July 1/Greece sends letter to the Troika and they refuse to deal until after the referendum/Michael Snyder warns of the coming shadow banking destruction/Poor USA auto sales

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1169.50 down $2.50  (comex closing time)

Silver $15.55  unchanged

In the access market 5:15 pm

Gold $1168.60

Silver: $15.57

Before we head into the body of the commentary, I would like to point out that tomorrow, we will have the jobs report and as you know, gold and silver are generally very volatile.  So expect an interesting day tomorrow in the precious metals.

As far as Greece is concerned, you must look at the big picture to try and get an understanding as to what is happening.

The key for Greece is to stay in the euro zone similar to England whereby UK uses the pound even though they are in the eurozone. Greece will still keep its huge free trade zone.  However it also will join the BRICS and by doing so, it will have a huge free trade zone with Russia and China and also it will be a gateway to the west for the huge Chinese SILK ROAD project.


The Western bankers truly want to get rid of Greece and hope that the damage from their defaults could be contained. The west believes that the containment would be better served if Greece was out of the Euro and out of the EU.  The ECB can then increase QE as interest rates on all the EU will rise.  The ECB has a major problem in that they cannot undergo QE due to the huge shortage of available bonds.



First, here is an outline of what will be discussed tonight:

At the gold comex today, we had a poor delivery day, registering  zero notices for zero ounces . Silver saw 330 notices filed for 1,650,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 250.01 tonnes for a loss of 53 tonnes over that period.

In silver, the open interest rose by 526 contracts despite the fact that Tuesday’s price was down 7 cents. The total silver OI continues to remain extremely high, with today’s reading at 196,724 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .984 billion oz or 141% 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. There can only be one answer as to how the OI of comex silver is now just under 1 billion oz coupled with a low price under 16.00 dollars:  sovereign China through proxies are the long and they have extremely deep pockets. This is the first time in almost two years that the open interest in an active delivery month did not collapse in number.

In silver we had 330 notices served upon for 1,650,000 oz. for July

In gold, the total comex gold OI rests tonight at 442,301 for a loss of 922 contracts as gold was down $7.00 yesterday.  We had zero notices filed for today.

We had no change in tonnage at the gold inventory at the GLD; thus the inventory rests tonight at 711.44 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. I am sure that 700 tonnes is the rock bottom inventory in gold.  Anything below this level is just paper and the bankers know that they cannot retrieve “paper gold” to send it onwards to China .In silver, again, we had a huge addition in inventory at the SLV to the tune of 1,624,000 oz/ Inventory now rests at 325.342 million oz.

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

1. Today, we had the open interest in silver rise by 526 contracts to 196,724 as silver was down 7 cents yesterday. The OI for gold fell by another 922 contracts down to 442,301 contracts as the price of gold was down by $7.00  yesterday.

(report Harvey)

2. Today, 13 important commentaries on Greece


(zero hedge, Reuters/Bloomberg/)

3.Michael Synder talks about the impending collapse of the shadown banking sector throughout the globe:

(Michael Snyder/EconomicCollapseBlog)

4.USA data tonight; i) ADP numbers

ii) ISM manufacturing

iii) PMI manufacturing

iv) domestic auto sales.

5. Gold trading overnight

(Goldcore/Mark O’Byrne)

6. Trading from Asia and Europe overnight

(zero hedge)

7. Trading of equities/ New York

(zero hedge)

8. Dave Kranzler/IRD:  topic the USA housing sector

(Dave Kranzler IRD)

plus other important topics….

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

Here are today’s comex results:

The total gold comex open interest fell by a tiny 922  contracts from 443,223 down to 442,301 as gold was down $7.00 in price yesterday (at the comex close).  We are now in next contract month of July and here the OI surprisingly rose by 10 contracts to 421.We had 0 notices filed yesterday and thus we gained 10 contracts or an additional 1000 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI fell by 2,541 contracts down to 283,573. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was horrendous at 48,766. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 159,001 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI rose by a small 526 contracts from 196,198 up to 196,724 despite the fact that the price of silver was down 7 cents in price with respect to Tuesday’s trading. 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 is now off the board.  The next delivery month is July and here the OI  fell by only 611 contracts down to 2,077. We had 746 notices served upon yesterday and thus we gained 135  contracts or an additional 675,000 ounces of silver will stand for delivery in this active month of July.This is the first time in quite some time that we have not lost any silver ounces standing immediately the day after first day notice. (Also notice above that gold oz standing increased).The August contract month saw it’s OI fall by 7 contracts. The next major active delivery month is September and here the OI rose by a small 4800 contracts to 138,181. This is the first time we did not witness the collapse of OI in an active delivery month.  All of the longs that stayed to the end in July rolled into September. The estimated volume today was horrendous at 15,259 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 65,817 contracts which is excellent  in volume.  We had 330 notices filed for 1,650,000 oz


July initial standing

July 1.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 302.217 oz (JPMorgan)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 421 contracts 42,100 oz
Total monthly oz gold served (contracts) so far this month 0 contracts
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil oz
Total accumulative withdrawal of gold from the Customer inventory this month 13,994.554   oz



Today, we had 0 dealer transactions


we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

we had 0 dealer deposits


total dealer deposit: zero
we had 1 customer withdrawal

i) Out of JPM: 302.217 oz



total customer withdrawal: 302.217 oz

We had 0 customer deposits:

Total customer deposit:0 ounces

We had 1 adjustment:

i) Out of Brinks; 5,066.84 oz was adjusted out of the customer account and this landed into the dealer account of Brinks;


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 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account


To calculate the total number of gold ounces standing for the July contract month, we take the total number of notices filed so far for the month (0) x 100 oz  or 0 oz , to which we add the difference between the open interest for the front month of June (421) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

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

No of notices served so far (0) x 100 oz  or ounces + {OI for the front month (421) – the number of  notices served upon today (0) x 100 oz which equals 42,100 oz standing so far in this month of July (1.309 tonnes of gold).  .

Total dealer inventory 522,283. or 16.24 tonnes

Total gold inventory (dealer and customer) = 8,043,291.086 oz  or 250.01 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.02 tonnes for a loss of 53 tonnes over that period.



And now for silver

July silver initial standings

July 1 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 630,432.89  oz (Delaware,Brinks,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 601,703.118 oz (HSBC,CNT)
No of oz served (contracts) 330 contracts  (1,650,000 oz)
No of oz to be served (notices) 1747 contracts (8,735,000 oz)
Total monthly oz silver served (contracts) 1076 contracts (5,380,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 630,432.89 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 1 customer deposit:

i) Into JPMorgan:  599,862.500 oz

total customer deposit: 599,862.500  oz


We had 3 customer withdrawals:

i) Out of Delaware:  7703.700 oz

ii) Out of HSBC: 120,000.700 oz

iii) Out of Scotia: 60,770.110 oz


total withdrawals from customer:  188,474.510   oz


we had 1 gigantic adjustment and it is a dilly!!

out of the Scotia vault:

We have a counting error of 1,201,077.02  oz which must be added to the customer account. I guess with all of that phantom silver around this is possible!!


Total dealer inventory: 59.689 million oz

Total of all silver inventory (dealer and customer) 183.996 million oz

The total number of notices filed today for the July contract month is represented by 330 contracts for 5,380,000 oz. To calculate the number of silver ounces that will stand for delivery in July, we take the total number of notices filed for the month so far at (1076) x 5,000 oz  = 5,380,000 oz to which we add the difference between the open interest for the front month of July (2077) and the number of notices served upon today (330) x 5000 oz equals the number of ounces standing.

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

1076 (notices served so far) + { OI for front month of June (2077) -number of notices served upon today (330} x 5000 oz ,= 14,115,000 oz of silver standing for the July contract month.

we gained a monstrous 135 contracts or an additional 675,000 oz will stand  in this active delivery month of July.


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



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:

July 1.2015; no change in inventory/rests tonight at 711.44 tonnes

June 30/no change in inventory/rests tonight at 711.44 tonnes

June 29/no change in inventory/rests tonight at 711.44 tonnes

June 26./it did not take our bankers long to raid the GLD. Yesterday they added 6.86 tonnes and today, 1.75 tonnes of that was withdrawn/Inventory tonight rests at 711.44 tonnes.

June 25/a huge addition of 6.86 tones of  inventory at the GLD/Inventory rests tonight at 713..23 tonnes

June 24/ a good addition of.900 tonnes of gold into the GLD/Inventory rests at 706.37 tonnes

June 23/no change in gold inventory/rests tonight at 705.47 tonnes

June 22/ a huge increase of 3.27 tonnes of gold into GLD/Inventory tonight: 705.47 tonnes

June 19.2015: no change in gold inventory/rests tonight at 701.90 tonnes.

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



July 1 GLD : 711.44 tonnes



And now for silver (SLV)


July 1/ we had an addition of 1,624,000 oz into the SLV inventory/rests tonight at 725.342 million oz

June 30/we lost another 621,000 oz of silver from the SLV/Inventory rests at 323.718 oz (somebody must be in great need of physical silver)

June 29/ a monstrous loss of 4.777 million oz of silver from the SLV/Inventory rests tonight at 324.339 million oz

June 26/today we had another addition of 198,000 of silver/Inventory rests at 329.116 million oz

June 25/ a huge increase of 1.242 million oz of silver into the SLV inventory/Inventory rests at 128.918 million oz

June 24/no change in inventory/rests tonight at 326.918 million oz

June 23/we had a small withdrawal of 956,000 oz/Inventory tonight rests at 326.918 million oz

June 22/ no change in silver inventory/327.874 million oz

June 19/no change in silver inventory/327.874 million oz

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


July 1/2015: we had a deposit  of  1,624,000 oz of  silver inventory/SLV inventory rests tonight at 325.342 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 7.4 percent to NAV usa funds and Negative 7.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.9%

Percentage of fund in silver:37.7%

cash .4%

( June 30/2015)  no data tonight: Cdn holiday.

2. Sprott silver fund (PSLV): Premium to NAV rises to 1.66%!!!! NAV (July 1/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .57% toNAV(July 1/2015

Note: Sprott silver trust back  into positive territory at +1.40%

Sprott physical gold trust is back into negative territory at -.57%

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 CentralGoldTrust (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.
* * * * *



And now overnight trading in gold/silver from  Europe and Asia/plus physical stories that might interest you:


First:  Goldcore’s Mark O’Byrne


(courtesy Goldcore/Mark O’Byrne)

Global Debt Time Bomb Ticks – Puerto Rico Is Next

Puerto Rico Governor says island cannot pay its $72 billion debt
Puerto Rico debt 15 times per capita median debt of the 50 U.S. states
– Complicated arrangements misled bond investors to believe their funds were secure
– Share price of bond insurer exposed to Puerto Rican debt plummeting, possibly on inside information

Puerto Rican Governor Alejandro García Padilla addressed the island's people about $73 billion debt

With all eyes on Greece it would seem another crisis relating to unpayable debt is brewing in the Caribbean. The governor of Puerto Rico, Alejandro García Padilla, has warned that the island is unable to pay its debts of $72 billion.

Puerto Rico has managed to rack up an astounding level of debt relative to the size of its economy. Moody’s estimates the small U.S. territory to have bond debts fifteen times greater than the median bond debt of the 50 U.S. states.

Padilla has warned that by 2025 the island could have bond debt of up to $40,000 for every man, woman and child – in a territory with high unemployment and where the average annual wage is less than $20,000.

The debt was amassed by offering too-good-to-be-true terms to U.S. investors wishing to avoid paying high taxes at home. Interest paid on Puerto Rico’s bonds are tax exempt in the U.S.

A complicated set of arrangements lulled investors into a false sense of security with regards to Puerto Rican bonds. For a start, the constitution “contains an unusual clause that requires general-obligation bonds to be paid ahead of virtually any other government expense,” according to the New York Times.The government then promised specific revenue streams to different groups of bondholders.

The 2008 crisis hurt the economy badly and the government continued to promise more and more revenue streams in order to issue more and more bonds, the funds from which were used to finance current expenditure. Now there is simply not enough cash to finance debt and public services.

The governor did not specifically say that debts would be restructured. He did, however, say that he was “guaranteeing our citizens essential services and our pensioners a just income.”

Now, bondholders are at risk as are the funds which hold Puerto Rican bonds and, more importantly, those who insure them in the derivatives market.

Dave Kranzler, from Investment Research Dynamics has warned that there are signs that the Puerto Rico situation may not remain a local crisis for much longer.

He points out that share prices of MBIA, the bond insurers have been plummeting. MBIA are valued at $3.9 billion whereas their exposure to Puerto Rican debt is around $4.5 billion. Kranzler reckons their exposure could even be multiples of that figure. A default could wipe them out.

He also points out that the firm’s largest shareholders are Warburg Pincus, the firm to which Timothy Geithner went after his stint as Treasury Secretary, when he helped paper over the chasms opening up in the financial system.

Geithner is, therefore, better placed than most to estimate the risks posed by various bond issuers. If it is Warburg Pincus who are shedding their MBIA stock it is likely that more trouble is brewing in Puerto Rico.

Essential Guides:

Protecting Your Savings In The Coming Bail-In Era

rom Bail-Outs To Bail-Ins: Risks and Ramifications



Today’s AM LBMA Gold Price was USD 1,171.70, EUR 1,053.26 and GBP 748.38 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,175.00, EUR 1,053.01 and GBP 747.08 per ounce.

Gold slipped $6.70 or 0.57 percent yesterday to $1,172.50 an ounce. Silver remained unchanged at $15.72 an ounce.

Silver in U.S. Dollars - 5 Year

Gold in Singapore for immediate delivery inched up 0.2 percent to $1,174.25 an ounce near the end of the day.

In spite of the Greek drama, the yellow metal has failed to see an influx of safe haven bids, as investors are still focussed on a potential U.S. interest rate hike. Greece has now become the first developed economy to miss a payment to the International Money Fund.

The market was affected by comments from a top central central bank member who said that The Federal Reserve is on track to raise interest rates this year, with September still “in play”, despite growing market volatility and anxiety in the wake of Greece’s debt default.

James Bullard, St. Louis Fed President, shrugged off the impact of Greece’s economic problems and said the Fed will remain data dependent on its view about when to raise rates. However, Mr. Bullard, does not currently hold a voting role on the monetary-policy setting Federal Open Market Committee and therefore his bark is worse than his bite.

In late morning European trading gold is up 0.04 percent at $1,172.70 an ounce. Silver is off 0.45 percent at $15.63 an ounce and platinum is up 0.56 percent at $1,081.00 an ounce. Palladium rose over 3 percent to a session high of $700 an ounce.

Breaking News and Research Here


Interesting development:

(courtesy Bloomberg)

Barrick’s cyanide breakthrough on gold solves a puzzle for gain

The new technique will let the company recover about 2.25 million ounces of gold worth $2.6bn over five years.

David Stringer (Bloomberg) | 1 July 2015 03:23

Miner Don Schumacher (R), a 30-year veteran miner and Barrick mining company official, Louis Schack, stand in a shaft more than 100 stories deep at the Goldstrike Mine in Northeastern Nevada, the most productive gold mine in U.S. history, March 11, 2008. Even amid a boom with gold nearing a record price of $1,000 an ounce, industry officials say they have had trouble recruiting qualified workers in the region. Picture taken March 11, 2008.  REUTERS/Adam Tanner       (UNITED STATES) - RTR1Y78M

Barrick Gold has pioneered a way to produce gold without having to depend on cyanide’s chemical ability to separate the precious metal from ore.

As much as 60% of the planet’s gold is currently produced using cyanide, a 120-year-old practice that carries environmental risks of groundwater contamination.

The new technique, used by Barrick to get gold from cyanide-resistant ore at its Goldstrike mine in Nevada, will let the world’s largest producer recover about 2.25 million ounces of gold worth $2.6 billion over five years. The technology could also spur other companies to consider new ways to limit the use of cyanide in mining.

“Now there’s a plant up and running it takes away some of the risk,” said Paul Breuer, a Perth-based principal research scientist at Australia’s Commonwealth Scientific and Industrial Research Organization, which worked with Barrick on the process. “People will be very seriously looking at it.”

Barrick and the CSIRO developed a way to use non-toxic thiosulfate to process so-called double refractory ore. The research group has also worked with companies including Newcrest Mining Ltd., Australia’s biggest producer, on techniques to limit cyanide use.

50 Biggest Miners

Researchers have been working on the thiosulfate technique since the 1970s. Breuer stressed that it’s not suitable for all mines and may add to production costs.

“We know that cyanide is a concern for some stakeholders,” Barrick spokesman Andy Lloyd said in an e-mail. “The potential to use alternatives to cyanide at certain operations in the future may help to address those concerns.”

About 50 large gold producers have adopted a voluntary policy on the use and disposal of the chemical. The International Cyanide Management Code was drafted after an accident in 2000 polluted rivers in eastern Europe, cutting off drinking water supplies to about 2.5 million people in Hungary and Serbia and killing 1,500 tons of fish.

The spill from a mine near Baia Mare in Romania, which let loose a torrent of waste water laced with 120 metric tons of cyanide, was caused when a tailings dam — used to store mine waste — overflowed.

A similar breach affected a mine in Mexico in January, though the operator Penmont S. de R.L. was able to contain the spill within the boundaries of the site, the country’s environmental prosecution agency said.

Stockpiled Gold

There haven’t been any incidents involving major producers resulting in deaths or significant environmental damage in at least a decade, said Norm Greenwald, executive vice president of the International Cyanide Management Institute, which oversees the gold industry’s code.

Barrick’s development of the new technique, which included a $620 million commitment for a new processing plant, was done primarily to help the company more quickly recover stockpiled gold rather than as an effort to limit environmental risks, according to Lloyd. Cyanide is safe when properly managed, he said in an e-mail.

The toxic legacy of cyanide is much more keenly felt in illegal mining. In February, China’s official news agency reported three people were killed after being poisoned by cyanide gas at an illegal gold mining operation in Henan Province.

Aquatic Life

Cyanide in high concentrations is toxic to aquatic life, especially fish, which are 1,000 times more sensitive to the chemical than humans. Birds and other wildlife are also at risk if they use tailings ponds for drinking or swimming.

“The biggest issue with cyanide is its toxicity to the environment and that’s the number one driver to try and get away from using it,” said CSIRO’s Breuer.

Use of the chemical in gold mining is restricted or banned in Montana, parts of Argentina, Hungary, Slovakia and the Czech Republic, according to the Cyanide Management Institute.

“You can’t really invest in gold without having some exposure to cyanide,” said David Coates, a Sydney-based analyst at Bell Potter Securities Ltd. “Though wherever you can see community or environmental benefits or risk reduction, that’s always a positive.”

©2015 Bloomberg News


(courtesy The London’s Telegraph/Fraser/GATA)

How do you change a currency fast?


By Isabelle Fraser
The Telegraph, London
Tuesday, June 30, 2015

The drachma was the world’s oldest existing currency before it was replaced by the euro on January 1, 2001. And it may be about to make a comeback. This Sunday’s referendum is described by European leaders as a vote for or against the euro. If Greece votes “oxi,” the country may soon be looking for a new currency.

Haris Theoharis, a politician in the centrist party To Potami, said: “There’s already a team within the prime minister’s office, with staff from the general accounting office, right now working on the drachma.”

But how? Has anything like this ever been done before?

Not really. The last time a currency union broke up was the Austro-Hungarian empire in 1918. …

… For the remainder of the report:



(courtesy Koos Jansen/GATA)

Koos Jansen: Former U.S. Mint director clueless on gold in Fort Knox


1:17p ET Wednesday, July 1, 2015

Dear Friend of GATA and Gold:

Gold researcher and GATA consultant Koos Jansen today disputes in great detail assurances that have been given over the years by the former director of the U.S. Mint, Edmund C. Moy, about the U.S. gold reserves at Fort Knox. Jansen’s commentary is headlined “Former US Mint Director Clueless on Gold in Fort Knox” and it’s posted at Bullion Star here:


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


(courtesy Reuters/GATA)

China targets counterweight in gold trade with yuan fix


By A. Ananthalakshmi and Jan Harvey
Wednesday, July 1, 2015

A decade after China kicked off a series of gold market reforms, plans to establish a yuan price fix mark one of Beijing’s biggest step so far to capitalise on the country’s position as the world’s top producer and a leading consumer.

While no immediate threat to the gold pricing dominance of London and New York, the benchmark could ultimately give Asia more power over bullion trade, particularly if the yuan becomes fully convertible, industry sources say.

The yuan fix is due to launch by the end of 2015 via the Shanghai Gold Exchange, which last year allowed foreign players to trade gold using offshore yuan.

“Across the commodity markets as a whole, we’re seeing some very significant initiatives by the Chinese authorities,” said Nic Brown, head of commodities research at Natixis. …

… For the remainder of the report:




And now overnight trading in equities, currencies interest rates and major stories from Asia and Europe:


1 Chinese yuan vs USA dollar/yuan weakens to 6.2012/Shanghai bourse red and Hang Sang: green

2 Nikkei closed up by 93.59  points or 0.46%

3. Europe stocks all in the green /USA dollar index up to 95.87/Euro falls to 1.1108

3b Japan 10 year bond yield:  rises to  .49% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.91/ominous to

3c Nikkei still just above 20,000

3d USA/Yen rate now well below the 123 barrier this morning

3e WTI 58.57 and Brent:  62.86

3f Gold up/Yen down

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

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

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

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

Except Greece which sees its 2 year rate rise  to 37.43%/Greek stocks this morning: stock exchange closed again/ still expect continual bank runs on Greek banks /Greek default to the IMF in full force/

3j Greek 10 year bond yield rise to: 15.43%

3k Gold at 1172.66 dollars/silver $15.65

3l USA vs Russian rouble; (Russian rouble up 1/5 in  roubles/dollar in value) 55.35,

3m oil into the 58 dollar handle for WTI and 62 handle for Brent/Saudi Arabia increases production to drive out competition.

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

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9415 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0459 well below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 3 year German bund remains in negative territory with the 10 year moving further from negativity at +.78%

3s The ELA is frozen now at 88.6 billion euros.  The bank withdrawals were causing massive hardship to the Greek banks.

4. USA 10 year treasury bond at 2.40% early this morning. Thirty year rate well above 3% at 3.17% / yield curve flatten/foreshadowing recession.

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

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

Market Wrap: Greek “Capitulation” Optimism Sends Global Risk Higher After China Re-crashes

Before we focus on the Greek drama which this morning has soared to new highs, a quick look at China which after trading largely unchanged for most of the day, saw a bout of late day selling, which brought the Shanghai Composite 5.2% lower, wiping out all Tuesday rebound gains, and back to the Monday post-PBOC crash level.One thing that was clear: nobody cared about the Chinese PMI data, where both the official PMI and HSBC Mfg PMI missed expectations and printed at 50.2 (exp. 50.4) and 49.4 (Exp. 49.6), respectively.

Other Asian equities mostly rose following renewed negotiations between Greece and its creditors with the Nikkei 225 up +0.5% following a strong BoJ Tankan survey if not so strong real wages which are now down for a record 25 consecutive months, with capex expectations at the highest level since 2004. JGBs fell 20 ticks despite the BoJ conducting its JGB purchase program while participants also look ahead towards tomorrow’s 10-year JGB auction. Hang Seng was closed today due to a public holiday.

So now a quick recap on the state of play in Greece courtesy of RanSquawk:

  • FT writes citing leaked letter that Greek PM is prepared to accept bailout conditions
  • ECB’s Nowotny says that the ECB have kept the Greek ELA unchanged at EUR 88.6bIn. (BBG) These comments come amid reports that the ECB is poised to impose tougher haircuts on the collateral that Greek lenders place in exchange for the emergency loans, according to the FT. Nowotny also added that the threat posed by Greece to the EUR is below what it was previously. According to sources, German finance minister Schaeuble informed conservative lawmakers that he would request that the ECB does not increase the ELA for Greek banks. (RTRS)
  • Eurogroup will hold a call again at 1630BST/1030CDT today in regards to Greece, according to an EU official. (BBG)
  • Greece may suspend the referendum (July 5th) if talks restart and there was an offer and agreement on required prior actions, according to the Maltese PM, with these comments later echoed by the Greek government. (BBG/Times of Malta)
  • Austrian Finance Minister Schelling stated Greek Finance Minister Varoufakis announced new proposals, adding that Greece should not accept loans without conditions. (BBG)
  • Eurogroup chief Dijsselbloem says institutions will debate the request for a further bailout program only following the referendum, this was also reiterated by German Chancellor Merkel. (BBG)
  • ECB’s Praet says that the central bank will implement further policy measures if required, he also says that the ECB stimulus will remain as long as it is required. (BBG)
  • According to the Prorata poll, before the bank closures the `No’ camp for accepting the terms of the bailout was on 57% with the ‘Yes’ vote at 30%. After the banks closed this changed to `No’ 46% and `Yes’ 37%. Note that polls reported yesterday all showed varying results.

Despite the downbeat view the market has taken on Greece throughout the week, stocks in Europe trade higher this morning with fixed income products lower in a reversal of recent moves as participants respond to the latest developments surrounding the troubled nation. Heading into the US open, European equities have been provided a further lift from their opening gains by reports in the FT that Greek PM Tsipras is prepared to accept bailout conditions, according to a leaked letter. Sentiment was already supported by news that the Eurogroup will be holding a teleconference call at 1630BST on the latest state of play with Greece, which could see a formal announcement by the group on the latest set of proposals.

This could subsequently lead to a suspension of the July 5th referendum, according to the Greek government although Eurogroup chief Dijsselbloem says institutions will debate the request for a further bailout program only following the referendum, this was also reiterated by German Chancellor Merkel.

Fed’s Bullard (Non-voter, Hawk) said that a Fed rate lift off is “very much in play” for September but also will be on the table for July, while also reiterating that every FOMC meeting is in play and is data dependent. (BBG)

Despite initially trading in a more subdued manner, EUR has erased its initial losses heading into the US open amid the aforementioned reports regarding Tsipras’ willingness to accept the demands of Greek creditors, news which has subsequently pressured the USD-index back into negative territory.

Elsewhere, antipodean currencies traded higher overnight amid upbeat Australian building approvals data, with supported also lent to AUD and other commodity related currencies from a resurgence in energy prices. Finally, GBP/USD has broken to a fresh session lows in recent trade in the wake of disappointing UK manufacturing PMI data with the pair tripping stops through the earlier weekly low of 1.5664.

In the commodity complex, price action for energy markets was initially swayed by the latest API inventory report which showed the first build in a month in crude stockpiles. (-1.9mln vs. Prey. -3.2mIn). Furthermore, participants also continue to assess the ramifications of Iranian nuclear talks which could lead the nation to provide yet more supply to the market with OPEC seemingly unwilling to cull existing production levels. However, some of the downside in prices was erased by the latest Greek developments which weighed on the USD-index.

Elsewhere, precious metals markets traded in a relatively rangebound manner throughout the session with the data overnight from China failing to weigh on spot gold and silver, although some of the recent safe-haven bid for prices was unwound alongside improved sentiment surrounding Greece. Elsewhere, copper prices were weighed on overnight by the PMI data with Nickel extending recent losses to a fresh 6yr low.

In summary: European shares rise with the basic resources and oil & gas sectors underperforming and autos, technology outperforming. Greece offers to accept proposals from creditors, subject to certain conditions. U.K. manufacturing grows at slowest pace in over 2 yrs. The French and Italian markets are the best-performing larger bourses, Swiss the worst. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields increase. Commodities decline, with nickel, Brent crude underperforming and copper outperforming.  U.S. Markit U.S. manufacturing PMI, ISM manufacturing, construction spending, vehicle sales, mortgage applications, ADP employment change, Challenger job cuts due later.

Market Wrap

  • S&P 500 futures up 1% to 2074
  • Stoxx 600 up 1.8% to 388.2
  • US 10Yr yield up 4bps to 2.4%
  • German 10Yr yield up 5bps to 0.82%
  • MSCI Asia Pacific up 0.2% to 146.7
  • Gold spot little changed at $1172.4/oz
  • All 19 Stoxx 600 sectors rise; basic resources, oil & gas underperform, autos, tech stocks outperform
  • Asian stocks rise with the Kospi outperforming and the Shanghai Composite underperforming.
  • MSCI Asia Pacific up 0.2% to 146.7
  • Nikkei 225 up 0.5%, Kospi up 1.1%, Shanghai Composite down  5.2%, ASX up 1%, Sensex up 1%
  • 6 out of 10 sectors rise with telcos, utilities outperforming and tech, financials underperforming
  • Euro down 0.18% to $1.1127
  • Dollar Index up 0.23% to 95.71
  • Italian 10Yr yield down 10bps to 2.23%
  • Spanish 10Yr yield down 10bps to 2.21%
  • French 10Yr yield up 3bps to 1.23%
  • S&P GSCI Index down 0.5% to 438.6
  • Brent Futures down 0.7% to $63.1/bbl, WTI Futures down 1.3% to $58.7/bbl
  • LME 3m Copper up 0.1% to $5768/MT
  • LME 3m Nickel up 0.3% to $12020/MT
  • Wheat futures down 0.8% to 611 USd/bu

Overnight Headline Bulletin from Bloomberg and RanSquawk

  • Sentiment in Europe has been supported by reports that the Greek PM is prepared to accept bailout conditions
  • Further
    clarity on the progress of discussions should be provided by the
    outcome of discussions from the Eurogroup teleconference at
  • Looking ahead, today sees the release of US
    ADP employment change, manufacturing PMI. Construction spending, ISM
    manufacturing and DoE inventories
  • Treasuries decline after Greece accepted creditors’ proposals as basis for compromise to end standoff over bailout; however, PM Tsipras signaled sticking points remain on pensions, tax discounts to Greek islands.
  • Creditors still view the Greek referendum, planned for July 5, as an issue for reaching an aid accord, according to an EU official; institutions are now analyzing amendments before submitting analysis to the Eurogroup which will hold call at 5.30pm local time
  • While about a third of Greece’s depleted banks cracked open their doors after being closed for three days, all they did was ration pension payments, hours after the country became the first advanced economy to miss a payment to IMF
  • Greece’s capital controls are beginning to bite, from standing in line for hours to withdraw maximum daily allowed EU60 to not be able to buy Apple Store apps
  • A Chinese factory gauge remained sluggish last month, suggesting a tepid response from manufacturers to loosened monetary policy settings and efforts to shore up local government finances
  • China’s $8.1t equity market now has more than 90m individual investors, according to China Securities Depository and Clearing Co, more than the 87.8m Communist Party members at the end of last year, according to Xinhua
  • Markit’s U.K. PMI dropped to 51.4 in June, less than forecast, from 51.9 in May; while total new orders rose, export orders fell for a third month
  • Sovereign 10Y bond yields mostly higher; Greece 10Y yields approach 16%. Asian stocks mixed; Shanghai plunges over 5%. European stocks higher, U.S. equity-index futures rise. Crude oil lower, copper higher, gold little changed


DB’s Jim Reid fills what gaps we may have left:

The tensions are heating up in Greece with lots of headlines and rhetoric but little incremental developments to the story over the last 24 hours. Interestingly I got a couple of emails from travel companies yesterday offering very cheap packages to Greece. That probably reflects the damage this impasse is having on the tourist industry during this peak season period. In terms of news, overnight we got the confirmation that Greece failed to make the €1.6bn payment due to the IMF which came as no surprise following the events of the last few days. A confirmation email from IMF spokesman Gerry Rice confirmed that Greece is now in arrears to the Fund. So with that, Greece now joins the historical ranks of countries including Cuba, Zimbabwe and Sudan as nations who’ve fallen into arrears with the fund. We’ve highlighted previously the various technicalities that now follow a non-payment and the cross-default implications on other EFSF loans, GGB’s and Greek CDS. However its unlikely that the Europeans are going to accelerate anything with regards to the EFSF before the referendum.

Before we got the non-payment confirmation, headlines yesterday were dominated by various reports of extension requests. Greece again made a request for a short-term extension of the existing program – which was swiftly rejected – while we also got the news that Athens submitted a request for a 2-year loan from the ESM. Although Eurozone finance ministers are set to discuss the request today (expected 10.30am GMT), the tone from Europe is one of pushback with German Chancellor Merkel in particular saying that there will be no new negotiations until after Sunday’s referendum. Eurogroup President Dijsselbloem, although acknowledging that the request will get looked at, also highlighted that ‘a new program takes time and will have to contain tough measures and payments’, while ‘the situation will unfortunately further deteriorate and the only way to solve this quickly is when the government will take another political position’. Certainly the bulk of the commentary on the wires was one of the offer being something of a non-starter in any case.

There’s been little in the way of much negative reaction in equity markets in Asia this morning to the non-payment. Aside from a more mixed performance in China where the Shenzhen is +1.15% and the Shanghai Comp -0.27%, most major bourses are firmer with the Nikkei (+0.30%), Kospi (+1.12%) and ASX (+0.52%) all up. Asia credit markets are around a basis point tighter while sovereign bond yields in the region are around 2-3bps wider.

It’s been a busy morning for data meanwhile. In Japan we saw the Q2 Tankan survey which showed a rise of 3pts to 15 in the large manufacturer’s index, and 4pts to 23 for large non-manufacturing companies, while small manufacturer’s declined 1pt to 0 for the quarter, although small non-manufacturer’s rose 1pt to 4. Our colleagues in Japan noted that the most important development in the survey was a large upward revision in the FY15 capex plan across all industries and companies. The plan was revised upward to 5.6% yoy which is up 5ppt from the Q1 survey. Meanwhile over in China, the June PMI readings made for slightly more mixed reading. There were contrasting figures from the official and non-official manufacturing PMI readings. The former showed no change to the 50.2 print, while the latter HSBC print was revised down to 49.4 from 49.6 previously, the fourth straight sub-50 reading. The details still point to overall sluggishness in the economy. The official non-manufacturing print made for slightly better reading however, with the print up 0.6pts to 53.8, a four-month high.

Back to markets yesterday, European equities again remained under controlled pressure for most of the session, although not without plenty of intra-day volatility in reaction to the various Greece headlines which came out over the day. Indeed the Stoxx 600 (-1.26%), DAX (-1.25%) and CAC (-1.63%) all ended the quarter on a weak note, while peripheral bourses actually outperformed with the IBEX and FTSE MIB -0.78% and -0.48% respectively. There were similar choppy moves in US markets, although the S&P 500 (+0.27%) and Dow (+0.13%) did finish the session a touch higher at the close reflecting perhaps the last-minute pitch for an extension. It was a stronger day across the board for European bond markets. 10y Bunds fell 3.1bps in yield to 0.762%, while in the periphery we saw Italy (-5.6bps), Spain (-4.5bps) and Portugal (-6.6bps) all recover some of Monday’s move wider. The same couldn’t be said for Greece however as we saw 2y (+125bps) and 10y (+22bps) yields again move higher. 10y Treasuries traded with little obvious direction having moved in an 8bps range over the course of yesterday’s session, before eventually ending 2.9bps wider at 2.354%.

Yesterday’s mixed data-flow in the US did little help to provide conviction one way or another. Despite rising 3.2pts to 49.4, the Chicago PMI for June still came in below expectations (50.0 expected) for the second straight sub-50 reading. In terms of housing data, the Case-Shiller house price index rose +0.30% mom during April (vs. +0.80% expected) which was the smallest increase since September last year. There was positive news out of the June consumer confidence index however where the 101.4 print (vs. 97.4 expected) rose 6.8pts from May. Over in Europe yesterday, we got the preliminary June CPI print for the Euro area which came in as expected at +0.2% yoy while the advanced reading for the core was also as expected at +0.8% yoy (down from +0.9%). In Germany we saw retail sales in the month of May come in well above expectations at +0.5% mom (vs. 0.0% expected), although we did see a 40bps downward revision to April’s reading to +1.3% mom. Staying in Germany, we also saw the unemployment rate remain unchanged at 6.4% as expected, while in France we got some slightly better than expected consumer spending data for May (+0.1% mom vs. -0.2% expected). Finally, in the UK we saw that the final Q1 GDP reading was revised up to +0.4% qoq (from +0.3%), while the annualized rate was taken up to 2.9% yoy from 2.4% previously.

Elsewhere, there was also some Fedspeak for the market to digest yesterday. Vice-Chair Fischer said that there are ‘tentative’ signs of wage growth and further job creation which is giving him confidence that the US labour market will continue improving and is approaching full employment. Although maintaining a data dependent stance, Fischer also said that ‘we should not wait until we have reached our objectives to begin adjusting policy’. The St Louis Fed President Bullard was noted as saying that a September move is still ‘very much in play’. Bullard also noted that he would like to see more evidence of a bounce back in Q2 data and was also quoted as saying that ‘the Fed should hedge against the possibility of a third major macroeconomic bubble in the coming years by shading interest rates somewhat higher than otherwise’.

Quickly running over today’s calendar, data-flow in Europe this morning is centered on the manufacturing PMI’s where we’ll see the final readings for the Euro area, Germany and France as well as preliminary prints out of the UK, Italy and Spain. It’s a busy calendar in the US this afternoon with the final revision to manufacturing PMI also, along with ISM manufacturing, prices paid and construction spending. Ahead of payrolls on tomorrow (a day early due to the holiday) there will also be much focus on the ADP employment change reading for June, while we’ll also get Challenger jobs cuts for the same month. Of course, Greece related headlines will continue to dominate in the mean time.



And now for the Greek Saga:

Source: @mylittlebaklava


Source: RoarMag


The big story came at 5 am (CET/Central European time) this morning our time as Tsipras sent a letter to the Troika capitulating on most items except the 23% tax on VAT to the islands.  The European response has been quite muted to this belated attempt at reconciliation:

(courtesy zero hedge)

Equities Soar As Tsipras Said Ready To Accept Most Of Expired Bailout Offer, European Response Muted

It’s deja vu all over again.

Just hours after Greece became the first developed country to default to the IMF, as a result being expelled from its existing bailout program, a little before 5am CET news hit that Greek PM Tsipras was willing to concede to virtually all creditor demands, with a few exceptions. As the FT first reported, “Greek prime minister Alexis Tsipras will accept most of the bailout creditors’ conditions offered last weekend, but is still insisting on a handful of changes that could thwart a deal according to a letter he sent late on Tuesday night.”

The two-page letter to the heads of the European Commission, International Monetary Fund and European Central Bank and obtained by the Financial Times, elaborates on Tuesday’s surprise request for an extension of Greece’s now-expired bailout and for a new, third rescue rescue worth €29.1bn.


The letter was sent as eurozone central bankers were preparing on Wednesday to raise the heat on Greece and its banks by restricting their access to emergency loans, a decision that could topple at least one Greek bank.


Although the bailout’s expiry at midnight Tuesday night means the extension is no longer on the table, Mr Tsipras’ new letter, which marks a significant climbdown from his previous position, could serve as the basis of a new bailout in the coming days.


Eurozone finance ministers are due to discuss Mr Tsipras’ new proposal in a conference call at 5:30pm, Brussels time (4.30pm BST).


Mr Tsipras’ letter says Athens will accept all the reforms of his country’s value added tax system with one significant change: keeping a special 30 per cent discount for Greek islands, many of which are in remote and difficult-to-supply regions.

As Bloomberg added, “The letter is the latest indication that Tsipras may be more willing to yield to prevent the nation’s economy from cratering after more than five years of crisis-fighting. Today, euro area finance ministers will weigh the bid from Tsipras, while European Central Bank policy makers will discuss whether to maintain their emergency lifeline.”

And as per the WSJ, “in the new letter sent to the country’s lenders late Tuesday night, Greek Prime Minister Alexis Tsipras proposes changes on several key parts of measures at the center of a five-month standoff between the two sides over funding Greece desperately needs.”

Those include a later start of pension overhauls and exceptions on sales-taxes for certain Greek islands, measures that lenders already rejected when talks broke down last week.


“If Friday’s proposals (from creditors) are the baseline, these measures would significantly increase (the) fiscal gap,” said one official. “And lots of clarifications would be needed on other aspects,” the official added.


A second official said that the proposals from Mr. Tsipras are a weakening of the measures that have been discussed and would not be well received by the three institutions that oversee eurozone bailouts–the European Commission, the European Central Bank and the International Monetary Fund. A third official echoed that assessment.


A senior Greek government official said that the Greek government was not planning to send additional proposals with more concessions on Wednesday.


The letter is the latest in a flurry of drama over the bailout. In the last week, Greece has called a referendum on demands made by creditors and closed its banks to stop a flow of money out of the country. On Tuesday, it became the first developed country to default on the IMF, as the rescue program that has sustained it for five years expired.

The full letter, which was not denied by the Greeks, can be found below:

(see zero hedge for the letter)

to be sure, equity markets around the globe, and especially in Europe soared while bond markets tumbled, when the news first hit just around 11am CET.

Curiously, this happens even after news that in one of the first polls conducted since the referendum announcement a majority of the Greeks would be willing to side with Tsipras gambit and vote No:

And yet, the question is: just what offer is Greece conceding to – the one which expired yesterday? And then there is also the question whether Europe is even willing to budge at this point, since it goes to the very core of the matter: just who is it that wants a Grexit (recall: according to Goldman, a Greek exit is just what the ECB wants to boost QE).

To be sure the first counter headlines from the Troika were anything but supportive.


Schauble made it quite clear that the Greek offer has now expired, and “any further negotiations on aid to Greece would be more difficult and fall under the European Stability Mechanism, which incidentally is just what Tsipras had requested overnight. He had a few more comments:


Others joined in: Reuters cites Italy’s PM who said that Greek Prime Minister Alexis Tsipras announced plans for a referendum on European bailout conditions for political reasons and the vote is “highly risky.”

Austria’s FinMin Schelling said should the Greeks vote no in a referendum on Sunday on whether to accept Athens’ creditors’ bail-out terms, no new talks would be possible with the cash-strapped nation.  “If Greece votes no, no further talks will be possible,” he said on the sidelines of an economic event.

More from Reuters:

Euro zone officials said a letter sent to creditors by Greek Prime Minister Alexis Tsipras on Tuesday contained conditions for Athens’ acceptance of a loan offer that at least some governments would find hard to accept.


The letter, seen by Reuters on Wednesday, said Greece would accept terms published by the European Commission on Sunday but with a number of amendments, including maintaining a reduction on value-added tax for Greek islands and maintaining a pension supplement for the richest beneficiaries for the time being.


“There are still a lot of loose ends,” one euro zone official said. “The letter mentions, for example, reform of the labour market from autumn. It’s just one sentence, not more.


“I don’t think the Eurogroup still believes those promises just like that. By the way, they’re asking for the extension of a programme which has already expired.”

But the biggest hurdle by far is that Greece still seems intent to proceed with the Referendum. Clearly at this point withdrawing the popular vote would be political suicide for Tsipras who just two days ago, full of bluster, addressed the nation and saying it would not be blackmailed. Flipping on that position would hardly win him any popularity points.

Which begs the question: is this merely the latest ploy in the blame game, in which Greece can say: look, we tried absolutely everything, and they still did not budge, just to assure a “No” vote.

Ironically, it is Europe who now appears to desire a referendum as much as Greece.

And what happens then?

To be sure, many “game theoretical” elements and nobody really has any idea what happens next as the Grexident unfolds.For now, however, at least the algos are happy if gradually fading the initial kneejerk bounce higher even as the EUR has now seen right through this latest diplomatic ruse and fallen back to unchanged since before the announcement.

Today there are reports that we might see threats of a depositor haircut at the Greek banks or in English, a Cyprus style bail in whereby Greek citizens will lose much of their deposits:
(zero hedge)

For Greeks The Nightmare Is Just Beginning: Here Come The Depositor Haircuts

With capital controls already imposed on Greece, some have wondered if this is as bad as it gets. Unfortunately, as the Cyprus “template” has already shown us, for Greece the nightmare on Eurozone streetis just beginning.

As a reminder, over the past few months there have been recurring rumors that as part of its strong-arming tactics the ECB may eventually move to raise the haircuts the Bank of Greece is required to apply to assets pledged by Greek banks as collateral for ELA. The idea is to ensure the haircuts are representative of both the deteriorating condition of Greece’s banking sector and the decreased likelihood that Athens will reach a deal with its creditors.

Flashback to April when, on the heels of a decree by the Greek government that mandated the sweep of “excess” cash balances from local governments to the Bank of Greece’s coffers, Bloomberg reported that the ECB was considering three options for haircuts on ELA collateral posted by Greek banks. “Haircuts could be returned to the level of late last year, before the ECB eased its Greek collateral requirements; set at 75 percent; or set at 90 percent,” Bloomberg wrote, adding that “the latter two options could be applied if Greece is in an ‘orderly default’ under a formal ECB program or a ‘disorderly default.’” 

While it’s too early to say just how “orderly” Greece’s default will ultimately be, default they just did if only to the IMF (for now), in the process ending their eligibility under the bailout program and ending any obligation by the European Central Bank to maintain its ELA or its current haircut on Greek collateral, meaning the ECB will once again reconsider their treatment of assets pledged for ELA and as FT reported earlier today, Mario Draghi may look to tighten the screws as early as tomorrow:

When the Eurozone’s central bankers meet in Frankfurt on Wednesday, they could make a decision which some officials fear could push one or more of Greece’s largest banks over the edge.


The European Central Bank’s governing council is poised to impose tougher haircuts on the collateral Greek lenders place in exchange for the emergency loans. If the haircuts are tough enough, it could leave banks struggling to access vital funding.


The ECB on Sunday imposed an €89bn ceiling for so-called emergency liquidity assistance, effectively putting the Greek banking system into hibernation. If, to reflect the increased risk of default, the ECB now applied bigger discounts to the Greek government bonds and government-backed assets which lenders use as collateral, that could leave banks struggling to roll over those emergency overnight loans.


Some on its policy-making governing council feel that Athens’ exit from a programme — notwithstanding its 11th-hour request for an extension and third bailout — leaves the ECB with little choice but to take actions that would, in effect, cut the Bank of Greece’s emergency support to Greek lenders.


Some eurozone officials fear that the position at Greece’s biggest lenders is so tight the ECB could be in danger of pushing some weaker banks over the edge if tougher haircuts are imposed.

Recall that in mid-June, Greek banks were said to have had as much as €32 billion in ELA eligible collateral that served as a buffer going forward. Since then, the ELA cap has been lifted by around €5 billion, meaning that a generous estimate (and we say “generous” because according to JPM, Greek banks ran out of ELA collateral weeks ago) puts the buffer at a little more than €25 billion.

As the haircut rises, that buffer disappears and once the discount applied to the collateral reaches a certain level, an implied depositor haircut materializes. Why? Because by simple balance sheet rules, assets must match liabilities (leaving a token €0.01 for shareholder equity) and once the haircuts eat through the collateral buffer, the implied value of Greece’s pledged assets (currently at around €125 billion) will quickly fall below the value of Greek banks’ unsecured liabilities which sit at around (but really under) €120 billion as of the date capital controls were imposed in Greece over the weekend. These liabilities are better known as “deposits.”

At that point, a depositor haircut is required.

Although the collateral haircuts aren’t public, the face value of pledged collateral is (it can be found on the BoG’s balance sheet) as is the ELA cap, meaning it’s possible to estimate the current haircut and, starting with the assumption that a generous €25 billion buffer remained as of the ECB’s Sunday freeze of the ELA ceiling at €89 billion, project the implied depositor bail-in for different collateral haircut assumptions.

Here is the summary sensitivity analysis indicating what a specific ELA haircut translates to in terms of deposit haircut.


Another way of showing this dynamic is presenting the ELA haircut on the X-axis and the corresponding deposit haircut on the Y-axis once the critical “haircut” threshold of 60% in ELA haircuts is crossed.

As can be seen raising the haircut to 75% implies a €33 billion (or 37%) depositor bail-in or “haircut”, while raising the haircut to 90% implies a €67 billion (or 55%) hit.

Note that the latter scenario looks quite familiar to what happened in Cyprus, and indeed that’s not at all surprising because if, as Dijsselbloem himself said,Cyrpus is a “template“, then the next step after capital controls is a depositor bail-in.

And while we wish we could have some good news for the Greek population, this outcome may have been preordained by none other than Goldman whose Hugh Pill, who on June 28 suggested the following:

The core constituency of the current Greek government — pensioners and public employees — has enjoyed the first claim on remaining government cash reserves. Only when those cash reserves are exhausted will that constituency face the direct implications of the liquidity squeeze the political impasse between Greece and its creditors has created.And only then will the alignment of domestic political interests within Greece change to allow a way forward.

And as Goldman’s former employee and current head of the ECB is about to have his way, the pensioners and public employees will be the first to suffer – first with capital controls and then with ever increasing haircuts on their deposits.

In other words, in order for the Troika to finally achieve its goal of either forcing Tsipras to relent or inflicting enough pain on Syriza’s “core constituency of pensioners and public sector employees” to compel them to drive the PM from office, after capital controls come the depositor haircuts, first small, then ever greater until Greece collectively Cries Uncle and begs Europe to take it back while presenting Merkel with Tsipras and Varoufakis’ heads on a proverbial (and metaphorical, we hope) silver platter.

Then Merkel addressed the German Parliament and basically states that there could be no discussion of an agreement for a new bailout until after the referendum.
(courtesy zero hedge)

Merkel Addresses German Parliament: Key Points

All eyes are once again trained squarely on Greece this morning after a letter surfaced which shows Greek PM Alexis Tsipras is prepared to concede to most of Brussel’s demands in order to secure a deal for Greece which is laboring under capital controls and the threat of a banking collapse after becoming the first developed country to default to the IMF.

This morning, German Chancellor Angela Merkel addressed the German parliament. Here are the key talking points (via Bloomberg):

“The door for talks with Greece was always open and remain always open. We owe that to the people and we owe it to Europe.”


“There can be no negotiations for a new credit program before the referendum.” 


“Greek people unquestionably confronting difficult days.” Greece unilaterally ended debate on second credit program, failed to make IMF payment, Merkel says


“Greece has legitimate right to hold referendum, euro states have right to respond.”

And some more of her speech highlights from MNI:


So is Germany bluffing the bluffer Tsipras, and effectively saying it won’t negotiate with the current Greek government but would rather wait until its replacement is sworn in after the referendum?


Of course, that assumes a Yes vote, which would be contrary to earlier reports that at least in early polling, the “No”s have it? Unless of course Germany does want a No vote, in which case all bets are off.

Leaked Troika documents show that Greece needs huge debt relief and if they capitulate to their demands they will be in servitude forever…
(courtesy Raul Meijer)

Leaked Troika Documents Show Greece Needs Huge Debt Relief

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Just when you think things can’t get any crazier, they always do. The Guardian reports on unpublished Troika documents that show Greece is only too right in asking for debt relief. That for the Syriza government to sign what the Troika wants to force them to sign would see Tsipras et al plunge their country into a financial hell hole.

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As a reminder, this is what hell looks like…


So let’s say that somehow Greece kicks every can left until the end of 2015. Surely Greece will be out of the woods then, right.

Wrong. Because for Europe’s most devastated country, it is only then that the debt nightmare officially begins.

Below are all upcoming Greek debt payments until 2057, also known as the first, ninth and all circles of Greek hell inbetween:

*  *  *

What’s potentially even weirder is that all German MPs have received the documents, because a vote on them was supposed to take place, but none have said a thing about them. Good thing one at least was awake enough to send them to the press.

So they have these docs, and then yesterday Merkel says no more talks until after the referendum, and total silence follows. Boy, has she fallen from her pedestal. We know the Troika are composed of lackeys to the banking system -and this proves it once and for all-, but Merkel is worse. And she has the entire Bundestag wrapped around her finger. Some democracy, that Germany.

But the documents were also part of a package that was sent to Greece and everyone else. But still debt relief remained off the table? What am I missing here? How could Tsipras have signed off on this? He could see the Troika’s own numbers, and still they refused to take them into account and make them part of the deal?!

The Guardian gives the write up a half-ass title, but the contents are clear enough.

IMF: Austerity Measures Would Still Leave Greece With Unsustainable Debt

Greece would face an unsustainable level of debt by 2030 even if it signs up to the full package of tax and spending reforms demanded of it, according to unpublished documents compiled by its three main creditors. The documents, drawn up by the so-called troika of lenders, support Greece’s argument that it needs substantial debt relief for a lasting economic recovery.


They show that, even after 15 years of sustained strong growth, the country would face a level of debt that the IMF deems unsustainable. The documents show that the IMF’s baseline estimate – the most likely outcome – is that Greece’s debt would still be 118% of GDP in 2030, even if it signs up to the package of tax and spending reforms demanded.


That is well above the 110% the IMF regards as sustainable given Greece’s debt profile, a level set in 2012. The country’s debt level is currently 175% and likely to go higher because of its recent slide back into recession. The documents admit that under the baseline scenario “significant concessions” are necessary to improve Greece’s chances of ridding itself permanently of its debt financing woes.


Even under the best case scenario, which includes growth of 4% a year for the next five years, Greece’s debt levels will drop to only 124%, by 2022. The best case also anticipates €15bn in proceeds from privatisations, five times the estimate in the most likely scenario.


But under all the scenarios, which all assume a third bailout programme, looked at by the troika, Greece has no chance of meeting the target of reducing its debt to “well below 110% of GDP by 2022” set by the Eurogroup of finance ministers in November 2012. In the creditors own words: “It is clear that the policy slippages and uncertainties of the last months havemade the achievement of the 2012 targets impossible under any scenario”.


These projections are from the report Preliminary Debt Sustainability Analysis for Greece, one of six documents that are part of the full set of materials that comprise the “final” proposal sent to Greece by its creditors last Friday. These, which the Guardian has seen, were obtained by Süddeutsche Zeitung after they were sent to all German MPs with the expectation that the deal would need to be approved by the country’s parliament. A vote in the Bundestag never took place as the Greek prime minister, Alexis Tsipras, rejected the plans and called a referendum on whether to accept the creditors’ demands. While the analysis underlines the fact that Greece has already benefited from a number of debt-reducing measures – maturities have been extended, interest payments are similar to those of less indebted nations and the PSI in 2012 cut debt by about €100bn – the document also admits that under the baseline scenario “significant concessions” would improve sustainability.


But despite the lenders’ admission that Greece cannot thrive without debt relief the documents provide no clarity about what such a package might look like, nor does it provide any detail of a third bailout programme despite assuming one would exist. They promise only a more detailed debt sustainability analysis in due course.

There’s more in the article. But who needs more of this?





Goldman Sachs wants a GREXIT so the ECB can undergo a huge increse in QE as liquidity in their bond market is quite low: this seems to be the game plan of the ECB as they want Greece to exit.  They are too smart for that.  They will default but stay in the eurozone. Only Greece can say if Greece is to have an GREXIT

(courtesy zero hedge)

Goldman: “ECB Will Have To Go Big”


Bank Of England Warns Greece “Threatens To Trigger Market Selloff That Could Ripple Through The Global Economy”

Early last week we presented something rather shocking: a note by Goldman Sachs suggested that as a result of the ECB’s QE failure to push the EUR lower and with bond yields having risen instead of falling since the launch of the ECB’s QE in March, and perhaps due to a perplexing conflict between the ECB and the Bundesbank when it comes to debt monetization, a Greek default sparking contagion blowout risk, not to mention a “seven big figure” tumble in the EURUSD, may be just what the ECB needs.

On one hand, the Goldman assessment was not surprising: after all the bank’s top trade for 2015 has been that the EUR will go much lower from current levels so in many ways it was self-serving. But, what’s far more stunning is that Goldman, accurately, assessed the ECB’s needs in light of what is increasingly seen by many as a QE program that is faltering just 4 months after its launch, and the direct implication was evident: for all the posturing and bluffing from Greece that it won’t be blackmailed, it may have fallen precisely in a trap set by none other than the ECB.

The only hurdle was getting the Greeks to accept the blame for the failure of the negotiations which happened, at least in the perspective of the Eurozone, when Tsipras announced the referendum after midnight on Friday. Merkel herself admitted as much earlier:


In other words, when it comes to Europe, Greece lost the blame game, and just like the Ukraine civil war last year, became an unwitting catalyst greenlighting Germany’s concession to ECB QE, this time it may be Greece that launches the next step in the ECB’s master plan: not just QE but more QE.

This is precisely what Goldman’s Franceso Garzarelli, co-head of macro and markets research, admitted earlier today in an interview on Bloomberg TV, when he said that the ECB “will have to go big” if the situation in Greece worsens and leads to wider peripheral bond yield spreads.

He added that a close call or “no” vote at referendum will cause spread widening which as a result of the complete lack of bond liquidity borne out of the ECB’s intervention and soaking up of government bond collateral, “the market is not deep enough to accommodate a rotation in risk at this point in time.

How ironic: what Goldman is saying that the more the ECB intervene, the more it will have to intervene. Which, of course, is very convenient for all those who stand to benefit the most from more ECB – entities such as Goldman Sachs…

In terms of specific markets, Garzarelli said that the 10Y Italian yield at 3% would be a sign ECB may move. He added that the market is currently “frozen” with Italy-Germany spread trading in a range because the direct risk from Greece is low, i.e., “if you have Greek risk on at the moment it’s because you want it”; because there is hope of an agreement and because expectation the ECB will limit contagion. The clear circularity of the last argument is too obvious to even note it.

And perhaps just to emphasize Goldman’s point, earlier today another (ex) Goldmanite, this time the one in charge of the Bank of England, Mark Carney, directly refuted Obama who said Greece is not a “major shock” to the US economy, admiting this morning that “the outlook for financial stability in the U.K. has deteriorated in recent days as the crisis in Greece intensifies, underscoring how the Mediterranean nation’s debt troubles are reverberating outside the eurozone.”

As the WSJ reported, when “presenting the BOE’s twice-yearly Financial Stability Report, the central bank’s governor Mark Carney said the risks associated with Greece and its failure so far to reach a deal with its international creditors have grown acute, and threaten to trigger a selloff in financial markets that could ripple through to the wider global economy.”

Mr. Carney told reporters that although U.K. banks’ direct exposure to Greece through loans and deposits is minimal, that doesn’t mean the British economy would necessarily be immune to the fallout should Greece exit the eurozone.


“The situation remains fluid, and it is possible that a deepening of the Greek crisis could prompt a broader reassessment of risk in financial markets,” Mr. Carney said. That could ultimately hurt the confidence of businesses and households in Britain, he said.


The BOE has been working with the U.K. Treasury and authorities across Europe to draw up contingency plans to shield the U.K. economy from harm, Mr. Carney said, although he declined to elaborate. He did say regulators have in stepped up their scrutiny and engagement with the U.K. branches of some Greek lenders.


On Wednesday, U.K. Treasury chief George Osborne said Britain is hoping for the best but “preparing for the worst.”


“We stand ready to do whatever is necessary to protect our economic security at this uncertain time.”

Conveniently, if only for all those 0.01% of the economy who benefit directly from QE, so does the ECB: it is, in fact, ready (and would be delighted) to “go big”…

…. in case Greece votes “Oxi” on Sunday which would mean that, for the second time in the 21st century, Goldman wins and Greece loses.

Very heartbreaking to see this:
(courtesy zero hedge)

“Heartbreaking” Scene Unfolds At Greek Banks As Pensioners Clamor For Cash


1,000 Greek bank branches chanced a stampede in order to open their doors to the country’s retirees on Wednesday.

The scene was somewhat chaotic as pensioners formed long lines and the country’s elderly attempted to squeeze through the doors in order to access pension payments.

As Bloomberg reports, payouts were rationed and disbursals were limited according to last name. Here’smore:

It’s a day of fresh indignities for the people of Greece.

About a third of the nation’s depleted banks cracked open their doors after being closed for three days. But all they did was ration pension payments, hours after the country became the first advanced economy to miss a payment to the International Monetary Fund and its bailout program expired.


On the third day of capital controls, a few dozen pensioners lined up by 7 a.m. at a central Athens branch of the National Bank of Greece, an hour before opening time.They were to receive a maximum of 120 euros ($133), compared with the average monthly payment of about 600 euros. Many left with nothing after the manager said only those with last names starting with the letters A through K would get paid.


“Not only will I have to queue for hours at the bank in the hope of getting 120 euros, but I’ll have a two-hour round trip,” said Dimitris Danaos, 77, a retired local government worker who was making the bus journey from his home outside the Greek capital to the suburb of Glyfada. 

AFP has more color:

In chaotic scenes, thousands of angry elderly Greeks on Wednesday besieged the nation’s crisis-hit banks, which have reopened to allow them to withdraw vital cash from their state pensions.


“Let them go to hell!” said one pensioner waiting to get his money, after failed talks between Athens and international creditors sparked a week-long banking shutdown.


The Greek government, which closed the banks and imposed strict capital controls after cash machines ran dry, has temporarily reopened almost 1,000 branches to allow pensioners without cards to withdraw 120 euros ($133) to last the rest of the week.


The move has again sparked lengthy queues at banks across Greece — and outrage from many retirees who are regarded as among the most vulnerable in society, exposed to a vicious and lengthy economic downturn.


Under banking restrictions imposed all week, ordinary Greeks can withdraw up to 60 euros a day for each credit or debit card — but many of the elderly population do not have cards.


Another customer, a retired mariner who asked not to be named, told AFP he had no cash to buy crucial medicine for his sick wife.


“I worked for 50 years on the sea and now I am the beggar for 120 euros,” he said.


“I took out 120 euros — but I have no money for medication for my wife, who had an operation and is ill,” he added.


Here’s a look at the scene at National Bank in Athens courtesy of The Telegraph:

As we outlined in detail earlier this morning, the latest polls show a slim majority of Greeks plan to vote “no” in the upcoming referendum (which, as far as we know, will still go on). Many analysts and commentators say a “oxi” vote would likely lead to a euro exit and with it, far more pain for the country’s retirees.

Indeed, as we noted on Tuesday in “For Greeks, The Nightmare Is Just Beginning: Here Come The Depositor Haircuts,” Goldman has suggested that only once Syriza’s “core constituency of pensioners and public sector employees” sees the cash reserves (to which they have heretofore enjoyed first claim on) run dry, will they “face the direct implications of the liquidity squeeze the political impasse between Greece and its creditors has created. And only then will the alignment of domestic political interests within Greece change to allow a way forward.”

And so, as sad as it is, the scene that unfolded today in front of the roughly one-third of Greek bank branches which opened their doors to pensioners, may have been preordained by the powers that be in Burssels because as we said yesterday evening, breaking Syriza’s voter base may have been necessary in order for the Troika to finally force Tsipras to relent or else risk being driven from office, after capital controls and depositor haircuts force public sector employees to collectively cry “Uncle”, beg Europe to take it back, and present Merkel with Tsipras and Varoufakis’ heads on a proverbial (and metaphorical, we hope) silver platter.

Tsipras announces that he will not back down on the referendum: it will be held!!
(courtesy zero hedge)

Tsipras Will Not Back Down On Referendum: Media Report

Contrary to suggestions that Greek PM Alexis Tsipras was set to cancel this weekend’s euro referendum as part of a negotiated deal with creditors, at least one report claims Syriza isn’t set to back down and will go ahead with the popular vote.

As noted earlier, Tsipras is set to address the nation soon, although it appears he may wait to see if the ECB tips its hand first.



Defiant Tsipras Addresses Nation, Calls For “No” Referendum Vote – Live Webcast

After a letter surfaced which shows Athens is ready to accept the latest proposal presented by the troika (i.e. the now expired offer from Brussels) in exchange for a third rescue package worth nearly €30 billion, Greek PM Alexis Tsipras is set to address the nation. As a reminder, a little before 5am CET, news hit that Tsipras was willing to concede to virtually all creditor demands, with a few exceptions.

Although the latest opinion polls show a narrow majority of Greeks would vote “no” in the referendum scheduled for this weekend, the bite of capital controls and threat of an imminent banking sector collapse have heaped pressure on the government which, as of midnight, became the first developed country to default to the IMF.

  • WE WILL RESUME TALKS ON MONDAY (after referundum)
Six reasons for the Greece populace to vote no:
(courtesy Yanos Varoufakis/zero hedge)

Greek FinMin Lays Out 6 Reasons To Vote “No” In The Referendum

Did your country recently become the first developed nation in history to default to the IMF?

Are you worried your deposits will soon play a starring role in the blockbuster sequel to the Cyprus bail-in?

Or, finally, are you confused as to how you should vote in an unprecedented referendum which many say is effectively a decision between democratic rule and debt servitude?

Well, have no fear because Greek FinMin Yanis Varoufakis is here to help with 6 reasons why you should just say “no” to the troika…

  1. Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren.
  2. The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.
  3. The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure
  4. Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.
  5. Greece will stay in the euro.  Deposits in Greece’s banks are safe.  Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.
  6. The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.

Source: YanisVaroufakis.com



Stocks tumble after the Eurogroup meeting ends.  They state that there will be no talks until after the Greek referendum:
(courtesy zero hedge)

Stocks Tumble After Eurogroup Meeting Ends: “No Talks Until After Referendum

Surprise! The Eurogroup conference call has ended and there’s no deal in sight until after the referendum.


Small Caps are leading the way…


and now Disselboom:

Eurogroup’s Dijsselbloem Says “No Grounds For Further Talks”, Will “Wait For Outcome Of Referendum”

Update: Here is the statement:

And the highlights from Bloomberg:


The first of today’s two key catalysts following Tsipras’ defiant speech has concluded: the Eurogroup teleconference chaired by Jeroen Dijsselbloem. And, as he tweeted moments ago, he will post his remarks momentarily.

What will he announce? Probably not much, if the FT’s Peter Spiegel is right:

As much was confirmed by others:


Watch the Eurogroup’s summary remarks at the following site, assuming it can be un “503”-ed.

And now everyone focuses on the ECB’s much more important decisions: will Mario haircut (or even pull) the ELA or not.


written over a year ago but it is still precisely what is guiding the Greeks:

(courtesy zero hedge)

“What If Berlin And Frankfurt Do Not Budge” – How Varoufakis Saw The “Worst Case Scenario”

Over a year ago, and long before he became the mascot for fraught negotiations between Greece and its creditors, Yanis Varoufakis penned a lengthy essay on what might happen should the Greek government decide to stand firm in the face of pressure from Brussels, Frankfurt, and Berlin.

Earlier today we learned that in fact, Greece will stick to its negotiating position even in default and will remain defiant to the end, or at least until the voters who swept PM Tsipras and Varoufakis into office indicate at the ballot box that concedeing the Syriza campaign mandate is an acceptable outcome. With the government urging Greeks to vote “no”, the Tsipras and Varoufakis’ gambit will be put to the test next week, or perhaps even as early as this afternoon when the ECB could decide to effectively bring the Greek banking sector to its knees.

In this context, we bring you Yanis Varoufakis’ vision of the endgame, straight from the embattled FinMin himself:

That Greece has the right and the opportunity to deploy these bargaining cards there is no doubt. The important question is this: What if Berlin and Frankfurt do not budge? What if they tell Athens to ‘go jump of the tallest cliff’? The Greek government currently claims that it has a budget surplus. While I strongly doubt this claim, I suspect that a small primary surplus can be concocted through some additional cost cutting and a leximin squeeze of top public sector incomes downwards (without affecting the lowest incomes, pensions and benefits). That should suffice to allow the Athens government to meet its needs during any medium term standoff with Berlin and Frankfurt, as the Greek state will need no financing either from the official sector or from the money markets.In short, the answer to a German “Go jump” can be: “We shall not jump but we shall stay rock solid within the Eurozone and behind our demand for a debt conference. Just watch us.”

Berlin and Frankfurt will, undoubtedly, be furious. They will issue a variety of threats, including the suspension of structural fund flows from Brussels. But the real battleground will be the banks. As they did with Cyprus, where they threatened the government with an immediate suspension of the island nation’s ELA, so too in the case of Greece they will threaten to pull the plug on the Greek banks. Two points need to be made here. First, the Greek banks no longer hold any Greek government debt, which means that their collateral with the European System of Central Banks cannot be downgraded legally. Secondly, Frankfurt will have to think twice before it issues the threat of bending its own rules to close down Greek banks – since doing this would threaten to engulf the whole of the Periphery’s banking system into another cascading panic.

Confronted with such a reality, I have good cause to hope that Berlin will prefer to accommodate the Greek government and to look with a great deal more ‘kindness’ the ‘request’ for a debt relief conference. And if it does not, and wishes to bring the Eurozone down with it, let it do its worst, I say.

With Brussels and especially Berlin having now run fresh out of “accommodation”, we shall see shortly if the ECB intends to “pull the plug.”



Then this surprise:  no change in the haircut at the ECB..exactly what Varoufakis thought would happen.

The Bluff May Be Working: ECB Does Not “Haircut” Greek ELA Collateral

Following our post yesterday, in which we calculated the levels of ELA haircuts that would result in corresponding deposit haircuts, we – and the rest of the world – were patiently waiting to see if the ECB would commence using its nuclear option, first with a small increase in haircuts, then as we got closer to Sunday, with larger ones.

Even Goldman this morning wrote that “we see a sharp increase in haircuts as unlikely.” but as we showed, even a modest increase, for example from 50% to 65%, would promptly impair Greek deposits and require deposit haircuts.


Of course, the far bigger question in any ECB haircut decision was whether the central bank would tip its hand that it is indeed a political entity, and perhaps tip the scales either way in Sunday’s referendum.

Moments ago we got the answer, when the ECB not only kept the ELA frozen as expected, thus requiring the continuation of the Greek capital controls, but decided against a collateral haircut.


In other words, so far Varoufakis’ thesis remains intact, and the ECB has refused to push the “nuclear option” launch button.

Recall what the finmin said last April:

… the real battleground will be the banks. As they did with Cyprus, where they threatened the government with an immediate suspension of the island nation’s ELA, so too in the case of Greece they will threaten to pull the plug on the Greek banks. Two points need to be made here. First, the Greek banks no longer hold any Greek government debt, which means that their collateral with the European System of Central Banks cannot be downgraded legally.Secondly, Frankfurt will have to think twice before it issues the threat of bending its own rules to close down Greek banks – since doing this would threaten to engulf the whole of the Periphery’s banking system into another cascading panic.

So far he has been proven correct, which may mean that his final bluff will ultimately pay off, namely that “Berlin will prefer to accommodate the Greek government and to look with a great deal more ‘kindness’ the ‘request’ for a debt relief conference. And if it does not, and wishes to bring the Eurozone down with it, let it do its worst, I say. ”

As to whether today’s ECB decision boosts the “No” vote on Sunday because it validates the hardline taken by Tsipras and Varoufakis, it may be best to let the next round of polling answer that question.




As we promised you yesterday, it is our belief that Greece will become a member of the BRICS and its new development bank while at the same time stay in the Eurozone.  This would definitely kick start its economy as it would have free trade from China et al and also they would become the gateway into Europe from the “SILK ROAD” project
(courtesy Sputnik news/and special thanks to Robert H for sending this to us)
Greece Open to Becoming BRICS Member – Defense Ministry / Sputnik International
Greece is open to the possibility of becoming a member of the BRICs group of developing nations as part of the BRICS new Development Bank (NDB). Greek deputy defense minister Kostas Isychos told Sputnik

ATHENS (Sputnik) – In May, Russia invited Greece to become an NDB member, with discussions on Athens’ membership in the bank expected to take place at the July 9-10 BRICS summit in the Russian city of Ufa.“Greece has also been invited to become a BRICS member within the Development Bank of the BRICS. We are still open to that,” Isychos, who is also the co-chair of the Russian-Greek Intergovernmental Committee, said.

According to him, Greece has always been in favor of good European-Russian relations and of European-Eurasian relations. Athens is currently in talks over joining the BRICS bank with the group’s members.

“So we do have a multilateral foreign policy, both in the strict sense of foreign policy, but also in a broader sense of economic external policy,” Isychos added.Five major developing economies — Brazil, Russia, India, China and South Africa — signed an agreement to establish the NDB at a July 2014 summit in Fortaleza, Brazil. BRICS member states agreed to establish a $100-billion liquidity reserve to ensure the bank’s financial stability.

The NDB is expected to become an alternative to Western-dominated financial institutions and will focus primarily on funding infrastructure projects.





An extremely important paper from Michael Snyder as he shows that the global shadow banking sector now totals 75 trillion usa and the USA has 1/3 of that. Please read this and Michael states that it is in danger of collapsing:

(courtesy Michael Snyder/Economic collapse blog)

The 75 Trillion Dollar Shadow Banking System Is In Danger Of Collapsing

Shadow Banking System - Public Domain


Keep an eye on the shadow banking system – it is about to be shaken to the core.  According to the Financial Stability Board, the size of the global shadow banking system has reached an astounding 75 trillion dollars.  It has approximately tripled in size since 2002.  In the U.S. alone, the size of the shadow banking system is approximately 24 trillion dollars.  At this point, shadow banking assets in the United States are even greater than those of conventional banks.  These shadow banks are largely unregulated, but governments around the world have been extremely hesitant to crack down on them because these nonbank lenders have helped fuel economic growth.  But in the end, we will all likely pay a very great price for allowing these exceedingly reckless financial institutions to run wild.

If you are not familiar with the “shadow banking system”, the following is a pretty good definition from investing answers.com

The shadow banking system (or shadow financial system) is a network of financial institutions comprised of non-depository banks — e.g., investment banks, structured investment vehicles (SIVs), conduits, hedge funds, non-bank financial institutions and money market funds.

How it works/Example:

Shadow banking institutions generally serve as intermediaries between investors and borrowers, providing credit and capital for investors, institutional investors, and corporations, and profiting from fees and/or from the arbitrage in interest rates.

Because shadow banking institutions don’t receive traditional deposits like a depository bank, they have escaped most regulatory limits and laws imposed on the traditional banking system. Members are able to operate without being subject to regulatory oversight for unregulated activities. An example of an unregulated activity is a credit default swap (CDS).

These institutions are extremely dangerous because they are highly leveraged and they are behaving very recklessly.  They played a major role during the financial crisis of 2008, and even the New York Fed admits that shadow banking has “increased the fragility of the entire financial system”…

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-based financial system, banking and capital market developments are inseparable: Funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. Growth in the balance sheets of these intermediaries provides a sense of the availability of credit, while contractions of their balance sheets have tended to precede the onset of financial crises. Securitization was intended as a way to transfer credit risk to those better able to absorb losses, but instead it increased the fragility of the entire financial system by allowing banks and other intermediaries to “leverage up” by buying one another’s securities.

Over the past decade, shadow banking has become a truly worldwide phenomenon, and thus it is a major threat to the entire global financial system.  In China, shadow banking has been growing by leaps and bounds, but this has the authorities deeply concerned.  In fact, according to Bloomberg one top Chinese regulator has referred to shadow banking as a “Ponzi scheme”…

Their growth had caused the man who is now China’s top securities regulator to label the off-balance-sheet products a “Ponzi scheme,”because banks have to sell more each month to pay off those that are maturing.

And what happens to all Ponzi schemes eventually?

In the end, they always collapse.

And when this 75 trillion dollar Ponzi scheme collapses, the global devastation that it will cause will be absolutely unprecedented.

Bond expert Bill Gross, who is intimately familiar with the shadow banking system, has just come out with a major warning about the lack of liquidity in the shadow banking system…

Mutual funds, hedge funds, and ETFs, are part of the “shadow banking system” where these modern “banks” are not required to maintain reserves or even emergency levels of cash. Since they in effect now are the market, a rush for liquidity on the part of the investing public, whether they be individuals in 401Ks or institutional pension funds and insurance companies, would find the “market” selling to itself with the Federal Reserve severely limited in its ability to provide assistance.

As far as shadow banking is concerned, everything is just fine as long as markets just keep going up and up and up.

But once they start falling, the whole system can start falling apart very rapidly.  Here is more from Bill Gross on what might cause a “run on the shadow banks” in the near future…

Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.

And what might precipitate such a “run on the shadow banks”?

1) A central bank mistake leading to lower bond prices and a stronger dollar.

2) Greece, and if so, the inevitable aftermath of default/restructuring leading to additional concerns for Eurozone peripherals.

3) China – “a riddle wrapped in a mystery, inside an enigma”. It is the “mystery meat” of economic sandwiches – you never know what’s in there. Credit has expanded more rapidly in recent years than any major economy in history, a sure warning sign.

4) Emerging market crisis – dollar denominated debt/overinvestment/commodity orientation – take your pick of potential culprits.

5) Geopolitical risks – too numerous to mention and too sensitive to print.

6) A butterfly’s wing – chaos theory suggests that a small change in “non-linear systems” could result in large changes elsewhere. Call this kooky, but in a levered financial system, small changes can upset the status quo. Keep that butterfly net handy.

Should that moment occur, a cold rather than a hot shower may be an investor’s reward and the view will be something less than “gorgeous”. So what to do? Hold an appropriate amount of cash so that panic selling for you is off the table.

In order to avoid a shadow banking crisis, what we need is for global financial markets to stabilize and to resume their upward trends.

If stocks and bonds start crashing, which is precisely what I have projected will happen during the last half of 2015, the shadow banking system is going to come under an extreme amount of stress.  If the coming global financial crisis is even half as bad as I believe it is going to be, there is no way that the shadow banking system is going to hold up.

So let’s hope that the financial devastation that we have seen so far this week is not a preview of things to come.  The global financial system has been transformed into a delicately balanced pyramid of glass that is not designed to handle turbulent times.  We should have never allowed the shadow banks to run wild like this, but we did, and now in just a short while we are going to get to witness a financial implosion unlike anything the world has ever seen before.



Oil related stories for today:

(courtesy zero hedge)

Crude Slumps To $57 Handle As DOE Confirms Surprise Inventory Build, Production Hovers Near Record Highs

Confirming last night’s surprise API inventory build data, after 8 weeks of inventory draws, DOE reports crude oil inventories rose 2.386 million barrels. Overall production dropped a miniscule 0.09% last week but basically production remains at cycle record highs. Crude prices are dropping on the news… testing to a $57 handle.


The Builds are back…


The result… a $57 handle for WTI

Charts: Bloomberg


Then late in the afternoon:

Crude Crashes To $56 Handle – 10-Week Lows

Following today’s record production and renewed inventory build, it appears the $57 to $62 range of the last 3 months is about to be tested … especially as Kerry et al. assure the world an Iran deal is “very very close” and they are working “very very hard.” WTI (Aug) is now trading with a $56 handle – its weakest since mid-April



Charts: Bloomberg



Your important early morning currencies/interest rates and bourses results overnight:




Euro/USA 1.1108 down .0023

USA/JAPAN YEN 122.91 up .497

GBP/USA 1.5656 down .0024

USA/CAN 1.2520 up .0066

This morning in Europe, the Euro fell by a considerable 23 basis points, trading now just above the 1.11 level at 1.1108; 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, an imminent  default of Greece and the Ukraine, rising peripheral bond yields.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 50 basis points and trading just below the 123 level to 122.91 yen to the dollar.

The pound was again down this morning as it now trades just below the 1.57 level at 1.5656, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is down by 66 basis points at 1.2520 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).

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

The NIKKEI: this morning :  up 93.59  points or 0.46%

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

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

Gold very early morning trading: $1172.60


Early Wednesday morning USA 10 year bond yield: 2.40% !!! up 5 in basis points from Tuesday night and it is trading just above  resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Wednesday morning: 95.84 up 32 cents from Tuesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning

And now for your closing numbers for Wednesday:


Closing Portuguese 10 year bond yield: 2.93%  down 7 in basis points from Tuesday (  very ominous/and dangerous with an accident waiting to happen)

Closing Japanese 10 year bond yield: .48% !!! up 1 in basis points from Tuesday/ still very ominous

Your closing Spanish 10 year government bond, Wednesday, down 2 in basis points  ( very ominous)

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

Your Wednesday closing Italian 10 year bond yield: 2.29% down 5 in basis points from Tuesday: (very ominous)

trading 1 basis point higher than Spain.



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


Euro/USA: 1.1046 down .0084 ( Euro down 84 basis points)

USA/Japan: 123.18 up  0.768 ( yen down 77 basis points)

Great Britain/USA: 1.5604 down .0078 (Pound down 78 basis points)

USA/Canada: 1.2591 up .01370 (Can dollar down 137 basis points)

The euro fell by a fair amount today. It settled down 84 basis points against the dollar to 1.1046 as the dollar traded northbound today against all the various major currencies. The yen was down by 77 basis points and closing well above the 123 cross at 123.18. The British pound lost huge ground today, 77 basis points, closing at 1.5604. The Canadian dollar lost huge ground against the USA dollar, 137 basis points closing at 1.2591 and was again the biggest loser amongst the major currencies today.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.


Your closing 10 yr USA bond yield: 2.42% up 7 in basis point from Tuesday// (well above the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

96.28 up 77 cents on the day


European and Dow Jones stock index closes:


England FTSE up 87.61 points or 1.34%

Paris CAC up 92.99 points or 1.94%

German Dax up  235.53 points or 2.15%

Spain’s Ibex up 142.00 points or 1.32%

Italian FTSE-MIB up 482.93. or 2.15%


The Dow up 138.40  or 0.79%

Nasdaq; up 26.26 or 0.53%


OIL: WTI 56.90 !!!!!!!



Closing USA/Russian rouble cross: 55.73  down 6/10  rouble per dollar on the day



And now for your more important USA stories.


NY trading for today:

Stocks Surge Despite Dashed Hellenic Hope, Crude Carnages, Bonds Bruised, Greenback Gains

Seems appropriate once again…


China did not help..


But today was all about Greece again, and CNBC’s Michelle Caruso-Cabrera summed it up perfectly:

“Stocks are rallying on hopes of a deal. There is no deal! There will be no deal! Everyone’s gone home”

Another day, another hope-driven spike that ends in tears and recriminations… The Dow got a lift as it broke stops through its 200DMA and Nasdaq back above 5000


The late day ramp was all machines ramping VWAP – as volume utterly collapsed…


VIX was clubbed like a baby seal… (notice the flash crash early on seemed to signal again) because why not sell Vol ahead of NFP


On the week, stocks remain driven by Greece and nothing else – not even today’s mixed data (maybe NFP tomorrow will change that)


Futures show the mess more clearly…


The extent of hope is seemingly impossible to comprehend as GREK – the Greek ETF – manage to get all the way back to unchanged on the week!!!! Before giving up all its gains on the day…


Airlines were Baumgartner’d on news of a DoJ collusion probe…trading at the lowest since October 2014…


Depsite the carnage in crude to 11-week lows…


High Yield bonds and stocks did not play well with each today…


Treasury yields rose notably (seemingly led by Bunds weakness as Europe rallied into its close on hope of Greek deal)…


The US Dollar Surged today led by EUR weakness (but where were all the talking heads today about how EURUSD is showing how GREXIT doesn’t matter?)


For some context on Crude’s move today, Silver slipped but copper and gold were flat…


Charts: Bloomberg


ADP shows highest private jobs growth this year even though job cuts surge!!

(courtesy zero hedge/ADP)

ADP Rises To Highest Since 2014 Despite Challenger Job Cuts’ Surge To Highest Since 2010

As the shortened week continues ahead of tomorrow’s payrolls print, and amid chaotic Greek headline-hockey, ADP and Challenger jobs data gives us a glimpse of what volatility lies ahead. After jumping a little last month, but remaining in weak territory, ADP printed 237k for June (beating expectations of +217.5k) in line with estimates for nonfarm payrolls. This is the best print since Dec 2014 but is dominated by small businesses with large companies lagging.  Job gains were dominated by Services (+225k) with goods-producing fiorms gaining a mere 12k jobs. This comes after Challenger-Gray showed job cuts increasing 42.7% YoY in June and are at the highest level for June since 2009.

Mark Zandi, chief economist of Moody’s Analytics, said,

“The U.S. job machine remains in high gear. The current robust pace of job growth is double that needed to absorb the growth in the working age population. The only blemish in the job market is the loss of jobs in the energy sector. Most encouraging is the healthy rate of job growth among the nation’s smallest companies.”

Bounce back… good for the economy – bad for the market?


More visual details:

Change in Nonfarm Private Employment


Change in Total Nonfarm Private Employment


Change in Total Nonfarm Private Employment by Company Size


Change By Selected Industry

From the ADP report:

Payrolls for businesses with 49 or fewer employees increased by 120,000 jobs in June, the same as May. Employment among companies with 50-499 employees increased by 86,000 jobs, up from 63,000 the previous month. Employment gains at large companies – those with 500 or more employees – increased from May, adding 32,000 jobs in June, up from 19,000. Companies with 500-999 employees bounced back to 27,000 jobs added after shedding 1,000 jobs in May. Companies with over 1,000 employees added 5,000 jobs, down from 21,000 the previous month.


Goods-producing employment rose by12,000 jobs in June, after adding 11,000 in May. The construction industry had another solid month in June adding 19,000 jobs, down from 28,000 last month. Meanwhile, manufacturing added 7,000 jobs in June, after losing 2,000 in May.


Service-providing employment rose by 225,000 jobs in June, a strong rise from 192,000 in May. The ADP National Employment Report indicates that professional/business services contributed 61,000 jobs in June, almost double May’s 32,000. Trade/transportation/utilities grew by 50,000, the same as the previous month. The 19,000 new jobs added in financial activities was an increase from last month’s 12,000.

The always “informative” ADP infographic:

<br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />
       ADP National Employment Report: Private Sector Employment Increased by 237,000 Jobs in June<br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />
     http://www.adpemploymentreport.com/2015/June/NER/images/infographic/main…&#8221; width=”598″ />


So that’s all great news – more bartenders and waiters,but as Challenger-Gray reports,

Job cuts increased by about 10 percent in June, as employers announced plans to reduce payrolls by 44,842 workers during the month.Meanwhile, heavier-than-expected downsizing throughout the first half of 2015 pushed the midyear total to its highest level since 2010, according to a report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.




This is also the highest June print since 2009



Real, non seasonally adjusted iSM manufacturing plunges to lows for this year:

(courtesy ISM/zero hedge)

Non-Seasonally-Adjusted ISM Manufacturing Plunges To 2015 Lows As Production Tumbles

Following Construction Spending’s exuberant 2.2% MoM surge in April (revised to 2.1), May saw a fall-back-to-earth 0.8% gain (still better than expected). However, while Markit’s Manufacturing survey tumbled, ISM’s rose in May and now in June picked up again to 53.5 – its highest since January. Employment rose notably but New orders were only marginally higher and Production slowed. Rather stunningly, all the improvment in ISM is seasonal adjustments with the non-seasonally-adjusted data at its lowest since January. The question remains, is this good news enough to warrant a September rate cut – if we ignore everything else that is weak?


The excitment is over… but still rising


As ISM jumps in the face of Markit’s survey tumble…


Under the covers the story is mixed at best…


As production plunged…


Wondering how ISM Manufacturing is so high? Simple – Seasonal Adjustments


Charts: Bloomberg



USA manufacturing PMI falters:

(courtesy zero hedge/Markit PMI)

“Strong Fundamentals” Meme Destroyed As US Manufacturing PMI Slows To Its Weakest Since October 2013

US Manufacturing PMI’s final print for June at 53.6 (slightly above its preliminary 53.4 print) is its lowest since October 2013. The survey has fallen almost non-stop since the end of QE3. Under the covers, data was mixed,softer output growth was offset by a slight pick-up in the pace of new business gains and job creation, but Manufacturers indicated a slowdown in production growth for the third month running during June. As Markit’s echief economist notes,“Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”


Worst since Oct 2013…


As Markit explains,

June data indicated a slower improvement in overall business conditions across the U.S. manufacturing sector, with softer output growth offsetting a slight pick-up in the pace of new business gains and job creation. The latest survey indicated that subdued export demand remained a key factor weighing down overall new order growth, as highlighted by a fall in new work from abroad for the third month running. Meanwhile, input cost inflation picked up in June, but output charge inflation moderated since the previous month.


The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.6 in June, down from 54.0 in May and the lowest reading since October 2013.


Manufacturers indicated a slowdown in production growth for the third month running during June. Reports from survey respondents suggested that subdued export sales and weaker investment spending patterns in the energy sector had weighed on output growth.

Things changed after the end of QE3…

Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:

“Purchasing managers are reporting the slowest rate of manufacturing expansion for over a year and a half, suggesting that the economy is slowing again.


“The slowdown is largely linked to a third consecutive monthly fall in exports, in turn attributed by many companies to the strong dollar undermining international competitiveness.


“Investment spending also appears to be waning, with recent months seeing the slowest growth of new orders for business equipment and machinery for two years. The investment slowdown suggests companies are becoming more risk averse and cautious in their spending. The current impressive rate of factory job creation could soon likewise wane unless the outlook improves.


“The good news is that the export and investment drags are being offset by an ongoing surge in consumer spending, which is in turn most likely linked to falling prices in recent months. An upturn in growth of new orders for consumer goods helped drive an increase in overall manufacturing orders books during the month, providing a ray of hope that output growth will stabilise at its current modest pace.


“Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”

Charts: Bloomberg



Loan to Value percentage in the used car loan business is up to 137%.

This means that the loans are greater than what the value the car is worth. This is another accident waiting to happen:

(courtesy zero hedge)

LTV 137% – In Unprecedented Development, Lenders Now Take Record Losses On Every Used Car Loan

This wasn’t supposed to happen.

With the US consumer hunkering down in 2015 and barely spending more than in the comparble period last year, the only silver lining had been auto sales driven almost entirely by access to cheap credit; in fact, as the chart below shows while revolving credit has barely budged from its post-crisis lows with consumers still failing to fall for the “recovery” narrative, Uncle Sam’s zero cost loans which are now reaching well over 6 years in average duration have provided a generous support for the US auto industry. In addition to the bubble in student loans, car loans have been the only confirmation that the US consumer – that driver of 70% of the US economy – is still alive.


So in a world in which one can buy cars now and worry about the costs later, much much later, auto sales should have been soaring as they have been in recent years, right?


Well, not for GM, which moments ago reported a surprising drop in June auto sales, which declined 3% M/M to 259,353 from the prior month, driven by an 18.1% plunge in Buick sales, with Chevy and Cadillac also posting declines, despite expectations of a 3% headline increase. This even as GM announced pickup deliveries were up 33% with the Silverado up 18%. Curiously, GM’s main domestic competitor, Ford, reported a 9% drop in F-Series sales in June.


What is more surprising is that even as GM posted its first monthly sales miss in a long time, it now appears to be engaging in yet another stealth government bailout, this time not on the balance sheet but the income statement.

As GM reported, even in a month of broader decline in sales, “State and local government sales were up 6 percent in June, with full-size pickup and Tahoe PPV deliveries more than doubling.”

The US government is buying GM pickup trucks now?

It gets better: “State and local government sales are up 19 percent calendar year to date.

So just what is the dollar amount of these soaring government purchases from a company that was bailed out by the same government several years ago? That information is not disclosed, as otherwise it may crush the fiction that it is the US consumer that is behind GM’s powerful “rebound” and not the entity that has an unlimited balance sheet.

But what is most concerning in light of weak sales not only from GM but virtually all other carmakers, both domestic and foreign, is what was reported in the OCC’s semiannual report on “Semiannual risk perspectives” in which we learned something truly stunning: according to the OCC, “60 percent of auto loans originated in the fourth quarter of 2014 had a term of 72 months or more.Extended terms are becoming the norm rather than the exception and need to be carefully managed.

But the real stunner is the following: also according to the OCC, quoting Experian, “average advance rates well above the value of the autos financed. In the fourth quarter of 2014, the average LTV for used vehicle auto loans was 137 percent.” In other words banks are assured to take major losses on their loans and they are still lending at a record pace. Or rather, not so much banks because as we have shown before, the primary source of auto loans in recent years has been just one, as shown below.


Believe it or not, it gets worse:

“advance rates for borrowers across the credit spectrum are trending up, with used vehicle LTVs for subprime borrowers (credit score < 620) averaging nearly 150 percent at the end of 2014 (see figure 24).”

For those who are confused, an LTV of over 100% at origination guarantees that the lender will suffer losses on the loan (absent some dramatic price bubble which sends car prices soaring in the coming years).

This explains why the Fed stopped reported LTV data for auto loans altogether and one has to rely on period snippets of updates to get a sense of just how terrifying the real Loan to Value situation currently is.

So what is going on here? Well, for lenders, car loans have become a definitive loss leader. How do they recover the losses on the loans? “Sales of add-on products such as maintenance agreements, extended warranties, and gap insurance are often financed at origination. These add-on products in combination with debt rolled over from existing auto loans contribute to the aggressive advance rates.

In other words, in the US, the car industry has been quietly transformed to a razor-razorblade model, one in which it is not the manufacturers who benefit on the razorblade sales but the lenders!

That this too will result in an epic disaster is not a question of if but when, which is a recurring question considering there is now a bubble virtually anywhere one turns.

Source: OCC

Domestic auto sales tumble;
(courtesy zero hedge)

Domestic Auto Sales Tumble, Miss For 6th Of Last 7 Months (Don’t Tell Phil LeBeau)

Judging by the smiling Phil LeBeau who earlier opined of an 8.9% plunge in For F-Series sales that “I don’t know if I’d Call that a slowdown,” you would think the US Auto industry was killing it. Apart from the fact that all but the most luxurious brands missed expectations, we sum up the month of June’s results by nothing the credit-spewed spike in May is now over and domestic car sales are continuing to trend lower. This is the biggest MoM drop since Sept 2014. As Ward’s notes, they have now missed expectations for 6 of th elast 7 months…


Auto Sales SAAR dropped from 17.71mm to 17.11mm – the biggest percentage drop MoM since Sept 2014.


Charts: Bloomberg

Looks like the HFT boys will be blamed for the next market crash.
Why on earth are they tolerating this criminal activity?
(courtesy CNBC/zerohedge)

Pre-Blame-Game Begins: Fed’s Brainard Fingers HFT For “Amplifying Market Shocks”


We warned previously that when (not if) the market crashes next, The Fed is going to need a scapegoat(other than British traders living at home with their parents) and judging by The Fed’s Lael Brainard’s comments today, high-frequency-traders (HFT) are in the crosshairs. Crucially, Brainard warns that HFT “may amplify market shocks,” and The Fed is “studying possible changes in liquidity resilience.” As Brainard hints, if liquidity is less resilient, that “could be significant” in times of stress if “it acted as an amplification mechanism, impeded price discovery, or interfered with market functioning.”

As Bloomberg reports,

Federal Reserve Governor Lael Brainard says central bank is closely watching for changes in the resilience of market liquidity, in prepared remarks Wed. at panel discussion about future of financial market intermediation.

  • Brainard speaks in Salzburg, Austria, at global forum on finance
  • “An upcoming study of the October 15 event will shine some light on the functioning of the U.S. Treasury market, but there is still much we need to learn,” Brainard says, referring to intraday gyrations in 10-year Treasury yields that day
  • “Although anecdotes of diminished liquidity abound, statistical evidence is harder to come by,” Brainard says
  • If liquidity is less resilient, that “could be significant” in times of stress if “it acted as an amplification mechanism, impeded price discovery, or interfered with market functioning”
  • Regulation may be playing contributing role in reducing broker-dealer bond inventories, but other factors may also be contributing, Brainard says
  • High frequency traders’ effect on market liquidity is a topic for further research, and markets increasingly dominated by HFTs “may be less able to absorb large shocks”

So given all that, why is HFT tolerated after all?

Could it indeed be that the only reason why HFT – which has constantly been in the background of broken market structure culprits but never really taken such a prominent role until last night, is because the market is being primed for a crash, and just like with the May 2010 “Flash Crash” it will all be the algos’ fault?

This is precisely the angle that Rick Santelli took earlier today, during his earlier monolog asking “Why is HFT tolerated.” We show it below, but here is Rick’s punchline:

Are regulators stupid when it comes to high frequency trade? Well, i think that there was a time where they were a bit slow to the party. But i don’t think it’s stupidity or ignorance or not paying attention. So let’s wipe that off. So the question i’m asking is, why do they let it continue?


Why is it that anybody would want HFT to be unchallenged or at least not challenge it now? My reason, this is just my reason, when i look at the stock market it’s basically at historic highs. When i look at what the federal reserve is doing, it’s mostly to put stocks on all-time highs. When i look at all the debt and all the programs that don’t seem to be making a difference except for putting stocks on all-time highs, i see that you have this tower of power with regard to the stock market. And nobody wants to challenge or alter hft because it is good to go that many days without having a loss. So my guess is when the stock market eventually deals with reality and pricing, which will come at a time when there’s not a zero interest rate policy and we’re long past QE, I think they’ll address it.


Rick’s full clip:


Precisely: when reality reasserts itself – a reality which Rick accurately points out has been suspended due to 5 years and counting of Fed central-planning – HFT will be “addressed.” How? As the scapegoat of course. Because since virtually nobody really understands what HFT does, it can just as easily be flipped from innocent market bystander which “provides liquidity” to the root of all evil.

In other words: the high freaks are about to become the most convenient, and “misunderstood” scapegoat, for when the market finally does crash. Which means that those HFT-associated terms which very few recognize now, especially those on either side of the pro/anti-HFT debate who have very strong opinions but zero factual grasp of the matter, such as the following…

  • Frontrunning: needs no explanation
  • Subpennying: providing a “better” bid or offer in a fraction of penny to force the underlying order to move up or down.
  • Quote Stuffing: the HFT trader sends huge numbers of orders and cancels
  • Layering: multiple, large orders are placed passively with the goal of “pushing” the book away
  • Order Book Fade: lightning-fast reactions to news and order book pressure lead to disappearing liquidity
  • Momentum ignition: an HFT trader detects a large order targeting a percentage of volume, and front-runs it.

… will become part of the daily jargon as the anti-HFT wave sweeps through the land.

Why? Well to redirect anger from the real culprit for the manipulated market of course: the Federal Reserve. Because while what HFT does is or should be illegal, in performing its daily duties, it actively facilitates and assists the Fed’s underlying purpose: to boost asset prices to ever greater record highs in hopes that some of this paper wealth will eventually trickle down, contrary to five years of evidence that the wealth is merely being concentrated making the wealthiest even richer.

Amusingly some get it, such as the former chairman of Morgan Stanley Asia, Stephen Roach, who in the clip below laid it out perfectly in an interview with Bloomberg TV earlier today (he begins 1:30 into the linked clip), and explains precisely why HFT will be the next big Lehman-type fall guy, just after the next market crash happens. To wit: “flash traders are bit players compared to the biggest rigger of all which is the Fed.” Because after the next crash, which is only a matter of time, everything will be done to deflect attention from the “biggest rigger of all.”

*  *  *

So enjoy the ride for now but Brainard’s comments (full speech below) appear to be pre-empting the blame game for when (not if) this bubble blows.

*  *  *

Recent Changes in the Resilience of Market Liquidity

Recent events and commentary raise concerns about a possible deterioration in liquidity at times of market stress, particularly in fixed income markets. These concerns are highlighted by several episodes of unusually large intraday price movements that are difficult to ascribe to any particular news event, which suggest a deterioration in the resilience of market liquidity. For example, on the morning of October 15, 2014, 10-year U.S. Treasury yields gyrated wildly, and the intraday movement in Treasury prices was 6 standard deviations above the mean. In addition, after 4 p.m. on March 18 EDT of this year, a meeting day for the Federal Open Market Committee, the U.S. dollar depreciated against the euro by 1.75 percent in less than three minutes, an unusually large drop in such a short interval. A few weeks later, markets experienced some very large intraday movements in the price of German bunds during times of little market news.

In contrast, there have been a few notable episodes where market volatility was clearly attributable to significant news but nonetheless appeared to evidence some deterioration in the resilience of liquidity. For example, on January 15 of this year, the announcement by the Swiss National Bank regarding the floor of the exchange rate between the euro and the Swiss franc led to severe disruptions in foreign exchange markets. Separately, the rise in bond yields in May and June 2013, the so-called taper tantrum, also appeared to many observers to have been out of proportion to the news that prompted it.

A reduction in the resilience of liquidity at times of stress could be significant if it acted as an amplification mechanism, impeded price discovery, or interfered with market functioning. For instance, during episodes of financial turmoil, reduced liquidity can lead to outsized liquidity premiums as well as an amplification of adverse shocks on financial markets, leading prices for financial assets to fall more than they otherwise would. The resulting reductions in asset values could then have second-round effects, as highly leveraged holders of financial assets may be forced to liquidate, pushing asset prices down further and threatening the stability of the financial system.

Although anecdotes of diminished liquidity abound, statistical evidence is harder to come by. Indeed, there is relatively little evidence of any deterioration in day-to-day liquidity. Traditional measures of liquidity, such as bid-asked spreads, are generally no higher than they were pre-crisis. Turnover, an alternative measure of day-to-day liquidity, is lower, but it is unclear whether this reflects changes in liquidity or perhaps changes in the composition of investors. The share of bonds owned by entities that tend to hold securities until maturity, such as mutual funds and insurance companies, has increased in recent years, which would lead turnover to decline even with no change in market liquidity. In some markets, the number of large trades has declined in frequency, which could signal reduced market depth and liquidity, but could also reflect a shift in market participants’ preferences toward smaller trade sizes.

Finding a high-fidelity gauge of liquidity resilience is difficult, but there are a few measures that could be indicative, such as the frequency of spikes in bid-asked spreads, the one-month relative to the three-month swaption implied volatility, the volatility of volatility, and the size of the tails of price-change distributions for certain assets. We see some increases in the values of these indicators, which provide some evidence that liquidity may be less resilient than it had been previously. But this evidence is not particularly robust, and, given the limitations of the existing data, it is difficult to know the extent to which liquidity resilience may have declined.

As we continue to investigate quantitative evidence of the deterioration in the resilience of liquidity in some of the financial markets, we are also trying to tease out the various drivers of liquidity conditions, such as changes in regulation, trading strategies, and market structure. Regulatory changes are often cited as a contributing factor. Trading financial assets is a balance-sheet-intensive activity, and the Dodd-Frank Act, has created incentives for institutions to carefully assess the risks of such activity through stricter requirements on leverage, liquidity, and proprietary trading, raising the cost of market making and possibly affecting market liquidity. Indeed, there is evidence of reductions in broker-dealer bond inventories in recent years. Nonetheless, since not all broker-dealer inventories are used for market-making activities, the extent to which lower inventories are affecting liquidity is unclear. Moreover, reductions in broker-dealer inventories occurred prior to the passage of the Dodd-Frank Act, suggesting that factors other than regulation may also be contributing. In assessing the role of regulation as a possible contributor to reduced liquidity, it is important to recognize that those regulations were put in place to reduce the concentration of liquidity risk on the balance sheets of the large, highly interconnected institutions that proved to be a major amplifier of financial instability at the height of the crisis.

A second possible contributor may be the growing role of electronic execution of trades across equity, Treasury, and foreign exchange markets and the associated increasing role of high-frequency trading. Competition from high-frequency trading in a particular market may reduce the attractiveness of that market for traditional (manual) traders or slower automated traders, leading to a progressive shift in the composition of market participants toward high-frequency traders (HFTs) over time. This shift could be important to the extent that HFTs may have more limited capacity to support liquidity resilience since, on average, HFTs appear to trade with smaller inventories and lower capital than traditional traders. Although having less inventory and capital reduces the cost of trading, it also means that markets increasingly dominated by HFTs may be less able to absorb large shocks. Thus, liquidity may be sufficient and relatively cheap on normal trading days, but it may not be deep enough to prevent large price swings when demand for liquidity is significantly above the norm. This consideration would be most relevant in the markets that are amenable to high-frequency trading, and automated trading more generally, where assets are fairly standardized, such as equities and U.S. Treasury securities, and less relevant in markets where securities are more idiosyncratic, such as corporate bonds. It is also possible that markets that more readily lend themselves to high-speed trading may be characterized by relatively greater concentration over time. Achieving the speed necessary for high-frequency trading requires large technology investments that necessarily may support a relatively more limited number of market participants. Greater concentration in turn might be associated with lower resilience at times of stress. The possible effect of HFTs on the resilience of market liquidity is an important topic for future research.

Of course, other developments may be affecting liquidity in financial markets. For example, market participants have indicated that changes in participants’ risk-management practices may be contributing to reduced market liquidity. In particular, the experience of the financial crisis may have led many participants to reevaluate the risk of their market-making activities and either reduce their exposure to that risk, become more selective, or charge more for it, thereby reducing liquidity.4

It is also worth noting the increased role of asset managers on the buy side of the fixed income markets. During normal market conditions, the demand for liquidity from this group of bond holders is likely relatively small, since asset managers acting on behalf of retail investors generally buy bonds to hold them for some period. Moreover, managers of open-end funds hold liquidity buffers that enable them to respond smoothly to normal redemption demands. However, because the large increase in bond fund holdings is relatively recent, little is known about how these funds will react to periods of market stress or to abrupt changes in financial conditions and the adequacy of their liquidity buffers for such situations. Because funds potentially allow daily redemptions even against illiquid assets, it is possible that redemptions could be magnified in stressed conditions as individuals try to redeem early, which in turn could lead to liquidations of relatively less liquid assets, thereby amplifying price volatility and reducing market liquidity.

If in fact liquidity resilience has declined recently, it may be a transitional development that will be corrected going forward as participants adjust their risk management practices, and the structure of these markets continues to evolve. For example, if traditional providers of liquidity scale back their activity in response to changes in regulation and market structure, over time, this shift may create incentives for other providers, which are not similarly constrained, to step in.

Stress tests, such as those announced by the Securities and Exchange Commission (SEC) offer one way to help ensure that market participants are prepared for sharper spikes in market volatility. For instance, in the Federal Reserve Board’s most recent stress test, the severely adverse scenario featured a large decrease in the prices of corporate bonds.

We are in the early stages of data-based analysis of possible recent changes in the resilience of market liquidity. An upcoming study of the October 15 event will shine some light on the functioning of the U.S. Treasury market, but there is still much we need to learn. More broadly, at the Board, we will closely monitor and investigate the extent of changes in the resilience of liquidity in important markets, while deepening our understanding of different contributors and how market participants are adapting.

*  *  *

Smells like scapegoating to us…

And India has already started:


Would that ever be allowed in America?


Dave Kranzler discussing huge cracks in the uSA housing sector:

(courtesy Dave Kranzler/IRD)

Big Cracks Forming In The Housing Market

How many of you reading this were aware that new home prices are down 12% since October 2014?   Do not believe the propaganda.  The headlines are full of lies.  The numbers themselves are lies.

The 2.2% gain in new home “sales” from the Census Bureau was driven by what is likely a corrupted “sales” report from the northeast region.  I am putting “sales” in quotes because “new home sales” as reported by the Census Bureau are based on contracts signed.  How many of you were aware of that?   On average right now roughly 20% of all contracts signed are cancelled.  So the report has a natural 20% error built into it.

But wait, it gets better.  According to the Census Bureau’s stated methodology, in areas where it can’t get data on contracts from homebuilders, it resorts to “guesstimating” the number of new contracts based on the number of permits filed in that area.  In other words the Census Bureau’s data is outright an insane guess in some areas.

As it turns out, the CB is telling us there was an 87.5% jump in “sales” in the northeast in May vs. April.  Well, guess what?  It also turns out that there was a huge spike in permits filed in the northeast in May.   I wrote about this here:  Housing Starts Plunge, Permits Spike Up

Let’s look at some truth.  First, here’s a graph that might startle you:


The graph above shows the year over year monthly change in private residential construction spending. You can see that the metric is falling off a cliff, just like it did when the Housing Bubble 1.0 popped.  You shouldn’t need any more evidence to tell you that what is being reported by the media, Larry Yun, Wall Street and the Government is a complete fraud.

But it just so happens that I wrote a report for Seeking Alpha in which I take a scalpel to the latest Census Bureau reporting abortion and demonstrate that the Housing Bubble 2.0 is about to pop:   May New Home Sales Were Not As Reported

As you can see from the graph above, the homebuilder sector is down 5.3% since its recent high close on April 1. During the same time period the S&P 500 has been flat. This divergence from the market indicates to me net selling by “smart” money. The pattern in the graph above also correlates with the move in mortgage rates from April to the present. If mortgage rates continue to trend higher, I believe it will exert forceful downward pressure on homebuilder stocks.

(courtesy John Williams/Greg Hunter/USAWatchdog)

New Recession Starts After Mid-Year-John Williams

New Recession Starts After Mid-Year-John WilliamsBy Greg Hunter’s USAWatchdog.com

Economist John Williams correctly predicted the first quarter GDP in 2015 would turn negative.  What is his second quarter prediction for GDP?  Williams says, “I am looking for an outright contraction in the second quarter as well.  Two back to back negative quarters in the GDP (Gross Domestic Product) would be counted as a recession.  GDP is very heavily bloated and inflated by all sorts of gimmicks. . . . In effect, we are seeing a weakening of the economy now that is dragging down these bloated numbers.  I contend we never recovered from the collapse in 2008 and 2009.  We have just been bottom bouncing. . . . It is beginning to turn down again. . . . Expectations for the second quarter will begin to sink.”

To back up Williams’ claim of a “sinking” economy, look no further than the Dow Transports which show a clear downtrend.  There are many more signs of trouble as Williams contends, “. . . The better quality numbers show the economy is sinking.  For example, industrial production, published by the Federal Reserve, has contracted dramatically in the first quarter, and it is a virtual certainty to contract in the second quarter. . . . Year-to year growth of industrial production is at a level that you only see going into recession.  New orders of durable goods, that’s a leading indicator to industrial production.  It contracted in the fourth quarter, it contracted in the first quarter, and it is basically in the second quarter. . . . I think it will be down when all the numbers are in, and that will indicate a further contraction in the third quarter of this year.  Now, where you have has stronger numbers in the last month or so is with the housing numbers.  Home sales and housing starts, but those numbers are highly volatile and they are extremely unstable. . . . You look at those numbers, you are down anywhere between 30%-60% from where you were before the (2008-2009) recession. . . . Those numbers are going to start to turn down.”

So, what does Williams make of the strength of the dollar in the last year?  He thinks the markets were anticipating the Fed raising interest rates because of the so-called “recovery.”  Of course, the economy is not improving, and Williams thinks when the Fed tries to pump the economy back up, the dollar will dive.  Williams explains, “I was looking for a hyperinflation in 2014.  What I did not expect and what I have missed is the big rally in the dollar. . . . The economy was never improving.  Now, it’s not only not improving, but it is begging to turn down again.  That’s the importance of quarter to quarter contraction.  When you get that, you get official recognition that the economy is falling, and it is not recoveringSo, as the expectations wane on the Fed tightening, you will start to see dollar selling.  I think you are going to see a panic decline in the dollar at some point, massive selling of the dollar, not only that, it will take it down to levels of a year ago, but to historic lows.  As that happens, you will see a tremendous spike in oil prices which will start moving the consumer price index pick up. . . . You have an overhang in excesses of $12 trillionoutside the United States.  A goodly portion of that will be repatriated to the United States into the US markets.  People will be dumping the dollar to get out of the dollar, and the Fed is going to have to be monetizing all sorts of things. . . . What’s out of whack right now against reality is the strength of the dollar.  We don’t have a booming economy.  We don’t have a Fed that is going to happily raise rates, although they would like to.  As the realization sinks in, the exchange rate of the dollar will start falling.  Then, you will actually have a panic, and once that has happened, you will see a sharp upturn in headline inflation, and that will evolve eventually into hyperinflation. . . . A dollar panic is reflective of the problems here.”

Join Greg Hunter as he goes One-on-One with economist John Williams of Shadowstats.com.

(There is much more in the video interview.)

After the Interview:
John Williams has some free i

Well that about does it for tonight


I will see you tomorrow night




  1. Agnes · · Reply

    Thank you for remembering us on your big holiday. Informative as usual. “Hello. Pretty bird.” from Fred the Timneh to Caesar the Conure.


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