June 18/Scotia continues to remove gold from its eligible category at the comex/Silver OI remains extremely high/No deal with respect to Greece/Emergency meeting set for tomorrow with respect to ELA for Greece/France and Belgium are set to confiscate Russian property due to Yukos ruling/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:


Gold:  $1201.50 up $25.10 (comex closing time)

Silver $16.15 up 19 cents.

In the access market 5:15 pm


Gold $1201.70

Silver: $16.19


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


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


At the gold comex today, we had a poor delivery day, registering 6 notices serviced for 600 oz.  Silver comex filed with 0 notices for nil oz.


Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 244.48 tonnes for a loss of 59 tonnes over that period.


In silver, the open interest fell slightly by 730 contracts even though Wednesday’s silver price was down by only 2 cents.   The total silver OI continues to remain extremely high with today’s reading at 191,044 contracts now at multi-year highs despite a record low price. In ounces, the OI is represented by 955 million oz or 136% of annual global silver production (ex Russia ex China). This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end as they continue to raid as basically they have no other alternative.

In silver we had 0 notices served upon for nil oz.

In gold,  the total comex gold OI rests tonight at 417,229 for a gain of 1,511 contracts as gold was down by $4.00 yesterday. We had 6 notices filed for 600 oz.

we had no change in gold inventory at the GLD; thus the inventory rests tonight at 701.90 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, /no change in inventory at the SLV/327.874 million oz

We have a few important stories to bring to your attention today…

1. Today, we had the open interest in silver fall by 730 contracts to 191,044 despite the fact that silver was down by only 2 cents on Wednesday.. The OI for gold rose by 1511 contracts up to 417,229 contracts despite the fact that the price of gold was down by $4.00 yesterday.

(report Harvey)

2. Today, 10 important commentaries on Greece

zero hedge, Reuters/Bloomberg)

 3.  Koos Jansen tackles the inventory at the Bank of England and the entire LBMA
(Koos Jansen)

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. Craig Hemke of TFMetals discusses why Scotia has been removing huge amounts of gold inventory from the eligible category.

(Craig Hemke/Turd Ferguson/GATA)

8. Michael Kosares and Alasdair Macleod have each written a commentary at the GATA site:

Kosares: the refusal of the USA to raise interest rates.This will cause  speculative bubbles to appear.

Macleod: the central banks around the world are struggling to keep asset prices higher.


9. Hugo Salinas Price discusses the ramifications of a rise in global interest rates.

(Hugo Salinas Price)

10. Belgium and France are about to confiscate Russian property in their respective countries due to the Yukos ruling.  The courts gave the Russians until June 15.2015 to comply.  The refused and now, both France and Belgium have decided to immediately confiscate Russian property.

(zero hedge)

11.  USA CPI results and Philly Fed Index report

(zero hedge)

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

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

Here are today’s comex results:

The total gold comex open interest rose by 1511 contracts from 415,718 up to 417,229 despite the fact that gold was down $4.00  yesterday (at the comex close).  We are now in the big active delivery contract month of June.  Here the OI fell by 53 contracts down to 576. We had 0 notices served upon yesterday.  Thus we lost 53 contracts or an additional 5300 oz will not stand for delivery as they were no doubt cash settled.  The next contract month is July and here the OI fell by 0 contracts remaining at 587.  The next big delivery month after June will be August and here the OI rose by 848 contracts  to 274,492.  The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 123,503. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was poor at 106,284 contracts. Today we had 6 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI fell by 730 contracts from 191,774 down to 191,044 despite the fact that the price of silver was down by only 2 cents, with respect to Wednesday’s trading and behaving quite opposite to that of gold. We continue to have our bankers pulling their hair out with respect to the continued high silver OI.  The front non active  delivery month of June saw it’s OI fall by 0 contracts and remaining at 27. We had 0 contracts delivered upon yesterday.  Thus we neither gained nor lost any silver contracts that will stand for delivery in this non active June contract month.The next delivery month is July and here the OI surprisingly fell by only 2,155 contracts down to 80,469. We have less than two weeks left to go before first day notice on June 30. The estimated volume today was fair at 36,459 contracts (just comex sales during regular business hours. The confirmed volume on day (regular plus access market) came in at 50,032 contracts which is very good in volume. We had 0 notices filed for nil oz today.

June initial standing

June 18.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 41,373.363 (Scotia) oz
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 110,390,321 oz (Delaware, HSBC)
No of oz served (contracts) today 6 contracts (600 oz)
No of oz to be served (notices) 570 contracts (57,000 oz)
Total monthly oz gold served (contracts) so far this month 2655 contracts(265,500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month nil
Total accumulative withdrawal of gold from the Customer inventory this month  457,440.4  oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz

we had 0 dealer deposit

total dealer deposit: nil oz
we had 1 customer withdrawal

i) Out of Scotia: 41,373.363 oz  (please read Turd Ferguson as he has been watching the huge withdrawal from Scotia vaults in the last 3 months)


total customer withdrawal: 41,373.363 oz

We had 2 customer deposits:

i) Into Delaware: 100.000 oz ????

ii) Into HSBC: 110,290.321 oz

Total customer deposit: 110,390.321 oz

We had 0  adjustments:


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 6 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 4 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 (2655) x 100 oz  or 265,500 oz , to which we add the difference between the open interest for the front month of June (576) and the number of notices served upon today (6) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2655) x 100 oz  or ounces + {OI for the front month (576) – the number of  notices served upon today (6) x 100 oz which equals 322,500 oz standing so far in this month of June (10.0311 tonnes of gold).  Thus we have 10.19 tonnes of gold standing and only 17.07 tonnes of registered or for sale gold is available.  We lost 53 contracts or 5300 oz to probable cash settlements.

Total dealer inventory 548,844.869 or 17.07 tonnes

Total gold inventory (dealer and customer) = 7,860,171.829 (244.48 tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 244.48 tonnes for a loss of 59 tonnes over that period.



And now for silver

June silver initial standings

June 18 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 90,338.67 oz (Scotia,HSBC)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  nil
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 5,158,941.3 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:


total dealer withdrawal: nil  oz

We had 0 customer deposits:


total customer deposit: nil  oz

We had 2 customer withdrawals:

i) Out of Scotia: 60,312.370 oz

ii) Out of HSBC: 30,026.300 oz

total withdrawals from customer; 90,338.67 oz

we had 0 adjustment

Total dealer inventory: 57.840 million oz

Total of all silver inventory (dealer and customer) 180.603 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



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 18/no change in gold inventory/rests tonight at 701.90 tonnes

June 17/no change in gold inventory/rests tonight at 701.90 tonnes

June 16./no change in gold inventory/Rests tonight at 701.90 tonnes.

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 18 GLD : 701.90  tonnes.




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

June 18 no change in silver inventory/327.874 million oz

June 17/no change in silver inventory/327.874 million oz

June 16./no change in silver inventory/327.874 million oz

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 18/2015: no change in silver inventory/SLV inventory rests tonight at 327.874 million oz


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

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

1. Central Fund of Canada: traded at Negative 7.9% percent to NAV in usa funds and Negative 7.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.7%

Percentage of fund in silver:37.9%

cash .4%

( June 18/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to +.27%!!!!! NAV (June 18/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .35% to NAV(June 18/2015

Note: Sprott silver trust back  into positive territory at +.27%.

Sprott physical gold trust is back into negative territory at -.35%

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.
* * * * *


Early morning trading from Asia and Europe last night:


Gold and silver trading from Europe overnight/and important physical


(courtesy Mark O’Byrne/ Steve Flood/Goldcore)

Please read …very important today.

Russia Buy Gold Bullion For “Principles Of Diversification” – Central Bank Governor

Russia “bought gold” for “diversification” – Russian Central Governor Nabiullina
– Russian central bank prefers gold bullion to euros or dollars
–  Russia points out that other countries have a  “bigger share of gold in their reserves” (laugh!!)
– “Can’t imagine a situation where bitcoins would be considered a reserve currency”
– On bitcoin – sees “mobility”, “expediency” and “low cost” but may regulate

Russian Central Bank Governor, Elvira Nabiullina

The Russian Central Bank Governor told CNBC this morning that Russia has bought and will continue to buy gold bullion for “principles of diversification.”

In an interview with Geoff Cutmore of CNBC, Elvira Nabiullina was asked

Why would you be adding significant amounts of gold at this time when you could be taking euros or dollars or other foreign currencies to makeup reserves?”

Elvira Nabiullina said that the Russian central bank believes in diversification and bases itself

“upon the principles of diversification of our international reserves and we bought gold not only last year but during the previous years. Our gold mining industry is very well developed and it is ready to supply gold. That is why our attitude towards here is based upon diversification of our reserves.”

When asked whether Russia was buying gold produced in Russia in order to support the Russian gold industry as they may be struggling to export gold abroad, she disagreed and said that Russia does not have the “objective” of “supporting any specific industry” and she pointed out that Russia’s gold reserves are still quite small when compared to other countries – presumably referring to the U.S., believed to be the largest holder of gold reserves.

In terms of the share of gold, actually we are not holding the records because there are countries that have a bigger share of gold in their reserves.”

Cutmore also asks Nabiullina for her view on bitcoin as a currency or means of exchange and whether Russia would consider holding bitcoin as a reserve currency.

Nabiullina is balanced and quite positive on bitcoin but completely dismisses the possibility of using it as a reserve currency. At the same time, she realises the benefits of crypto currencies and specifically mentions “mobility”, “expediency” and “low cost.”


Russia, like all governments, is monitoring bitcoin and cryptocurrencies and should they become popular and enter the mainstream, they will seek to regulate.

Cutmore: I understand you have been looking at bitcoin, can you see a time in the near future where you may be looking to hold any reserves of bitcoin or you might authorize the use of bitcoin in Russia as a legitimate currency of exchange?

Nabiullina: So far I can’t imagine a situation where bitcoins would be considered a reserve currency but we are looking at how this market is developing, we are noting certain risks there and we’ve informed the market players that we identify these risks and because there are many representatives in that particular sector that could be resorted to some dubious operations and transactions. You know the kind of policy we conduct about dubious transactions, but we are watching over the development of this market and see that for consumers there are certain attractions in bitcoin’s mobility, expediency, low cost, so this is something definitely the market will be welcoming so we will be watching with attention and, if necessary, regulate it.

Regarding the Russian economy, she says it is quite stable despite Western sanctions.

“Sanctions are actually negative for everyone who is affected by them, they erode traditional trade ties and they decrease the potential for developing the economy and the potential for increasing workplaces,” Nabiullina said.

She said that the Russian economy could withstand any developments in the economic sense.

“We have both accumulated buffers and gold currency reserves, and we have introduced a floating currency exchange rate in order to absorb various shocks,” Nabiullina added.

The United States, the EU and a few other countries have introduced several rounds of sanctions against Russia since 2014, accusing it of meddling in Ukraine. The restrictions target several individuals, as well as Moscow’s banking, energy and defense sectors.

On Wednesday, an EU source familiar with the EU leadership told a Russian news agency that the sanctions would be extended until next January, without introduction of new restrictions.

Russia has repeatedly denied its involvement in the Ukrainian conflict, and introduced responsive measures in August 2014, banning certain food imports from the countries that imposed restrictions on Russia. Yesterday, Russian Economic Development Minister Alexei Ulyukayev said that Russia would continue the food embargo if the EU extended their sanctions.

A transcript of the CNBC interview can be read here
The video segments regarding gold and bitcoin do not appear to have been released

Download Guide:  Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold



Today’s AM LBMA Gold Price was USD 1,198.00, EUR 1,050.65 and GBP 752.42 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,181.70, EUR 1,045.65 and GBP 748.92 per ounce.

Gold rose $5.40 or 0.46 percent yesterday to $1,187.10 an ounce. Silver climbed $0.15 or 0.94 percent to $16.17 an ounce.

Gold in USD - 1 Week

Gold in Singapore for immediate delivery rose 0.3 percent to $1,188.16 an ounce near the end of day trading in Asia prior to good gains being seen in London which saw gold rise 1 per cent to touch $1,199 per ounce.

Yellen’s dovish comments that hinted the U.S. Fed rate hike may come later and more slowly than the market expected and decreased economic forecasts helped gold push higher yesterday and those gains have been built on today due to concerns that D-Day for Greece and its creditors fast approaches.

Market participants are now focussed on Greece who may exit the euro if they can not come to an agreement with their creditors. Gold is pushing back towards the important $1,200 level as concerns about Greece and the ramifications of a Greek default deepen.

Euro zone finance ministers meet later today in a desperate attempt to find a last minute sticking plaster for the gaping wound that is  Greece. Expectations are low that Greece and its international creditors will reach a deal to prevent the cash-strapped country from defaulting at the end of this month.

The Bank of Greece said yesterday the country’s future in the EMU and the EU itself could also be at risk without a deal, underlining the extent to which officials who once refused any suggestion of “Grexit” are now openly discussing the prospect.

The Fed voted to keep the current near-zero interest rate and said a hike would only be appropriate after the labour market sees improvement. The Fed’s board of governors have been at loggerheads over the timing of the interest rate hike.  Some are in favor of hiking rates only once in 2015 and others believe it should wait until 2016.

In late European trading gold is up 1.1 percent at $1,198.66 an ounce. Silver is up 1.4 percent at $16.40 an ounce, and platinum is up 0.97 percent at $1,090.50 an ounce.




Another great commentary from Hugo.  Today he discusses the problem of huge amounts of debt and what happens when many wish to liquidate their holdings in bonds.

(courtesy Hugo Salinas Price/GATA)


Hugo Salinas Price: The coming liquidation


8p ET Wednesday, June 17, 2015

Dear Friend of GATA and Gold:

If interest rates continue rising, banks and other bond investors stand to lose everything they made as rates were being pushed down by central banks, Hugo Salinas Price of the Mexican Civic Association for Silver writes today, adding that rising interest rates may explode all sorts of derivative instruments.

Salinas Price writes: “Banking systems are investors in bonds, and bonds make up an important part of their assets. In Europe, if the assets of the banking system fall by only 4 percent, then the whole European banking system is bankrupt. A collapse in bond prices caused by rises in interest rates would be deadly for the whole European banking system, and if Europe collapses, the rest of the world would have to follow suit.”

Salinas Price’s commentary is headlined “The Coming Liquidation” and it’s posted at the association’s Internet site, Plata.com, here:


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


(courtesy Bloomberg/GATA)

Deutsche Bank FX trader admits manipulation of markets by central banks


And at Deutsche Bank they should know all about market rigging. Unfortunately the Bloomberg reporter lacked the sense or nerve to ask the guy to specify the markets most under manipulation.

* * *

You’ve Been Warned: Central Bankers Turning Less Market-Friendly

By Simon Kennedy
Bloomberg News
Wednesday, June 17, 2015

Some things seem permanent. Greece is fighting for a bailout. A Bush and a Clinton are running for the White House. FIFA is plagued by scandal.

But for those who track the world’s central banks, change is afoot.

Having soothed investors for the past seven years with low interest rates, bond buying, and other interventions aimed at shoring up weak economies, monetary policy makers are slowly stepping out of markets in a variety of ways.

That leaves investors facing renewed bouts of the volatility that marked recent weeks. A record number of investors told Bank of America Merrill Lynch this month that they have taken out protection against falling stocks over the next three months.

“2015 will go down as the year when major central banks hit an inflection point in their willingness to distort and manipulate markets,” said Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG in New York. “This mix of overt and subtle withdrawal of market support is a key macro driver of recent increased volatility.” …

… For the remainder of the report:




Mike Kosares and Alasdair Macleod

(courtesy Kosares/Macleod)

Kosares — Fed’s influence failing; Macleod — markets will beat central banks


3:16p ET Thursday, June 18, 2015

Dear Friend of GATA and Gold:

USAGold proprietor Mike Kosares writes today that the Federal Reserve’s continued reluctance to raise interest rates, demonstrated again this week, will trigger still more speculative bubbles. His commentary is headlined “Fed Cracking the Whip Will No Longer Work to Keep the Tiger Sitting on Its Stool” and it’s posted at USAGold here:


Meanwhile, GoldMoney’s head of research, Alasdair Macleod, writes that central banks are struggling to prop up asset prices and suppress them at the same time, and it’s starting to come apart, because markets will always win in the end. Macleod’s commentary is headlined “Bonds and Banks” and it’s posted at GoldMoney here:


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


The following is a terrific commentary and a must read.  We have been noticing now for quite some time  (the last 4 months or so) the continued removal of gold from Scotia’s eligible vaults.

Craig Hemke(Turd Ferguson) discusses the possible reasons why this is happening!!

(courtesy Turd Ferguson (Craig Hemke)/GATA)

TF Metals Report: More oddities in the Comex vaults


10:15a ET Thursday, June 18, 2015

Dear Friend of GATA and Gold:

Another gold repatriation movement seems to be happening, the TF Metals Report’s Turd Ferguson writes today. But this repatriation, Ferguson says, is not from the vaults of the Federal Reserve Bank of New York or the Bank of England but from the account of bullion bank Scotia Mocatta. Ferguson’s analysis is headlined “More Oddities in the Comex Vaults” and it’s posted at the TF Metals Report here:


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




A good picture as to how much gold is in the British system:


Posted on 18 Jun 2015 by
(courtesy Koos Jansen)

Bank Of England Custodian Gold Drops 351t

The Bank Of England (BOE) has recently released its annual report in which it’s disclosed the gold held in custody for a range of customers was 5,134 metric tonnes on February 28, 2015, down 351 tonnes (6 %) from the previous year. 

The data on gold in custody at the BOE is disclosed in billions of Great British Pounds. The annual report states the BOE’s custodian gold was worth £130 billion on February 28, 2015. Because the data is disclosed in round numbers the derived tonnage is an estimate.

BOE custodian gold
Exhibit 1.

The BOE isn’t a member of the LBMA, but members of the LBMA hold gold in custody accounts with the BOE – next to foreign central banks and international financial institutions.

Let’s throw in some more numbers that are publicly available to get a better handle on gold stored in London and to see if we can figure out how much gold is left in the LBMA system ‘loco London’:

Since January 2015 the LBMA website claims the total LBMA system holds 7,500 tonnes (in London) of which three quarters is stored at the BOE vaults. We’ll use 5,625 tonnes as an estimate for gold held at the BOE in custody for LBMA members on February 28, 2015.

From the Internet Archive it can be seen the same website claimed in April 2014 the LBMA system was holding 9,000 tonnes of which two thirds was stored at the BOE. We’ll use 6,000 tonnes as an estimate for gold held at the BOE in custody for the LBMA system on February 28, 2014.

Gold from the GLD ETF is also stored in the LBMA system, at an HSBC vault located within the M25 London Orbital Ringway (typically LBMA vaults are within M25 to limit transportation and security costs), but this is all outside the BOE vaults.

The BOE could be a subcustodian for HSBC, as can be read in the GLD prospectus:

Gold bars may be held by one or more subcustodians appointed by the Custodian [HSBC], or employed by the subcustodians appointed by the Custodian, until it is transported to the Custodian’s London vault premises [the HSBC vault].

However, it’s likely in February there was nil GLD gold held by a subcustodian. From the prospectus:

As at March 31, 2015, the Custodian [HSBC] held 23,702,920 ounces of gold on behalf of the Trust [GLD] in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $28,135,365,641 (cost — $29,341,051,196) based on the LBMA Gold Price PM on March 31, 2015. Subcustodians held nil ounces of gold in their vaults on behalf of the Trust. 

GLD was holding 771 tonnes on February 28, 2015, and 804 tonnes on February, 28, 2014.

Next is an overview of the estimates we just talked about:

LBMA system estimates Feb 2015
Exhibit 2.
  • ‘tonnes at BOE’ is the data from the BOE annual reports
  • ‘LBMA’ is the data from the LBMA website
  • ‘LBMA gold at BOE’ is derived from the data from the LBMA website
  • ‘LBMA gold outside BOE’ is ‘LBMA’ minus ‘LBMA gold at BOE’
  • ‘LBMA gold outside BOE minus GLD’ is exactly what is says it is

What can be seen is that ‘tonnes at the BOE’ and ‘LBMA gold at BOE’ roughly corresponds. This implies that ‘LBMA gold at the BOE’ includes foreign central bank gold, or put differently; foreign central bank gold at the BOE is counted as gold in the LBMA system.

From a PDF by the BOE (exhibit 3) we learn in total 400,000 bars are stored, which translates into roughly 5,000 tonnes. More confirmation ‘LBMA gold at the BOE’ includes foreign central bank gold. The BOE claims it holds 5,000 tonnes in total for LBMA members and foreign central banks (exhibit 3), the LBMA claims it holds roughly 5,000 tonnes at the BOE. This is the same gold.

Screen Shot 2015-06-18 at 12.50.33 AM
Exhibit 3.

Because the BOE states it holds 400,000 bars in total they can not store roughly 5,625 tonnes for LBMA members in addition to foreign central bank reserves. In total the BOE holds 400,000 bars in custody for LBMA members and foreign central banks.

It’s hard to say how much gold foreign central banks store at the BOE, but according to my estimates it is at least 2,000 tonnes – based on data from the central bank of the Netherlands (123t), Austria (230t), Germany (441t), Australia (80t), Switzerland (208t), Sweden (61t), Finland (25t), Belgium (±200t) and India (±250t) in addition to the IMF (±450t).

Let us assume foreign central banks store 3,000 tonnes at the BOE. This means the floating supply of London Good Delivery bars at the BOE is:

5,134 (annual report) – 3,000 (foreign central banks) = 2,134 tonnes

‘LBMA gold outside BOE minus GLD’ (exhibit 2) = 1,104 tonnes

Summed up, there is an estimated 3,238 tonnes of floating supply in the LBMA system in London. This excludes GLD and gold stored by foreign central banks at the BOE.

LBMA estimates Feb 2015
Exhibit 4.

This post will be continued.

There is a lot more gold in London outside the LBMA system in private vaults. Hopefully some day I can make an estimate. 

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

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

1 Chinese yuan vs USA dollar/yuan strengthens to 6.2079/Shanghai bourse red and Hang Sang: red

2 Nikkei closed down by 228.45  points or 1.13%

3. Europe stocks all in the red/USA dollar index down to 93.77/Euro rises to 1.1394

3b Japan 10 year bond yield: slightly falls  .45% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.62/ominous to

3c Nikkei still just above 20,000

3d USA/Yen rate now well above the 122 barrier this morning

3e WTI 60.63 and Brent:  64.74

3f Gold up/Yen up

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .78 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate fall  to 28.74%/Greek stocks fall by 2.90%/ still expect continual bank runs on Greek banks /Greek default inevitable/

3j Greek 10 year bond yield rise to to: 12.97%

3k Gold at 1195.35 dollars/silver $16.22

3l USA vs Russian rouble; (Russian rouble up 6/10 in  roubles/dollar in value) 53.50,

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

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

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9171 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0450 just below the floor set by the Swiss Finance Minister.

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

3r the 4 year German bund remains in negative territory with the 10 year moving closer to  negativity at +0.780

3s Ten 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 4 weeks ago they raised it another tiny 200 million euros to a maximum of 80.2 billion euros. Three weeks ago, the limit was not raised. Last week, the ECB raised the ELA by 1/2 billion euros to 80.7 billion euros. Last Thursday, it was raised by a huge 2.3 billion euros to 83.0 billion.Today, we hear (not confirmed yet) that the ELA has been raised by another 1.1 billion euros to 84.1 billion euros.The ELA is used to replace depositors fleeing the Greek banking system. The bank runs are increasing exponentially.This week 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 but this weekend is the likely time to do it.

4. USA 10 year treasury bond at 2.28% early this morning. Thirty year rate well above 3% at 3.06% / yield curve flatten/foreshadowing recession.


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

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

Dollar Tumbles After Fed Whiffs Again; More Cracks Appear In Chinese Stock Bubble

All those saying the Fed will never be able to raise rate are looking particularly smug this morning, because if the market needed a green light that despite all the constant posturing, pomp and rhetoric, the US economy is simply (never) ready for a rate hike, it got it late last night when Goldman is pushing back its forecast for the first Fed rate hike from  September to December 2015 saying that “in large part this reflects the fact that seven FOMC participants are now projecting zero or one rate hike this year, a group that we believe includes Fed Chair Janet Yellen. We had viewed a clear signal for a September hike at the June meeting as close to a necessary condition for the FOMC to actually hike in September, but the committee did not lay that groundwork today.”

This happened even as Citi did the reverse, and pulled forward its first rate hike estimate from December to September, citing “compelling” evidence that moderate growth may be sufficient to close output gap in medium term, because potential growth has slowed significantly since 2008. Citi is also concerned that buildup of financial imbalances may manifest in disruptive rate volatility, notwithstanding Fed communications to the contrary.

Judging by the reaction in the US Dollar (which is crashing) it is Goldman 1:Citi 0.

As for June, allow us to sumamrize: US economy is so strong the Fed once again contemplated a “barely noticeable” 25 bps hike… and whiffed. As for December, we give Goldman 3 months, or some time in September, when the Fed realizes the US economy will be covered in 6-12 inches of GDP crushing snow in December and as a result the rate hike will be delayed to some time in 2016. And so on. And so on. Because, well, here is a chart from 2010 from a CNN article titled “Economists: Fed won’t raise rates until 2012” which needs no comment.

End result of this latest risk repricing is that the USD tumbled overnight, as did bond yields for obvious reasons…  as did China, where the market plunged another 3.7% overnight on increasing chatter that the locals are realizing that the local stock bubble is, well, a bubble and nobody wants to be the last one in.

In central bank news Norway cuts rate to record low 1.00% as expected, while the SNB maintains deposit rate at -0.75%. So yes: Europe continues to ease further into NIRP territory and/or monetize debt, and people are talking about the Fed hiking rates.

A closer look at stocks, shows the European Eurostoxx50 -0.6% remaining on the back foot, as market participants continued to grapple with Greek debt saga, while EUR strength stemming from broad-based USD weakness in reaction to dovish FOMC weighed on exporters. Investment banks Citigroup brought forward their expectation for Fed rate hike from December to September, while Goldman Sachs hold converging views and pushed back the date of its first projected Fed rate hike from September to December. At the same time, supply from Spain and France (both auctioned at higher than prev. yield levels) failed to weigh on Bunds, which remained bid since the open, while Greek bond yields continued to climb and the benchmark Greek equity index fell to its lowest level since Sep’12.

Heading into the North American crossover, sources out of Greek press reported that the EU and ECB are drafting a possible debt relief statement on regards to Greece. (eKathimerini)

ECB are to increase their ELA ceiling to Greek institutions by EUR 1.1bln to EUR 84.1bln while leaving their haircuts on Greek debt unchanged, according to sources. (BBG) Of note, this decision comes as part of the ECB’s weekly review of the ELA limit for Greek banks as bailout talks continue.

Greek Finance Minister Varoufakis said it is unlikely that an agreement can be made at today’s Eurogroup meeting as it requires
approval at a higher level of government. However, did later state that Greece seeks to remain in the EU (RTRS)

ECB’s Weidmann said that the ECB will not be able to provide further financing to Greece if discussions fail. Elsewhere, German
finance minister Schaeuble stated that aid can only be provided if Greece adheres to its obligations adding that the IMF must continue Greek aid. (RTRS/Bild)

GBP/USD rallied to its highest level since Nov’14 and UK TWI rose to 7y high, supported by a weaker USD, the release of better than expected UK retail sales and also comments by BoE’s Forbes (soft hawk) who said she foresees an increase in interest rates in the “not too distant future” and that the central bank could lift rates before UK inflation reaches its 2% target. Commodity linked currencies benefited from the broad based commodity rally, with AUD/USD which moved above its 100DMA and the 50DMA levels, while USD/CAD fell to its lowest level since mid-May. Elsewhere, NZD slumped after NZ Q1 GDP fell to a 2-year low (Q/Q 0.2% vs. Exp. 0.6%, Prev. 0.8%, Rev. 0.7%) which prompted many to bring forward RBNZ rate cut expectations, with a July cut all but priced according to OIS.

Despite the risk averse sentiment, commodity complex posted broad based gains, with gold trading above the 50DMA and in close proximity to the 100DMA line, with the key psychological USD 1,200 level to follow. Whilst WTI and Brent crude futures remain bid and sit comfortably above the USD 60.00 and USD 64.00 handle respectively.

In summary: European shares pare losses, remain lower with the tech and autos sectors underperforming and basic resources, utilities outperforming. Merkel says a deal with Greece is still possible provided the Greek government follows through on the  economic-reform pledges made to creditors. ECB provides EU74b in TLTRO, estimated range EU20b-EU160b. U.K. retail sales  rise, analysts had expected a decline. Fed kept its forecast for  rates to begin rising this year and reduced its projection for where they’ll be by the end of 2016.  Norway cuts rate to record low, SNB maintains deposit rate at -0.75%. The Swiss and Swedish markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields fall; German yields decline. Commodities gain, with natural gas, soybeans underperforming and Brent crude outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, CPI, Bloomberg economic expectations,  Philadelphia Fed index, leading index, current account balance due later.

Market Wrap

  • S&P 500 futures up 0.2% to 2094
  • Stoxx 600 down 0.7% to 381.1
  • US 10Yr yield down 4bps to 2.28%
  • German 10Yr yield down 5bps to 0.76%
  • MSCI Asia Pacific up 0.4% to 146.8
  • Gold spot up 1% to $1197.9/oz
  • Eurostoxx 50 -0.6%, FTSE 100 -0.3%, CAC 40 -0.7%, DAX -0.7%, IBEX -0.6%, FTSEMIB -0.4%, SMI -1.1%
  • Asian stocks rise with the Sensex outperforming and the Shanghai Composite underperforming.
  • MSCI Asia Pacific up 0.4% to 146.8
  • Nikkei 225 down 1.1%, Hang Seng down 0.2%, Kospi up 0.3%, Shanghai Composite down 3.7%, ASX down 1.3%, Sensex up 1.1%
  • 9 out of 10 sectors rise with health care, energy outperforming and telcos, financials underperforming
  • Euro up 0.52% to $1.1396
  • Dollar Index down 0.58% to 93.75
  • Italian 10Yr yield down 3bps to 2.28%
  • Spanish 10Yr yield down 6bps to 2.27%
  • French 10Yr yield down 7bps to 1.17%
  • S&P GSCI Index up 0.9% to 440.5
  • Brent Futures up 1.5% to $64.9/bbl, WTI Futures up 1.4% to $60.7/bbl
  • LME 3m Copper up 0.8% to $5789.5/MT
  • LME 3m Nickel up 0.9% to $12860/MT
  • Wheat futures up 0.3% to 498.5 USd/bu

Bulletin Headline Summary From Bloomberg and RanSquawk

  • FOMC post-mortem takes centre stage, with USD weakness supporting EUR and GBP, as well as the broader commodity complex.
  • Greek debt crisis uncertainty and firmer EUR weighed on exporters and sees EU stocks trade lower again, with the benchmark index in Greece trading at its lowest level since Sep’12.
  • Going forward, market participants will get to digest the release of the latest US CPI, weekly jobs, Philadelphia Fed survey and the release of the latest EIA natural gas storage change report.
  • Treasuries gain, with shorter maturities extending rally seen yesterday after Fed cut longer-term rate forecasts and as Greece remains at an impasse.
  • Fed officials’ median forecast for fed funds target fell to to 1.625% for end-2016 from 1.875% March; it fell to 2.875% for end-2017 from 3.125% in March
  • Merkel, in a speech to lawmakers in Berlin, said a deal with Greece is still possible provided the Greek government follows through on the economic-reform pledges made to  creditors
  • EC, ECB are working on the draft of a possible statement on debt relief to be used if Greece, creditors reach an agreement, Kathimerini newspaper reports, without saying how it got the information
  • Greek banks, which received two capital infusions in the past two years, may need a third one as a recession drives up losses from bad loans
  • U.K. retail sales rose 0.2% in May, more than expected, led by sales of food and gasoline, as spending on clothing declined
  • Hong Kong lawmakers rejected a China-backed plan for the city’s first leadership elections, a result that leaves both Chief Executive Leung Chun-ying and pro-democracy campaigners with little to show after months of protests
  • Sovereign 10Y bond yields lower. Asian, European stocks slide, U.S. equity-index futures gain. Crude oil, copper, gold higher


DB’s Jim Reid completes the overnight recap


So all-in-all it was a fairly balanced set of minutes released by the FOMC and post-meeting statement from Yellen last night, one which keeps a 2015 and September lift-off in play, but also one which emphasized the need for any move to be gradual and clearly still data dependent. It was the dovish undertone in the dot plots which got most of the market talking however after we saw the 2016 and 2017 dot plot median forecasts revised down and a greater proportion of members signaling for just one hike this year, perhaps meaning that the likelihood of a move in September has slipped slightly. Rates markets certainly reflected a more dovish tone. Indeed having opened at 2.310%, 10y Treasury yields rose steadily over the course of the day, eventually reaching an intraday high of 2.399% in the minutes before the FOMC. Yields immediately dropped following the release however with a 9bps tightening to close more or less unchanged at 2.317% (+0.7bps). Yields have in fact declined a further 4.8bps this morning and are currently hovering around 2.268%. It was a similar story in Fed Funds contracts yesterday where yields on the Dec15, 16 and 17 contracts fell 3.0bps, 5.0bps and 5.5bps respectively.

In terms of the dot plots first of all, as largely expected the median dot for 2015 stayed at 0.625% or consistent with two rate hikes this year. It was the dispersion around this median however which was interesting. In the March meeting, there were 7 dots at 0.625%, 7 dots above this and 3 dots below. The latest forecasts now show 5 dots at 0.625%, with 5 dots above this and 7 dots below (of the 7 dots below, 5 are forecasting one hike and 2 are forecasting no move at all). There were plenty of suggestions that one of the dots representing just a single hike belonged to Fed Chair Yellen, although in reality it’s not possible to tell. DB’s Peter Hooper noted that the count is potentially closer that it appears now because most if not all of the five favouring one hike are likely to be voting members. Given this uncertainty, Peter thinks that this makes the dot charts considerably less clear as a guide to Committee expectations about the timing of liftoff than it was three months ago. In doing so, it also gives the Chair more flexibility as she now has an easier option to guide the Committee towards September or December depending on how the data are coming in over the month just ahead. Meanwhile, the median dots for 2016 and 2017 were revised down 25bps each to 1.625% and 2.875%, but interestingly the long-run forecast was unchanged at 3.75%.

Away from the dot plots and as largely expected the statement on the whole painted a more upbeat picture of the economy relative to April’s meeting. Yellen acknowledged that the disappointing economic performance in Q1 was largely transitory, as well as noting improvements in the pace of job gains and the labour market. Yellen also said that any tightening would be ‘gradual’ and that the Fed would not follow a ‘mechanical’ formula. There was also some acknowledgement of positive signs for inflation. When questioned on Greece, Yellen said that the difficulties there do have the potential to disrupt global financial markets and that these could spill over negatively into the US economy. As expected, 2015 growth forecasts were lowered to 1.8% to 2.0% from 2.3% to 2.7% previously, while there was a small tweak upwards in unemployment forecasts for the year. Headline and core PCE inflation estimates were unchanged for this year with some minor tweaks to 2016 and 2017.
With the move lower in Treasury yields, the Dollar sold off in parallel as the Dollar index ended -0.75%. US equities traded with little obvious direction for the most part, paring some modest losses leading up to the FOMC with the S&P 500 (+0.20%) eventually finishing slightly up on the day. Gold (+0.29%) also gained following the release, while oil markets ended more mixed with WTI (-0.08%) declining slightly and Brent (+0.27%) a tad higher.

Looking at the early reaction in Asia this morning, bond markets have largely followed the lead from Treasuries, where 10y yields have fallen led by Australia (-14.2bps) while Singapore (-2.6bps), Japan (-3.3bps) and South Korea (-2.6bps) are also tighter. Asia currencies are having a stronger morning too. The Malaysian Ringgit (+0.92%), Korean Won (+0.94%) and Philippines Peso (+0.27%) all up against the Dollar. Meanwhile a report showing that China property prices for May were deflating at a slower rate (-5.7% yoy vs. -6.1% in April) doesn’t appear to have helped give a lift to equity markets in the region where the Shanghai Comp (-0.18%) and CSI 300 (-0.48%) are both currently down. It’s a similar story elsewhere too with the Nikkei (-0.85%), Hang Seng (-0.06%), and ASX (-1.49%) are all lower this morning.

Back to China, yesterday our Chief China Economist Zhiwei Zhang noted that the State Council had held a meeting and decided to launch more investment projects to boost growth. The measures were said to include housing renovation plans, investments in rural power, food storage and also the speeding up of investments in water management and railways. Zhiwei believes that this is more evidence of significant fiscal easing and reinforces his view that growth will pick up slightly to 7.0% in Q3 and 7.2% in Q4.

Back to yesterday, it was something of a day of two halves as pre-FOMC Greece headlines once again dictated most of the price action in Europe. Indeed it was a weaker day in equity markets as the Stoxx 600 (-0.45%), DAX (-0.60%) and CAC (-1.02%) all declined, while Greek equities fell 3.15%, the fourth consecutive daily decline with the index now down over 17% in that time. It was a bit more mixed in bond markets as 10y Bunds eventually closed 1.1bps wider at 0.806% having traded in a tight range for most of the day, while it was a better day for the periphery as Spain (-2.5bps), Italy (-1.6bps) and Portugal (-4.8bps) yields all fell. The same couldn’t be said for Greece however where 10y yields ended 19bps wider at 13.134%. European credit markets were under pressure also. Crossover ended 7.5bps wider while Main hit fresh 8-month wides after another +2.3bps move yesterday. In fact just looking at the cash spreads now for Euro IG, as of Tuesday’s close cash spreads are now at 14-month wides having moved steadily wider since mid-May. Data flow in Europe yesterday was confined to Euro area CPI where the final May print for the headline (+0.3% yoy) and core (+0.9% yoy) were unchanged.

It was another day of largely negative headlines out of Greece leading into today’s Eurogroup where expectations appear to be pretty low for any hope of a breakthrough. Yesterday we heard Greece PM Tsipras again heighten tensions after saying that ‘if we don’t have an honorable compromise and an economically viable solution, we will take the responsibility to say a big no to the continuation of a catastrophic policy’. Meanwhile, Bank of Greece Governor Stounaras fired a stern warning after saying that ‘failure to reach an agreement would mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the Euro area’. This came as the ECB yesterday raised the ceiling on the ELA facility, while there were no announced changes to the discounts on collateral pledged.

Over on the European side, German Finance Minister Schaeuble told parliament that the German government is preparing for the worst. In expectation of no breakthrough tomorrow, attention will turn to a likely EU Leaders Emergency Summit meeting this weekend. Given Tsipras’s repeated rhetoric that any agreement must be struck at the highest possible political level, the meeting could be seen as the best possible chance.

Wrapping up, there was also Central Bank attention in the UK yesterday following the release of the BoE’s minutes. They indicated a somewhat more hawkish tone with the minutes noting that factors constraining price growth ‘were likely to dissipate fairly shortly’ and may well ‘strengthen’ by year-end. The BoE’s Forbes added to this saying that she sees UK inflation rebounding ‘fairly quickly’ while yesterday’s employment data was certainly supportive, in particular the rise in average weekly earnings to +2.7% yoy in the three months to April from +2.3% previously – the highest since 2011. 10y Gilts ended +7.4bps higher in yield yesterday and back above 2% at 2.060%. The Pound closed 1.2% higher versus the Dollar.

Looking at the day ahead now, the bulk of the attention will likely remain on Greece with the Eurogroup meeting due while data wise we get UK retail sales for May and the Norges Bank rate decision where consensus is for a cut in the deposit rate. It’s set to be another busy day across the pond this afternoon with US CPI due for May, while initial jobless claims, average weekly earnings, the Conference Board leading index and the Philadelphia Fed business outlook round off a busy day ahead.

Greek banks are badly in need of cash.  A Greek deal will not save them.
Read below to find out why!!
(courtesy Bloomberg)

Greek Deal Won’t Save the Country’s Banks

Greek banks, which received two capital infusions in the past two years, may need a third one as a recession drives up losses from bad loans.

The four biggest lenders, accounting for 91 percent of the country’s banking assets, could see their 12 billion euros ($14 billion) of tangible core capital wiped out by mounting provisions as overdue and restructured loans default. Even if Greece reaches an agreement with European creditors to free up additional money, its next bailout will need to include a new round of funding for the ailing banks.

Bad loans rose last quarter as the economy slipped back into recession and Greeks delayed payments waiting for the new government to pardon debt. With the recovery stalled, the four banks — National Bank of Greece SA, Piraeus Bank SA, Alpha Bank AE and Eurobank Ergasias SA — could require 16 billion euros in additional provisions to cover losses if half of the 59 billion euros of overdue and restructured loans on their books sour.

Precarious Position: Rising Bad Loans

“We had expected nonperforming loans to peak in the first quarter, but we now expect this sometime in 2016, subject to some kind of economic stability,” said Nondas Nicolaides, an analyst at Moody’s Investors Service in Athens. “There’s a high risk that restructured loans and others showing signs of trouble will slip back into default. It’s a possibility the banks might need another round of capital injections.”

Spokesmen for National Bank, Piraeus and Eurobank declined to comment. A spokeswoman for Alpha didn’t return calls.

Tax Assets

Even after two previous capital infusions, including a bailout by the European Union and the International Monetary Fund, Greek banks are thinly capitalized. More than half their capital is made up of deferred tax assets, or DTAs, credits for losses that can be used to reduce taxes when the banks return to profitability. The credits only have value if the government, which is almost broke, can convert them to cash.

Global rules implemented after the 2008 financial crisis are phasing out the use of DTAs as capital because they don’t help absorb losses. Some European countries including Greece converted them to government guarantees of future credits. The European Central Bank is skeptical of their use and may ask banks to increase equity to lower their reliance on such capital. The 12 billion-euro figure for tangible capital at the four Greek banks excludes DTAs.

Reversing Outflows

Analysts and investors have focused more in recent months on liquidity — how banks are funded — than on solvency. Lenders have lost more than 20 percent of their deposits since November, according to Greek central bank data and JPMorgan Chase & Co. estimates. The firms have relied on almost 120 billion euros of funding from the ECB and Greece’s central bank to replace the deposits and are close to running out of collateral to pledge.

Liquidity Gap: Deposits Keep Fleeing

Bank executives expressed optimism during first-quarter earnings calls that the outflows would reverse once the government reaches an agreement with its creditors. While that would resolve the liquidity issue, it would do little for longer-term solvency. With an agreement in place, the banks could switch back to ECB funding, which is cheaper than loans from the Greek central bank. Still, those savings pale in comparison to potential losses from souring loans.

Shares of the four Athens-based banks have gyrated in recent months depending on how close or far an agreement between Greece and Europe looks. They fell again earlier this week when a negotiating session ended after 45 minutes. Since December, they’ve lost about half their value.

Restructured Loans

The four banks had an aggregate 59 billion euros of restructured and overdue loans that they didn’t consider impaired at the end of 2014. Banks typically restructure loans by modifying payment schedules or lowering interest rates to help struggling borrowers continue paying. Those borrowers remain at a heightened risk of going back into default, with the failure rate often depending on how long it takes their country’s growth to resume.

In India, where the economy is booming, more than 40 percent of restructured loans have turned bad in the past four years. In Greece, where gross domestic product has shrunk more than 25 percent in six years, the rate will probably be higher.

Greek banks provision for an average of 55 percent of the value of soured loans based on the assumption the firms will be able to recover the rest. That means they’ll need to set aside an additional 16 billion euros if half of the restructured loans and those less than 90 days overdue fall into default.

Capital Controls

As Greece and its creditors head for a showdown, the specter of the country’s exit from the euro or the imposition of capital controls is rising. The latter would try to halt the deposit flight from the banking system by restricting cash withdrawals and money transfers abroad. Such controls could hurt the economy more as importers face difficulty paying suppliers and consumers without full access to their savings cut spending. That could further sap borrowers’ ability to pay and speed up the rise in bad loans.

The four banks reported at the end of the year that they had collateral worth about 60 percent of their total loan books, without breaking down how much of that was for soured debt. Countries that have tried to clean up their banks after an economic or financial crisis have sold bad-loan portfolios for as little as 10 percent of face value. When banks repeatedly restructure bad loans, they usually end up delaying the day of reckoning as well as economic recovery because they can’t make fresh loans to worthy companies in need.

That suggests the recovery rates banks assume are probably unrealistic. Housing prices in Greece, which have declined about 40 percent since 2008, would fall further if banks tried to foreclose and sell the property, according to Nondas at Moody’s.

“The real recoverability of the bad debt is probably not so realistic,” said Jonas Floriani, a London-based analyst who follows Greek banks for Keefe, Bruyette & Woods. “The time it takes to recover, the legal issues, all those would reduce the final value they can receive.”


Zero hedge also weighs in on the above story:
(courtesy zero hedge)

Greek Bank Run Crosses Terminal Phase: Depositors Yank €2 Billion In Past Three Days

At this point, regardless of whether Greece miraculously cobbles a last minute deal together and gets just enough funds to pay back the near-term debt maturities (long-term can be found here):


And interest payments:

… to the IMF, it is too late to save the Greek bank system.

The key reason, as Reuters just updated, is that the Greek bank run which we have been closely tracking in recent months, just saw its biggest 3 days surge perhaps in history, when Greek depositors yanked over €2 billion from local banks, an amount which means the latest ELA boost has already been depleted, and amounts to about 1.5% of total Greek deposits.

In context this would be equivalent to about $150 billion in deposit outflows from US banks in half a week, or about 10% of the total amount of currency in circulation.

Per Reuters, “Greek banks have seen deposit outflows surge to about 2 billion euros over the past three days, with the pace of daily outflows tripling since the collapse of talks at the weekend with creditors, three banking sources told Reuters on Thursday.

Talks between Greece and its euro zone and IMF creditors collapsed over the weekend in Brussels, leaving the country on the verge of a default at the end of the month and sparking fears of capital controls.


Before the collapse of talks, bankers said outflows had been ranging between 200-300 million euros a day.


A spokesman for the Greek central bank declined to comment on the figures, saying it releases data on deposits on set dates every month and would publish data for May on June 26.

We now expect more images such as this one hitting the social networks momentarily:

But that’s just the first part of the bad news for Greek banks. The second one comes courtesy of Bloomberg’s Yalman Onaran who reminds us that it is not just a matter of liquidity (which is only there as long as the ECB keeps boosting its ELA allotment), but also solvency. To wit:

The four biggest lenders, accounting for 91 percent of the country’s banking assets, could see their 12 billion euros ($14 billion) of tangible core capital wiped out by mounting provisions as overdue and restructured loans default. Even if Greece reaches an agreement with European creditors to free up additional money, its next bailout will need to include a new round of funding for the ailing banks.


Bad loans rose last quarter as the economy slipped back into recession and Greeks delayed payments waiting for the new government to pardon debt. With the recovery stalled, the four banks — National Bank of Greece SA, Piraeus Bank SA, Alpha Bank AE and Eurobank Ergasias SA — could require 16 billion euros in additional provisions to cover losses if half of the 59 billion euros of overdue and restructured loans on their books sour.


“We had expected nonperforming loans to peak in the first quarter, but we now expect this sometime in 2016, subject to some kind of economic stability,” said Nondas Nicolaides, an analyst at Moody’s Investors Service in Athens. “There’s a high risk that restructured loans and others showing signs of trouble will slip back into default. It’s a possibility the banks might need another round of capital injections.”


Just replace “possibility” with “certainty” and the picture is complete.  Spokesmen for National Bank, Piraeus, Alpha and Eurobank declined to comment which was to be expected. After all, what can they say?

In other words, the Troika – whose intention from the very beginning was to cripple Greek banks so badly and terminally that Tsipras and Varoufakis are forced to accept any terms hoisted on them as we predicted in January – has succeeded. The only question is how long until the Syriza government admits defeat.


Early this morning, markets responded to rumours that Europe was preparing emergency debt write offs in the future as long as Greece undergoes pension and VAT reforms.  It proved to be false!!
(courtesy zero hedge)

Europe Considers Emergency Debt Writeoffs As Greece Faces “Ungovernable Chaos”

Greek FinMin Yanis Varoufakis is in Luxembourg on Thursday for a meeting with EU finance ministers. Some EU officials indicated earlier in the week they hoped some progress on the stalemate between Athens and Brussels could be made at the meeting, but Varoufakis, whose track record at Eurogroup summits is not great, said he would not be presenting a new proposal at the talks, setting the stage for an emergency meeting between the EU’s top brass over the weekend and the possible imposition of capital controls to stem the flow of deposits out of the ailing Greek banking sector.

Protesters took to the streets in Athens on Wednesday evening, marking a fresh wave of anti-austerity protests while Zoe Konstantopoulou, the president of the parliament, chided Bank of Greece governor Yannis Stournaras for a report in which the central bank warnedof an “uncontrollable crisis” and “soaring inflation” if a deal with creditors isn’t struck soon. “With his report today, the governor of the Bank of Greece not only exceeded the boundaries of his institutional role, he is attempting to contribute to the creation of an asphyxiating framework in the moves and negotiating abilities of the Greek government,” Konstantopoulou said.

There’s some speculation early Thursday that EU officials could soften their stance on Greek debt relief. The idea that EU creditors should write down their Greek debt holdings in order to bring down the country’s unsustainable debt burden has been floated by the IMF on several occasions recently, although it’s been met with a lukewarm reception from Brussels. Three years ago, eurozone ministers agreed to consider writing down their loans to Greece in order to appease the IMF but never followed up. According to Kathimerini, that agreement could be reiterated next week at the EU Summit. Here’s more (Google translated):

While finance ministers of the Eurozone have gathered in Luxembourg for another Eurogroup, in which the expectations of any progress in the Greek issue is very limited, discussions focus on who and when there could be a further debate which will bring and the solution to the impasse that has been created in recent months.


According to a senior European official said the scenario is considered and the more likely this time is to convene an emergency summit of eurozone members Thursday evening (25.06) after the end of the deliberations of the Summit scheduled on that day and has very heavy agenda. The aim is the Greek issue not overshadow this way the other serious issues to discuss as the Grexit and immigration policy. At the same time it will have spent one week from today’s Eurogroup meeting without another thus putting further pressure on the Greek side.


According to him a high-ranking European official, this time from European Commission and European Central Bank edit text that refers to the debt issue in the event of agreement. A re-statement for debt relief won the Greek side of the Eurogroup of November 2012 when he was the Minister C. Stournaras.

More, via Bloomberg:

EU Commission, ECB draft statement on debt relief, which could be used if a deal is reached between Greece, creditors, could be a renewal of Nov. 2012 Eurogroup commitment, Kathimerini reports, citing unidentified EU official.


Euro area finance ministers agreed in Nov. 2012 that “euro area member states will consider further measures and assistance, including inter alia lower co-financing in structural funds and/or further interest rate reduction of the Greek Loan Facility, if necessary, for achieving a further credible and sustainable reduction of Greek debt-to-GDP ratio, when Greece reaches an annual primary surplus, as envisaged in the current MoU, conditional on full implementation of all conditions contained in the programme”


This would be “in order to ensure that by the end of the IMF programme in 2016, Greece can reach a debt-to-GDP ratio in that year of 175% and in 2020 of 124% of GDP, and in 2022 a debt-to-GDP ratio substantially lower than 110%”


Greek govt has said that country needs something more concrete than Nov. 2012 commitment, which was never implemented even after Greece achieved a primary budget surpluses in 2013, 2014

As discussed last weekend, it’s possible that Greek PM Alexis Tsipras could spin a writedown of Greece’s debt burden as a concession he extracted from creditors in exchange for a softened stance on pension reform and the VAT, although it isn’t yet clear how well that would play with Syriza’s Left Platform or with voters.

Meanwhile, Christine Lagarde is attempting to dispel the idea that she has discretion to grant Greece a grace period after June 30. From Bloomberg:

“I have a deadline, which is 30th of June, when a pyament is due from Greece,” IMF Managing Director Christine Lagarde says at press conference in Luxembourg. “If 1 July it’s not paid, it’s not paid.”


“There is no grace period or 2 months delay as I have heard.”


“It will be in areas, vis-a-vis the IMF. But I hope it’s not the case.”

Despite the rhetoric, it certainly does appear as though Lagarde could avoid triggering accelerated payment rights for other creditors by delaying the delivery of a formal failure to pay notice to the IMF board by 30 days.

Finally, some asset managers contend the market is understimating the fallout from an escalation in the Greek crisis. Russel Matthews of Bluebay for instance, says ideology and politics may prove difficult to overcome. Indeed, the following comments echoe everything we’ve said recently about the politicization of the negotiations:

Sovereign markets are still unprepared for the uncertainty and turmoil that is coming in Greece, Bluebay portfolio manager Russel Matthews says in interview.


Divide between Syriza and European policymakers is too large; early expectations of a last-minute deal have been shattered due to danger Syriza poses for euro zone.


European institutions “cannot allow Tsipras to be seen to be successfully breaking the rules of the game”.


“Syriza is an ideologically driven entity” which makes it highly unlikely that deal can be done in time to prevent onset of capital and deposit controls in Greece.


Tsipras’ claim to be working for all Europeans is a “dangerous assertion to make to the political hegemony that has designed the system that governs Europe”.


Had hoped Tsipras would be more pragmatic once he was in power but “increasingly obvious that he sees himself more as an activist hero”; has turned into Chavez rather than Lula.

We’ll close with Matthew’s grave warning about what comes next:

“Greece domestic situation will be chaos and ungovernable.”

The IMF has decided that it will not give one day past the June 30th deadline for Greece to pay what it owes.
(courtesy Bloomberg/Stagno/Bodoni, Christie)

IMF Warns No Leeway on Payment as Merkel Urges Greece to Bow

International Monetary Fund chief Christine Lagarde said Greece won’t be given a grace period if it fails to make a payment of about 1.5 billion euros ($1.7 billion) to the fund on June 30, setting a hard deadline for the indebted nation to reach a deal with creditors.

With euro-area finance ministers converging on Brussels and bailout talks stalled, Lagarde is helping European officials to box in Greece in a bid for force Prime Minister Alexis Tsipras to accept the terms of more financial aid. Last week Tsipras said the IMF’s policies toward Greece have been “criminal.”

“I have a deadline, which is the 30th of June, when a payment is due from Greece,” Lagarde said at a press conference in Luxembourg Thursday. “There is no grace period.”

Greece’s bid to obtain the aid required to shore up its position within the euro is going down to the wire with its euro-area bailout agreement expiring in less than two weeks, the same day the IMF payment comes due. With the European Central Bank reviewing the emergency funding keeping the Greek banking system afloat, German Chancellor Angel Merkel signaled her desire to keep the process alive at least until next week’s summit of European leaders.

IMF Rules

“I remain convinced that where there’s a will there’s a way,” Merkel told lawmakers in Berlin earlier on Wednesday. “If Greek authorities show this will, then an agreement with the three institutions is still possible.”

Under IMF rules, once a payment becomes overdue, a nation immediately becomes ineligible for additional funds until the arrears are cleared. IMF staffers contact the borrower to urge it to “make the payment promptly” and follow up with the nation’s representative on the IMF’s executive board, according to a 2012 IMF report.

If the payment is still overdue after a month, the head of the IMF notifies the board and after another month, the chief issues a formal complaint to the board.

While the IMF procedures stretch out over two years, with the ultimate punishment being expulsion from the IMF, credit default swaps on Greece could be triggered at once depending on how the International Swaps and Derivatives Association decides to rule.

“If on July 1st it’s not paid, it’s not paid,” Lagarde said. Greece “will be in arrears, vis-a-vis the IMF. But I hope it’s not the case,” she added.



And with all of the above horrific news on Greece, stocks in the USA are ramped higher…go figure!!!!!!

Stocks Soar In Biggest Opening Ramp Since 2011 As Austria Says Greek “Game Is Finished”

Presented with little comment side to note that the ramp on restructuring rumors has not diminished as the denials pile up. The US cash session open was the strongest since late 2011 as the headline hockey continues…



All your stops are belong to us…


In Summary:

  • market up on Greece but Greece is flat
  • market up on Europe but Europe is down
  • market up on Japan but Japan tanked
  • market up on China but China dumped
  • market up on lower interest rates but rates are higher
  • market up on ORCL earnings but ORCL is getting slammed



And finally, at 2 pm est:  no deal as Greek belligerence grows. The Greeks no doubt already have a deal sown up with the Russians
(courtesy zero hedge)

Eurogroup Meeting Ends Without A Deal, Greek Belligerence Grows

Another day over, and another failure to reach a Greek deal, except for the usual pathetic rumor mill allowing “someone” to exit positions:


As Greek belligerence grows:


And now, onward to the next Eurogroup meeting.


Late in the day, sure enough:

Russia, Greece Ink Pipeline Deal As Gazprom Boosts Ukraine Bypass

Two weeks ago, in “Greece Breaks America’s Heart, Will Sign MOU With Russia For Gas Pipeline,” we highlighted comments from Greek Energy Minister Panagiotis Lafazanis which indicated that Athens was prepared to sign an MOU with Russia on the Turkish Stream pipeline.

As a reminder, The Turkish Stream will allow Gazprom to bypass Bulgaria by piping gas through Turkey, then through Greece, Serbia, and Hungary straight to the Austrian central hub.


Washington urged Greece to spurn the Russians and support an alternative pipeline plan designed to let the EU tap into Caspian gas via a series of connecting pipelines running from Azerbaijan to Italy. The Greeks, seeing no need to view the two pipeline projects as competitors, indicated that they would be open to supporting both. “Greece is no one’s property,” Lafazanis said, adding that Athens would “move based on its national interests.”

As is becoming more apparent by the day, the country’s “national interests” are clearly not aligned with the rest of Europe and to the extent Gazprom would be willing to advance Greece a portion of the projected revenues from its portion of the pipeline, Athens interests very clearly align with Moscow’s which is why no one should be surprised that Greek energy officials indicated Thursday that the MOU was a done deal. WSJ has more:

Greece is expecting to sign a preliminary agreement for the country’s participation in Russia’s planned extension of a gas pipeline through Greek territory, Greek energy ministry officials said Thursday..


The potential Greek-Russian agreement, which wouldn’t be legally binding, is expected to be signed Friday during Greek Prime Minister Alexis Tsipras’ visit to an economic conference in St. Petersburg.


Mr. Tsipras is due to meet Russian President Vladimir Putin Friday on the sidelines of the forum.


The agreement on the so-called ’Turkish Stream’ gas pipeline, which would bring Russian gas to Europe through Greece and Turkey, is expected to be signed by the Russian and Greek Energy Ministers, the Greek officials said.

But the Turkish Stream MOU with Greece wasn’t the only preliminary energy deal Gazprom inked on Thursday. The company also signed a memorandum of intent with Shell, E.On and OMV to double the capacity of the Nord Stream pipeline — the shortest route from Russian gas fields to Europe — to 110bcm/year. The Nord Stream 

Here’s WSJ again:


State-controlled Gazprom said it had signed a memorandum of understanding with Royal Dutch Shell, Germany’s E. ON and Austria’s OMV AG to add two lines to the Nord Stream pipeline, opened in 2011 as part of a Russian strategy to circumvent transit countries such as Ukraine. 


Gazprom said the additional pipelines in the Baltic would double Nord Stream’s current capacity of 55 billion cubic meters a year. Gazprom accounts for one-third of the European Union’s imports, around half of which is transported through Ukraine. 


Gazprom said the companies would form a joint venture for the project. The creation of additional transport infrastructure along the shortest route connecting gas fields in northern Russia and markets in Europe will facilitate an increase in the security and reliability of deliveries under new contracts, said Gazprom Chief Executive Alexei Miller.


(Nord Stream line)

It appears Russia is making progress in efforts to facilitate the unimpeded flow of gas to Europe even as the crisis in Ukraine has escalated recently in the face of conflicting reports about artillery fire and various other violations of the ceasefire struck four months ago in Minsk. Gazprom also faces anti-trust charges filed in April by the EU Commission.

Perphaps Moscow thinks now is a good time to beef up the capacity of existing supply routes considering the increasinly tenuous situation in Ukraine and given that events in the Middle East may eventually conspire to bring a new source of supply for the EU online…


The lineup at Greek ATMs will no doubt have long lines as the world guesses that Greek banks will not reopen on Monday:

(courtesy zero hedge)

ECB “Blesses” Greek Bank Runs, Says Unsure If Banks Will Reopen Monday

Just minutes after Greek FinMin Varoufakis warned people were trying to “incite capital flight” from Greece and Dijsselbloem stated that “capital outflows from Greece are worrying,” Reuters is reporting that The ECB dropped the bank run hammer:


Friday sees Russia-Greece meetings and Euro area leaders are supposedly meeting on Monday evening due to the seriousness of the situation so it appears the endgame is looming large one way or another.

The Greeks said this:


And now we know who: the same ECB staffer who leaked the ECB’s “adjustment” to QE to a select group of hedge funds 10 hours before the news was public:Benoit Couere.

As Reuters reports,

The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.


The officials said that during the closed-door meeting of the ministers on Greece, the chairman of the meeting Jeroen Dijsselbloem asked European Central Bank Executive Board member Benoit Coeure if Greek banks would be able to open tomorrow.


Coeure answered: “Tomorrow, yes. Monday, I don’t know”


Banking sources said on Thursday that between Monday and Wednesday, Greeks have withdrawn around 2 billion euros from their bank accounts.

EU’s Dijsselbloem added:


Of course this should be a huge surprise given the massive outflows being reported.



The protesting which started yesterday intensified today:

(courtesy zero hedge)

Meanwhile In Athens, There Is A Pro-Austerity, Anti-Syriza Protest – Periscope Live Feed

Yesterday, summer officially returned to Greece when the infamous Syntagma square saw several thousand protesters demanding the end of austerity.

24 hours later, same time, same place, another protests only this time, to keep it fair, it is by the people who are demanding less Syriza and more Europe, and thus, more austerity.


Live Periscope feed below:

Fair? Yes. Confusing? Most certainly. But nobody ever said the unwind and collapse of massive, “political capital”-funded artificial monetary regimes is logical, calm and collected…



oh oh!! late this afternoon:

(courtesy zero hedge)


ECB Admits Emergency Call On Greece ELA Planned For Friday


Having vehemently denied the rumor that Benoit Coeure specifically said he questioned whether Greek banks will open on Monday, The ECB has, rather awkwardly, admitted that:


Given the accelerating outflows and implicit bank run today’s comments will create, if The ECB does not re-up the ELA, it is indeed over for Greek banks (unless Russia or China step in over the weekend) come Monday morning.

As Bloomberg reports,

The Governing Council of the European Central Bank plans to hold an unscheduled call on Friday to discuss Emergency Liquidity Assistance available for Greek lenders, according to two people familiar with the plans.


People asked not to be named as ELA decisions aren’t public


An ECB spokesman declined to comment; Greek central bank didn’t respond to calls and text messages after business hours



This should give perspective as to how the Euro has hurt Greece:


(courtesy Thad Beversdorf)

Is Greece Hurting The Euro Or The Euro Hurting Greece?

Submitted by Thad Beversdorf via FirstRebuttal.com,

Just to throw a little grease on that Saganaki…….  let’s have a look at some FACTS.  Now I know our global bankers just hate when we bring facts into the discussion but you know us, always having to rock the boat and all…..

It never ceases to amaze me how the sheeple simply accept the explanation as given by those ‘in charge’ in the face of blatantly obvious conflicting facts (think 9/11, Ukranian coup, Iraqi WMD, ISIS, etc.).  But as one doesn’t fight the Fed, one mustn’t fight the perceived reality for one quickly becomes the crazy-one.  But, understanding the risks, allow me to present some facts that conflict with the explanation given by those ‘in charge’.

Pre Euro Greek total production increased by some 600% between 1960 and 2001 while German total production increased by a mere 255%.  Now if we think about it in footballer (soccer) terms, Greece gave the German nationals a real thrashing.  However, throw in the Euro and the subsequent 15 years has German total production up 20% while Greece total production is down 26%.

Screen Shot 2015-06-18 at 6.22.53 AM

So a nation that had essentially 40 continuous years of production expansion suddenly goes into a tailspin upon changing up the monetary basis of trade suggesting that we can pinpoint the culprit.  A 5 year old could pick up on this actuality.  So how is it that these supposed omniscient academics at the ECB are simply incapable of seeing the blatantly obvious?

Well because the Euro is what provides them their perceived and weightless authority but we must all recognise these emporers have no clothes.  If the Euro goes so too does their political power of persuasion.  And this is why the negotiation is no longer between the ECB and Greece, Greece has made their intention clear, but between Germany and the ECB.  Germany is the nation currently funding the ECB’s false authority.

Just to prove that the Euro induced Greek economic breakdown was not a fluke isolated to only Greece,  let’s look at further proof in the pudding.

Screen Shot 2015-06-18 at 6.54.48 AM

One could likely tie the massive negative global economic inflection point of 2001 to the flooding of an overvalued new currency into global markets, thus significantly further inflating assets in all other currencies, exacerbating the bubble that was already building.  But that’s for another day…..



This ought to get Putin angry.  Belgium and France are seizing Russian property.  The Hague gave the Russians until June 15.2015 to repay Yukos shareholders.  Russia refuses to pay the money it owes, so Belgium and France has decided to take Russian assets in their respective countries.  I cannot wait until Russia responds by confiscating Belgian and French assets in Russia:

(courtesy zero hedge)

Moscow Furious After Both Belgium And France Freeze Russian State Assets


Russia has summoned the Belgian ambassador to Moscow and threatened to “respond in kind” after bailiffs instructed nearly 50 Belgian companies to disclose Russian state assets, a move which reportedly sets the stage for the seizure of Russian property in connection with the disputed $50 billion Yukos verdict. Essentially, Russia was required to submit a plan for a €1.6 billion payment pursuant to the ECHR decision by June 15, and because Moscow did not do so, Belgium will attempt to extract the payment on its own.

As a refresher, here’s what we said last year regarding the arbitration:

The Hague is not Vladimir Putin’s favorite place today. Following the “war crime” comments earlier, the arbitration court’s decision to rule in favor of Yukos shareholders (and thus against the allegedly “politically motivated” confiscation of the firm’s assets by the Russian government) with a $50 billion settlement (half what was sought) has prompted a quick and angry response from the Russian government. Blasting the “one-sided use of evidence,” and re-iterating the massive tax evasion that the leadership were involved in, Russia slams “the puzzling unprecedented amount of damages” awarded, claiming the process is “becoming increasingly politicized.”

Here’s RT on Belgium’s move to freeze Russian assets:

The bailiffs were reportedly acting at the behest of the Isle of Man-based Yukos Universal Limited, a subsidiary of the Russian energy giant, dismantled in 2007. They have given the target companies a fortnight to comply..


Russia will appeal the court’s arrest of Russian property, Russian presidential aide Andrey Belousov said. According to the official, “the situation with the arrest of the property is politicized, [and] Moscow hopes to avoid a new escalation in relations.”


A letter accompanying the notice, reportedly drafted by the law firm Marc Sacré, Stefan Sacré & Piet De Smet, accused Moscow of a “systematic failure to voluntarily follow”international legal judgments.

The addressees included not just local offices of Russian companies, but international banks, a local branch of the Russian Orthodox Church, and even Eurocontrol, the European air traffic agency headquartered in Brussels. Only diplomatic assets, such as embassies, were exempt.


The situation was not unexpected, and Russia is considering a number of measures to deal with possible asset seizures both in Belgium and in other countries, said Andrey Belousov, an aide to Russian President Vladimir Putin.


Yukos Universal Limited was awarded $1.8 billion in damages by the Permanent Court of Arbitration in The Hague in July 2014, as part of a total settlement for approximately $50 billion, owed to its former shareholders and management. The court concluded that the corporation, once headed by Mikhail Khodorkovsky, who spent more than a decade in prison for embezzlement and tax evasion from 2003 to 2013, “was the object of a series of politically motivated attacks.”


Russia has not accepted the ruling, saying it disregards widespread tax fraud committed by Yukos, and constitutes a form of indirect retribution for Russia’s standoff with the West over Ukraine. 

And more, from Interfax (Google translated):

Russian institutions in Belgium, except for diplomatic missions, received on Wednesday by bailiffs arrest warrants in their possession of the State Property of the Russian Federation.


The document stated that the arrest is made on the basis of the decision of the Belgian Court of Arbitration of 18 July 2014 to the claim of “Yukos Universal Limited.”

The specified amount of the claim in it – 1.6 billion euros.


Bailiffs indicate that the plaintiff has demanded such a measure, “because it has serious concerns about the possibility to receive the sum due, in particular, due to a systematic failure of the Russian Federation to fulfill handed down judgments against it and considering the attitude of the Russian Federation to the decision.”


As explained by “Interfax” the representative offices of bailiffs’ Marc Sacre – Stefan Sacré – Piet De Smet “listed in the organizations are obliged to declare within two weeks at their disposal cash, property of the Russian Federation and the debt to the Russian Federation.


The list covers almost all the major banks, registered in Belgium, and even organizations such as “Eurocontrol”, which regulates air traffic over Europe. In it – all Russian representative, except for the protected diplomatic immunity until the Archbishopric of Brussels and Belgium ROC, including the representation of non-governmental organizations and the media.

But it’s not just Belgium. France also froze the accounts of Russian companies on Thursday, targeting Russian firms run by a French subsidiary of the country’s second largest lender, VTB. Here’s RT again:

French law enforcement has frozen the accounts of Russian companies operated by the French subsidiary of VTB, Russia’s second-largest bank, CEO Andrey Kostin told RBC. Diplomatic accounts were briefly frozen as well, but have since been unlocked. “As of this morning [diplomatic accounts] were unfrozen… The sums are small, some dozens of thousands of euros, [but] Russian companies’ accounts are still frozen,” the bank chief was cited as saying. “We are working on the problem with our lawyers now.”

And the response from the Kremlin:


“[Remove the violations], otherwise, the Russian side will be forced to consider taking adequate response measures against properties of the Kingdom of Belgium, including properties of the Belgian embassy in Moscow, as well as of its legal entities”

We imagine this will only serve to further inflame tensions between Russia and Europe amid escalating violence in Ukraine and an increasingly aggressive stance towards the Kremlin on the part of Washington and NATO.


Your more important currency crosses early Thursday morning:

Euro/USA 1.1394 up .0021

USA/JAPAN YEN 122.62 down .895

GBP/USA 1.5913 up .0067

USA/CAN 1.2164 down .0067

This morning in Europe, the Euro rose by a tiny 21 basis points, trading now well above the 1.13 level at 1.1394; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine, rising peripheral bond yields and today crumbling bourses.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 90 basis points and trading just below the 123 level to 122.62 yen to the dollar.

The pound was again well up this morning as it now trades just above the 1.59 level at 1.5913, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is up by 67 basis points at 1.2164 to the dollar.

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure). Swiss franc is now 1.0489 to the Euro, trading well below the floor 1.05. This will continue to create havoc with the Hypo bank failure.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this morning :  down 228.45 points or 1.13%

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

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

Gold very early morning trading: $1195.35


Early Thursday morning USA 10 year bond yield: 2.28% !!! down 4 in basis points from Tuesday night and it is trading just at resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Thursday morning: 93.77 down 51 cents from Tuesday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Thursday morning

And now for your closing numbers for Thursday:


Closing Portuguese 10 year bond yield: 3.11%  down 6 in basis points from Wednesday ( still very ominous)

Closing Japanese 10 year bond yield: .45% !!! down 3 in basis points from Wednesday/very ominous/central bank intervention

Your closing Spanish 10 year government bond, Thursday, down 7 points in yield ( still very ominous)

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

Your Thursday closing Italian 10 year bond yield: 2.29% down 3 in basis points from Wednesday: (very ominous)

trading 1 basis point higher than Spain.




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


Euro/USA: 1.1375 up .0013 ( Euro up 13 basis points)

USA/Japan: 122.96 down  .605 ( yen up 61 basis points)

Great Britain/USA: 1.5883 up .0036 (Pound up 36 basis points)

USA/Canada: 1.2230 down .0002 (Can dollar up 2 basis points)

The euro rose by a tiny bit today. It settled up 13 basis points against the dollar to 1.1375 as the dollar traded aimlessly today against all the various major currencies. The yen was up by 61 basis points and closing well below the 123 cross at 122.96. The British pound gained some ground today, 36 basis points, closing at 1.5883. The Canadian dollar gained tiny ground against the USA dollar, 2 basis points closing at 1.2230.

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: 2.35% up 3 in basis point from Wednesday// (just above  the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

94.05 down 25 cents on the day


European and Dow Jones stock index closes:

England FTSE up 27.33 points or 0.41%

Paris CAC up 12.86 points or 0.27%

German Dax up  122.29 points or 1.11%

Spain’s Ibex up 58.50 points or 0.54%

Italian FTSE-MIB up 234.96 or 1.06%


The Dow up 180.10  or 1.00%

Nasdaq; up 68.07 or 1.34%


OIL: WTI 60.34 !!!!!!!



Closing USA/Russian rouble cross: 53.40  up 1/4  roubles per dollar on the day



And now for your more important USA stories.


NY trading for today:

Total Greek Deal Failure Sparks Biggest Buying Spree Since 2011, Stocks Set New Records

Just to confirm reality for a second…

Yesterday: Yellen sees global turmoil if no Greece deal.


Today: Greece deal falls apart, ECB hints at bank runs; -> stocks hit record

Confused? Don’t be… Only one clip seems appropriate for a day like this…

As long as you ignore Greek contagion, economic downgrades, weak earnings, and that general sense that none of this makes any sense…

European negotiations (Warning NSFW)



Before we start, there was only one thing that mattered today… Squeeze the shorts again…

Biggest 2-day short squeeze in 5 months…


Squeeze all week…


This resulted in the biggest opening ramp since late 2011!

Post-FOMC, futures show the craziness…


Cash indices are soaring…


Despite all the headlines and denials and disaster…


Greek Stocks not happy…


And note that US stocks did nothing post EU close….


Nasdaq and Russell 2000 hit all-time highs intraday… (Nasdaq previous intrday high in 2000 – 5132.32)



On the week. even Trannies are in the green…


Post-FOMC, Utes and Healthcare (Biotech) are leading and Energy lagging and Financials are hardly exuberant…


Treasury yields spiked higher wit a notable steepening (30Y +10bps off intraday lows today, 2Y unchanged) but with various dire headlines crossing into the close, bonds were bid…


Post-FOMC, prices are up for bonds…


The USDollar dumped and pumped as headlines hit and were rapidly denied


a look at EURUSD tells you all you need to know about liquidity and Grexit being contained…


Gold was well bid (its best post-FOMC day performance in a year)


Gold and Crude love the post-FOMC environment…


To summarize, here are today’s catalysts:

  • market up on Greece but Greece is flat
  • market up on Europe but Europe is down
  • market up on Japan but Japan tanked
  • market up on China but China dumped
  • market up on lower interest rates but rates are higher
  • market up on ORCL earnings but ORCL is getting slammed


Charts: Bloomberg

Bonus Chart: Nasdaq bitches!

Bonus Bonus Chart: Biotechs bitches-er!


Bonus Bonus Bonus Chart: UnFITBIT…


Today’s CPI misses despite the rise in gasoline prices.  Core inflation the smallest so far in 2015.  With the Fed desperately trying to reflate the balloon, this is not going too well:

(courtesy zero hedge)

CPI Misses Despite Surge In Gasoline Prices, Core Inflation Rise Is Smallest In 2015

Another nail in the “imminent rate hike” coffin thesis came moments ago when the BLS reported that May CPI missed both on the headline (0.4%, exp.0.5%) and on the core (0.1%, exp. 0.2%) despite a 10.4% surge in the price of gasoline. Other energy indexes were mixed, with the fuel oil index rising but the electricity index declining and the index for natural gas unchanged. The food index was unchanged for the second month in a row, as a decline in the food at home index offset an increase in the index for food away from home.


Core CPI:

At least this time, the BLS was not so naive as to try to pass the latest record rent prints as a drop in housing costs saying that “the index for all items less food and energy rose 0.1 percent in May, its smallest increase since December. The indexes for shelter, airline fares, and medical care all increased, as did the indexes for personal care, recreation, new vehicles, alcoholic beverages, and tobacco.” But if you rent has you down, fear not: at least you can dress in style and buy furniture for that apartment you can’t afford: “the indexes for apparel, for household furnishings and operations, and for used cars and trucks all declined in May.”

The full breakdown of May’s CPI:

But all eyes on gasoline which, since plunging gas prices were “unambiguously good” for consumers, then a 30% increase in the last 4 months must be unambigously bad, right Larry Kudlow?


Perhaps what is most surprising is that like Europe, so the heat map of US inflation is also quite regional, with only California seeing a jump in inflation mostly on soaring gas prices in the state. Everywhere else: deflation.

  • NorthEast -0.3%
  • MidWest -0.8%
  • South -0.4%
  • West +1.2%

And while the BLS’ inflation measures of food and housing are so stretched and manipulated as to be utterly meaningless, here is where in the CPI report the prices of the all important core items moved:

The index for all items less food and energy increased 0.1 percent in May following a 0.3 percent increase in April. The shelter index, which rose 0.3 percent in April, increased 0.2 percent in May. The indexes for rent and owners’ equivalent rent both rose 0.3 percent, but the index for lodging away from home turned down in May, falling 2.0 percent. The index for airline fares, which had declined 5 of the last 6 months, rose sharply in May, increasing 5.7 percent. The medical care index rose 0.2 percent in May after increasing 0.7 percent in April. The hospital services index rose 0.5 percent and the index for prescription drugs advanced 0.4 percent. The personal care index rose 0.3 percent in May, while the recreation index increased 0.1 percent. Also increasing in May were the indexes for new vehicles (0.2 percent), tobacco (0.4 percent), and alcoholic beverages (0.2 percent). In contrast to these increases, the apparel index declined 0.5 percent in May. The index for household furnishings and operations fell 0.3 percent, and the index for used cars and trucks decreased 0.4 percent.


The index for all items less food and energy has risen 1.7 percent over the past 12 months, a slight decline from the 1.8-percent increase for the 12 months ending April. The shelter index has risen 2.9 percent over the last year, the medical care index has increased 2.8 percent, and the new vehicles index has advanced 0.8 percent. The indexes for airline fares, apparel, and used cars and trucks have all declined over the past 12 months.

In conclusion: another month in which the Fed’s trillions in reserves end up almost entirely in the stock market and NYC penthouses, with little trickling down into clothes and other “core” items, even as beef prices and asking rent hit record highs month after month.


The following is the most important stat:  rising wages. The figures today show that hourly earnings drop to its lowest level in 2015 and thus real wages are dropping.  This is not conducive to a growing economy:
(courtesy zero hedge/BLS)

About Those Rising Wages: Real Hourly Earnings Drop To Lowest In 2015

When the “expert” weathermen advocates of a Fed rate hike (because it “proves the economy is getting better”) are cornered, their cop out excuse is that “wage growth is just around the corner”, and then the promptly point to soaring labor costs, which as we showed have nothing to do with actual wages and everything to do with even more soaring healthcare costs incurred by employers courtesy of Obamacare.

What they don’t touch on is facts, which as we have shown before are bad because not only is nominal wage growth for over 80% of the labor force barely above recession levels, and in a clear downtrend…


… and they certainly don’t discuss real, i.e. net of in/deflation hourly earnings, which in May just dropped to $10.53, indicating zero real wage growth and in fact, the lowest real wage number of 2015.


And zoomed in:

Bring on those rate hikes and the economic “recovery.”


The Philly fed index rises but two factors spoil the party:

1.  employment plunges

2. and that all important input costs (prices paid) soar by the most in 42 years.

Philly Fed Bounces But Employment Plunges & Costs Soar By Most In 42 Years!

After 6 months of dismal data, Philly Fed bounced back in June. Printing at 15.2 against expectations of 8.17. this is the biggest beat of the year but remains below levels seen over a year ago. Tis will be celebrated we are sure as heralded Yellen’s big comeback but under the covers, employment tumbled and Prices-Paid exploded higher by the most since 1973…crushing margins – hardly a sign of strength.


A bounce but some context shows it not so exuberant…


The breakdown is mixed…


Prices Paid spiked by the most since 1973!!!


Crushing Margins…



Charts: Bloomberg

Graham Summers of Phoenix Research Capital describes in simple but accurate detail why the Fed is boxed in and as such in very serious trouble.  It has to do with the global rise in interest rates despite the global QE!!
(courtesy Graham Summers/Phoenix Research Capital)

June 18, 2015

The Fed is Now Officially in VERY Serious Trouble

The market action of the last 24 hours can be summated as thus:

The Fed didn’t raise rates, so the US Dollar fell and all risk rallied hard.

The fact the Fed didn’t raise rates is not important. Interest rates have not been at zero for six years. And the last real period of tightening ended in 2006, nearly a full decade ago.

In the simplest of terms, for the Fed not to be raising rates is not interesting. What IS interesting is WHY the Fed is not raising rates.

Of course there are many reasons why: the economy is not strong enough to handle it, the Fed missed its chance to raise rates in 2011-2012, etc.

However, there is only one REAL reason why rates remain so low:

Actually it’s $555 trillion reason: and they are derivatives based on interest rates.

That is not a typo. $555 trillion… as in an amount greater than 700% of global GDP.



The world tracks “risk” based on the yield of the 10-Yr US Treasury. This yield has generally been falling non-stop since 1983. So we’ve had well over 30 years of money getting cheaper.


It is not coincidence that as money got cheaper, Wall Street went nuts with leverage. And given that rates have generally been trending down for over 30 years, betting on cheap money became one of the easiest trades in the world.

And that is how you get to where we are today: with a global bond bubble with over $555 trillion in derivatives trading based on it.

This is the REAL issue with interest rates, NOT the economy. The Fed cannot and will not raise rates any significant amount without risking a Crisis that would make 2008 look like a picnic (the CDO market which caused 2008 was a mere $50-60 trillion in size by comparison).

This is why Ben Bernanke told a group of hedge fund managers behind closed doors “rates will not normalize in my lifetime.” Rates CANNOT normalize because this would instantly implode the financial system.

However, the Fed has backed itself into a corner. Globally the bond markets are already starting to plunge pushing rates higher. Spain, and Italy’s bond yields have already taken out their downtrends (meaning bonds are falling and yields are rising). Japan is fast approaching the critical point at which it does the same.

And even the US is about to have its bonds test resistance (a break above the trendline means it’s GAME OVER for the Fed).



Smart investors should take note of this now. It is a MAJOR red flag to be watched closely.


Best Regards

Graham Summers

Phoenix Capital Research



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

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