June 15/GLD loses another 2.08 tonnes/SLV remains constant/No deal in Greece and they expect capital controls by this weekend/Peripheral European bonds rise in yield/stock markets tank/Huge demand for silver coming from both China and India, mfgers of solar panels/Record silver open interest on the comex despite Friday’s drop in price/Huge number of OI still standing for July silver.

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

 

Gold:  $1185.30 up $6.50 (comex closing time)

Silver $16.08 up 28 cents.

 

In the access market 5:15 pm

Gold $1185.80

Silver: $16.08

 

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 1 notice serviced for 100 oz.  Silver comex filed with 0 notices for nil oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 249.13 tonnes for a loss of 54 tonnes over that period.

 

In silver, the open interest rose by another 864 contracts even though Friday’s silver price was down by 13 cents.   The total silver OI continues to remain extremely high with today’s reading at 192,527 contracts now at multi-year highs despite a record low price. In ounces, the OI is represented by 962 million oz or 137% 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 0 notices served upon for nil oz.

 

In gold,  the total comex gold OI rests tonight at 407,147 for a gain of 2778 contracts as gold was down  $1.10 yesterday. We had 1 notice filed for 100 oz.

 

we had another withdrawal, (although this time it is quite large )in gold inventory at the GLD to the tune of 2.08 tonnes. Thus the inventory rests tonight at 701.98 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 864   contracts to 192,527 despite the fact that silver was down by 13 cents on Friday..  The OI for gold fell by 2778 contracts up to 407,147 contracts despite the fact that the price of gold was down by $11.20 on Friday.

(report Harvey)

2. Today, 6 important commentaries on Greece

zero hedge, Bloomberg)

3. Dave Kranzler discusses the huge demand for silver coming from China and India

(Dave Kranzler/IRD)

4. Gold trading overnight

(Goldcore/Mark O’Byrne)

5. Trading from Asia and Europe overnight

(zero hedge)

6. Trading of equities/ New York

(zero hedge)

7. 2 Commentaries re Russia and the Ukraine
(/zero hedge)
8. Dollars are leaving emerging nations by the bucketful/huge problems will ensue
(Ambrose Pritchard Evans/UKTelegraph)
9. China has a war of words with the USA
(zero hedge)
10 Poor results in USA data from the NY Empire manufacturing survey and also it falters in their numbers for industrial production
(zero hedge)
11, After the market closed, GAP announced store closings and huge layoffs
(zero hedge)
12. Texas to repatriate 26 tonnes of gold from Federal Reserve Bank of Ny to Texas.
(zero hedge)
13, Koos Jansen debunks data from western consulting firms.
(courtesy Koos Jansen)

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

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

Here are today’s comex results:

The total gold comex open interest rose by 2778 contracts from 404,169 up to 407,147 as gold was down $1.10 on Friday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 96 contracts down to 652. We had 6 notices served upon yesterday.  Thus we lost 90 contracts or an additional 9,000 oz will not stand for delivery.  No doubt, again, we had a huge number of cash settlements and the farce continues.  The next contract month is July and here the OI rose by 11 contracts up to 680.  The next big delivery month after June will be August and here the OI rose by 2,778 contracts  to 267,333.  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 67,823. The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day) was poor at 96,344 contracts. Today we had 1 notice filed for 100 oz.

And now for the wild silver comex results.  Silver OI rose by  contracts from 191,663 up to 192,527 despite the fact that the price of silver was down 13 cents, with respect to Friday’s trading.  The front non active  delivery month of June saw it’s OI fall by 1 contract and remaining at 27. We had 2 contracts delivered upon on Friday.  Thus we  gained 1 contract or an additional 5,000  silver ounces that will stand for delivery in this non active June contract month.The next delivery month is July and here the OI surprisingly rose by 578 contracts up to 91,328. We have only two weeks left to go before first day notice. The OI for the July contract month is absolutely huge as nobody is leaving quite yet. The estimated volume today was poor at 18,575 contracts (just comex sales during regular business hours. The confirmed volume on day (regular plus access market) came in at 47,240 contracts which is very good in volume. We had 0 notices filed for nil oz today.

June initial standing

June 15.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 63,686.016 oz (Scotia,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 1 contracts (100 oz)
No of oz to be served (notices) 651 contracts (65,100 oz)
Total monthly oz gold served (contracts) so far this month 2632 contracts(263,200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  198,136.3  oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz

we had 0 dealer deposit

total dealer deposit: nil oz
we had 2 customer withdrawals

i) Out of Scotia: 63,686.016 oz

ii) Out of Manfra: 104.458

total customer withdrawal: 63,686.016 oz

We had 0 customer deposits:

 

Total customer deposit: nil oz

We had 0  adjustments:

Today, 0 notices was issued from JPMorgan dealer account and 10 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the June contract month, we take the total number of notices filed so far for the month (2632) x 100 oz  or 263,200 oz , to which we add the difference between the open interest for the front month of June (652) and the number of notices served upon today (1) 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 (2632) x 100 oz  or ounces + {OI for the front month (652) – the number of  notices served upon today (1) x 100 oz which equals 328,300 oz standing so far in this month of June (10.21 tonnes of gold).  Thus we have 10.21 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 249.13 tonnes for a loss of 54 tonnes over that period.

end

And now for silver

June silver initial standings

June 15 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 2006.10 oz (Brinks)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  384,751.85 oz (Delaware,JPM)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 27 contracts(135,000 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 4,407,871.8 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 CNT:  1997.200 oz

ii) Into JPMorgan: 382,754.65 oz*** (8th straight day of an above 300,000 oz silver deposit)

total customer deposit: 384,751.850  oz

 

We had 1 customer withdrawals:

i) Out of Brinks: 2006.10 oz

 

total withdrawals from customer; 2006.10 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 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in June, we take the total number of notices filed for the month so far at (222) x 5,000 oz  = 11,100,000 oz to which we add the difference between the open interest for the front month of June (27) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.

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

222 (notices served so far) + { OI for front month of June (27) -number of notices served upon today (0} x 5000 oz ,= 11,235,000 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 15/we lost a huge 2.08 tonnes of gold from the GLD/Inventor rests tonight at 701.90 tonnes

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 15 GLD : 701.90  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 15/we had no change in silver inventory/327.874 million oz

June 12/we had another addition to the tune of 956,000 oz/Inventory rests this weekend at 327.874.  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 15/2015: no change in silver inventory/SLV inventory rests tonight at 327.894 million oz

 

end

 

 

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

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

1. Central Fund of Canada: traded at Negative 7.5% percent to NAV in usa funds and Negative 7.5% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.8%

Percentage of fund in silver:37.8%

cash .4%

( June 15/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to +.46%!!!!! NAV (June 15/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to – .28% to NAV(June 15/2015

Note: Sprott silver trust back  into positive territory at +.46%.

Sprott physical gold trust is back into negative territory at -.28%

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

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)

 

Financial System “Will Implode” … “Hold Precious Metals” – Faber

– “Whole Financial System Will One Day Implode” – Marc Faber
– “I feel like I’m on the Titanic …”
– Arguing over the best assets akin to re-arranging deck chairs on Titanic
– Investors need escape plan and “safety boat”
– Forget Fed rate hike, Fed QE 4 is coming
– Diversify and hold “commodities, precious metals”

goldcore_chart1_15-06-15
The highly regarded editor of the Gloom, Doom and Boom report, Dr. Marc Faber has warned that “the whole financial system will one day implode”.

Speaking on CNBC’s Squawk Box, he likened the global economy to the Titanic.

Dr. Faber believes that arguing over which assets are best in the current environment is akin to re-arranging deck chairs on the ill-fated Titanic. Only last month, Stephen King – chief economist with HSBC – made the same analogy.

“When I look at the whole financial sector … I feel like on the Titanic. We’re fighting about deck chairs -which assets are performing best and we’re fighting over the best tables in the ballroom – but I think it’s worthwhile to have your own safety boat and have your own ladder that will lead you to your safety boat because I think the problem is that the whole financial system one day will implode.”

goldcore_chart3_15-06-15
Faber believes that the Fed and central banks will have no choice but to wade back into another QE program rather than raise rates in an attempt to avert the iceberg.

Such a move would likely have negative consequences for confidence in central banks and paper currencies across the globe. Then, people may come to realise that the central banks are not omnipotent after all and that currency debasement is set to continue and even intensify.

Investors and savers need an escape plan. The safety boat which Dr. Faber has in mind entails a highly diversified portfolio.

Among the basket of assets he proposes are a 25% allocation to stocks, a 25% allocation to property, 30-year U.S. Treasuries and precious metals.

“I have advised my investors and also on this program that you have to have a diversification and that you should hold around 25% in stocks, 25% in real estate” …  “And I would also hold some commodities, precious metals.”

Faber remains long gold – but he prefers physical gold coins and bars and opts for storage in Singapore.

Marc Faber on Storing Gold in Singapore
Essential Guide To Storing Gold In Singapore

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,178.25, EUR 1,049.57 and GBP 760.01 per ounce.
Friday’s AM LBMA Gold Price was USD 1,179.25, EUR 1,055.68 and GBP 761.27 per ounce.

Gold fell $0.50 or 0.04 percent Friday to $1,181.00 an ounce. Silver slipped $0.10 or 0.62 percent to $15.94 an ounce. Gold rose 0.86 percent for the week, while silver fell 0.99 percent over the 5 trading days.

Gold in U.S. dollars

Gold in Singapore for immediate delivery was up 0.3 percent to $1,184.28 an ounce  near the end of the day,  while gold bullion in Switzerland came under pressure and fell 0.6% to $1,177.40 an ounce.

Gold in Asian trading saw safe haven bids push gold higher after Greece failed to agree to a deal with its creditors. However, prices then came under pressure despite falling stock markets and declining risk appetite.

U.S. Fed officials are still undecided as to when to raise interest rates. At the Fed’s previous meeting they removed all date references in its forward guidance and noted that the economic weakness may be “transitory” in nature. By alluding to this the Fed is now dependent on published economic data and a rate increase could happen at any future meeting. The wording of the policy statement released this Wednesday will be interesting.

Greece left last minute crisis talks with its creditors after 45 minutes of negotiations. Prime Minister Alexis Tsipras arrived with no new initiatives to the talks. nor did Greece’s creditors. Greece’s latest payment is 1.6 billion euros to the IMF by the end of June.

In late morning European trading gold is down 0.59 percent at  $1,174.13 an ounce. Silver is off 0.40 percent at $15.88 an ounce, and platinum is also down 0.87 percent at $1,082.68 an ounce.

Breaking News and Research Here

 

end

 

Koos continues to debunk Western calculations on gold demand from China

(courtesy Koos Jansen)

 

Posted on 13 Jun 2015 by

Western Consultancy Firms Continue Making Up False Arguments In An Attempt To Debunk SGE Withdrawals

More false arguments – that should explain the difference between Shanghai Gold Exchange (SGE) withdrawals and Chinese gold demand as disclosed by the World Gold Council – are being spread in the gold space. The most recent argument is gold export from China. 

Since 2013 I’ve been writing the World Gold Council (WGC) is grossly understating Chinese gold demand. The aggregated difference between SGE withdrawals and WGC demand from 2007 until 2014 is 3,354 tonnes. Though many arguments have been tested the Western consultancy firms have not been able to elucidate the difference – illustrated by the fact many new arguments keep appearing.

Please make sure you’ve read The Mechanics Of The Chinese Gold Market.

Chinese Gold Export Has Got Nothing To Do With SGE Withdrawals

Against all odds, the ‘export’ argument was presented by Phillip Klapwijk, former Executive Chairman of GFMS, currently Managing Director of Precious Metals Insights Limited (PMI), at the Bloomberg Intelligence Forum in London May 22, 2015, where Klapwijk talked specifically about the ‘supply surplus’ (the difference) in the Chinese gold market. I wouldn’t be writing this post if I would agree with Klapwijk. (PMI is nowadays the main data provider for WGC demand figures.)

In a previous post I’ve expanded on Chinese gold trade rules (click this link to read a detailed analysis). All we have to do now is refresh our memory and have a look at what Klapwijk said in London. There is no transcript of his speech, but Lawrie Williams from Mineweb.com has written an article  about Klapwijk’s argument regarding gold export, I assume Williams has reported accurately or Klapwijk wouldn’t have tweeted a link to the article.

The slides from the presentation can be found on the PMI website.

Klapwijk’s argument: gold is exported from China mainland, which explains the difference between SGE withdrawals and WGC demand.

Williams wrote:

Chinese do export gold – to Hong Kong

…Indeed he [Klapwijk] asserts that this [gold export] has been happening in sufficient quantity to cover virtually all the imbalance between SGE figures and those of the Western analysts over the past two years.

I have a few reasons to believe this is not true:

1) Chinese gold export has got nothing to do with SGE withdrawals as gold is only allowed to be exported from Free Trade Zones, which are separated from the Chinese domestic gold market (the SGE system). It’s prohibited by the PBOC to export gold from the Chinese domestic gold market. 

Gold export from China to Hong Kong is nothing new, in contrast to Williams’ headline. Since I’ve been publishing data and charts on gold trade between Hong Kong and China I’ve always included gross import and export.

Hong Kong - CN monthly gold trade January 2009 - March 2015

Not only are these figures well known, it’s also well known gross gold trade between Hong Kong and China has got nothing to do with the Chinese domestic gold market and the SGE system. Gold can only flow in and out of the mainland through processing trade in Free Trade Zones, such as Shenzhen right across the border with Hong Kong. What is net imported into the mainland is done through general trade; this gold is required to be sold first through the SGE. The PBOC does not allow gold to be exported from the Chinese domestic gold market.

Gold that is exported from China is always processing trade from FTZs, it’s not gold from the SGE and therefor can’t have anything to do with the difference we’re after.

Screen Shot 2015-06-12 at 6.53.39 PM
Slide 1 by Klapwijk.
Screen Shot 2015-06-12 at 6.54.11 PM
Slide 2 by Klapwijk. Total supply is compounded by gross import, mine output and scrap supply. 

It’s pointless to measure total Chinese gold supply by Chinese gross import like Klapwijk does. Gross import has got nothing to do with the Chinese domestic gold market and Chinese gold demand.

Additionally, Round tripping inflates gross gold trade. Round tripping is always done through processing trade; speculators import and export gold from FTZs (usually between Hong Kong and Shenzhen). Because gold used in round tripping can make more than one round – the same batch of gold is imported and exported over and over again – Hong Kong/China gross trade data captures far more gold than is used for genuine processing trade (jewelry fabrication). For example, if 50 tonnes are round tripped 6 times, gross import and export are inflated by 300 tonnes, though nothing has been net imported into the Chinese domestic gold market.

China net imported 1,540 tonnes in 2013. The exact number for 2014 has not yet been published, my estimate is 1,250 tonnes.

2) Gold is smuggled from Hong Kong to China, not the other way around as Klapwijk states. From Williams’ article we can read:

…the China/Hong Kong border has been pretty porous, with very big movements of gold bullion, much in the form of very low mark-up jewellery and artefacts, from Mainland China into Hong Kong.

The low mark-up artefacts are just round trip products in my opinion. They certainly are not smuggled SGE bars.

Let me describe an example of how gold between Hong Kong and the mainland flows: gold bullion is exported from Hong Kong to Shenzhen, then the bullion is manufactured into jewelry and exported back to Hong Kong where thousands of jewelry shops are located (genuine processing trade). In Hong Kong consumer prices for jewelry are significantly lower than in the mainland because of tax rules, as we can see in the next slide from Chow Sang Sang Jewelry.

Screen Shot 2015-06-12 at 7.42.12 PM
Slide 3 by Chow Sang Sang.

As a result, many mainland tourists visit Hong Kong to load up on jewelry and return home. It’s common knowledge mainland tourist can walk across the border without having to declare gold jewelry. Chinese customs at the airport is very stringent on the export side, not on the import side (into the mainland).

Screen Shot 2015-06-12 at 7.45.42 PM
Slide 4 by Chow Sang Sang. Mainland tourists buy roughly half of Chow Sang Sang’s gold products in Hong Kong. 

So, bullion flows from Hong Kong to the mainland, then back to Hong Kong as jewelry and then it’s ‘smuggled’ into the mainland by tourists. No doubt gold is also smuggled from China to abroad, but I have no data on this.

3) Klapwijk greatly overstates Chinese gold export numbers. Let us turn to another slide compiled by Klapwijk.

Screen Shot 2015-06-12 at 8.00.26 PM
Slide 5 by Klapwijk. The data is based on Hong Kong Trade statistics.

Although it has got nothing to do with SGE withdrawals, in the slide above it’s shown China exports 1,000 fine tonnes every year based on Hong Kong customs data. Needless to say, I fully disagree; let’s do some number crunching. If I check the numbers on bullion, jewelry and articles from the Hong Kong Census and Statistics Department in 2013 I get totally different results (source import data, source export data). The next chart is based on my calculations and estimates from looking at Klapwijk’s previous chart.

Naamloos
Jansen’s data is based on the assumption all jewelry imported is pure gold (no gems) and the value excludes fabrication costs.

Quite some discrepancies. For the amount ‘gold bullion’ traded have a look at a screenshot from the Hong Kong Census report below. It’s disclosed Hong kong imported 337 tonnes of bullion from China in 2013 – the disclosed value matches this tonnage. I don’t see how Klapwijk can come up with 250 tonnes.

Screen Shot 2015-06-12 at 9.40.54 PM
The value is in ‘000 HKD.

Moving on to jewelry. After scanning the customs reports there was only one item I could find that can be used: “ARTICLES OF JEWELLERY AND PARTS THEREOF, OF PRECIOUS METALS OR METALS CLAD WITH PRECIOUS METALS (G)”, code 89731. Below you can see a screenshot.

Screen Shot 2015-06-12 at 10.03.39 PM
The value is in ‘000 HKD.

Because the weight is in GRAMS, not in KILOGRAMS as is ‘gold bullion’, the total tonnage is 209 metric tonnes. The total value is 39 billion Hong Kong dollars (HKD). The description of this category tells us the jewelries are made of ‘precious metals’, which can be gold, silver or platinum, it’s impossible to know exactly how much gold content is in the jewelry. Additionally, the total value includes gems and fabrication costs. If we deny silver, platinum, gems and fabrication costs and compute the total value to fine gold tonnes, the outcome is 104 tonnes (at a USDHKD exchange rate of 7.75 and a gold price of 1,500 USD). I don’t see how Klapwijk can come up with 450 tonnes.

Same story for articles, I get 1 tonne in contrast to his 300 tonnes. If someone can tell me what categories in the Hong Kong customs reports do capture a few hundred tonnes of fine gold I would be happy to change my numbers. Until then, China does not export 1,000 tonnes of gold to Hong Kong every year.

If the argument is, gold is smuggled out of China and doesn’t appear in Hong Kong trade statistics, that’s another story. In 2014 gold was trading at a small discount on the SGE relative to international prices for substantial periods, this could have triggered smuggling. But, in this scenario SGE bars (bullion) would have crossed the border with Hong Kong, notlow mark-up jewelry and artefacts. 

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

 

end

 

This is a big story:  Texas has now signed into law the repatriation of its gold from the Federal Reserve Bank of New York.  I wonder how long it will take for them to get their 1 billion dollars worth of gold (approximately 26 tonnes)

Writing’s On The Wall: Texas Pulls $1 Billion In Gold From NY Fed, Makes It “Non-Confiscatable”

The lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now – as we noted was possible previouslyTexas has enacted a Bill to repatriate $1 billion of gold from The NY Fed’s vaults to a newly established state gold bullion depository…”People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold,” and the Bill includes a section to prevent forced seizure from the Federal Government.

From 2011:

The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.”

 

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board,Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

 

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

And now, after we noted the possibility previously,as The Epoch Times reports, Texas Governor Greg Abbott signed a bill into law on Friday, June 12, that will allow Texas to build a gold and silver bullion depository. In addition, Texas will repatriate $1 billion worth of bullion from the Federal Reserve in New York to the new facility once completed.

On the surface the bill looks rather innocent, but its implications are far reaching. HB 483, “relating to the establishment and administration of a state bullion depository” to store gold and silver coins, was introduced by state Rep. Giovanni Capriglione.

 

Capriglione told the Star-Telegram:

 

“We are not talking Fort Knox. But when I first announced this, I got so many emails and phone calls from people literally all over the world who said they want to store their gold … in a Texas depository. People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold.”

 

But isn’t New York, where most of the world’s gold is stored, also big and powerful? Why does the state of Texas want to go through the trouble of building its own storage facility?

There are precisely two important reasons. One involves distrust in the current storage system. The second threatens the paper money system as a whole.

“In a lot of cases with gold you may not have clear title to the metal. You may have a counterparty relationship that makes you a creditor. If the counterparty has a problem unrelated to gold, they can default and then you become an unsecured creditor in bankruptcy,” said Keith Weiner, president of the Gold Standard Institute.

 

This means you get whatever is left after liquidation, often just a fraction of the initial value of your holdings.

 

“This exact scenario happened with futures broker MF Global. I knew people who had warehouse receipts to gold bars with a specific serial number. But that gold had an encumbered title and they became unsecured creditors in bankruptcy,” said Weiner.

 

In Texas, two big public pension funds from the University of Texas (UoT) and the Teacher Retirement System (TRS) own gold worth more than $1 billion.

 

Being uncomfortable with holding purely financial gold in the form of futures and Exchange-traded Funds, University of Texas actually took delivery of the gold bars in 2011 and warehoused it with HSBC Bank in New York.

 

At the time pension fund board member and hedge fund manager Kyle Bass explained:“As a fiduciary, which I am in that position to the extent you own gold and you are going for a long time, and it’s not a trade. … We looked at the COMEX at the time and they had about $80 billion of open interest between futures and futures options. And in the warehouse they had $2.7 billion of deliverables. We are going to own it a long time. You are on the board, you are a fiduciary, so that’s an easy one, you go get it.”

 

Bass is implying that there is much more financial gold out there than physical, and that it is prudent to actually hold the physical.

 

Taking the gold to Texas would then also solve the counterparty risk. “In this case it’s going to be a depository, the gold is going to be there, they are not going to be able to lend it out and it won’t serve as collateral for other transactions of the bank.” said Victor Sperandeo of trading firm EAM Partners. “Because if the bank closes, you are screwed.”

 

“I think that somebody was looking at that, we better have this under our complete control,” said constitutional lawyer and gold expert Edwin Vieira, of the Texas bill. “They don’t want to have the gold in some bank somewhere and in two to five years it turns out not to be there.”

So far most of the attention has focused on the part of the depository and the big institutions. However, the bill also includes a provision to prevent seizure, which is important for private parties who want to avoid another 1933 style confiscation of their bullion by Federal authorities.

Section A2116.023 of the bill states: “A purported confiscation, requisition, seizure, or other attempt to control the ownership … is void ab initio and of no force or effect.” Effectively, the state of Texas will protect any gold stored in the depository from the federal government.

 

And free from the threat of confiscation, private citizens can use gold and silver as money, completely bypassing the paper money system.

 

“People can legally do that with gold contracts. The difficulty is the implementation. Now Texas has set up a mechanism with the depository. We have accounts in that institution and can easily transfer back and forth certain amounts. So we can run our money system a gold or silver basis if we were so inclined,”said Vieira.

 

This would not be possible if the gold is stored in a bank because of the risks of bank holidays and bankruptcies. It would also not be possible if the federal government could confiscate gold.

 

According to Vieira, this anti-seizure provision rests on Article 1, section 10 of the Constitution of the United States, which obliges the States to not make anything tender in payment of debts apart from gold and silver coin.

 

If someone from the Department of Justice comes along you are going to see legal and political fireworks. The state is going to say ‘we need to have a mechanism to make gold and silver money. This is pursuant to the constitutional provision we have. You can’t touch this. Our state power on the constitutional level is more powerful than any statute you may pass,’” said Vieira.

 

Because one of the litigant parties is a state, the case would go directly to the Supreme Court.

 

“We are talking about something completely new in terms of the legal playing field. This is no longer a fringe concept,” he adds, but cautions about a possible fight with the federal government: “We will have to see how committed the governor and the attorney general are.”

 

Official Statement from Governor Abbott:

Governor Greg Abbott today signed House Bill 483 (Capriglione, R-Southlake; Kolkhorst, R-Brenham) to establish a state gold bullion depository administered by the Office of the Comptroller. The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas. The bullion depository will serve as the custodian, guardian and administrator of bullion that may be transferred to or otherwise acquired by the State of Texas. Governor Abbott issued the following statement:

 

“Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals. With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state.”

*  *  *

Is this the first step down a road to secession?Notably, they’ll need that gold to establish their own country once they win the potentially imminent war with the US military which starts on Monday (Jade Helm).

*  *  *

This implicit subordination of The Fed’s gold sends a more ominous signal of rising fears of confiscation and leaves us wondering just how long before every state (and or country) decides to follow Texas’ lead?

 

end
Just look at who the World Gold council’s points to raising funds for it to continue with its fraudulent reporting:  GLD
(Ronan Manley/GATA)

Ronan Manly: As World Gold Council’s membership falls, it hikes fees to GLD

Section:

11:40a ET Sunday, June 14, 2015

Dear Friend of GATA and Gold:

As the World Gold Council’s membership of mining companies has been declining, reducing annual dues payments, the council now is generating most of its income through royalties from the exchange-traded gold fund GLD, gold researcher and GATA consultant Ronan Manly reports today.

Australia’s Newcrest Mining, Manly writes, is the latest major miner to withdraw from the council, though no one wants to talk about it. Manly adds that the council has just increased the charges it assesses against GLD.

Despite its declining revenue, the council maintains extremely plush offices around the world, Manly adds.

If the council’s objective is to get the gold price up, it hasn’t had much success lately. While the failure may be attributed to the Western central bank gold price suppression scheme, the council remains studiously silent about it even as the diversion of some of the council’s still-ample resources from jewelry promotion to exposure of market rigging might be productive.

All GATA’s documentation of gold price suppression, archived here —

http://www.gata.org/taxonomy/term/21

— and summarized here —

http://www.gata.org/node/14839

— has been shared with the council, but the council has never acknowledged it, giving rise to suspicions about the council’s intentions.

Manly’s review of the council’s operations seems to be the most comprehensive of anything published in public. It is headlined “The Funding Model of the World Gold Council: GLD Fees and Gold Miner Dues” and it’s posted at Bullion Star here:

https://www.bullionstar.com/blogs/ronan-manly/the-funding-model-of-the-w…

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

 

end

 

Even though, India is reporting record imports of gold, it is also witnessing huge smuggling of gold.

 

(courtesy Times of India/Mumbai/GATA)

Gold smuggling into India soars despite easing of import curbs

Section:

Five-Time Jump in Gold Smuggling; Seizure Worth Rs 1,120 Crore

From The Press Trust of India
via The Times of India, Mumbai
Sunday, June 14, 2015

NEW DELHI — There has been an unprecedented five-time jump in cases of gold smuggling in 2014-15 over 2012-13 during which yellow metal worth Rs 1,120 crore was seized, notwithstanding easing of curbs on its import.

What is worrying the revenue intelligence officials is that cases of the smuggling have not come down despite the legal import of gold into the country increasing significantly during the same period.

A total of 4,400 cases of gold smuggling has been registered in the country during 2014-15. About 4,480 kgs (4.48 metric tonnes) of the precious metal valued at about Rs 1,120 crore were seized in these cases, a senior official in Directorate of Revenue Intelligence said.

Some 252 persons were also arrested in the last fiscal in these cases, he said.

There were 870 cases of gold smuggling registered during 2012-13, five times less than those filed in 2014-15 fiscal. About 400 kgs of gold valued at about Rs 100 crore were seized in these cases, the official said. …

… For the remainder of the report:

http://timesofindia.indiatimes.com/india/Five-time-jump-in-gold-smugglin…

 

end

Dave Kranzler describes the idiotic paper silver comex market:

(courtesy Dave Kranzler/IRD)

Comex Paper Silver: New Record Naked Short Interest

2014 total GLOBAL mine supply 877.5 million ozs. So Comex OI is now 110% of annual mine supply. What a sick joke.  – Craig “Turd Ferguson” Hemke on Twitter

I need to make a slight correction to Craig’s analysis.  2014 silver production is already used up.  70% of all silver produced is used up in manufacturing processes.  The other 30% produced in 2014 is sitting in jewelry boxes across India and China or in fabricated bullion form in private investment hands around the globe.

Because most silver is produced as a by-product of mining base metals, and because the world economy slowed drastically or contracted, it is likely that base metal mining production declined.  It is thus likely that silver output is declining in 2015.  Therefore, the open interest in silver futures on the Comex is likely even greater than the 110% of 2014 production cited by Craig.

Please note:  any open interest in silver futures on the Comex that is in excess of the amount of silver available for delivery – i.e. the “registered” account in the Comex vaults – is considered a “naked short.”  This is because paper obligations have been issued against physical silver that does not exist to be delivered.  In any other market, this activity would be stopped immediately by the regulators – FINRA, the SEC and the Justice Department. But the regulators blatantly ignore the most manipulated in the history of the world.   Click to enlarge:

SilverOI

This table above is the silver trading and open interest data from Friday’s Comex trading session in silver.  It includes the electronic Globex trading plus the Comex floor activity.  As you can see, the total open interest moved up to 192,527 contracts.   This represents 962 million ozs of silver – 110% of 2014 global silver production but likely a much larger percentage of the current 2015 global silver production.

To put the 962 million ozs in context:  the total amount of silver reported to be in Comex vaults is 179.8 million ozs;  the “registered”  and available to be delivered amount is 57.8 million ozs.  Please note:  the numbers reported by the Comex banks are suspect as to their validity, as banks have been successfully prosecuted for reporting fraud in other areas of their business activity and JP Morgan has been fined and censured by the CFTC for its Commitment of Traders data reporting.

Based on the numbers above, the amount of naked short interest on the Comex is 904.2 million ounces, which is the amount by which the total paper open interest exceeds the amount of silver – 57.8 million ounces – that has been made available for delivery.  Anyone see a problem here with the integrity of the Comex and its regulators?

The amount of July open interest – 456.2 million ozs – is 7.8x greater than the registered silver and 2.5x greater than the total amount of silver on the Comex.  The total open interest exceeds the registered silver by 16.6x and exceeds the total amount of Comex silver by 5.3x.

This market imbalance represents first and foremost a degree of market intervention and price-setting collusion that has never been witnessed in the history of any market, let alone the history of what is supposedly a country devoted to free markets and Rule of Law.

There’s a reason the Government is enabling this illegal activity to persist and to grow more extreme.  I have a bad feeling that no one wants to see this reason and I have a worse feeling that we may find out this year

end

On the weekend, I highlighted to you the huge demand for silver coming from India (approximately 9,000 metric tones or 290 million oz or approximately 41.4% of annual world production (ex China ex Russia) or 33% if you include by China and Russia.  (Russia and China do not export one oz of silver or for that matter gold). Now we see record demand for silver in China;  the reason: solar panels:

(courtesy Jeff Brown/Dave Kranzler IRD)

 

SoT #36 – Jeff Brown: Solar Energy Drives Silver Demand In China

Jeff Brown of 44days.net – Reflections in Sinoland is our “eyes and ears on the ground in Beijing.  Because he lives in a suburb of Beijing with his family,  he can provide us with real news, data and political/economic developments in China – as opposed to the filtered propaganda vomited at us from U.S. media puppets.

Very little is known or understood about China’s silver demand and imports.  In our last episode – Unlocking Some Secrets to China’s Silver Demand – Jeff was able to dig up some information on China’s imports which we believe heretofore has not been published in the west.

Based on everything I could find, it looks like China is trying to get its hands on all the silver it can find. – Jeff Brown

This episode Jeff presents us with some stunning statistics regarding the amount of silver required by China to meet its 5-yr plan to install 100 gigawatts of solar (by 2020).   In China, 1 gigawatt will power about 3 million homes (vs. about 700,000 homes in the U.S. – the U.S. is an energy hog). The plan calls for converting 300 million homes to solar by 2020.

It takes 236 metric tonnes of silver per gigawatt of solar energy. This translates into 8.3 million ounces per gigawatt of solar energy output. If China installs 100 gigawatts in the next 5 years, this will require 26,300 metric tonnes, which is 731.6 million ounces of silver. On an annual basis, China’s solar industry alone will require more than the entire amount of silver produced annually by Chinese mines.

In the context of what is believed to be a massive short-squeeze developing in the global supply of silver, it is likely that China’s push to solarize its middle class could have an extraordinary affect on the price of silver. Please click here to see this video and subscribe to our channel: Shadow of Truth.

 

 

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

 

1 Chinese yuan vs USA dollar/yuan weakens to 6.2087/Shanghai bourse red and Hang Sang: red

2 Nikkei closed by 19.29  points or 0.09%

3. Europe stocks all in the red/USA dollar index up to 95.31/Euro falls to 1.1209

3b Japan 10 year bond yield: remains at  .51% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.64/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 59.16 and Brent:  62.60

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 .80 per cent. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate jump big time  to 28.37%/Greek stocks down 4.18%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield rise to to: 12.25%

3k Gold at 1181. dollars/silver $16.00

3l USA vs Russian rouble; (Russian rouble par in  roubles/dollar in value) 54.96,

3m oil into the 59 dollar handle for WTI and 62 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 .9341 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0471 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 +0.800

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. On Thursday, 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 2.37% early this morning. Thirty year rate well above 3% at 3.08% / yield curve flatten/foreshadowing recession.

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

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

European Stocks Slide, Greece Tumbles But US BTFDers Emerge After Collapse In Greek Bailout Talks

As extensively reported over the past two days, this weekend’s “last chance” Greek negotiations reached a roadblock after talks broke down after just 45 minutes. Creditors deemed the renewed reform proposals from Greece as inadequate as the troubled nation stands firm that they will not budge on pension cuts or VAT increases ahead of the June 18th European finance minister meeting.

Following these events, European equities (Eurostoxx50 1.2%) kicked off the week broadly lower, with the ASE down 7% and notable underperformance seen in the National Bank of Greece (-12% ) and Alpha Bank (-7%). Separately, after opening up by around 60 ticks, Bunds have since given up some of its gains but remain firmly higher (+28 ticks), touching on the 50% retracement level of June sell-off in the process. US equity futures likewise opened lower but have proceeded to levitate marginally higher as the BTFDer brigade refuses to buy that Greece will be kicked out.

Meanwhile the bluffing on all sides continues, with Greece refusing to budge on its red lines, while EU ratcheting up rhetoric even more and now openly saying Greece should prepare for a “state of emergency” if no deal by June 30: The European Commission needs to make plans for a ‘state of emergency’ in Greece from July 1 if Athens does not reach an agreement with its creditors, Germany’s EU Commissioner Guenther Oettinger said on Monday in Berlin.

“We should work out an emergency plan because Greece would fall into a state of emergency,” Oettinger, who is also a senior member of Chancellor Angela Merkel’s Christian Democrats said, citing the need to ensure access to energy and medicine.

In any event, while as usual US stocks are preparing to brush off concerns of a default, so far Europe is a different story and by midmorning, the Stoxx Europe 600 index was trading around 1% lower, weighed down by a 1.2% slide on Germany’s DAX-30. Athens’ main stock exchange fell by just over 5%, led by a steep decline in banking stocks.

Greek bonds also tumbled Monday, sending the yield on the country’s 2-year debt up to almost 28%, more than 3 percentage points higher on the day and a level last seen in late April. Yields rise as bond prices fall. Peripheral European bonds have also blown out, with Spanish 10Y yields rising above US bonds for the first time since October, and both Spain and Italy were trading in the mid-2.3% range at last check.

As WSJ notes, Greek bank stocks were hit particularly hard, with shares in Alpha Bank AE, Eurobank Ergasias SA, National Bank of Greece SA and Piraeus Bank SA all down between 6.5% and 14% by midmorning. Monday’s drop means they have now all declined more than 18% since the start of June. So far in 2015, all are nursing losses of between 35% and 65%. So much for that Bloomberg rumor inspired surge which sent Athens stocks soaring late last week.

The stalemate in Greece continues to drag on, weighing on EUR/USD, however the pair has trimmed its earlier weakness. Yet another failure to reach an agreement pushed the 1-month implied rate to its highest level since Dec’11. Elsewhere, GBP/USD is trading lower following the S&P revising the UK credit outlook to negative from stable while affirming its rating at AAA. The rating agency attributed the move to the planned referendum on EU membership which they say represents a risk to growth prospects for the country’s economy.

WTI and Brent crude futures are lower amid a lack of fundamental news with the greenback residing in positive territory amid the risk averse sentiment. Of note, Libya News Agency reported citing an unidentified official at National Oil Corp that Libya’s output has climbed to 500,000bpd, (compared to 460,000bpd reported last week). Meanwhile, risk-off sentiment supported spot gold in early trade following the global selloff in equities however, later entered negative territory after a hitting its 10DMA at 1,180.65. Analysts at Morgan Stanley expect gold prices to remain under pressure amid expectations of higher US interest rates.

Looking ahead, sees a light economic calendar with the highlights coming in the form of the US Empire Manufacturing and Industrial Production reports.

In summary: European shares remain lower, close to intraday lows, with the banks and autos sectors underperforming and food & beverage, retail outperforming. Tsipras hardens Greek stance after collapse of bailout talks. The Italian and Swedish markets are the worst-performing larger bourses, the U.K. the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; Spanish yields increase. Commodities decline, with copper, nickel underperforming and natural gas outperforming. U.S. Empire manufacturing, net TIC flows, NAHB housing market index, industrial production, capacity  utilization due later.

Market Wrap:

  • S&P 500 futures down 0.3% to 2077.7
  • Stoxx 600 down 1.2% to 384.9
  • US 10Yr yield down 3bps to 2.36%
  • German 10Yr yield down 1bps to 0.82%
  • MSCI Asia Pacific down 0.6% to 147.3
  • Gold spot down 0.6% to $1175/oz
  • All 19 Stoxx 600 sectors fall; food & beverage, retail outperform, banks, autos underperform; 3% of Stoxx 600 members gain, 96% decline
  • Eurostoxx 50 -1.4%, FTSE 100 -0.8%, CAC 40 -1.2%, DAX -1.5%, IBEX -1.4%, FTSEMIB -1.9%, SMI -0.8%
  • Asian stocks fall with the Sensex outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific down 0.6% to 147.3
  • Nikkei 225 down 0.1%, Hang Seng down 1.5%, Kospi down 0.5%, Shanghai Composite down 2%, ASX down 0.1%, Sensex up 0.6%
  • Saks Owner Plots Europe Expansion After $3.2 Billion Kaufhof Buy
  • Euro down 0.39% to $1.1222
  • Dollar Index up 0.3% to 95.25
  • Italian 10Yr yield up 11bps to 2.32%
  • Spanish 10Yr yield up 12bps to 2.37%
  • French 10Yr yield up 5bps to 1.27%
  • S&P GSCI Index down 1% to 433.3
  • Brent Futures down 1.7% to $62.8/bbl, WTI Futures down 1.3% to $59.2/bbl
  • LME 3m Copper down 1.9% to $5797/MT
  • LME 3m Nickel down 1.9% to $12875/MT
  • Wheat futures down 1.3% to 504 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Greek government official refuted claims that they have discussed a potential default and stated that Greece are hoping to reach a deal by 18th June.
  • Greek 2Y yield up over 100 bps, Greek ATG index down 6.3% and Greek Banking Index down 12.8% following Greek talk failure over the weekend.
  • Looking ahead, sees a light economic calendar with the highlights coming in the form of the US Empire Manufacturing and Industrial Production reports
  • Treasuries gain, 10Y yields 2.361% from YTD high 2.498% reached last week as Greek bailout talks collapse;
  • Fed meeting starts tomorrow, with rate decision, updated SEP and Yellen press conference tomorrow.
  • Greece and its creditors swapped recriminations over the breakdown of bailout talks, each side hardening its position after attempts to bridge their differences collapsed in acrimony
  • PM Tsipras portrayed Greece as the torchbearer of democracy, standing firm against attacks while the caucus leader of Merkel’s parliamentary bloc said Greeks had to “finally reconcile themselves with reality”
  • German Finance Minister Wolfgang Schaeuble is ready to accept the consequences of a Greek euro exit and “to write down what has to be written down,” Ifo economic institute President Hans-Werner Sinn says on German ARD public television
  • The tumble in German stocks has already breached a level that constitutes a correction and could go another 10% should Greece exit the euro, according to Ralf Zimmermann of Bankhaus Lampe KG and UniCredit Bank AG’s Christian Stocker
  • The European Union Court of Justice will deliver a verdict Tuesday on the legality of a plan Draghi announced three years ago, when surging bond yields in stressed economies threatened to split the currency bloc
  • 97% of respondents in a Bloomberg survey predicted the ECB won’t take action to stem falling bond prices, after Draghi said this month that investors must get used to more volatility
  • Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358b pile of margin debt
  • Sovereign 10Y bond yields mostly lower; peripheral Europe wider led by Greece. Asian, European stocks slide, U.S. equity-index futures fall. Crude oil, copper and gold lower

 

DB’s Jim Reid completes the overnight event wrap

 

Over the weekend the Europeans revived a stalled mission that 7 months ago went sour. Yes space probe Philae miraculously woke up after hiding out on a cliff face on a comet and even tweeted to say it was alive after running out of batteries in November, 500m km from earth. It seems as it approached closer to the sun (205m km now) its batteries started to charge. However as the continent’s scientists scored a major victory, their politicians saw another failed attempt to recharge Greek talks yesterday as the latest talks collapsed in an atmosphere as icy as a comet’s tail.

Indeed it’s looking set to be another hugely important and potentially pivotal week for markets with the soundtrack for the summer possibly being set. Fed liftoff expectations will once again be sharpened come Wednesday evening when we get the FOMC meeting and statement, as well as Fed Chair Yellen’s post-meeting press conference. In addition, the Greece situation is looking like it’s close to boiling point with Thursday’s Eurogroup set to be the next key event, although the political ping-pong battle of headlines will almost certainly continue in the days leading up. As we’ll see in the week ahead there are also quite a few inflation prints out this week which will be important.

Touching on Wednesday evening first of all, our US team expects that the meeting statement should sound a more positive tone relative to that of April’s. It’s likely that we see a downward revision to the Fed‘s forecast for GDP this year and next, but little change to unemployment and inflation. On the important dot plot, our colleagues don’t expect any change to the median Fed forecast for the funds rate for this year (at 0.625% or consistent with two rate hikes before year end), although it’s possible that we see a slight fall in the 2016 median, especially if the Fed modestly trims its 2016 growth estimate. Clearly however, the market is also set to latch onto the language used in Yellen’s press conference and whether or not data so far in Q2 has been sufficient to warrant a move soon.

In terms of Greece, this weekend’s talks have yielded an all too familiar result after yet another breakdown in negotiations between the Greek government and its Creditors. Following the meeting by the Greek delegate and staffers from the European Commission, which after a lengthier discussion on Saturday lasted just 45 minutes yesterday, a spokesman for the EC was quoted as saying that ‘while some progress was made, the talks did not succeed as there remains a significant gap’. The spokesman went on to say that ‘on this basis, further discussion will now have to take place in the Eurogroup’. Deputy PM Dragasakis, part of Greece’s negotiating team, said that there was no response from the institutions for discussions to be held at the necessary level and with the required authorization that would allow a solution to issues that remain open.

DB’s George Saravelos believes that the breakdown in last night’s talks materially reduces the odds that a referendum can be held before a default to the IMF unless some surprising breakthrough is reached today or tomorrow.

He notes that this ultimately leaves PM Tsipras with only two options; agreeing to something that would likely lead to his government collapsing or refusing to agree and capital controls. So attention now turns to Thursday’s Eurogroup at which the IMF’s Lagarde is also expected to be present in the hope that there will be a renewed attempt at an agreement made in the run-up and during the meeting. The ECB non-monetary policy meeting is also scheduled for Wednesday. George believes that a lack of progress on Thursday should see a more formal deadline put on Greece, beyond which capital controls will be implemented. With a deal on the table, it’s looking more and more likely that any decision will be made at the last possible moment. In the meantime and with patience clearly wearing thin amongst various European officials, in an op-ed due to be published today in German newspaper Bild, German Vice Chancellor and Economy Minister Gabriel has been quoted as saying that ‘the shadow of a Greek exit from the euro zone is becoming increasingly perceptible’ and that ‘repeated apparently final attempts to reach a deal are starting to make the whole process look ridiculous, there is an even greater number of people who feel as if the Greek government is giving them the run-around’.

Looking at how markets have responded this morning, the Euro has sold-off around half a percent as we go to print, trading at $1.121 on the back of yesterday’s news. Equity markets in Asia are weaker also with the Shanghai Comp (-1.54%), Nikkei (-0.39%), Hang Seng (-1.36%) and Kospi (-0.49%) in particular all falling. S&P 500 futures are around 0.5% lower meanwhile. There is similar weakness in Asia credit markets this morning where indices are around 1.5bps to 2.5bps wider across the region. Meanwhile in bond markets there’s a noticeable safe haven bid for US Treasuries this morning where the benchmark 10y is 4.9bps lower in yield at 2.343%.

In terms of Friday’s price action, negative sentiment around Greece largely dictated market direction after news on Thursday evening of the IMF leaving talks. Markets were very much in risk-off mode in Europe as we saw the Stoxx 600 (-0.92%), DAX (-1.20%), CAC (-1.41%), FTSE MIB (-1.27%) and IBEX (-1.13%) all sell off. Credit markets weakened also as Crossover finished 13bps wider. Bunds benefited from a safe-haven bid meanwhile as the 10y closed 4.9bps lower in yield at 0.832%, closing more or less at the same level as June 4th after a roundabout week in which we saw yields break briefly through 1%. The Greece concerns weighed on the periphery however as we saw Spain, Italy and Portugal yields rise +11.3bps, +7.0bps and +14.1bps respectively. There was an unsurprising weakening in Greek assets as Greek 2y (+110bps) and 10y (+51bps) yields both took a steep leg higher, while Greek equities were dragged down 5.92% as financials in particular sold off 10.31%.

There was similar weakness in US equities on Friday as we saw the S&P 500 finish the day -0.70%, closing out a relatively flat week for the index (+0.06%). Despite losses being largely broad based, energy stocks (-1.16%) led as WTI (-1.33%) and Brent (-0.86%) fell, not helped by more headlines of record production data out of the EIA concerning Saudi Arabia, Iraq and UAE. It was a reasonably choppy sessions for US Treasuries and despite trading in an 8bps range, the benchmark 10y yield closed just 1.5bps higher in yield at 2.393%. It was a similar story for the Dollar which pared all of the intraday gains to close unchanged at the end of the day.

Friday’s PPI data did little to add to the liftoff debate. Despite a slightly better than expected headline reading for May (+0.5% mom vs. +0.4% expected), the ex food and energy (+0.1% mom as expected) and ex food, energy and trade (-0.1% mom vs. +0.1% expected) prints were a bit more mixed. The preliminary June University of Michigan consumer sentiment reading recovered much of the weakness in May meanwhile, with the print up 3.9pts to 94.6 (vs. 91.2 expected). Despite improvements for both the current conditions (+6.0pts to 106.8) and expectations (+2.6pts to 86.8pts) components, inflation expectations for both 1y and 5-10y buckets were revised down 0.1% to 2.7%.

Elsewhere on Friday, there was some focus on the UK where S&P cut its outlook on the sovereign’s AAA rating to negative from stable as a result of the UK government’s decision to hold a referendum on EU membership by 2017. Meanwhile, Germany’s Merkel provided some support to the low rate environment in Europe saying that as a result the weaker Euro has helped reform efforts in the likes of Spain and Portugal.

Onto this week’s calendar now, we kick off this morning in Europe with the Euro area trade balance for April, while Italian CPI data is also due this morning. The ECB’s Draghi speaking in Brussels is likely to attract the bulk of the attention however. It’s a reasonably busy calendar in the US this afternoon where we are due to get empire manufacturing, manufacturing production, industrial production, capacity utilization and finally the NAHB housing market index. It’s set to be a busy morning in the European timezone on Tuesday where we are due to get German CPI and ZEW survey reading, Euro area employment data and finally the UK CPI/RPI/PPI prints. We’ve got more key releases due in the US on Tuesday where we get housing starts and building permits data for May. Wednesday starts in Japan with trade data expected in the early morning. The focus in Europe on Wednesday will be on the final May CPI print for the Euro area, while UK employment data is also due up as well as the release of the BoE minutes. The bulk of the attention will of course be in the US on Wednesday where we’ve got the FOMC meeting and associated Yellen press conference. It’s a quiet start in Europe on Thursday with just UK retail sales data for May and the ECB economic bulletin due. In the US however we’ve got another first tier release with the crucial CPI reading for May. We’ll also get initial jobless claims, average weekly earnings, Philadelphia Fed business outlook and the leading index on Thursday. We finish the week on Friday in Japan with the Conference Board leading indicator as well as the BoJ meeting. PPI data out of Germany will be a focus, as will UK public finance data in the European timezone. There are no releases due in the US on Friday. The Fed’s Mester will be due to speak however.

end
Sunday night:  no deal as the discussions lasted only 45 minutes at best:
(courtesy zero hedge)

“Last Chance” Greek Bailout Talks End Without Deal

The writing was already on the wall after several EU officials expressed reservations about the feasibility of striking any sort of compromise with Greece’s negotiating team in Brussels on Sunday, and now it’s official. Talks have once again ended with no deal as the Greeks are standing their ground on pension cuts and VAT hikes.

More color from Bloomberg:

Greek govt delegation in Brussels bearing proposals that can bridge gap between country, its creditors on fiscal, financing matters, Greek govt official says in e-mailed statement, asking not to be named in line with policy.

 

Greek govt will not accept cuts to pensions, VAT increases on basic needs goods like electricity.

 

IMF insisting on annual pension cuts of EU1.8b, or 1% of GDP; another EU1.8b of increased VAT revenue: govt official.

What this means is that Greece came to Brussels and presented the same “not serious” proposals Tsipras submitted last week. That is, Athens is willing to deal on fiscal targets and is more than willing to accept free money from the EFSF and ESM (which would be used to pay the ECB on July 20) but is not yet desperate enough to concede to pension cuts or VAT hikes. That means there will be no deal for now and all eyes will turn to a scheduled meeting of EU finance ministers on Thursday.

As we noted earlier today (and on countless occasions previously), ‘deadlines’ and ‘ultimatums’ are largely meaningless because even if Greece misses its June 30 bundled payment to the IMF, Christine Lagarde would need to send a formal failure to pay letter to the Executive Board. Only then would Greece actually be in default. It’s up to Lagarde to decide when to send that letter and she would have at least 30 days. The set up for EFSF loans is similar, and besides, it seems exceptionally unlikely that either EU creditors or the IMF would put Greece into formal default while a deal is working its way through the Greek parliament, meaning all Tsipras really needs to do is get something on paper that has a chance of flying with Syriza hardliners and get it to the floor before July 20, when a payment to the ECB comes due.

In other words: expect more contradictory headlines and more ‘ultimatums’ next week as this charade continues into its sixth month.

A sampling of headlines:

  • EU: `THERE REMAINS A SIGNIFICANT GAP’ BETWEEN PARTIES
  • EU: GAP BETWEEN PARTIES `IN THE ORDER’ OF 0.5%-1% OF GDP
  • EU: GAP BETWEEN PARTIES IS ABOUT 2B EUROS ON ANNUAL BASIS
  • EU: GREECE PROPOSALS REMAIN `INCOMPLETE’
  • JUNCKER’S `LAST ATTEMPT’ TO SEEK ACCORD MADE `SOME PROGRESS’
  • EU: FURTHER GREECE DISCUSSION WILL NOW MOVE TO EUROGROUP
  • EUROPEAN COMMISSION GIVES DETAILS IN TEXT MESSAGE
end
Europe now getting quite worried: “we are in a state of emergency”:
(courtesy zero hedge)

Europe Warns Of “State Of Emergency” As Greek Stalemate Drags On

Talks between Greece and creditors collapsed on Sundayafter Athens once again refused to compromise on the pension cuts and VAT hike the troika insists are necessary if the country is to receive the final tranche of aid from its second bailout program.

We noted yesterday that the charade is hardly over as Greek PM Alexis Tsipras knows he can continue to bluff for a few more weeks. Even in the event Greece misses its June 30 payment to the IMF, Christine Lagarde would need to muster the political will to send a failure to pay notice to the IMF board, at which point Athens would be formally in default and cross acceleration rights for the country’s other creditors would trigger. But Lagarde has considerable discretion on the default notice and can delay it for at least 30 days. Between this and the fact that a critical payment to the ECB is still more than a month away, we suggested that the brinksmanship was far from over and that the new ‘deadline’ would be Thursday’s meeting of EU finance ministers in Luxembourg.

On Monday the usual back-and-forth between the IMF, Greece, and EU officials continued with IMF chief economist Olivier Blanchard insisting that Greece must implement changes to pensions and the VAT in order to hit (reduced) budget surplus targets while EU creditors should reshuffle Greece’s payment schedule, reduce interest rates on the country’s debt, and, if push comes to shove, writedown Greek bonds:

On the one hand, the Greek government has to offer truly credible measures to reach the lower target budget surplus, and it has to show its commitment to the more limited set of reforms. We believe that even the lower new target cannot be credibly achieved without a comprehensive reform of the VAT – involving a widening of its base – and a further adjustment of pensions. Why insist on pensions? Pensions and wages account for about 75% of primary spending; the other 25% have already been cut to the bone.  Pension expenditures account for over 16% of GDP, and transfers from the budget to the pension system are close to 10% of GDP.  We believe a reduction of pension expenditures of 1% of GDP (out of 16%) is needed, and that it can be done while protecting the poorest pensioners. We are open to alternative ways for designing both the VAT and the pension reforms, but these alternatives have to add up and deliver the required fiscal adjustment.

 

On the other hand, the European creditors would have to agree to significant additional financing, and to debt relief sufficient to maintain debt sustainability.We believe that, under the existing proposal, debt relief can be achieved through a long rescheduling of debt payments at low interest rates. Any further decrease in the primary surplus target, now or later, would probably require, however, haircuts.

As for Greece’s European creditors, the focus continues to be on Greece’s perceived unwillingness to accept economic realities. Here’s Valdis Dombrovskis, European Commission vice president for euro policy:

“In the end, this is not the kind of situation where you can have a mechanical agreement for some kind of numbers, where you meet in the middle or something similar. In this event, it’s most important to have a clear exit strategy, how Greece will renew financial stability and how renewed financial stability will return to economic growth.”

In Germany, where Chancellor Angela Merkel is fighting to preserve the last vestiges of patience among lawmakers in the face of staunch opposition from FinMin Wolfgang Schaeuble, the mood is becoming increasingly hostile with Merkel’s party whip Michael Grosse-Broemer saying “a Grexit must be factored in if the Greek government doesn’t do what it’s long been called upon to do,” and Vice Chancellor and Economy Minister Sigmar Gabriel accusing Greece’s “game theorists” of “gambling” with Europe’s future and noting that “repeated apparently final attempts to reach a deal are starting to make the whole process look ridiculous.”

For his part, Greek FinMin Yanis Varoufakis reiterated that Athens would not compromise on pension reforms and a VAT hike. In an interview with Bild, Varoufakis flatly rejected a VAT increase, claiming that “the higher these taxes, the less people will pay them. They would then feel justified not paying.”

As for Tsipras himself, the PM is taking a cue from these pages, hinting at the troika’s use of the Greek talks as a way of sending a political message to Podemos and other sympathetic parties and reminding the world that Greece, more so perhaps than any other country, has a commitment to defending democracy because after all, it is the birthplace of Western democratic ideals: 

One can only suspect political motives behind the institutions’insistence that new cuts be made to pensions despite five years of pillaging by the memoranda. The Greek government is negotiating with a plan, andhas presented nuanced counterproposals. We will patiently waitfor the institutions adhere to realism. Those who perceive our sincere wish for a solution and our attempts to bridge the differences as a sign of weakness, should consider the following: We are not simply shouldering a history laden with struggles. We are shouldering the dignity of our people,as well as the hopes of the people of Europe. We cannot ignore this responsibility. This is not a matter of ideological stubbornness. This is about democracy. We do not have the right to bury European democracy in the place where it was born.

The risk now is that by the time the shouting, bluffing, and finger-pointing finally gives way to realpolitik, Greeks may be living in what is effectively a third world country. As documented here extensively, the Greek economy is teetering on outright collapse, and irrespective of how long politicians on both sides are willing to redefine their own, self-imposed deadlines, a crisis of confidence on the ground in Greece could plunge the country into a state of emergency before EU officials have time to intervene. On that point, we’ll close with the following from Reuters which suggests that there are at least some people in Europe who understand the meaning of the word “urgent”:

The European Commission needs to make plans for a ‘state of emergency’ in Greece from July 1 if Athens does not reach an agreement with its creditors, Germany’s EU Commissioner Guenther Oettinger said on Monday in Berlin.

 

“We should work out an emergency plan because Greece would fall into a state of emergency,” Oettinger, who is also a senior member of Chancellor Angela Merkel’s Christian Democrats said, citing the need to ensure access to energy and medicine.

end
Early this morning (see below) peripheral European bond yields skyrocketed.  Also Greek bank shares collapsed as they know capital controls will probably be initiated this weekend:
(courtesy zero hedge)

Grexit Contagion Uncontained: Peripheral Bond Risk Surges As Greek Banks Collapse

Despite weeks of reassurances and repetitions that Grexit is “contained” – it’s not! Bond spreads for Portugal, Italy, and Spain are blowing out (now up 35-50bps in the last 2 days). While Draghi desperatly soaks up selling pressure, Spanish bond yields have surpassed US yields for the first time since October. But while bonds are turmoiling (Bunds/TSYS -5-7bps, everything else ugly), the real carnage is in Greece. Greek bank bonds are pushing to new record lows and the broad ASE is down over 13% from last week’s exuberant surge when Greece was fixed again (based on a Reuters headline rumor).

Grexit contagion is spreading across Europe…

For context – this is the biggest 2-day rise in bond risk since May 2010!!

Greek Bank Bonds are collapsing…

and broad Greek stocks are crashing…

Remember that 7% surge day last week when everything was fixed?

Charts: Bloomberg

 

 
end

Will The ECB Finally Use The Greek “Nuclear Option” This Wednesdsay?

This was not supposed to happen: by now the Greek insolvency “can” should have been kicked, and the Greek government, realizing the money has run out for both the government and the banking system, should have folded to Troika demands, and allow the Troika money to return repaying obligations to the Troika in exchange for more spending cuts.

Instead, the “game theoretical” approach of bluffing until the end, and beyond, has put both countries in a corner from which neither knows how to escape, and with the “final deal deadline” passing this weekend we now have quotes such as this from the EU:

  • OVERTVELDT: GIVING IN TO GREECE WOULD UNDERMINE EU CREDIBILITY

while in an op-ed due to be published today in German newspaper Bild, German Vice Chancellor and Economy Minister Gabriel has been quoted as saying that ‘the shadow of a Greek exit from the euro zone is becoming increasingly perceptible’ and that ‘repeated apparently final attempts to reach a deal are starting to make the whole process look ridiculous, there is an even greater number of people who feel as if the Greek government is giving them the run-around.” So time for another “final attempt” then:

  • EURO WORKING GROUP SAID TO DISCUSS GREECE TOMORROW AFTERNOON

Meanwhile, Greece digs in over its red lines:

  • GOVT SPOKESMAN: GREECE WON’T ACCEPT PENSION CUTS, VAT HIKES

And yet, in this climate of animosity between the IMF (which as a reminder walked out of talks last Thursday), and the Commission (whose amicable attitude toward Greece promptly soured over the past week), there is still one way Europe can promptly end the impasse.

As a reminder, on Friday when we looked at the latest Greek one-day outflow which saw another €600 million leave local banks, we said that “next Wednesday is when a non-monetary policy board meeting of the ECB non-governing council will take place in Frankfurt where Draghi and company will discuss the issue of guarantees of Greek banks and perhaps the proposal for collateral “haircut.”

Earlier today, Deutsche Bank hinted at the ECB meeting as just the place where the ECB, which has until now stayed out of the ever more rancorous Greek spat, and in fact has buttressed may just invoke the nuclear option. From DB’s Jim Reid:

The ECB non-monetary policy meeting is also scheduled for Wednesday. George believes that a lack of progress on Thursday should see a more formal deadline put on Greece, beyond which capital controls will be implemented.

Which makes us wonder: with both sides digging in and unwilling to budge, will Europe revert back to its strategy from day 1, namely creating a slow initially, then fast bank run in Greece, one which leads to gradual then sudden capital controls, resulting in civil discontent and disobedience and ultimately, a violent overthrow of the Greek government.

The best way to achieve all of that would be to use the aptly named Cyprus “blueprint” – after all, with the “successful” Cyprus capital controls already tested out, and with the Greece stalemate going nowhere and leading to a loss of credibility in the EU, it may be time for the ECB to do what it did on March 21, 2013 when it issued the following statement:

Governing Council decision on Emergency Liquidity Assistance requested by the Central Bank of Cyprus

 

The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013.

 

Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in

place that would ensure the solvency of the concerned banks.

So will Wednesday see an identical press release issued by the ECB, only with “Greece” instead of “Cyprus”? Because with the ECB’s emergency liquidity assistance already covering some 64% (call it two-thirds following the latest weekly outflows) of total Greek deposits…

 

… if there is one way to bring the Greek “crisis” to a grinding halt, it would be to give the Greeks themselves the “option” of regaining access to their now “capital controlled” funds if and only if they “choose” a different government, like any true democracy?

Considering that according to the latest poll, for the first time a majority, or 50.2%, of Greeks want the government to accept the creditors’ proposals to prevent the country’s bankruptcy, this may be just the catalyst to push the population over the edge and to tell Tsipras that Europe has won?

 
end

Summarizing The State Of Greek Negotiations

It’s quite simple really. Here is Draghi:

  • DRAGHI SAYS BALL LIES SQUARELY IN CAMP OF GREEK GOVERNMENT

And moments before this statement, here was the Greek government:

  • GREEK GOVT AWAITS INVITATION BY CREDITORS TO TALKS: STATEMENT

QED

end
And yes, the ECB is contemplating capital controls is no deal by the weekend:
(courtesy zero hedge

Russia Condemns “Aggressive” US Weapons Deployment; Will Send Troops To Protect Border

Cold War 2.0 is heating up week by week. In Ukraine, the fragile ceasefire struck four months ago in Minsk looks set to break down entirely with both the Ukrainian army and the Russia-backed separatists accusing each other of deploying heavy artillery in contested areas.

Meanwhile, GOP presidential candidates in the US are getting set to hit the campaign trail with foreign policy at the forefront in terms of the issues voters are likely to focus on in the primaries. All candidates seem prepared to attack the Obama administration’s handling of what is predictably being billed as “Russian aggression”, with Hillary Clinton’s 2009 “reset” button media spectacle serving as the tie-in between the current administration and the presumed Democratic nominee. As for The White House, the President is looking to dust off the Cold War playbook by implementing a modern day “containment” policy in the face of what the West claims are illegitimate attempts by the Kremlin to redraw European borders by violating territorial sovereignty.

As if all of this wasn’t enough to bring back memories of a bygone bipolarity, over the weekend we learned that the US is now set to “store” heavy weapons in Eastern Europe in an attempt to ensure NATO can respond quickly in the event Russia decides to do a bit more annexing. To recap (via NY Times):

In a significant move to deter possible Russian aggression in Europe, the Pentagon is poised to store battle tanks, infantry fighting vehicles and other heavy weapons for as many as 5,000 American troops in several Baltic and Eastern European countries, American and allied officials say.

 

The proposal, if approved, would represent the first time since the end of the Cold War that the United States has stationed heavy military equipment in the newer NATO member nations in Eastern Europe that had once been part of the Soviet sphere of influence. Russia’s annexation of Crimea and the war in eastern Ukraine have caused alarm and prompted new military planning in NATO capitals.

Here’s a bit more color from WSJ:

Poland’s government is discussing with the U.S. the placement of heavy weapons on Polish territory, Defense Minister Tomasz Siemoniak said Sunday, amid jitters over Russia’s military moves in the region.

 

Since Russia’s annexation of Crimea from Ukraine last year, Warsaw has sought a permanent presence of U.S. troops in Poland and other countries in the former Soviet bloc that are now part of the North Atlantic Treaty Organization.

 

“The U.S. is preparing a set of various measures, and among them the placement of heavy weaponry in Poland and other countries will be very important,” Mr. Siemoniak said.

 

(tanks in Poland last weekend)

 

“It’s relatively easy to move soldiers. It would be good, however, if the equipment was near the area of potential threat,” Mr. Siemoniak said.

 

Mr. Siemoniak said a rotational presence of U.S. forces would be maintained at least until the end of 2016.

Needless to say, Moscow — which has been quick to condemn recent NATO snap drills and war games — is not pleased with the prospect of more US weapons on its doorstep. Via Reuters:

Stationing heavy U.S. military equipment in the Baltic states and eastern Europe would amount to “the most aggressive step by the Pentagon and NATO” since the Cold War, Interfax news agency quoted a Russian Defense Ministry official as saying on Monday.

 

“Russia would be left with no other option but to boost its troops and forces on the western flank,” General Yuri Yakubov was quoted as saying.

With everyone from Senate war hawks to billionaire philanthropists advocating for lethal aid shipments to Kiev, this latest escalation is likely just the beginning of what could morph into a full-on proxy war between the West and Moscow.

end

Amazing; the IMF will lend to our good friends, the bankrupt Ukraine even after a default and yet they will not touch Greece.  I wonder why/ Answer: George Soros
(courtesy zero hedge)

IMF Says It Will Continue Lending To Ukraine Even After A Default, And Why This Is Bad News For Greek Gold

With Tsipras’ delegation in Brussels desperate to work out a last minute deal and preserve Greek pension cut “red lines”, not to mention Greece in the Eurozone, it is the IMF which has become the biggest hurdle to getting a deal done because while even the European Commission is ready defer €400 million of cuts in small pensions if Greece reduced military spending by same amount, the IMF promptly scuttled this suggestion according to FAZ.

So as we enter Sunday and what may well be the last possibility to get deal done before the “accidental” Grexit scenario is put in play, we thought our Greek readers would be interested to learn that while Lagarde’s “apolitical” IMF is digging in tooth and nail against giving Greece even the smallest amount of breathing room, the equivalent of half an our of a typical daily Fed POMO notional amount, yesterday the same Lagarde said that the IMF “could lend to Ukraine even if Ukraine determines it cannot service its debt.

This is the same Ukraine whose bonds last week tumbled by 9% after the country’s American finance minister Natalie Jaresko said Ukraine will default on its debt unless creditors (among which both Russia and the US taxpayer via the IMF in addition to various hedge and mutual funds all used to getting a last minute bailout on their terrible investments) acquiesce to their demands for more aid (i.e., more debt).

Lagarde’s statement also indicates that the Hermes and tanning bad connoisseur does not know the difference between a loan and an equity investment, which is what “lending” to an insolvent Ukraine would be equivalent to.

But more to the point, the very reason why the IMF has kept such a hard line position with Greece is precisely because the IMF alleges that unless Greece takes steps to solvency, the DC-based IMF will no longer give the country funds sourced primarily courtesy of US taxpayers.

In other words, under pressure by someone (and ZH readers know who), what for the IMF is a deal killer in Greece, is not even a small stumbling block when it comes to Kiev.

From Deutsche Welle:

IMF chief Christine Lagarde has reassured Ukraine that funds can still be made available even if the country fails to repay its private creditors. She ruled out resorting to national reserves to avoid defaulting.

 

Christine Lagarde, head of the Washington-based crisis lender, which had launched a four-year loan program of $17.5 billion (15.6 billion euros) in March for Ukraine’s government, said that the IMF was still encouraging a settlement in the debt talks, while highlighting that there were backup options in place.

 

“I believe that their program warrants the support of the international community, including the private sector, which is indispensable for the success of this program,” Lagarde said. She stressed that the IMF did not have to cut off its funding of the Ukraine government if it stopped servicing its private debts.

 

“But in the event that a negotiated settlement with private creditors is not reached and the country determines that it cannot service its debt, the fund can lend to Ukraine consistent with its lending-into-arrears policy,” Lagarde explained.

There actually is such a thing: as the following document reveals there is an “IMF Policy on Lending into Arrears to Private Creditors“, one which a 2006 paper described as merely encouraging moral hazard. Although with the world so far past the point of terminal insolvency, with capital markets centrally-planned from Tokyo to Shanghai to Frankfurt to New York, regional or global moral hazard is the last concern on anyone’s mind.

Also, sadly for Greece which barely has any private creditors left as all the debt has been funneled over to the public sector and the ECB, this loophole is impractical.

Actually, there is one loophole.

When talking about Ukraine, Lagarde ruled out recent speculations saying that Ukraine could use its central bank reserves to pay back creditors. The reserves of the National Bank of Ukraine “cannot be used for sovereign debt service without the government incurring new debt,” which she said ran against the aims of the IMF bailout program for the troubled country.

Actually, the reason why the reserves of Ukraine, whichalready received $5 billion from the IMF loan in March with the proceeds long since sent offshore by criminal, US-muppet politicians, can not be used is simple: with foreign reserves barely there, Ukraine’s true reserve,gold, was long ago confiscated and/or sold in the open market as we reported last November when Ukraine Admitted Its Gold Is Gone: “There Is Almost No Gold Left In The Central Bank Vault.”

Greece however does.

Some 112.5 tons of gold to be precise, or a fraction more than the infamous Bank of International Settlements, which at today’s price of gold is just over $4 billion, or enough to keep Greece solvent for a month or so.

It is also an amount which the BIS, or any other central bank would be delighted to take. Why just today the NY Fed learned it will have to part with another $1 billion in gold to satisfy a suddenly very concerned about its assets state of Texas.

So one wonders: will Greece use its last card, and agree to dump its gold using the proceeds to repay 1-2 months of arrears to the IMF or the ECB which will gladly print the money it needs to purchase all the gold Greece has to sell.

And if so, just how will the Greek population react it when it learns that it too was “Ukrained” and sold out by its corrupt western-puppet politicians to the highest central bank bidder, all of which can print fiat but none can print physical gold?

end
A terrific article from Ambrose Evans Pritchard as he states that the threat of rising USA rates has caused a huge removal of funds from the emerging markets setting off fears of another 1998 market contagion.
(courtesy Ambrose Evans Pritchard/UKTelegraph)

Fed tantrum sets off biggest exodus from emerging markets since 2008

 

A gathering boom in the US brings forward the long-feared moment of Fed tightening, setting off dollar fears and a rush for the exits from emerging markets

 

6:47PM BST 12 Jun 2015
Investors are withdrawing money from emerging markets at the fastest rate since the global financial crisis, raising the risk of a ‘sudden stop’ in capital flows as the US Federal Reserve prepares to turn off the spigot of cheap dollar liquidity.
Data from the tracking agency EPFR show that equity funds in Asia, Latin America, and the emerging world bled $9.27bn in the week up to June 10, surpassing the exodus in the ‘taper tantrum’ in mid-2013 when the Fed first began to hint at monetary tightening.
Jonathan Garner from Morgan Stanley said outflows from onshore-listed equity funds in China reached $7.12bn, the highest ever recorded in a single week. Brazil and Korea also saw large losses.
The pace has quickened dramatically as the US economy gathers steam after a growth scare earlier this year. Signs of incipient wage inflation bring forward the long-feared inflexion point when the Fed finally raises rates for the first time in eight years.
Morgan Stanley said its US tracking indicator for GDP growth in the second quarter has jumped from 1.5pc to 2.7pc over the last week and a half alone as a blizzard of strong figures changes the outlook entirely.

The University of Michigan’s index of consumer sentiment roared back to life in June, jumping from 90.7 to 94.6. It follows news of a surge in US retail sales in May.
Small investors have been pulling funds out of emerging markets for several months but the big pension funds and institutions have until now held firm. There is a danger that these giants could suddenly start  rushing for narrow exits at the same time.
The International Monetary Fund warned in its Global Financial Stability Report in April that the asset management industry now has $76 trillion worth of investments, equal 100pc of world GDP. These funds are prone to “herding” behaviour, and have vastly increased their holdings of emerging market bonds and equities.
The IMF fears a “liquidity storm” once the Fed starts to tighten, causing them to pull out en masse. It has repeatedly called on EM economies to beef up their defences and curb ballooning credit before it is too late. The great worry is what will happen if Fed action causes the dollar to spike dramatically and drives up global borrowing costs, transmitting a double shock through the international financial system.

This would amount to a “margin call” on $9 trillion of off-shore dollar debt, a figure that has exploded from $2 trillion fifteen years ago.
The Bank for International Settlements estimates that emerging markets now account for €4.5 trillion of this dollar debt, an unprecedented sum that escaped control over the last seven years as cheap liquidity from zero rates and quantitative easing in the West spilled into Asia, Latin America, and the rest of the EM nexus.
Many of these countries were unable to defend themselves against a flood of capital, much of it on offer at a real rates of just 1pc, far too low for conditions in fast-growing countries that were then overheating. The inflows set off credit booms that are now unwinding painfully.
They leave a stock of debt that will have to be rolled over in hostile markets, if it is possible at all. The BIS says that the dollar debts of Chinese companies have jumped fivefold to at least $1.1 trillion since 2008.
Emerging markets now account for half of global GDP, twice the level in the early 1990s. They are now so large – with debts to match – that a funding crisis induced by Fed tightening could rock the whole global boat and eventually come back to haunt the US itself.

Adam Slater from Oxford Economics says these economies are already slowing down so fast that they risk tipping world into recession. Brazil and Russia are contracting, and China is slowing sharply.
“Emerging markets have shifted from being a major support to world trade growth to a significant drag. Nothing like this has been seen since the worst period of the global financial crisis in 2008-2009,” he said.
The developed world was able to contain the damage from the Asian crisis and the Russian default in 1998 by cranking up stimulus. This time that may not be so easy. “Policy rates are near zero, large-scale QE is already under way in the Eurozone and Japan, and asset prices are generally pretty elevated already,” he said.
Whether it likes it or not, the Fed is more than ever the world’s superpower central bank in an international system leveraged to the hilt in dollars. Anything it now does risks setting off a global chain-reaction.

end

 

The war of words are intensifying:

(courtesy zero hedge)

China Mocks G7 As “Gathering Of Debtors”, Warns “Confrontation Will Be A Disaster For Europe”

Vladimir Putin didn’t get an invite to the Angela Merkel-hosted G7 Summit in Bavaria last week, which means the Russian President not only missed out on two days at the scenic Castle Elmau, but also on lederhosen shopping with US President Barack Obama who, judging from eyewitness accounts and a variety of amusing photo ops, channeledhis inner Clark Griswold upon touching down in the Bavarian town of Krun. The G7 isn’t pleased with Russia’s ‘behavior’ in Eastern Europe and so, Moscow has been expelled from the cool kids club until such a time as the Kremlin agrees to uphold Western democratic values.

(Obama in Krun)

But the G7 is an equal opportunity exclusionist which means it’s not just former superpowers that aren’t welcome, but rising superpowers as well, which means you won’t be seeing Xi Jinping at the table either.

But “Big Uncle Xi” (as he is affectionately known in China) likely isn’t losing any sleep because in the eyes of Beijing, the G7 — much like the IMF and the ADB — is a relic of a global economic and political order that is well on its way to obsolescence if it isn’t there already.

(Xi Jinping; illustration: The New Yorker)

The Global Times (which, it should be noted, is owned by the ruling Communist Party’s official newspaper, the People’s Daily) has more on why the G7 is largely irrelevant in the modern world.

Via The Global Times:

The G7 summit concluded in Germany last week. Chinese scholars and media barely showed any interest to this outdated informal institution, except for a Declaration on Maritime Security issued by G7 foreign ministers. The declaration expressed their concerns on “unilateral actions” in the South China Sea, with China as the obvious target.

 

Judging from the agenda and outcomes of this year’s G7 summit, it has run counter to the global trend of peace, development and cooperation and become mere of a geopolitical tool.

 

Since the very beginning of the establishment of the G7, it has been a rich-man’s club that consists of Western major powers and aims to maintain the collective hegemony of the US-led West.It used to focus on the world’s economic issues, and then extended to political and security affairs. After the Cold War, Russia was included in this grouping, which almost became the core of global governance and looked as though it might replace the UN Security Council. 

 

However, the other G7 members never treated Russia as an equal partner. Russia was only entitled to discuss politics and security but not financial and economic issues.

 

As the world entered the 21st century, new economies started to emerge and the world’s political and economic center has gradually shifted to the Asia-Pacific.The 2008 global financial crisis forced G7 members into a stalemate, and these nations started to realize that they could only get rid of the crisis with the help of emerging economies. Therefore, the US proposed defining the G20 as the main platform to discuss international economic problems. Within the G20, although the G7, as a sub group, intends to dominate the agenda-setting, the G7 cannot play its role without cooperation from new economies whose voices can be heard more nowadays.

 

Yet countries such as the US and Japan can hardly accept the rising international status of emerging economies and are reluctant to give up their hegemony. When the financial crisis eased slightly, Western media vigorously propagated the “revival” of the G7. But the economic performance of G7 members meant the summit was a gathering of debtors.

 

To some extent, the role of the G7 in global economic governance is negative. The IMF and the World Bank are under the control of G7 members. This is one of the reasons for the low implementation capacity of the G20.

 

In the field of politics and security, Western powers relentlessly promoted the role of the G7. But the G7 has proved to be unable to maintain regional stability, and has led to chaos in the Middle East instead. After the Ukrainian crisis, the West excluded Russia from the original G8, making the current G7 grouping on the way to becoming a Cold War relic.

 

Russia and China are main targets of the discussion at this G7 summit. They decided to continue to impose pressure on Russia amid the ongoing Ukrainian crisis. As for China, they focused on issues around the Asian Infrastructure Investment Bank and the East and South China Sea. But it is worth noting that European members have shown a different stance from the US and Japan on both matters.

 

Whether the G7 will become a geopolitical tool or a Cold War relic largely depends on European countries. Unlike the US, Europe shares a closer geopolitical and economic links with Russia. If the G7 becomes a platform for the confrontation between the West and Russia, it will undoubtedly be a disaster for Europe. Seeking a peaceful solution to the Ukrainian crisis with Russia fits European interests. As for the East and South China Sea disputes thousands of kilometers away from the European continent, these countries needn’t necessarily get involved.

 

During the G7 summit, Japanese Prime Minister Shinzo Abe tried to pull European countries to Japan’s anti-China bandwagon. China should continue to stay wary of the Japanese government.

Obviously this is to be taken with a grain of salt considering it comes directly from the politburo, but nevertheless, there are some important observations here that deserve attention.

For instance, China equates the G7 with the IMF and the World Bank, two institutions which Beijing is well on its way to challenging via the AIIB and The Silk Road Fund. In public, China has been careful to adopt a conciliatory stance towards existing multilateral lenders. This partly reflects the fact that China isn’t eager to ruffle any feathers among the Western countries who took a rather palpable political risk by throwing their support behind the AIIB in the face of fierce opposition from Washington. Beyond that though, adopting an overly critical stance towards institutions whose goals are ostensibly similar to those of the AIIB risks sending the wrong message to countries who depend on supranational institutions for aid. That said, equating the IMF, The World Bank, and the ADB with the G7 before subsequently calling the latter a “Cold War relic” is a kind of backdoor way of suggesting that the G7-dominated multilateral institutions are, by virtue of their leadership, hurtling towards irrelevancy.

Further, the assertion that “the economic performance of G7 members [means] the summit [is] a gathering of debtors” is on the one hand hypocritical (China, after all, is sitting on $28 trillion in debt) but on the other hand speaks to the fact that, even as China’s economic growth slows as Beijing marks a difficult transition from an investment-led economy to a consumption driven model, economic growth in the West has simply stalled out altogether and as for Japan, well, Tokyo has been grappling with a deflationary nightmare for decades, something Abenomics has so far failed to correct. In other words, China’s economic miracle may be “landing hard” so to speak, but there’s certainly an argument to be made that even in its crippled state, the Chinese economic machine is still capable of outperforming the West.

Finally, and perhaps most importantly, China suggests Washington’s dominance has led the G7 to pursue myopic foreign policies that have conspired to stoke sectarian chaos in the Middle East (it’s now almost impossible for the US to keep track of where it supports Shiite militias and where it backs Sunni militants) and create the conditions for a second Cold War in Eastern Europe. The deliberate exclusion of Russia, Beijing says, risks transforming the G7 into what is effectively the political arm of NATO, which undercuts the institution’s ability the foster peace and cooperation.

Again, some of this is propaganda served hot and fresh straight from the Communist Party kitchen. That said, the underlying geopolitical analysis is spot-on even if it’s presented with a hyperbolic veneer.

The G7, like the IMF and the World Bank, is quickly falling victim to the arrogance of its most powerful members. If an overriding sense of Western exceptionalism is allowed to create the same type of complacency and rigidity that has paralyzed the IMF, it may not be long before the world’s emerging powers supplant entrenched political bodies much as they have moved to supersede ineffectual economic institutions.

end

 

Oil related stories:

 

(courtesy Robert Rapier/OilPrice.com)

Don’t Believe The Hype On U.S. Shale Growth

Submitted by Robert Rapier via OilPrice.com,

The OPEC Free Fall

There is a popular narrative going around that I want to address in today’s article. Last November, after several months of plummeting crude oil prices, the Organization of the Petroleum Exporting Countries (OPEC) met to discuss the oil production quotas for each country in the months ahead. Many expected OPEC to cut production in order to shore up crude prices that had been falling since summer. This was the strategy favored by OPEC’s poorer members, as many require oil prices at $100/barrel (bbl) in order to balance government budgets.

Instead, OPEC announced that they would continue pumping at the same rate. They chose to defend market share against the surge of supply from U.S. shale producers, and in doing so the fall in the price of crude oil accelerated. A look at the U.S. rig count shows the swift impact to U.S. shale drillers in the aftermath of that meeting:

USRigCountDrop

Rig counts went into free-fall after it became clear that OPEC was not interested in propping up the price of oil for the benefit of rapidly expanding shale oil producers. While that approach hurt OPEC’s income in the short term, it also immediately impacted rig counts in the shale oil fields. But — and here is the narrative — shale oil producers continue to make gains in production even as rig counts have been slashed because they are becoming more and more efficient

Dissecting the Narrative

There is some truth to the narrative. Yes, oil production has continued to grow even though rig counts have plummeted. The week before OPEC’s meeting last November, the number of rigs drilling for oil stood at 1,574. Oil production that week was 9.1 million bpd. Today, with the rig count at 642, production is 9.6 million bpd — a gain of just over half a million bpd.

Yes, producers are getting better at squeezing oil and gas from these shale formations. And natural gas production has indeed continued to expand for years despite a sharp drop in the rigs drilling for gas.

But oil production isn’t expected to follow the same pattern as natural gas. The gains are already slowing as a result of the drop in rig counts. There have been some weekly declines recently, and the Energy Information Administration (EIA) is projecting a 91,000 bpd drop over the next month.

Bloomberg put together a nice graphic showing the expected impact in the country’s shale oil basins:

America'sShaleOutput

OPEC’s Latest Decision

Leading up to OPEC’s June 5th meeting, there had been much speculation about the direction OPEC might go now that one of its key objectives had been achieved. Most believed it wouldn’t do anything drastic enough to shake up the oil markets again. I placed the odds of either a big production cut or a production increase at under 10%. I estimated a 40% chance that production would be left unchanged, and a somewhat greater than 50% probability of a modest production cut.

There was risk either way. Leaving production unchanged ran the risk of sending crude prices back toward $40/bbl. This would the hurt poorer members of OPEC, which have historically favored higher prices. On the other hand, low prices would continue to slow down the U.S. shale oil boom.

A modest production cut would have satisfied OPEC’s poorer countries, but would have also likely boosted oil prices toward $70/bbl. This would start to bring marginal shale oil production back online.

There were also variations of these two outcomes. OPEC could have announced production cuts but not actually made any. The organization is notorious for exceeding its production quotas, so that wouldn’t have been a big surprise. Or, it could have left production unchanged, while attempting to talk up the demand side of the equation in order to limit a marker overreaction. That is in fact exactly what OPEC did.

In announcing a decision to leave production unchanged — the same decision that led to last winter’s plunge toward $40/bbl — OPEC noted that world oil demand is forecast to increase in 2015 and in 2016, with growth driven by developing countries. On the supply side, non-OPEC growth in 2015 is expected to drop below 700,000 barrels per day, about one-third of the supply growth in 2014. With supplies expected to tighten in the months ahead, OPEC therefore saw no need to cut production.

While the exporters’ club is certainly known for self-serving statements, I believe it is correct here in noting the trajectory of supply and demand in the months ahead. Shale oil production growth is going to continue to slow (if not decline), while global demand growth will start to outpace the new supplies coming online. By leaving the production quotas unchanged OPEC is letting growing demand catch up to North American output growth, and counting on this to prevent an extended slump.

It is interesting to note that the price of WTI has already moved up 6% in the wake of the OPEC meeting. It looks like traders accept the tightening supply narrative, which runs contrary to the narrative that shale oil production will continue its growth trajectory at $60/bbl oil due to the increased efficiency of the shale oil extraction technologies.

The odds look good that OPEC will also have to accommodate production from Iran should sanctions soon be lifted as anticipated. But this won’t impact the global supply/demand balance for a few months, and is something that will probably be a big topic at OPEC’s next meeting in December.

 end

Your more important currency crosses early Monday morning:

Euro/USA 1.1209 down .0048

USA/JAPAN YEN 123.64 up .408

GBP/USA 1.5492 down .0050

USA/CAN 1.2356 up .0056

This morning in Europe, the Euro fell by a considerable 48 basis points, trading now just above the 1.12 level at 1.1209; 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 41 basis points and trading just below the 124 level to 123.64 yen to the dollar.

The pound was down this morning as it now trades just below the 1.55 level at 1.5492, 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 56 basis points at 1.2356 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 down 19.29 points or 0.09%

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

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

Gold very early morning trading: $1176.80

silver:$15.93

 

Early Monday morning USA 10 year bond yield: 2.37% !!! down 1 in basis points from Friday 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 Monday morning: 95.31 up 33 cents from Friday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Monday morning

 

And now for your closing numbers for Monday:

 

Closing Portuguese 10 year bond yield: 3.25%  up 21 in basis points from Friday (very ominous)

Closing Japanese 10 year bond yield: .51% !!! down 1 in basis points from Friday/very ominous/central bank intervention

Your closing Spanish 10 year government bond, Monday, up 16 points in yield ( very ominous)

Spanish 10 year bond yield: 2.41% !!!!!!

 

Your Monday closing Italian 10 year bond yield: 2.36% up 14 in basis points from Friday: (very ominous)

trading 5 basis point lower than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

Euro/USA: 1.1286 up .0020 ( Euro up 2- basis points)

USA/Japan: 123.37 up  .065 ( yen down  7 basis points)

Great Britain/USA: 1.5608 up .0055 (Pound up 55 basis points)

USA/Canada: 1.2312 down .0004 (Can dollar up 4 basis points)

The euro rose marginally today. It settled up 20 basis points against the dollar to 1.1286 as the dollar moved aimlessly against most of the various major currencies. The yen was down by 7 basis points and closing well above the 123 cross at 123.37. The British pound gained some  ground today, 55 basis points, closing at 1.5608. The Canadian dollar gained a little ground against the USA dollar, 4 basis points closing at 1.2312.

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: 2.36% down 3 in basis point from Monday// (well above  the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

94.77 down 20 cents on the day

.

European and Dow Jones stock index closes:

England FTSE down 74.40 points or 1.10%

Paris CAC down 85.83 points or 1.75%

German Dax down 211.52 points or 1.89%

Spain’s Ibex down 188.40 points or 1.71%

Italian FTSE-MIB down 549.78 or 2.40%

 

The Dow down 107.67  or 0.60%

Nasdaq; down 21.13 or 0.42%

 

OIL: WTI 59.55 !!!!!!!

Brent:62.28!!!!

 

Closing USA/Russian rouble cross: 54.55  up 3/4  roubles per dollar on the day

 

end

 

And now for your more important USA stories.

NY trading for today:

Dismal Data & “No Deal” Drive Down Dow To Red Close For 2015

More lines crossed…

 

To clarify, Greece is as close to Grexit as it has ever been and US data is dismal… and stocks are bid, bonds offered, and EUR is being horded.

Futures show the real fun and games in markets today… Futures gapped lower on the Sunday open, then plunged as US liquidity began to arrive (pre-Open) – only to be rescued back miraculously…

 

Cash indices all opened gap down and tried their best to rally back…but ended slightly lower with a weak close…

 

Despite their best efforts at a late ramp, The Dow closes red for 2015!

 

Notably stocks were unable to recover the losses from last week’s Greek Deal Rumor levitation…

 

VIX saw its biggest 2-day surge since January from Thursday’s 12.56 lows to 15.57 highs today…

 

Credit protection costs are also soaring (more than than underlying stocks)

 

The Dollar fell notably today as early EUR weakness was aggressively bid (by someone) as the US session started (and dismal data suggested delayed rate hikes) but then as Greek Capital Controls news hit, dipped and ripped…

 

Led by a surge in Swissy…

 

 

Treasury Yields dumped early after weak data exaggerated Grexit anxiety bid… but then the ‘sellers’ arrived…

 

Commodities were mixed with Gold and Silver well bid at the European close (only to fade) and Crude and copper weak all day (after China stock weakness)

 

Charts: Bloomberg

end
The all important USA empire manufacturing survey plunges again to levels last seen in Jan 2013.  Inventory optimism crashes by the most ever on record.
(courtesy USA NY Empire Manufacturing survey/zero hedge)

US Empire Fed Manufacturing Survey Plunges To Lowest Since January 2013 As Inventory Optimism Crashes By Most Ever

Empire Fed Manufacturing has now missed expectations for 8 of the last 9 months. June’s -1.98 print (against hopes for a post-weather bounce to 6.00 from 3.09) is the lowest since January 2013. With only 26% of respondents saying conditions had improved, New orders tumbled, Prices Received slid, shipments dropped and inventories fell… but employment and workweek increased? What hope for the future – less! General Business conditions 6-month ahead fell for the 2nd consecutiuve month with th emost crucial aspect being a total and utter collapse in future inventories from 3.13 to -17.31

The headline was the weakest since Jan 2013…-

 

And future optimism is waning…

The index for future general business conditions fell for a second consecutive month. The four-point drop, to 25.8, signaled that optimism about the six-month outlook ebbed further in June. The future new orders index fell eight points to 26.1, and the index for future shipments fell ten points to 22.1. The future inventories index plunged twenty points to -17.3, suggesting a widespread belief that inventory levels would decline in the months ahead. Indexes for future prices paid and received were little changed. The index for future employment declined for a third consecutive month but, at 13.5, it still suggested that manufacturers expected employment levels to rise. The capital expenditures index moved down four points to 11.5, and the technology spending index fell to -1.0.

And most critically…

The future inventories index plunged twenty points to -17.3, suggesting a widespread belief that inventory levels would decline in the months ahead

 

 

This the biggest crash in inventory optimism ever

This does not bode well for Q4 GDP!

Charts: Bloomberg

 

end
USA Industrial production weakest since Jan 2010 as it flashes a huge red flag (recession)
(courtesy zero hedge)

US Industrial Production Weakest Since January 2010, Flashes Recessionary Red Flag

US Industrial production has missed expectations for 4 of the last 5 months (not seen outside recession) and has not seen notable MoM gains for 6 months in a row (not seen outside recession). Against expectations of a 0.3% gain, IP dropped 0.2% in May (not what the meteorconomists were hoping for). Without the over-stocking of motor vehicles, the number would have been a total disaster as Autos rose 1.&% MoM (the only industry to gain) but the 7.9% plunge in drilling/servicing at oil/gas wells is “unequivocally bad.” At 1.37% YoY growth, this is the weakest industrial production since January 2010. Minor upward revisions stalled the MoM drop streak but US factory output has now fallen YoY 6 months in a row (not seen outside recession) for the biggest drop in over 4 years.

MoM it’s ugly…

 

But YoY is flashing recessionary red!

 

“The global economic situation is not ideal,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in Stamford, Connecticut, said before the report.

 

Charts: Bloomberg

end
California’s water situation goes from bad to worse:
(courtesy AP)

California Water Wars Escalate: Government Orders Massive Supply Cuts To Most Senior Rights Holders

Just two weeks after California’s farmers – with the most senior water rights – offered to cut their own water use by 25% (in an attempt to front-run more draconian government-imposed measures), AP reports that the California government has – just as we predicted – ignored any efforts at self-preservation and ordered the largest cuts on record to farmers holding some of the state’s strongest water rights. While frackers and big energy remain exempt from the restrictions, Caren Trgovcich, chief deputy director of the water board, explains, “we are now at the point where demand in our system is outstripping supply for even the most senior water rights holders.”

 

With “the whole damn state out of water,”AP reports State water officials told more than a hundred senior rights holders in California’s Sacramento, San Joaquin and delta watersheds to stop pumping from those waterways.

The move by the State Water Resources Control Board marked the first time that the state has forced large numbers of holders of senior-water rights to curtail use. Those rights holders include water districts that serve thousands of farmers and others.

 

The move shows California is sparing fewer and fewer users in the push to cut back on water using during the state’s four-year drought.

 

“We are now at the point where demand in our system is outstripping supply for even the most senior water rights holders,” Caren Trgovcich, chief deputy director of the water board.

 

The order applies to farmers and others whose rights to water were staked more than a century ago. Many farmers holding those senior-water rights contend the state has no authority to order cuts.

 

The reductions are enforced largely on an honor system because there are few meters and sensors in place to monitor consumption.

 

California already has ordered cuts in water use by cities and towns and by many other farmers..

 

The move Friday marked the first significant mandatory cuts because of drought for senior water rights holders since the last major drought in the late 1970s. One group of farmers with prized claims have made a deal with the state to voluntarily cut water use by 25 percent to be spared deep mandatory cuts in the future.

 

The San Joaquin River watershed runs from the Sierra Nevada to San Francisco Bay and is a key water source for farms and communities.

 

Thousands of farmers with more recent, less secure claims to water have already been told to stop all pumping from the San Joaquin and Sacramento watersheds. They are turning to other sources of water, including wells, reservoirs and the expensive open market.

 

Some farmers have built their businesses around that nearly guaranteed access to water.

 

Jeanne Zolezzi, an attorney for two small irrigation districts serving farmers in the San Joaquin area, says she plans to go to court next week to stop the board’s action. She said her clients include small family farms that grow permanent crops such as apricots and walnuts without backup supplies in underground wells or local reservoirs they can turn to when they can’t pump from rivers and streams.

 

“A lot of trees would die, and a lot of people would go out of business,” said Zolezzi. “We are not talking about a 25 percent cut like imposed on urban. This is a 100 percent cut, no water supplies.”

 

California water law is built around preserving the rights of such senior-rights holders. The state last ordered drought-mandated curtailments by senior-water rights holders in 1976-77, but that order affected only a few dozen rights holders.

*  *  *

As NASA concluded previously, as difficult as it may be to face, the simple fact is that California is running out of water — and the problem started before our current drought. NASA data reveal that total water storage in California has been in steady decline since at least 2002, when satellite-based monitoring began, although groundwater depletion has been going on since the early 20th century.

Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

In short, we have no paddle to navigate this crisis.

Several steps need be taken right now.

First, immediate mandatory water rationing should be authorized across all of the state’s water sectors, from domestic and municipal through agricultural and industrial. The Metropolitan Water District of Southern California is already considering water rationing by the summer unless conditions improve. There is no need for the rest of the state to hesitate. The public is ready. A recent Field Poll showed that 94% of Californians surveyed believe that the drought is serious, and that one-third support mandatory rationing.

 

Second, the implementation of the Sustainable Groundwater Management Act of 2014 should be accelerated. The law requires the formation of numerous, regional groundwater sustainability agencies by 2017. Then each agency must adopt a plan by 2022 and “achieve sustainability” 20 years after that. At that pace, it will be nearly 30 years before we even know what is working. By then, there may be no groundwater left to sustain.

 

Third, the state needs a task force of thought leaders that starts, right now, brainstorming to lay the groundwork for long-term water management strategies.Although several state task forces have been formed in response to the drought, none is focused on solving the long-term needs of a drought-prone, perennially water-stressed California.

end
Not good news for many:
i. shutting down 25% of its specialty stores (175 stores)
ii thousands of terminations will ensue because of these closing
iii. head office terminations
(courtesy zero hedge)

Gap To Fire Thousands, Close A Quarter Of All Specialty Locations

Either the winter that is coming will knock the socks right out of the pre-quadruple seasonally adjusted GDP and the Gap knows all about this, or the much-hyped economic recovery, of which the US is supposedly in the 6th year now, has been nothing but a myth and a lie.

Moments ago, one of the biggest clothing retailers in the US confirmed the worst nightmares about the state of US consumer spending, when it reported that it would shut down over 25% of all of its specialty stores in the US, or about 175 (of which 140 will be shut in the current year), leaving the firm just 500 specialty locations and 300 outlet stores. And, in addition to the thousands of job terminations these closures would entail, the company will further fire another 250 in its headquarters.

Why? As the company admits: “To Increase Productivity and Profitability”, to “deliver more consistent and compelling product collections and engage customers across all channels”, because “Our customers and employees want Gap to win.”

Well, maybe not the employees, and certainly not those that are not only about to get a modest severance package, but will make the BLS’s role of painting the mass terminations “recovery” that much harder.

Oh well, that’s what double, triple, quadruple and so on seasonal adjustments are for.

From the press release:

Gap Inc. Announces Strategic Initiatives to Increase Productivity and Profitability of Namesake Brand

Gap today announced a series of strategic actions to position Gap brand for improved business performance and build for the future. Following a thorough evaluation of its business and operations, Gap plans to right-size its specialty store fleet and streamline its headquarter workforce, primarily in North America, as part of the comprehensive effort to deliver more consistent and compelling product collections and engage customers across all channels.

“Returning Gap brand to growth has been the top priority since my appointment four months ago – and Jeff and his team bring a sense of urgency to this work,” said Art Peck, Gap Inc. chief executive officer. “Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.”

In order to drive productivity improvements and showcase the brand in the most successful locations, Gap will close about 175 specialty stores in North America over the next few years, with about 140 closures occurring this fiscal year. These changes will not impact Gap Outlet and Gap Factory Stores. In parallel with these moves, the brand will close a limited number of European stores during this period.

Following the fleet optimization effort, the brand will continue to serve North American customers through about 800 Gap stores – comprised of 500 Gap specialty locations and 300 Gap outlet stores – as well as its dynamic online channels, better reflecting the way today’s customers shop across specialty, outlet and online. The brand will continue to have a robust global presence in more than 50 countries and with about 1,600 company-operated and franchise locations globally.

Our customers and employees want Gap to win,” said Jeff Kirwan, global president for Gap. “We’re focused on offering consistent, on-brand product collections and enhancing the customer experience across all of our channels, including a smaller, more vibrant fleet of stores.”

Since Kirwan was appointed to lead Gap in December 2014, he’s rebuilt the leadership team and implemented an aggressive agenda designed to strengthen the brand and successfully compete on the global stage. The team is driving towards a clear, on-brand product aesthetic framework focused on optimistic and elevated American style, while also rebuilding the brand’s product operating model to increase speed, predictability and responsiveness, and enable greater competitiveness.

To speed decision making and responsiveness, Kirwan also announced decisions meant to align Gap’s organization in support of its new product operating model. This will result in the reduction of the brand’s headquarter workforce, primarily in North America, by approximately 250 roles during fiscal year 2015.

Kirwan added, “These decisions are very difficult, knowing they will affect a number of our valued employees, but we are confident they are necessary to help create a winning future for our employees, our customers and our shareholders.”

The company estimates an annualized sales loss of approximately $300 million associated with the store closures. Additionally, the company estimates one-time costs primarily associated with these actions to be in the range of approximately $140 million to $160 million, of which about $55 million to $75 million is non-cash. These costs are expected to be recognized primarily in the second quarter of fiscal year 2015 and include lease buyouts, asset impairments primarily related to the Gap fleet, inventory and fabric write-offs, and employee related costs associated with organizational changes.

The company estimates annualized savings from these actions to be approximately $25 million, beginning in 2016.

Excluding the estimated pre-tax costs of $140 million to $160 million referenced above, or approximately $0.21 to $0.24 per diluted share, the company is reaffirming its guidance for fiscal year 2015 to be in the range of $2.75 to $2.80. This guidance is provided to enhance visibility into the company’s expectations regarding its ongoing business excluding the Gap brand optimization effort.

end

Well that about does it for tonight
I will see you Tuesday night
Harvey
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One comment

  1. john mcmullan · · Reply

    stop the dollar on Saudi oil, no driving on either sat. or sun.stay home stay cool watch the results.yes you can fight your government without violence.peace.

    Like

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