June 12b/GLD loses another .24 tonnes/SLV adds 956,000 oz/Greece given final ultimatum to sign a deal or else/3rd mining company issues a complaint to the CFTC/Record levels of open interest in silver (191,663)

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1178.80 down $1.10 (comex closing time)

Silver $15.82  down 13 cents.

In the access market 5:15 pm

Gold $1181.50

Silver: $15.98

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 6 notices serviced for 600 oz.  Silver comex filed with 2 notices for 10,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 251.09 tonnes for a loss of 52 tonnes over that period.

In silver, the open interest rose by another 1993 contracts even though Thursday’s silver price was unchanged.   The total silver OI continues to remain extremely high with today’s reading at 191,663 contracts now at multi-year highs despite a record low price. In ounces, the OI is represented by 958 million oz or 136% of annual global silver production (ex Russia ex China). 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 2 notices served upon for 10,000 oz.

In gold,  the total comex gold OI rests tonight at 404,169 for a loss of 2682 contracts as gold was down  $6.20 yesterday. We had 6 notices filed for 600 oz.

Late last night, we had another withdrawal, (although this time it is quite small )in gold inventory at the GLD to the tune of .24 tonnes. Thus the inventory rests tonight at 703.98 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 326.918 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 1993  contracts to 191,663 despite the fact that silver was unchanged in price.  The OI for gold fell by 2682 contracts down to 404,169 contracts despite the fact that the price of gold was down by $6.20 on Thursday.

(report Harvey)

2. An unbelievable COT report

(report Harvey)

3. Today, 7 important commentaries on Greece

zero hedge, Bloomberg)

4. Dave Kranzler and Craig Hemke talk about the manipulation of the metals

(Dave Kranzler/IRD/TFMetals/)

5. Bill Holter’s paper tonight is entitled:

“Zimbabwe to make you think..”

6. We now have our 3rd mining company issue a complaint to the CFTC on silver manipulation

(GATA)

7. Alasdair Macleod discusses calculations and meaning of GDP!

(Alasdair Macleod)

8. Grant Williams of HMMM fame talks with Andrew Maguire: two great minds discuss the precious metals and what is really going on underneath the surface

(Grant Williams/Andrew Maguire)

9. Is Deutsche bank the next Lehman

(NOTQUANT.com)

10. Precious metals trading overnight from Asia/Europe

(Goldcore)

11. Trading from Asia and Europe overnight

(zero hedge)

12. Trading of equities/ New York

(zero hedge)

13. Another big story on the huge shortage of collateral in the uSA namely the use of USA treasuries.  You must pay an additional 2.2% in order to obtain a treasury.  Why the huge cost?  The derivatives must have blown up and thus the huge need for additional collateral.
(zero hedge)
14. Beef prices up significantly these past two years
(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 2682 contracts from 406,851 down to 404,169 as gold was down $6.20 yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 40 contracts down to 748. We had 26 notices served upon yesterday.  Thus we lost 14 contracts or an additional 1,400 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 146 contracts down to 669.  The next big delivery month after June will be August and here the OI fell slightly by 2882 contracts  to 264,561. 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 47,665. The confirmed volume on Thursday (which includes the volume during regular business hours + access market sales the previous day) was poor at 120,486 contracts. Today we had 6 notices filed for 600 oz.

And now for the wild silver comex results.  Silver OI rose by  contracts from 189,670 up to 191,663 despite the fact that the price of silver was unchanged, with respect to Thursday’s trading.  The front non active  delivery month of June saw it’s OI fall by 0 contracts and remaining at 28. We had 0 contracts delivered upon yesterday.  Thus we neither gained nor lost any  silver ounces that will stand for delivery in this non active June contract month. The estimated volume today was poor at 14,504 contracts (just comex sales during regular business hours. The confirmed volume on Thursday (regular plus access market) came in at 65,861 contracts which is very good in volume. We had 2 notices filed for 10,000 oz today.

June initial standing

June 12.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz  37,281.049 oz (Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 51,061.329 oz (HSBC, Manfra)includes 300 kilobars Manfra
No of oz served (contracts) today 6 contracts (600 oz)
No of oz to be served (notices) 742 contracts (74,200 oz)
Total monthly oz gold served (contracts) so far this month 2631 contracts(263,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  134,450.3  oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz

we had 0 dealer deposit

total dealer deposit: nil oz
we had 1 customer withdrawals

i) Out of Scotia: 37,281.049 oz

total customer withdrawal: 37,281.049 oz

We had 2 customer deposits:

i) Into HSBC: 50,096.829 oz

ii) Into Manfra: 964.50 oz

Total customer deposit: 51,061.329 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 6 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 2 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 (2631) x 100 oz  or 263,100 oz , to which we add the difference between the open interest for the front month of June (748) and the number of notices served upon today (6) 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 (2631) x 100 oz  or ounces + {OI for the front month (748) – the number of  notices served upon today (6) x 100 oz which equals 337,300 oz standing so far in this month of June (10.49 tonnes of gold).  Thus we have 10.49 tonnes of gold standing and only 17.07 tonnes of registered or for sale gold is available:

Total dealer inventory 548,644.134 or 17.06 tonnes

Total gold inventory (dealer and customer) = 8,072,671.523 (251.09 tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 251.09 tonnes for a loss of 52 tonnes over that period.

end

And now for silver

June silver initial standings

June 12 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 486,170.271 oz (CNT,Scotia,Delaware)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  629,129.010 oz (Delaware,JPM)
No of oz served (contracts) 2 contracts  (10,000 oz)
No of oz to be served (notices) 26 contracts(130,000 oz)
Total monthly oz silver served (contracts) 222 contracts (11,010,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 526,732.4  oz
Total accumulative withdrawal  of silver from the Customer inventory this month 4,405,865.7 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:  17,810.48 oz

ii) Into JPMorgan: 611,318.53 oz*** (7th straight day of an above 500,000 oz silver deposit)

total customer deposit: 629,129.01  oz

We had 3 customer withdrawal:

i) Out of Scotia: 60.261.78 oz

ii) Out of CNT: 382,754.65  oz

iii) Out of Delaware: 43,153.921 oz

total withdrawals from customer;  486,170.271 oz

we had 0 adjustment

Total dealer inventory: 57.845 million oz

Total of all silver inventory (dealer and customer) 179.855 million oz

The total number of notices filed today is represented by 2 contracts for 10,000 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 (222) x 5,000 oz  = 11,010,000 oz to which we add the difference between the open interest for the front month of June (28) and the number of notices served upon today (2) x 5000 oz equals the number of ounces standing.

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

222 (notices served so far) + { OI for front month of June (28) -number of notices served upon today (2} x 5000 oz ,= 11,140,000 oz of silver standing for the June contract month.

we neither gained nor lost any silver ounces standing for this no active  delivery month of June.

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

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

end

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

June 12/we had a small withdrawal of .24 tonnes of gold from the GLD/Inventory rests this weekend at 703.98 tonnes.

June 11/we had another huge withdrawal of 1.5 tonnes of gold from the GLD/Inventory rests tonight at 704.22 tonnes

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 12 GLD : 703.98  tonnes.

end

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 12/we had another addition to the tune of 956,000 oz/Inventory rests this weekend at 327.918.  Please note that there has been an addition on each of the past 5 days.

June 11.2015: we had another monster of an addition to the tune of 2.791 million oz/Inventory rests at 326.918

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 12/2015:a small addition of 956,000 oz of silver/ inventory at the SLV now rests at 327.874 million oz/ lately silver inventories have been rising at the SLV with a constant price of silver!!

end

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

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

1. Central Fund of Canada: traded at Negative 7.6% percent to NAV in usa funds and Negative 7.6% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.8%

Percentage of fund in silver:37.8%

cash .4%

( June 12/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to -.05%!!!!! NAV (June 12/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to – .34% to NAV(June 12/2015

Note: Sprott silver trust back  into negative territory at -.05%.

Sprott physical gold trust is back into negative territory at -.34%

Central fund of Canada’s is still in jail.

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

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

end

At 3:30 the CME sends down the COT report which gives position levels of our major players.  They are now giving out purple hearts to those players wishing to take on the criminal bankers;

First the Gold COT

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
186,813 111,723 33,742 150,277 228,866 370,832 374,331
Change from Prior Reporting Period
-7,486 21,834 944 11,854 -17,707 5,312 5,071
Traders
129 102 71 54 51 220 195
 
Small Speculators  
Long Short Open Interest  
35,237 31,738 406,069  
2,033 2,274 7,345  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, June 09, 2015

The bankers fleeced our speculators again.

Our large specs;
Those large specs that have been long in gold pitched 7486 contracts from their long side.

Those large specs that have been short in gold added a monstrous 21,834 contracts to their short side???

Our commercials;

Those commercials that have been long in gold added 11,854 contracts to their long side.

Those commercials that have been short in gold covered a monstrous 17,707 contracts from their short side.

Our small specs;
Those small specs that have been long in gold added 2033 contracts to their long side in total contrast to their larger older brother, the large specs.

Those small specs that have been short in gold added 2274 contracts to their short side, also in total contrast to the large specs.

Conclusion; I am tired of this crap.

And now the Silver COT:

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
65,881 43,335 24,291 71,347 107,288
2,308 26,607 -640 4,154 -17,474
Traders
96 57 50 46 41
Small Speculators Open Interest Total
Long Short 189,524 Long Short
28,005 14,610 161,519 174,914
5,359 2,688 11,181 5,822 8,493
non reportable positions Positions as of: 167 130
Tuesday, June 09, 2015

 Our large specs; unbelievable!!

Those large specs that have been long silver added 2308 contracts to their long side.

Those large specs that have been short in silver added an unheard of 26,607 contracts to their short side!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Our commercials:

Those commercials that have been long in silver added 4154 contracts to their long side.

Those commercials that have been short in silver, covered a monstrous 17,474 contracts from their short side

Our small specs

Those small specs that have been long in silver added a monstrous 5359 contracts.

Those small specs that have been short in silver added another 2688 contracts to their short side.

Conclusion: an accident waiting to happen.

end

Early morning trading from Asia and Europe last night:

Gold and silver trading from Europe overnight/and important physical

stories

(courtesy Mark O’Byrne/Goldcore)

Cyberwarfare Threat To Nuclear, Banking and Financial System

Legacy of stuxnet is risk posed to technology dependent world
20 countries have launched cyberwarfare programmes since exposure of stuxnet in 2010
Stuxnet virus targeted safety mechanisms in Iran’s nuclear reactors in 2010
Virus launched to sabotage Iran’s nuclear program was also used for mass spying
All types of digital systems at risk, including financial, banking and gold providers
Direct ownership of physical gold, unlike digital currency, not vulnerable to cyber warfare

20 Countries Have Announced Digital Warfare Programs

A new book detailing the development, operation and ramifications of the deployment of the notorious Stuxnet virus shows that it has created a far more risky world.

The book, Countdown to Zero Day, by Wired magazine writer Kim Zetter, shows that – apart from being an extremely irresponsible and dangerous act of sabotage – the deployment of Stuxnet against Iran has led to an acceleration in development of cyberwarfare.

In a must read article in the Irish Times, respected technology journalist, Karlin Lillington reviews the book which presents some fascinating insights into the whole Stuxnet affair which she describes as “the world’s first digital weapon”.

Wired Magazine writer Kim Zetter

Most unnerving is the fact that twenty different countries have announced digital warfare programmes since the exposure of Stuxnet in 2010.

The U.S. had been demanding that other countries refrain from engaging in cyber warfare techniques until it emerged that the U.S. itself, along with Israel, had deployed the extremely destructive virus against Iran. The NSA had been authorised to launch Computer Network Attacks (CNA’s) for over a decade.
Zetter’s book gives a fascinating insight into how the virus operates. It was launched via a USB key rather than via the internet. The developers had identified glitches in Microsoft’s operating systems which were not publicly known and used these flaws against their target.

The virus secretly collected data on the operation of centrifuges in nuclear reactors for thirty days. Then it began interfering with the operation of the centrifuges in such a way that it would damage the reactors while reporting back the data of the previous thirty days so that engineers could not identify any problem.

goldcore_chart7_12-06-15
Normally, Iranian engineers would need to decommission around 800 centrifuges in a year. Stuxnet caused such havoc that they were forced to change 2000 in a two month period.

The virus then spread rapidly into the systems of contractors working in the power stations who unwittingly infected systems all around the world. In all, over 100,000 computers were infected which Zetter says laid the groundwork for a mass espionage program.

Lillington writes

“Zetter says the attackers also failed to eventually kill the code and stop log files in Stuxnet from communicating back to the command and control server, even after it was apparent the worm had spread beyond Iran. She argues this was to keep the backdoors into millions of computers globally that were obtained in this way, which would form the basis for subsequent mass surveillance programmes.”

Zetter believes that the launch of Stuxnet by the U.S. and Israel was particularly foolish because its

“development also meant the US lost moral ground for demanding other countries not use cyberwarfare techniques …  And, inevitably, it launched many more digital warfare programmes across the world.”

She warns that it

“ignores the fact that our systems are just as vulnerable, because U.S. systems are the most connected systems in the world.”

Indeed, our modern western financial and banking system with its massive dependency on single interface websites, servers and the internet faces serious risks that few analysts have yet to appreciate and evaluate.

We previously referred to Russian Prime Minister Medvedev’s allusion to cyber warfare when he stated the Russia’s response to U.S. attempts to have it locked out of the SWIFT system that the Russian response “economically and otherwise – will know no limits.”

Dormant malware, apparently of Russian origin had previously been discovered buried in the software that runs the Nasdaq stock exchange according to Bloomberg.

Given that a military confrontation is not desired by Russia it is likely that cyber-warfare will be part of Russian arsenal in any confrontation with the U.S. and NATO countries.

Hacking is becoming more common and recent months have seen the hacking of Sony Pictures, allegedly by North Korea, and the hacking of Instagram, Tinder and Facebook.

Banks have been hacked, stock exchanges have been hacked and critical infrastructure, including nuclear have been hacked in recent years. It is likely that many of these small scale attacks have been merely testing of  defenses.

Even one of the largest and most powerful banks in the world, JP Morgan has been hacked.
Exactly a year ago, in June 2014, JP Morgan Chase were hacked by unknown parties who stole the personal details of 83 million customers.

A concerted attack on the western financial system would likely include attempts at disabling various exchanges including stock markets and foreign exchange markets. Banks could be attacked in such a way that bank balances, which are merely digital figures, could be erased.

Should banks be hacked and customers deposit accounts compromised then the vista of potential bail ins becomes a real one.

The vulnerability of investment providers, banks and the global banking system – reliant as they have become on single interface websites, servers, computer systems, information technology and the internet – is very slowly being realised.

Academic and independent research and indeed the modern and historical record shows how physical gold is a safe haven asset – provided you have direct ownership of coins and bars and are not dependent on single websites and technology.

An allocation of some of one’s portfolio to physical gold is insurance against technological and systemic risks posed to all virtual wealth today – whether that be digital bitcoin and gold or electronic currencies in deposit accounts.

These risks have never been seen before and are largely unappreciated and ignored by brokers, financial advisors, bankers and the majority of people.

Having all your eggs in a deposit account or with one single investment, or indeed gold broker or storage provider, is no longer prudent.

Must Read Guide:  7 Key Gold Must Haves


MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,179.25, EUR 1,055.68 and GBP 761.27 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,180.50, EUR 1,049.19 and GBP 763.51 per ounce.

Gold fell $4.70 or 0.4 percent yesterday to $1,181.50 an ounce. Silver climbed $0.01 or 0.06 percent to $16.04 an ounce. Gold is on track for a 1% gain in dollar terms, is flat in euro terms and is lower in sterling terms.

Gold in USD - 1 Week

 Gold in Singapore for immediate delivery was steady at at $1,183.03 an ounce near the end of the day,  while gold bullion in Switzerland was again marginally lower.

 Even though gold declined yesterday on the back of positive U.S. retail figures, it is still on track for a 1 percent weekly gain due to a weaker U.S. dollar.

 Gold is not seeing a boost from safe haven buyers due to the Greek financial crisis, which may or may not include an exit from the euro. European Commission President Jean Claude Juncker said today that stalled debt talks between Athens and its creditors would restart but put the ball firmly in the Greek government’s court to come up with an acceptable deal.

The question is whether this is due to quite poor sentiment in the gold market or are banks that have been found rigging most markets, manipulating the gold market?

Gold in Euros -  1 Week

 Poor sentiment towards gold is seen in liquidations of the gold ETF’s such as the SPDR Gold Trust, the world’s largest. It  has seen its holdings fall again this week to the lowest levels since 2008.

With sentiment poor and prices depressed or suppressed, depending on your point of view, gold looks gold value at these levels and is over due a bounce. The possibility of a Greek financial debacle should support gold and potentially push it higher before the important June end deadline.

The psychological price level of round number $1,200 per ounce will offer resistance but should gold rise above it, we would expect a move to $1,250 in short order.

Gold in British Pounds -  1 Week

The sharp bond market selloff is bullish for gold as it is starting to pinch American consumers and companies, causing a mild economic tightening that will raise alarms at the Fed and will likely delay the expected hike of interest rates in coming months.

U.S. mortgage rates have reached their highest level in 18 months, auto loans are getting more expensive, and corporations across the board have seen their borrowing costs jump as U.S. and European debt retrenched in recent weeks.

Asia’s demand has faltered a bit with monsoon season in India and China’s surging stock market has softened buying of the yellow metal but demand remains quite high as seen in the premiums on the Shanghai Gold Exchange (SGE).

In late morning European trading gold is down 0.13 percent at $1,180.14 an ounce. Silver is off 0.44 percent at $15.95 an ounce, and platinum is also down 0.81 percent at $1,098.90 an ounce.

end

As I pointed out to you yesterday, Rhodesia was a very rich nation twenty five years ago.  Today everybody is impoverished:

(courtesy Agence  France-Presse/GATA)

All they had to do was monetize the gold from their own mines

Section:

Another rich country insisting on being poor.

* * *

Zimbabwe to Phase Out Worthless Local Dollar

From Agence France-Presse
via Raidio Teilifis Eireann, Dublin
Thursday, June 11, 2015

http://www.rte.ie/news/business/2015/0611/707434-zimbabwe-dollar/

The Zimbabwean dollar will officially be taken out of circulation, officials said today, six years after hyper-inflation rendered it worthless and US dollars became the most widely-used currency.

The government effectively abandoned the local currency in 2009 and adopted a multiple-currency system that includes the US dollar and the South African rand.

“Zimbabwe adopted the multiple-currency system or dollarization in 2009 and it is therefore necessary to demonetise the Zimbabwe dollar unit,” Reserve Bank of Zimbabwe governor John Mangudya said at a news conference.”We are decommissioning this currency,” he added.

The southern African country once removed 12 zeros from its battered currency at the height of hyper-inflation in 2009 when the largest note was the $100 trillion denomination.

Official figures put inflation at 230 million per cent but in reality it was much higher.

Mangudya said $20 million has been set aside to offset Zimbabwe dollar bank balances and to pay people still holding to the local unit. The process will run until September, he said.

“People went through a difficult process in terms of inflation. Yes, we know that there was hyperinflation. We need to ensure that as a country we move forward,” Mangudya said.

Zimbabwe has been saddled with a financial crisis for over a decade following President Robert Mugabe’s land reforms, which decimated farming, the backbone of the economy.

Growth is expected to weaken further this year, according to the International Monetary Fund.

end

Alasdair Macleod…..

(courtesy Alasdair Macleod/GATA)

Alasdair Macleod: The fallacies of GDP

Section:

2:09p ET Thursday, June 11, 2015

Dear Friend of GATA and Gold:

GoldMoney’s head of research, Alasdair Macleod, today explains why gross domestic product, a statistic worshipped by some economists, is misleading and does only harm.

“GDP,” Macleod writes, “has nothing to do with economic progress. It is a flawed statistic that imperfectly summarizes the money-value of selected transactions over a given period. The fact that it is usually positive is a reflection of the temporal difference between monetary inflation and the lagging effect on prices, and has nothing to do with economic progress.”

Macleod’s commentary is headlined “The Fallacies of GDP” and it’s posted at GoldMoney here:

https://www.goldmoney.com/research/analysis/the-fallacies-of-gdp?gmrefco…

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

end

A must listen to:

Grant Williams and Andrew Maguire two great minds talk about gold suppression.  Grant Williams is formerly of Hmmmm…fame!!

(courtesy Grant Williams/Real Vision and Andrew Maguire)

Real Vision has great interview with Andrew Maguire about gold suppression

Section:

1:58p ET Thursday, June 11, 2015

Dear Friend of GATA and Gold:

Singapore-based fund manager Grant Williams has just done an outstanding and detailed interview with London metals trader Andrew Maguire in the Real Vision series of in-depth interviews with leading figures in the financial markets.

Among the topics discussed by Maguire and Williams:

— The intention of the Bank of England’s gold sales to drive the price down 15 years ago to rescue bullion banks from a short squeeze.

— Maguire’s attempt to get the U.S. Commodity Futures Trading Commission interested in documentation he provided about silver market manipulation in London.

— The shocking impact on the metals market caused by CPM Group executive Jeffrey Christian’s admission to a CFTC hearing that bullion banks are leveraged by as much as 100 to 1 in their shorting of metal.

— The official interventions against gold in April 2013

— London’s loss of control of the gold market to Asia, where the physical market will overwhelm the paper or “synthetic” markets of the West.

— The new Asian exchanges that will draw metal away from the West and break the price-suppression system.

— What Maguire considers the financial trade of the decade.

The Real Vision people have kindly posted Maguire’s interview entirely in the clear here —

https://teaser.realvisiontv.com/130358792

— in the hope that you’ll want to consider subscribing to their service, whose price is $400 per year. But a $100 discount is available to GATA supporters who use the discount code GATA-RV when subscribing. Please check out Real Vision here:

https://realvisiontv.com/#About

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

end

And now we have Dave Kranzler talk about the huge manipulation in silver:

(courtesy Dave Kranzler/IRD)

Silver Manipulation May Be The Most Extreme In History

Much has been made in this commentary of the soaring silver open interest, which ought to be unprecedented in commodity market history.  – Bill “Midas” Murphy, co-founder and Chairman of GATA

The open interest in Comex silver hit another new all-time high yesterday.  As of Wednesday’s final open interest report, the open interest in silver was 189.7k contracts. This is the highest the open interest has been based on data I have going back to April 2005.

189.7k contracts translates into 948.5 million ounces of silver.  According to the Silver Institute, the total global silver mine output for 2014 was 877 million ozs.  The amount of paper silver open interest on the Comex is thus greater than the amount of silver mined in a year globally.

The ratio of silver futures open interest to the amount of silver warehoused on the Comex is even more absurdly disproportionate.   As of Wednesday, June 10 the Comex vault operators (JP Morgan, Scotia, HSBC, Delaware Depository, CNT and Brink’s) were reporting a total of 179.7 million ozs of silver in Comex vaults.  Of that, 57.8 ozs were classified as “registered,” or available for delivery (the rest was being “safekept” at the Comex by investors or commercial users of silver).

Based on these numbers, the silver open interest is now 5.3x higher than the totalamount of silver on the Comex and 16.4x the amount of silver that has been made available for delivery.

GoldSilverManipulationNever in the history of the commodities markets has the amount of futures outstanding for any commodity been this extraordinarily disconnected from the amount of the physical supply produced and available for delivery.

Anyone who asserts that gold and silver are not manipulated using paper derivatives just based on the market action alone is either completely corrupted – with a motivated financial interest in denying the obvious – or is a total idiot.  But upon examining the Comex data for silver – and accepting it prima facie, which I do not (I believe the real numbers are even more extreme) – anyone who denies that silver is manipulated in extremis has likely received a full frontal lobotomy.

The blatant takedown in gold and silver signals to me that something is coming. I enjoyed Keith Neumeyer’s letter to the CFTC. When a major producer like First Majestic raises the issue I think the CFTC will have a more difficult time blowing it off than another diatribe from Ted Butler.  – John Embry

Briefly, the price of gold/silver is manipulated in two ways.  The first method involves “bombing” the Comex (either the trading floor or the electronic Globex trading system) will massive futures sell orders, typically during periods of low liquidity or when economic reports are released.   This causes the sharp sell-offs.   The second method involves price capping, which is achieved by meeting periods increased demand from buyers with added supply of futures.

If the allowable amount of gold/silver futures open interest was pegged to the amount of physical gold/silver available for delivery, it would be impossible for the banks to print an infinite supply of paper contracts to meet demand from buyers.  This is how every other commodities product operates.   In fact, isn’t this how every other commercial product market typically operates?

The motivation by the Fed/Government to keep a lid on the price of precious metals is certainly understandable.  If gold and silver were allowed to operate in a market of bona fide price discovery, they would almost instantaneously re-price at significantly higher levels.  This event would completely undermine the legitimacy of the dollar.  It would disrupt entire the massive wealth transfer mechanism being operated by America’s corporate, banking and political elite.   We’re talking about blood money.

There’s no telling how much longer this extreme manipulation can continue.  History has shown that market interventions eventually fail – often with serious consequences.  As I have suggested in recent commentary, I believe that the credit market is sending signals which indicate that western Central Banks and Governments are beginning to lose their ability to control the markets.

This whole thing is totally nuts. I still think silver will go bonkers within the next few months. Maybe that is a hope trade of mine, but I smell it as much as I smelled my biggest winner, the copper move of 1987.  – Bill Murphy

end

We now have a 3rd mining company issue a complaint to the CFTC:

(First Mexican Gold Corp/Vancouver Canada)

Here is his letter;

First Mexican Gold Corp
1000 – 355 Burrard Street
Vancouver, BC, V6C 2G8
June 7, 2015

Mr. Massad
CFTC Chairman

tmassad@cftc.gov

Re: Silver Futures Contracts

Dear Chairman Massad,

The following has been brought to my attention:

The Commitments of Traders Report (COT) for May 19, 2015 indicates a record position change of more than 28,200 net contracts of COMEX silver futures being purchased by traders in the managed money category, the equivalent of 141 million ounces of silver and 61 days of world mine production. The COT report also indicates nearly 24,400 net contracts were sold by traders classified as commercials and the equivalent of 122 million ounces and 53 days of world mine production.

In addition, the report indicated that 8 traders in COMEX silver futures held a net short position of 376 million equivalent ounces of silver, by far the most of any commodity in terms of world production (163 days). With silver prices at current low levels, it is puzzling why the concentrated short position would be so large.

Since the Commission classifies traders in the managed money category as speculators (as opposed to hedgers) and because there is little evidence from public financial reports that silver producers are represented in the commercial category, it appears the big changes in positions on the COMEX are by speculators and commercials acting as speculators and not by those engaged in bona fide hedging.

It occurs to me that such massive speculation in COMEX silver futures may not be in keeping with the spirit and intent of commodity law and may suggest something is wrong with the price discovery process, since real producers and consumers of silver don’t appear to be represented.

Please address these issues in light of the current depressed price of silver and the questionable futures contracts.

The lack of oversight by the CFTC and total disregard by the CME is severely jeopardizing the future of precious metal companies’ ability to sell their product at legitimate and sustainable prices as a result of what appears to be manipulative falsely classified commercial entities that operate in a world of their own with no legitimate positon limit restrictions. Shareholders of these companies are being severely harmed as a result of unfair price actions totally unrelated to supply and demand or actual legitimate commercial objectives.

I look forward to hearing from you.

Sincerely,

Gregory Roberts
Chairman, Director
First Mexican Gold Corp

end

Dave Kranzler and Craig Hemke talk about the manipulation of the metals:

(courtesy Dave Kranzler/Turd Ferguson(Craig Hemke) GATA)

Spinning Out Of Control – A Conversation With TF Metals Report
Craig “Turd Ferguson” Hemke invited me on to his weekly podcast show this week. Some of the topics included in our conversation:

The fact that the U.S. economy is starting to contract and why Wall Street, DC and the mainstream media are working overtime to spread propaganda and disinformation; the cesspool of global derivatives bets that threaten to collapse the financial system; the true state of the U.S. housing market and why a the housing market is headed for another big decline; the prospect of the Government making gold illegal again.

You can access Craig’s site and the podcast here: TF Metals Report.

end

And now Bill Holter

(courtesy Holter/Sinclair collaboration)

Zimbabwe to make you think…

My last piece was quite long and involved, some liked it and “got it”, others not so much.  The breaking of confidence was the point I was trying to get to.  I intend to try again with this writing but from a different viewpoint.  Today, rather than continuing to hammer away at the fraud, collusion, and upside down logic of global politics, economics and finance, let’s look at a real world case.  I received a rather long note from a reader earlier this week who was visiting of all places …Zimbabwe!  I did not ask “why” he was visiting and can only imagine, but in light of where “we are going” it is fortuitous for us to have a pair of boots on the ground!  The following is “the heart” of what he wrote.   Please read this twice so it really sets in, I will comment afterward and hopefully this exercise will “make you think”.

————————————————————————————————-
     …First Hand from Zimbabwe;
Yes, they try to sell you their funny colored money with lots of zeros on it ROFL. They seem offended when you decline their offers. I told the guy I bought some off of ebay, and got the “deer in headlights” look back. I just moved on.
Anyway, met a guy who was friendly so started chatting.
This is first hand from someone who grew up here, born here, lived through the hyperinflation, had a real job, parents, house, savings, etc. I just asked him things point blank: what happened and what did you do during that period just to see what reality was.
His parents were pretty well off, brits of course, retired (or very close) for a normal Zimbabwean. Considerable savings. Not a mil USD (equivalent) but up there ($250K-$500K’ish I think in hard savings).
He said: “They went from set for life here in Zim to not being able to afford a loaf of bread in 2 days.” (these were his exact words, not mine, not a paraphrase, the exact statement, I remember it clear as day, and this was only 2 hrs ago).
The first question of course I followed with was: Um, why they didn’t buy gold? And here you have the story:
He said his parents were very conservative and placed complete trust in the system and the gov. It would never even occur to them to do something like that, and he said they said it would be way way too risky to do something like that (not because it was illegal or anything, but because gold was viewed as risky, asset wise!).
He said he might (!!) do gold next time. His first response was he’ll buy a few barrels of oil and keep them in his back yard to sell/barter LOL. Seriously. But he said, yeah, gold would be worth doing next time. I honestly don’t think that this option had occurred to him yet even to this very day, until I asked him this question. That’s just the feeling I got, as he had to pause like he was thinking about do the head nod (thinking, thinking….) what I just said before he answered.
So even now, if it happened AGAIN, the people would not necessarily turn to gold (wow, wow, and wow!). They would all instead INSTANTLY convert everything (it seemed he was indicating) into dollars to be safe! (another wow, wow, and wow)!
I told him the USD was likely on it’s way towards hyper’ing also. He seemed quite (totally) surprised. He said, he thought the EUR was headed that way, but not the USD. It seems that Zimbabwe feels the dollar is now, and always, solid as a rock.
————————————————————————————————-
 
  First, please remember this was a conversation with just one person so it is by no means even a “sampling”.  It was however a conversation with someone “who had something …and lost it all”.  The story is important in my opinion for several reasons I will touch on.
  “Mathematically”, the U.S. dollar is headed for the inferno of hyperinflation.  There is no argument on this point from anyone with intelligence.  Even Harry Dent and Martin Armstrong the most staunch “deflationists” around admit the final chapter is that of wildly high gold prices (which means a breakdown of confidence in the dollar).  The difference between “them and us” is “how” we get there?  I believe we have already been witnessing the “squeeze” and run into the dollar as a “safe haven”, they see it as a continuing and future event.
  The absolute most important thing to take from our reader’s comments is this line  He said: “They went from set for life here in Zim to not being able to afford a loaf of bread in 2 days.”  Yes I know, something in your gut is telling you “but we aren’t Zimbabwe”, the U.S. is far more sophisticated, has the greatest military in the world and of course the “it can never happen here” syndrome is chirping in the back of your mind.  Let me say this, “NO, we are not Zimbabwe, what a shame!”.  I might have lost or confused you here and I’ll get to this in a moment.
  “Banana Republicland” (debt to GDP ratios of 100% or more) is now occupied by a large percentage of the world’s sovereign nations.  The U.S. has more than a 100% debt to GDP ratio just using “funded” or on books debt.  The ratio goes ballistic and out of control when you add in “guarantees and future obligations”.  After researching the Zimbabwe situation, their debt to GDP number was not greater than Japan’s currently and approximately (180%) equal to that of Greece …with Italy slightly behind.  My point is this, the debt to GDP ratio in the U.S. when everything is included is some God awful number, maybe 500% or even multiples more!  I have news for you, we are already Zimbabwe on STEROIDS!  Before commenting further, I will refute the obvious, “but the U.S. has the strongest military in the world …probably yes, but we are stretched out with many various “scopes” targeted at us.  The days of “forcing” the dollar on the rest of the world are waning very quickly!  World War 3 will be our main concern should the U.S. try to “force” dollar dominance.  All you need to do is look around, the ROW is and has been angered by our “forcing” the use of dollars.  They have been reacting by doing trade to the EXCLUSION of the dollar.  The days where our military could foist the dollar on the world are over!
  I mentioned above, “it is a shame we are NOT Zimbabwe”, can you guess why?  Because the U.S. still “has” (or believes it does) mass wealth.  Yes we have really split into the have’s and have nots as the middle class has been attacked and fallen into the have not category but …our living standard is far advanced from Zimbabwe’s in general.  We have more to lose.  In other words, “it is better to have never had than to fall from grace”.  Zimbabweans lost their savings, on average their “fall” in living standards is miniscule to an event like that happening in the U.S..  Not to mention the unrest and riots we will see when people who were previously “entitled” …wake up to nothing!  As an analogy, their fall was off the bottom rung, ours from a skyscraper!  A very timely side note, while writing this article, the Zimbabwe dollar will officially “go away”  http://www.zerohedge.com/news/2015-06-11/zimbabwe-demonetizes-offers-us5-175-quadrillion-zim-dollars
  I also found it curious that this person had not “figured out” gold and to this day still has a feeling of “risk” when it comes to the metal.  Stepping back for a moment, why do you suppose invading forces ALWAYS steal their captor’s gold rather than the currency and the plates to make the currency?  Please don’t tell me I am living in Roman times, or the Middle Ages, or Napoleonic times.  I am not even living in WW I or II times, as recently as the last several years, Iraqi, Ukrainian, Greek and Libyan gold has ALL been pilfered!  Ask yourself this question, if the U.S. was invaded, would our conquerors steal our dollars or break into our vaults in search of gold (maybe to a very bad and empty surprise?)?
  Please think this through for yourself, can we in the U.S. and the West in general wake up to closed markets and panic conditions?  Do you really believe paper currency will become more valuable (for more than a week or two) if the debt markets and derivatives are closed with no bids?  Do you really believe gold and silver will be “offered” in any fashion except maybe for something you have as barter?  I still cannot get over the deflationists argument the dollar will strengthen in this scenario.  The killer question of course is this, where exactly should (can) we store all of these valuable notes and digits “safely”?  I suspect there will be a run on wheel barrows and those old “Radio Flyer” wagons will actually again have a function beyond their antique value!
Regards,  Bill Holter
Holter-Sinclair collaboration
end

 

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

1 Chinese yuan vs USA dollar/yuan weakens to 6.2081/Shanghai bourse green and Hang Sang: green

2 Nikkei closed by 24.11  points or 0.12%

3. Europe stocks all in the red/USA dollar index up to 95.43/Euro falls to 1.1184

3b Japan 10 year bond yield: slightly falls to .51% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.67/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 60.18 and Brent:  64.76

3f Gold down/Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .86 per cent. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate fall slightly  to 25.06%/Greek stocks down 4.18%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield falls slightly to: 11.52%

3k Gold at 1180.90 dollars/silver $15.95

3l USA vs Russian rouble; (Russian rouble down 1/4 in  roubles/dollar in value) 54.99,

3m oil into the 60 dollar handle for WTI and 64 handle for Brent/Saudi Arabia increases production to drive out competition.

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

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9333 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0456 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 closer t0  negativity at +0.864

3s Eight weeks ago, the ECB increased the ELA to Greece by another large 2.0 billion euros.Six 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. Two weeks ago, the limit was not raised. Last week, the ECB raised the ELA by 1/2 billion euros to 80.7 billion euros. Yesterday, it was raised by a huge 2.3 billion euros to 83.0 billion.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 2.39% early this morning. Thirty year rate well above 3% at 3.10% / yield curve flatten/foreshadowing recession.

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

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

Markets Twist And Turn On Every Headline In The Endless Greek Tragedy

For a sense of what is driving sentiment this morning look no further than the Athens stock market which exploded higher yesterday on a Bloomberg story based on “two sources” that Germany was willing to compromise, only to close just as the IMF pulled a classic bad cop and announced it was halting work on Greece, and beforefurther news from Bild that Germany was preparing for a Greek default while Europe had given Greece 24 hours to submit a final, workable proposal. As a result, it tumbled promptly at the open even as optimism persists and since the opening plunge, Greek stocks have continued to climb and are now back to yesterday’s euphoric opening levels.

Then there was Diesel-BOOM, who had the usual batch of headlines of which this one was key:

  • GREECE REJECTING PROPOSALS `NOT AN OPTION’: DIJSSELBLOEM

Which is ironic because Greece can say the same for the Troika’s reaction to its own proposal.

Germany’s economy minister was also in the spotlight:

  • GREECE EURO EXIT WOULD BE ‘CATASTROPHE’: GERMANY’S GABRIEL

But not before Merkel hit the tape saying that:

  • STRONG EURO MAKES IT HARDER FOR SPAIN, PORTUGAL, IRELAND: MERKEL

Which in turn sent the Euro tumbling, but only for another comment to send it surging:

  • IMF HASN’T BROKEN OFF GREECE TALKS, JAEGER SAYS

Needless to say, the algos have had a field day with the kneejerk reactions to all of the above.

One thing is certain: by the end of trading stocks will be anywhere but here, following the daily barrage of optimistic rumors offset by subsequent official rejections. Also, the Greek clock has practically run out, so the time to come up with a credible conclusion to the world’s longest running soap opera is here. Imagine what would happen if the decision whether to let Lehman default took five years…

Aside from Greek stocks, in what has otherwise been a relatively quiet start to the session, European equities have ebbed lower in a continuation of the move seen in the wake of the downbeat IMF comments from Greece during market yesterday. These comments have also been followed by reports overnight that the German government is said to be planning for a potential Greek state bankruptcy with discussions on capital controls and debt haircuts. Nonetheless, markets still await further updates for Greece as, technical level talks between EU officials and the Greek government have recommenced. In terms of sector-wide moves in Europe, selling has been relatively broad-based with stock specific newsflow particularly light. From a fixed income perspective, Bunds trade relatively unchanged while the Greek spread is wider to the German  benchmark by around 18bps amid the downbeat reports for Greece.

Asian equities traded mixed despite a positive Wall Street amid light news flow and a scarce economic calendar. Both the Hang Seng (+1.4%) and Shanghai Comp. (+0.9%) rose, the latter yet again hitting fresh 7-year highs, underpinned by further easing calls after yesterday’s tepid Chinese data. The ASX 200 (-0.2%) fell following yesterday’s slump in commodities while the Nikkei 225 (+0.12%) finished the session with modest gains.

Given the sentiment across Europe, EUR is weaker this morning with the currency also dealt a blow by comments from German Chancellor Merkel who said the EUR is problematic for reform efforts in the periphery. These comments weighed on EUR given the rarity of the German Chancellor speaking directly about the EUR level, with the move to the downside in EUR/USD exacerbated by the pair tripping stops through yesterday’s lows at 1.1183. Elsewhere, commodity currencies including CAD, NZD and AUD have been weighed on by lower oil prices as WTI and Brent crude futures with NZD looking to equal its worst weekly performance on record.

Price action in the commodity complex has largely been swayed by the EUR-inspired stronger USD with commodity newsflow otherwise light and as such, WTI and Brent crude futures have resumed the downtrend seen during yesterday’s session. In metals markets, spot gold and silver trade modestly lower while copper remained near 7-week lows overnight and is on course for a 4th consecutive weekly loss amid fears that demand for the red metal is down in China, while Dalian iron ore futures saw a mild pullback overnight.

Bulletin headline summary from Bloomberg and RanSquawk

  • The Greece saga continues with reports for the troubled nation continuing to paint a dreary state of affairs
  • EUR was dealt a further blow by comments from German Chancellor Merkel who warned of a strong EUR with newsflow otherwise relatively light
  • Looking ahead, today sees the release of US PPI and Univ. of Michigan
  • Treasuries head for weekly gain after yesterday’s rally (10Y yield -10.7bps), strong 3Y/10Y/30Y auctions; focus shifts to next week’s Fed meeting with updated “dot plot” and Yellen presser due Wednesday.
  • Greece was given less than 24 hours to come up with firm proposals to end an impasse with creditors, two officials present said
  • Policy makers are now examining all scenarios if Greece refuses to compromise, including the possibility that the country could eventually leave the currency, said the officials
  • German government is preparing for a Greek default after Tsipras again didn’t concede any ground on EU proposals, Bild reports, citing unidentified people familiar with the talks; growing number of Merkel’s CDU object to further financial aid for Greece
  • China could cut banks’ reserve-requirement ratios as early as this weekend to spur economic growth and boost cash supply to counter a surge in municipal bond sales
  • Mario Draghi denied that a closed-door speech by a ECB official that sent bond yields tumbling revealed a change in policy, while pledging new measures to improve transparency
  • Merkel said in a speech that a too-strong euro makes it harder for countries “especially Spain and Portugal” to reap rewards from economic reforms in terms of exports
  • The jump in Swedish house prices revealed in a Friday report is grounds for concern and policy makers are looking for ways to deal with the development, Finance Minister Magdalena Andersson said
  • The conviction of China’s former security chief in a secret one-day trial laid bare the limits of President Xi Jinping’s campaign against corruption and undercut his pledge to enforce the rule of law
  • Sovereign 10Y bond yields mostly higher. Asian stocks gain, European stocks, U.S. equity-index futures higher. Crude oil, copper and gold lower

DB’s Jim reid completes the overnight summary

In terms of the data, headline retail sales advanced +1.2% mom for the month of May and in line with market expectations while there was a cumulative +0.6% of revisions to the prior two months. The important retail control element however (which is a key input into goods spending for GDP) was up +0.7% mom and ahead of expectations of +0.5%, as well as upward revisions for April and March of +0.1% and +0.4% respectively. Our colleagues in the US note that following this print, the level of retail control is up approximately +5.0% annualized from its Q1 average, which marks the fastest pace of growth since Q2 last year. As well as the obvious positive read-through to growth this quarter following yesterday’s data, our colleagues expect that yesterday’s revisions to the prior months should result in Q1 real GDP being revised up to 0.0% when the final reading is released in 12 days time. Other data was also stronger in the US yesterday. The import price index for May (+1.3% mom vs. +0.8% expected) was a notable beat, while business inventories for April (+0.4% mom vs. +0.2% expected) also surprised to the upside. Initial jobless claims meanwhile rose 2k to 279k (in-line with the four week average), but stayed below 300k for the 14th consecutive week.

Yesterday’s improvement in retail sales saw the Atlanta Fed upgrade their GDPNow Model to 1.9% for Q2, from 1.1% at the previous estimation after citing the improvement to real consumer spending growth. The model continues to paint a less optimistic picture than the street however, with the median estimates generally hovering between 2.5%-3.0%. Price action in rates yesterday was fairly confusing to say the least. Despite a +0.42% rise for the Dollar index (although paring gains of as much as +1.0%) 10y Treasury yields actually rallied on the day and eventually closed 10.7bps tighter at 2.378%. Prior to the data, yields hovered dangerously close to 2.5% intraday, reaching a high of 2.499%. The level appeared to attract some buyers however as yields trended steadily lower from around midday, and quickly reversed a sharp spike upwards following the data. As well as the perhaps sensitive 2.5% level, a safe-haven bid on the back of concerns on headlines around the IMF withdrawing from Greece negotiations (more later) and a bull flattening of the yield curve following a strong 30y auction have all been cited as possible explanations for yesterday’s moves in Treasuries. Indeed, just on this, 30y Treasuries closed 12bps tighter yesterday at 3.096%, helped by a strong 30-year auction later in the day which saw the bid-to-cover ratio of 2.54 (bouncing from 2.20 in May) the highest since December last year. Equities enjoyed a modestly better day yesterday as the S&P 500 finished +0.17%, paring initial gains of some +0.5% pre-IMF headlines. The commodity complex closed softer yesterday. Gold finished -0.34% while in oil WTI (-1.07%) and Brent (-0.90%) gave up some of this week’s gains.

The Greek saga took another important twist yesterday when the IMF decided to withdraw its team from negotiations in Brussels, with a spokesman for the Fund saying that ‘there are major differences between us in more key areas’ and that ‘there has been no progress in narrowing these differences recently’. The news has put a clear dent in what was the now false optimism that appeared to be building in the previous few days. Instead, the move highlights that 1) both Greece and its Creditors still appear to be no closer to aligning views and 2) that the relationship between both is seemingly on a knife edge. On top of this, tensions in Athens and specifically in Greek parliament continue to add to melting pot of issues, with PM Tsipras regularly coming under fire for more and more criticism. The time pressure has been well documented with the bundling of IMF payments due at the end of the month as well as the need for a Staff Level Agreement to be agreed and passed through Greek parliament before any funds can be released. For now, with talks more or less halted the ball appears to be firmly in Greece’s court and it seems that we are more or less at the stage where it is now time for Government to decide one way or another. A spokesman for the IMF suggested that ‘we remain engaged’ and that the IMF doesn’t leave the table, but it’s hard to see the Fund re-engaging unless some material progress is made by Greece. European Council President Tusk has emphasized the need for things to now accelerate, while also warning that ‘there is no more space for gambling’. Tusk also highlighted that the next Eurogroup on the 18th June should be decisive, suggestive perhaps of a soft deadline. So we look likely to move on for another week, but perhaps with the pressure greater than ever on PM Tsipras and his government.

Greek equities actually closed up +8.16% yesterday, although it’s worth noting that the market closed before the IMF headlines came out. The headlines did however cause a dent to other European equity markets however. Having traded as high as +1.2% intraday, the Stoxx 600 eventually finished +0.57% while the DAX (+0.60%), CAC (+0.74%), IBEX (+0.53%) and FTSE MIB (+0.35%) all saw similar moves down into the close. Yesterday’s move lower in Treasury yields was mirrored in Europe yesterday as 10y Bunds (-9.7bps) bounced off their recent highs in yield to finish at 0.881%. Peripherals meanwhile, finished 8-11bps lower. European data flow was contained to just France yesterday where we saw CPI (+0.2% mom) print in line with consensus.

Before we take a look at today’s calendar, looking across the Asia region this morning equity markets are generally flat to slightly up for the most part. In China the Shanghai Comp (+0.44%) and Shenzen (+1.00%) are both higher, supported perhaps by Bloomberg commentary that the PBOC may look to ease again as soon as this weekend. Elsewhere there are also gains for the Hang Seng (+0.66%) while the Nikkei (-0.04%) is more or less unchanged. Bond markets in the region have generally followed the lead from Europe and the US yesterday, with 10y Japan (-3.5bps), Australia (-14.8bps) and Singapore (-4.7bps) yields in particular falling, while 10y Treasuries have dropped a further 1.6bps in yield and currently sit at 2.361%.

After we went to print yesterday, we saw the usual monthly data dump in China. The readings for May were fairly disappointing for most part with very little growth in retail sales (+10.1% yoy from +10.0% previously) and industrial production (+6.1% yoy from +5.9% previously) while fixed asset investment growth fell below expectations (+11.4% yoy vs. +11.9% expected) and down from +12.0% in April. DB’s Zhiwei Zhang noted that the fiscal slide continued last month with total government income growth deteriorating to -5.6% yoy from -4.7% in April. Zhiwei continues to believe that the economy improves in Q3 as various easing measures feed through. He also reiterates his view that China will continue both fiscal and monetary policy easing in the next few months and the fiscal deficit will expand to 3.7% of GDP. He forecasts GDP growth to bottom in Q2 at +6.8% yoy and rebound slightly to +7.0% in Q3 and +7.2% in Q4.

Looking at the day ahead, Euro Area industrial production will likely attract the bulk of the attention in the European timezone this morning, while UK construction output is also due. Over in the US this afternoon, PPI data for May will be the key as well as the preliminary June University of Michigan Consumer Sentiment reading.

end

Late last night:  The EU gives Greece up until midnight tonight to come to a deal:

(courtesy zero hedge)

Europe Gives Greece 24 Hours To Comply; Germany Draws Up Capital Control Plans

EU officials turned up the heat on Athens Thursday after the IMF withdrew its team and sent its lead negotiators back to Washington.

In what can only be described as a half-hearted effort, Greek PM Alexis Tsipras submitted two three-page proposals earlier this week that were dismissed by creditors as “not serious.” We suggested that perhaps that was intentional as Tsipras, having bought Greece some time by opting for the “Zambian” IMF payment bundle, is simply keeping up appearances while the real negotiating is going on behind the scenes with Syriza party hardliners who Tsipras desperately needs to support any proposal before it goes to parliament in order to avoid what could quickly deteriorate into a political and social crisis.

One has to believe that Brussels understands this, but it could very well be that between Tsipras’ scathing op-ed (published two Sundays ago) and the PM’s fiery speech to parliament last Friday, creditors are becoming concerned that Tsipras might actually be starting to believe that he can effectively blackmail the EMU by threatening to prove, once and for all, that the currency bloc is in fact dissoluble no matter what manner of protestations one might hear in polite company.

So, with the IMF having thrown in the towel, and with German lawmakers set to rally behind the incorrigible FinMin Wolfgang Schaeuble in what amounts to a mutiny on the SS Merkel, Europe appears to have finally had enough because by Thursday evening, reports indicated that EU officials have given Greece 24 hours to come back with a proposal that includes pension reform and VAT increases.

Via Bloomberg:

Greece was warned by a group of European Union officials in Brussels it had less than 24 hours to come up with a serious counter-proposal, according to a person familiar with the discussion.

Greek delegate told by EU officials that a list must includes reform on pension and VAT.

Greece told by the officials that they are taking seriously all scenarios.

EU official didn’t specifically say what would happen to Greece if there was no plan presented tomorrow.

And meanwhile, Reuters (citing Bild) says Germany is now engaged in “concrete” discussions over how to handle a Greek bankruptcy :

The German government is holding “concrete consultations” on what to do in the case of a bankruptcy of the Greek state, German newspaper Bild said, citing several people familiar with the matter.

This includes discussions about introducing capital controls in Greece if the crisis-stricken country goes bankrupt,Bild said in an advance copy of an article due to be published on Friday.

It said a debt haircut for Greece was also being discussed, adding that government officials were in close contact with the European Central Bank on that.

The German government did not, however, have a concrete plan of how it would react if Greece goes bankrupt and much would have to be decided on an ad-hoc basis, Bild cited the sources as saying.

The takeaway here is that come hell, high water, or “Grimbo,” the EU is going to extract its pension cuts and VAT hikes from Tsipras, and not because anyone seriously thinks it will make a difference in terms of putting the country on a ‘sustainable’ path, but because the EU simply cannot afford for Syriza sympathizers in more economically consequential countries like Spain to get any ideas about rolling back austerity (of ‘fauxsterity‘ as it were) and using EMU membership as a bargaining chip.

The only question now is whether Tsipras has been successful at convincing party hardliners to support further concessions, because if this turns into a protracted political battle, it’s entirely possible that the country will descend into chaos, if only for a few weeks.

Stay tuned, and as a reminder, here’s a flowchart that outlines various political and economic ramifications as well as a guide to what’s being negotiated:

 end
Greece responds:
(courtesy zero hedge)

Greece Refuses To Blink; EU Says Noncompliance “Not An Option”

Months of tense negotiations between Athens and creditors came to a head on Thursday when the IMF (which at this point is just going through the motions after telling the EU it would not participate in a third Greek program) sent its lead negotiators back to Washington.

EU officials, who have long contended that without IMF participation there can be no solution for Greece, followed the Fund’s lead, stepping up the pressure on Athens and telling Greek PM Alexis Tsipras that his government has 24 hours to submit a proposal that includes pension reform and VAT hikes.

To be clear, that’s tantamount to saying Tsipras has one day to abandon Syriza’s electoral mandate and will come as no surprise to those who frequent these pages, as we’ve said for months now that come hell, high water, or “Grimbo,” the EU is going to extract its pension cuts and VAT hikes from Tsipras, and not because anyone seriously thinks it will make a difference in terms of putting the country on a ‘sustainable’ path, but because the EU simply cannot afford for Syriza sympathizers in more economically consequential countries like Spain to get any ideas about rolling back austerity (of ‘fauxsterity’ as it were) and using EMU membership as a bargaining chip. Here’s a bit of color on the pension issue from Bloomberg:

For creditors, the pension system is still too generous. For the Greek government, it’s a system struggling to cope after five years of recession and dwindling contributions in a nation with the European Union’s highest unemployment.In the first quarter, the rate was 26.6 percent overall and 30.6 percent for women.

Creditors are asking Tsipras to implement reforms agreed to and deliver savings of as much as 0.5 percent of gross domestic product this year and 1 percent next year in part by immediately clamping down on early retirees. They also want supplementary pension funds — lowered about 5 percent last year — to be financed by contributions, not the state budget.

In parliament on June 5, Tsipras called the proposals from creditors “unrealistic” and said no lawmaker could agree to demands such as removing a stipend from the lowest-paid pensioners. Tsipras has agreed to merge funds to cut costs and close loopholes that allow early retirement.

He blamed five years of austerity for weakening the system, saying fund reserves fell by 25 billion euros through the 2012 debt swap and high unemployment. In the last five years, pensions fell as much as 48 percent, Tsipras said, while 45 percent of recipients get pensions that are below the poverty threshold.

In 2012, Greece spent more relative to GDP on pensions than any other EU nation. The 17.5 percent of GDP it spent compared with the EU average of 13.2 percent, according to the most recent Eurostat figures.

A wave of reforms begun in 2010, in the months after Greece agreed the terms of its first bailout with the European Commission, International Monetary Fund and European Central Bank, scaled back payments, introduced means-testing, raised the statutory retirement age and calculated pensions over the entire working career.

The result was Greece was able to move from having the weakest pension system in the world in 2011, according to Allianz Asset Management’s pension sustainability index, to cede that place to Thailand, Brazil and Japan in 2014.

Greece chased employers and employees to pay contributions. Bank of Greece Governor Yannis Stournaras said on June 2 that public pension expenditure is set to decline by about 1.9 percent of GDP by 2060, the fifth best performance in the EU, 

Still, the recession, with rising unemployment and a wave of company closures, has hit contributions.

(Greece CDS overlaid on the Greek public’s bargaining stance preference)

“The program applied caused greater problems in terms of loss in contributions than the sum of money collected through the program itself,” said George Simeonides, a board member at the Hellenic Actuarial Authority, which monitors the pension system. “In some cases the cure was worse than the disease.”

Greece’s debt restructuring cut the nominal value of the bonds held by pension funds by 8.3 billion euros, Simeonides estimates. The funds may take further real hits when they’re forced to sell their holdings to pay pensioners, he said.

As you can see, further pension cuts will indeed be quite painful and there certainly seems to be something to the argument that calculating how “generous” a program is as a percentage of GDP can be somewhat misleading when GDP has contracted by a quarter over the course of just five years.

But again, that doesn’t matter.

This is more about making a point than it is about an honest assessment of economic realities and as we discussed late on Thursday, EU creditors may now be concerned that Tsipras’ recent behavior — including a scathing op-ed and impassioned speech to parliament — may indicate he’s leaning towards siding with Syriza party hardliners, and that is simply unacceptable to Brussels and also to Germany, where economy minister Sigmar Gabriel has given up all pretenses that this is about Greece and not about Spain:

If Greece should leave the euro it may spark a wave of political separatism in the EU, German Economy Minister Sigmar Gabriel says today in speech in Munich at Ifo institute.

“As before, I hope that in these somewhat final days common sense prevails. If it comes to it that Greece can’t be kept in the euro that would be something of a disaster — for Europe too:” Gabriel

An exit “wouldn’t just be much more expensive than many realize today — not just financially — for it would change Europe’s aggregate structure.” “Grexit today, Brexit tomorrow — the debate about Catalonia and others:” Gabriel

EU officials are also beginning to be a bit more transparent about the fact that this was never really up to Tsipras in the first place. That is, even using the term “negotiations” might have been a bit disingenuous from the start. There are two options for the embattled PM: 1)become a technocrat puppet, or 2) attempt to stick an impossible dismount from the EMU balance beam knowing that the slightest slip-up could trigger political and social instability and risks plunging the country into chaos. For anyone still not convinced that this is the case, just ask Eurogroup President Jeroen Dijsselbloem:

  • GREECE REJECTING PROPOSALS `NOT AN OPTION’: DIJSSELBLOEM

For her part, Angela Merkel is doing what she can to rally support behind the Greek cause. Why? Because she, perhaps more than any other EU official, fears the geopolitical fallout from a Greek exit. Unfortunately for the Chancellor, the political will is quickly fading in Berlin, thanks in no small part to FinMin Wolfgang Schaeuble who was finished with the Greeks long ago and who has now managed to rally the support of German lawmakers who are increasingly frustrated with Merkel’s bargaining stance.

And it’s not just German MPs. The public, although largely ambivalent to whether Greece stays or goes, is overwhelmingly opposed to further concessions:

Poll finds 51% of Germans want Greece out of the euro area, compared with 55% in favor of keeping Greece in the euro in similar poll at the start of the year, German broadcaster ZDF says.

41% want Greece to stay in euro in poll published today

70% oppose further concessions to Greece by the European Union.

65% expect limited or no economic harm to Germany from a Greek exit.

Having said all of this, it’s worth reiterating what we said on Thursday, namely that through it all, Tsipras likely believes he can buy a bit more time in order to cement an agreement with Syriza party hardliners. Accepting a ‘deal’ without first ensuring it can pass the Greek parliament could be a political disaster and may be followed, in relatively short order, by social upheaval. That is aggravating the troika in the interim is preferable to trying to push an extremely unpopular deal through parliament without first securing support. Underscoring this point is the following headline from Friday morning:
  • GREEK GOVT WON’T ACCEPT ANY PENSION, WAGE CUTS: GOVT OFFICIAL
Well, yes, they probably will accept pension and wage cuts. But not yet.
Because why should Greece care that creditors are a bit more angry today than they were yesterday? The payment schedule is the payment schedule and unless the IMF decides to effectively execute the Greeks by scrapping the 30-day grace period (and thereby immediately triggering accelerated payment rights for other creditors), Athens can effectively drag this out for some time.
We’ll close with the following rather amusing commentary from UniCredit’s Erik Nielsen, who spoke to Bloomberg on Friday:
“I really don’t believe they have either the political or technical capability of starting their own currency. Money needs to be a commodity of trust, and I don’t think they have the trust in the population. I’ve never seen anything so completely ridiculous, frankly speaking, from a debtor country in the way they approach it.” 
end
Erik Neilson, may be right: Greece may not have the capacity to change currency:
(courtesy Bloomberg)

Greece Can’t Plan a Barbecue, Let Alone a Currency, Nielsen Says

June 12, 2015 — 5:50 AM EDT

Greece isn’t likely to leave the euro as the government wouldn’t have the capacity to issue a replacement currency, UniCredit SpA Chief Global Economist Erik Nielsen said.

Arranging the production of new banknotes wouldn’t be an “easy task for a government that cannot organize a barbecue, frankly speaking,” Nielsen said in an interview on Bloomberg television on Friday. “I really don’t believe they have either the political or technical capability of starting their own currency. Money needs to be a commodity of trust, and I don’t think they have the trust in the population.”

The International Monetary Fund said its team negotiating with Greece left Brussels on Thursday after failing to make progress on a debt deal that would help the country to avoid default. Since a program has to be in place by the end of the month the deal has to be agreed by the end of next week to allow time for parliamentary approvals, Nielsen said.

If talks fail and Greece tries to create a parallel currency to the euro, issuing new physical banknotes would still be difficult because the country does not have its own printing press. Notes ordered abroad would have to be distributed to banks, in secret, which are “halfway closed, nationalized, or under capital controls,” Nielsen said.

Greece’s creditors have “never seen anything so completely ridiculous, frankly speaking, from a debtor country in the way they approach it,” he said. “People are just simply fed up with this.

end

The EU prepares for the worst:

(courtesy Bloomberg)

EU Prepares for Worst as Tsipras Drives Greek Finances to Brink

end

And now the resultant action on the markets with this turmoil from Greece:

(courtesy zero hedge)

Grexit Contagion Uncontained – European Peripheral Bond Risk Is Soaring

While talking heads have proclaimed any Grexit contagion will be contained… it appears they are wrong (surprise!). The last 2 days have seen sovereign bond spreads soar 25-35bps for Spain, Portugal and Italy. On the yield side, Spain 10Y spread to Bunds is at its highest since August 2014 and Portugal at its highest since Feb 2015.

EU Sovereign Bond risk is soaring…

The contagion has been rising…

And it’s spreading…

Charts: Bloomberg

end
The following is the big story of the day. Macedonia has decided to block any Greek bank withdrawals as they fear a GREXIT.  This will spread to other nations and thus the start of huge controls:
(courtesy zero hedge)

Macedonia Central Bank Blocks Greek Bank Withdrawals “In Case Of Grexit”

The bank runs (and capital controls) begin. Macedonia Central Bank Governor Bogov states:

  • *GREEK BANKS IN MACEDONIA CAN’T WITHDRAW CASH: BOGOV
  • *MACEDONIAN BANKS PROTECTED IN CASE OF GREXIT: BOGOV

How long before the rest of Europe follows suit and a bank holiday is declared Monday to “Cyprus” depositors?

He further added:

  • *MACEDONIAN CENTRAL BANK SEES MAJOR RISKS FROM POLITICAL CRISIS

Just to be clear, this withdrawal halt is protection against a worst case scenario… BUT, by imposing capital controls you are ASSURING a worst case scenario occurs!!

end
In just two days, another 1 billion euros leaves Greek banks. I would guess that the correct total Greek deposits should be around 115 billion euros. They have already on their books  around 112 billion euros of bad debts.  The ECB has already supplied 83 billion euros of ELA:
(courtesy zero hedge)

Is Deutsche Bank The Next Lehman?

Submitted by NotQuant.com

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened.  In hindsight there were a few early-warning signs,  but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.

MI-CB391_PECK_G_20140218184730

First, for purposes of drawing a parallel, let’s re-cap the events of 2007-2008:

There were few early indicators of Lehman’s plight.   Insiders however, were well aware:   In late 2007, Goldman Sachs placed a massive proprietary bet against Lehman which would be known internally as the “Big Short”.  (It’s a bet that would later profit from during the crisis).

In the summer 2007 subprime loans were beginning to perform poorly in the marketplace.  By August of 2007, the commercial paper market saw liquidity evaporating quickly and funding for all types of asset-backed security was drying up.

But still — even in late 2007,  there was little public indication that Lehman was circling the drain.

Probably the first public indication that things were heading downhill for Lehman wasn’t until June 9th, 2008,  when Fitch Ratings cut Lehman’s rating to AA-minus, outlook negative. (ironically, 7 years to the day before S&P would cut DB)

The “negative outlook” indicates that another further downgrade is likely.   In this particular case, it was the understatement of all time.

A mere 3 months later, in the course of just one week,  Lehman would announce a major loss and file for bankruptcy.

article-2203390-1504DEE9000005DC-669_634x346

And the rest is history.

Could this happen to Deutsche Bank?

First, we must state the obvious:  If Deutsche Bank is the next Lehman, we will not know until events are moving at an uncontrollable and accelerating speed.   The nature of all fractional-reserve banks — who are by definition bankrupt at all times – is to project an aura of stability until that illusion has already begun to implode.

By the time we are aware of a crisis – if one is in the offing — it will already be a roaring blaze by the time it is known publicly.   It is by now well-established that truth is the first casualty of all banking crises.  There will be little in the way of early warnings.   To that end, we begin connecting the dots:

Here’s a re-cap of what’s happened at Deutsche Bank over the past 15 months:

  • In April of 2014,  Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure.  Why?
  • 1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock – at up to a 30% discount.Why again?  It was a move which raised eyebrows across the financial media.  The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity.  Something was decidedly rotten behind the curtain.
  • Fast forwarding to March of this year:   Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
  • In April,  Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR.   The bank is saddled with a massive $2.1 billion payment to the DOJ.  (Still, a small fraction of their winnings from the crime). 
  • In May,  one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors.  We guess that this is a “crisis move”.  In times of crisis the power of the executive is often increased.
  • June 5:  Greece misses it’s payment to the IMF.   The risk of default across all of it’s debt is now considered acute.   This has massive implications for Deutsche Bank.
  • June 6/7:  (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company.  (Just one month after Jain is given his new expanded powers).   Anshu Jain will step down first at the end of June.  Jürgen Fitschen will step down next May.
  • June 9: S&P lowers the rating of Deutsche Bank to BBB+  Just three notches above “junk”.  (Incidentally,  BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)

And that’s where we are now.  How bad is it?  We don’t know because we won’t be permitted to know.  But these are not the moves of a healthy company.

deutsche_ceos2

How exposed is Deutsche Bank?

The trouble for Deutsche Bank is that it’s conventional retail banking operations are not a significant profit center.  To maintain margins, Deutsche Bank has been forced into riskier asset classes than it’s peers.

Deutsche Bank is sitting on more than $75 Trillion in derivatives bets — an amount that is twenty times greater than German GDP.    Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.

With that kind of exposure, relatively small moves can precipitate catastrophic losses.   Again, we must note that Greece just missed it’s payment to the IMF – and further defaults are most certainly not beyond the realm of possibility.

Not good.

And if the dominos were not adequately stacked already, there is one final domino which perfects the setup.

Meet Tom Humphrey.  He heads up Deutsche Bank’s Investment Banking operations on Wall Street.

He was also head of fixed income at Lehman.

Prior history.

History never repeats.   But it does rhyme.    In market terms, it tends to rhyme just about every 7 years.

* * *

For more read the Zero Hedge piece from April 2014: The Elephant In The Room: Deutsche Bank’s $75 Trillion In Derivatives Is 20 Times Greater Than German GDP

end

Oil related stories:

Energy Stocks Give Up Week’s Gains As WTI Drops Below $60

As the reality of moar record production in a slowing demand world filter through the narrartive of a dropping inventory being dragged away into tanker storage arb, so WTI has dropped back below $60 and Energy stocks have tumbled – giving up all the week’s gains. Just when the mainstream media was reconvinced that oil is fixed…

Up on inventory draws, down on production…

But stocks are all in the red now.. (despite oil still being higher on the week)

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Rig counts decline but production still rising:
(courtesy zero hedge)

Oil Pops As Rig Count Decline Reaccelerates

Even though production has hit new record highs (and Saudis threatening to increase further), the machines remain transfixed by rig counts and inventories. The total rig count dropped 9 to 859 – declining at a faster rate than the prior week. Oil prices are jumping modestly on the news for now…

  • *U.S. OIL RIG COUNT FALLS 7 TO 635, BAKER HUGHES SAYS
  • *U.S. TOTAL RIG COUNT FALLS 9 TO 859 , BAKER HUGHES SAYS

Another week of declines…

But production just keeps rising…

And the result…

end

Your humour for today:

(courtesy zero hedge/Jim Quinn Burning Platform)

Forget Caitlyn Jenner, distracted Americans have moved on and are now gladly signing a petition to launch a pre-emptive nuclear strike against Russia “to show them who is the real super-power.”

h/t Jim Quinn’s Burning Platform blog

end

Your more important currency crosses early Friday morning:

Euro/USA 1.1184 down .0062

USA/JAPAN YEN 123.67 up .078

GBP/USA 1.5489 down .0026

USA/CAN 1.2294 up .0002

This morning in Europe, the Euro fell by a considerable 62 basis points, trading now below the 1.12 level at 1.1187; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine, rising peripheral bond yields and today crumbling bourses.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 8 basis points and trading just below the 124 level to 123.67 yen to the dollar.

The pound was down this morning as it now trades just below the 1.55 level at 1.5489, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is down by 2 basis points at 1.2294 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 : up 24.11 points or 0.12%

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

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

Gold very early morning trading: $1180.40

silver:$15.95

Early Friday morning USA 10 year bond yield: 2.38% !!! down 1 in basis points from Thursday 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 Friday morning: 95.49 up 51 cents from Thursday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Friday morning

And now for your closing numbers for Friday:

Closing Portuguese 10 year bond yield: 3.04%  up 14 in basis points from Thursday (very ominous)

Closing Japanese 10 year bond yield: .52% !!! down 2 in basis points from Thursday/very ominous/central bank intervention

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

Spanish 10 year bond yield: 2.25% !!!!!!

Your Friday closing Italian 10 year bond yield: 2.22% up 8 in basis points from Thursday: (very ominous)

trading 3 basis point lower than Spain.

IMPORTANT CURRENCY CLOSES FOR TODAY

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

Euro/USA: 1.1254 up .0009 ( Euro up 9 basis points)

USA/Japan: 123.40 down  .191 ( yen up  19 basis points)

Great Britain/USA: 1.5553 up .0038 (Pound up 38 basis points)

USA/Canada: 1.2310 up .0018 (Can dollar down 18 basis points)

The euro rose marginally today. It settled up 9 basis points against the dollar to 1.1254 as the dollar moved aimlessly against most of the various major currencies. The yen was up by 19 basis points and closing well above the 123 cross at 123.40. The British pound gained some  ground today, 38 basis points, closing at 1.5553. The Canadian dollar lost a little ground against the USA dollar, 18 basis points closing at 1.2310.

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: 2.39% par in basis point from Thursday// (well above  the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

94.99 down 2 cents on the day.

European and Dow Jones stock index closes:

England FTSE down 61.82 points or 0.90%

Paris CAC down 70.18 points or 1.41%

German Dax down 136.29 points or 1.20%

Spain’s Ibex down 126.20 points or 1.13%

Italian FTSE-MIB down 194.53 or 1.27%

The Dow down 140.53  or 0.78%

Nasdaq; down 31.41 or 0.62%

OIL: WTI 59.95 !!!!!!!

Brent:63.72!!!!

Closing USA/Russian rouble cross: 55.24  down 3/4  roubles per dollar on the day

end

And now for your more important USA stories.

NY trading for today:

Grexit Anxiety Sparks Bond Bid As Stocks Skid To Worst Streak Since Jan

Summing up the week (in Washington and NYC)…

A hope-strewn squeeze at the open was dominated by the Grexit contagion spreading across the pond..

On the week. the S&P just managed a gain with theNasdaq on a 3-week losing streak – its worst since January…

But Futures show the real volatile swings in the markets this week…

On the week, Energy stocks were the biggest losers (despite Crude’s gains) and Homebuilder led (WTF!?)

Bonds & Stocks decoupled…

And SMART money flow is notably  divergent…

And then there’s TWTR…

And Axon – the biggest Pharma fraud IPO ever…

Treaury yields ended the week lower… after all that hand-wringing about bonds collapse

The dollar ended lower for the 2nd week in a row…NOTICE THE PATTERN?

Gold and Crude made gains on the week as Copper and Silver slipped…

Crude ended higher but gavce back all its post inventory draw gains as Saudi threats and record production did not help…

Charts: Bloomberg

Bonus Chart: Credit Suisse warns that this level of extreme non-volatility (the smallest range on record) implies investors are like a deer in headlights – stuck in place and too overwhelmed to act.

Bonus Bonus Chart: The S&P 500 is 2% off all-time record highs and investors’ Fear is getting extreme…

 end

Another big story for today.  Despite the huge success in selling a huge number of bonds and bills these past few days, there is a huge shortage of available bonds and bills for collateral.  The difference is an almost unheard of 2.2%.  That means that the borrowers pay a huge 2.2% premium on the bond/bill in order to obtain these instruments for collateral use.  Ladies and Gentlemen:  we have a huge liquidity shortage and this shortage has no doubt been caused by the huge losses in derivatives by our 6 major banks:

(courtesy zero hedge)

Massive Shortage Of US Treasury Paper As 10 Year Plunges To -2.20% In Repo

Yesterday, after the impressive 30 Year auction which as we explained performed as well as it did, due to a persistent short overhang resulting in a -0.35 bps repo rate, we noted something concerning: using SMRA data, we showed that benchmark 10Y has been trading negative in repo virtually all of 2015.

One day later, the shortage has gotten out of hand as following the Wednesday 10Y auction and ahead of its Monday settlement, there is not an On The Run cash bond to be found as all of them have been either removed from the repo market, or have been shorted.

From SMRA:

The 10-year note is trading even tighter today than it was yesterday. At -220 basis points, this is the tightest that the 10-year note has been since April. After the auction settlement Monday, the current 10-year note will become the off the run 10-year note. If it maintains this much pressure it result in an extremely tight off the run 10-year issue again. The new 10-year note will likely trade near the GC rate.

Indicatively, today’s shortage is massive, and putting it in context, there have been only two previous comparable squeezes in the repo market: one year ago, and in April when the 10Y was trading at its tights of the year well under 2%.

Recall a few months ago, when a comparable gold collateral shortage hit unprecedented levels, the LBMA decided to simply do away entirely with the GOFO metric which measures physical gold scarcity, thus avoiding hinting at how big a potential squeeze in gold could be if the shorting central bank (mostly the BOJ these days) were to be caught out.

As for US Treasuries, at some point this huge short will be cleared out with a violent reaction in the underlying one way or another.

However, while we know now just how substantial the shorting activity in the 10Y is, a better question is who is behind it: hedge funds or central banks. If the letter, don’t expect to find out – just like PIMCO, central banks can just “sell” to themselves without ever touching, and disrupting the market. If it is someone else who can’t print money, then it may get very interesting soon.

end
Today, U. Mich sentiment shows wage growth. Not sure if the consumer is basing his sentiment on hope or is the USA really growing?
(courtesy U.Michigan sentiment/zero hedge)

UMich Sentiment Shows Wage Growth Delusion Has Never Been Bigger (Or Fed So Far Behind The Curve)

Preliminary June UMich consumer sentiment data rose from 90.7 to 94.6 as respondents appear very excited about soaring gas prices and far more excited abiout stocks than every other confidence survey recently. Current conditions soared from 100.8 to 106.8 as expectations only rose from 84.2 to 86.8. Where does the hope come from? Simple… income expectations are the highest since 2008 and the most divergent from reality ever.

Are we still rolling over?

Hope triumphs over reality…

As hopes for houshold finances remain mired in total farce…

*  *  *

Alternatively – Is The Fed already FAR behind the curve on tightening as wages are set to soar?

Charts: Bloomberg

end
Just take a look at the rise in beef prices for the past two years:
(courtesy zero hedge)
 

Beef Prices Hit Record: Up 30% In Past Two Years

While the Fed may continue to claim inflation is non-existent, except for those “few” Americans who can’t afford a house and thus have to rent (incidentally, in New York the average rent just hit a record), inflation is all too present for those other Americans who still enjoy occasionally eating eating beef as opposed to its sawdust-inspired substitute found in various fast-food venues across the US.

According to the BLS, after a torrid 2014, in which there was a 24% surge in beef prices which central planners blamed on everything except their policies, in May the Beef and Veal price index just rose to a new all time high of 260.8, up 12.3% from a year ago, and up 30% in the past two years.

So yes, aside from soaring rent prices and costs of food that won’t actually force you into an early grave, there is almost no inflation anywhere. Well, except gasoline prices too. After dropping sharply through the end of 2014 and in January, they have unambiguously surged pretty much in a diagonal line ever since.

Source: BLS

 
end
Let’s wrap up the week, with this offering by Greg Hunter
(courtesy Greg Hunter, USAWatchdog)

WNW 194-Secret Trade Deals, Not Serious About Stopping ISIS, Obama Care and Economy in Trouble

4_jpgBy Greg Hunter’s USAWatchdog.com (6.12.15) 

The Republicans are pushing trade agreements, but they are secret.  Congressman Paul Ryan says “We the People” do not get to know the secret details until Congress votes them through.  On the trade packages in Asia and Europe, Ryan said, “It’s declassified and made public once it’s agreed to.”  Is this his Republican version of the Nancy Pelosi “We have to vote for it to see what’s in it”?  You know it’s a bad deal for everyday Americans when this sort of trade deal is opposed by Democrats, such as Senator Elizabeth Warren and Republican Congressmen Duncan Hunter.  Hunter even wrote Ryan a letter asking him not to vote on the deal until allAmericans know what’s in the agreements.  In other words, NO SECREAT TRADE DEALS.  Every Congressional office Republican and Democrat should be called to tell them to vote “no” on secret deals.  If it was such a good deal and Republicans were so proud of what they were doing, why would it be a secret?  This is why I say Democrats and Republicans just take turns ripping us off.

Looks like the President is going to send another 450 troops to train Iraqis to fight ISIS.  Listen, the Obama Administration is not serious.  Months ago, a top military expert said in order to kick ISIS out of Iraq, there would need to bae 80,000 well trained troops.  450 is drop in the bucket.  Also, ISIS gets a lot of its funding from selling oil on the black market.  Why are those wells allowed to pump oil in Syria and Iraq that are under ISIS control?  Those can’t be bombed?  Please, they are not serious.

The G7 met this week, and Russian sanctions are still in place, and do not look like they will be removed anytime soon.  The Ukraine situation is at a standstill.  The G7 also scolded China on building islands in the South China Sea, and again, the G7 is all bark and no bite.

In the here-we go-again file, here is a headline that reads “Job Openings Jump to Record.”  I called economist John Williams, and his first comment was “nonsense.”  Williams told me they count each new job opening multiple times.  He also says that when you drill down, the majority of jobs are part-time, or 29 hour a week jobs.  Thank you Obama care.  Williams also points out we are still 800,000 full time jobs short of the pre 2008 crisis.  So, we are still not back to the number of jobs we had 7 years ago.  I’ll have Williams back on in the next few weeks.

Speaking of Obama Care, it is looking like the Supreme Court is going to rule against the Obama Administration on subsidies for more than 30 states.  People were only supposed to get them if they set up an exchange, and 34 states did NOT set up an exchange.  This could end Obama Care, or at least severely limit it.  I expect Obama to continue to give out the subsidies if the High Court rules against him.  This will give us more chaos and set up yet another Constitutional crisis.

Here’s another piece of news on the stock market from Gregory Mannarino.  Look at this chart of the stock market for the S&P 500.  It starts in 1993 and goes up to today.  If this picture doesn’t say“run Forest run,” I don’t know what does.  Mannarino says the higher the high the lower the low.  Even though we had a recovery in the stock market this week, Mannarino says we are at the high, which is way higher than 2008, and the only major move left is down—way down.  He says traders are shorting the market, and they will yank money out of the market when it falls.

Join Greg Hunter as he covers these stories and more in the Weekly News Wrap-Up.

end

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

  1. What’s happening with June Silver contracts at the Shanghai futures exchange is rather interesting. 13,408 contracts (201 metric tons of silver) stood for delivery as 6/16/15 is first delivery day. That’s 52% of the SHFE current silver inventory. This is certainly going to increase silver backwardation for China. The Silver shortage scenario Harvey predicted for December 2014 seems to be ripe for December 2015! With the Silver OI also surging to an all-time high at the comex, this looks to be the perfect storm in the making. Silver prices are rumbling and about to take off to the moon and beyond.

    Like

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