.

So… not markets which are artificially rigged by $22 trillion in central bank liquidity and which collapse every time the “threat” that any of this preciously liquidity may be taken away?

And as for cracking down on criminal market rigging banks, perhaps Mark Carney can start with Martin “The Hammer” Mallett, the former chief currencies dealer at the Bank of England, whose role in the FX rigging scandal was revealed early on and who was fired for “serious misconduct” just as promptly before too many questions emerged.


At a July 4, 2006, meeting led by BOE chief dealer Martin Mallett, attendees discussed “evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix,” according to the minutes. “It was noted that ‘fixing business’ generally was becoming increasingly fraught due to this behavior.”

Not only that but as the WSJ reported, the BOE’s Mallett “received emails that were part of an alleged campaign to rig benchmark interest rates, according to evidence presented in a London trial Wednesday.

Mallett’s Bank ogf England email addres:hammer@bankofengland.co.uk (.com also works)

Because we know Mr. Carney is very sincere and quite serious with his gratuitous and wanton statement, he eagerly await for Scotland Yard to show up on Mr. Mallett’s doorstep and to throw him in the prison cell next to Navinder Sarao.

As for bankers going to prison for 10 years instead of 7, let’s start will less lofty ambitions: how about some banker, anywhere, and not one who was trading out of his mother’s basement, going to prison for 10 minutes first.




Oil related stories:


Crude rises despite record Saudi production and the lowest demand from China since 2008:

(courtesy zero hedge)


Crude Soars Despite Record Saudi Production, Lowest China Demand Growth Since 1998

If Inventories down, then buy oil at the fastest pace in 2 months. That appears to be the algo logic as talking heads additionally blame Saudi airstrikes on Yemen for the over 6% surge in WTI in the last 2 days. However, as crude nears $62 (6 month highs) once again, we note that not only Saudi oil production just hit a new record high, but US production hit a new cycle high last week (DOE data today), and this is happening as China’s energy demand grows at the slowest pace since 1998.

So slowing demand growth and soaring production…  means prices are ripping.


This is happening as Saudi Oil Production hits a record high:

Saudi Arabia increased its oil production to a fresh record in May as the kingdom stepped up its attempt to win back more customers and as Opec forecasts supply outside the group to fall in the second half of this year.


The Kingdom’s output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to Opec, confirming the widely held view that Saudi Arabia’s production is heading higher, Anjli Raval, FT oil and gas correspondent writes.


Saudi’s oil output was 10.31m b/d in April, Riyadh told Opec.

While on the demand front, BP reports that demand growth was the lowest of the 21st century aside from the 2008 financial crisis:

Global energy consumption growth slowed markedly last year to the lowest level since the late 1990s, apart from around the time of the financial crisis in 2008, BP said on Wednesday.


Significant growth in shale oil and gas output put the US ahead of Saudi Arabia as the world’s largest oil producer and ahead of Russia as the world’s biggest producer of oil and gas, the energy giant said on release of its annual Statistical Review of World Energy.


Global primary energy demand growth slowed to 0.9% with Chinese growth at its lowest level since 1998 as its economy was rebalanced away from energy intensive sectors, BP said. China remained, however, the world’s largest market for energy.


Global oil consumption growth was slower last year at 0.8m bbl/day compared with 1.4m bbl/day in 2013. BP said that countries outside the OECD accounted for all oil consumption growth even though China consumption growth was below average.


Natural gas consumption growth was just 0.4%, well below the 10-year average of 2.4%, the review shows. EU natural gas consumption was down 11.6% mainly due, it is thought, to mild winter weather.


Global natural gas production growth was 1.6% in 2014, below the 10-year average of 2.5%. US natural gas production was up 6.1% while production in Russia was down 4.3% and in the Netherlands down 18.7%.


China’s slowdown and the rebalancing of its economy meant that its coal consumption growth stalled in 2014 compared to 2% in 2013 and an average of 6% over the past 10 years. The BP data are based on the energy content of coal. Global coal consumption growth was 0.4% compared with a 10-year average of 2.9%.


BP’s data show that China’s slower economic growth helped reduce the growth in global carbon dioxide (CO2) emissions by 0.5%, to the lowest level since 1998 apart from at the time of the global financial crisis.


Your more important currency crosses early Wednesday morning:


Euro/USA 1.1252 down .0010

USA/JAPAN YEN 123.21 down 1.130

GBP/USA 1.5459 up .0072

USA/CAN 1.2257 down .0084

This morning in Europe, the Euro fell by a tiny 10 basis points, trading now just above the 1.12 level at 1.1252; 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.

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 113 basis points and trading just above the 123 level to 123.21 yen to the dollar and triggering massive losses on yen carry trades.

The pound was up this morning as it now trades well above the 1.54 level at 1.5459, 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 84 basis points at 1.2257 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 49.94 points or 0.25%

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

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

Gold very early morning trading: $1185.70



Early Wednesday morning USA 10 year bond yield: 2.49% !!! up 5 in basis points from Tuesday night and it is trading well above resistance at 2.27-2.32% and no doubt setting off massive derivative losses.


USA dollar index early Wednesday morning: 94.79 down 37 cents from Tuesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning


And now for your closing numbers for Wednesday:


Closing Portuguese 10 year bond yield: 2.98%  down 2 in basis points from Tuesday (getting ominous)

Closing Japanese 10 year bond yield: .51% !!! up 5 in basis points from Tuesday/very ominious

Your closing Spanish 10 year government bond, Wednesday, down 4 points in yield (very ominous)

Spanish 10 year bond yield: 2.24% !!!!!!


Your Wednesday closing Italian 10 year bond yield: 2.25% down 4 in basis points from Tuesday: (very ominous)

trading 1 basis point higher than Spain.




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

Euro/USA: 1.1330 up .0037 ( Euro up 37 basis points)

USA/Japan: 122.61 down  1.738 ( yen up 174 basis points)

Great Britain/USA: 1.5539 up .0149 (Pound up 149 basis points)

USA/Canada: 1.2161 down .0080 (Can dollar up 80 basis points)

The euro rose today. It settled up 37 basis points against the dollar to 1.1330 as the dollar jolted southbound against most of the various major currencies. The yen was up by 149 basis points and closing well below the 123 cross at 122.61. The British pound gained a lot of ground today, 149 basis points, closing at 1.5539. The Canadian dollar gained huge ground against the USA dollar, 80 basis points closing at 1.2261.

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: 2.49% up 7 in basis point from Monday// (well above  the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

94.60 down 57 cents on the day.


European and Dow Jones stock index closes:


England FTSE up 76.47 points or 1.13%

Paris CAC up 84.69 points or 1.75%

German Dax up 264.10 points or 2.40%

Spain’s Ibex up 159.40 points or 1.46%

Italian FTSE-MIB up 564.03 or 2.50%


The Dow up 236.16  or 1.33%

Nasdaq; up 68.74 or 1.37%


OIL: WTI 61.20 !!!!!!!


Closing USA/Russian rouble cross: 54.31  up 1 1/4  roubles per dollar on the day




And now for your more important USA stories.

NY trading for today:

“Denied” Greek Rumor Sparks Stock Buying Panic As Bonds Near Death Cross

Volatility is contained… just like this…

The biggest driver of today’s panic buying fiasco was rumors of a German compromise which were quickly denied (but the machines forgot to sell on the denial)… EURUSD gave back all its gains but US equity traders are far more intelligent and held…



A squeeze already had us rising before the rumor…


On the day, Trannies underperformed and the S&P had its best day in a month


Notably, from the spike after the Greek rumor headlines,. stocks went nowhere…


Since Friday, Trannies remain the red but today’s excitement lifted the rest into the green on the week (and year)…


The reason for today’s ramp – simple – recover the losses from Payrolls… (on no volume)


Volume was weak but everything traded very technically today:

  • AAPL closed back above its 50DMA (bouncing off 100DMA yesterday)
  • S&P 500 closed back above its 100DMA and 50DMA
  • Dow broke above the 50DMA but closed below (losing 18,000 into the close)

The VIX ETF VXX hit a new record low today… (biggest 2-day drop today in 2 months)


Mission Accomplished:


The USDollar weakened again today, led by a surge in JPY on the back of Kuroda’s idiocy…


Treasury Yields rose once again (up 7 of the last 8 days)…


Based on Long Bond yields, it appears 30Y bond prices are about to experience the Death Cross…


The weaker USD enabled some strength in the commodity space…


Crude oil prices soared on the back of record production in US, record production in Saudi Arabia, looming Iran supply, and the weakest demand grwoth in China since 1998… because inventories dropped and that’s all the machines comprehend…


Airlines love higher oil prices now…




Charts: Bloomberg

Bonus Chart: RCA – The Netflix of The 20s

this could end up costing the uSA hundreds of billions of dollars.
(courtesy zero hedge)

Taxpayers To Lose Billions On Student Loan Refinancing

Monday marked the beginning of what could end up being one of the largest taxpayer-funded bailouts in history. On the heels of Corinthian Colleges’ move to shutter its remaining campuses after government investigations tied to deceptive practices forced the school to wind down operations last year, thousands of students have appealed to the Department of Education to have their federal student debt forgiven.

The initial joint petition sent to Secretary of Education Arne Duncan came from dozens of consumer and labor organizations claiming to represent some 80,000 aggrieved students seeking to have their loans discharged on the basis that the government’s move to close the school was the result of Corinthian’s fraudulent practices.

Initially, the Education Department wasn’t sure how to proceed, but after two weeks of apparent deliberation, the decision was made that students who attended schools run by Corinthian would be eligible to have their federal student debt forgiven, a move that could cost taxpayerssome $3.6 billion.

Should the government crackdown on for-profit institutions continue, the taxpayer bill could run into the tens, if not hundreds of billions. For the Education Department, it’s a choice between eradicating fraud and saddling taxpayers with the bill once the schools are closed.

Because nearly 90% of students at for-profit schools have funded their education with loans, and because these institutions only exist thanks to federal funding for students, every for-profit school that’s closed down represents a potential landmine for taxpayers. This, it should be noted, is just as much the government’s fault as it is the schools’. Questions about the integrity of for-profit colleges have existed for years and yet the government continued to allow them to operate while their CEOs reaped millions in compensation.

Now, it’s time to pay the piper and unfortunately, it’s taxpayers who will end up getting the bill.

One thing we haven’t discussed as of yet, is what might happen should students who do manage to land a good job after graduation decide to refi their student loans. Just as P2P lenders are eager for borrowers to refi their credit cards with P2P loans, startups backed by VCs and hedge funds (whose funding costs are basically zero thanks to ZIRP) are cherry picking the most qualified graduates and pushing them to refi their student debt at rates that are far lower than what the government charges. Bloomberghas more:

In a growing refinancing boom, a new generation of private lenders — backed by hedge-fund billionaires and Silicon Valley royalty — is targeting successful graduates with professional degrees and student loans. For the borrowers, “it’s an uncashed lottery ticket,” said Brendan Coughlin, head of education finance for Citizens Financial Group Inc.


There’s a catch. Their good fortune could cost taxpayers billions and damage the credit quality of the government’s $1.2 trillion student-loan portfolio, the biggest pool of U.S. debt, except for mortgages. That’s because professional-school graduates and other borrowers with successful careers subsidize the less fortunate, who are more likely to default.


“Cream-skimming by private lenders will remove these profitable loans and leave mainly — or only — the more risky loans,” said James McAndrews, executive vice president and director of research at the Federal Reserve Bank of New York

Traditionally, the student-loan program returns money to the U.S. Treasury. Now, the exodus of its most reliable customers could lead to losses.


“This is one of those looming financial bills that is going to come due,” said Jaret Seiberg, a Guggenheim Securities analyst. “If the best borrowers leave, taxpayers are going to have to ante up even more cash.”

In other words, just as the Fed remits ‘profits’ from SOMA to Treasury and just as Fannie and Freddie are subject to a Treasury sweep when they turn a profit, so too does the Treasury collect from the government’s student loan program (recent estimates show the US ‘profiting’ to the tune of $110 billion over ten years).

However, as would be the case if some “adverse scenario” were to suddenly blow a hole in Fannie and Freddie, losses on the government’s student loan portfolio will ultimate be borne by taxpayers. Removing the best borrowers (i.e. the ones making payments and paying down principal) from the equation makes an already bad situation worse, as billions in interest is lost to prepayments funded by private sector refis. Here’s more from Bloomberg:

Borrowers holding about $150 billion in federal loans have strong enough credit that private lenders could offer a cheaper rate, Goldman Sachs Group Inc. estimated in a March report.


Refinancings are likely to reduce by as much as $10 billion to $20 billion the value of the federal portfolio because of lower income from loan payments,primarily for graduate school, according to Deborah Lucas, former chief economist at the Congressional Budget Office and now a Massachusetts Institute of Technology finance professor. 


The situation is another consequence of historically low- interest rates, as well as a peculiarity of higher-education finance. Congress sets federal student-loan rates, and older obligations now demand as much as 8.5 percent annually. For decades, government loans undercut the private sector. Now it’s the other way around.

Companies pitching the refi opportunity include SoFi, LendKey, and Earnest which together have raised hundreds of millions from VCs and, of course, from PE and hedge funds:

That number is sure to rise, since better-quality borrowers have no logical reason to stay put and subsidize others, said Vince Passione, founder of Lendkey Technologies Inc., which connects students online with private student-loan lenders. In April, an affiliate of Apollo Global Management LLC, billionaire Leon Black’s private-equity investment shop, said it plans to invest $1 billion in refinanced student loans through LendKey.


Other big names are taking notice. A company called Earnest, which started online student-loan refinancing in January, has backing from Silicon Valley venture-capital firm Andreessen Horowitz, famed for helping seed Facebook Inc. SoFi’s investors include another hedge-fund billionaire, Dan Loeb, and Peter Thiel, a co-founder of PayPal.

*  *  *

Putting the pieces together, we have the unintended consequences of ultra accommodative monetary policy (i.e. private lenders offering rock bottom refi rates) conspiring with both the VC world’s enthusiasm for anything that even looks like P2P lending and billionaires’ penchant for getting involved anywhere there’s money to be made, to siphon off the best loans from the Department of Education’s portfolio, leaving taxpayers with a book full of IBR enrollees and severely delinquent borrowers who aren’t even thinking about making payments:

The government will be left with a greater share of borrowers like Jennifer Rejon. A 29-year-old single mother of a 10-year-old daughter, she has $17,000 in federal loans.


Under a federal program to help low-income borrowers, Rejon, who lives in Chicago and has struggled to find a job, isn’t making payments. “I’m trying to at least get my life on track and be able to pay my bills,” she said. “The loans are the last thing I’m thinking about.”

Take the above and throw in a few more $4 billion for-profit debt discharge fiascos and taxpayers could be in the red on the government’s student loan portfolio before the mass debt cancellations even begin.

For your humour of the day:
Well that about does it for tonight
I will see you tomorrow night

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