July 6/Greece votes no/ECB raises haircut on Greek collateral which will cause chaos in the Greek banking sector/FRBNY ships 10.1 tonne of gold from its vault overseas/no doubt that this gold is being repatriated to Germany/All bourses trade southbound/POBC tries unsuccessfully to rescue Shanghai bourse/July 26 is the key day for Greece as that is when they must repay the ECB 3.455 billion euros/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1172.90 up $9.90  (comex closing time)

Silver $15.73 up 19 cents.

In the access market 5:15 pm

Gold $1170.50

Silver: $15.75

 

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

At the gold comex today, we had a fair delivery day, registering 8 notices for 800 ounces . Silver saw 177 notices filed for 885,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 248.17 tonnes for a loss of 55 tonnes over that period.

In silver, the open interest fell by 1948 contracts despite the fact that Thursday’s price was down by only one cent. Again we must have had some short covering. The total silver OI continues to remain extremely high, with today’s reading at 195,889 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .979 billion oz or 139% 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 177 notices served upon for 855,000 oz.

In gold, the total comex gold OI rests tonight at 446,268 for a loss of 51 contracts as gold was down $6.50 on Thursday.  We had 8 notices filed for 800 oz  today.

We had no change in tonnage at the gold inventory at the GLD; 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 a slight withdrawal change in inventory at the SLV to the tune  of 137,000 oz/ Inventory now rests at 325.205 million oz.

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

1. Today, we had the open interest in silver fell by 1,948 contracts to 195,889 despite the fact that silver was down by only 1 cent on Thursday.  The OI for gold fell by another 51 contracts down to 446,268 contracts as the price of gold was down by $6.50 on Thursday.

(report Harvey)

2, COT report for gold and silver

(Harvey)

3. Today, 16 important commentaries on Greece

 

(zero hedge, Reuters/Bloomberg,Meijer/David Stockman)

 

4. Two commentaries on the collapse in the stock market in China

(zero hedge)

4.USA data tonight; service PMI falters.

 

5. Gold trading overnight

(Goldcore/Mark O’Byrne/)

6. Trading from Asia and Europe overnight

(zero hedge)

7. Trading of equities/ New York

(zero hedge)

8. Bill Holter’s commentary tonight is titled:

What “Exit Door”?

9.  Koos Jansen delivers a very important discussion on gold titled:

“Global Financial Turmoil, Gold Price Doesn’t Move”

also gold demand this past reporting week; 46 tonnes.

10. GATA reveals the following:

Gold Bullion Dealer Unexpectedly “suspends operations” due to

“significant transactional delays’

11. Andrew Crichlow of the London’s Telegraph writes on Peter Hambro’s troubles with his Russian based gold mining operation.

(Andrew Crichlow/London’s telegraph)

12. Citibank cornering the silver derivative market

(zero hedge)

plus other important topics….

Before we begin, I just retrieved the data from the FRBNY for gold leaving this depository for safe havens abroad.

Data for May:

8103 – 8089 =  14 million dollars worth of gold left NY at a value of 42.22 per oz.

Thus 331,596.4 oz leaves or 10.314 tonnes

This is approximately what left last month. Since Germany is the only nation that have officially asked for repatriation, I am quite sure that the destination of this gold is Germany.

 

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

Here are today’s comex results:

The total gold comex open interest fell by a tiny 51 contracts from  446,319 down to 446,268  as gold was down $6.50 in price on Thursday (at the comex close).  We are now in the next contract month of July and here the OI surprisingly fell by 246 contracts to 174 contracts. We had 300 notices filed on Thursday and thus we gained 54 contracts or an additional 5800 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI fell by 4139 contracts down to 281,148. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 62,242. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 163,611 contracts. Today we had 8 notices filed for 800 oz.

And now for the wild silver comex results. Silver OI fell by a huge 1948 contracts from 197,837 down to 195,889 despite the fact that the price of silver down 1 cent in price with respect to Thursday’s trading. We continue to have our bankers pulling their hair out with respect to the continued high silver OI. The next delivery month is July and here the OI fell by only 1062 contracts down to 709. We had 1115 notices served upon yesterday and thus we gained 53 contracts or an additional 265,000 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 9 contracts. The next major active delivery month is September and here the OI fell by a small 1,242 contracts to 137,840.  The estimated volume today was horrendous at 13,608 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 37,302 contracts which is good in volume.  We had 177 notices filed for 885,000 oz

 

July initial standing

July 6.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 64,324.833 oz (Manfra,Scotia) INCLUDES  7 kilobars
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 8 contracts (800 oz)
No of oz to be served (notices) 166 contracts 16,600 oz
Total monthly oz gold served (contracts) so far this month 308 contracts(30,800 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 78,319.4   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 2 customer withdrawals

i) Out of Manfra; 225.05 oz (7 kilobars)

ii) Out of Scotia:  64,324.783 oz

 

 

total customer withdrawal: 64,324.833 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 (308) x 100 oz  or 30,800 oz , to which we add the difference between the open interest for the front month of July (174) 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 (308) x 100 oz  or ounces + {OI for the front month (174) – the number of  notices served upon today (8) x 100 oz which equals 47,400 oz standing so far in this month of July (1.474 tonnes of gold).

we gained an additional 5800 oz of gold  standing in this non active delivery month of July.

Total dealer inventory 522,283. or 16.24 tonnes

Total gold inventory (dealer and customer) = 7,978,966.253 oz  or 248.17 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 248.17 tonnes for a loss of 55 tonnes over that period.

 

end

And now for silver

July silver initial standings

July 6 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 877,036.490  oz (Delaware,Brinks,Scotia,CNT)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 177 contracts  (885,000 oz)
No of oz to be served (notices) 532 contracts (2,660,000 oz)
Total monthly oz silver served (contracts) 2408 contracts (12,040,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 1,507,469.4 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 4 customer withdrawals:

i) Out of Brinks:  166,412.16 oz

ii) Out of CNT: 80,135.24 oz

iii) Out of HSBC: 600,314.19 oz

iv) Out of Scotia:  30,174.900

 

total withdrawals from customer:  877,036.49   oz

 

we had 1  adjustment out of the CNT vault

We had an adjustment of 29,690.000 oz   (???) adjusted out of the customer and this landed into the dealer account of CNT

Total dealer inventory: 60.146 million oz

Total of all silver inventory (dealer and customer) 182.808 million oz

The total number of notices filed today for the July contract month is represented by 177 contracts for 885,000 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 (2408) x 5,000 oz  = 12,040,000 oz to which we add the difference between the open interest for the front month of July (709) and the number of notices served upon today (177) x 5000 oz equals the number of ounces standing.

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

2408 (notices served so far) + { OI for front month of July (709) -number of notices served upon today (177} x 5000 oz ,= 14,700,000 oz of silver standing for the July contract month.

we gained 53 contracts or an additional 265,000 oz will stand in this active delivery month of July.

 

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

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

end

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

 

And now the Gold inventory at the GLD:

July 6/no change in gold inventory at the GLD/Inventory at 709.65 tonnes

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 6 GLD : 709.65 tonnes

 

end

 

And now for silver (SLV)

July 6/we have a slight inventory withdrawal which no doubt paid fees. we lost 137,000 oz/Inventory rests tonight at 325.205 million oz

July 2/ no change in inventory at the SLV/rests tonight at 325.342 million oz

July 1/ we had an addition of 1,624,000 oz into the SLV inventory/rests tonight at 325.342 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 6/2015:  tonight inventory rests at 325.205 million oz

 

end

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

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

1. Central Fund of Canada: traded at Negative 7.7 percent to NAV usa funds and Negative 7.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.7%

cash .3%

( July 6/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 1.24%!!!! NAV (July 6/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .69% toNAV(July 6/2015

Note: Sprott silver trust back  into positive territory at +1.24%

Sprott physical gold trust is back into negative territory at -.69%

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.
* * * * *

end

today the CME sent down the COT report.  Let us first head over to the gold COT and see what we can glean from it:

Gold COT

 

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
194,476 127,321 46,169 163,797 238,566 404,442 412,056
Change from Prior Reporting Period
-8,468 19,491 4,902 13,353 -12,766 9,787 11,627
Traders
132 96 79 54 50 227 192
 
Small Speculators  
Long Short Open Interest  
37,859 30,245 442,301  
1,536 -304 11,323  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, June 30, 2015

The Gold COT:  criminal activity is the name of the game:

Our large specs:

Those large specs who have been long in gold pitched a huge 8468 contracts from their long side

Those large specs that have been short in gold added a monstrous 19,491 contracts from their short side.  (this is an accident waiting to happen)

Our commercials  (fleeced again)

Those large commercials that have been long in gold added a monstrous 13,353 contracts to their long side.

Those commercials that have been short in gold covered a large 12,766 contracts from their short side.

Small specs:

The small specs that have been long in gold added 1,536 contracts to their long side.

Those small specs that have been short in gold covered a tiny 304 contracts from their short side.

Commercials go net long by  a little over 26,000 contracts and fleece the large specs again for the millionth time.

 

end

And now for our silver COT

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
71,886 62,005 22,560 76,246 97,406
-2,368 3,308 -914 2,403 -5,914
Traders
109 47 44 44 39
Small Speculators Open Interest Total
Long Short 196,724 Long Short
26,032 14,753 170,692 181,971
-2,670 -29 -3,549 -879 -3,520
non reportable positions Positions as of: 171 117
Tuesday, June 30, 2015

Our large specs:

Those large specs that have been long in silver pitched 2368 contracts from their long side.

Those large specs that have been short in silver added another 3308 contracts to their short side.

Our commercials;
Those commercials that have been long in silver added a rather large 2408 contracts to their long side.

Those commercials that have been short in silver covered a whopping 5914 contracts from their short side.

(judging from the decline in silver OI it sure looks like the commercials have covering their shortfall in a hurry).

Our small specs;
Those small specs that have been long in silver pitched 2670 contracts from their long side.

Those small specs that have been short in silver covered a tiny 29 contracts from their short side.

commercials go net long by over 8,000 contracts.

end.

 

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)

 

Stephen Flood
Chief Executive Officer

Varexit – Greeks Sacrifice Euro Antagonist In Bid To Secure Deal

– Brave Greeks vote overwhelmingly against austerity
– Varoufakis resigns to clear air for next phase of negotiations
– We think a Greek debt deal is highly likely over the next few days
– EU elites had hoped “yes” vote would force the replacement of Syriza with unelected technocratic experts
Syriza may nationalize banks to protect depositors from “bail-ins”
– UK slashes Deposit Insurance from £85,000 to £75,000
– Europe and the world now in uncharted waters, gold will protect

The Greek people have voted overwhelmingly against using austerity as a tool to somehow normalise their economy in a world where normality no longer applies, on any level, to economic policy.

Greek “No” Campaigners Waving Flags

Yanis Varoufakis, the Greek Finance Minister, has announced his shock resignation this morning. This, despite the vote of confidence that yesterday’s result is for Syriza’s policies.

It is believed that his absence from the next phase of negotiations will clear the air with Greece’s “partners”. He had managed to antagonise most of his European counterparts by speaking bluntly about the problems facing Greece – both internally and externally.

The “no” vote carried despite blanket coverage in the private media that such an outcome would be disastrous for Greece – which it may yet be.

However, the alternative would be to allow the EU continue to kick the can down the road until conditions for ordinary Greeks become so intolerable that they would be faced with the same option some time in the not too distant future.

Christine Lagarde has gone on record to say that Greece’s debts are unpayable. For Syriza – and the Greek people apparently – there is absolutely no advantage to be gained in taking on more austerity without some of their debt being written off. It offers no long-term solutions to their suffering.

It is highly unlikely that the EU elites are unaware of this. It would appear that the wave of scare-mongering prior to the referendum was designed to force the resignation of Tsipras and Varoufakis.

This would likely be followed by the imposition of an unelected technocratic government as was proposed by unelected European Parliament president Martin Schultz last week. In an interview with German business daily Handelsblatt he said that following a “yes” vote Syriza would be forced to resign and the period between then and the election of a new government would “be bridged with a technocratic government, so that we can continue to negotiate”. The notion that an EU imposed technocratic government would then “negotiate” with the EU is, of course, laughable.

In the Telegraph today, Ambrose Evans Pritchard reports that the Greek Finance Ministry may nationalise the banks in an attempt to protect the public from bank bail-ins – and it is worth noting rumours that Greeks deposits are only covered up to a value of €8,000 – and to prevent the ECB from shutting down any banks.

Factions within Syriza advocate taking the “provocative step in extremis of creating euros”, writes AEP, should the ECB fail in its duty to keep greek banks capitalised.

The resignation of Varoufakis is somewhat disappointing. He has been the one element in the mix that has saved observers watching the drawn-out Greek tragedy dying of utter boredom.

Like or loath him, his refusal to conform to business-as-usual and “the (unelected) experts know best” politics of the EU has drawn attention to the increasingly authoritarian nature of the EU institutions.

The people of Greece have rejected further impositions on them. They reject further hardship when there is no reason to believe that such hardship will lead to a brighter future. In effect, they are asserting their liberty in the face of slavery.

How the institutions choose to respond will be telling. Do they respect democracy or do they choose authoritarianism for what they decide is the greater good? We are now truly in uncharted waters.

Physical gold will serve as protection in the coming weeks and months as the consequences of the referendum unfold.

We think a Greek deal is highly likely over the next few days and here is why. Varoufakis’ exit implies that negotiations are already under-way. The removal of a perceived lighting rod and divisive figure from the table will allow creditor countries to ease the passage of a deal which may likely have substantial haircuts. Varoufakis’ role in this debacle has been very effective. Creditors know that a Greek exit will create a dangerous precedent that will linger in Europe for years and stifle attempts for closer fiscal and political union.

Like a game of chess Tsipras may have just sacrificed a knight in order to achieve a greater strategic aim – the marketing of a compromise deal to highly sceptical northern European countries. Were Greece to be expelled, and our television screens filled with Greek humanitarian causes, the likelihood of any Euro nation passing additional powers to an increasingly European feckless elite has become essentially zero.

This modern Greek tragedy may have spelled the end of the European project. It is probably just a matter of time before it unwinds. It has blown apart any vestiges of cohesion and foresight and planning on the part Brussels.

The entirely predictable Greek debt bomb was created many years ago. Bureaucrats knew Greece was cooking the books, utilising Wall Street banks to concoct complex debt instruments to manufacture fiscal and structural targets. Throughout that time they did nothing. It is sad, as the European project was a very noble effort and it united Europe’s tribes like nothing ever has.

In other news, the UK’s Financial Services Compensation Scheme (FSCS) has directed banks that the new deposit guarantee level will fall from £85,000 to £75,000. They effected this new level on the on the same day they announced it! They also instructed the banks to have staff trained up on the new level on that same day. Needless to say banks are furious.

The very odd reason given is the British Pounds exchange rate change over the last 5 years. The equivalent European target level for bank deposit insurance of Euro €100,000 used to be £85,000, now only buys you £75,000. The timing of the announcement is either a stroke of genius, (waiting for bad news (Greece) in order to deliver your own bad news), or a case of staggering stupidity; undermine the confidence in your own banking system just as a European neighbours system is in the process of collapse.

The fact that they changed it so quickly without anyone being aware that it was happening is more than concerning. Suppose a crisis envelopes Britain’s banks, will the FSCS arbitrarily drop the rate again, to say £50,000. The mere risk of this utterly undermines the effectiveness of the guarantee and renders it pretty much useless.

If they were smart they would have sought to increase the guarantee to the largest in Europe and attracted monies to Britain’s bank. If you have excess money sitting in a bank in amounts greater than £50,000 you should seek to move it to safer banks in safer jurisdictions and invest a modest sum in gold for safe keeping a safe jurisdiction.

Must Read Guide:7 Key Gold Must Haves for Storing Gold Bullion

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,164.25, EUR 1,053.43 and GBP 748.43 per ounce.
Friday’s AM LBMA Gold Price was USD 1,168.25, EUR 1,051.10  and GBP 747.44  per ounce.
Friday’s PM LBMA Gold Price was USD 1,167.95, EUR 1,052.21  and GBP 748.21  per ounce.

The U.S. Market’s were closed on Friday for a national holiday.

Gold in U.S. Dollars - 10 Year

Gold in Singapore for immediate delivery was flat at $1,167.50 an ounce near the end of the day. The yellow metal rallied to hit a one-week high of $1,174.70 during Asian trading hours, but failed to hold onto gains, as the dollar rose against the euro.

Gold dipped on Monday against the dollar strength as Greek voters rejected the bail-out package, likely sending Greece out of the euro.

Greek prime minister Alexis Tsipras said during a TV address on Sunday that the country would go back to the negotiating table “as of tomorrow” and that his party’s primary priority was to reinstate the financial stability of the country.”

In late morning European trading gold is down in U.S. dollars  0.27 percent at $1,165.09 an ounce. Silver is off 0.64 percent at $15.58 an ounce and platinum is also down 1.85 percent at $1,060.00 an ounce.


Breaking News and Research Here
 

end

 

(courtesy Reuters/Dasgupta/Kumar/GATA)

India considers ending import curbs on gold-silver alloy

Section:

By Neha Dasgupta and Manoj Kumar
Reuters
Friday, July 3, 2015

The Reserve Bank of India and the finance ministry are in talks to scrap bulk import licences for a gold-silver alloy used by domestic refiners, months after relaxing curbs on gold imports, officials with direct knowledge of the discussions told Reuters.

Gold is India’s second-highest import in value terms, and a jump in imports widened the current account deficit in 2013, sparking the country’s worst currency turmoil since a balance of payments crisis in 1991.

An alloy of gold and silver, called dore, from which refineries produce pure gold, forms about 150 tonnes of imports each year and attracts a duty of 8.24 percent, which is less than the duty of 10.30 percent on refined gold.

The RBI wants to remove all restrictions on refiners while the finance ministry has raised concerns over tax evasion, the sources said. …

… For the remainder of the report:

http://www.reuters.com/article/2015/07/03/india-gold-economy-idUSL3N0ZJ2..

end

 

(courtesy  GATA)

Gold Bullion Dealer Unexpectedly “Suspends Operations” Due To “Significant Transactional Delays”

What makes the current sovereign default episode different from previous ones is the uncanny stability and lack of buying of “fiat remote” assets such as gold and silver, and to a lesser extent, digital currency such as bitcoin. Indeed, all throughout the Greek pre-default escalation and ultimately, sovereign bankruptcy to the IMF, it seemed as if there was an absolute aversion to the peak of Exter’s inverted pyramid.

What is even more surprising about the lack of any gold price upside is that it is not due to lack of demand. Quite the contrary, because as Bloomberg wrote last week, “European investors are increasing purchases of gold as Greece’s turmoil boosts the appeal for an alternative to the euro.”

Demand from Greek customers for Sovereign gold coins was double the five-month average in June, the U.K. Royal Mint said in an e-mailed statement. CoinInvest.com, an online retailer, said sales on Saturday and Sunday were the highest since Cyprus limited cash withdrawals in 2013, driven by a jump in German, French and Greek buyers.

 

Investors are searching for a safe haven after Greece imposed capital controls, closed banks and stopped selling gold coins to the public until at least July 6.Chancellor Angela Merkel on Monday said Germany is still open to negotiations if Greece wants.

 

“Most of our common gold coins are sold out,” Daniel Marburger, a director of Frankfurt-based CoinInvest.com, said by phone. “When people learned that the Greek banks will be closed, they started to think that it may not be such a bad idea to have some money in gold.”

The bullion dealers themselves are enjoying a jump in sales to retail customers:

GoldCore Ltd., which buys and sells bullion, reported coin and bar demand rose “significantly” on Monday. Sales to U.K. and Ireland today are about three times the average for the past three Mondays, the Dublin-based firm said in an e-mailed statement.

 

The U.S. Mint has sold 61,500 ounces of American Eagle gold coins this month, the most since January.

 

BullionVault, which says it operates the largest online physical gold trading platform, reported a jump in sales during the first half of this year, a sign of a broader increase.

However, it is the “paper” gold market where things were most perplexing in recent months. Recall that, as Zero Hedge broke and first reported, in the first quarter of the year, or the same time the Syriza government took power, something very dramatic took place in the US derivatives market, where first JPM saw an absolute explosion of its commodity derivative holdings (a broad umbrella which is not broken down further):

 

… coupled wih Citi’s surge in “precious metals” derivatives which soared from $3.9 billion to $42 billion.

 

But what is most confusing is how even as physical metal demand clearly rose across Europe in the past few months and the price of paper gold actually declined, perhaps facilitated by some “hedged” derivative positions on the short side of precious metals, some bullion dealers have actually found it impossible to survive, and in the last few days at least one major gold bullion dealer, Bullion Direct, greeted customers with the following notice on its website:

Bullion Direct has experienced significant transactional delays. To avoid further inconvenience or other adverse consequences to our customers, Bullion Direct is suspending its operations as it attempts to resolve those issues. We intend to keep you informed at this website. Thank you for your patience.

 

Just what are “significant transactional delays” and how bad is the physical gold supply-chain if it can put at least one dealer out of business. Another question: is this a solitary failure by gold vendor due to a one-off problem with working capital, or is something more systemic about to be revealed in the gold bullion sales industry?

We look forward to finding out, but in the meantime our advice to buyers of physical precious metals is the same as always: if you purchased it and you can’t hold it in your hand, it isn’t yours.

 

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Criminality to the highest degree:

JPMorgan corners the gold commodity derivative market and Citibank corners the silver derivative market:

(courtesy zero hedge)

Citigroup Just Cornered The “Precious Metals” Derivatives Market

One week ago, when we scoured through the latest OCC quarterly derivative report (in which we find that the top FDIC insured 4 US banks continue to account for over 90%, or $185.5 trillion of all outstanding derivatives which as of March 31 amounted to $203 trillion; nothing new here), we found something fascinating: based on the OCC’s derivative update, JPM had literally cornered the commodity derivatives complex, when from “just” $226 billion in total Commodity exposure, JPM’s notional soared by 1,690% in one quarter to $4 trillion, or about 96% of total.

 

Some, without even bothering to read the article, did what they always do when reacting to Zero Hedge articles: accused it of “writing a post first and asking questions later“, and coming up with some utterly incorrect response to show just how wrong Zero Hedge was because, guess what, the Office of the US Currency Comptroller had clearly “fat fingered” trillions in critical data.

As usually happens in these situations, Zero Hedge was right (there was some tongue in cheek apology but hey, at least someone got to boost their traffic briefly by namedropping this web site), which could have been checked simply just by looking at bank call reports, in this case the quarterly Regulatory Capital report, schedule RC-R, which made it very clear that indeed JPM’s OTC commodity derivatives had exploded to $4 trillion.

For those too lazy to check before tweeting, here is the number of OTC cleared “Other” commodity derivatives for JPM before, as of December 31:

 

And after,as of March 31:

 

Furthermore, while we await the OCC to respond to our inquiry (we aren’t holding our breath), nobody has disputed our claim (because it is purely factual) that as of Q1 the OCC decided to exclude Gold as a separate commodity category (see call reports above) and lump it in with Foreign Exchange for some still unexplained reason. It would appear that gold is money after all…

So to summarize: as we reported first (and we would be delighted if other so called financial experts dedicated as much effort to digging through the primary data as they have to desperately try to disprove our article), JPM has indeed cornered the OTC commodity market, with its $4 trillion in “Other” commodity derivatives which amount to 96% of total. We don’t expect anyone to ask Jamie Dimon about this on the quarterly earnings call because this is one of those things one doesn’t want an answer to if one wishes to be invited to the next conference call.

However, another big question remains: just what is Citigroup – not, not JPMorgan – with the Precious Metals category.

Here is the chart showing Citigroup’s Precious Metals (mostly silver now that gold is lumped in with FX), exposure over the past 4 years. Of note: the 1260% increase in Precious Metals derivative holdings in the past quarter, from just $3.9 billion to $53 billion!

 

For those of a skeptical bent the proof can be found in Citi’s own call report, which can be seen here as ofMarch 31, 2015 vs December 31, 2014.

Another way of showing what Citi just did with the “Precious Metals” derivative category, is the following chart which shows Citi’s total PM derivative exposure as a percentage of total.

 

Soaring from just 17.4% to over 70%, there is just one word for what Citigroup has done to what the Precious Metals ex Gold (i.e., almost exclusively silver) derivatives market.

Cornering.

So, the question then is: just what is Citigroup doing with its soaring Precious Metals (excluding gold) exposure, and why is such a dramatic place taking place at precisely the time when not only JPM is cornering the entire “Other” Commodity derivatives market in the form of a whopping $4 trillion in derivatives notional, but in the quarter after none other than Citigroup itself was responsible for drafting the swaps push-out language in the Omnibus bill.

Screen Shot 2014-12-05 at 3.32.12 PM

And also: how is it legalthat JPM is solely accountable for 96% of all commodity derivatives while Citigroup is singlehandedly responsible for over 70% of all “precious metals” derivatives?Surely even by the most lax standards this is illegal, but what makes the farce even greater is that all of this taking place out of FDIC-insured entities!

The final question, which we are absolutely certain will remain unanswered, is whether any of these dramatic surges have anything to do with the recent move in precious metals prices, or rather the complete lack thereof, even as Europe is on the verge of its first member officially exiting the Eurozone, and China’s stock market is suffering its worst market crash since 2008.

We have inquired with the OCC about both the derivative moves of both JPM’s “commodity” and Citi “precious metals” surges, both rising by over 1000% in the past quarter. We will promptly inform readers if we hear back, which we won’t.

 

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(courtesy London’s Telegraph/Critchlow)

Peter Hambro’s nightmare when his Russian Gold miner nearly went out of business

A tumbling gold price nearly wrecked plans for the Russian gold mining company Petropavlovsk

From his Mayfair office overlooking the gardens of Buckingham Palace, Peter Hambro the scion of the storied City banking dynasty is in reminiscent mood.

Earlier this year he nearly lost control of Petropavlovsk – the Russian gold mining company he helped to create over 20 years ago with his friend Pavel Maslovskiy.

A collapse in the prices of precious metals nearly forced it out of business but the company was saved at the eleventh hour when shareholders approved a rights issue.

Gold is in Mr Hambro’s blood and, to illustrate his belief in its enduring value despite its fluctuating price, he pulls out of his pocket a money clip. Fashioned from two American gold coins, the clip once belonged to his late father who had established the family name in merchant banking circles following the Second World War.

According to Mr Hambro, his father who had once banked Sheikh Shakbut bin Sultan al-Nahyan,the ruler of oil-rich Abu Dhabi in the 1960s, carried the precious clip everywhere he travelled following the war. His reasoning was that, no matter what the circumstances, the value of the gold in the clip would always outweigh the currency it held and, therefore, be enough to buy him safe passage back to Britain from anywhere in the world.

“If I was in Athens now and I had a few gold sovereigns I would be feeling a hell of a lot happier than if I was relying on my euros in a bank, or my ability to get it out of a cash machine,” said Mr Hambro.

However, his deep-rooted belief in gold was also the reason for his near undoing. Petropavlovsk – which up until 2009 was known as Peter Hambro Mining – has been one of the biggest victims of the collapse in the price of gold from a peak above $1,900 per ounce to its current levels around $1,200 per ounce.


Peter Hambro started the gold mining business in 1994

The company, which is listed on the London market, had borrowed hundreds of millions of pounds and invested heavily in the development of a Malomir deposit in Siberia.

The mine has an abundance of refractory ore, which is relatively cheap to extract but expensive to process, requiring the use of pressure oxidation plants to transform it into gold.

“We were certain that the gold price was going up, which it did. We wanted to increase our production.

We spent a lot of money increasing capacity. One of the things we saw was that the world was running out of easy-to-process ore,” he said.

Mr Hambro sold the idea to investors on the basis of the gold price continuing its upward trajectory, and when it went into reverse the company had to perform an about-turn on its plans.

“Nothing that we did was illogical,” he said. “We thought it through, but we got it wrong. The gold price just crashed. I had told the world that gold was going to $2,000 per ounce and I wasn’t far wrong, but when it came down it went thumping down. The momentum of it got away from us. We didn’t pack up, we carried on and turned things around from refractory to non-refractory and basically did our best to make it work and eventually we had to put our own money in to do that.”

http://cloud.highcharts.com/embed/ufawal

The financial costs of the mistake have been crippling for both the company and Mr Hambro, who puts his own losses from the debacle in the region of “hundreds of millions”. Shareholders have also suffered. Petropavlovsk’s shares are down almost 50pc so far this year at around 7½p. At its 2010 height, the miner’s share price nudged £13.50.

“What I have said to equity holders is that this has been effectively 21 years of my life. For the first eight years I worked for free and I put my own money into it with Pavel [Maslovskiy]. I was 50 when I started this and I’m now 70. What I built got destroyed,” he said.

According to Mr Hambro – who originally ventured beyond the Iron Curtain in the Cold War era to broker gold deals with the former Soviet Union – at its peak Petropavlovsk had an enterprise value of around $4bn (£2.5bn) and net debt of around $500m.

Now the company’s enterprise value stands at around $1bn and debts of $700m, a far more worrying ratio for investors to absorb, especially when gold prices show little sign of returning to their previous highs.

“It was just a black hole. Everything was disappearing and there was nothing we could do to stop it until the very last minute when we said, OK we will do a debt-for-equity swap with the bondholders, and Pavel, myself and our other partner put our hands in our pockets and after that we were safe again,” said Mr Hambro.

Adding to his problems caused by the plummeting gold price, economic sanctions imposed on Russia by the West have complicated the company’s dealing with its bankers.

“They have had collateral effects rather than a direct impact. It’s very difficult to get an American investor or a Canadian investor interested. Not that bad for equity but very bad for debt. In terms of our relationship with the banks, they have problems with interbank lending, which makes things difficult,” said Mr Hambro.

Despite nearly losing control of the company in an episode, which Mr Hambro admits left him genuinely “scared”, he has lost none of his enthusiasm for Petropavlovsk and turning the company around.

The company is producing around 680,000 ounces of gold per year and its guidance for the next five years is for output to remain at around 600,000 ounces, which will generate significant cash flow.

“I couldn’t walk away. I’m captain of the ship and I would have to go down with it. I’m just that kind of guy. I come from a long line of people who have behaved well. My father, mother, grandparents, great grandparents would not have been happy if I had done anything else,” said Mr Hambro.

Based on gold remaining within its current range, Mr Hambro is confident of maintaining a margin of $500 on every ounce that the company can produce, which is equivalent to around $300m of cash flow. “Our inherent strength is that we are in an area with a fantastic amount of gold,” he said.

Provided that there isn’t another major dip in gold prices, this should mean that Petropavlovsk could be debt free by 2019. Restoring the enterprise value of the business, he says, is his “number one” priority.

“It’s equity shareholders who have taken the beating. What we have got to do now is pay off that debt because we have spent all the money on new plant and equipment and our capital costs going forward are very low,” he said.

Given the growing economic uncertainty in Europe and the recent crash of the Chinese stock markets, the likelihood is growing of gold prices rising again as investors search for safe-haven assets.

However, Mr Hambro questions just how much gold is actually in circulation, making it hard to predict prices of the precious metal.

“For some reason I don’t understand why gold has reacted the way you would think it would react. Gold has gone back into the hands of governments, particularly in China and Russia. China has encouraged people to go out and buy gold.

“The Shanghai exchange has shipped an incredible amount of gold to the Chinese people but where that has come from I don’t know. The fact it takes five years for the German central bank to get its gold back from the Federal Reserve is very strange. If it’s really there, it should be possible to deliver much more quickly than that,” he said.

Immaculately dressed as he sits in his oak-panelled office with walls adorned by his own watercolour paintings of the English coastline, Mr Hambro, who has spent a lifetime working in and around the City, shakes his head at some of the financial scandals that have rocked the public’s confidence in business. He is also aghast at the bonus culture, which continues to dominate how business is done in the Square Mile.

“I grew up in a City family. The City was a small village when I started where everyone knew everyone and in my view it was very well regulated. There were no rules, but people understood that they had to behave properly and they did. I didn’t get a bonus for most of my City career. It wasn’t something you relied on.

“You lived on your salary and people lived really, really well,” he said.

end

 

(courtesy Gerald Celente/Kingworldnews/Eric King/GATA)

All major central banks strive to suppress gold, trends forecaster Celente tells KWN

Section:

8:32p ET Saturday, July 4, 2015

Dear Friend of GATA and Gold:

Government currencies are always battling against gold and all major central banks are desperate to keep the monetary metal’s price down as their Ponzi-type management of the world financial system collapses, trends forecaster Gerald Celente tells King World News today. Celente’s interview is excerpted at the KWN blog here:

http://kingworldnews.com/gerald-celente-the-great-panic-is-now-on-throug…

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

 

end

 

(courtesy Egon Von Greyerz/Kingworldnews/Eric King/GATA)

 

Derivatives will shake world financial system and central banks, von Greyerz tells KWN

Section:

8:36p ET Sunday, July 5, 2015

Dear Friend of GATA and Gold:

The explosive growth in derivatives held by banks threatens to cause an explosion that central banks will try to forestall by creating nearly infinite money, only to fail as the world financial system collapses, gold fund manager Egon von Greyerz tells King World News today. His interview is excerpted at the KWN blog here:

http://kingworldnews.com/the-bis-is-trying-to-hide-the-terrifying-nightm…

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

end

(courtesy London’s Financial times/Sanderson/GATA)

Chinese hedge fund Shanghai Chaos closes out copper short

Section:

By Henry Sanderson
Financial Times, London
Sunday, July 5, 2015

A Chinese hedge fund that made a huge bet against copper has closed out its entire position in the metal, as the selloff in the country’s stock market forces investors to pull money out of other markets.

A unit of Shanghai Chaos, a fund that held the biggest short position in Shanghai copper, was no longer in the top 20 holders of short copper contracts Friday, data from the Shanghai Futures Exchange showed.

Chinese hedge funds rely on retail investors much more than their Western counterparts. It is not clear whether Shanghai Chaos made the copper move as a trading decision or because it needed to return money to investors. …

… For the remainder of the report:

http://www.ft.com/intl/cms/s/0/aadf1092-2193-11e5-ab0f-6bb9974f25d0.html

 

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Gold demand from China: 46 tonnes for the last reporting week

Commentary from Koos Jansen

Posted on 4 Jul 2015 by

Global Financial Turmoil, Gold Price Doesn’t Move

It’s remarkable the Greek tragedy has had no influence on the gold price in recent weeks. We’ve heard repeatedly Europe and Greece could not reach a deal for an extended bailout, are financial markets suffering from Euroscrisis fatigue?

Team Dijsselbloem-Juncker states they stretched all they could and offered the Greek government a reasonable deal that would require more reforms the Hellenic Republic, but team Varoufakis-Tsiparas will not agree with the proposed reforms. On Thursday June 25 anotherfinal meeting ended with no success, while Greece had a payment of €1.6 billion to the IMF coming up on June 30, negotiations were pushed to Saturday June 27. Dangerous territory, a bank holiday usually kicks of in the weekend when financial markets are closed.

Again, on Saturday June 27 no agreement could be reached, crowds started to appear at ATMs in Greece. The Greek government closed the banks, only allowing people to withdrawal €60 a day, and organized a referendum (held on Sunday July 5) to let the Greek people decide if the latest offer from their creditors should be accepted, yes or no.

On June 30 Greece defaulted by not paying the IMF €1.6 billion, followed by a media war between team Varoufakis-Tsiparas and Europe in which both sides are accusing each other of spreading false rumors on the current state of affairs; shaking the fundamentals of the great European project.

Concurrently the Chinese stock market fell into an abyss, from a peak on June 12 down 29 % on July 3, nearly ¥15 trillion yuan (over $2 trillion dollars) was moved out of the Shanghai Composite Index. Yet, recent financial turmoil has not moved the gold price. Not in dollars (or renminbi, as the renminbi is pegged to the US dollar):

Screen Shot 2015-07-04 at 11.44.35 AM
From BullionStar Charts

Not in euros:

Screen Shot 2015-07-04 at 11.45.03 AM
From BullionStar Charts

This smells like market rigging. Surely, the last thing the authorities need at this moment is gold on the move. Variousmedia and bullion dealers reported demand for physical gold in Europe is strong. Walter Hell-Höflinger, owner of a gold shop in Austria, stated: “The critical thinkers have lost faith in politicians, their currencies and in the media. The price of gold is actually artificial.”

I’ve asked Torgny Persson, CEO of BullionStar.com in Singapore, and CEO of LibertySilver.se and LibertySilver.ee in Europe, about the recent sales dynamics at his bullion shops. This is what he told me:

– Precious metals demand in the last week leading up to the Greek referendum has been about 150 % higher than normal both in terms of order quantity and order volume. This is true for Bullionstar.com as well as for LibertySilver.se and Libertysilver.ee

– Based on my conversations with the western world’s leading refineries and precious metals wholesalers, they have experienced similar increases in the last week.

– There’s however no shortage of gold or silver at this point although bottlenecks in minting capacity may soon lead to prolonged delivery times if the demand is kept up. 

During week 25 (June 22 – 26) gold withdrawn from the vaults of the Shanghai Gold Exchange (SGE) accounted for 46 tonnes. Year to date 1,162 tonnes have been withdrawn.

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 25

Withdrawals have been strong in recent weeks, however, at this point it’s not sure if SGE withdrawals equal Chinese wholesale demand. We’ll find out if more trade data is released.

In short, for the first time ever a developed country has defaulted on an IMF loan, the future of the euro is at stake (kindly note The Netherlands and Germany have backup currencies ready, that’s partially the reason they repatriate gold), the stock market of the world’s second largest economy declined by nearly 30 % in less than three weeks, but the gold price doesn’t move.

Rigging markets can be very effective, short-term. Remember ABN-AMRO wrote in June last year “gold’s safe haven status should be revised”, because the gold price was moving sideways since 2013. Some analysts and investors forget about thousands of years of history and go with the trend. No matter how you look at it, gold is in a bear market, but will it remain there?

Tomorrow the Greeks will vote and the European struggle continues. In fear of a financial meltdown China hasdesperately ordered fund managers to invest $19 billion of their own money into stocks, it suspended IPOs and launched a market-stabilization fund. Let’ see what happens.

Just in:

Germany suggests Greece could exit eurozone ‘temporarily’

Greece must introduce another currency if “no” vote wins – Schulz

Chinese banker: “The government must rescue the market, not with empty words, but with real silver and gold,”

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

end

(courtesy Peter Cooper/Arabian Money.com)

Gold flows out of Switzerland up 10% mainly to China, prices going up

Posted on 06 July 2015 with 1 comment from readers

Switzerland refines two-thirds of the world’s gold and far from demand slowing down, as lower prices might suggest, the latest year-on-year figures show a 10 per cent increase to 108 tonnes in May.

The flow of gold from the West to the East continues with Switzerland importing gold from countries like the UK and exporting to China and its business hubs, Singapore and Hong Kong, and India.

West-East gold flow

For 2105 projections indicate that 2,000 tonnes of gold will be exported from Switzerland, the second best year on record. It could be much higher if the financial crisis in China gets out of control, and the 30 per cent crash in local stock markets over the past three weeks is not encouraging.

Europeans are also likely to be bigger buyers of gold as the value of the euro takes a hit from the ongoing debt crisis in Greece that still looks months from any resolution with a referendum supporting an exit from the euro yesterday.

In the short term the flow of money into the dollar and US bonds may be more significant than the flow into gold, and that could weaken the gold price.

Sudden stop?

But in the longer term credit is now beginning to freeze up across the world. Emerging market bonds are becoming illiquid, that is to say they don’t have a buyer at any price.

The Chinese equity crash also risks a ’sudden stop’ in the world’s second largest economy. Companies have been swapping massive debts for equity through IPOs, something they now cannot do as all IPOs were suspended at the weekend.

This is the bubble created by huge and uncontrolled stimulus measures in China since the last global financial crisis and the authorities have this time created a monster that they cannot contain. Think Wall Street Crash 1929.

In these circumstances any rational person left holding paper money will want to turn it into something more solid. This is not a new trend in China. That’s why the gold flow from Switzerland has been predominantly into its hands.

Gold to surge

However, the stock market crash has now removed what had become gold’s biggest competitor for Chinese investors, big and small. Expect the flow of gold from West to East to become more of a flood.

Now what will a huge surge in demand met by no increase in supply do to the gold price? Dollar bulls should take note that the dollar’s strength will also come under pressure in due course as the US economy slows and goes into recession.

Then everybody in the entire world will want to own gold.

 

end

 

This is interesting!!

(courtesy Robert Baillieul/GATA)

Billionaire Ray Dalio Bought 463,000 Shares of Silver Wheaton Corp

By Robert Baillieul B. Comm. • Monday, July 6, 2015

Silver WheatonInstead of trusting their savings in the stock market, investors should be worried about a U.S. dollar collapse and begin storing their wealth in hard assets like gold and silver. At least, that is, according to billionaire investor Ray Dalio.

In recent quarters, Dalio has been warning investors to get out of fiat currencies. That’s probably why he has accumulated massive positions in mining companies like Goldcorp Inc., Barrick Gold Corporation, and Pan American Silver Corp. These metal producers are leveraged bets on higher gold prices and a hedge against inflation.

He also just picked up a new position. Buried inside a recent 13-F SEC filing, Dalio disclosed a huge stake in another precious metals miner. And if he’s right, the upside for early investors could be enormous. Let me explain.

The Best Silver Stock You’ve Never Heard Of

Ray Dalio is one of the best stock-pickers around.

In 1975, he founded Bridgewater Associates. Over the next four decades, Dalio went on to generate double-digit compounded returns for his investors, turning his Connecticut-based firm into one of the largest hedge funds in the world.

For this reason, I always pay close attention to what stocks Dalio is buying. And right now, he’s making some interesting bets in the mining industry.

In a recent 13-F SEC filing, Dalio disclosed a 463,000 share position in precious metals giant Silver Wheaton Corp. (NYSE/SLW). What makes this company interesting is that it doesn’t actually own or operate any mines at all. Instead, you could think of Silver Wheaton like the banker of the mining industry. (Source: Bridgewater Associates 13-F Filing, last accessed July 5, 2015.)

Here’s how it works. Silver Wheaton fronts resource firms with the cash they need to complete a new project. In exchange, the company receives a percentage of the mine’s production once the project is up and operational. Even better, Silver Wheaton can often purchase this production at a steep discount to market prices, securing a dependable source of gold and silver for decades to come.

 

This business model allows the company to crank out oversized profit margins. In the case of Silver Wheaton, the firm pays $4.14 on average per silver equivalent ounce. It can then turn around and sell this production for $16.00 per ounce at today’s spot silver price. (Source: Silver Wheaton Investor Presentation Slide 21, last accessed July 5, 2015.)

Needless to say, this is a lot more lucrative than your traditional mining stock. Operating a mine for a profit is tough. You can watch your investment get wiped out if a company runs into a labor strike, socialist government, or an expensive engineering problem.

In contrast, Silver Wheaton can generate higher profits without that risk. For this reason, the stock has returned over 500% over the past decade, easily beating the rest of the resource industry.

Those returns are likely to continue. Last year, the company’s producing streams generated 43.6 million silver equivalent ounces. By 2019, that figure is projected to grow over 40%, increasing to 51.4 million silver equivalent ounces per year. (Source: Silver Wheaton Investor Presentation Slide 15, last accessed July 5, 2015.)

At those rates, Silver Wheaton is going to be gushing cash flow. Most of those profits will likely be paid out to shareholders as dividends or reinvested back into the business to earn even more silver royalties.

If You’re Not Watching This Silver Stock Now, You’ll Hate Yourself Later

A quick word of warning: Wall Street is beginning to catch on to this opportunity.

Last quarter, a number of billionaire investors, including Ken Griffin, Cliff Asness, and Murray Stahl, initiated or increased their stakes in the streaming metals company. And in March, Morgan Stanley issued its first report on the firm.

Now I have to ask you; what would make the smartest investors in the world take notice of a company like this? I’d say it could only be one thing: they see a giant rally ahead.

How Safe is Your Retirement from a Stock Market Crash?

The flight into safe haven assets like gold and silver says what many of us already know: there has been no real “recovery” for the U.S. economy. While government officials try to soothe investors’ fears with a lot of “happy talk,” new indicators suggest the U.S. economy may be on the verge of collapse. In fact, it’s starting to happen already.

In a special investor presentation, Profit Confidential Editor-in-Chief Michael Lombardi outlines exactly what the next financial crisis will look like as well as how to protect your savings. To get the full story, check out his special report, “The Great Crash of 2015.”

http://www.profitconfidential.com/stocks/billionaire-ray-dalio-bought-463000-shares-of-silver-wheaton-corp/

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(courtesy Bill Holter/Holter-Sinclair Collaboration)

 

Bill H:

What “Exit Door”?

Often times I like to write about an event or someone else’s article because of the importance to the overall picture. Today I will do something a little different. Below is an e-mail I received last Thursday from a friend. I have the utmost respect for his thought process and his knowledge. The writer is “plugged in” if you will, he has very high and powerful contacts in both China and London while he operates out of North America. The following is chilling to say the least because it comes from someone who “knows”, it is not a speculation on his part because he is seeing it real time! I will add my comments afterward.

I have been pounding the drum for some time about shrinking liquidity and what the impact will be. Well, I can tell you that we are almost there and a real crisis is developing far faster than what I envisioned that is impacting the 75 Trillion Shadow Banking sector which is on the verge of implosion. Focus on Europe as the real crunch will spread like a wildfire from there seizing up all credit markets.

We will ignore China and the BRIC for the time being as to impact and focus on the European Ponzi that the bankers have brought to the table.

The specific area we should keep an eye on is the U.S./bund 10yr yield spread, currently quoted at 155bp. This spread will start taking its lead from the euro, so when that starts to lose favor keep sharp eye out for the next shoe to drop.

Asian shares were very volatile today, Shanghai in particular, trading with a 10% variation (daily low to high) today as PBOC were active again. In Europe we did see small gains intraday in DAX and CAC but neither could hold on and actually closed well into negative territory both down over 1%. UK FTSE never got into the green all day and closed -1.5%. Even seasoned Traders are scared now about intra day swings and being caught in a downdraft at closing. Banks are tightening the leash on trading lines to reduce exposure which is sure to castrate liquidity of bonds.

Credit markets are almost closed, I am being told! I REPEAT again the CREDIT markets are almost closed! Trades are happening by appointment and to even move 1MM EM bonds (at an opening price) is almost impossible. It is not uncommon to hear an indication only to trade and a 2% trade away from from opening, assuming you are able to trade, and desire to trade is no guarantee of a sale. NO ONE is standing up to market prices and to liquidate even a small portfolio can take weeks. It is important that you cannot any longer trade the basis as value is dropping and there no point to partially selling specific bonds unless you can clear a given position! Because once there is a traded price ALL holders of same or similar will have to remark the book. That is unless you are a bank where the Balance Sheet is not a Mark-to-Market approach on a daily basis for the book being held. Think holding government debt at par for the likes of Italy or Spain knowing they can never clear the debt, and knowing that no one will buy at market. So what is the true value of a large portfolio? Do you hang on getting interest while it is still being paid or do you attempt to go to cash? And if you do who is going to step into your shoes ? Especially since the banks are all trying to save cash and want no exposure of any kind. We maybe approaching the point where central banks are losing credibility and their ability to contain the fallout, when governments are so badly in debt they are powerless and rudderless in a sea of chaos.

We are coming very close to complete chaos that will make 2008 look like a walk in the park! We will be fortunate if we make fall without a real financial disaster!

——————————————————————————————-

Following up from yesterday let’s ponder the upcoming Crisis that we are facing that specifically involves bonds, which are the bedrock of the financial system and what the fallout maybe.

Every asset class in the world trades based on the pricing of bonds. So the fact that bonds are in a bubble (perhaps the biggest bubble in financial history), means that EVERY asset class is in a bubble. Everything from real estate to stocks to the buying of cars. Ever wonder why car loans in America exceed the value of the cars in question.

Depending on who you speak with globally there are $75-$100 trillion in bonds in existence today.

A little over a third of this is in the US. About half comes from developed nations outside of the US. And finally, emerging markets make up the remaining 14%.

So whatever the real trillion it is, the size of the bond bubble alone should be enough to give pause. Even to the most aggressive or optimistic folks.

However, when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to something like $500TRILLION. This affects both banks and the shadow banking industry. No wonder the Bank of England is perplexed as to the shrinking liquidity, it is a problem to which they have no solution.

To put this into perspective, the Credit Default Swap (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).

And this was at a time when there was QE and other means to throw at the problem which are now spent. So what will be used this round?

This is why the shrinking liquidity in bond sales is even to give real pause and wonder what will come to be as confidence in government wanes, and the shrinking liquidity affects all markets at the same time in different degrees but with a universal discount of value and liquidity, egged on by collapsing derivative trades.”

So there you have it. This is something I have been saying for quite some time, we are living in the greatest credit bubble of all time…and it is bursting. It is bursting because liquidity is drying up. The point made regarding the inability to offload bonds speaks to just how small the “exit door” really is in the most crowded trade in all of history! I hope you did not miss what was said about “marking to market”. The sale of a measly $1 million worth of bonds at any discount affects the pricing of BILLIONS which then acts as a further liquidity restriction on bank balance sheets.

To this point we have not seen much weakness in U.S. markets BUT we are witnessing the “volume” dry up drastically. This lack of volume also speaks to the size of the exit door. Without volume, how does one sell if they want to? Better yet, without sufficient volume, how does one sell if they HAVE TO or are FORCED TO? In Asia, China’s stock market has collapsed over 20% in just three weeks. They are living a real life margin call! What is most humorous to me is China has now instituted rules where stock market margin calls can be met by posting real estate as collateral! Meeting margin with an already margined asset is the recipe for disaster!

Please understand this, “policy” and central banks are doing whatever they can to keep investors away from the exit door because they know there isn’t one. Central banks all over the world are “buyers” of nearly all things paper, do we really have “markets”? Anywhere? Let me finish with this, it is written in the Bible “and on the third day He rose again”. Here on Earth I believe we will soon find out after credit breaks, “and on the third day …nothing opened”. I truly believe this is possible. I do not believe the Earth can spin more than twice after a true break in the credit markets before a COMPLETE SHUTDOWN will occur. Nothing “paper” will be spared!

Regards, Bill Holter
Holter-Sinclair collaboration
Comments welcome!
bholter@hotmail.co

 

and now Bill Holter being interviewed with our friends from Silver Doctors:

 

The following link is my latest interview with Silver Doctors.

and then last night SGT:
https://www.youtube.com/watch?v=BeoVCO8gJNo  to my latest interview with Sean at SGT.
end

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 6.2090/Shanghai bourse green and Hang Sang: red

2 Nikkei closed up by 427.67  points or 2.08%

3. Europe stocks all in the red (hugely) /USA dollar index up to 96.45/Euro down to 1.1036

3b Japan 10 year bond yield:  falls to  47% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.97

3c Nikkei still just above 20,000

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

3e WTI 54.25 and Brent:  58.60

3f Gold up (from comex close on Thursday)/Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .73 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rise  to 49.42%/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: 15.46%

3k Gold at 1164.90 dollars/silver $15.60

3l USA vs Russian rouble; (Russian rouble down 9/10 in  roubles/dollar in value) 56.46,

3m oil into the 54 dollar handle for WTI and 58 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 .9456 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0435 just below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 3 year German bund remains in negative territory with the 10 year moving towards negativity at +.73%

3s The ELA is frozen now at 88.6 billion euros.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.

4. USA 10 year treasury bond at 2.30% early this morning. Thirty year rate well above 3% at 3.10% / yield curve flatten/foreshadowing recession.

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

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

 

Tumbling Futures Rebound After Varoufakis Resignation; Most China Stocks Drop Despite Massive Intervention

More than even the unfolding “chaos theory” pandemonium in Greece, market watchers were even more focused on whether or not China and the PBOC will succeed in rescuing its market from what is now a crash that threatens social stability in the world’s most populous nation. And, at the open it did. The problem is that as the trading session progressed, the initial 8% surge in stocks faded as every bout of buying was roundly sold into until every other index but the benchmark Shanghai Composite turned sharply red.

The reason the SHCOMP stayed above water is because China’s sovereign fund Huijin was in the market to keep large caps like PetroChina, ICBC up. And then, shortly after it was announced that China’s National Security Fund had ordered all of its managers “not to sell a single stock“, the Composite briefly dipped into the red and the local Chinese bank was on the verge of a total loss of control.

Luckily, by the end of the session, the Composite managed a modest 2.4% recovery even as investors in the vast majority of Chinese shares suffered another day of losses and as the PBOC’s credibility came this close to being fully wiped out.

 

Elsewhere in Asia, central banks were less forceful and the Nikkei 225 (-2.1%) fell to within close proximity to the 20,000 level while JPY strength further weighed on the index. ASX 200 (-1.3%) was dragged lower by weakness in the commodities complex.

And while China was a roller coaster, Europe’s volatility wasn’t far behind: as was to be expected, the price action was dominated by the Greek ‘No’ vote victory, in turn prompting a risk-off tone which was observed overnight with US equity futures slumping 1.5% while T-notes gapping higher by over 1 point. However, the subsequent shocker that Yanis Varoufakis is to step down, citing preference of some Eurogroup participants, resulted in EUR and equity markets recovering off the worst levels. According to the latest reports, Greece’s chief negotiator Tsakalotos is the favourite to replace Varoufakis as the Greek Finance Minister.

EUR/USD staged an impressive recovery overnight, largely supported by the resignation of the Greek finance minister and the upside in EUR/CHF driven mostly by another post-weekend day of relentless Swiss National Bank intervention. However, in recent hours the central bank bid appears to have fizzled and the EUR is once again grinding slowly lower as the selling wave appears to have overcome European central banks just as it did in China earlier.

Gold failed to hold onto early gains and trended lower overnight, before consolidating in negative territory in early European trade, amid the ongoing concerns over growth prospects in China. The drop in gold is due to further central bank intervention, this time by the BIS’ FX and gold trading desk under the auspices of Benoit Gilson. At the same time, the risk averse sentiment weighed on the energy complex, with WTI and Brent Crude futures trading lower.

Notable energy stories:

Saudi Arabia has cut the OSP for Arab light crude to Asia in August by USD 0.10 per barrel, while increasing the price to European customers by USD 0.25 per barrel. (RTRS). Iranian Oil Minister Bijan Zanganeh will release a template for international oil contracts in the near future, as companies wait for deal that will open up one of the world’s premier oil markets to foreign investment. (RTRS) FCC (36.9k bpd ) has been shut down at the CVR — Coffeyville refinery (155.7k bpd) having been recently restarted. (Genscape) The CDU (64k bpd ) and VDU (30k bpd) have been restarted at the Phillips 66 – Wood River refinery (306k bpd). (Genscape) The FCC (80k bpd) was shut down at the Valero — Port Arthur Refinery (292k bpd) (Genscape)

On the macro economic calendar today we have ISM non-manufacturing, and the Markit U.S. composite/services PMI due later but these will be absolutely meaningless in light of the headline Greeknado that simply refuses to go away.

In summary: European shares remain lower, off opening lows, with the banks and basic resources sectors underperforming and travel & leisure, health care outperforming. Varoufakis quits as Greek finance minister, Greeks voted “no” in Sunday’s referendum. Merkel to meet Hollande today ahead of emergency summit of European leaders Tuesday. ECB governing council due to talk today on support to Greek banks. Hang Seng index enters correction with 11% drop from April peak, Shanghai Composite rises.

The Italian and Spanish markets are the worst-performing larger bourses, the U.K. the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields decline. Commodities decline, with WTI crude, nickel underperforming and gold outperforming. U.S. ISM non-manufacturing, Markit U.S. composite PMI, Markit U.S. services PMI due later.

Market Wrap

  • S&P 500 futures down 0.6% to 2056.3
  • Stoxx 600 down 0.8% to 380.2
  • US 10Yr yield down 8bps to 2.3%
  • German 10Yr yield down 5bps to 0.74%
  • MSCI Asia Pacific down 2% to 143.5
  • Gold spot down 0.3% to $1165.1/oz
  • All 19 Stoxx 600 sectors fall
  • Eurostoxx 50 -1.5%, FTSE 100 -0.5%, CAC 40 -1.3%, DAX -1.2%, IBEX -1.6%, FTSEMIB -2.4%, SMI -0.6%
  • Asian stocks fall with the Shanghai Composite outperforming and the Hang Seng underperforming; MSCI Asia Pacific down 2% to 143.5
  • Nikkei 225 down 2.1%, Hang Seng down 3.2%, Kospi down 2.4%, Shanghai Composite up 2.4%, ASX down 1.1%, Sensex up 0.4%
  • Euro down 0.79% to $1.1026
  • Dollar Index up 0.37% to 96.47
  • Italian 10Yr yield up 9bps to 2.34%
  • Spanish 10Yr yield up 10bps to 2.31%
  • French 10Yr yield down 2bps to 1.22%
  • S&P GSCI Index down 3.3% to 419.4
  • Brent Futures down 2.3% to $58.9/bbl, WTI Futures down 4.3% to $54.5/bbl
  • LME 3m Copper down 3.2% to $5573/MT
  • LME 3m Nickel down 3.4% to $11595/MT
  • Wheat futures down 2.5% to 575.8 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • Risk-off tone was observed overnight with US equity futures slumping 1.5% while T-notes gapped higher by over 1 point, however subsequent reports that Greek finance minister Varoufakis is to step down prompted a recovery in riskier assets amid a glimmer of hope that a deal will be easier to reach.
  • EU’s Juncker is to hold a conference with Tusk, ECB’s President Draghi and Eurogroup Dijsselbloem on Greece. Furthermore, an EU summit will take place on Tuesday at 1700BST.
  • Going forward, market participants will get to digest the release of the latest US ISM-Non-Manufacturing report, Canadian Ivey PMI and also await any further developments surrounding Greece.
  • Treasuries gain, 10Y yield falls to touch 50-DMA at 2.271% as 61% of Greeks, more than forecast, voted against yielding to further austerity demanded by creditors.
  • Most Chinese stocks fell as a fresh round of government support measures, including suspending IPOs as brokerages pledged to buy shares and urged investors not to panic, failed to spark gains outside the largest state-run companies
  • Yanis Varoufakis quit as Greek finance minister, a move intended to help speed talks with creditors; “I shall wear the creditors’ loathing with pride,” he wrote in a blog post
  • Economists from JPM to Barclays Plc made a Greek exit their base scenario, while those at Goldman and Citigroup saw ways it can remain within the bloc
  • European officials are putting the onus on the Greek government to make the next move as Merkel heads to Paris today for talks with Hollande to map out a way forward for Greece
  • Help for Greece is possible on basis of ESM rules, which say states in receipt of aid must accept contractual conditions, German Finance Ministry spokesman Martin Jaeger said
  • Jaeger also said euro area has different sustainability assessment of Greek debt than presented last week by IMF, which said Greece needs at least $40b in new euro-area funds
  • Podemos, Syriza’s ally in Spain, said EU should guarantee Greek financial system, Troika must respect Greek sovereignty
  • Sovereign 10Y bond yields lower with the exception of EU periphery: Greece 10Y +300bps to 17.642%; Portugal, Spain, Ireland and Italy yields also rise. Asian stocks mostly lower; Shanghai gains 2.4%. European stocks fall, FTSE -2.1%. U.S. equity-index futures fall. Crude oil slides, WTI -4.4%, Brent -2.4%; copper -3.1%, gold -0.4%

 

In conclusion, here is DB’s Jim Reid with his view of this weekend’s crazy events

Europe has perfected the art of muddling through over the last few years. With yesterday’s 61% ‘No’ vote win in Greece, they will have to do it all again to ensure the status quo. For the wider global economy/macro markets, this doesn’t yet feel anywhere near as scary as when Italy and Spanish 10 year yields were trading well north of 7% a few years back. It is however a major historic event and a Greek exit if it happens could have significant medium-long term ramifications on the survival of the Euro.

Before we delve deeper, let’s first glance at the initial Asian market reaction so far. There’s been an unsurprising sell-off across risk assets this morning although much like last week the moves have been fairly well contained. The Nikkei (-1.98%), Hang Seng (-3.18%), Kospi (-2.05%) and ASX (-1.41%) are all more or less at their lows without being overly stressed, while S&P 500 futures are currently 1.3% lower. Credit markets are modestly weaker but have pared a lot of the initial early move wider. Having traded 7 to 8bps wider at the open, Asia (+5bps) and Aus (+4bps) indices have bounced back slightly. 10y Treasuries yields are 10.4bps lower as we type at 2.278% while similar maturity yields in Australia (-17.1bps), New Zealand (-7.5bps), Singapore (-2.8bps) and Hong Kong (-9.6bps) have followed suit. The Euro has slid -0.73% versus the Dollar to $1.103, again paring some of the earlier weakness (-1.3% at the Sydney open). The single currency is also -1.1%, -0.7% and -0.3% against the Yen, Sterling and Swiss Franc respectively. Trading to their own tune are China equities with bourses reacting to the measures announced over the weekend (which we detail later). Having initially opened nearly 8% higher, the Shanghai Comp has tumbled sharply, trading at +2.16% as we to print. The Shenzhen Comp (-2.59%) and CSI 300 (+2.52%) have been similarly volatile. So we need to keep an eye on this story this week as there’s a danger Greece could distract us from what would otherwise be the main story.

Back to Greece for now though. Following the result, some important meetings have now been scheduled in response.An emergency summit of European leaders has been called for Tuesday. German Chancellor Merkel is said to be meeting with French President Hollande tonight. European Commission President Juncker is also set to hold a conference call with the ECB’s Draghi and Eurogroup President Dijsselbloem this morning while the ELA review is also due today. In terms of the political reaction so far, Dijsselbloem said in a statement that ‘the result is very regrettable for the future of Greece’ while German Vice-Chancellor Gabriel said that Tsipras has ‘torn down the last bridges across which Europe and Greece could have moved toward a compromise’. On the other side of the fence, Greek PM Tsipras was quoted shortly following the result saying that ‘the mandate you’ve given me does not call for a break with Europe, but rather gives me greater negotiating strength’.

This leads to the obvious question of where we go next? The starting point for most discussions will be the likelihood of a Grexit. DB’s George Saravelos noted on last night’s client call that despite the result, Grexit is not inevitable but ultimately depends on the political will following pressure on the ground in Greece. George believes that the probability of a Grexit is somewhere around 40% now. Another outcome path is a potential bank recap program eventually resulting in EU bank ownership assuming Greece remained in default, however this is probably less likely at this stage given the moral hazard implications. That leaves some sort of agreement as the other possible option, although the path to which is far from straightforward and likely to take some time.

Immediate focus now switches to the European response, starting with the ELA review today. We expect that the ECB will keep the current cap in place rather than any seeing an outright suspension. A suspension would effectively put the Greek banking system into immediate resolution and so moving Greece one step closer to exit, however we believe that it’s more likely that we wait and see the European political response first before such a move was contemplated.

With the result, it feels like Tsipras has bought himself a few more days before the economic reality of the situation catches up with him. By the end of the week we may see most ATM’s out of cash, massive pressure on the payment of upcoming public sector wages, tourism issues and wider economic damage. For that reason Tsipras will be keen to move quickly with his new found momentum, but the risk is that the relationship between Europe and Greece has been damaged so much that additional conditions need to be set before any negotiations around a possible ESM program can even begin. The stance that Europe takes from here will be critical in how things develop. Too soft a stance and there is the risk of moral hazard, too hard a stance (possibly by demanding government change) and we may remain at deadlock. So some sort of middle ground will need to be achieved if keeping Greece in the Euro is desired.

The negotiations for an ESM program are unlikely to be straightforward. George notes that an ESM program requires prior ECB/IMF assessment of financing needs/debt sustainability as well as Bundestag approval before talks around a Staff Level Agreement can even begin. He believes that a written letter from the Greek government on its commitment to continue negotiations along the prior path may be requested, or possibly even a broader negotiating team backed by cross-parliamentary support required. The rhetoric out of Tsipras may also be a play a part in how Europe ultimately chooses to react. Irrespective of this however, the need for greater fiscal commitments as well as the overall weakening commitment of the Europeans in recent months to negotiations will only make the process more difficult.

DB’s Mark Wall touches on another interesting possibility, that being a scenario whereby a collapse in the Syriza government (due to rising economic and political costs of a closed banking system) results in a new government of national unity being formed and resulting in an agreement on a new deal with Creditors. In such a case, an agreement would have to be based on a more balanced programme and probably along the lines outlined by the IMF in their latest debt sustainability report. Structural reforms would have to be well considered in exchange for a less growth-unfriendly fiscal consolidation and a commitment on a gradual debt relief based on implementation milestones. Political deadlock in the event of a new government failing to be formed (assuming Syriza resigned) is still a possibility under such a scenario however.

As we look ahead to European market open this morning then, the wait-and-see aspect (with regards to a European response) may mean markets are reasonably well behaved and revert to ‘controlled risk-off’ mode. The moves 7 days ago and for much of last week were fairly contained on the whole, however this may also reflect partly the view of a yes vote being favoured. It’s certainly possible that we see disorderly market behaviour should a Grexit appear to be more and more likely, in which case all eyes would turn to the ECB and specifically to their reaction function – most probably through front loading of QE.

There’s a lot to consider and the ‘no’ result certainly muddles the outlook. Over the next 24-36 hours however it’s likely that we stay in wait-and-see mode with the European response function most important right now. The latter part of the week could see bigger market moves one way or the other once we know where we stand on negotiations. Its a tricky one to call but both Mark Wall and George Saravelos still put the risk of ‘Grexit’ at less than 50%. If ‘Grexit’ does occur my personal view is that its more damaging for the longer-term than the short-term. Europe has ensured that direct contagion should be limited for now and more liquidity should help stabilise markets after any initial shock. However it will become a huge focal point in the future for any country with issues within the EU, especially if Greece finds some growth further down the line. This could be a catalyst for extreme politicians around the continent campaigning on the basis that there was an alternative to the Euro. We stress this is not for now but its potentially the biggest long-term consequence of a ‘Grexit’.

Not to be outdone, China once again shared at least some of the headlines this weekend following an effort to stabilize equity markets. According to the nation’s two exchanges, 28 companies are said to have halted their IPO’s while the Securities Association of China also announced that a group of 21 brokerages will invest at least 120bn yuan in a stock market stabilization fund in a bid to support the market. Most importantly, the China Securities Regulatory Commission also announced ‘liquidity support’ from the PBoC and the China Securities Finance Corporation will also raise its capital to RMB100bn from RMB24bn previously. DB’s Zhiwei Zhang believes that a PBoC intervention in the equity market is not necessary to avoid a financial crisis in China. Zhiwei notes that the index is still one of the best performing markets in the world from a YTD perspective and that the economy is dominantly dependent on the banking sector rather that the equity market for financing. He notes that the exposure of the banking sector to the leveraged finance scheme in the equity market to be only around RMB300bn and thus it’s hard to make a case that there is systematic risk from the equity market selloff for the economy. At this stage there has been no statement from either the PBoC or the State Council. Zhiwei notes that what this does do however is that this heightens the uncertainty on growth and inflation beyond this year with the PBoC’s mandate becoming more obscure as it becomes involved in the equity market. A fascinating sideshow to Greece and one that might be the more important story medium-term.

Looking at this week’s calendar now. It’s a fairly quiet start to the week in Europe this morning with just German factory orders and Euro area investor confidence data due. Across the pond this afternoon in the US we get the final composite and services PMI’s for June, alongside the ISM non-manufacturing and the labour market conditions index. Moving to Tuesday, industrial production readings out of Germany and the UK will be the morning’s highlight, as well as the manufacturing production print in the latter. Over in the US we’ve got the May trade balance, JOLTS job openings and the IBD/TIPP economic optimism survey to look forward to. Trade data out of Japan kicks things off on Wednesday, before we get French business sentiment data in the European session. The focus however will be on the FOMC minutes of the June 17th meeting due out late in the session, while consumer credit data is also expected. Turning to Thursday, attention will be on the China CPI and PPI reports in the early morning. German trade data for May along with the BoE decision highlight the European session while in the US we’ve just got initial jobless claims due. Moving to Friday, Japan PPI and consumer confidence data are the only notable releases in the Asia timezone. Over in Europe we’ve got French industrial and manufacturing production, Italian industrial production and UK trade data and construction output. It’s a quiet end to the week in the US with just wholesale inventories expected. Earnings season kicks into gear meanwhile with Alcoa due to report tomorrow. On top of that, it’s a busy week for Fedspeak with Williams, Brainard, George, Kocherlakota, Rosengren and Fed Chair Yellen (on Friday) all expected.

For now its over to the European politicians!!

end

 

First:  trading from China and Asia while the USA was celebrating Independence day:

 

USA markets are closed for the 4th of July holiday weekend.

Chinese Stocks Plummet Despite Government Threats To Shorts, Europe Lower, US Closed

The Greece impasse set to culminate on Sunday continues to have a massive impact on at least one stock market, unfortunately it is the wrong one, located on a continent which is mostly irrelevant to the future of the Greek people (unless that whole AIIB bailout does take place of course). We are, of course, talking about China which as noted earlier, started off horribly, plunging over 7% with over 1000 stocks hitting 10% limit down, then in the afternoon session mysteriously recovering all losses and even trading slightly higher on the day, before the late selling returned once more, and the Shanghai Composite plunged to close down 5.8%: a ridiculous 20% total roundtrip move!

This brings the total drop since the highs less then three weeks ago to just over 28% (and 33% for the Nasdaq-equivalent Shenzhen) the biggest 3-week plunge in 23 years.

What is most troubling is that, as we noted last night, this clear bubble bursting is not done with the government’s blessings – as should have been the case since a crash was clear to anyone – but despite the government constant attempts to intervene and prop up the bubble.

Overnight Bloomberg reported that in one sign of utter desperation, under new rules announced Wednesday real estate is now an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker.

While the rule change was intended to help revive confidence in China’s $7.3 trillion stock market, down almost 30 percent in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market.

“It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”

“Brokers are not stupid,” said Hao Hong, a China strategist at Bocom International Holdings Co. in Hong Kong. “I don’t think they would be willing to take this kind of collateral.”

For more on China’s margin debt and Umbrella Trust problem read our article from earlier in the week:

But the real desperation was revealed overnight when China effectively hinted anyone caught shorting would be put in front of a firing squad (metaphorically, we hope)

Even Morgan Stanley was mysteriously dragged into the blame game:

And if indeed the Chinese government is now helpless to halt the all out rout which, as we have warned countless times over the past 6 months, will leave millions of Chinese “traders” with nothing and thus desperate and angry, then the next step is also very clear and was laid out last week in a note by Nomura which warned that “A Market Crash “Poses Great Danger To Social Stability.”

Because a civil war over a market crash is all this worlds needs right now.

Hopefully there will be no civil war in Greece after this weekend’s referendum which those who are not watching their paper “profits” vaporize in China, will be watching closely as tthe fate of the Eurozone may well depend on the outcome of the vote.

For now, however, unlike in China European trading is muted perhaps because unlike in China, the European Central Bank long ago became the primary marginal source of risk demand.

In what will most likely be a front-loaded session with the US away from market today, price action has been relatively subdued. In terms of the current state of play, the latest Ethnos poll shows there is not much between the ‘yes’ and the `no’ vote, while Varoufakis remains optimistic that a deal can be done in the event of a `no’ victory, although his European counterparts fail to share his optimism. Therefore, given the uncertainty surrounding the event, markets started off on a relatively tentative footing with equities drifting lower with selling pressure relatively broad-based while fixed income products have been provided a bid tone.

Elsewhere, in FX markets EUR/USD has been relatively resilient to the otherwise dampened sentiment for Europe. This is likely a continuation of the recent trend which has seen prices largely swayed by carry trade flow which sees purchases of EUR when the market is presented with bad news. AUD/USD has continued to extend on losses after stops were tripped on the break of June low of 0.7587. Of note, AUD underperformed overnight following lower than expected Australian retail sales data (0.3% vs. Exp. 0.5%), while soft Chinese HSBC PMI readings further weighed on the currency. Finally, GBP was lent some support by the latest services PMI data (58.5 vs. Exp. 57.5).

In the commodity complex, WTI and Brent crude futures trade with minor losses in the wake of yesterday’s Baker Hughes data. In terms of commodity specific newsflow, participants continue to keep an eye on negotiations between Iran and their counterparts with the latest reports suggesting Iran are finally paving the way to allow inspectors access to some of their nuclear facilities. With this in mind, some have suggested that sanctions could be lifted by as soon as December.

According to Genscape, flows from the Marathon to Catlettsburg pipeline have increased to 210k bpd from 141k bpd. (RTRS)
In metals markets, spot gold and silver trade relatively unchanged while Nickel extended on recent losses overnight in the wake of disappointing Chinese PMI data. Iron ore prices continue to be weighed on by increasing supply levels with reports suggesting that China will allow Vale’s 400,000 tonne mega-ship access to its ports

In summary: European shares remain lower, though are off intraday lows, with the basic resources and banks sectors underperforming and real estate, tech outperforming. Euro-area services PMI rises in line with estimate, U.K. services PMI above. Greeks split evenly on Sunday’s referendum, poll shows, more than 4 in 5 want to keep euro. ECB said to extend backstop to Bulgaria. Shanghai Composite drops 5.8%. U.S. markets closed for holiday. The Spanish and Swiss markets are the worst-performing larger bourses, the Dutch the best. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Spanish yields decline. Brent crude, WTI crude fall.

end

 

Major events from China:

 

 

Sunday afternoon, we find panic with the Central Bank of China ready to bailout stocks as soon as trading commences later their evening:

(courtesy zero hedge)

 

Panic: China Central Bank Steps In To Bailout Stocks As Underwater Traders Pray For A Rebound

China’s equity miracle — the one bright spot that has so far served to distract the masses from rapidly decelerating economic growth and a bursting real estate bubble — is in deep trouble.

A dramatic unwind in unofficial margin lending channels such as umbrella trusts and structured funds which have together served to pump some CNY1 trillion into a market that was already red-hot, sparked and perpetuated a 30% decline in the space of just three weeks, pushing Beijing into panic mode and promptingsimultaneous policy rate cuts along with a variety of other measures designed to stop the bleeding.

On Saturday we learned that a consortium of Chinese brokers will inject 15% of their net assets — or around $19 billion — into blue chip stocks starting Monday and China’s mutual funds have pledged not to sell their equity positions for at least a year.

As we and others noted, the injection from the brokerages likely will not matter. As one analyst told Bloomberg, “it won’t last an hour in this market.” Besides, much of the unofficial, backdoor margin buying was funneled into speculative small caps, which are, for now anyway, outside the purvey of the emergency measures. For these reasons (and others) we said the following:

It’s probably just a matter of time before the PBoC intervenes to provide Kuroda-style plunge protection when “sentiment” looks to be souring.

It took less than 24 hours for that prediction to be proven correct because on Sunday, the China Securities Regulatory Commission announced that the PBoC is set to inject capital into China Securities Finance Corp which will use the funds to help brokerages expand their businesses and reinvigorate stocks. Here is the confirmation from the People’s Daily:

And here is the WSJ:

China’s central bank will provide liquidity to help stabilize the country’s crumbling stock market, according to a statement by China’s top securities regulator late Sunday.

 

The People’s Bank of China will inject capital into China Securities Finance Corp., which is owned by the securities regulator, according to the statement by the China Securities Regulatory Commission. The company will then use the funds to expand brokerages’ business of financing investors’ stock purchases.

 

The CSRC said Friday it would dramatically increase the company’s capital to 100 billion yuan ($16.1 billion) from the current 24 billion yuan. The exact amount to come from the central bank hasn’t been disclosed.

 

The latest move comes as Chinese authorities are scrambling to stem a stock-market slide that officials fear could spread to other parts of the world’s second-largest economy.

 

Also late Sunday, a unit of China’s giant sovereign-wealth fund, Central Huijin, said it recently purchased exchange-traded funds and will continue to do so, another measure aimed at stabilizing the market.

In other words, China’s central bank is now underwriting brokerages’ margin lending businesses; that is, the PBoC is now in the business of financing leveraged stock buying.

Despite being one step removed from onboarding equities directly onto its balance sheet, the PBoC is effectively buying stocks, which amounts (of course) to QE. What’s particularly interesting here is that as we’ve said on too many occasions to count, it’s exceedingly likely that the plan in China was to save outright QE for purchases of China’s local government bonds.

The CNY15 trillion (at least) of new muni bond issuance that’s part and parcel of the country’s critical local government debt refi program will likely put quite a bit of upward pressure on rates which will make benchmark lending rate cuts less effective, eventually necessitating outright purchases by the PBoC. Now, a very inconvenient stock market rout may have just pushed Beijing into QE far sooner (and in a different market) than it would have liked. But as noted above, China has no choice. The effect of an outright stock market collapse on domestic morale would be devastating and might very well serve to undermine international confidence in the country’s equity markets just when momentum was building for MSCI benchmark inclusion.

We’ll close with our (slightly modified) warning from Saturday which seems particularly relevant now:

“Because the reckless margin buying in China is concentrated in small caps trading at nosebleed multiples, the central bank will be funding the purchase of umbrella manufacturers, real estate developers-turned P2P lenders, and ponzi schemes unlike the BoJ’s equity book which (at least as far as we know), is comprised mostly of ETFs.”

“Leverage your dream”, now sponsored by the PBoC.

However it may now be too late as the psychology has changed irreparably: “I didn’t sell at the peak because people all say the market will rise beyond 6,000 points,” Shao Qinglong, a public service worker who has already lost over a quarter of his capital investing in stocks, told Reuters all he is waiting for is for the market to recover enough for him to break even. “I’m now waiting for the market to rebound so that I can get out.

Good luck.

end

 

Then this afternoon in preparation for tonight’s trading the central bank decided to ban SELLING by pension funds.  My goodness!!

Peak Desperation: China Bans Selling Of Stocks By Pension Funds

What do you do when two policy rate cuts, $19 billion in committed support from a hastily contrived broker consortium, and a promise of central bank funding for the expansion of margin lending all fail to quell extreme volatility in a collapsing equity market?

Well, you can simply ban selling, which is apparently the next step for China.

According to Caijing, the country’s national social security fund is now forbidden from selling (but is welcome to buy). Here’s more, via Caijing (Google translated):

Social Security informed the public fund social security portfolio not only buy sell stock

 

“Financial” reporter learned that the Social Security Council on Monday (July 6) Call each raised funds, social security portfolio is not allowed to sell their holdings of stock.

 

Sources said that Social Security Council has just informed all social security portfolio can only buy stocks can not sell the stock; and it is not defined as the net selling, but completely unable to sell the stock.

And a bit more from FT:

Financial magazine Caijing reported on Monday that the National Social Security Fund had told its external fund managers they could buy stocks but were not permitted to sell them.

 

Central Huijin, a unit of China’s sovereign wealth fund, also said on Sunday it was supporting the market by buying blue-chip exchange traded funds.

As mentioned above, and as discussed at length over the weekend (here and here), China is scrambling to counter an unwind in the country’s various unofficial margin lending channels which have combined to pump between CNY500 billion and CNY1 trillion in borrowed funds into the country’s previously red-hot equity market.

The pension selling ban comes just days after China moved to curtail margin calls in a similary ridiculous attempt to stop the bleeding by simply making selling against the rules.

For their part, Moody’s says the “lack of compulsory liquidiation” in margin accounts is probably a very dangerous idea:

Lack of compulsory liquidation rules in unmet margin call is credit negative for securities cos. because it weakens controls against losses, allows industry to increase risk.

 

Moody’s expects some cos. to aggressively incentivize clients to buy stocks on margin and allow value of collateral to fall below safe level to avoid damaging customer relationships, putting themselves in riskier position.

The takeaway: this is simply one more example (the insolvent US shale space and HY bond funds being two others) of forestalling the inevitable and in the process allowing already precarious situations to mushroom into speculative bubbles that have the potential to wreak untold havoc when the inevitable unwind finally comes. We’ll close with the following quote (again from Moody’s):
New rules [in China] appear to be attempt to stabilize market, [but] less discipline around liquidating positions and risk taking with securities cos. underwriting leveraged positions will sow seeds for greater market peril.

 

end

 

 

 

 

A chronological sequence of events relating to the Greek crisis

The Greek banks have only a few days of physical cash left as citizens pull out 60 euros per day:

Friday morning

(courtesy zero hedge)

 

Greek Banks To Run Out Of Physical Cash “In A Matter Of Days”

Over the past several weeks we’ve documented the acute cash crunch that’s crippled the Greek banking sector and ultimately brought the country to its knees.

Since March, Greek banks have subsisted on a slow liquidity drip administered by the ECB through the Bank of Greece. Once Syriza swept to power on an anti-austerity platform in January, it quickly became clear to Mario Draghi that accepting collateral backed by the full faith and credit of the new Greek government in exchange for cash loans wasn’t a safe bet and so, the ECB shifted the burden to the Bank of Greece, making it more expensive for the Greek banking sector to obtain emergency funding.

As the crisis unfolded and Athens’ negotiations with creditors became increasingly contentious, Greek banks began to bleed cash. Eventually it became clear that the banks were relying entirely on the Eurosystem to meet outflows.

Meanwhile, banknotes in circulation surged, as cash usage jumped 44%, prompting Barclays to note that “the amount of banknotes in excess of the quota for Greece represents a liability of the BoG to the Eurosystem.” Essentially, we said, Greece was quietly printing billions of euros.

Now, with the ECB holding steady on the ELA cap and the banking system still hemorrhaging deposits despite the imposition of capital controls, Greek banks are running out of cash — literally.

WSJ has more:

How long the remaining cash lasts and how unsettled Greeks become will be big factors in Sunday’s referendum on creditors’ demands for more austerity in exchange for more bailout funds. The tighter the squeeze, the more Greeks might vote “yes” to reconcile with creditors, analysts say.

 

As of Wednesday, Greece’s banking system had about €1 billion in cash left, according to a person familiar with the situation. Even with the €60-a-day limit on ATM withdrawals from Greek’s closed banks, “it’s a matter of a few days” until the money runs out, this person said.

 

By Wednesday, many ATMs in central Athens had constant lines of people waiting to withdraw their daily limit. The crunch has suffused the economy. Merchants report lower spending. Wholesalers can’t pay for supplies. Importers’ foreign counterparts won’t trade.

 

Greece’s cash crunch hit small merchants first. They are less able to get credit from their suppliers, especially those dealing in perishable products that are continually imported. Christos Georgiopoulos owns a gourmet supermarket in Plaka, a picturesque Athens neighborhood frequented by tourists. He sells Champagne and Russian crab legs.

 

Nobody is buying. “I haven’t had a single customer in two days,” he said Wednesday. He is shutting down his shop and says he doesn’t know when he will reopen. He gave some crab legs to his workers and is taking some home. “I haven’t paid my staff and don’t know if and when I will,” he added.

 

Cash is king. “Now you have almost every cardholder going to the ATM every day,” said Stefanos Kotronakis of payment-processing provider ACI Worldwide in Athens, which operates systems that drive ATMs. “Cash has a higher value now.”

 

Ellie Tzortzi, a partner at a Vienna-based digital-design and market research firm, is flying to Athens this weekend to pay her employees here in cash. “The last time I traveled with a wad of cash to pay someone’s salary was 10 years ago in Kosovo,” she said.

And AFP has more color on the crisis facing Greek businesses:

Greece’s dive into financial uncertainty is forcing struggling businesses to take unusual steps to survive, including hoarding euros in cash.

 

The government’s announcement it was closing banks this week to stem a panicked rush to withdraw money, left many ordinary Greeks high and dry.

 

“I put aside as much cash as possible” in advance, said an Athens baker Taso Paraskevopoulos, who had expected the controls to be imposed as the country staggered towards a default on a debt repayment to the International Monetary Fund.

 

“I sometimes need hundreds of euros a day to pay suppliers and expenses, I can’t allow myself to be caught short,” he said, making it quite clear he blames the radical left ruling party SYRIZA for the crisis.

 

The capital controls forbid money transfers abroad, except by express permission from the Finance Ministry.

 

Businesses which import their raw materials have been the hardest hit, says Vassilis Korkidis, head of the National Confederation of Hellenic Commerce (ESEE).

 

As unease spreads, getting ones hands on cash has become a sort of national sport,with businesses from restaurants to car mechanics telling customers paying by card is no longer an option.

 

And what if the crisis drags on? asked Sotiris Papantonopoulos, head of online insurance broker Insurancemarket, which employs 70 people.

 

Launched in 2011 despite the financial crisis, the company was in expansion and had intended to take on other 60 people in the coming months, “but now everything is on hold,” said Papantonopoulos, visibly upset after having to ask some of his employees not to come to work this week.

 

“If the measures remain in place for two months, well close, it’s over.”

So there you have it. The unthinkable — which we have of course been warning about for months — is unfolding before Europe’s very eyes.

The crisis has officially moved beyond the negotiating table and has now manifested itself in a shortage of physical banknotes and the inability of Greek businesses to stock the shelves, leaving all of those who accused the tin foil hat crowd of fearmongering to look on in horror as the ATMs go dark, imports grind to a halt, and Greece rapidly descends into the Third World.

This is no longer speculation, it is a stark reality, and as Constantine Michalos, the president of the Athens Chamber of Commerce and Industry told WSJ, “in one week, two weeks, three weeks, it will be finished.”

end
The German message to Greece Friday morning

When a message needs to be sent by the powers that be, the German press can always be relied upon to send it, no matter how divisive (as they did here, here, and here). So it is no surprise that with the stakes appearing to have never been higher, Handelsblatt unleashes the following…

Translated: “Give Me The Money Or I’ll Shoot”

 

And this is how the Greeks promptly responded on Twitter…

 

@RolfTheGreek@nickdim7@keeptalkingGR Γνωρίζει καλά από τέτοια η Μέρκελ .>>>>>>>> pic.twitter.com/UeOenCYILY

View image on Twitter

translation:

Thank goodness they are all ‘partners’ in the ‘union’ of Europe…

 

end

 

 

Raul Meijer is very angry that the IMF hid the damaging report from the world.

He wrote two commentaries and they are a must read…

First commentary!

(courtesy Raul Meijer/Automatic Earth Blog)

 

The Troika Turns Europe Into A Warzone

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

So now they do it. Now the IMF comes out with a report that says Greece needs hefty debt restructuring.

Mind you, their numbers are still way off the mark, in the end it’s going to be easily double what they claim. Not even a Yanis Varoufakis haircut will do the trick.

But at least they now have preliminary numbers out. The reason why they have is inevitably linked to the press leak I wrote about earlier this week in Troika Documents Say Greece Needs Huge Debt Relief. If that hadn’t come out, I’m betting they would still not have said a thing.

It’s even been clear for many years to the IMF that debt restructuring for Greece is badly needed, but Lagarde and her troops have come to the Athens talks with an agenda, and stonewalled their own researchers.

Which makes you wonder, why would any economist still want to work at the Fund? What is it about your work being completely ignored by your superiors that tickles your fancy? How about your conscience?

Why go through 5 months of ‘negotiations’ with Greece in which you refuse any and all restructuring, only to come up with a paper that says they desperately need restructuring, mere days after they explicitly say they won’t sign any deal that doesn’t include debt restructuring?

By now I have to start channeling my anger about the whole thing. This is getting beyond stupid. And I did too have an ouzo at the foot of the Acropolis, but I’m not sure whether that channels my anger up or down. The whole shebang is just getting too crazy.

For five whole months the troika refuses to talk debt relief, and mere days after the talks break off they come with this? What then was their intention going into the talks? Certainly not to negotiate, that much is clear, or the IMF would have spoken up a long time ago.

At the very least, all Troika negotiators had access to this IMF document prior to submitting the last proposal, which did not include any debt restructuring, and which caused Syriza to say it was unacceptable for that very reason.

Tsipras said yesterday he hadn’t seen it, but the other side of the table had, up to and including all German MPs. This game obviously carries a nasty odor.

Meanwhile, things are getting out of hand here. It’s not just the grandmas who can’t get to their pensions anymore, rumor has it that within days all cash will be gone from banks. And then what? Oh, that’s right, then there’s a referendum. Which will now effectively be held in a warzone.

It’s insane to see even Greeks claim that this is Alexis Tsipras’ fault, but given the unrelenting anti-Syriza ‘reporting’ in western media as well as the utterly corrupted Greek press, we shouldn’t be surprised.

The real picture is completely different. Tsipras and Varoufakis are the vanguard of a last bastion of freedom fighters who refuse to surrender their country to an occupation force called the Troika. Which seeks to conquer Greece outright through financial oppression and media propaganda.

Tsipras and Varoufakis should have everyone’s loud and clear support for what they do. And not just in Greece. But where is the support in Europe? Or the US, for that matter?

There’s no there there. Europeans are completely clueless about what’s happening here in Athens. They can’t see to save their lives that their silence protects and legitimizes a flat out war against a country that is, just like their respective countries, a member of a union that now seeks to obliterate it.

Europeans need to understand that the EU has no qualms about declaring war on one of its own member states. And that it could be theirs next time around. Where people die of hunger or preventable diseases. Or commit suicide. Or flee.

All Europeans on their TV screens can see the line-ups at ATMs, and the fainting grandmas at the banks, the hunger, the despair. How on earth can they see this as somehow normal, and somehow not connected to their own lives?

They’re part of the same political and monetary union. What happens to Greece happens to all of you. That’s the inevitable result of being in a union together.

Don’t Europeans ever think that enough should be enough when it comes to seeing people being forced into submission, in their name? Or are they too fat and thick to understand that it’s in their name that this happens?

The July 5 referendum here in Greece is not about whether the country will remain in the EU, or the eurozone, no matter what any talking head or politician tries to make of it. The narrow question is about whether Greeks want their government to accept a June 26 Troika proposal that Tsipras felt he could not sign because it fell outside his mandate.

That the Troika after the referendum was announced then pulled a Lucy and Charlie Brown move on Syriza, and retracted the proposal, is of less interest. Lucy always pulls away the football, and Charlie Brown always kicks air. He should wisen up at some point and refuse to play ball.

However, at the same time, though it’s highly unfair to burden the Greeks’ shoulders with this, the referendum has a far broader significance. It is about what and who will rule Europe going forward, and we’re talking decades here.

It will either be a union of functioning democracies, or it will be a totalitarian regime in which all 28 nations surrender their independence, their sovereignty, their votes and then their lives to Brussels and Berlin.

Democracies are about one thing first and foremost: the people decide. If you can’t have that, than why would you have elections and referendums? Those then become mere theater pieces. Like we already have in the US, where if anyone can explain to me the difference between the Clintons and the Kardashians, by all means give it a go.

Since it’s clear that Berlin is by far the strongest voice in the three-headed monster the Troika has become, it’s no exaggeration to say that what we see unfold before our eyes is yet another German occupation of Greece. There are no tanks and boxcars involved yet, but wars can be fought in many ways. And scorched earth can take up many different forms too. It’s the result that counts.

In the meantime it has somehow become entirely acceptable for politicians and media from foreign countries to tell the Greeks what to do, who to vote for, and what to make sure happens after.

European Parliament chief Martin Schulz even dares claim that Syriza should resign if the vote is yes, and it should be replaced with a bunch of technocrats. It’s none of your business, Martin. Or yours, Bloomberg writers, or Schäuble, or anyone else who’s not Greek. Shut up! You’re all way out of -democratic- line.

It’s up to Greeks to decide what happens in their country. It’s both a sovereign state and a democracy. The utmost respect for this should be the very foundation of everything we do as free people, whose ancestors fought so hard to make us free.

How come we moved so far away from that, so fast? What happened to us? What have we become?

end
Second commentary….
(courtesy Raul Meijer/Automatic Earth Blog)

Submitted by Raúl Ilargi Meijer of The Automatic Earth

This Is Why The Euro Is Finished

The IMF Debt Sustainability Analysis report on Greece that came out this week has caused a big stir. We now know that the Fund’s analysts confirm what Syriza has been saying ever since they came to power 5 months ago: Greece needs debt relief, lots of it, and fast.

We also know that Europe tried to silence the report. But what’s most interesting is that this has been going on for months, as per Reuters. Ergo, the IMF has known about the -preliminary- analysis for months, and kept silent, while at the same time ‘negotiating’ with Greece on austerity and bailouts.

And if you dig a bit deeper still, there’s no avoiding the fact that the IMF hasn’t merely known this for months, it’s known it for years. The Greek Parliamentary Debt Committee reported three weeks ago that it has in its possession an IMF document from 2010(!) that confirms the Fund knew even at that point in time.

That is to say, it already knew back then that the bailout executed in 2010 would push Greece even further into debt. Which is the exact opposite of what the bailout was supposed to do.

The 2010 bailout was the one that allowed private French, Dutch and German banks to transfer their liabilities to the Greek public sector, and indirectly to the entire eurozone‘s public sector. There was no debt restructuring in that deal.

Reuters yesterday reported that “Publication of the draft Debt Sustainability Analysis laid bare a dispute between Brussels and [the IMF] that has been simmering behind closed doors for months.

But that’s not the whole story. Evidently, there was a major dispute inside the IMF as well. The decision to release the report was apparently taken without even a vote, because it was obvious the Fund’s board members wanted the release. The US played a substantial role in that decision. Why the timing? Hard to tell.

The big question that arises from this is: what has been Christine Lagarde’s role in this charade? If she has been instrumental is keeping the analysis under wraps, she has done the IMF a lot of reputational damage, and it’s getting hard to see how she could possibly stay on as IMF chief. She has seen to it that the Fund has lost an immense amount of trust in the world. And without trust, the IMF is useless.

And while we’re at it, ECB chief Mario Draghi, who is also a major Troika negotiator, made a huge mistake this week in -all but- shutting down the Greek banking system, a decision that remains hard to believe to this day. The function of a central bank is to make sure banks are liquid, not to consciously and willingly strangle them.

How Draghi, after this, could stay on as ECB head is as hard to see as it is to do that for Lagarde’s position. And we should also question the actions and motives of people like Jean-Claude Juncker and Jeroen Dijsselbloem.

They must also have known about the IMF’s assessment, and still have insisted there be no debt relief on the negotiating table, although the analysis says there cannot be a viable deal without it.

One can only imagine Varoufakis’ frustration at finding the door shut in his face every single time he has brought up the subject. Because you don’t really need an IMF analysis to see what’s obvious.

Which is exactly why there is a referendum tomorrow: Alexis Tsipras refused to sign a deal that did not include debt restructuring. It would be comedy if it weren’t so tragic, most of all for the people of Greece. Here’s from Reuters yesterday:

Europeans Tried To Block IMF Debt Report On Greece

 

Euro zone countries tried in vain to stop the IMF publishing a gloomy analysis of Greece’s debt burden which the leftist government says vindicates its call to voters to reject bailout terms, sources familiar with the situation said on Friday. The document released in Washington on Thursday said Greece’s public finances will not be sustainable without substantial debt relief, possibly including write-offs by European partners of loans guaranteed by taxpayers. It also said Greece will need at least €50 billion in additional aid over the next three years to keep itself afloat. Publication of the draft Debt Sustainability Analysis laid bare a dispute between Brussels and the IMF that has been simmering behind closed doors for months.

 

Greek Prime Minister Alexis Tsipras cited the report in a televised appeal to voters on Friday to say ‘No’ to the proposed austerity terms, which have anyway expired since talks broke down and Athens defaulted on an IMF loan this week. It was not clear whether an arcane IMF document would influence a cliffhanger poll in which Greece’s future in the euro zone is at stake with banks closed, cash withdrawals rationed and commerce seizing up. “Yesterday an event of major political importance happened,” Tsipras said. “The IMF published a report on Greece’s economy which is a great vindication for the Greek government as it confirms the obvious – that Greek debt is not sustainable.”

 

At a meeting on the IMF’s board on Wednesday, European members questioned the timing of the report which IMF management proposed at short notice releasing three days before Sunday’s crucial referendum that may determine the country’s future in the euro zone, the sources said. There was no vote but the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication, the sources said.

 

The reason why all Troika negotiators should face very serious scrutiny is that they have willingly kept information behind that should have been crucial in any negotiation with Greece. The reason is obvious: it would have cost Europe’s taxpayers many billions of euros.

But that should never be a reason to cheat and lie. Because once you do that, you’re tarnished for life. So in an even slightly ideal world, they should all resign. Everybody who’s been at that table for the Troika side.

And I can’t see how Angela Merkel would escape the hatchet either. She, too, must have known what the IMF analysts knew. And decided to waterboard the Greek population rather than be forced to explain at home that her earlier decisions (2010) failed so dramatically that her voters would now have to pay the price for them. No, Angela likes to be in power. More than she likes for the Greeks to have proper healthcare.

Understandable, perhaps, but unforgivable as well. Someone should take this entire circus of liars and cheaters and schemers to court. They’re very close to killing the entire EU with their machinations. Not that I mind, the sooner it dies the better, but the people involved should still be held accountable. It’s not even the EU itself which is at fault, or which is a bad idea, it’s these people.

But fear not, there’s no tragedy that doesn’t also have a humorous side. And I don’t mean that to take anything away from the Greek people’s suffering.

Brett Arends at MarketWatch wrote a great analysis of his own, and get this, also based on IMF numbers. Turns out, the biggest mistake for Greece and Syriza is to want to stay inside the eurozone. The euro has been such a financial and economic disaster, it’s hard to fathom that nobody has pointed this out before. Stay inside, and there’s no way you can win.

I find this a hilarious read in face of what I see going on here in Greece. It makes everything even more tragic.

Stop Lying To The Greeks — Life Without The Euro Is Great

 

Will the euro-fanatics please stop lying to the people of Greece? And while they’re at it, will they please stop lying to the rest of us as well? Can they stop pretending that life outside the euro — for the Greeks or any other European country — would be a fate worse than death? Can they stop claiming that if the Greeks go back to the drachma, they will be condemned to a miserable existence on the dark backwaters of European life, a small, forgotten and isolated country with no factories, no inward investment and no hope? Those dishonest threats are being leveled this week at the people of Greece, as they gear up for the weekend’s big referendum on more austerity.

 

The bully boys of Brussels, Frankfurt and elsewhere are warning the Greek people that if they don’t do as they’re told, and submit to yet more economic leeches, they may end up outside the euro … at which point, of course, life would stop. Bah.

 

Take a look at the chart. It compares the economic performance of Greece inside the euro with European rivals that don’t use the euro. Those other countries cover a wide range of situations, of course – from rich and stable Denmark, to former Soviet Union countries, to Greece’s neighbor Turkey, which isn’t even in the EU. But they all have one thing in common.

 

 

During the past 15 years, while Greece has been enjoying the “benefits” of having Brussels run their monetary policies, those poor suckers have all been stuck running their own affairs and managing their own currencies (if you can imagine). And you can see just how badly they’ve suffered as a result.

 

They’ve crushed it. Romania, Turkey, Poland, Sweden, Croatia — you name it, they’ve all posted vastly better growth rates than Greece. The data come from the IMF itself. It measures growth in gross domestic product, per person, in constant prices (in other words, with price inflation stripped out). Greece adopted the euro in 2001.

 

And after 14 years in the same club as the big boys, they are back right where they started. Real per-person economic growth over that time: Zero. Meanwhile Romania, with the leu, has only … er … doubled. Everyone else is up. The Icelanders, who suffered the worst financial catastrophe on the planet in 2008, have nonetheless managed to grow.

 

Yes, all data points have caveats. Each country has its own story and its own advantages and disadvantages. But the overall picture is clear: The euro has either caused Greece’s disastrous economic performance, or at least failed to prevent it.

 

What I find amazing about the euro-fanatics is that they just don’t seem to care about facts at all. They carry on repeating the same claims about the alleged miracle cure of their currency, no matter what happens. You can hit them over the head with the latest IMF World Economic Outlook and they carry on droning, unfazed.

 

I was in England during the 1990s when those people were warning that if the Brits didn’t give up the pound sterling and join the euro, they were doomed as well. For a laugh, I just went through news archives on Factiva and refreshed my memory.

 

Britain without the euro would be an “orphan country,” petted, humored but ignored, warned one leading figure. Britain would lose all influence and status. It would become a marginal country outside the mainstream of Europe. It would lose “a million jobs.” Factories would close. The car industry would collapse. Foreign investors would walk away because of Britain’s isolation.

 

Exports would plummet because of exchange-rate fluctuations. The City of London, Britain’s financial district, would lose out to Frankfurt. The London Stock Exchange would be reduced to a local backwater. Tumbleweeds would blow in the streets. (OK, I made that one up.)

 

And here we are today. Since 1992, when the single currency project began taxiing for takeoff, the countries on board have seen total economic growth of 40%, says the IMF. Poor old Great Britain, stuck back at the departure lounge with its miserable pound sterling? Just 67%. Bah.

 

This currency that Greece is fighting so hard to be part of is in fact strangling it. The reason for this lies in the structure of the EMU. Which makes it impossible for individual countries to adapt to changing circumstances. And circumstances always change. As a country, you need flexibility, you need to be able to adapt to world events.

You need to be able to devalue, you need a central bank to be your lender of last resort. Mario Draghi has refused to be Greece’s lender of last resort. That can’t be, that’s impossible. there is no valid economic reason for such an action, it’s criminal behavior. But the eurozone structure allows for such behavior.

In ‘real life’, where a country has its own central bank, the only reason for it to refuse to be lender of last resort would be political. And it is the same thing here. It’s about power. That’s why Greece’s grandmas can’t get to their meagre pensions. There is no economic reason for that.

In the eurozone, there’s only one nation that counts in the end: Germany. The eurozone has effectively made it possible for Angela Merkel to save her domestic banks from losses by unloading them upon the Greeks. This would not have been possible had Greece not been a member of the eurozone.

That this took, and still takes, scheming and cheating, is obvious. But that is at the same time the reason why either all Troika negotiators must be replaced, and by people who don’t stoop to these levels, or, and I think that’s the much wiser move, countries should leave the eurozone.

Look, it’s simple, the euro is finished. It won’t survive the unmitigated scandal that Greece has become. Greece is not the victim of its own profligacy, it’s the victim of a structure that makes it possible to unload the losses of the big countries’ failing financial systems onto the shoulders of the smaller. There’s no way Greece could win.

The damned lies and liars and statistics that come with all this are merely the cherry on the euro cake. It’s done. Stick a fork in it.

The smaller, poorer, countries in the eurozone need to get out while they can, and as fast as they can, or they will find themselves saddled with ever more losses of the richer nations as the euro falls apart. The structure guarantees it.

end
David Stockman on Friday also released an extremely important commentary on the Greek debt.  He basically states that once Greece defaults the debt to be placed on the 19 European monetary states (EMU) would be unbearable to their balance sheets:
Here are the 4 major European countries and what they are on the hook for not counting Target 2 balances:
Germany 92 billion euros
Italy: 60 billion euros
France: 70 billion euros
Spain: 42 billion euros.
Stockman claims as to I that as soon as parliamentarians in each respective country finds what would is owed, they will demand a renege and have those debts foisted upon the original banks that had this debt.
You will recall that I stated in 2012 that these debts were on the balance sheet on French and German banks and to save their skins they swapped these bonds for cash with the ECB.  You will also recall that I stated that these bonds were also used as Tier 1 capital upon which huge leverage to the tune 26:1 were orchestrated by the banks in question. Stockman believes that there will be blood on the streets on this.
As far as the Greek banks are concerned, they only have 9 billion in liquid assets against debts over well over 250 billion euros.  It is better to default and start all over again.  It is interesting that Stockman believes that depositors are senior to the ECB’s ELA.  That should be fun..
a must read
(courtesy David Stockman)

Good On You, Greece – But Don’t Waver Now (Part 2)

Submitted by David Stockman via Contra Corner blog,

Earlier this week the embattled Greeks delivered still more body blows to the rotten regime of Keynesian central banking and the crony capitalist bailout state to which it is conjoined. By defaulting on its IMF loan, walking away from the troika bailout program and taking control of its insolvent domestic banking system, Alexis Tsipras and his band of political outlaws have shattered a giant illusion.

Namely, that the world’s debt serfs will endlessly and meekly acquiesce to whatever onerous, eleventh hour arrangements might be concocted by their official paymasters——even when these expedients are for no more noble or sustainable purpose than to forestall a Monday moring hissy fit among the gamblers in the world’s financial casinos.

So at midnight on June 30 the proverbial can was not kicked again as scheduled. Instead, Greek democracy kicked back. And it is to be hoped that the end result will be a mighty boot to the tyranny of the status quo in the form of a resounding “no” vote on Sunday.

The latter would clarify that everything at issue between the parties is false. There is no way to pay Greece’s debts, modify the troika austerity plan, save the euro, rescue Greece’ banking system or stabilize Europe’s hideously mispriced and distorted debt markets.

Its all going to blow and it should. The entire European mess has been concocted by statist politicians and policy apparatchiks who falsely and arrogantly believe they can defy the laws of markets, sound money and fiscal rectitude indefinitely.

The truth lost in all the meaningless “puts and takes” of the latest negotiations is that the Greek state was bankrupt five years ago; it can not reform, save, skimp, or grow its way out of its crushing debt, and should stop looking for ways to accommodate its paymasters. It urgently needs to default massively and decisively, and is in a ideal position to do so.

That’s because the clowns who run the troika have taken themselves hostage.That is, they have shifted virtually the entirety of Greece’s unpayable debts from private banks and bond funds to the taxpayers of Europe, the US, Japan and even the unwary citizens of Peru, Senegal and Bangladesh.

Here is the debt in 2009–mostly owed to private banks and bondholders—compared to Greece negligible private external debt today. In the case of the French, German, Dutch and Italian banks and other private lenders, for example, outstandings have been cut from $100 billion in 2009 to barely $15 billion today.
By contrast, here is the pea under which Greece’s massive debt is hiding today. Namely, almost all of it has been shifted onto the backs of the taxpayers of these Eurozone nations.

Moreover, as the New York Times noted with respect to this massive shift, the most aggressive punters have made a killing. One of them noted quite explicitly that when hedge funds started buying Greek government bonds in 2012:

“People made their careers on that trade,” Mr. Linatsas said.”

Indeed they did. And now taxpayers around the planet have been stuck with the due bill. Specifically, $250 billion or nearly 80% of Greece’s $320 billion of fiscal debt is directly owed to the EU facilities and the IMF; and upwards of half of the balance is indirectly owed to European taxpayers because $45 billion of Greece’s T-bills and bonds are either owned or funded by the ECB.

If Tsipras were not so badly advised by his pro-euro Keynesian advisors like Varoufakis, he would realize that there is no point in negotiating with the troika at all because Greek concessions can not possibly lead to the only two things that count. That is, meaningful debt relief or reentry into world bond markets.

In fact, the sole reason for compromising—nay capitulating—-is to keep the euro, and that is a snare and a delusion.

Accordingly, a clean default on this massive burden of official debt is in order for two reasons. First, Greece’s government never asked for the giant bailouts of 2010 and 2012 which transferred their onerous debts to the world’s taxpayers. The $250 billion outstanding was forced upon them by Brussels and IMF officialdom in order to protect the German, French, Dutch, Italian and other banks; and to insure that when the markets opened on innumerable Monday mornings, there would be no inconvenient turmoil on the stock exchanges or in the bond pits.

Secondly, the troika cannot give honest debt relief anyway. That’s because officialdom is now petrified of their own taxpayers—-whom they have betrayed and baldly lied to from the very beginning. Thus, the IMF has now loaned Greece $35 billion in gross violation of its own credit standards and long-standing rules. Were it ever to take the huge write-offs that are objectively warranted by the actual facts of Greece’s economic and fiscal situation, it would be eaten alive in the legislative chambers of its member governments.

Indeed, in the case of the $6 billion share of the loss attributable to the US quota, the Republican congress would have a field day investigating the incompetence and misdirection underlying the IMF’s role in the Greek bailout. The IMF would never again achieve a congressional majority for a subscription funding increase—effectively putting it out of business.

And that’s nothing compared to the political explosion that would be unleashed in the national parliaments of the Eurozone itself—– were proper debt relief to be granted. As shown below, the Germans are on the hook for $56 billion of the direct fiscal debt, but that’s not the whole of it by any means. Through the backdoor of the ECB, German taxpayers have also loaned Greece another $36 billion in the guise of liquefying the collateral of the Greek banking system.

“Liquefying” my eye!

The Greek banking system is hopelessly insolvent; the so-called “Eurosystem” obligations shown below are nothing more than fiscal transfers.  Accordingly, what the clueless Angela Merkel actually accomplished during five years of weekend Gong Shows was to bury her taxpayers under $92 billion of liabilities—–nearly all of which are off-budget and unacknowledged.

Her desperate and mindless temporizing in order to remain in power thus constitutes a monumental political lie and betrayal. Were this to be exposed by a major write-down of the Greek debt,it would lead to an instant fall of her government.

The same is true for the rest of the Eurozone—only the facts are even more egregious.

France’s share of the fiscal debt is $42 billion and its total obligation including the ECB exposure is $70 billion. But France has not had a balanced budget in 40 years; is suffering from record unemployment and a decaying economy that has been suffocated by socialist taxes and regulatory dirigisme; and will soon join the triple digit club on its public debt. Accordingly, its government is petrified by even mention of Greek debt relief.

Then you have Italy buried under a 130% debt-to-GDP ratio and an economy that is 10% smaller in real terms than it was 7 years ago. So it is not surprising that its paralyzed, caretaker government does not wish to contemplate even the prospect of a write-down on the $37 billion of fiscal debt owed by Greece or the $60 billion of total exposure.

Then there is the crook and fiscal phony running Spain. No wonder Mr.Rajoy has practically threatened to take out a contract on Alexis Tsipras’ life. Spain’s economy is still grinding away 15% below its boom time peak and its government is faking its fiscal accounts to a fare-the-well. Still, its public debt continues to rise toward 100% of GDP.

So its cowardly government would rather consign the Greek people to permanent depression and debt servitude than own up to the $42 billion it has loaned the Greek state and banking system in order to keep the European banks and bond funds afloat.

Source: @FGoria 

After generations of fiscal profligacy the Greek government should not worry about re-entering the capital markets at any time soon. It should resign itself to running primary budget surpluses for the indefinite future based on whatever domestic political consensus it can cobble together on the matter of taxation, pension reform, divestiture of state assets and weaning its crony capitalist leeches and special interest groups from their stranglehold on the Greek state’s depleted coffers.

Under such an all-Greek fiscal regime, it need not worry about its $250 billion of official fiscal debt or even the $130 billion of Euro-system obligations. Here’s why.

None of the governments which foisted these obligations on Greece will survive a blanket default. The more likely scenario is that the successor governments—–almost certain to be anti-EU—- will disavow the guarantees undertaken by the EFSF and demand haircuts from the underlying bank and bond holder claimants. Stated differently, a Greek default on its $150 billion of EFSF funding would trigger a domino effect back to the status quo ante.

In any event, the only alternative to this sequential chain of defaults or punishment of Eurozone taxpayers is to send in the German and French armies. But unlike the Ruhr in 1923, there are no coal mines, steel mills or other significant industrial assets in Greece to occupy. The geniuses at the troika have essentially made massive unsecured loans that are uncollectible—–proof positive that, among other things, governments shouldn’t be in the banking business.

So if Syriza gets its “no” mandate Sunday and if meaningful debt relief is impossible, what is it exactly that it would negotiate for from an arguably strengthened position? The conventional answer, of course, is continued ECB support for its banking system and retention of the euro.  But both of these objectives are invalid, and are just gateways back into subservience to the Troika.

Since Greece is already irrevocably knee deep in capital controls it need only complete the process and nationalize the banks since they are irreparably insolvent anyway. For instance, Greece’s three largest banks with available public data—–Alpha Bank, National Bank of Greece and Eurobank Ergasias—–have upwards of $60 billion of non-performing loans, which represent nearly one-third of their total book of $180 billion. In addition, they also have $50 billion of bonds and other investments—much of which was issued or guaranteed by the Greek state.

Against the massive imbedded losses in these totals, by contrast, the three banks have only $9 billion of tangible book equity excluding their worthless tax-deferred assets. In short, neither the stock or the long-term debt of these banks have any recoverable value at all.

As part of a housecleaning at these wards of the state, therefore, tens of billions of bad debts would be written off including the debt of the Greek state. And the massive $130 billion of ECB claims would be primed by the claims of domestic depositors.

To be sure, most of the deposits have already fled the Greek banking system and there is upwards of $50 billion in euro notes and coins in the billfolds and mattresses of Greek citizens and multiples of that in off-shore bank accounts. Nevertheless, under a proper state directed liquidation and clean-up of the Greek banking system, the remaining domestic depositors would be made the senior creditors of a shrunken but solvent banking system. The eurosystem’s $130 billion of claims, including the ECB’s lunatic extension of $90 billion in ELA funding to the Greek central bank, would be forced to take a deep haircut on the subordinated claims it would hold after a restructuring.

Given what needs to be done with respect to Greece’s massive fiscal debt and its insolvent banking system, why would Syriza want to make post-referendum concessions to the troika for the privilege of staying in the euro?

The short answer is that is wouldn’t and shouldn’t. After the necessary fiscal default and nationalization of the Greek banking system the euro is a club no one would want to join.

Stated differently, underlying the present fraught confrontation between Greek democracy and the troika’s financial oppression is an epochal catch-22. The sweeping debt relief on which survival of the Greek economy depends would unhinge European politics, discredit the so-called European project and shatter the flawed and unsustainable money printing regime underlying the euro.

Indeed, if the Greeks do not waver after a successful rejection of the status quo on Sunday they will not need to feel lonesome about returning to the Drachma. The Italian lira, Spanish peseta, Portuguese escudo, the French franc and  countless more will be back in short order.

Think of that. The IMF out of business. Merkel and Brussels gone. The Bundesbank and D-mark restored. The Keynesian money printers discredited. The front-runners and speculators in the casino carried out on their shields.

Now that’s a referendum that the world desperately needs.

end
Greece: Friday night
(courtesy zero hedge)

Police Fire Tear Gas, Stun Grenades Ahead Of Tsipras Speech

With Greek PM Tsipras due to speak any moment, scuffles in the crowds of protesters have broken out and police have resorted to stun grenades and tear gas…

As Reuters reports,

Greek police threw stun grenades and scuffled with protesters in central Athens on Friday, as a rally got under way in support of a ‘No’ vote in a Sunday referendum on whether to endorse an aid deal with creditors.

 

The scuffles involved a few dozen people, many dressed in black and wearing helmets but quickly appeared to calm.

*  *  *

 

Live Feed:

*  *  *

end
Late Friday night:
as we indicated to you above, the IMF held a very important document from the Greeks and for that matter from the rest of the world which basically stated that Greece was right, that their debt is unsustainable and that in order to survive, they needed a haircut.  Now we find that the USA pushed to have that IMF document released!
(courtesy zero hedge)

US Pushed For IMF Greek Haircut Study Release After Euro ‘Allies’ Tried To Block

The timing of the release of The IMF’s ‘Greece needs a debt haircut no matter what’ report this week was odd to say the least. Being as it confirmed everything the Greek government has been saying and provided the perfect ammunition for Tsipras to spin Sunday’s Greferendum as a Yes/No to debt haircuts – something everyone can understand (and get behind). It is understandable then that, as Reuters reports, Greece’s eurozone allies tried to block the release of the damning report this week but the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication, sources said. While The IMF concluded, “Facts are stubborn. You can’t hide the facts because they may be exploited,” one wonders if this move merelyreinforces Goldman’s concpiracy theory.

 

Euro zone countries tried in vain to stop the IMF publishing a gloomy analysis of Greece’s debt burden which the leftist government says vindicates its call to voters to reject bailout terms, sources familiar with the situation said on Friday. As Reuters reports, publication of the draft Debt Sustainability Analysis laid bare a dispute between Brussels and the Washington-based global lender that has been simmering behind closed doors for months…

At a meeting on the International Monetary Fund’s board on Wednesday, European members questioned the timing of the report which IMF management proposed at short notice releasing three days before Sunday’s crucial referendum that may determine the country’s future in the euro zone, the sources said.

 

There was no vote but the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication, the sources said.

 

The Europeans were also concerned that the report could distract attention from a view they share with the IMF that the Tsipras government, in the five months since it was elected, has wrecked a fragile economy that was just starting to recover.

 

“It wasn’t an easy decision,” an IMF source involved in the debate over publication said.“We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives.”

 

The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum.

 

“Facts are stubborn. You can’t hide the facts because they may be exploited,” the IMF source said.

*  *  *

Quite simply this should be horrifying to not just The Greeks(who just discovered their supposed ‘allies’ tried to hide the truth from them and in fact negotiated in bad faith) but to all Europeans who by now must realize the union is not for them, it is for the few ruling elite and their corporate and banking overlords.

Isn’t it time to Just Say No?

*  *  *

Of course, taking a step back from the table, it is clear that a forced decision by Washington against the interests of its European allies – that is likely to engender more chaos and strengthen Greece’s ability to destabilize Europe – must have been done for ‘another reason’. Perhaps after all is said and done, the powers that beneed chaos, need instability, need panic in order to ensure the public gratefully accept the all-in QE-fest that they want.

end
OH OH!!
Friday night:  The gloves come off as the ECB is threatening depositors (anything over 8,000 Euros) with a bail in haircut of 30%

Greek Banks Considering 30% Haircut On Deposits Over €8,000: FT

Last week in “For Greeks, The Nightmare Is Just Beginning: Here Come The Depositor Haircuts,” we warned that a Cyrpus-style bail-in of Greek depositors may be imminent given the acute cash crunch that has brought the Greek banking sector to its knees and forced the Greek government to implement capital controls in a futile attempt to stem the flow.

Unfortunately for Greeks, the ECB has frozen the ELA cap, meaning that as of last Sunday, Greek banks were no longer able to meet deposit outflows by tapping emergency liquidity from the Bank of Greece.

Now, with ATM liquidity expected to run out by Monday and with the country’s future in the eurozone still undecided, it appears as though Alexis Tsipras’ promisethat “deposits are safe” may be proven wrong.

According to FTGreek banks are considering a depositor bail-in that could see deposits above €8,000 haircut by “at least” 30%. 

Via FT:

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears

 

The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

 

A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000.

 

It would be implemented as part of a recapitalisation of Greek banks that would be agreed with the country’s creditors — the European Commission, International Monetary Fund and European Central Bank.

 

“It [the haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” said one person following the issue. “This is not something that is going to happen immediately.”

 

Greek deposits are guaranteed up to €100,000, in line with EU banking directives, but the country’s deposit insurance fund amounts to only €3bn, which would not be enough to cover demand in case of a bank collapse.

 

With few deposits over €100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.

 

Earlier, via Bloomberg:

Liquidity for Greek bank ATMs after Monday will depend on the ECB decision, National Bank of Greece Chair Louka Katseli tells reporters in Athens.

 

end

 

and this sequel to the above story!!

If the ECB garnishes the bank accounts of ordinary citizens, I can assure you there will be chaos on the streets, bankers strung up, as well as full contagion across the periphery:

 

Saturday morning:

(courtesy zero hedge)

Will Greek Depositors Under €100,000 Be Spared In Case Of A “Bail-In”

One week ago, we first explained that as the Cyprus bail-in “blueprint” scenario unfolds, the one final, and most important, remaining variable in the ongoing Greek drama, soon to devolve to tragedy, is how big the ECB’s ELA haircuts would be in the case of a No vote, which would be the first catalyst of a depositor haircut.

 

Then, overnight, in a report since denied by both the Greek finance ministry and by the European Banking Authority Plan, the pro-Europe FT did yet another hit piece on Greece desperate to push those Greek voters on the fence ahead of tomorrow’s referendum to vote “Yes” (just think of the lost advertising revenue if say Deutsche Bank were to go under).

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday.

 

The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

Ignoring whether the FT is now merely a venue used by conflicted parties to publish pro-Europe, anti-Syriza hit piecestthat benefit “bankers and businesspeople with knowledge of the measures” and are promptly refuted, the article does bring up a relevant point: if the ECB does escalate the ELA collateral haircuts, something we analyzed in our own piece last week, what kind of haircut scenarios are possible, and will “insured” deposits under €100,000 be indeed made whole, or will the bail-in affect, as the FT suggested, everyone with over €8,000 in savings?

Regarding the first part of the question, what are the possible scenarios, JPM had this to say yesterday when evaluating the history of bail-ins in Europe in recent years:

If the deterioration in asset quality means there is no sufficient collateral to cover ELA claims, either the ECB (via its ELA residual claim) or domestic depositors will have to suffer a loss. Our understanding is that there are no clear rules on whether this ELA residual claim will be ranked above depositors or not. In fact EU policymakers adopted different and inconsistent approaches in the past when faced with bank insolvencies:

  1. In the case of Cypriot banks,depositors were hit while senior bond holders were spared, so seniority was not respected. ELA claims were also protected.
  2. Deposits of foreign branches were protected in the case of Cyprus while deposits of domestic branches were hit.This is the opposite of what happened to Iceland.
  3. In the case of Ireland, which also had a big banking system relative to the size of its economy, only sub debt holders, accounting for a very small portion of total creditors, were hit. No depositors were hit, in either domestic or foreign branches.
  4. In the case of SNS, sub debt holders were wiped out and reports suggest that the Dutch government came close to imposing losses on senior bond holders and was only prevented from doing so because of unsecured intergroup loans between SNS bank and Reaal insurance that would be subjected to the same losses as senior bond holders.

In other words, Europe will do what it always does: make it up as it goes alone. However, one notable difference between Cyprus and Greece is that the former held the deposits of a number of wealthy Russian oligarchs, which skewed the deposit distribution a la the 80/20 rule, and permitted smaller depositors to be saved while the Russians took the bulk of the hits (an outcome which according to some led to the suicide of Russian billionaire in exile, Boris Berezovsky).

Unlike Cyprus, Greece does not have the luxury of several massive depositors. In fact, according to JPM, the distribution of deposits appears to be relatively flat. JPM continues:

… under a stress scenario of prolonged impasse, Greek depositors will be likely hit while ELA claims are protected. There is currently €120bn of deposits with Greek banks. A haircut increase on ELA collateral assets from our currently estimated level of 43% to 60%, for example, would require a €26bn deposit haircut or 20% of outstanding bank deposits assuming for simplicity no available buffer from shareholders or bond holders. A bigger increase in the collateral haircut, for example to 75%, would require a €50bn deposit haircut or 40% of outstanding bank deposits.

Whereas we disagree with JPM’s calculation due to our baseline assumption that the current haircut level is more in the 48% region, we do agree with the directionality.  As a reminder, this was our own math as laid out last week:

 

But what does this mean for ordinary Greeks, those who have negligible amounts still held by Greek banks despite our recurring pleas to withdraw their funds ahead of just this eventuality? Sadly, nothing good. Here is JPM’s conclusion:

Could deposits below €100k be protected as it happened in Cyprus? The answer depends on the total amount of deposits above €100k. If there are enough of these large deposits above €100k, then most likely any required deposit haircut will be inflicted on these depositors only. There are no recent data on how big this universe of large depositsis. The most recent data from the European Commission suggest that at the end of 2012, covered (i.e. those below €100k) represented 75% of eligible Greek deposits. We suspect this number is now significantly higher leaving little room for depositors with less than €100k to be spared. And the reserves that the Greek state has to back its bank deposit guarantee are miniscule, likely not more than a couple of billions euros.

Which means that unlike Cyprus, which was mostly a targeted punitive bail-in aimed almost entirely at Russian oligarchs, should the ECB indeed enact ELA haircuts which it may have to do as soon as Monday in the case of a No vote, it will be the ordinary Greeks who will see their already meager savings get haircut even more, anywhere between 30%, potentially up to 100% if the ECB were to announce the entire ELA no longer legal, pulls all funding and locks up Greek bank collateral.

Will the ECB do that? We don’t know, however the gambit is simple: should the ECB engage the full Greek haircut it risks a run on other peripheral banks and the true spread of Greek contagion to Italy, Spain, Portugal and all other economically crushed countries where an anti-austerity politician may a frontrunner for the next leadership position. Such as France..

 

end

This guy (Shulz) is nuts!!

(courtesy Keep Talking Greece)

Europarliament President Threatens Greeks With Armageddon If They Vote No

Submitted by Keep Talking Greece

EP Schulz threatens Greeks with Armageddon – Can we sue him for “moral damage” & “breach of public office”?

“Without new money, salaries won’t be paid, the health system will stop functioning, the power network and public transport will break down and they won’t be able to import vital goods because nobody can pay” President of European Parliament Martin Schulz warned Greek voters one day before the crucial Referendum on Sunday.

Schulz’s warning targets some 1,500,000 jobless and their families, roughly estimated at least 3.500,000 people, without health insurance, with no money available to buy a ticket fair or pay their electricity bill, who nourish themselves from soup kitchens and charity packages with pasta, rice, canned tomatoes, 1 bottle of oil and maybe a bottle of shampoo. Schulz’s warning targets all these people who already suffer the so-called austerity-depression and anxiety attack for the last five years.

Theoretically if not all Greeks, at least these above mentioned could file a lawsuit against the President of the EP for violating his post’s “neutrality”, “for blatant intervention in internal political and fiscal affairs of a sovereign country” – how much more as the EP is not part for the creditors’ three-institutions – and for “causing moral damage and psychological distress” to at least several million Greek citizens.

Not to mention the fact, that these austerity-ridden Greeks used to pay their taxes and fund the salary of Schulz & Schulz.

I suppose inthe free market,  Schulz & Schulz would have been fired for incompetence and for breach of duty and code of conduct in context of his public office.

On Thursday, Schulz told German dailyHandelsblatt that the elected Syriza government should be replaced by “technocrat” government until stability is restored.

“We should appoint governments of technocrats,” Martin Schulz told Handelsblatt.

Schulz statement is here:EU warns of Armageddon if Greek voters reject terms

end

 

Sunday afternoon:

This post verifies Stockman’s thinking on the Greek default and how the fallout will be felt by Europe far greater than Greece itself:

(courtesy zero hedge)

 

The Greek Bluff In All Its Glory: Presenting The Grexit “Falling Dominoes”

Earlier today, Yanis Varoufakis reiterated his core thesisdriving the entire Greek approach from day 1 of its negotiations with the Eurogroup: “Europe [stands] to lose as much as Athens if the country is forced from the euro after a referendum on Sunday on bailout terms.”

This is merely a recap of what we said 4 years ago when in July of 2011 we explained “How Euro Bailout #2 Could Cost Up To 56% Of German GDP“, recall:

the bottom line is that for an enlarged EFSF (which is what its blank check expansion today provided) to be effective, it will need to cover Italy and Belgium. As AB says, “its firepower would have to rise to €1.45trn backed by a total of €1.7trn guarantees.” And here is where the whole premise breaks down, if not from a financial standpoint, then certainly from a political one: “As the guarantees of the periphery including Italy are worthless, the Guarantee Germany would have to provide rises to €790bn or 32% of GDP.” (GDP of Germany)That’s right: by not monetizing European debt on its books, the ECB has effectively left Germany holding the bag to the entire European bailout via the blank check SPV. The cost if things go wrong: a third of the country economic output, and the worst case scenario: a depression the likes of which Germany has not seen since the 1920-30s.Oh, and if France gets downgraded, Germany’s pro rata share of funding the EFSF jumps to a mindboggling €1.385 trillion, or 56% of German GDP!

Several years later, in anticipation of precisely the predicament Europe finds itself today, the ECB did begin to monetize European debt, which has since become the biggest European risk-shock absorber of all, and the one which the ECB is literally betting the bank on: just count the number of times the ECB has sworn it has the tools and can offset any Greek risk contagion simply by buying bonds.

Unfortunately, it is not that simple.

The reason is precisely in the contagion threat inherent in Europe’s alphabet soup of bailout mechanism as we explained four years ago in the post above, and as Carl Weinberg of High-Frequency Economics did hours ago in today’s edition of Barrons. Here is how the Greek contagion would spread, laid out in all its simplicity, should there be a Grexit, an outcome which the ECB could catalyze as soon as Monday in case of a “No” vote by raising ELA collateral haircuts:

 

The [Greek] government appears ready to renege on its debt obligations. So Greece’s creditors are going to lose money—a lot of money. Since these creditors are public entities, the losses will be borne, initially, by the public.

 

This crisis is about managing the resolution of bad Greek assets in a way that inconveniences creditor governments the least, forcing the least net new public borrowing, and minimizing financial system risks. The best way to do that is to avert a hard default, even if it means kicking the can down the road.

That, once again, is the Varoufakis all-in gamble, a gamble which assumes the ECB will be rational enough (in a game theory context) to appreciate the fallout of a Grexit on Europe’s creditors. Here is a qualitative determination:

Consider the ESM, Greece’s biggest creditor. Under its previous name, the European Financial Stability Facility, it loaned Greece €145 billion. If Greece defaults, the ESM, a Luxembourg corporation owned by the 19 European Monetary Union governments, will have to declare loans to Greece as nonperforming within 120 days. Accounting rules and regulators insist that financial institutions write off nonperforming assets in full, charging losses against reserves and hitting capital.

 

Here’s the rub: The ESM has no loan-loss contingency reserves. Its only assets—other than loans to Greece—are loans to Ireland and Portugal. Its liabilities are triple A-rated bonds sold to the public. How do you get a triple-A rating on a bond backed entirely by loans to junk-rated sovereign borrowers?Well, the governments guarantee the bonds, and because they are unfunded off-balance-sheet liabilities, they aren’t counted in their debt burdens—unless borrowers default.

 

If Greece defaults hard, governments will be on the hook for €145 billion in guarantees on those loans to the ESM. We expect credit-rating agencies to insist that these unfunded guarantees be funded. After all, unfunded guarantees are worthless guarantees.

And the punchline:

The strength of these guarantees is untested.Would the German Bundestag vote tomorrow to raise €35 billion by selling Bunds, the government debt, to cover Germany’s share of ESM losses on Greek bonds? That seems improbable. Bund sales of that scale, if they did occur, would flood the market, raising yields and depressing prices.If, instead, the Bundestag refused to cover its guarantees, then we would see a legal dust-up on a grand scale. With the presumption of valid guarantees, credit raters would have no choice but to downgrade ESM paper. Then losses would be borne by bondholders, and the ESM—the euro zone’s safety net and backstop—couldn’t raise money in the capital markets.

In other words, Grexit would usher in a pandemonium of unheard proportions because when the ESM, EFSF and countless other bailout mechanism were postulated, none even for a minute evaluated the scenario that is being flouted with ease, and, paradoxically, by the ECB itself most of all: an ECB which stands to lose the most…

A hard default would produce other losses to be covered. The ECB would have to be recapitalized after it writes off the €89 billion it has loaned the Greek banks to keep them liquid. The ECB would need to call for a capital contribution from its shareholders—the governments.

… not to mention any last shred of confidence it may have had.

But wait, there’s more:

And don’t forget that Greek banks owe the Target2 bank clearinghouse, a key link in the interbank payment system, an estimated €100 billion. The governments are on the hook to make good that shortfall, too. The cash required to cover these contingencies would have to be funded with new bond sales.

The conclusion is incidentally, identical to what Zero Hedge said back in the summer of 2011: the ultimate loser in a Greek default would be the euro-zone sovereign-bond market, which is already vulnerable. The only difference is that this time, yields are near all-time lows, and durations are high. Ironically, even the smallest fluctuations in yield mean a volatile response in prices, and an immediate crippling of the bond market. Perhaps most ironic is that Europe’s bond market is far less prepared to deal with Greek contagion now than when Italian bonds were blowing out and trading at 7%, just because everyone has double down and gone all-in that the ECB can contain the contagion. If it can’t, it’s very much game over.

This is what Varoufakis’ likewise all-in gamble on the future of Greece boils down to.

And just so we have numbers to work with, here courtesy of Bawerk’s fantastic summary, is a way to quantify what a Grexit and the resultant falling dominoes would look like for Europe:

 

Simplistic representation of falling dominos not enough? Then here is the full breakdown of implicit exposure every Euro Area country has toward a Greek exit, because it is not just the EFSF dominoes, it is also SMP, MRO, ELA, Target2, and oh my…

And tying it all together, here is some more from “Eugen von Böhm-Bawerk“:

The Germans, French and IMF alike reluctantly admit so much, but they cannot give the Greeks any debt relief because as soon as Greece starts to default on their obligations on the off-balance sheet guarantees extended by the euro countries the whole system could fall like dominoes. 

The problem, however, is that the IMF already did admit that Greece does need at least a 30% haircut, implying that at least one member of the grand status quo, under pressure form the US, already got the tap on the shoulder and has been told to prepare for more falling dominoes. Which leads to even more questions:

What would happen if Italy suddenly got an extra funding requirement of more than €60bn? Every euro apologist point to Italy’s primary surplus, but what good does that do when your debt is over 130 per cent of GDP and rising? The interest payment on that gargantuan debt load means Italy must cough up more than €75bn a year just to service liabilities already incurred. A primary surplus is a useless concept in a situation like the one Italy finds itself in. Adding another €60bn to Italy’s balance sheet could very well be the straw that breaks the Italian camel.

 

The French would be on the hook for around €70bn just when they have agreed with the European Commission to “slash” spending to get within the Maastricht goal of 3 per cent, in 2017!

 

Imagine the German peoples wrath when they learn that Merkel defied their sacrosanct constitution; a constitution that clearly state that the German people, through its Bundestag, is the sole arbiter of any act that have fiscal implications regarding the German people. The Bundestag did not approve the €42bn of ECB programs that have funded the Greek states excessive consumption.

All this is purely theoretical. For the practical implications of the above “falling domino” chain, we go back to Carl Weinberg:

What if a downgrade of ESM paper causes a hedge fund to fail, which triggers the demise of the bank that handles its trades? The costs of fixing failed institutions will also, of course, fall on governments. The ultimate cost of Greece’s default is yet to be seen, but it is surely larger than it seems.

Contained? We think not. And neither does Varoufakis, which is why he is willing to bet the fate of the Greek people on that most critical of assumptions. The only outstanding question is what does Mario Draghi, and thus Goldman Sachs, believe, and even more importantly, whether the Greek people have enough faith in Varoufakis to pull it off…

end

The vote: immediately we see that the NO side is heading for victory:

(courtesy zero hedge)

The Economist Calls Victory For “No” Camp: Sees 60% Voting “Oxi”

Can’t wait 4 more hours until the first official results from the Greek referendum trickle in? The “Intelligence Unit” of the Economist Group, part-owned by the Rothschild banking family, has already called it and the “Oxis” have it by a wide margin.

and then this:

Official Greferendum Results Show “No” Avalanche: Singular Logic Projects “Oxi” Victory

Update: The Greek interior ministry vendor Singular Logic projects that “No” vote will prevail with over 61% of vote in Greek referendum.

It would seem that the Troika’s fearmongering campaign backfired:

 

end

 

And now with the No vote clearly heading for victory:

(courtesy zero hedge)

Eurogroup In Shock: Finance Ministers “Would Not Know What To Discuss” After Greferendum Stunner

Just out from Reuters:

  • FINANCE MINISTERS “WOULD NOT KNOW WHAT TO DISCUSS” AFTER EMERGING GREEK ‘NO’ VOTE-EURO ZONE OFFICIAL

More:

There are no plans for an emergency meeting of euro zone finance ministers on Greece on Monday after Greeks voted overwhelmingly to reject the terms of a bailout deal with international creditors, a euro zone official said on Sunday.

 

Asked whether a meeting of the Eurogroup was planned for Monday, the official, speaking on condition of anonymity, told Reuters: “No way. (The ministers) would not know what to discuss.”

May we suggest containing the fallout, whether in capital markets or in the resurgent mood in the other PIIGS, as a primary topic?

And meanwhile, while we symptahize with the Greeks officially telling the Troika to “fuck off”, they may have other liquidity problems of their own.

Greeks cannot withdraw cash left in safe deposit boxes at Greek banks as long as capital restrictions remain in place, a deputy finance minister told Greek television on Sunday.

 

Greece’s government shut banks and imposed capital controls a week ago to prevent the country’s banks from collapsing under the weight of mass withdrawals.

 

Deputy Finance Minister Nadia Valavani told Alpha TV that, as part of those measures, the government and banks had agreed at the time that people would also not be allowed to withdraw cash from safe deposit boxes.

Surely the Greeks bought enough gold and/or bittcoin ahead of this outcome. Surely

end
Emergency meetings are now called to address bank liquidity:
(courtesy zero hedge)

Greek PM Calls Emergency Meeting For Bank Liquidity: MNI

Congratulations Greece: for the first time you had the chance to tell the Troika, the unelected eurocrats, and the entire status quo establishment, not to mention all the banks, how you really felt and based on the most recent results, some 61% of you told it to go fuck itself.

Now comes the hard part.

Because at this point, with Greek banks all of them effectively insolvent, it is all up to the ECB: should Mario Draghi now announce an increase in the ELA haircut or pull it altogether as the ECB did with Cyprus, then a Greek deposit haircut bloodbath ensues. And judging by the latest news out of Market News, this is precisely what Tsipras is focusing on.

According to MNI, Greece’s Prime Minister, Alexis Tsipras has called an emergency meeting for Sunday evening, after the referendum vote result will be announced, to assess the situation in the banking sector and the liquidity shortage, a senior Greek official told MNI Sunday. 

The source said that so far Tsipras has not had any communication with other EU leaders “but that could change in the coming hours.” Finance Minister Yiannis Varoufakis is currently meeting with the representatives of the Greek banking union to mull whether the banking holiday ,which expires Monday evening, should be prolonged and until when. 

 

Greece’s government spokesman, Gavriel Sakellarides told Antenna TV that the Central Bank of Greece will submit Sunday evening a request to the European Central Bank for further Emergency Liquidity Assistance saying “there is no reason why we cannot get ELA” adding that “negotiations should start as soon as today with reasonable demands.” 

 

The Greek source who spoke with MNI said that, according to his estimations, the No vote would be even higher than what the preliminary polls showed earlier.

 

The source also said that the EuroWorking Group, the aides of the Eurozone Finance Ministers, are expected to convene Monday and that the Eurogroup might also convene via teleconference to assess the situation.

 

A Banking source has told MNI that even when banks reopen capital controls are expected to be readjusted and imposed for a long period of time, until trust is restored and a deal with the creditors is being reached.

The ball is now in the ECB’s court: will it let Greece keep the Greek ELA (or perhaps even raise it) to prevent an all out banking panic and allow Greek bank to reopen as Varoufakis promised, or will raise the haircut or yank it altogether, starting with the Greek depositor haircut as well as the falling dominoes we described yesterday…

 

Because as much as the ECB wants to deny it, the Euroarea is on the hook for more than 3% of its gross GDP, and perhaps far more once all the off balance sheet liabilities emerge…

In other words, an uncontrolled Grexit at this point would surely lead to a Eurozone depression, one that not even an increase in the ECB’s massive bond (and perhaps stocks) buying would stem. Which, of course, was Varoufakis’ gamble all along.

end

One of the areas contemplated by the Greeks is taking over the 10 Euro paper note printing press. (All countries share in the printing of various notes: Greece is responsible for minting fresh 10 Euro notes for all of Europe). This would be no doubt a nuclear option and Athens would surely need the European court of Justice to be on their side.

Interesting times…

(courtesy zero hedge)0

Greece Contemplates Nuclear Options: May Print Euros, Launch Parallel Currency, Nationalize Banks

As we said earlier today, following today’s dramatic referendum result the Greeks may have burned all symbolic bridges with the Eurozone. However, there still is one key link: the insolvent Greek banks’ reliance on the ECB’s goodwill via the ELA. While we have explained countless times that even a modest ELA collateral haircut would lead to prompt depositor bail-ins, here is DB’s George Saravelos with a simplified version of the potential worst case for Greece in the coming days:

The ECB is scheduled to meet tomorrow morning to decide on ELA policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit. All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece. The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.

All of which of course, is meant to suggest that there is no formal way to expel Greece from the Euro and only a slow (or not so slow) economic and financial collapse of Greece is what the Troika and ECB have left as a negotiating card.

However, this cuts both ways, because while Greece and the ECB may be on the verge of a terminal fall out, Greece still has something of great value: a Euro printing press.

It may not get to there: according to Telegraph’s Ambrose Evans Pritchard who quotes what appears to be a direct quote to him from Yanis Varoufakis, Greece will, “If necessary… issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago.

California issued temporary coupons to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008. Mr Varoufakis insists that this is not be a prelude to Grexit but a legal action within the inviolable sanctity of monetary union.

In other words: part of the Eurozone… but not really using the Euro.

That’s not all, because depending just how aggressively the ECB escalates events with Athens, Greece may take it two even more “nuclear” steps further, first in the form of nationalizing the banks and second, by engaging in the terminal taboo of “irreversibility” printing the currency of which it is no longer a member!

Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings – reportedly a ‘bail-in’ above a threshhold of €8,000 – and to prevent any banks being shut down on the orders of the ECB.

 

Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza’s attitude at this stage is that their only defence against a hegemonic power is to fight guerrilla warfare.

 

Hardliners within the party – though not Mr Varoufakis – are demanding the head of governor Stournaras, a holdover appointee from the past conservative government.

 

They want a new team installed, one that is willing to draw on the central bank’s secret reserves, and to take the provocative step in extremis of creating euros.

 

“The first thing we must do is take away the keys to his office. We have to restore stability to the system, with or without the help of the ECB. We have the capacity to print €20 notes,” said one.

 

Such action would require invoking national emergency powers – by decree – and “requisitioning” the Bank of Greece for several months. Officials say these steps would have to be accompanied by an appeal to the European Court: both to assert legality under crisis provisions of the Lisbon Treaty, and to sue the ECB for alleged “dereliction” of its treaty duty to maintain financial stability.

And who “unwittingly” unleashed all of this?

 Mr Tsakalotos told the Telegraph that the creditors will find themselves be in a morally indefensible position if they refuse to listen to the voice of the Greek people,especially since the International Monetary Fund last week validated Syriza’s core claim that Greece’s debt cannot be repaid.

Recall last week we asked “Did The IMF Just Open Pandora’s Box?” We just got the answer. Our advice to Mme Lagarde: avoid stays at the Sofitel NYC for the next few weeks.

As for Europe: welcome to your own personal Lehman weekend. We hope you too enjoy making it all up as you go along, because you have officially entered the heart of monetary darkness.

end
Varoufakis resigns as the Euro group want a gentler negotiator. They consider Varoufakis as  ‘toxic’
 (courtesy zero hedge)

The First Post-Referendum Head Rolls: “Toxic” “Martyr” Yanis Varoufakis Resigns

The Greek referendum landslide “No” vote came and went and just hours after its passage claimed its first head, which was – perhaps somewhat surprisingly – that of the Greek finance minister himself, Yanis Varoufakis, who many say orchestrated the referendum seen as a loud endorsement of the government’s actions. As of this morning he is no more. Here is why in his own words.

Minister No More!

 

The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

 

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

 

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

 

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

 

And I shall wear the creditors’ loathing with pride.

 

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

 

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

Varoufakis’ resignation which came early in the morning Greek time, may be seen by many as the crowning cap of his path to political martyrdom, but more importantly is seen by others as a catalyst to what may be a long overdue deal. As Standard Bank’s Demetrios Efstathious says in an email to Bloomberg, “without Varoufakis, who’d become toxic and had to go, negotiations will prove somewhat easier” adding that “the slim hope of a last minute deal is indeed alive. “Varoufakis’s replacement increases chance of sensible negotiation, and positive outcome. If Tsakalotos or Dragasakis were to replace him would be positive news. Tsakalotos has been a key part of the negotiating team and is one of the most sensible/moderate figures in Syriza.”

That view was dashed by German SPD lawmaker Carsten Schneider who said on German ZDF public television that the resignation won’t make talks between Greece and its creditors any easier. Varoufakis is “building his own legend” adding that Varoufakis’s promises aren’t backed up by any money. “He’s been promising more than he could keep and now he’s drawing the conclusions by making an escape.”

So “martyr” or “toxic legend builder”, the historians will yet decide on Varoufakis’ legacy but the main question is: now that Greece took this decisive step, will anyone at the Troika or Eurogroup follow in V-Fak’s footsteps?

For now, however, the futures which were down as much as 33 points at the open have cut their losses by a third on yet another bout of hopes that even with Greece beyond the precipice, Varoufakis’ exit stage left may be just the deus ex machina endgame catalyst this Greek tragicomedy has been waiting for all along.

end
Then late this morning, the ECB adjusts its Greek ELA haircuts.
The war begins:  the chances for a settlement are basically nil!
(courtesy zero hedge)

It Begins: ECB “Adjusts” Greek ELA Haircuts; Full “Depositor Bail-In” Sensitivity Analysis

Earlier today we reported that as Bloomberg correctly leaked, the ECB would keep its ELA frozen for Greek banks at its ceiling level disclosed two weeks ago. However we did not know what the ECB would do with Greek ELA haircuts, assuming that the ECB would not dare risk contagion and the collapse of the Greek banking system by triggering a collapse in Greek banks if and when it boosts ELA haircuts. Turns out we were wrong, and as the ECB just announced “the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.”

Full Press Release:

 
 

ELA to Greek banks maintained

  • Emergency liquidity assistance maintained at 26 June 2015 level
  • Haircuts on collateral for ELA adjusted
  • Governing Council closely monitoring situation in financial markets

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

 

ELA can only be provided against sufficient collateral.

 

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

 

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

 

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

What does this mean? Since it is almost certain that the haircut is being increased (as decreasing the ELA haircut makes no sense since Greek banks still have about €20 billion in ELA collateral buffer and instead the ECB would have simply raised the total ELA amount), it means that the ECB just took its first practove step toward launching a Greek bank bail in.

And for the convenience of our readers, we have prepared precisely the sensitivity analysis showing what ELA haircut results in what depositor bail-in.

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

 

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

 

Further confirmation that this was a haircut increase comes from a Die Welt journalist who reported that the ECB will hike the haircut just enough to reduce the collateral on Greek banks to slightly above the current level of use which is about €90 billion. In other words, the ECB increased its haircut from roughly 50% to just about 60% above which level depositor bail ins begin.

Needless to say, this decision makes it quite clear that it was not Greece, but the ECB pushing all along for “burning the Greek bridges” – just as we warned in “Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants” – and as a result any chance of a compromise resolution with Greece may have just been, well, burned

 end

Turmoil in other parts of the world:

(courtesy zero hedge)

 

Egypt Is On The Edge Of Full Blown Civil War

Via GEFIRA,

In the last few days there were dozens of separate attacks in Egypt from the Sinai up to Cairo. Probably more than 60 people died while the Egyptian army used F16 attack planes to protect itself against it disgruntled population.It is clear that the Egyptian rulers will not be able to contain the current situation, today could be marked as the start of Egypt’s civil war.

Democratic elected governments were violently overthrown, in Algeria, Egypt and  Palestinian territories. In Algeria the FIS  had won the first held elections with a convincing majority in 1990 and 1992. It has been removed from power in 1992 by a coup d’etat that was highly approved by the West. Probably 150.000 people died in the civil war that followed these events up.

HAMAS winning the 2006 elections in the Palestinian territories resulted in a war among Palestinians and ended up with a split of Gaza and the West Bank

In 2011 Morsi, leader of the Muslim Brotherhood won the first free elections in Egypt.

In 2013 the first elected president of Egypt was removed by the army. There are clear signs that anti-democratic forces were deliberately destabilizing Egypt before the coup d’etat in 2013. In the running up of the July 3th coup by General Sisi an artificial oil shortages was created that contributed to the mass protest against the elected president of Egypt.

The new army coup was financially supported by the Saudi rulers while the West was mute, the only vocalized opposition came from Turkey’s ruler Mr Erdogan.

Washington was silent about Egypt’s coup and even resumed the delivery of military hardware to the Egyptian rulers, at the same moment Morsi received the death penalty during a mock process.  The situation in Egypt will be much worse than the situation that we saw in Algeria in 1992.

Libya has been split in 3 parts, the by the West installed and recognized government in Tobruk could be seen as a supporter of the rulers in Cairo. The government in Tripoli is allied with the Muslim Brotherhood party and sees the government in Cairo as a threat to its existence. Both Governments do not rule Libya completely, big parts of Libya are under control of ISIS and other unregulated Islamist groups.

The war that is coming to Egypt will not be limited to Egypt and will be an extend to Libya’s war, for the sole reason that a lot of fighters and weapons will come over from Lybia.

The substantial amount of impoverished Egyptians are lacking any perspective and have nothing to lose. It is their party that has been removed from power in 2013.

The Egyptian army is heavenly weaponized by the USA, there will not be any doubt that those weapons will end up in the hands of Islamist groups. The Egyptian conscript army will be a huge risk for the country’s leaders as army units might switch loyalty.

Experienced fighters from Syria and Iraq will actively support their brothers in Egypt.

The new generation of Islamist’s will utilize the internet in their advantage. They will use it to mobilize their supporters and build their case against the Egyptian army and their backers in Riyadh and Washington.

The Internet will also be used for advanced communications and “crowd reconnaissance”. In Ukraine we have already seen how YouTube and mobile phones were used to pass on enemy’s positions. Modern professional armies are not prepared for new agile tactics that will be utilized by a new Islamic internet generation.

As the Muslim Brotherhood is enjoying massive amounts of support we are expecting that the situation in Egypt will deteriorate at the same pace as we have seen in Syria.

The Egyptian rulers will not be able to contain the current situation, today could easily be recorded as the start of Egypt’s big civil war.

*  *  *

Sources:

Algerian Civil WarSource Wikipedia
Bouteflika said in 1999 that 100,000 people had died by that time and in a speech on 25 February 2005, spoke of a round figure of 150,000 people killed in the war.[5] Fouad Ajami argues the toll could be as high as 200,000, and that it is in the government’s interest to minimize casualties

Egypt’s Gas Shortage Fuels June 30 ProtestsAl Monitor June 2013
The latest gas crisis falls prior to the highly anticipated June 30 protests called by the Tamarrud movement demanding that Morsi step down for his failure to achieve any of the revolution’s goals

Libya supreme court rules anti-Islamist parliament unlawfulSource The Guardian 6 November 2014
In a blow to anti-Islamist factions, Libya’s highest court has ruled that general elections held in June were unconstitutional and that the parliament and government which resulted from that vote should be dissolved.

Mohammed Morsi death sentence upheld by Egypt courtSource BBC 16 June 2015
The sentence was initially passed in May, but was confirmed after consultation with Egypt’s highest religious figure, the Grand Mufti. The death sentences of five other leading members of the Muslim Brotherhood, including its supreme guide Mohammed Badie, were also upheld.

Egypt Officially Announces ‘State Of War’Source Egyptian Streets 1 July 2013
In an official statement released by the Egyptian Armed Forces, 17 Egyptian soldiers were reported killed, in addition to 13 more who were injured. The statement added that 100 militants have been killed, in addition to destroying 20 of the militants’ vehicles.

Sheikh Zuweid Death Toll: Egyptian Police Kill 9 In Cairo Suburb Raid As Assault On Sinai Town Comes To An End SourceInternational Business Times 1 July 2015
Egyptian police raided a home in a western suburb of Cairo on Wednesday, killing nine men who they said were armed and plotting a terrorist attack. The killings happened the same day an ISIS-affiliated group launched a major assault on Sheikh Zuweid, an Egyptian city in the Sinai Peninsula, resulting in at least 100 casualties. The assault ended Wednesday evening.

Two Bomb Explosions Resonate Through CairoSource Egyptian Streets 30 June 2015
In an official statement, the Director of Civil Protection in Cairo, Magdy al-Shalaqany has confirmed that two bombs have detonated in Cairo’s 6th of October city, with a five minutes gap between the two explosions, reported AMAY.

Islamist Blitz in Sinai Kills 64 as Egypt Sends Fighter Jets. Source Bloomberg 1 July 2015
Egypt’s army struck at militants with fighter jets and attack helicopters after 64 security personnel were killed in Sinai on the bloodiest day of the country’s escalating war with Islamist insurgents.

end
Oil related stories:

Crude Oil Plummets Most Since February, Nears 16 Year Support Line: Tap On The Shoulder Time?

Earlier today we commented that while stock markets across the globe, heavily influenced by central bank intervention from the PBOC to the SNB, are doing everything in the central planners’ power to telegraph just how irrelevant Greece is, other indicators are far less sanguine. One example was copper, which plunged to a level not seen since February, and was in danger of breaching its 15 year support level.

The commodity weakness today has persisted and is now crushing both WTI crude and Brent, both of which are in freefall, and WTI is now down over $3 on the session, or 6%, to a $53 handle, the biggest one day plunge since February (and the third largest in years) to a level last seen in early April when there was much hope that the dramatic plunge in December and January was finally over. Turns out it wasn’t.

 

And, just like in the case of copper, should the drop in Brent persist it too, like coper, would be in danger of breaching a very long-term support line starting with a base in 1999 and continuing all the way through the the plunges of booth 2008 and early this year. SocGen with more:

As previously highlighted, last May price action in Brent formed a monthly Spinning top pattern at the key resistance of $70/72, the interception of the upward channel upper limit and 2010 levels. A Spinning Top is a bearish pattern, rarely a reversal one though, which usually happens after an extended rally/a new high which indicates a pause in upside momentum.

 

After peaking at $70/72 levels, Brent has been correcting lower within a down sloping channel ($64.37-$58.30) and the down move suddenly accelerated after the up sloping channel in force since last January finally gave way (i.e. $62.00/62.30 levels, blue dash).

 

Brent is approaching near a key support region at $58.30/57.50, with $57.50 being the ultimate retracement (at 76.4%) of the recovery which took place from January lows to last May highs. In other words, a break below $58.30/57.50 would mean the extension of the down trend and a retest of the 15-year trend line support (at $52/50) with intermittent supports at $56.45 and $53.19. Near term resistance is placed at $60.60.

 

Daily Stochastic indicator is probing the same levels as in January and March and therefore underlines key supports are near.

 

However far more relevant than what some lines and squiggles suggest is the trajectory of this most traded commodity on earth, is the question: why is crude (and copper) suddenly crashing, and what is really going behind the scenes for crude to suffer such a dramatic one day move and whether, as some are suggesting, this is a margin-call related liquidation as some, still unknown, hedge fund got a tap on the shoulder (or alternatively someone big in China got an equity margin call and is taking it out on commodities).

Should the collapse persist perhaps this time, unlike the last tumble in early 2015 when many were expecting at least one commodity hedge fund to be carted out, there will finally be named “casualties.”

 end

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

 

 

Euro/USA 1.1036 down .0072

USA/JAPAN YEN 122.93 up .262

GBP/USA 1.5557 up .0007

USA/CAN 1.2626 up .0066

This morning in Europe, the Euro fell by a considerable 72 basis points, trading now just above the 1.10 level at 1.1036; 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 and today crumbling courses throughout Europe.

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 26 basis points and trading just below the 123 level to 122.26 yen to the dollar.

The pound was again up this morning as it now trades just below the 1.56 level at 1.5557, 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 66 basis points at 1.2626 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 :  down 427.67  points or 2.08%

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

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

Gold very early morning trading: $1164.80

silver:$15.60

Early Monday morning USA 10 year bond yield: 2.30% !!! down 9 in basis points from Thursday night and it is trading just above  resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Monday morning: 95.45 up 6 cents from Thursday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Monday morning

And now for your closing numbers for Monday:

 

Closing Portuguese 10 year bond yield: 3.19%  up 18 in basis points from Thursday (  very ominous/and dangerous with an accident waiting to happen)

Closing Japanese 10 year bond yield: .48% !!! down 5 in basis points from Thursday/still very ominous

Your closing Spanish 10 year government bond, Monday, up 6 in basis points  ( very ominous)

Spanish 10 year bond yield: 2.37% !!!!!!

Your Monday closing Italian 10 year bond yield: 2.39% up 7 in basis points from Thursday: (very ominous)

trading 2 basis point higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

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

 

Euro/USA: 1.1049 down .0058 ( Euro down 58 basis points)

USA/Japan: 122.48 down  0.174 ( yen up 17 basis points)

Great Britain/USA: 1.5604 up .0055 (Pound down 3 basis points)

USA/Canada: 1.2649 down .0034 (Can dollar down 34 basis points)

The euro fell by a fair amount today. It settled down 58 basis points against the dollar to 1.1049 as the dollar traded northbound today against most of the various major currencies. The yen was up by 17 basis points and closing well below the 123 cross at 122.48. The British pound gained some ground today, 55 basis points, closing at 1.5604. The Canadian dollar some  ground against the USA dollar, 34 basis points closing at 1.2649.

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: 2.29% down 10 in basis point from Thursday// (at the resistance level of 2.27-2.32%)/

Your closing USA dollar index:

96.28 down 11 cents on the day

.

European and Dow Jones stock index closes:

 

England FTSE down 50.10 points or 0.76%

Paris CAC down 96.68 points or 2.01%

German Dax down  167.76 points or 1.52%

Spain’s Ibex down 239.70 points or 2.22%

Italian FTSE-MIB down 907.41 or 4.03%

 

The Dow down 46.53  or 0.26%

Nasdaq; down 16.63 or 0.33%

 

OIL: WTI 52.63 !!!!!!!

Brent:56.67!!!!

 

Closing USA/Russian rouble cross: 56.77  down 1 1/4  rouble per dollar on the day

end

 

And now for your more important USA stories.

 

NY trading for today:

“Greece Is Contained” Except In Crude, Copper, FX, US & EU Stocks, & Peripheral Bonds

Seemed appropos…

“Greece is contained” was the clear message desperately trying to be provided to the masses today as PPTs from all around the world lifted FX (and equities directly in some regions) in an effort to keep the dream alive… It didn’t work!

 

It started in China… and failed…

 

Then Europe… and failed… (in stocks)

 

and bonds…

 

Then US… and failed…

 

FX markets turmoiled but it appears The ECB and BoJ had an ‘understanding’…

 

Here’s how EURJPY was used to ingite carry trade-spewed momos into lifting stocks higher…

 

Treasuries well well bid out of the gate as investors sought safety… then sold off into the European close… then yields ripped to the lows of the day…

 

Commodities mixed…

 

Crude clubbed like a baby seal…

 

Copper crashed…

 

And finally – gold and silver! Makes perfect sense as all hell breaks loose for the precious metals to trot along the flatline ignoring all the noise as if some external factor was crushing the life-giving volatility out of the status-quo-meme-destroying prices…

 

But apart from all that – Greece is priced in, Greece is contained, and Greece doesn’t matter

Charts: Bloomberg

Bonus Chart: How do you say “Deja Vu All Over Again” in Chinese?

 end
You know that this is going to be trouble:
(courtesy zero hedge)

FDIC Sounds Alarm On Insolvent, “Zero Hedged” Oil & Gas Producers

On Thursday, we outlined how America’s heavily indebted E&P companies are about to be “zero hedged” when the downside protection that accounted for some 15% of Q1 revenue for nearly half of North American O&G operations rolls off.

In short, the hedges that had, until now anyway, helped to forestall a terminal cash crunch are set to expire, which will have the knock-on effect of making it more difficult for the companies to maintain crucial credit lines with banks.

As discussed yesterday, the payments from the hedges were the last line of defense for a sector that has been kept afloat in part by artificially suppressed borrowing costs and investors’ hunt for yield. These otherwise insolvent companies have tapped wide open equity and credit markets allowing them to keep producing, which in turn has contributed to the very same depressed prices and global deflationary supply glut that bankrupted the sector in the first place.

Now, even the regulators (who are, as a rule, always behind the curve when it comes to assessing risk) are “sounding the alarm bells”. WSJ has the story:

U.S. regulators are sounding the alarm about banks’ exposure to oil-and-gas producers, a move that could limit their ability to lend to companies battered by a yearlong slump in prices.

 

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are telling banks that a large number of loans they have issued to these companies are substandard, said people familiar with the matter, as they issue preliminary results of a joint national examination of major loan portfolios.

 

The substandard designation indicates regulators doubt a borrower’s ability to repay or question the value of the assets that back a loan. The designation typically limits banks’ ability to extend additional credit to the borrowers.

 

The move could add an extra obstacle to companies struggling with high debt loads amid lower prices for the oil and natural gas they produce. Banks have been flexible with troubled energy companies to avoid triggering a flood of defaults and bankruptcy filings, but regulatory pressure could force them to tighten the purse strings.

 

This year’s Shared National Credit review process contrasts with those in prior years, when regulators didn’t broadly disagree with the banks’ own ratings of credit facilities known as reserve-based loans, the people said. But regulators are paying closer attention to these loans amid worries that a sustained slump in energy prices could lead to big losses for banks, they added.

 

Twice a year, banks themselves review the value of oil and gas deposits that companies have the right to extract and use as collateral for bank loans. Declines in commodity prices can prompt lenders to reduce their commitments to companies. The effects of such reductions can cascade through energy companies’ capital structures and require them to look elsewhere for funds.

 

Earlier this year, a number of energy producers sold bonds, took out term loans or sold new shares to replace shrinking reserve-based loans. While some of those moves were forced, others were pre-emptive.

 

Banks may turn to equity or bonds to supply additional financing to borrowers with the substandard designation, some of the people said, though both are costlier for companies than loans.

 

The analysts also said the prolonged period of lower revenue could push more companies closer to violating agreements with creditors to maintain certain profitability levels, and that they expect stock investors to be “more discerning” when offered new shares from heavily indebted companies.

In other words, if the BTFD-ers get wise to the fact that these companies are insolvent and that throwing money at equity and debt offerings only serves to allow them to lumber around, zombie-like in a desperate attempt to wait out what they hope is a temporary slump in crude prices rather than a fundamental commodity reset in the face of depressed global demand, the sucker bid will dry up just as HY spreads blow out and the hedges roll off, leaving Wall Street to clean up the mess.

And as for waiting out the crude price slump, well, things aren’t moving in the right direction…

…which means that in the absence of the home gamer, E*Trade bid, a buyer of last resort may have to double down…

end
Service PMI drops to lowest level since January as job creation slows. Also input costs inflation surges!!
(courtesy PMI/zero hedge)

Service PMI Drops To Lowest Level Since January: Job Creation Slows, Input Cost Inflation Surges

Following last week’s disappointing manufacturing PMI, today it was Markit’s turn to report the June Service PMI, which just came out at 54.8, just under the 54.9 expected, down from 56.0 in May and the lowest reading since January. Additionally, job creation eased to a  three-month low while input cost inflation reaches its highest since October 2013. In other words, more bad news for future job prospects and margins.

 

From the report:

The seasonally adjusted final Markit U.S. Composite PMI™ Output Index
(covering manufacturing and services) posted 54.6 in June, down from
56.0 in May and the lowest reading since January. A softer overall
increase in U.S. private sector business activity reflected weaker
growth contributions from both services activity (54.8 in June, down
from 56.2 in May) and manufacturing output (53.9, down from 55.2).

 

Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 54.8 in June, down from 56.2 in May but above the neutral 50.0 threshold for the twentieth successive month. The latest reading pointed to the least marked pace of expansion since January, although the index was only slightly below the average seen since the survey began in late-2009 (55.8).

More on the bad news in the report:

Despite an upturn in new business growth, the latest survey pointed to a reduction in backlogs of work across the service economy for the first time since July 2014. Anecdotal evidence highlighted that ongoing company expansion plans and robust job hiring patterns had contributed to reduced volumes of unfinished work. That said, the rate of employment growth moderated for the first time in 2015 to date and was the weakest since March.

And even more bad news for jobs:

Some service providers noted that reduced optimism regarding the year-ahead business outlook had led to softer rises in payroll numbers at their units. Moreover, the latest survey indicated that the balance of service sector firms expecting an increase in activity over the next 12 months was the second-lowest since July 2014

The dour assessment came from Markit’s Chris Williamson who still maintains his 3% Q2 GDP forecast but adds that “although still signalling moderate growth in June, the manufacturing and service sector surveys indicate that the rate of economic expansion has slowed markedly since the start of the quarter, when business was boosted by a rebound from weather related weakness. The loss of growth momentum seen in the surveys means GDP growth could slacken off again in the third quarter and hiring could likewise ease off.”

In conclusion, Markit joins the IMF in once again beckoning the Fed to delay rate hikes:

“Fed talk will most likely continue to prepare the ground for rate hikes later this year, but policymakers will want to see firmer evidence that the economy retains healthy growth momentum before taking the plunge and hiking interest rates, especially given ongoing disappointing pay growth and benign inflation.”

Because clearly 6 years after the “recession ended”, the only thing preventing the economy from blasting off into escape velocity is the difference between 0.00% and 0.25% fed funds rate.

 

end

Well that about does it for tonight

I am so sorry that this commentary is long but there is so much that we have to go over and I do not want to miss anything that might be of importance to you that happened over the 4 day holiday.

 

I will see you Tuesday night

Harvey

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