July 2/Phony jobs report/ Of the 223,000 supposed job gains 213,000 came from B/D/IMF throws the EU under the bus/Many Greece stories/Gold hit in price/Silver and gold OI continue to rise!!

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1163.00 down $6.50  (comex closing time)

Silver $15.54  down 1 cent.

In the access market 5:15 pm

Gold $1167.00

Silver: $15.68


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

At the gold comex today, we had a good delivery day, registering 300 notices for 30,000 ounces . Silver saw 1115 notices filed for 5,575,000 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 1113 contracts despite the fact that Wednesday’s price was unchanged. The total silver OI continues to remain extremely high, with today’s reading at 197,837 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .989 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 1110 notices served upon for 5,565,000 oz. for July

In gold, the total comex gold OI rests tonight at 446,319 for a gain of 4018 contracts even though gold was down $2.50 yesterday.  We had 300 notices filed for 30,000 oz  today.

We had a huge withdrawal in tonnage at the gold inventory at the GLD to the tune of 1.79 tonnes; thus the inventory rests tonight at 709.65 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, we had no change in inventory at the SLV to the tune / 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, 12 important commentaries on Greece


(zero hedge, Reuters/Bloomberg/)



3.USA data tonight; i) Jobs report

ii) New Factory orders

iii) jobless claims


4. Gold trading overnight

(Goldcore/Mark O’Byrne/off tonight)

5. Trading from Asia and Europe overnight

(zero hedge)

6. Trading of equities/ New York

(zero hedge)

7. Dave Kranzler/IRD:  topic the phony jobs report

(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 rose by a huge 4,018 contracts from 442,301 up to 446,319 even though gold was down $2.50 in price yesterday (at the comex close).  We are now in next contract month of July and here the OI surprisingly fell by only 1 contract to 420 contracts. We had 0 notices filed yesterday and thus we lost only 1 contract or an additional 100 ounces will not stand in this non active delivery month of July. The next big delivery month is August and here the OI rose by 1468 contracts up to 285,041. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 117,985. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 104,437 contracts. Today we had 300 notices filed for 30,000 oz.

And now for the wild silver comex results. Silver OI rose by a huge 1113 contracts from 196,724 up to 197,837 despite the fact that the price of silver was unchanged in price with respect to Wednesday’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 306 contracts down to 1,771. We had 330 notices served upon yesterday and thus we gained 24 contracts or an additional 120,000 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 after first day notice. The August contract month saw it’s OI fall by 8 contracts. The next major active delivery month is September and here the OI rose by a small 901 contracts to 139,082. 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 21,403 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 36,011 contracts which is good in volume.  We had 1110 notices filed for 5,565,000 oz


July initial standing

July 2.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz nil
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 300 contracts (30,000 oz)
No of oz to be served (notices) 120 contracts 12,000 oz
Total monthly oz gold served (contracts) so far this month 300 contracts(30,000 oz)
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 0 customer withdrawals




total customer withdrawal: nil oz

We had 0 customer deposits:

Total customer deposit:0 ounces

We had 0 adjustments.


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 300 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 (300) x 100 oz  or 30,000 oz , to which we add the difference between the open interest for the front month of July (420) and the number of notices served upon today (300) 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 (300) x 100 oz  or ounces + {OI for the front month (420) – the number of  notices served upon today (300) x 100 oz which equals 42,000 oz standing so far in this month of July (1.306 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 2 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) 1155 contracts  (5,775,000 oz)
No of oz to be served (notices) 616 contracts (3,080,000 oz)
Total monthly oz silver served (contracts) 2231 contracts (11,155,000 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 0 customer deposits:


total customer deposit:nil  oz


We had 1 customer withdrawals:

i) Out of Brinks:  311,379.730 oz


total withdrawals from customer:  311,379.730   oz


we had 1  adjustment out of the CNT vault

We had an adjustment of 427,630.18 oz adjusted out of the customer and this landed into the dealer account of CNT

Total dealer inventory: 60.116 million oz

Total of all silver inventory (dealer and customer) 183.685 million oz

The total number of notices filed today for the July contract month is represented by 1155 contracts for 5,775,000 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 (2231) x 5,000 oz  = 11,155,000 oz to which we add the difference between the open interest for the front month of July (1771) and the number of notices served upon today (1155) x 5000 oz equals the number of ounces standing.

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

2231 (notices served so far) + { OI for front month of June (1771) -number of notices served upon today (1155} x 5000 oz ,= 14,235,000 oz of silver standing for the July contract month.

we gained 24 contracts or an additional 120,000 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 2/we had a huge withdrawal of inventory to the tune of 1.79 tonnes/rests tonight at 709.65 tonnes

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 2 GLD : 709.65 tonnes




And now for silver (SLV)

July 2/ no change in inventory at the SLV/rests tonight at 725.342 million oz

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 2/2015:  tonight inventory rests 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 7.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.7%

cash .3%

( July 2/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to 1.15%!!!! NAV (July 2/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .60% toNAV(July 2/2015

Note: Sprott silver trust back  into positive territory at +1.15%

Sprott physical gold trust is back into negative territory at -.60%

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)

>no commentary today/day off!!


Mike Kosares: Gold ownership as a lifestyle decision


9:46p ET Wednesday, July 1, 2015

Dear Friend of GATA and Gold:

In the July edition of USAGold’s News & Views letter, proprietor Mike Kosares describes the serene confidence and gratitude of a now-retired doctor who put a huge amount of his savings into gold coins a little more than a decade ago, taking a long-term approach to capital preservation and perceiving ownership of the monetary metal as a sort of lifestyle decision.

Such an outlook is not likely to mollify anyone aggrieved by the ever-more-comprehensive destruction of markets by megalomaniacal central banks, but it’s a reminder of the monetary metal’s enduring virtue and purpose and of why a free and transparent market in gold is worth contending for.

The newsletter’s headline, taken from Kosares’ commentary, is “Gold Ownership as a Lifestyle Decision” and it’s posted at USAGold here:


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


Is gold ‘shrugging off Armageddon’ or just being shrugged off?


5:33p ET Wednesday, July 1, 2015

Dear Friend of GATA and Gold:

Your secretary/treasurer today sent the e-mail below to Bloomberg View columnist Barry Ritholtz in response to his commentary posted today, “Gold Shrugs Off Armageddon,” which can be found here:


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

* * *

Wednesday, July 1, 2015

Dear Mr. Ritholtz:

Your commentary today, “Gold Shrugs Off Armageddon” —


— invites people to e-mail you “explaining how wrong and stupid I am.” Instead, may I write you to ask that in future commentary you address a few specific questions of fact and that you review and respond to some documentation about the gold market?


— Was the Banque de France’s director of market operations, Alexandre Gautier, telling the truth when he told the London Bullion Market Association meeting in Rome in September 2013 that the bank is secretly trading gold for its own account and the accounts of other central banks “nearly on a daily basis”? (See:http://www.gata.org/node/13373.)

— Is the Bank for International Settlements telling the truth when it maintains in its annual report that it does the same sort of secret trading on behalf of its member central banks, trading not only gold itself but also gold futures, options, and other derivatives? (See: http://www.gata.org/node/12717.)

— Is the BIS sincere when it advertises that it undertakes secret interventions in the gold market for its members? (See http://www.gata.org/node/11012.)

— Was CME Group, which operates the major futures exchanges in the United States, telling the truth last year when it told the U.S. Commodity Futures Trading Commission that it is offering volume trading discounts to central banks for secretly trading all contracts on its exchanges? (See http://www.gata.org/node/14385.)

— Was CME Group telling the truth last year when it told the U.S. Securities and Exchange commission that its customers include governments and central banks? (See http://www.gata.org/node/14411.)

— If central banks are indeed doing so much secret trading in the gold market and other markets, what are their objectives and might this secret trading be intended to manipulate markets, support government currencies and bonds, and deceive and cheat investors who think that markets are free trading?

There is a lot more documentation suggesting as much here:


My organization would welcome an honest exchange with you about these things, as your commentaries about gold seem to overlook the most relevant “narrative” about the monetary metal and ignore a substantial and serious audience quite different from the one you seem to enjoy engaging with.

With good wishes.

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




Why gold should be heading higher:

(courtesy Moe Zulfigar/Profit Confidential/GATA)

Gold Prices Headed Higher; Scrutiny at Suppliers Says So

By Thursday, July 2, 2015

Don’t pay attention to the current gold prices. Think long-term when looking at the precious metal. As it stands, the fundamentals are improving. This will eventually reflect in prices.

I am paying extra attention to the supply side.

Gold Mining Companies Falling Victim to Low Prices

You see, when the prices are low, the producers struggle by facing severe scrutiny.

So far, we have heard some miners already giving up as they have stopped their operations. For instance, Midway Gold Corp. filed for Chapter 11 bankruptcy. The reasons for this were too much debt, and needing to restructure the company. (Source: Midway Gold Corp., June 22, 2015.) There are other companies that have stopped their operations as well; Allied Nevada Gold Corp. is another.

Sadly, there are many more companies that are currently in business and producing. But if they are faced with even a minor issue that results in cash outflow, they won’t be operating for too long.

What does this all mean? All of this will impact production. As mining companies shuffle to keep their business in order, or give up, they are bound to produce less.

We already see it happening; if you pay attention to production figures from gold producing regions, you will notice a decline. I will not be surprised if there are even further declines in production.

Gold Recycling Hitting Multi-Year Lows

Another major source of gold supply is from recycling.

To give you some perspective on how big this factor is to the gold market; in the first quarter of 2015, recycled gold amounted to 355.1 tons of the 1,089.2 tons of total supply. Simple math will tell you this was about one third of the total. (Source: World Gold Council, last accessed June 29, 2015.)

Thanks to the low prices, gold recycling has been hurt.

According to a report by the World Gold Council and the Boston Consulting Group, gold recycling in 2014 hit a seven year low and will remain low in 2015 as well. (Source: World Gold Council, last accessed June 29, 2015.)

Over years, it has declined significantly; in 2009, it was 42% of the total gold supply. By 2014, it declined to just 26% of the total supply.

For the recycler, life has become difficult. For example, the Cash4Gold.com mail-in refinery. The company bought gold, silver, and platinum from consumers. In 2009, it even ran an ad during the Super Bowl. Due to the decline of this sort of business, it had to file for bankruptcy just three years later.

Where’s Gold Headed?

Over the past few years, the mainstream has made it appear that gold is a useless metal and shouldn’t be held in a portfolio. I completely disagree with this claim.

I certainly agree that the metal prices are going through a rough phase, and mind you; every asset class does this. In 2008 and early 2009, stocks were a horrible investment. After a period of security, they turned out to be great. Gold is in very similar state.

As I see it, just from basic economics, the yellow metal is setting up to reward big-time. Investors should at least keep an eye on it.




Alasdair Macleod on the Greek referendum:

(courtesy Alasdair Macleod)

Greece’s referendum

This coming Sunday Greece will hold its referendum.

The question to be asked is not, as the foreign press initially reported it, about leaving the euro. It is about accepting or rejecting the troika’s bail-out terms.

The Greek government’s finance minister is making this distinction clear to voters in the few days remaining. As if to ram the point home, Greece was reported earlier this week to be considering taking out an injunction at the European Court of Justice to block attempts to expel Greece from the euro on the grounds that there is no mechanism to do so. Well, there is in the Lisbon Treaty, but it needs Greece’s approval, which amounts to the same thing. Indeed, in a blog written over a year ago the then economist Yanis Varoufakis wrote, “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'”. Now that he is finance minister he is ensuring his prediction will come to pass.

Behind the press reports there is also a common, dangerous assumption; and that is Greece would be better off out of the euro with its own currency, which it can devalue at will. This is not what Varoufakis seeks. He is not naïve enough to think that a new drachma is a panacea. The truth is simpler: Greece is drowning in debt and needs to negotiate at least a partial default, a point Varoufakis has made time and time again.

Unfortunately, in the minds of the Eurozone establishment, for which read Germany as the main creditor-nation, a negotiated default cannot be permitted: it’s the red line. Give in to Greece and you have Portugal, Italy and perhaps Spain and eventually France demanding the same forgiveness. The Eurozone’s banks, while reasonably free of Greek debt, are loaded up with sovereign debt issued by these nations and cannot take haircuts on it without going under. It would not only undermine the Eurozone, but it could trigger a global financial crisis as well.

Furthermore the Greek government’s own spending is exceptionally high, and from a creditor’s point of view should be addressed. This is behind the troika’s emphasis on radical pension reform, already rejected by this far-left government. But there comes a time when even the most lenient creditor has to bite the bullet and face reality, and that is what Germany is now being forced to do.

Of course this is a black-or-white argument, and reality is usually shades of grey. Normally politicians seek compromises so the press is naturally prone to believing that negotiations could be restarted at any time. However, Germany’s continuing insistence that the law will prevail means Varoufakis’s point will be addressed, if not through debt compromise, through the full pain of the financial rug being pulled. It really would be the end of the paved-with-debt road for Greece.

Paradoxically the worst outcome for everyone, creditors included, would be for the electorate to accept the troika’s terms by voting ‘Yes’ in the referendum. If this happens Greece’s debt problem will only be deferred, but not for long. The diversion of economic resources to pay debt-interest tightens the screw on the Greek economy, because the burden of debt escalates as GDP contracts, hastening economic collapse instead of deferring it. The troika, as instrument for this financial torture would naturally be judged by Greece’s people to be motivated by hard reparations, just as France was with Germany in the wake of the Versailles Treaty of 1919. Follow this route and the life of the Eurozone may be extended for a year or so, but the political consequences could hasten its destruction. Germany’s red line is very thin indeed.

Instead, a ‘No’ vote should be an opportunity in the absence of a post-referendum agreement for Greece to scrub all its international debt and start again. It will get no substantive financial help from the EU or financial markets, so the government would be forced to address bloated government spending itself without resorting to money-printing. At least Greece’s electorate will bear full responsibility for its own future.

It was easy to deride Varoufakis as the game-theorist turned finance minister wholly out of his depth negotiating with his hard-nosed opposite numbers in the Eurozone. History may judge him instead to have played a poor hand very well indeed


Welcome to the club of investigators, seeking to punish the banks for manipulation of interest rates:
(courtesy Wall Street Journal/GATA)

Brazil’s antitrust agency investigates banks for interest rate manipulation


By Jeffrey T. Lewis and Rogerio Jelmayer
The Wall Street Journal
Thursday, July 2, 2015

SAO PAULO, Brazil — Brazil’s antitrust agency is investigating banking giants HSBC Holdings PLC, Citigroup Inc., Deutsche Bank AG, and a long list of their peers on suspicion of forming a cartel to manipulate the exchange rate of the Brazilian currency, the real.

The agency, known as CADE, said Thursday there are “strong indications” of the use of anticompetitive practices in the foreign-exchange market by the three big banks and a number of other U.S. and overseas lenders.

CADE said there was evidence the banks worked together to fix the exchange rate, coordinate the buying and selling of currencies, and impede the operations of other banks operating in Brazil’s foreign-exchange market, among other things. …

… 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 6.2035/Shanghai bourse red and Hang Sang: green

2 Nikkei closed up by 193.18  points or 0.95%

3. Europe stocks all in the green (barely) /USA dollar index up to 96.28/Euro rises to 1.1071

3b Japan 10 year bond yield:  rises to  53% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.51/ominous rise in yield.

3c Nikkei still just above 20,000

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

3e WTI 57.07 and Brent:  62.32

3f Gold down/Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .84 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate fall  to 35.78%/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 fall to: 14.78%

3k Gold at 1162.50 dollars/silver $15.60

3l USA vs Russian rouble; (Russian rouble down 1/4 in  roubles/dollar in value) 55.64,

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 .9495 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0514 just above 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. We now await the Greek referendum.

4. USA 10 year treasury bond at 2.44% early this morning. Thirty year rate well above 3% at 3.23% / yield curve flatten/foreshadowing recession.

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

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


China Crash Accelerates, Drags Composite Under 4000; US Futures Flat Ahead Of Nonfarm Payrolls

If it was Greece’s intention to crush the Chinese stock market instead of Europe’s, well – it succeeded.  Because despite the PBOC and politburo throwing everything but QE at the stock market, China stocks closed down sharply on Thursday after another wild trading day as investors shrugged off regulators’ intensified efforts to put a floor under the sliding market, by cutting trading fees and easing margin rules, which has now crashed 25% in about two weeks wiping out $2.5 trillion of the peak $10 trillion in Chinese stock market cap as of June 14. This ultimately resulted with the Shanghai Composite closing under 4000 for the first time since April.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 3.4 percent, to 4,107.99, while the Shanghai Composite Index lost 3.5 percent, to 3,912.77 points, on volume of 58.3 billion shares as margin calls are accelerating and as regulators realize that investor took leverage upon margin upon leverage.

The only good news out of China is for those long realized vol; if only there was some way to be long realized vol that is…

Elsewhere in Asia, most markets ignored the ever louder noise out of China, and are so far doing their best to ignore what is going on their neighbor China, trading mixed following a positive Wall Street close, where renewed Greek optimism lifted sentiment after the Greek government showed a willingness to meet creditor’s demands. The Nikkei 225 (+1.0%) rose supported by JPY weakness, with lower than prior CPI forecasts from BoJ’s Tankan Survey adding to the case of further easing measures by the BoJ. Yes, bad news remains good news.

The ASX 200 (+1.5%) traded in the green with all sectors in positive territory, with gains exacerbated by a break above its 200 DMA (5584.62). Hang Seng (+0.12%) was bolstered by financials, while the Shanghai Comp (-3.48%) bucks the trend despite measures by the nation to support the stock markets by cutting trading fees and ease margin rules. JGB’s fell 40 ticks amid spill-over selling in USTs coupled with today’s lacklustre 10-yr JGB auction.

But while Greece may be happy with its “impact” on China, which alas could care less about the fate of Athens, the European session kicked off with equities trading in mixed territory (Euro Stoxx: -0.21%) amid fairly light newsflow as many market participants look ahead to US Nonfarm Payrolls scheduled for 8:30 Eastern as well as any potential Greek comments, which however have slowed to a trickle following the Eurogroup’s response it would not negotiate until after Sunday’s referendum.

In stock specific news, Syngenta (+2.3%) outperforms, boosting the SMI after reports pre market stated Monsanto (MON) CEO has travelled to Europe in order to hold discussions with Syngenta investors amid Monsanto’s bid for the Co.

Amid the light Greece related newsflow and supply from France and Spain, Bunds have drifted lower throughout the morning in a continuation of yesterday’s trend, while USTs also trade in the red, lower on the day by 4 ticks.

Today’s most notable news come as the Riksbank unexpectedly cut their interest rate by 10bps to -0.35% from -0.25%, QE extended by SEK 45b1n and cut inflation expectations for 2015 & 2016. This happens even though as we explained previously, the Riksbank has become the first central bank for whom QE has failed as incremental QE merely drives rates higher due to a soaring illiquidity premium. The announcement immediate downward pressure on SEK, with EUR/SEK reaching highs of 9.3683. Elsewhere, UK Construction PMI (58.1 vs. Exp. 56.5) came out better than expected, leading to strength in GBP, which in turn contributed to greenback weakness with the USD in modest negative territory (-0.2%).

Looking ahead, the Nonfarm Payroll report dominates this afternoon’s data slate, while participants will also be looking out for ECB minutes and US Factory orders as well as comments possible from ECB’s Draghi and Mersch.

The energy complex resides is modest positive territory having retraced earlier gains amid reports of progress in Iran nuclear talks ahead of the new deadline for an agreement to be reached of July 7th. Participants are wary of a possible deal due to concerns of Iran being able to increase supply substantially if a deal is agreed.

In terms of Genscape alerts, Pony Express pipeline, with a capacity of 235k bpd has seen increased flow to capacity from 56k bpd. Other notable energy news has seen reports that Saudi Arabia are expected to cut official selling price differentials for most of crude grades loading in August for Asian buyers according to trade sources. Libya have reduced Es-Sider OSP for July to USD 1/bbl discount to dated Brent and participants look ahead to EIA NatGas Storage Change (Exp. 70).

Elsewhere, the metal complex has also weakened overnight, with concerns over China failing to subside, while a note from UBS forecasts an increase in nickel prices amid rising Chinese imports and cancelled warrants as well as a fall in exchange inventories.

In summary: European shares remain little changed with the utilities and oil & gas sectors outperforming and tech, media underperforming. Greek poll shows voters almost evenly split ahead of referendum, Varoufakis says he’ll quit if Greek’s vote  yes. Sweden deepens negative interest rates to curb gains in krona. Shanghai Composite falls below 4,000. U.K. house prices drop most in 9 months. The Swiss and U.K. markets are the best-performing larger bourses, Swedish the worst. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Commodities gain, with wheat, zinc  underperforming and natural gas outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, ISM New York, factory orders, nonfarm payrolls, unemployment, average earnings, labor force participation due later.

Market Wrap

  • S&P 500 futures up 0.1% to 2073.7
  • Stoxx 600 little changed at 387.2
  • US 10Yr yield up 1bps to 2.43%
  • German 10Yr yield up 5bps to 0.86%
  • MSCI Asia Pacific up 0.1% to 146.7
  • Gold spot down 0.4% to $1164.4/oz
  • 7 out of 19 Stoxx 600 sectors rise; utilities, oil & gas outperform, tech, media underperform
  • Asian stocks rise with the ASX outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific up 0.1% to 146.7
  • Nikkei 225 up 1%, Hang Seng up 0.1%, Kospi up 0.4%, Shanghai Composite down 3.5%, ASX up 1.5%, Sensex down 0.3%
  • Euro up 0.21% to $1.1076
  • Dollar Index down 0.09% to 96.23
  • Italian 10Yr yield up 2bps to 2.31%
  • Spanish 10Yr yield up 1bps to 2.29%
  • French 10Yr yield up 6bps to 1.3%
  • S&P GSCI Index up 0.2% to 433.3
  • Brent Futures up 0.4% to $62.3/bbl, WTI Futures up 0.1% to $57/bbl
  • LME 3m Copper up 0.4% to $5798.5/MT
  • LME 3m Nickel up 1.7% to $12230/MT
  • Wheat futures down 1.2% to 581.5 USd/bu

Bulletin Headline Summary

  • Markets remained relatively subdued during the European session, with the most notable data showing UK Construction PMI (58.1 vs. Exp. 56.5) coming out better than expected, leading to strength in GBP
  • Riksbank unexpectedly cut their interest rate by 10bps to -0.35% from -0.25%, QE extended by SEK 45b1n and cut inflation expectations for 2015 & 2016
  • This afternoon sees Nonfarm Payroll report (Exp. 233k) as well as ECB minutes, US Factory Orders and comments from ECB’s Draghi and Mersch
  • Treasuries steady, yields higher by 1bp-2bp before reports forecast to show U.S. economy added 233k jobs in June while unemployment rate declined to 5.4% from 5.5%.
  • Greek voters are almost evenly split heading into a referendum in three days that European leaders said could plunge the country into economic darkness, with 47% endorsing austerity and 43% backing the government’s rejection of it
  • Greek finance minister Varoufakis said in a BTV interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt and he’ll quit if voters don’t back him in Sunday’s referendum
  • Merkel’s disapproval helped end the political careers of former Italian prime minister Silvio Berlusconi and Greek leader George Papandreou; Tsipras could be next after burning through whatever goodwill he had
  • The ECB added state-backed company debt to the list of assets eligible for purchase under its quantitative easing program, widening efforts to spur growth in the region
  • The Shanghai Composite Index fell below the 4,000 level for the first time since April, as margin traders continued to unwind positions amid doubts over the effectiveness of government measures to support equities
  • As China’s stock-market slump spurs margin traders to unwind record bullish bets, authorities have responded with a policy that analysts say could exacerbate the problem: make it easier to take on even more leverage
  • Sovereign 10Y bond yields mostly higher; Greece 10Y yields -20.2bps to 14.78%. Asian stocks mixed; Shanghai plunges over 3.5%. European stocks mostly lower, U.S. equity-index futures gain. Crude oil and copper higher, gold declines


DB’s Jim Reid completes the overnight event summary

For Greece it was a day of high excitement, lots of soundbites, positive sounding headlines and positive global markets but in truth not much changed apart from sentiment. From my angle one of the interesting developments came just after we went to press yesterday. The first opinion poll (for Efysn) showed a ‘no’ vote in the lead. Interesting 57% said they’d vote no before the closure of banks vs. 30% who said yes. After the closure of the banks 46% said no vs. 37% who said yes. The reason I found it interesting is that this was still a ‘no’ and the poll hardly impacted early trading yesterday which can mean one of two things. Firstly that markets were encouraged that the yes vote had some momentum after the banks were closed despite being behind or secondly that a no vote will not actually bring too much market turmoil if it materialises. If there is a hint of the latter then yesterday’s early trading reaction could be seen as a big positive.

After US markets closed yesterday a second opinion poll hit the wires which showed a higher proportion of yes (47%) versus no (43%) votes. The poll (run by GPO) was said to have been taken on Tuesday according to Bloomberg and the result is lending support to the argument of momentum perhaps moving towards the yes vote. Interestingly the poll was split into four categories with votes split between ‘definitely’ and ‘leaning’ with the ‘definitely yes’ at 43% and ‘definitely no’ at 39%. There are still a large number of undecided so all to play for on Sunday.

Equity markets in Asia are generally firmer this morning after the latest poll with the Nikkei (+1.09%), Hang Seng (+0.56%), Kospi (+0.25%) and ASX (+1.55%) all up. Treasuries are unchanged while Asian credit is around a basis point tighter. The outlier once again is in China where the Shanghai Comp (-1.24%) and Shenzhen (-1.95%) have both fallen although the former has pared losses of almost 4% in earlier trading. The moves in fact have come despite the news yesterday that the China Securities Regulatory Commission will no longer require brokerages to force the sale of stock held by clients with insufficient collateral. The Shanghai and Shenzhen exchanges have also announced that stock transaction fees would be cut by nearly a third.

Back to Greece, the better sentiment yesterday, particularly in early European trading, appeared to come about on the back of a story out of the FT which suggested that Tsipras was set to accept most of the earlier bailout terms. Despite some additional concessions it appeared that some important differences still remained and focus instead turned to a defiant nationally-televised address from the Greek PM who once again reiterated a push towards a ‘no’ vote. Addressing the people, Tsipras remarked that ‘the sirens of destruction are blackmailing you to say yes to everything without any prospect of exiting the crisis’ while ‘a no vote is a decisive step toward a better agreement that we aim to sign right after Sunday’s result’.

So with Eurogroup President Dijsselbloem saying that that there are no grounds for further talks at this point and that ‘we will simply wait now for the outcome of the referendum’, and with Merkel also ruling out any negotiations until post Sunday’s result it feels like the Europeans are relaxed enough about the poll and subsequent consequences to not rush to make any concessions ahead of Sunday.

In the meantime we’ve got US payrolls to look forward to today which is coming on the back of a better than expected June ADP employment change report (237k vs. 218k expected) which was up 34k from the May reading and to the highest level since December, with the details all largely supportive. Current market consensus is for a 233k reading for payrolls today, with DB’s Joe Lavorgna at 225k. Yesterday’s employment data helped support a slight lift in yields although in fairness the market was already in more of a risk-on mode with the Greece headlines. 10y Treasuries eventually closed +6.9bps higher in yield at 2.423% and not far off Friday’s closing level of 2.474% just before the referendum announcement. US equities, despite paring some of the initial early bounce, still closed higher on the day with the S&P 500 finishing +0.69%. The gain came despite a notably weaker day for energy stocks which saw the sector fall 1.31% after a particularly weak day in the oil complex. WTI (-4.22%) and Brent (-2.48%) both took a steep leg lower to $56.96/bbl and $62.01/bbl after an EIA report showed US inventories rising for the first time in nine weeks and also signs of crude output from OPEC accelerating last month.

European equity markets saw their first positive day yesterday since the referendum announcement. The Stoxx 600 (+1.51%), DAX (+2.15%), CAC (+1.94%), IBEX (+1.32%) and FTSE MIB (+2.15%) all firmed, while in credit markets Crossover did initially tighten by as much as 25bps on back of the early optimism before eventually paring back some of the gains but still ending the session 12bps tighter. Sovereign bond markets echoed the better sentiment where we saw 10y yields in Italy (-4.0bps), Spain (-2.7bps) and Portugal (-6.0bps) all close tighter, while Greek 2y (-120bps) and 10y (-21bps) yields rallied. 10y Bunds ended +4.8bps higher in yield by the end of the session at 0.811%.

Running over the rest of yesterday’s data, as well as the solid ADP print yesterday we also saw construction spending numbers for the month of May up +0.8% mom and ahead of market expectations of +0.4%. The final June manufacturing PMI reading was revised up 0.2pts to 53.6, while the ISM manufacturing was also supportive (53.5 vs. 53.2 expected) having risen 0.7pts from May with both new orders and employment edging up. There was some slight disappointment in the ISM prices paid however which remained unchanged at 49.5 after expectations of a 1.5pt rise. Finally total vehicle sales for June fell more than expected to 17.11m saar (vs. 17.20m expected). Following yesterday’s construction spending report, the Atlanta Fed GDPNow model was revised up to 2.2% for Q2 growth (from 2.1%), although it is still tracking below market forecasts of 2.5%-3.2%.

Data flow in Europe yesterday was centered on the manufacturing PMI reports where we saw no change to the final Euro area reading for June at 52.5 (a 0.3pt improvement from May). There was likewise no change for Germany at 51.9, while France’s print was revised up a modest 0.2pts to 50.7. Readings for the peripherals were slightly softer than forecast however. Italy saw a 0.7pts fall to 54.1 (vs. 54.3 expected) while Spain fell 1.3pts to 54.5, well below expectations of 55.5. There was unsurprising weakness in Greece meanwhile with a 46.9 reading, down 1.1pts from May. In the UK the reading fell 0.5pts to 51.4, surprising the market after expectations for a rise to 52.5.

Looking at the day ahead now, the focus in the European timezone this morning and away from the obvious Greece headlines will be on the ECB’s account of the monetary policy discussion from the June 3rd meeting, as well as Euro area PPI. We’ll also get UK house price data this morning. Payrolls will be the focus this afternoon in the US, while we also get average hourly earnings data, unemployment, initial jobless claims, factory orders and the ISM NY.




The following gives you a good idea on what is happening inside the streets of Athens:

(courtesy zero hedge)

Desperate Greeks Resort To Scavenging Through Garbage To Find Food

Earlier today we documented the “heartbreaking” plight of Greece’s retirees who have been reduced to lining up in front of Greek banks hoping for a chance to collect a portion of their pensions. Some went away empty handed (there were reports that only those whose last names began with “A” through “K” were paid on Wednesday) and those who did manage to leave with cash were only allowed to access a third of their usual payouts.

This comes as Greeks may (and we emphasize “may”, because nothing is certain and the Greek government has bent over backwards to claim that deposits are “safe”)face a Cyprus-like depositor bail-in in the weeks ahead.

But as bad as all of the above is, it gets still worse, because as The Telegraph reports, the beleaguered Greek populace has been reduced to collecting scrap metal and scavenging for food.

Here’s more:

Piled high with rubbish congealing in the summer heat, municipal dustbin R21 on Athens’ Sofokleous Street does not look or smell like a treasure trove.


But for Greece’s growing army of dustbin scavengers, its deposits of rubbish from nearby stores and grocery shops make it a regular point of call.


“Sometimes I’ll find scrap metal that I can sell, although if I see something that looks reasonably safe to eat, I’ll take it,” said Nikos Polonos, 55, as he sifted through R21’s contents on Tuesday morning. “Other times you might find paper, cans, and bottles that you can get money for if you take them back to the shops for recycling.”



One reason for R21’s popularity is because it is just down the road from a church soup kitchen, where the drug-addicted, the poor and homeless queue up for meals three times daily.


Mr Polonos, a quietly spoken man of 55, is typical of the new class of respectably destitute. He lost his job as a construction worker three years ago, when Greece’s building boom dried up, and in the current climate, cannot see himself finding paid work in the foreseeable future.


Yet he dresses as smartly as he can in second-hand trousers and shirt, and does not see himself as any kind of vagrant.


“I don’t want to ever look like him,” he said, gesturing to a tousle-haired drug addict slumped in a doorway near the soup kitchen. “I never believed I would end up like this, but as long as Greece is in this terrible situation, my construction skills are not in demand. A lot of my friends are doing what I do now, and some people I know are even worse off. They have turned to drugs and have no hope at all.”


Perhaps the most tragic thing about the above is that, as noted in the video, this is hardly a recent development in Greece.

High unemployment has plagued the country for years and has indeed become endemic, relegating many Greeks to a life of perpetual and severe economic hardship. One can only hope that whatever the outcome of this weekend’s referendum turns out to be, both Athens and Brussels will recognize the need to arrest what has become an outright humanitarian crisis.



Varoufakis states he will resign if referendum passes on a yes vote:

So far the election is too close to call!

(courtesy zero hedge)

Varoufakis Will Resign If Referendum Passes, Says Would Rather “Cut Off Arm” Than Sign

Yanis Varoufakis didn’t think it would come to this.

A little over a year ago, the Greek FinMin documented his thoughts on a possible Greek endgame, asking “what if Berlin and Frankfurt don’t budge and tell Athens to go jump off the tallest cliff”? That, Varoufakis said, was unlikely because “Berlin will prefer to accommodate the Greek government and to look with a great deal more kindness on the request for a debt relief conference.”

14 months and one referendum gamble later and Berlin is all out of accommodation and has indeed told Athens to “go jump off the tallest cliff,” which means that if the Greek people make the ‘wrong’ decision on Sunday by voting to accept the (no longer valid) demands of creditors, Varoufakis may be forced to do what anyone would do in the event of an adverse referendum outcome: pen a resignation letter and cut off an arm. Bloomberg has more:

Yanis Varoufakis said Greece won’t “extend and pretend” that it can pay its debts, vowing to quit as finance minister if voters don’t support him in Sunday’s referendum.


With banks shuttered and Greece’s economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt. The 54-year-old economics professor said he “will not” continue in his post if Greece endorses austerity in the plebiscite.


The minister’s comments illustrate the gulf between Greece’s government, which swept into office on a wave of discontent about budget cuts, and the creditors who are threatening to push it out of the euro. European governments led by Germany have condemned last weekend’s decision by Prime Minister Alexis Tsipras to pull out of talks and call a snap referendum on the conditions for financial aid. Polls suggest it’s too close to call.



Tsipras, Varoufakis and their Syriza party are urging Greeks to vote “no,” arguing that Greece can remain in the single currency on better terms if they do so — a contention rejected by creditors. A “yes” vote could lead to the collapse of the Tsipras government and fresh elections, a possibility to which Varoufakis alluded.


“Maybe we’ll change the configuration of the government because some of us will not be able to stomach it,” said Varoufakis, adding he would help ensure a smooth transition.

The idea that the government may soon have to be reshuffled echoes what we’ve said for months. “It is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-term solution that allows for stable relations with European creditors,” we noted in “Democracy Under Fire.”

So at the very least, a “yes” vote on Sunday could mean a shakeup in Syriza’s leadership. Whether that means Tsipras will simply preside over a more moderate party with new coalition partners or that the PM will himself will be forced out remains to be seen, but either way, it’s clear that this weekend’s popular vote represents far more than a vote on the troika’s proposals. It’s a vote on euro membership, democratic principles, and apparently, on whether to whisk Syriza from office with the same fanfare to which they were inaugurated.

This would certainly help the no side.  Russia now gets involved in the Greek dilemma by stating the EU must respect the Greek choice:
(courtesy zero hedge)

Russia Gets Involved: Tells Europe To Respect The Greek Choice

While Russia has been quiet on the sidelines of the Greco-European austerity-for-cash wrestling death match, offering assistance if it is needed and making new friends, it appears Putin is now getting more vocally involved:


A well-timed show of support for Greece from its potential alternate big brother may just be the ammo that Tspiras needs to reassure the people that they should vote without fear. With 3 days to go, we suspect fearmongering will rise.




Then the IMF comes out and states that Greece;s debt is huge and needs a 30% of GDP haircut. This again will bolster the no side!!

Two commentaries


(courtesy zero hedge.

IMF Bolsters Greek “No” Vote, Says Country Needs Much Bigger Debt Haircut

If the IMF were a Greek citizen, it would vote “No” in this weekend’s referendum.

According to a report prepared prior to capital controls and the banking sector meltdown, any deal that included creditor concessions on fiscal reforms would mean Greece’s debt load would have to be written down, as the country would need at least €60 billion in new financing

This should not come as a surprise to our readers because long before Greece returned to the spotlight we reported last October, citing an S&P report, that by the end of 2015 Greek financing would be at least €43 billion.  What we said then: “As for Greece, it appears that suddenly the idyllic image of its recovery is about to be torn to shreds and the Syntagma riotcam will have to come out of hibernation.”

We were right about the former, still waiting for the riotcam. We were also right about this:

In other words, Greece will default the second the people start protesting the crushing, and very simple math, and they decide they have had enough of the technocrat and appoint another president. Because, you see, it is not that Greece implemented zero reform, and rooted out the pervasive cooruption that saw billions in foreign “aid” end up in offshore bank accounts of the political oligarchy, or the simple math of sources and uses of funds: it is the danger of the Greek people returning to what they did best in those days of 2010 and 2011 when every other day saw a riot in the center of Athens, that will be the straw that finally breaks the camel’s back.


And thus we go back to square one, as we always said we would, when only timing was a matter of debate. Well, we now know the timing: T minus 15 months and counting to yet another Eurozone collapse.

Actually the collapse may have come earlier than that: some 6 months so, depending on what the vote in Sunday’s referendum is.

But back to the IMF’s report which underscores the Fund’s long-standing position that EU creditors will ultimately need to write down their holdings if Greece has any hope of returning to a situation where the country’s debt-to-GDP ratio is “sustainable,” and suggests Syriza is indeed making a smart move by holding out.

  • IMF ASSUMES GREEK GDP GROWTH OF 0% IN 2015, 2% IN 2016 AND 3% IN 2017

What this means is that the Troika “joint” position just fractured, and the Greek demands for more debt writedowns, so vociferously rejected by the Eurogroup, were actually valid.

Here’s more, via MNI:

The report was drafted before the shutdown of the Greek banking sector and is dated June 26. Although the report has “not been approved (by the) IMF’s Executive Board” it concludes that Greece has “substantial financing needs” which would render the debt dynamics unsustainable.


The report argued that any agreement for a softer reforms package such as lower primary surpluses, weaker structural reforms or lower than expected privatization revenues would make the haircuts on the debt “necessary.”


“Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30% of GDP would be required to meet the November 2012 debt targets,” it added.


And the punchline from the IMF’s report (attached below), which may be just the push the Oxi vote needs to win on Sunday (and why stocks are suddenly swooning following this report):

Even with concessional financing through 2018, debt would remain very high for decades and highly vulnerable to shocks. Assuming official (concessional) financing through end–2018, the debt-to-GDP ratio is projected at about 150 percent in 2020, and close to 140 percent in 2022 (see Figure 4ii). Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30 percent of GDP would be required to meet the November 2012 debt targets. With debt remaining very high, any further deterioration in growth rates or in the mediumterm primary surplus relative to the revised baseline scenario discussed here would result in significant increases in debt and gross financing needs (see robustness tests in the next section below). This points to the high vulnerability of the debt dynamics.


It gets better:

A lower medium-term primary surplus of 2½ percent of GDP and lower real GDP growth of 1 percent per year would require not only concessional financing with fixed interest rates through 2020 to cover gaps as well as doubling of grace and maturities on existing debt but also a significant haircut of debt, for instance, full write-off of the stock outstanding in the GLF facility (€53.1 billion) or any other similar operation. The debt-to-GDP ratio would decline immediately, but “flattens” afterwards amid low economic growth and reduced primary surpluses. The stock and flow treatment, nevertheless, are able to bring the GFN-to-GDP trajectory back to safe ranges for the next three decades (Figure 8)



Well, yes. As we can’t tire of showing:

Also recall that in 2011, Citi estimated that if Athens waited until 2015, a haircut of 94% would be necessary to bring the debt-to-GDP ratio down to 60%:




Finally The Truth: “The Greek Debt Is So Big Everyone Understands It Won’t Be Repaid”

On Monday morning, before the latest series of optimistic rumors and realistic denials was unleashed, Latvia’s outgoing President Andris Berzins had a surprisingly accurate observation in an interview with Latvian Independent TV when he said that “this [Greek] debt is so big that everyone understands that it won’t be repaid.”

We find this statement to be amazing because this may be the very first time an official has actually told the truth about not only Europe’s but the global debt crisis, in recent history. Granted, it does miss one key distinction, namely that all the risk exposure to Greece has been shifted from European private banks to the all too public European taxpayer, but that’s a story for another day.

Berzins had some further observations that were likewise amazing, adding that “loans to Greece have just bought time so that those in power don’t have to take decisions. This is like a game: who can hold out longer by not  showing that this money has been lost? This burden has become bigger and there obviously is no possibility to repay.”

He concluded that the “debt writedown of Greek debt will come after bankruptcy of state.”

Well that, or hyperinflation. But that can only occur in local currency, i.e., New Drachma, terms.

So if a “No” vote wins on Sunday, Greece will basically end up with precisely the outcome that everyone has been terrified to mention: a clean balance sheet and the hope of an actual recovery, granted with much interim pain. Incidentally a debt restructuring, one way or another, is precisely what Syriza’s goal has been from the very beginning.

And yet, there was one problem with this statement. As we noted on Twitter:

Since our questions was rhetorical, and since there is no way of knowing if Mr. Berzins has looked at the US debt, we decided to make it easy not just for him, but for everyone else, and show where the real debt that will never be repaid is held.

U.S. Debt Chart


Luckily, the USD which is the world’s reserve currency, and which is the only reason the chart above is possible, will remain so in perpetuity, because this time it will be different.

As we have been highlighting to you for the past year and now a Chinese state official hints that Beijing may bailout Greece.  I indicated to you yesterday that Greece will join the BRICS bank and the Chinese AIIB development bank.  This will give them a portal to eastern countries for their manufactured goods as well as westward. Greece will be China’s portal for the silk road, free trade project, through Europe.  Furthermore the Russian Southstream pipeline will provide adequate financing for Greece to eventually revert back to the drachma. However it will always stay in the Eurozone as only Greece herself can remove itself from the EU.  In other words Greece will act exactly like England who has its own central bank and its own currency the pound.
(courtesy zerohedge)

China State Official Hints Beijing May Bailout Greece

On Monday, after Greek PM Alexis Tsipras’ dramatic referendum call sparked a run on Greek ATMs, grocery stores, and gas stations, we did our part to help ameliorate the situation by sending a subtle message to Athens:

Indeed, now may be an opportune time to tap Beijing for a few billion given that China officially launched the AIIB this week. As a reminder, the success of China’s AIIB membership drive was a political disaster for The White House, which expended considerable effort to discourage US allies from supporting the new China-led venture.

As such, it would be difficult to imagine a more fitting pilot program for the world’s newest supranational lender than a rescue package for the birthplace of Western democracy which has been brought to its knees by that most Western of all multilateral institutions, the IMF. 

And while any funding to Greece from China would likely be channeled through the Silk Road fund (at least for now, given that the AIIB is just a few days old, officially), any aid from Xi Jingping’s deep pockets to Athens would represent a spectacular coup on both an economic and political level.

While the world is by now likely incredulous about the prospects for a Greek “Eastern” pivot (around a half dozen Russian headfakes have made us somewhat numb to the idea), Chinese assistance might be more likely than Europe cares to admit. Sputnik News has more:

China may help Greece directly through its new financial instruments, director of the Quantitative Finance Department at China’s Institute of Quantitative and Technical Economics told Sputnik China.


Goldman Sachs predicted in a report published on Wednesday that in a worst-case scenaria China’s exports would decline 2.2 percent as a result of Greece’s economic crisis. Other than exports to Greece itself, the crisis could also hurt the economies of nearby countries, where Chinese businessmen have also made considerable investments.


“The Greek crisis has an undoubtedly seriously influence on China’s trade with Greece and investment into the country. But I think that European countries together with China can help Greece overcome the problems that arose,” Fan Mingtao said.


“I believe there are two ways to give Greece Chinese aid. First, within the framework of the international aid through EU countries. Second, China could aid Greece directly. Especially considering the Silk Road Economic Belt and the Asian Infrastructure Investment Bank. China has this ability,” Fan added.

And while it’s impossible to overstate how hilariously ironic it is that Communist China could be the world’s best hope for preventing the birthplace of Western civilization from careening into the Third World, there’s a more subtle joke here as well. We’ll let readers discern what that joke is with the help of the following graphic:

The kiss of death for democracy!!
(courtesy zero hedge)

EU Parliament President Tells Greece:Time For Another Puppet Government

European Parliament president Martin Schulz said hisfaith in the Greek government had reached “rock bottom,” and, as AFP reports, that he hopes it resigns after Sunday’s referendum. Luckily, he has an idea for a solution… the time between the departure of Tsipras’ hard-left Syriza party and new elections would have to“be bridged with a technocratic government, so that we can continue to negotiate.”


As AFP reports,

Schulz on Thursday told German Handelsblatt business daily that “new elections would be necessary if the Greek people vote for the reform programme and thus for remaining in the eurozone and Tsipras, as a logical consequence, resigns.”


The time between the departure of Tsipras’ hard-left Syriza party and new elections would have to “be bridged with a technocratic government, so that we can continue to negotiate,” Schulz was quoted as saying.


“If this transitional government reaches a reasonable agreement with the creditors, thenSyriza’s time would be over,” he said. “Then Greece has another chance.”


Schulz charged that Tsipras was “unpredictable and manipulates the people of Greece, in a way which has almost demagogical traits.”


“My faith in the willingness of the Greek government to negotiate has now reached rock bottom,” he said

*  *  *

Just what The Greeks need – another “Yes man” puppet government to implement whatever Europe’s bankers demand.

the various scenarios on what will happen with the Greek referendum if a Yes vote and a no vote:
(courtesy Goldman Sachs/Bank of America/zerohedge)

Goldman: “Greece Will Remain In Euro Even If It Votes No”, And How Markets Will React

The time to negotiate the Greek referendum this Sunday has come and gone and at this point, one can only sit and wait as the vote results start trickling in on Sunday evening. And, as Goldman’s Huw Pill prudently observes, the outcome of Sunday’s Greek referendum is uncertain. “Regardless of the outcome, Greece will continue to face substantial economic dislocation in the shorter term.” What is interesting is that Goldman says “Greece will ultimately remain in the Euro area even in the event of a ‘No’ vote.”

Clearly, this together with the earlier IMF note, is great news for the Greek government, which can now point to not only the IMF backing its original claim that a debt haircut is absolutely necessary, but that none other than Mario Draghi’s former boss, Goldman Sachs, agrees with Varoufakis that Greece will remain in the Eurozone even after a “No” vote.

That said, this is how Goldman handicaps the possible voting outcomes and the subsequent reactions:

Result of referendum likely to prove less pivotal than how Greek domestic politics evolves in response to it. We envisage three main scenarios following the referendum:


1. A ‘Yes’ vote, followed closely by the resignation of Messrs. Tsipras and Varoufakis and the formation of a new Greek government. This is likely to be the most market-friendly outcome. Clearly, its implications will hinge crucially on the character of the new government. A government committed to reform, credible in the eyes of the creditor institutions and with a mandate to act (e.g., a technocratic government enjoying a broad base of parliamentary support and committed to a limited tenure followed by elections) could move forward to a new programme that would allow a resumption of Greece’s financial and liquidity support. Weaker governments that fall short on these dimensions would likely struggle to move forward with the same vigour and pace.


2. A ‘Yes’ vote, with the current government seeking to remain in power.Such an outcome appears inherently unstable. Creditors are unlikely to resume funding Greece under a Tsipras government, given the breakdown of trust resulting from the recent painful negotiations. The Greek economy would thus remain mired in its current state of ‘suspended animation’ with banks closed. Eventually the political contradictions and economic fragilities that would follow are likely to create powerful  forces for political change in Greece. In our view, these forces are more likely to lead towards a rapprochement with creditors, but a more negative dynamic towards ‘Grexit’ cannot be ruled out.


3. A ‘No’ vote, in which the current government becomes more politically entrenched. This is likely to be viewed negatively by markets. We do not see such an outcome as necessarily implying a definitive ‘Grexit’. In the first instance, such an outcome is likely to perpetuate the status quo: the European authorities would neither extend further financial and liquidity support nor engage in a new round of negotiation with the Greek government offering more favourable terms. As a result, Greek banks would remain closed and the economic situation would deteriorate, ultimately triggering political change as the economy seizes up. Of course, that change could move in a chaotic direction leading to a ‘Grexit’. Uncertainty is clearly higher in this scenario.But our base case would remain that any attempt to shift policies in the direction of exit would prompt a domestic political response bringing down the government and moving to an accord with Brussels to maintain membership of the Euro area.

But while Goldman’s assessment that a “No” vote allows for Greece to remain in the Euro and is thus beneficial to the current administration which has claimed just that all along, Goldman’s own take is less favorable for the future of the Tsipras government:

Across the spectrum of scenarios sketched out above, our base case is that: (a) eventually there will be political change in Greece; and (b) this political change will ultimately lead in the direction of Greece reaching a new accommodation with its creditors that preserves Euro membership.

So having already effectively decided the fate of the Tsipras government, how do the three Goldman scenarios differ:

(a) the pace at which the political change takes place (which declines as we move from scenario #1 through to scenario #3); and (b) the uncertainty surrounding our base case (with the risks of an alternative chaotic ‘Grexit’ outcome rising as we move from scenario #1 through to scenario #3).

As for the market response, Goldman begins with the bond markets. Fear not says Goldman, for they are all in the hands of the ECB:

With regard to the wider implications of developments in Greece for Euro markets, we maintain our view that the European authorities in general and the ECB in particular stand ready to act as necessary to preserve the integrity of the Euro area in the face of any turbulence emerging from Greece.


In our view, the ECB can be relied upon to do “whatever it takes” to support other vulnerable Euro area countries. The likely method in the first instance would be an expansion and/or reorientation of sovereign debt purchases within the ECB’s existing programme. While the ECB is still likely to be reactive rather than pre-emptive in stepping up sovereign purchases, we expect that reaction to be both prompter and more aggressive than in the past. The likely trigger would be a (substantial) widening of peripheral sovereign spreads symptomatic of a re-fragmentation of Euro government and credit markets. We do not expect the ECB to be highly sensitive to falls in the equity market or the Euro exchange rate.

Still, even Goldman is willing to admit the ECB may not be omnipotent and suggests that “in the event of negative surprises, bond spreads could widen out as much as 200-250bp, with 10-year BTPs yielding around 3%.From these levels and upwards we would view the probability of an ECB intervention as increasing.

What about a good outcome:

In the event of a ‘Yes’ vote this Sunday, and a subsequent accommodation between the Greek authorities and the official sector creditors, we would look for BTP/Bonos to eventually go back down to around 100-120bp (or 30-50bp tighter from current levels) as investors anticipate a new political direction followed by fiscal and structural adjustments, comprising a re-profiling of the Greek public debt. These steps would, however, take time to achieve, and the price action could remain volatile.”

As for stocks, Goldman’s worst case “No” outcome is a 10% plunge in the Stoxx 50:

Based on the impact of sovereign spreads and equity risk premia, our best estimate for the worst-case downside in the equity market in Europe on a ‘No’ vote is a move to around 3150 on Eurostoxx 50 (around 10%)…

… but don’t panic because once again…

we think this would be short-lived as ECB intervention would kick in, prompting investors to focus on improving  fundamentals; we would see any meaningful correction as a buying opportunity, particularly for MIB, IBEX and DAX for investors taking a medium-term view. A ‘Yes’ vote followed by an accommodation between the Greek authorities and the institutions would likely see equities up around 10%, back to April highs of around 3830.

In short: a “No” vote will roil markets, send stocks tumbling and yields soaring before a “forceful” ECB response (one which the ECB itself hinted at today when it expanded the universe of monetizable collateral) restores (ab)normalcy even as Greece remains in the Eurozone but really, in limbo.

The conclusion: for Tsipras to have had the full leverage he wanted, he should have had this standoff last year, before the ECB launched its QE.

Then again, the much hyped ECB response just may backfire. After all, QE in Sweden has already failed forcing the central bank to do even more QE until the whole thing blows up due to lack of liquidity. And when it comes to lack of eligible collateral, the ECB is just a few feet behind Sweden. It would be delightfully ironic if, in an attempt to save Europe by boosting its QE, the ECB destroys everything and it is Greece who ends up with the last laugh.


* * *

If all of this seems complicated, here is the traditionally far simpler take from Bank of America:


Nai. A “yes” vote is the outcome currently more priced-in to financial markets, and would cause a bid to European assets, at least in the short-term. The reaction of the Euro would be most important to watch: a rally (as EU growth expectations rise) would mean a more durable rally in European assets and a reversal of the long DAX, short banks trade that has worked so well in Europe the past 2 years. Note also that Cyprus shows that even under capital controls some Greek assets could also find a strong bid.

Oxi: A “no” vote by contrast would signal GREXIT; a Greek economy without banks, without a lender of last resort, without access to liquidity, in deep recession and exposed to new social and geopolitical risks. In this scenario we would watch the European banks closely.Failure of FT3FIN index to hold 850-900 would be very negative for global risk assets in July.


What a terrific report written by Renee Maltezou on the last 10 days
where Greece officials faced the Troika.  The following gives a day by day description of events important for us to see what Greece was facing
(courtesy Renee Maltezou,Reuters)

Special Report: How Greece went bust

It was a small room with a plain wooden table a few feet wide. The Greek Prime Minister Alexis Tsipras sat on one side, along with a translator and Angela Merkel, the German chancellor. On the other sat President Francois Hollande of France; around were a handful of officials.

In this modest Brussels setting last Friday morning, key players in the great Greek debt drama tried to avert a meltdown that could threaten the future of the euro and even the European Union (EU). Merkel and Hollande made a final offer of billions of euros in aid for bankrupt Greece – if Tsipras would sign up to economic reforms demanded by his country’s creditors.

The participants looked tired, their body language was stiff. The meeting did not last long. Tsipras, according to Greek officials close to the negotiations, had already decided to call an emergency meeting of his cabinet in Athens for that evening. Even as he spoke with Merkel and Hollande, he was preparing to hand the decision over Greece’s fate to the nation’s voters. The day before he had decided, after months of talks, that he and Greece’s creditors were unable to agree a deal.

As he flew home to Athens later that day on a government plane, the young Greek leader settled on the idea of a referendum, according to the Greek officials. Staging a full-scale election would take too long, he had been advised. But a referendum could express the will of the Greek people.

He informed ministers of his plan, the cabinet approved it and he announced the referendum in a late night television broadcast. The abruptness of the move took some European leaders by surprise. Merkel and Hollande were told of it by telephone shortly before Tsipras announced it.

The bombshell said much about the long-running struggle between wayward Greece and the megalithic European Union, a struggle beset by blunders and serial brinkmanship. As this account details, all parties had their flaws and misjudgments.

At stake is far more than money. The Greek problem cuts to the heart of Europe’s future. In Tsipras’ eyes it is a crisis of democracy and sovereignty, of whether the wishes of a nation state outweigh the aims of the supra-national euro zone and EU.

For the euro zone – and Germany in particular – it is a test of unity, of whether countries within the 19-nation single currency bloc that fail to meet its economic standards and agreed rules can be brought into line, or not.

Tsipras’ call for a referendum infuriated finance ministers from the euro zone, whose meetings are known as the Eurogroup. They and the International Monetary Fund (IMF) had previously rescued Greece from its mountainous debts with massive bailout program; the latest was due to end on June 30, when Greece also had to pay 1.6 billion euros to the IMF.

Patience exhausted, the Eurogroup decided last weekend to let the bailout program expire as scheduled. The European Central Bank (ECB), which was keeping Greek banks afloat with 89 billion euros of emergency funding, also decided enough was enough: it said it would give no further emergency funding.

In Greece fearful citizens queued to take cash out of ATMs. Tsipras and his government ordered Greek banks to stay shut and imposed capital controls to stop funds leaving the country.

On Tuesday Greece failed to make its payment to the IMF. Though talks between the various parties continue and a deal may still be struck, Wednesday dawned with Greece adrift – with no recourse to further funding from the IMF or the bailout program.

The referendum is due on July 5, though rumors circulated on Wednesday that it might be canceled. If it does go ahead, Greek voters face a stark choice: Give in to their creditors and accept painful economic reforms, or go their own way. The latter course, some European leaders have made clear, will amount to a decision to quit the euro zone – though Tsipras disputes that view.

This account, based on interviews with people close to the negotiations, shows how the debt crisis became a political one. None of the main players would speak to Reuters on the record.


From the moment he became Greek prime minister in January, Tsipras, 40, posed a novel challenge to the well-cut suits of Brussels. Bold and inexperienced, he had no fear of defying convention – not for him any necktie, no matter who he was meeting. His finance minister, Yanis Varoufakis, was inclined to leather jackets, blunt language and radical ideas.

Though Tsipras’ style was casual, his resolve was steely. As talks on Greece’s debts dragged on, he held firm to the core demands of his leftist Syriza party for debt relief – allowing Greece not to repay some of the billions it had borrowed – and an end to austerity.

Tsipras, who had flirted with communism in his youth, cast the debt crisis more as a political issue than a problem of number-crunching. Europe, he wrote in French newspaper Le Monde at the end of May, was “at a crossroads.” Either it showed solidarity and granted Greece an easier ride, or it would face division and “the beginning of the end for the European unification project.”

That was his bargaining chip: If the euro zone leaders did not cave in, Greece could cause chaos by defaulting on its loans. Greece owes its official lenders 243 billion euros ($271 billion), according to a Reuters calculation based on official data. Germany alone accounts for 57 billion euros in two bailout programs. Germany is also the biggest shareholder in the European Central Bank (ECB), which has provided 118 billion euros in liquidity to Greek banks, the bank’s head Mario Draghi recently said.

Tsipras’ chief opponent was Merkel, long-standing leader of Germany, seen by some as a bastion of financial rectitude. Merkel and her combative finance minister, Wolfgang Schaeuble, did not believe Germany should pay any more for Greece’s economic mistakes. Not all creditors agreed: Some were sympathetic to Tsipras’ call for debt relief.

One of Merkel’s main objectives, according to a senior German official, was to get creditors and other institutions to take a united position. Berlin suspected the EU Commission – the executive body running the EU – was willing to give too much ground to Greece to hold the euro zone together.

The Germans fretted that Jean-Claude Juncker, the Commission’s president, might be too amenable to Tsipras. When Juncker had met the newly-elected Tsipras in February, he had greeted him with a kiss and led him off by the hand to a meeting. One senior German official joked: “If Juncker could decide for himself, we would have a pure financial transfer (of money from Germany and other countries) to Greece for the next 10 years.”

The Germans and their northern creditor allies repeatedly pointed out that the Commission does not provide loans to Greece. It is the member states who lend the money and call the shots.

Merkel was also at odds with the IMF, which thought further debt relief for Greece should be considered. Merkel told Christine Lagarde, the IMF’s managing director, that it was essential for Germany that the IMF remain engaged in the Greek bailout program, according to two persons briefed on their discussion. But the German chancellor ruled out what many economists, and the Greek finance minister, saw as the most practical solution to Greece’s immediate cash crunch. That idea was to allow the euro zone’s bailout fund, the European Stability Mechanism (ESM), to pay off the loans from the IMF and to take over Greek government bonds held by the ECB. Both sets of debts could be replaced with lower-rate, longer-term loans from the ESM.

Merkel told Lagarde the idea would be unacceptable to Berlin and to others in the euro zone, according to a person familiar with the German position.

Whether Tsipras felt emboldened by divisions among Greece’s creditors is unclear. He played his cards close to his chest. Compounding the difficulties on the Greek side was the fragmented nature of Tsipras’ ruling party, Syriza, an assemblage of leftist factions, some passionately opposed to any deal involving austerity. Alexis Mitropoulos, a Syriza member and deputy parliamentary speaker, described one set of creditors’ proposals as “the most vulgar, most murderous, toughest plan.”


As endless meetings came and went, both sides refused to give much ground. Tsipras ratcheted up the rhetoric, accusing Greece’s creditors of “five years of looting under the bailouts.” Greece, he said, would wait until the creditors recognized the will of the Greek people to end austerity. “We do not have the right to bury European democracy at the place where it was born,” he said.

On the other side, some EU officials wondered whether Tsipras wanted to reach a compromise at all. The Greek government repeatedly sent its proposals or responses too late to be analyzed by experts of the EU, ECB and IMF before ministerial meetings, raising suspicions that it wanted to avoid scrutiny of fiscal measures that did not add up.

The creditors saw chaos looming. They hurriedly agreed to hold an emergency summit at which political leaders – not officials – would discuss the crisis. It was a goal Tsipras had been seeking.

Events, though, had a momentum of their own. Fearful Greeks were pulling their money from Greek banks. Between last October and April, about 30 billion euros had flowed out. Now the pace quickened: In just a week, depositors yanked some 4 billion euros out of Greek bank accounts.

The governor of Greece’s central bank, Yannis Stournaras, summoned senior bankers to a special meeting. According to two of those present, Stournaras issued a dire warning. “If there is no deal, the Europeans will have decided to move on – (that) is what we were told,” said one of the bankers. In other words, if there was no deal, Greece would default, go bust and maybe crash out of the euro. A spokesman for the central bank confirmed that the meeting took place but declined to comment on what was discussed.


Faced with time running out and the possibility of banks closing their doors, Tsipras began contemplating concessions to Greece’s creditors, according to aides. One of the main sticking points was the pensions system. The IMF insisted that Greece overhaul its pension system to reduce the burden on the state, people familiar with the negotiations said.

Pensions gobbled up 17.5 percent of Greece’s GDP in 2012, according to Eurostat, more than any other EU country. Despite subsequent cuts, the country still spends 16 percent of its GDP on pensions – though that’s partly because Greece’s GDP has fallen. Creditors say the system is fundamentally flawed, creating perverse incentives for Greeks to retire early, draw a pension and then work in the shadow economy, depriving the government of revenue.

The IMF wanted that to change. Tsipras resisted, saying that high unemployment meant that pensions were a vital source of income for many families.

On Sunday June 21 he met Syriza colleagues in Athens to thrash out a new deal to present to creditors. “Tsipras was in and out of the meeting room,” said a deputy minister. “He spoke several times by phone to other EU leaders and some policy makers during the meeting. That’s why it lasted so many hours.”

Late that night Tsipras’ team sent new proposals to euro zone officials in Brussels. But they arrived too late for proper consideration at a summit scheduled for the next day, according to EU officials.

Still, after months of wrangling there was mood of optimism as European leaders gathered in Brussels on June 22. President Francois Hollande of France flew in on a Falcon jet and was upbeat, despite headlines such as “Europe on a knife-edge” and “Greece Bust.” As a person on the plane familiar with the president’s thinking told Reuters: “It’s always at the last moment that people find solutions that seemed difficult to imagine at the start.”

The same source added a note of caution. “This drama has a risk too, and that’s that people may find themselves in a real Greek tragedy, with a death at the end. Possibly several.”

True to the warning, talks did not go well. Tsipras gave some ground on pension reforms, but he focused on increasing pension contributions and taxes rather than cutting spending. Creditors wanted more cuts.

German finance minister Schaeuble remained unconvinced. “There is nothing new beyond many trying to create expectations which are not supported by substance,” he told reporters. Once again discussions descended into disagreement and acrimony.

Ordinary Greeks also reacted angrily. As word of Tsipras’ proposals reached Athens, impoverished pensioners protested in the streets. Leftist lawmaker Yannis Michelogiannakis decried the proposed reforms as a “tombstone” for Greece, asking: “How can you cut a deal that will increase suicides and make people poorer?”

With creditors insisting on tougher measures, Tsipras began considering putting the issue to voters. “We realized … that there was no will to reach a deal on a viable solution,” said a Greek official.

On June 26, Tsipras met Merkel and Hollande in the small room in the French delegation offices in Brussels. Merkel and Hollande dangled the prospect of more than 15 billion euros of loans in installments over the next five months if Tsipras agreed to creditors’ proposals. Almost all of that money, though, would simply go to meet Greece’s debt repayments, and none of it was new cash not already committed under the bailout program. Greeks would still face years of austerity and economic reform.

Tsipras spurned the offer and accused the creditors of “blackmail” in a press conference with reporters.


When he announced the referendum, Tsipras hoped the European institutions would grant some respite from financial pressures until the vote could be held. He asked for Greece’s bailout program to be extended beyond July 5.

France was willing to discuss the idea, euro zone officials said. But other finance ministers refused. “That (calling a referendum) is a sad decision for Greece,” said Jeroen Dijsselbloem, president of the Eurogroup. “It has closed the door on further talks while the door was still open, in my mind.”

Schaeuble was blunter: “The negotiations are clearly ended, if I understand Mr Tsipras correctly. We have no grounds for further discussions.”

Early that evening Varoufakis, the Greek finance minister, left the EU Council building in Brussels. According to several participants in the Eurogroup, he went with a smile. “It was disturbing that someone who has just made a decision against his country, is not devastated, but grins,” said an EU official.

The following day, Varoufakis posted a blog entry defending the referendum. “The very idea that a government would consult its people on a problematic proposal put to it by the institutions was treated with incomprehension and often with disdain bordering on contempt,” he wrote. “Can democracy and a monetary union coexist? Or must one give way?”

In Berlin, government officials noted that Schaeuble had suggested the idea of a Greek referendum back in May.

Greek officials close to the talks said negotiations could continue despite the expiry of the bailout program and the referendum. For now, though, Greek banks remain closed. Efforts to find a compromise continued, though on Wednesday Merkel showed little sign of giving ground.

EU Commission president Juncker has made plain the stakes as he sees them in a referendum. On June 29 he told a news conference: “The whole planet would take a Greek ‘No’ … to mean Greece wants to set itself apart from the euro zone and from Europe.”

He said he would ask “the Greek people to vote ‘Yes,'” advising that they should not “commit suicide.”

(Maltezou reported from Athens; Pineau from Paris; Rinke from Berlin; Additional reporting by Deepa Babington, Lefteris Papadimas, George Georgiopoulos, Karolina Tagaris andMichele Kambas in Athens; Ingrid Melander in Paris; Paul Taylor, Jan Strupczewski, Philip Blenkinsop and Alastair Macdonald in Brussels; Erik Kirschbaum, Sabine Siebold and Noah Barkin in Berlin; John O’Donnell in Frankfurt; Written by Richard Woods; Edited by Simon Robinson)




The Goldman conspiracy theory works again as the ECB expands it’s QE.  And of course, gold goes down.


(courtesy zero hedge)

Goldman “Conspiracy Theory” Validated As ECB Expands QE Program

The ECB has expanded the list of SSA securities eligible for purchase under PSPP. The updated list includes:

  • Tyoettoemyysvakuutusrahasto
  • OeBB-Infrastruktur
  • Asfinag
  • Infraestruturas de Portugal
  • Entidade Nacional para o Mercado de Combustiveis
  • Ferrovie dello Stato Italiane
  • Terna Spa – Rete Elettrica Nazionale
  • ENEL
  • SNAM
  • Administrador de Infraestructuras Ferroviarias – Alta
  • Velocidad
  • SNCF Reseau
  • Caisse Nationale des Autoroutes
  •  DARS

Since the program’s inception, we and others have said the central bank will likely need to add more names to the list of QE-eligible SSA bonds or move into corporate credit in order to ensure that NCBs can meet their purchase targets under the capital key (especially in core markets where scarcity is a problem) and in order to allay concerns about liquidity in the secondary market for some core EGBs.

That said, the decision to expand the list this week is obviously no coincidence and reflects the fact that the ECB is keen to ensure there are no lasting “spillover” effects from the meltdown in Greece on periphery yields which the central bank has worked so hard to keep unrealistically low.

The move also, as RBS noted this morning, shows the ECB is “ready to intervene closer to the real economy.” RBS also says the bank could move into IG corporate credit next, something we predicted months ago when we discussed the lower limit problem.

So that’s the surface-level analysis.

Beyond that, today’s announcement by the ECB seems to prove what we said in “Goldman’s Conspiracy Theory Stunner“; namely that Mario Draghi wants to push Greece over the edge in order to give himself an excuse to expand QE. Here’s howwe explained the situation earlier this week: 


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.

With Thursday’s move, the ECB has set the stage for the expansion of QE, suggesting that indeed, the escalation of the Greek drama has served its purpose. No one will question the expansion of the eligible SSA list, especially given the fact that the central bank can say the move gives supply-constrained NCBs more options when it comes to hitting their monthly targets. 

We would venture to say that it’s now just a matter of time before €60 billion/month becomes €70 or €80 billion and then, once the EGB and SSA markets have been sufficiently cornered, it will be on to euro IG corporate credit before Draghi finally becomes Kuroda by throwing the ECB’s balance sheet at the DAX, CAC, and IBEX at the first sign of trouble.

Well put letter:
(courtesy New York Times)

Is This Why ‘Europe’ Is Now Trying To Crush Greece?

Via The NY Times,

To the Editor:


If, as Paul Krugman suggests, Greece leaves the euro and returns to the drachma, and if it is then successful at reconfiguring its economy and managing to re-establish a functional government that collects taxes and pays debts, wouldn’t this encourage other economically struggling states like Italy, Ireland, Portugal and even France to abandon the union?


Won’t a successful Greece show others that — much as many young people who cannot afford to pay their rent return home — they, too, can return to the way things used to be?


If Greece does what seems so difficult, won’t it encourage a dissolution of the European Union?




New York

*  *  *

Simply put –  Europe can’t ‘afford’ anything positive to come of Greece…


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





Euro/USA 1.1071 up .0034

USA/JAPAN YEN 123.51 up .179

GBP/USA 1.5597 down .0004

USA/CAN 1.2610 up .0016

This morning in Europe, the Euro rose by a considerable 34 basis points, trading now just above the 1.10 level at 1.1071; 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 above the 123 level to 123.51 yen to the dollar.

The pound was again down this morning as it now trades just below the 1.56 level at 1.5597, 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 well down again by 16 basis points at 1.2610 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: $1162.50


Early Thursday morning USA 10 year bond yield: 2.44% !!! up 2 in basis points from Wednesday night and it is trading well above  resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Thursday morning: 96.28 up 3 cents from Wednesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Thursday morning

And now for your closing numbers for Thursday:


Closing Portuguese 10 year bond yield: 3.01%  up 8 in basis points from Wednesday (  very ominous/and dangerous with an accident waiting to happen)

Closing Japanese 10 year bond yield: .53% !!! up 5 in basis points from Wednesday/  very ominous

Your closing Spanish 10 year government bond, Thursday, up 3 in basis points  ( very ominous/yields rising even though stock market falls

Spanish 10 year bond yield: 2.31% !!!!!!

Your Thursday closing Italian 10 year bond yield: 2.32% up 3 in basis points from Wednesday: (very ominous/yields rise even though stock market falls)

trading 1 basis point higher than Spain.



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


Euro/USA: 1.1078 up .0042 ( Euro up 42 basis points)

USA/Japan: 123.09 down  0.234 ( yen up 23 basis points)

Great Britain/USA: 1.5598 down .0003 (Pound down 3 basis points)

USA/Canada: 1.2563 down .0027 (Can dollar up 27 basis points)

The euro rose by a fair amount today. It settled up 42 basis points against the dollar to 1.1078 as the dollar traded southbound today against all the various major currencies. The yen was up by 23 basis points and closing well above the 123 cross at 123.09. The British pound lost tiny ground today, 3 basis points, closing at 1.5597. The Canadian dollar gained back some ground against the USA dollar, 27 basis points closing at 1.2563.

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


Your closing 10 yr USA bond yield: 2.39% down 3 in basis point from Wednesday// (well above the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

96.11 down 20 cents on the day


European and Dow Jones stock index closes:


England FTSE up 21.88 points or 0.33%

Paris CAC down 47.63 points or 0.98%

German Dax down  81.15 points or 0.73%

Spain’s Ibex down 65.10 points or 0.73%

Italian FTSE-MIB down 327.14 or 1.43%


The Dow down 27.80  or 0.16%

Nasdaq; down 3.91 or 0.08%


OIL: WTI 56.84 !!!!!!!



Closing USA/Russian rouble cross: 55.44  up 1/4  rouble per dollar on the day



And now for your more important USA stories.


NY trading for today:


Jobs Jolt Sparks Bond Bid; Stocks Skid As “Day Of Greckoning” Looms


little premature but…


Deja Vu all over again…


Stocks limped higher into the payroll print – running stops above yesterday’s highs… then dropped to yesterday’s lows before trying to melt up into the last illiqui hour…


Small Caps were weak out of the gate today…


On the week, Small Caps are worst…


But since the peak of “Greece is rescued” last weekend, Trannies are the biggest loser…


Bonds rallied on the weaker than expected payrolls data, stocks slowly caught down, accelerated by the comments by The IMF…


European risk is now double that of American stocks – the highest spread in 13 years…


Social media darlings continue to take it on the chin (not Yelp’s big dump today)…


Bond yields ripped lower on the jobs data, stabilized then squeezed into the close… NOTE that 30Y tagged unchanged perfectly before payrolls snapped yields lower…


The US Dollar drifted sideways to lower with a jolt lower on the jobs data…


Commodities were mixed but had some precious metal turmoil aroun dthe jobs data…


Gold & Silver ended the week lower after a number of crazy moves…


Crude was whipsawed as rig count increases and Iran Deal rumors dominated any BTFD hopes… on target for the worst week in 4 months – lowest weekly close sicnce April 17th



Charts: Bloomberg

Bonus Chart: Feeling spooked?


Today was the release of the jobs report and it was not pretty!!
(as a spoiler the phony B/D added 213,000 of the 223,000 jobs)

First:  the official release:

June Payrolls Increase By 223K, Less Than Expected; Unemployment Rate Drops To 5.3%

According to the BLS, in June the US added 223K payrolls, less than the expected 233K, even as the the US unemployment rate dropped to 5.3% from 5.4%. Worse, the previous number was revised from 280K to  254K. Worst of all, average hourly earnings were flat despite expectations of a 0.2%, and a big drop from last month’s 0.3%.

So much for escape velocity in payrolls: not only did June disappoint but the last two months were revised lower by 60K.

But the worst news in the report was the average hourly earnings, which were expected to rise by a modest 0.2%, down from last month’s 0.3%. Instead they were unchanged at $24.95. 

Why? Because wages continue to track the real state of the labor market as shown by the total civilian employment to population ratio, not the ridiculously fabricated headline unemployment number.

And with this data it is now time to cross over the September rate hike from the calendar. 

More from the BLS report:

Total nonfarm payroll employment rose by 223,000 in June, compared with an average monthly gain of 250,000 over the prior 12 months. In June, job gains occurred in professional and business services, health care, retail trade, financial activities,  and in transportation and warehousing.

Employment in professional and business services increased by 64,000 in June, about in line with the average monthly gain of 57,000 over the prior 12 months. In June, employment continued to trend up in temporary help services (+20,000), in architectural and engineering services (+4,000), and in computer systems design and related services (+4,000).

Health care added 40,000 jobs in June. Job gains were distributed among the three component industries–ambulatory care services (+23,000), hospitals (+11,000), and nursing and residential care facilities (+7,000). Employment in health care had grown by an average of 34,000 per month over the prior 12 months.

Employment in retail trade increased by 33,000 in June and has risen by 300,000 over the year. In June, general merchandise stores added 10,000 jobs.

In June, employment in financial activities increased by 20,000, with most of the increase in insurance carriers and related activities (+9,000) and in securities, commodity contracts, and investments (+7,000). Commercial banking employment declined by 6,000. Employment in financial activities has grown by 159,000 over the year, with insurance accounting for about half of the gain.

Transportation and warehousing added 17,000 jobs in June. Employment in truck transportation continued to trend up over the month (+7,000) and has increased by 19,000 over the past 3 months.

Employment in food services and drinking places continued to trend up in June (+30,000) and has increased by 355,000 over the year.

Employment in mining continued to trend down in June (-4,000). Since a recent high in December 2014, employment in mining has declined by 71,000, with losses concentrated in support activities for mining.

Employment in other major industries, including construction, manufacturing, wholesale trade, information, and government, showed little or no change over the month.

The average workweek for all employees on private nonfarm payrolls was 34.5 hours in June for the fourth month in a row. The manufacturing workweek for all employees edged down by 0.1 hour to 40.7 hours, and factory overtime edged up by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. (See tables B-2 and B-7.)

Now the real story:
Wow!!! A monstrous 640,000 poor souls drop out of the labour pool.  Participation rate drops to a 38 year low of 62.7%
(courtesy zero hedge)

Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 Levels

The devastation of the US labor force continues.

In what was an “unambiguously” unpleasant June jobs payrolls report, with both April and May jobs revised lower, the fact that the number of Americans not in the labor force soared once again, this time by a whopping 640,000 or the most since April 2014 to a record 93.6 million, with the result being a participation rate of 62.6 or where itt was in September 1977, will merely catalyze even more upside to the so called “market” which continues to reflect nothing but central bank liquidity, and thus – the accelerating deterioration of the broader economy.


End result: with the civilian employment to population ratio dropping from last month to 59.3%, one can easily on the chart below why there will be no broad wage growth any time soon, which will merely allow the Fed to engage in its failed policies for a long, long time.

Get a load of this stat:  part timers surge by 161,000 but the full time jobs tumble by 349,000 on the household survey which is more reliable
(courtesy zero hedge/BLS)

Part-Time Jobs Surge By 161,000; Full-Time Jobs Tumble By 349,000

While the kneejerk reaction algos were focusing on the +223K jobs number reported by the Establishment Survey, few if anyone notched that the Household survey reported a decline of 56,000 workers in June.

But what’s worse, is that according to this survey which according to some is far more reliable than its peer, the composition of the US labor force once again deteriorated rapidly with part-time jobs added in June surging by 161,000 while the number of full time jobs tumbled by 349,000.


Putting this number in context, while the total number of US workers has long since surpassed its previous crisis high, the number of full time US workers has yet to overtake its November 2007 lever of 121.9 million, and in June dropped to 121.1 million.


Why is this a problem: because while the US still has 800k full-time jobs to go to at least regain the prior peak, during the same time period the US civilian, non-institutional population has risen from 232.9 million to 250.7 million: an increase of 17.724 million!

And now the last word of the phony jobs report
Again, that phony B/D plug number came in at 213,000 out of the 223,000 jobs.  This jobs report is one big farce!!
(courtesy Dave Kranzler/IRD)


Factory Orders Scream Recession: Annual Drop Biggest Since 2008

This has never happened outside of recession… Year-over-year, factory orders dropped 6.3% (adjusted) but 8% non-adjusted, the most since the financial crisis. Against expectations of a 0.5% drop MoM, manufacturers saw new orders tumble 1.0% and previous months were revised dramatically lower. Factory orders has now missed 10 of the last 11 months.

Factory Orders have fallen for 9 of the last 10 months…


Seasonally adjusted things look terrible…


Non-seasonally adjusted they look even worse..


Recession is coming…


Charts: Bloomberg

In another stat, since 2007 the USA has gained a whopping 1.4 million waiters and bartenders.  It has lost the exact same 1.4 manufacturing jobs.
And they call this a recovery????
(courtesy zero hedge)

Since 2007 The US Has Lost 1.4 Million Manufacturers, Gained 1.4 Million Waiters And Bartenders

Presented without comment.

* December 2007 is when, according to the NBER, the recession started. The same recession which also according to the NBER ended precisely 6 years ago.


Thursday is also the day for the jobless claims and it rose!!

(courtesy BLS/Kate Davidson/Eric Morath)

U.S. Jobless Claims Rise to 281,000

New claims are up more than expected, but the level remains historically low

By Kate Davidson And Eric Morath July 2, 2015 8:32 a.m. ET

WASHINGTON—The number of Americans filing new claims for jobless benefits rose last week, but the level remains historically low. Initial jobless claims, a proxy for layoffs across the U.S. economy, increased by 10,000 to a seasonally adjusted 281,000 in the week ended June 27, the Labor Department said Thursday. Economists surveyed by The Wall Street Journal had expected 270,000 new claims last week. The level of claims for the prior week was unrevised at 271,000. The Labor Department said no special factors affected the latest claims data. Jobless claims can be volatile from week to week, but have been generally falling since 2009 and have held below the psychological threshold of 300,000 for 17 straight weeks. The four-week moving average for initial claims, which evens out weekly volatility, ticked up by 1,000 to 274,750. Low jobless claims can be a sign of health in the labor market. Hiring slowed in early 2015, but has rebounded over the past few months. The unemployment rate has also moved lower, and the number of long-term unemployed workers and those stuck in part-time jobs has declined. “While these developments represent considerable progress toward strengthening of the labor market, some room remains for further improvement,” Federal Reserve Vice Chairman Stanley Fischer said in a speech Tuesday. “There are grounds for optimism that economic growth will be sufficient to promote further gains in labor market conditions.” The economy added 223,000 jobs in June and the unemployment rate fell to 5.3%, according to a separate Labor Department report released Thursday. Thursday’s report on jobless claims also showed the number of people filing continuing claims for unemployment benefits increased by 15,000 to 2.3 million for the week ended June 20. Continuing claims are reported with a one-week lag.


Well that about does it for tonight

I wish all our American friends, a safe, and happy

4th of July holiday weekend, and please come back

in one piece so you are able to read my reports!!!


I will see you Monday night



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