July 8/Greece has until tomorrow night to provide reforms or else the game is over for them/Tsipras folds as he is now willing to accept more austerity than had he accepted EU proposals before the referendum/Huge 4 hour NYSE blackout from trading/Oil drops again/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1163.30 up $10.90  (comex closing time)

Silver $15.15 up 20 cents.


In the access market 5:15 pm

Gold $1158.00

Silver: $15.15


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

At the gold comex today, we had a good delivery day, registering 100 notices for 10,000 ounces . Silver saw 294 notices filed for 1,470,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 248.19 tonnes for a loss of 55 tonnes over that period.

In silver, the open interest rose by 1071 contracts despite the fact that Tuesday’s price was down by 78 cents.  The total silver OI continues to remain extremely high, with today’s reading at 197,092 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .985 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.

In silver we had 247 notices served upon for 1,470,000 oz.

In gold, the total comex gold OI rests tonight at 452,145 for a gain of 5480 contracts despite the fact that gold was down $20.50 yesterday.  We had 100 notices filed for 10,000 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 no change in inventory at the SLV/ 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 rise by 1071 contracts to 197,092 despite the fact that silver was down by 78 cents yesterday.  The OI for gold rose by another 5480 contracts up to 452, contracts as the price of gold was down by $20.50  yesterday.

(report Harvey)


2 Today, 10 important commentaries on Greece


(zero hedge, Reuters/Bloomberg,Bershidsky / Graham Summers/Ambrose Evans Pritchard)


3. One commentaries on the collapse in the stock market in China

(zero hedge)

4.USA data tonight; Beige book minutes

(3 commentaries)


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. Oil retreats again as inventories rise

(zero hedge)


plus other important topics….


Just in case you missed this from yesterday, I am repeating it for you:

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 rose by a whopping 5480 contracts from 446,665 up to 452,145 as gold was down $20.50 in price yesterday (at the comex close).  We are now in the next contract month of July and here the OI surprisingly rose by 78 contracts to 241 contracts. We had 2 notices filed yesterday and thus we gained 80 contracts or an additional 8000 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI rose by 500 contracts up to 279,397. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 173,142. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was good at 213,590 contracts. Today we had 100 notices filed for 10,000 oz.

And now for the wild silver comex results. Silver OI rose by a huge 1071 contracts from 196,022 up to 197,092 despite the fact that the price of silver was down by 78 cents in price with respect to yesterday’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 rose by 387 contracts up to 903. We had 5 notices served upon yesterday and thus we gained 382 contracts or an additional 1,910,000 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 rise by 76 contracts up to 263. The next major active delivery month is September and here the OI rise by a small 106 contracts to 137,.  The estimated volume today was excellent at 84,540 contracts (just comex sales during regular business hours) with mucho help from the HFT traders. The confirmed volume  yesterday (regular plus access market) came in at 107,181  contracts which is huge in volume.  We had 247 notices filed for 1,470,000 oz


July initial standing

July 8.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 96.45 (3 kilobars)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 2502.12 oz (Delaware,JPM)
No of oz served (contracts) today 100 contracts (10,000 oz)
No of oz to be served (notices) 141 contracts 14,100 oz
Total monthly oz gold served (contracts) so far this month 410 contracts(41,000 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil oz
Total accumulative withdrawal of gold from the Customer inventory this month 80,455.1   oz



Today, we had 0 dealer transactions


we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

we had 0 dealer deposits


total dealer deposit: zero
we had 1 customer withdrawal

i) Out of Manfra; 96.45 oz (3 kilobars)




total customer withdrawal: 96.45 oz

We had 0 customer deposits:


Total customer deposit: nil ounces

We had 1 adjustment.

i) today we had 29,078.008 oz leave the dealer account of JPMorgan and this entered into the customer account of JPM.

*JPMorgan has only 230,183.398 oz left in its dealer account or 7.15 tonnes)



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 100 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 (410) x 100 oz  or 41,000 oz , to which we add the difference between the open interest for the front month of July (241) and the number of notices served upon today (100) 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 (410) x 100 oz  or ounces + {OI for the front month (241) – the number of  notices served upon today (100) x 100 oz which equals 47,100 oz standing so far in this month of July (1.7138 tonnes of gold).


we gained an additional 8000 oz of gold standing in this non active delivery month of July. somebody was badly in need of physical gold today.

Total dealer inventory 493,204.734 or 15.34 tonnes

Total gold inventory (dealer and customer) = 7,979,322.770 oz  or 248.19 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 248.19 tonnes for a loss of 55 tonnes over that period.




And now for silver

July silver initial standings

July 8 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,205,309.790  oz (HSBC,Brinks,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 35,124.815 oz (Brinks, Delaware)
No of oz served (contracts) 247 contracts  (1,470,000 oz)
No of oz to be served (notices) 609 contracts (3,045,000 oz)
Total monthly oz silver served (contracts) 2707 contracts (13,535,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 2,712,779.2 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 2 customer deposit:

i) Into Brinks: 30,059.800 oz

ii) Into Delaware: 5065.015 oz

total customer deposit: 35,124.815  oz


We had 2 customer withdrawals:

i) Out of CNT: 5201.89 oz

ii) Out of Scotia: 1,200,107.900 oz




total withdrawals from customer:  1,205,309.79   oz


we had 0  adjustments


Total dealer inventory: 60.146 million oz

Total of all silver inventory (dealer and customer) 180.972 million oz

The total number of notices filed today for the July contract month is represented by 247 contracts for 1,470,000 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 (2707) x 5,000 oz  = 13,535,000 oz to which we add the difference between the open interest for the front month of July (903) and the number of notices served upon today (247) x 5000 oz equals the number of ounces standing.

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

2707 (notices served so far) + { OI for front month of July (903) -number of notices served upon today (247} x 5000 oz ,= 16,580,000 oz of silver standing for the July contract month.

we gained a whopping 1,910,000 ounces standing in this active delivery month of July. Somebody was in great need of physical silver today.


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



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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:

July 8/no change in gold inventory at the GLD/Inventory at 709.65 tonnes

July 7/ no change in gold inventory at the GLD/Inventory at 709.65 tonnes

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




July 8 GLD : 709.65 tonnes




And now for silver (SLV)

July 8/no change in inventory at the SLV/rests at 325.205

July 7/no change in inventory at the SLV/rests at 325.205 tonnes

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


July 8/2015:  tonight inventory rests at 325.205 million oz



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

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

1. Central Fund of Canada: traded at Negative 8.3 percent to NAV usa funds and Negative 8.1% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.8%

Percentage of fund in silver:36.9%

cash .3%

( July 8/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to 2.49%!!!! NAV (July 8/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV rises to – .51% toNAV(July 7/2015

Note: Sprott silver trust back  into positive territory at +2.49%

Sprott physical gold trust is back into negative territory at -.51%

Central fund of Canada’s is still in jail.


Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *



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


First:  Goldcore’s Mark O’Byrne


(courtesy Goldcore/Mark O’Byrne)


Leveraged Chinese “Investors” Learning Painful Lesson

– Shanghai Composite has lost over 32% of its value in less than month
– Investors selling on “panic sentiment”
– Persistent intervention by government agencies has failed to support market
– Market has doubled over past year while real economy struggles
– Chinese Market had been boosted by participation of market-illiterate savers
– May morph into wider crisis

China’s stock markets continued their decline overnight with the Shanghai SE Composite falling another 4.64% and down of 32% since June 12. Markets have begun seizing up as sellers overwhelm the system.

The Chinese regulator, the China Securities Regulatory Commission, has described market participants as being “irrationally” driven by “panic sentiment” despite there having been no rational basis for the run up in Chinese markets before they peaked last month.

Indeed, in these past two weeks the government itself has taken a series of panic measures to prop up the system but, thus far, to no avail. These measure include cuts in reserve requirements, and a rate cut to boost lending for the purpose of further speculation, easing regulations on margin financing, reduction on transaction fees and providing liquidity to brokerage firms to prop up shares. Which is more or less what western agencies have done to prop up their markets. They have even directed state companies to not sell public companies stock that they might own.

The Shanghai Composite had surged to 5,166 on June 12 from just over 2,000 a year previously. In the same period China’s official GDP growth rate has declined from 1.9% to 1.3%. Commodity prices have been languishing as the economy of the world’s largest importer of raw materials has slowed down.

The past year has seen an influx of unsophisticated and inexperienced investors pouring into the market with the active encouragement of the Chinese government. Many are trading on leverage – borrowed cash – and few have the the capacity to weather margin calls as their positions nosedive.

The internet abounds with anecdotes from China reminiscent of those stories told about the atmosphere in the run up to the 1929 Wall Street crash where shoe-shine boys were giving investment advice to their customers.

The failure of the government to successfully intervene may have profound psychological consequences across the nation. China’s gargantuan property bubble, propped up by confidence in the power of the state, is yet to burst. The effect on China’s banking system of the evaporation of all this borrowed cash remains to be seen.

“Only when the tide goes out do you discover who’s been swimming naked” – Buffett

Some analysts view the crisis brewing in China to be of more significance globally than the on-going Greek crisis.

Why, well because contagion is now a real risk. You have far more connections with the Chinese economy then you do with the Greek one. For Europeans, Greece is in our currency boat and they are causing it to sink. The Chinese though own a big part of our boat and what we have in it, so a crisis in China very quickly becomes a big problem here.

Chinese consumer demand is becoming increasingly important to the global economy. As 1.5 billion people move up the food chain to the middle class they become a driver for global economic growth far into the future. Should the average Chinese household balance sheet take a bath in this market sell off it will have a significant effect on consumer sentiment and thus Global GDP growth.

Furthermore, this could be just the beginning. The Chinese government has not really been tested. They have enjoyed a massive year on year growth for over a decade. How will they manage a sharp downturn in their economy, discontentment on the streets, a perception that they may not have the skills to manage the crisis? How will they react to popular protests? Time will tell, but this crisis may be their greatest test yet and without an institutional memory of crisis management to rely on they will have to find their way through.

We believe that China stock crash is symptom of dangerous debt dynamics sweeping the world. The western markets are equally positioned. Investors should consider diversification strategies if they haven’t already done so. Call our office today to discuss.


Today’s AM LBMA Gold Price was USD 1,154.25, EUR 1,045.61 and GBP 749.46 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,166.25, EUR 1,063.22 and GBP 752.10 per ounce.

Silver in USD - 5 Year

Gold fell $13.10 or 1.12 percent yesterday to $1,155.80 an ounce. Silver slid $0.59 or 3.76 percent to $15.10 an ounce.

Gold in Singapore for immediate delivery inched down 0.6 percent to $1,147.75 an ounce near the end of the day.

As Europe called an emergency summit on Greece, the dollar rallied and gold dipped to a four month low. Silver slipped almost 7 percent and platinum fell to a 2009 low.

For the second time in the past year the U.S. Mint has run out of  its popular 2015 American Eagle silver bullion coins due to a “significant” increase in demand. A signal that there are bargain hunters out there who want to buy on the dip.

In a statement sent to its biggest U.S. wholesalers, the Mint said its facility in West Point, New York, continues to manufacture coins and expects to resume sales in about two weeks.

In late morning European trading gold is up 0.08 percent at $1,155.40 an ounce. Silver is down 0.56 percent at $15.00 an ounce and platinum is also off 0.88 percent at $1,020.00 an ounce.

Breaking News and Research Here



(courtesy Bron Suchecki/GATA)

Bron Suchecki: Conspiracy, complacency, and the death spiral phase


10:14p ET Tuesday, July 7, 2015

Dear Friend of GATA and Gold:

Central banks aren’t the only ones with potentially a lot of money to deploy trading gold, Perth Mint analyst Bron Suchecki writes tonight, adding that some major investment houses lately have expressed negative sentiment about the monetary metal.

While Suchecki acknowledges that some central banks are active in the gold market, his suggestion that investment houses might influence the market to an equal extent seems improbable. After all, central banks, unlike investment houses, are authorized to create not a few billion or even tens of billions but actually infinitemoney and to apply it in secret, even through some of the investment houses Suchecki cites. And while investment houses, if they are truly acting on their own, ordinarily care only about making money regardless of a market’s direction, central banks have a longstanding policy interest, overwhelmingly documented —


— of wanting to hold the gold price down to protect their own currencies, bonds, and interest rates.

Further, of course, the financial market maxim is not “Don’t fight Bessemer Trust” but rather “Don’t fight the Fed,” though lately it might be amended as “Don’t fight JPMorganChase when it is trading for the Fed.”

But Suchecki finds it “interesting” that Bloomberg View columnist Barry Ritholtz, disparaging gold as an investment last week and inviting critics to e-mail him, did not respond to the specific questions GATA put to him about surreptitious central bank intervention in the gold market, and “interesting” may be close enough to “telling.”

Suchecki’s commentary is headlined “Conspiracy, Complacency, and the Death Spiral Phase” and it’s posted at the Perth Mint’s research page here:


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



(courtesy Reuters/GATA)


U.S. Mint sold out of silver coins due to strong demand


From Reuters
Tuesday, July 7, 2015

The U.S. Mint said on Tuesday it temporarily sold out of its popular 2015 American Eagle silver bullion coins due to a “significant” increase in demand, the latest sign that plunging prices have spurred a resurgence of retail buying.

In a statement sent to its biggest U.S. wholesalers, the Mint said its facility in West Point, New York, continues to produce coins and expects to resume sales in about two weeks.

This is the second time the mint has sold out of silver coins in the past nine months. It ran out of 2014-dated American Eagles in November last year.

In 2013 the historic drop in precious metals prices unleashed a surge in global demand for coins, forcing the mint to ration silver coin sales for 18 months. …

… For the remainder of the report:



gee! I wonder who???

(courtesy GATA/Arabian Money.com)

Somebody big’s sitting on the gold price says Sharps Pixley CEO Ross Norman

Posted on 08 July 2015 with no comments from readers

Somebody big is sitting on the gold price and a relief rally when the Fed raises interest rates is ‘a distinct possibility’, Ross Norman, CEO of Sharps Pixley and London Bullion Market Association’s top forecaster of the past 15 years, told ArabianMoney today.

‘Gold is looking like the dog that just did not bark – but not uniquely so,’ he commented. ‘Most safe haven assets are looking distinctly lacklustre, including the VIX index.

Safe haven

‘Either 5,000 years of safe haven buying has just become bunk, or there is a desire to portray what it is evidently a financial and economic crisis as nothing to be concerned about.’

However, things look very different to eurozone gold holders whose currency has depreciated around 15 per cent against the US dollar.

‘European gold investors saw a 10 per cent gain last year and are up eight per cent year-to-date,’ pointed out Mr. Norman. ‘So again gold is doing what it should do, and that is to provide a means of hedging ones exposure to a currency crisis.’

Will an interest rate hike by the Federal Reserve really be bad for gold as Goldman Sachs predicts, if or when it happens?

Mr. Norman noted: ‘I think a rate hike must rate as the most telegraphed move in the history of financial markets and as such it must be fully factored into the price. When it does eventually come, say in Q1 2016, I could see a relief rally in gold as a distinct possibility.

‘Gold is looking rather like the late 1990’s when it became horribly price elastic – with selling on price strength and buy on dips with volatility falling dramatically as the market reverted to the mean.’

$1,450 an ounce?

In January Mr. Norman forecast a peak gold price of $1,450 an ounce for the year (click here). That’s looking a bit on the optimistic side with gold trapped in a trading range.

But if the Chinese stock market crash, or the Greek exit from the euro, overspills into global financial markets then all bets are off, and if past performance is any guide then gold will fulfill its historic role as a safe have when markets are really in serious distress.

Gold is always the ultimate bubble in global financial cycles but we are not there yet.



(courtesy Peter Cooper/Arabian Money)

Precious metal trading surges in China as equities crash

Posted on 08 July 2015 with no comments from readers

China recently saw trades of precious metals hit new highs as brokers introduced new investment products that are more accessible to average investors, reported the Guangzhou Daily.

The paper noted that the Shanghai Gold Exchange posted a record trading volume of 48.33 million grams in a single day in late June, even though global gold prices remained low.

Gold price angst

Today gold prices logged a four-month low close to $1,150 an ounce despite uncertainty created by the Greek debt crisis and crashing Chinese equity prices. Still this is clear evidence that Chinese investors are shifting out of stocks and into gold.

Several precious metals trading platforms in China have also witnessed a rebound and record trading volumes since mid-May, the newspaper said. The Guangdong Precious Metals Exchange reported that it had tripled institutional investors from a year earlier, while trading volume in June almost doubled from last year.

Meanwhile, the SGE, which has led markets in gold trading volume for the past eight years, is seeking greater price-setting power and will launch the Shanghai-Hong Kong Gold Connect program on July 10th.

New investment products for precious metals were among the highlights at this year’s China International Finance Expo in Guangzhou from June 26-28th, the newspaper reported. A total of 43 precious metal brokers showcased products created for mobile devices or popular instant messaging service WeChat.

Some of these new products lowered the minimum investment requirement from a few thousand yuan to as low as 8 yuan $1.30, making investing in precious metals more accessible to investors new to the market.

Bear growling

So far this source of new investors has not been enough to counter the bearish trend in the gold market which is being pushed down by strong intervention by the global central banks now facing a major financial crisis in the making.

But physical demand may well underpin the gold price at current levels, while as the crisis worsens the central banks are likely to lose control of gold as they did in 2009.

Besides for Chinese investors losing their shirts on stocks a shift into gold is an obvious safe haven move, and they have little alternative in the other investments open to them.

Posted on 08 July 2015


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


1 Chinese yuan vs USA dollar/yuan strengthens to 6.2089/Shanghai bourse red and Hang Sang: red

2 Nikkei closed down by 638.95  points or 3.14%

3. Europe stocks all in the green /USA dollar index up to 96.68/Euro up to 1.1012

3b Japan 10 year bond yield:  falls to  44% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 121.56

3c Nikkei still just above 20,000

3d USA/Yen rate now just below the 122 barrier this morning

3e WTI 52.70 and Brent:  57.35

3f Gold up /Yen up

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .64 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rise  to 57.42%/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 rises to: 18.38%

3k Gold at 1154.50 dollars/silver $14.98

3l USA vs Russian rouble; (Russian rouble up 1/2 in  roubles/dollar in value) 57.04,

3m oil into the 52 dollar handle for WTI and 57 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 .9503 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0467 well below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 3 year German bund remains in negative territory with the 10 year moving closer to negativity at +.63%

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 2.21% early this morning. Thirty year rate just at 3% at 3.00% / yield curve flatten/foreshadowing recession.

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


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


Will Greek “Hope” Offset “Limit Down” Contagion From The “Frozen” China Crash

Today’s market battle will be between those (central banks) “hoping” that a Greek deal over the weekend is finally imminent (which on one hand looks possible after a major backpedaling by Tsipras – who may never have wanted to win the Greferendum in the first place – yesterday in Brussels and today during his speech in the Euro Parliament, but on the other will be a nearly impossible sell to Greece as any deal terms will be far harsher than the deal offered by the Troika 2 weeks ago and will have no debt reduction), and those who finally noticed that the Chinese central planners have effectively lost control.

For those who may have missed the overnight fireworks, here are some more indicative Bloomberg headlines about China:

  • China’s Stocks Plunge as State Intervention Fails to Stop Rout
  • China Freezes Trading in 1,300 Companies as Stock Market Tumbles
  • China’s State-Owned Firms Ordered Not to Cut Share Holdings
  • China’s Market Rescue Makes Matters Worse as Prices Lose Meaning
  • China Ramps Up Policy Response as Panic Grips Stock Market

While pundits have been eager to downplay what is now a historic rout in Chinese risk assets, one that is matched by the depression of 2008 and which has sent the SHCOMP from up 60% for the year 3 weeks ago to barely greenlosing some 15 Greeces in market cap since mid-June

… the same pundits to whom neither the oil crash nor a Grexit nor the imminent collapse in Q2 corporate revenues and GAAP EPS, or anything else matters, the reality is that the Chinese stock rout is very clearly starting to have contagion effects on the rest of the economy, crashing commodities such as crude, gold, copper, iron and virtually everything else where China has been a marginal source of demand, but leading to forced selling of anything that is not nailed down.

As Bloomberg reported, raw materials from silver to lead and sugar to eggs fell to daily trading limits as the Shanghai Composite Index crashed to a three-month low Wednesday. A raft of measures to stabilize equities is failing to stop the bear-market rout in the country’s stock market, which had lured a record number of amateur investors and grown to become the world’s second-largest outside the U.S.

“People are selling everything in sight to get their hands on cash,” Liu Xu, a trader at private asset-management company Guoyun Investment Co in Beijing, said by phone.Some need to cover their margin calls in the stock market while others are gripped by fear that the Chinese economy will be affected by this crisis.”

Metals including copper, nickel and silver in Shanghai fell to their daily down limits, while rubber entered a bear market. Steel rebar and iron ore, as well as eggs, sugar and soybean meal dropped to the lowest level allowed by their exchanges.

“Agricultural products in my view are collateral damage in this sell off,” said Liang Ruian, a fund manager at Shanghai-based Jianfeng Asset Management Co. “Pigs are still going to eat, so what does this stock market stampede have to do with soybean meal?”

The problem with the Chinese plunge is that the value of collateral is dropping faster than the amount of outstanding maring debt, thus perpetuating a vicious circle of selling.

Worse, with well over half of the Chinese market frozen and not trading, the real extent of the selloff won’t be known until such time as all stocks resume trading, which like the Greek capital controls, will take a while.

Incidentally, it was almost exactly one year ago when we wrote “How The Market Is Like CYNK.” For those who still don’t get it, China is a perfect example of how the next monster crash will play out: stock trading or rather selling will be halted, first gradually then completely. To those needing liquidity, better luck next time.

As for the S&P which is now tractored to the 200DMA, the NY Fed and the BOJ will do everything in their power to offset the impotence of the PBOC. If the 200 DMA in the S&P is solidly breached, and if suddenly the Greek “hope” turns to despair again, 1-handle in the S&P500 here we come. Which is why expect some very dramatic central bank BTFD of E-minis via the CME’s Central Bank Incentive Program, because if there is one thing the Chinese crisis has shown it is that central banks now openly and without prejudice buy stocks, and quite desperately at that.

* * *

Looking around other markets, Asian equities were dragged lower by Chinese markets, where the Shanghai Comp (-5.9%) began the session with its largest decline since 2007, with losses of 8% as ‘panic selling’ continued with nearly half of Chinese stocks halted for trade, while margin trading fell by the most on record. Stocks initially recovered over half its losses after the PBoC vowed to support the market, however this was not sustained, with the Hang Seng (-5.8%) being dragged lower in tandem to see its largest drop since 2008. On a sector specific basis, Financials are the worst performers in the Hang Seng Index with HSBC and Standard Chartered both ending the session lower in Hong Kong. Furthermore, Bank of China which is one of the largest companies globally and boasts a market cap of USD 234BN, ended the session down 6.9%.

Nikkei 225 (-3.1%) broke below 20,000 to hit a 2-month low, while the ASX 200 (-1.8%) fell amid a slump in basic materials. Finally, JGBs rose 32 ticks amid safe haven buying in fixed income markets coupled with weakness in stocks.

European equities trade in positive territory today (Euro Stoxx +0.7%) as the latest update on Greece appears more upbeat after the sell-off seen in the last couple of days. On a sector specific note, this morning has seen a substantial amount of news regarding the banking sector after the sacking of Barclays chairman Antony Jenkins, seeing the Co. shares among the best performers in Europe (+3.3%). Meanwhile, HSBC (-1.5%) were impacted by the aforementioned weakness in China overnight, while many will be looking ahead to the UK Budget expected at 1230BST/0630CDT, with many anticipating the scrapping of the proposed banking levy.

Elsewhere, UK retailers and pension names may also be in the limelight during the budget with the possibility of the loosening of Sunday trading hour restrictions and UK press suggesting that in order for the government to hit their deficit targets they may need to cull some of the tax reliefs that pensions currently enjoy. Market participants will also be watching earnings from Alcoa aftermarket today, with the company unofficially kicking off this quarter’s earnings season. Meanwhile T-Notes trade higher heading into the North American crossover, with a USD 21Bn 10yr Note auction scheduled for 1800BST/1200CDT.

The latest update from Greece suggests that a proposal will be offered in writing by Friday morning at the latest, with a Eurogroup meeting and EU leaders’ summit scheduled for Saturday and Sunday respectively in order to potentially approve any short-term deal. The news strikes a more conciliatory tone than has been noted in recent days and as such has seen a period of respite for the EUR, which resides in positive territory this morning back above the 1.1000 handle.

Elsewhere, USD/JPY has fallen throughout the Asian session and into the European morning as risk off sentiment bolsters JPY amid concerns regarding the aforementioned ongoing volatility in Chinese equities. This has seen the USD dragged lower, currently residing down 0.3% on the day ahead of this afternoon’s FOMC minutes and with comments expected from Fed’s Williams.

The metals markets have been weighed upon heavily with copper at its lowest level since 2009 and spot gold at its lowest level  since March 18th on the back of aforementioned dampened Chinese sentiment. The energy complex has seen weakness this morning on demand fears despite yesterday API drawdown (-958K vs. Prey. 1900K) and EIA increasing their forecast for 2015 and 2016 oil demand growth by 20k bpd and 60k bpd respectively. Of note for the energy complex, DoE Crude Oil Inventories are expected at 0k.

Bulletin headline summary from RanSquawk and Bloomberg

  • Greece are set to offer a written proposal by Friday morning at the latest, with a Eurogroup meeting and EU leaders’ summit scheduled for Saturday and Sunday respectively in order to potentially approve any short-term deal.
  • Asian equities was dragged lower by Chinese markets, with Shanghai Comp (-5.9%) seeing its largest decline since 2007 and the Hang Seng (-5.8%) seeing its largest drop since 2008.
  • Today sees FOMC minutes, comments expected from Fed’s Williams and earnings from Alcoa.
  • Treasuries gain for a fourth day, curves flatten as Greece, China stocks spur flight-to-quality flows; supply continues with $21b 10Y, WI 2.205% vs. 2.461% in June.
  • Rout in China shares continued, Shanghai falls 5.9%; with at least 1,331 companies halted on mainland exchanges and another 747 falling by the 10% daily limit, sellers were locked out of 72% of Chinese market
  • Goldman says China’s large-cap CSI 300 index will rally 27% over next 12 months as government support measures boost investor confidence, monetary easing spurs growth
  • Greece has requested a 3Y loan facility from ESM, according to documents obtained by Bloomberg; proposes to implement reform measures from next week, commites to tax/pension reforms, will set out details by July 9
  • European leaders talked openly about a Greek exit from the euro ahead of a weekend summit on the country’s economic future, breaking dramatically with years of denial about the possibility
  • EU set Sunday deadline to reach deal; Merkel said in briefing last night that she “isn’t especially optimistic” about Greece, rules out debt haircut
  • EC President Juncker said Tuesday Europe has “a Grexit scenario prepared in detail,” hours before Austrian Chancellor Faymann said Greece’s Plan B is “another currency”
  • ECB is set to confer on how to keep Greek banks alive long enough for political leaders to craft a last-ditch deal and stop the country spinning out of the euro area
  • ECB’s Noyer says “we’re starting to be very worried”; ECB will stop its support to Greece if “there is no more political accord in sight for a program”
  • Travel bookings to Greece from Germany plunged 39% in the week through July 5 from a year ago, according to Amadeus IT Holding SA, a co. that processes flight reservations for airlines
  • Japanese investors sold net 4.09t yen ($33.6b) of overseas bonds in June, most on record, according to finance ministry data going back to Jan. 2005
  • Sovereign 10Y bond yields higher; Greek 10Y yields 19.381%. Asian stocks plunge; Hang Seng -5.8%. European stocks post modest gains. U.S. equity-index futures fall. Crude oil gains, WTI and Brent remain below $60/bbl; gold lower, copper higher


DB’s Jim Reid completes the overnight recap

There’s been many ‘deadlines’ and countless meetings of politicians and finance ministers throughout this Greece saga but this Sunday now looks set to be the most important yet. Late last night and post the US close, German Chancellor Merkel confirmed that an emergency EU summit has been scheduled for Sunday in what is being branded as a last chance saloon to reach a new bailout deal and to avoid Grexit. A barrage of stern rhetoric from European officials accompanied the headlines and was summed up by EU Council Head Donald Tusk stating that ‘I have no doubt that this is most critical moment in the history of the EU’.

Bourses in Asia have opened weaker this morning although further steep falls in China equity markets appear to be leading much of the broader move lower. We’ll take a look in more detail shortly, but the Shanghai Comp and Shenzhen have tumbled -3.88% and -3.27% respectively as we go to print. Those losses have also filtered across other bourses with the Hang Seng (-4.20%), Nikkei (-2.60%), Kospi (-1.00%) and ASX (-1.78%) all lower as we type. S&P 500 futures are -0.8% while the Euro spiked late last night to pare most of yesterday’s selloff and is unchanged versus the Dollar this morning. Asia credit is +4bps wider on the back of the moves in China, while China CDS is +5bps. 10y Treasuries are 4.6bps lower in yield at 2.212%.

So back to Greece. A Eurogroup meeting has now been scheduled for Saturday with a full EU summit planned for Sunday. In the meantime Athens has been given until Thursday evening to submit detailed reform proposals (although EC President Juncker suggested that this may be Friday morning). Greece will also have to commit to a list of prior actions to be voted through parliament before any financing can be provided and it’s likely that an even greater level of detail and commitment will be required from the Greece side relative to the previous EFSF negotiations given the deteriorating economic conditions Greece has faced over the last week. Should the Greek proposals be deemed acceptable, then the Europeans will formally open negotiations for the ESM program as well as a possible short term bridge loan given that any disbursements under an ESM program are likely to take time (given the process of various parliamentary approvals).

DB’s George Saravelos noted that in the event of no agreement, then he would expect the Euro Summit to discuss Grexit. There were certainly some signs of this yesterday. The EC’s Juncker in particular was quoted as saying that ‘I am strongly against Grexit but I can’t prevent it if the Greek government is not doing what we expected’. Juncker also confirmed that ‘we have a Grexit scenario prepared in detail’ while Tusk mentioned that ‘our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system’. George notes that, assuming no agreement, we would likely see the ECB suspend ELA financing on Monday morning and therefore effectively putting the entire Greek banking system into resolution, moving the country a step closer to leaving the Eurozone.

So the calendar is set for the next five days. The referendum result gave Tsipras the political boost needed to pass an agreement through parliament, albeit perhaps with the loss of some Syriza MP’s. The debate now will be around what conditionality is required from the Greek government and it’s likely that this has only gotten more significant in the days since the referendum result. George attaches a marginally higher probability to a post-midnight agreement being reached but notes that it is a close call. One way or another, the saga is approaching an end game and the future of Greece in the Eurozone is likely to be decided by the end of the week.

Once again the Chinese equity market is the other notable headline grabber this morning. It’s been another morning of huge swings with the Shanghai Comp and CSI 300 initially opening nearly 8% lower before paring around half of those losses as we go to print, while the Shenzhen opened just over 4% lower. The latest sharp declines have come despite renewed attempts at trying to halt the selloff. Over 1300 stocks or more than 40% of the market cap of the mainland China exchanges have been suspended from trading with the bulk frozen pre-market open. As well as this, the China Financial Futures Exchange has raised margin requirements for sell orders on CSI 500 index futures, while the China Securities Finance Corp put out a statement saying it will ‘increase the force of its small and mid cap share purchases in order to relieve the problem of strained liquidity’. Meanwhile, the PBoC reiterated its support minutes after bourses plunged at the open, saying it will provide ‘ample liquidity’ to the stock market and ensure no systematic and regional financial risks occur. Finally on China, The SASAC (the state owned administrator of SOEs) has ordered central govt-administered companies not to cut holdings of stocks of their listed companies. So a multitude of things the authorities are trying to do to stem the severe bleeding. I suppose the main question is whether this is a bigger story than Greece. Our answer would be that a freefalling Chinese economy (if it came to that) would be much more important than a ‘Grexit’ for global markets. We’re not at that stage yet but if the authorities aren’t able to stabilise things soon then there will be collateral damage so this is a crucial story to watch. Expect more intervention to come.

Looking back at markets yesterday, a renewed optimism for negotiations with Greece getting underway helped support a bid for risk assets mid way through the US session as the S&P 500 turned around an initial 1.2% intraday decline to finish +0.61% at the closing bell. The Dow (+0.53%) also closed higher with utility stocks leading the way. 10y Treasury yields bounced off their intraday lows (of 2.183%) to close at 2.259%, still 2.7bps lower in yield on the day and the lowest level now since early June. The Dollar Index firmed 0.59%, while it was a softer day for Gold with the commodity falling 1.29%. Oil markets took something of a breather meanwhile. WTI (-0.38%) finished modestly lower at the close although Brent (+0.55%) ended slightly firmer.

In terms of data yesterday, the May trade balance didn’t add a whole lot to the debate after the deficit rose to $41.9bn from $40.7bn in April, although behind expectations of $42.7bn. In the details net exports data was supportive enough to see the Atlanta Fed raise their GDPNow model forecast for Q2 growth to 2.3%, from 2.2% previously and putting it more or less at the low end of the market range now. Elsewhere, JOLTS job openings for May rose to 5.36m from a revised 5.33m in April, the highest now since the series began in 2000. In the details the quits rate was unchanged at 1.9% while the hiring rate eased to 3.5% from 3.6%. Finally the IBD/TIPP economic optimism survey was unchanged at 48.1 (vs. 48.9 expected).

With much of the optimism for Greece negotiations coming in the latter half of the US session, it was another softer day all round for European equities as the Stoxx 600 (-1.57%), DAX (-1.96%), CAC (-2.27%), IBEX (-1.84%) and FTSE MIB (-2.97%) all slipped. The risk-off tone helped support a bid for Bunds with the 10y yield 12.1bps lower at 0.640% and the lowest level now since June 1st. Despite Greek 10y yields moving 68bps wider, Spain (-11.4bps), Italy (-11.7bps) and Portugal (-4.3bps) all enjoyed a better day which is probably giving European leaders a boost in their decision making with regards to Greece. Data wise we saw a slightly below market German industrial production reading (0.0% mom vs. +0.1 expected) for May while over in the UK data was more mixed. Industrial production (+0.4% mom vs. -0.2% expected) was well ahead of consensus, however this was slightly offset by a soft manufacturing production print (-0.6% mom vs. +0.1% expected).

Away from the obvious Greece headlines, it’s a quiet calendar data-wise today. We have a post election budget in the UK which may impact the market’s perception of the path of the deficit over this parliament. Elsewhere French business sentiment and UK house price data are due in the European time zone while the FOMC minutes will be due this evening along with the May consumer credit print. It’ll be interesting to see if we get much in the details of the minutes with regards to Greece, but clearly a lot has happened in the time since the June 16th/17th meeting. Finally earnings season also commences today in the US with Alcoa due to report after the closing bell.



The most important development overnight is on China:


(courtesy zero hedge)


China Crashes Most Since 2007 Amid “Panic Sentiment”; Over Half Stocks Suspended, PBOC Promises “Liquidity Support”

Some context…

For a record 12th day in a row, Chinese margin debt balances have dropped with today’s 8.5% collapse the largest in history. As of last night, there were around 570/1694 Shenzhen stocks halted/suspended and hundreds more on the Shanghai bourse leaving more than 54% of all Chinese stocks frozen ($2.6 trillion or 40% of value). China continues to try to manage leverage down (raising margin requirements on stock futures) whileencouraging speculation (easing rules for insurers to buy blue chips and financing the purchase of smaller company shares directly) and CYNK’ing the entire marketif it’s not open, you can’t sell it and the price cannot fall! It’s not working as CSI-300 futures are now down 7.9% in the preopen.


China appears to be trying to manage leverage…



The problem is the collateral value is falling faster than the margin debt leaving “leverage” still at record highs…

While encouraging speculation…


China news is domninated by dozens of pages of this…

  • UPDATE: Trading halts have left 1544 companies, equivalent of 54.7% of the Shanghai Composite and Shenzhen Composite, suspended today.(@GregorHunter)

With what we estimate is around 850-900 Shenzhen Composite stocks suspended (over half of the 1694 stocks in the index) and almost 25% of Shanghai Composite stocks, it appears China has resorted to the endgame in managing a collapse…

if it’s not open, you can’t sell it and the price cannot fall!

In other words – the whole Chinese market just got CYNK’d

* * *

It’s not working…



It looks like today could see China go red for the year…

*  *  *

China weakness and European rhetoric wearing S&P futures lower (down 11 points from cash close)…

*  *  *

Another day another attemnpt to stabilize…


Just add this to the list of interventions…

Perhaps if you just stare at it long enough, it will rise…


Just remember this crash is telling us somethinmg about China…

The stock market knows more than any individual investor, and China’s is no exception.

As NYU Professors Jennfier Carpenter and Robert Whitelaw told CNBC in January…

This optimism should be taken seriously. This run-up is not a bubble, and so investors should not fear another crash.


Our research shows that after a rocky first decade, which earned China’s stock market a reputation as a casino, stock prices in China predict future profits as well as they do in the U.S. Moreover, this predictive power is highly correlated with China’s corporate investment efficiency, suggesting that stock prices are teaching corporate managers important lessons as well. However, capital in China is still allocated almost entirely by its massive banking sector. It is time to untie the hand of the stock market, reform listing standards, streamline the IPO approval process now holding up over 600 firms seeking equity capital, and let the stock market allocate capital, too.

Shut Up!!!

As we detailed earlier – none of this was real or indicative of any real economic growth – it was all speculative ponzi and will not end well…

Exhibit 1 – Based on ‘fundamentals’, The Shanghai Composite has a long way to go…


Exhibit 2 – If Dr. Copper is right about the state of the world, The Shanghai Composite won’t find support until it has fallen another 60%…


Exhibit 3 – Judging by historical analogs, The Shanghai Composite will need to destroy all gains in the last 2 years before ‘value’ is once again seen…


Chinese investor psychology has shifted. Period.The more the government intervenes to lift stock prices explicitly, the more local and professsional leveraged investors will use any strength to unwind their positions (profitably or unprofitably).




Just in case you missed last night’s big story on Tsipras who intended to lose the referendum but was shocked out of his mind when the vote became “NO” by a landslide:
(courtesy Ambrose Evans Pritchard/zero hedge)

The Greferendum Shocker: Tsipras “Intended To Lose” And Is Now “Trapped By His Success”

Call it game theory gone horribly chaos theory.

It all started with a report by the Telegraph’s Ambrose Evans-Pritchard, whose release of on the recordcomments by Yanis Varoufakis (which we noted was rather surprising) that Greece was contemplating a parallel currency and potentially nationalizing Greek banks over the weekend, was supposedly the catalyst that got the Greek finmin fired. As a reminder, this is what Varoufakis told AEP on Sunday night: “If necessary… issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago.” And this is what the WSJ said on Monday morning:

… the premier decided to act after Mr. Varoufakis told a U.K. newspaper late Sunday that Greece might introduce a parallel currency and electronic IOUs similar to those issued previously in California. Mr. Varoufakis quickly backtracked on his comments to the Daily Telegraph, but his prime minister had had enough, the people familiar with the matter say.

That was the first indication that the wheels had officially come off the Greek wagon.

Moments ago, we got confirmation of just that, when in another surprising twist it was again the Telegraph’s Evans-Pritchard who reported that the Greek prime minister who decisively and unexpectedly pushed for a referendum on the last weekend of June, “never expected to win Sunday’s referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

He got just that, and in a landslide vote at that even though “he called the snap vote with the expectation – and intention – of losing it.”

Also according to the Telegraph, “the plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25th “ultimatum” and suffer the opprobrium.”

He had good reason: according to another Varoufakis quote provided by AEP, “[the Troika] just didn’t want us to sign. They had already decided to push us out.”  In other words, as we speculated in mid-June, the only question was who gets stuck with the blame, and when Tsipras called the referendum, he made it quite easy for Europe; it was even easier when Greece collectively voted “Oxi” to a referendum spun in Europe as one whether or not to remain in the Eurozone.

There is more: with Tsipras having already checked out it was a case of “after me, the flood”

This ultimatum came as shock to the Greek cabinet. They thought they were on the cusp of a deal, bad though it was. Mr Tsipras had already made the decision to acquiesce to austerity demands, recognizing that Syriza had failed to bring about a debtors’ cartel of southern EMU states and had seriously misjudged the mood across the eurozone.

But it is what happened next that took everyone by surprise: “Syriza called the referendum. To their consternation, they won, igniting the great Greek revolt of 2015, the moment when the people finally issued a primal scream, daubed their war paint, and formed the hoplite phalanx.”

Suddenly the stakes are even higher for Tsipras, who is “now trapped by his success.” According to Costas Lapavitsas, a Syriza MP, “the referendum has its own dynamic. People will revolt if he comes back from Brussels with a shoddy compromise.”

Ironically, that is precisely why the market soared today after it tumbled early in the morning, because it appeared that the Greek finmin was doing just: accepting a shoddy compromise. Of course, it wouldn’t be the first time: the Greeks had come home with “compromise” deals on many previous occasions only to have Syriza tear them apart. And this time the stakes are higher not only for Tsipras but the entire party, which realizes it faces a mutiny by the people, mostly the young ones, those with little to lose, if some 60% of them voted against a deal “at any cost” just to see the government fall back to just such an outcome.

The Syriza MP Lapavitsas is correct when he says that  “Tsipras doesn’t want to take the path of Grexit, but I think he realizes that this is now what lies straight ahead of him.

In some ways Tsipras tried to backtrack: “The prime minister was reportedly told that the time had come to choose, either he should seize on the momentum of the 61pc landslide vote, and take the fight to the Eurogroup, or yield to the creditor demands – and give up the volatile Mr Varoufakis in the process as a token of good faith.”

What would happen if Tsipras did decide to stick it to Europe, launch a parallel currency, sack the legacy central banker and nationalize the insolvent banks? We already laid out the key points previously but here it is again:

They would “requisition” the Bank of Greece and sack the governor under emergency national laws. The estimated €17bn of reserves still stashed away in various branches of the central bank would be seized.


They would issue parallel liquidity and California-style IOUs denominated in euros to keep the banking system afloat, backed by an appeal to the European Court of Justice to throw the other side off balance, all the while asserting Greece’s full legal rights as a member of the eurozone. If the creditors forced Grexit, they – not Greece – would be acting illegally, with implications for tort contracts in London, New York, and even Frankfurt.


They would impose a haircut on €27bn of Greek bonds held by the ECB, and deemed ‘odious debt’ by some since the original purchases were undertaken by the ECB to save French and German banks, forestalling a market debt restructuring that would otherwise have have happened.

None of that happened, instead Greece is now in full chaos mode.

Events are now spinning out of control. The banks remain shut. The ECB has maintained its liquidity freeze, and through its inaction is asphyxiating the banking system.


Factories are shutting down across the country as stocks of raw materials run out and containers full of vitally-needed imports clog up Greek ports. Companies cannot pay their suppliers because external transfers are blocked. Private scrip currencies are starting to appear as firms retreat to semi-barter outside the banking system.

However, it is not just Greece which is sliding into total chaos – so is Europe itself, where the splits are becoming so obvious none other than the head of the German Institute for Economic Research said “What Is Happening Now Is A Defeat For Germany.”

The entire leadership of the eurozone warned before the referendum that a ‘No’ vote would lead to ejection from the euro, never supposing that they might have to face exactly this. Jean-Claude Juncker, the European Commission’s chief, had the wit to make light of his retreat. “We have to put our little egos, in my case a very large ego, away, and deal with situation we face,” he said.


France’s prime minister Manuel Valls said Grexit and the rupture of monetary union must be prevented as the highest strategic imperative. “We cannot let Greece leave the eurozone. Nobody can say today what the political consequences would be, what would be the reaction of the Greek people,” he said.


French leaders are working in concert with the White House. Washington is bringing its immense diplomatic power to bear, calling openly on the EU to put “Greece on a path toward debt sustainability” and sort out the festering problem once and for all.


The Franco-American push is backed by Italy’s Matteo Renzi, who said the eurozone has to go back to the drawing board and rethink its whole austerity doctrine after the democratic revolt in Greece. He too now backs debt relief for Greece.

However, as if oblivious to these terminal developments within her own union, Merkel is already pushing onward and discussing plans for humanitarian aide and balance of payments support for the drachma: if there was any clearer indication that the Eurozone has been an abject failure, it would be the treatment of one of its member states as a 3rd world African banana republic even before it formally withdrew from its quasi-prison.

Some within Syriza realize that it is all coming to an end, no matter if the can is kicked one more time (which it increasingly looks like it may be despite the referendum’s landslide vote):

Mr Lapavitsas said Europe’s own survival as civilisational force in the world is what is really at stake. “Europe has not show much wisdom over the last century. It launched two world wars and had to be saved by the Americans,” he said


“Now with the creation of monetary union it has acted with such foolishness, and created such a disaster, that it is putting the very union in doubt, and this time there will be no saviour. It is the last throw of the dice for Europe,” he said.

… and yet, in the very end, the Greek prime minister who bluffed and unexpectedly won, now appears willing to concede just about everything to Merkel. Because even if the Telegraph’s entire article is based purely on speculation, it doesn’t explain the easy with which Tsipras seems to have folded not only on implementing reform as part of the harsher deal proposed by Merkel, but his admission that further debt relief now appears unlikely:


And from the president of the European Council:

Because in the end money talks, in this case €120 billion in hijacked unsecured liabilities known “deposits” and politicians walk. As for those millions of Greeks who gave Europe the symbolic middle finger on Sunday, their reaction when they just find out they were sold down the river once again will be all that matters.

Yet in the end, Varoufakis’ line may again be the most important one: “they had already decided to push us out.” If true, then as Juncker threatened earlier not only will the last day for the Greek government be Monday, but so will the last day for Greece in the Eurozone.

The EU gets tough with Tsipras/offers terms much more austere than before the referendum:
(courtesy zero hedge)

EU Tells Tsipras the Party’s Over as Euro Exit Door Swings Open

After five months of drama, false dawns and unpleasant surprises, Europe’s leaders are finally ready to show Alexis Tsipras the exit.

Behind the doors of the Justus Lipsius building in the heart of the political district in Brussels, the euro-region’s leaders rounded on the Greek prime minister for destabilizing the currency union before Germany’s Angela Merkel emerged to deliver an official ultimatum.

In a tense and at times emotional meeting, Tsipras’s European peers told him he’d failed to appreciate the efforts the continent’s voters and taxpayers had made to help the Greek people and blamed him for escalating tensions across the region. Six officials agreed to share their knowledge of the private talks while asking not to be named because of the sensitivity of the historical moment.

“Party time at the expense of others in Greece has come to an end,” Lithuanian President Dalia Grybauskaite said. “Europe and the euro area are surely unprepared to pay for the irresponsible behavior of the new Greek government.”

Afterward in public comments, the leaders competed to find the harshest language to describe Tsipras’s approach and its likely consequences. Dutch Prime Minister Mark Rutte said a “miracle” would be needed to keep Greece in the euro-region, while Malta’s Joseph Muscat said the 40-year-old had created an “enormous trust-gap” with his European counterparts.

“We have a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said, using the shorthand for expulsion from the now 19-nation currency area.

Mood Sours

That bookended a day that began with a meeting of the region’s finance ministers, and a welcome for Greece’s new man in that role, the 55-year-old economist Euclid Tsakalotos. At first Tsakalotos won the acceptance of his colleagues, who’d been riled by his predecessor Yanis Varoufakis’s hectoring style.

But the mood soured quickly.

Many of his new colleagues were irritated that Tsakalotos had failed to present concrete plans to bridge the nation’s financing gap, prompting some to question the purpose of interrupting their vacations to show up.

“I expected so much from the new minister who, yes, gave us a good presentation on the situation in Greece but still no proposals,” Belgian Finance Minister Johan Van Overtveldt said. “I only wish the Greeks realize the same urgency and seriousness of the situation as much as the rest of the Eurogroup.”

Plan B

Germany’s Wolfgang Schaeuble demanded that officials from the European Central Bank and the European Commission detail their plans to shield the rest of the bloc from the fallout from a Greek exit. A long-held taboo against discussing such plans had been cast aside, officials said.

As European leaders arrived to meet Tspiras, the rhetoric built. Muscat said the meeting would probably be a “waste of time” as the Greeks had arrived “empty-handed.”

“You can’t have one country enjoying a feast, overspending and having everyone else pay for it, including our citizens with much lower pensions and wages,” said Grybauskaite.

During the subsequent meeting, Muscat and Grybauskaite led the attacks on Tsipras, according to a European official.

Grybauskaite’s adviser didn’t respond to requests for comments. Muscat said in an interview that leaders had been angered by Tsipras’s decision to called a snap referendum when a deal seemed to be within reach last month.

“The referendum has practically antagonized public opinion across the EU,” Muscat said after the summit. “So we wanted to be tougher more than ever with him in our requests.”

That became clear as soon as leaders left the meeting rooms in Justus Lipsius and began speaking to reporters. After a briefing from ECB President Mario Draghi, the leaders gave Tsipras five days to accept the terms of their financial support or face ejection from the euro region.

“The final moment of truth is approaching quickly for Tsipras,” Wolfango Piccoli, managing director at Teneo Intelligence in London, said by e-mail.




Early this morning; Tsipras caves in and formally requests a ESM 3 year bailout.  The conditions will be much more austere and Germany is not in the mood to provide any more funds:

(courtesy zero hedge)

Greece Caves, Formally Requests ESM Bailout: Full Headline And Next Steps Summary

As we reported yesterday, following the latest European leaders summit, Greece was given until the end of the week to come up with a proposal for sweeping reforms in return for loans that will keep the country from crashing out of Europe’s currency bloc and into economic ruin.

“The stark reality is that we have only five days left … Until now I have avoided talking about deadlines, but tonight I have to say loud and clear that the final deadline ends this week,” European Council President Donald Tusk told a news conference.

It did that moments ago when Greece officially submitted a request for a three-year loan facility from the European Stability Mechanism. And to think Syriza’s main election promise was no more bailouts…

As Bloomberg reports, the loan will be used to meet Greece’s debt obligations, and to ensure financial system stability. Greece proposed immediate implementation of measures, including tax, pension reforms as early as next week. Govt to detail its  proposals for specific reform agenda on July 9 at latest or tomorrow.

More details from the WSJ:

Greece formally requested a three-year bailout from the eurozone’s rescue fund Wednesday and pledged to start implementing some of the overhauls demanded by creditors by early next week, according to a copy of the request seen by The Wall Street Journal.


Crucially for Greece’s creditors, the letter says the government would start implementing some measures, including on taxation and pensions, by the beginning of next week, though it doesn’t go into details.


The letter is a first step toward fulfilling a demand by international creditors, who have given Athens until Sunday to come up with tougher measures they would impose in return for desperately needed financing that could keep the country from bankruptcy and even worse economic turmoil. 


The full list of overhauls and budget cuts is what will determine whether the application for a new rescue program will be approved by the rest of the eurozone. The currency union’s leaders said Tuesday they would assess whether it makes sense to start formal negotiations on a bailout program at an emergency summit on Sunday.

In other words, and as expected, Greece has essentially capitulated to Troika demands which will come with far harsher terms and even more austerity, just to keep the myth that Greece is an “equal member” in the Eurozone, yet virtually all the proceeds will go back to repaying the ECB, the IMF and other official taxpayer-backed European creditors as well as the occasional private holdout creditor.

This is all happening as Tsipras is currently talking in the Euro parliament, where he is trying to strike a far more cooperative tone now the only Greek hope is that it is not too late for Europe to accept any offer Greece will propose, oblivious of the referendum.

Earlier he submited the following statement after the Eurozone summit.

Here are some of his speech highlights via Reuters:

Thank you for the invitation-& honor-to address the elected representatives of peoples of Europe.


The Greek people’s brave choice in conditions of unprecedented pressure, does not mean a break w/Europe.


My country was used to experiment with austerity. The experiment, we must admit, failed.


The majority of Greek people feel that there is no other choice but to stop treading this road to nowhere.


Our proposal to the institutions includes: credible reforms based on a fair sharing of burdens.


It includes the adequate coverage of the country’s financial needs.


It includes a strong investment program, primarily for combating unemployment and encouraging entrepreneurship.


It includes a commitment to begin a sincere discussion regarding a solution to problem of sustainability of Greece’s public debt.


Our proposals for financing our obligations & restructuring our debt will not burden European taxpayers.


I’m not one of those politicians who claim that foreigners are to blame for all of Greece’s woes.


Previous governments created clientelistic state, furthered corruption & strengthened ties to economic elite.


Our proposals focus on reforms that aim to change #Greece, reforms that the Memoranda purposely did not include.


Now, must reach a viable & honest compromise, one that will avoid a historical break & goes against EU tradition.


And I am sure that we’re all aware of-& we’ll all take into account-our historic responsibility. Thank you.

It is unclear if Tsipras has converted the Syriza hard cores to his camp just days aftter the critical Greek “Oxi” referendum passed on a landslide, but at least one MEP was convinced:

All of us, urgently, by Sunday, have to do what needs to be done, whatever it takes, as Mr. Draghi says, so we see the word Grexit wiped out of EU vocabulary for ever.

– Dimitrios Papadimoulis, MEP FROM TSIPRAS’S SYRIZA PARTY

But others were not easily fooled:

So if this piece de theatre continues I think we will be more and more confused about who and what we are trying to save. Are we trying to save the currency union, Greek society, the credibility of the government, the creditors, the reputation of Angela Merkel, or the infallibility of ever closer-union?


We certainly cannot save all of these. There will be some casualties.


In any event, the latest Greek crisis, if only for the time being, is likely about to close this weekend. Will the can be kicked for 3 years or will the Greek people confirm they have had enough and rebel from under Tsipras, we will hopefully find out shortly.

In the meantime, here is the recap of all the key Greek headlines and events in the past several hours from Reuters and Bloomberg…

  • 1015 – Technical experts will review Greece’s request for an ESM loan on Wednesday but there will be no conference call among euro zone ministers, a spokesman says
  • 0956 – Russia is not in a position to help solve the Greek debt crisis, and the EU should resolve it on its on, the chief executive of Russia’s second largest bank VTB says
  • 0947 – Greece lodges formal request for bailout loan with the euro zone’s special support fund, a spokesman for the European Stability Mechanism says
  • 0920 – European Central Bank Governing Council member Ewald Nowotny says hard to imagine that ECB council could increase emergency liquidity for Greece
  • 0904 – Bank of Italy and ECB member Ignazio Visco says ECB will will do what it can to contain financial and economic consequences of Greek crisis.
  • 0903 – Greece successfully rolls over T-bills to refinance a maturing six-month issue
  • 0820 – Greek Prime Minister Alexis Tsipras tells European Parliament says will present details proposal to EU in next 2-3 days.
  • 0812 – Greek Prime Minister Alexis Tsipras tells European Parliament the referendum gave him a mandate to find a socially just and economically sustainable solution to end the crisis.
  • 0747 – EU Economics Commissioner Pierre Moscovici tells BBC radio an agreement between Greece and its euro zone partners is still possible.JULY 7
  • 2347 – Euro zone members give Greece until the end of the week to come up with a proposal for sweeping reforms in return for loans
  • 2135 – Merkel says she hopes to have sufficient reform proposals from Greece this week to be able to ask the German parliament to approve negotiations on a new long-term aid programme for Athens. If the reform list was adequate and Greece took some prior actions to enact first measures, she says she is sure that short-term finance can be provided to help Athens over its immediate funding needs.
  • 2030 – Austria’s finance minister says Greece’s request for financial aid from the European Stability Mechanism (ESM) is so far very vague.
  • 2020 – Summit over; Italian Prime Minister Matteo Renzi says a final meeting on Greece, involving all 28 EU leaders, will take place on Sunday.
  • 1932 – Greek banks could start to run out of cash over the next two days if creditors do not agree to a new aid deal, two sources familiar with the country’s financial system say.

…. and here are the key catalysts in the coming days.

  • July 8: Greece scheduled to submit request for a bailout agreement to the European Stability Mechanism
  • Euro area finance ministers may hold a conference call to assess Greece’s request for a new program * European Central Bank Governing Council will review liquidity situation of Greek lenders
  • Greek bank holiday, capital controls decree expires; government set to renew it
  • July 9: Greece must submit its reform agenda, which will be assessed by the European Commission, the European Central Bank and the International Monetary Fund. Results will be given to the Eurogroup, which will hold another call to discuss the new proposals
  • July 10: Greece needs to refinance EU2b in t-bills
  • July 11: Euro-area finance ministers will meet in Brussels
  • July 12: Euro-area and EU leaders will hold meetings to discuss the results of Greece’s expected comprehensive reform agenda


Many European parliamentarians are not happy with the performance of Tsipras:
(courtesy zero hedge)

“Prove You’re Not A False Prophet!”; Tsipras Lambasted At Fire And Brimstone European Parliament Session

Facing a new “deadline” (doomsday is now set for Sunday) to submit a viable proposal to EU creditors, Alexis Tsipras addressed the European Parliament in Strasbourg on Wednesday.

The embattled Greek PM once again called for debt relief (something Angela Merkel roundly rejected yesterday despite the IMF’s contention that writedowns are a precondition for “sustainability”) and claimed that Greece was being used as a “laboratory for testing austerity.” 

Greeks, “stood up and were counted” last Sunday and it is now incumbent upon Brussels to “listen to what they said,” Tsipras continued, referencing the referendum which The Telegraph’s Ambrose Evans-Pritchard says the PM did not in fact plan on winning.

Here’s more from NY Times on Tsipras’ defiant speech:

“We want an agreement that will give a final end to the crisis and show there is light at the end of the tunnel,” Mr. Tsipras told the packed chamber. But he indicated that a deal could not come at any price, noting that Greece had been “transformed into a laboratory for testing austerity over the past years.”


“The money that was given to Greece never went to the people,” Mr. Tsipras said, drawing a mix of booing and applause. “The money was given to save Greek and European banks.”


The Greek leader declared that he was not seeking a “rupture” with Europe but rather a “socially just and economically viable agreement without the mistakes of the past, that caused a recessionary spiral.”


Any deal should reflect the “strong mandate” of the Greek people, he added, a reference to the resounding rejection of austerity measures proposed by creditors in a referendum last Sunday.

And more from the Irish Times:

“We are determined not to have a clash with Europe but to tackle head on the establishment in our own country and to change the mindset which will take us and the euro zone down,” Tsipras said to applause from the left.


He promised to deliver detailed reform proposals in the next 48 hours and mostly eschewed the angry rhetoric that has alienated many European partners, although he criticised attempts to “terrorise” Greeks into voting for “never-ending austerity”.


Mr Tsipras acknowledged his radical government’s share of responsibility for what had gone wrong in its 5 and a half months in office but said the bulk of Greece’s problems lay in a failed austerity policy imposed over the last 5 and a half years of crisis.


He was also strongly critical of Greece’s failings as a society, citing a history of clientelism, corruption, chronic tax evasion that had “run riot”, inequality and “the nexus of political and economic power”.

Finally, here’s Reuters with a recap:

I find myself here only a few days after the resounding verdict of the Greek people, after a decision we took to give the floor directly, to ask the Greek people directly, for the their views and be an active part of the negotiations affecting their own future. A few days after these negotiations we’ve now been given a mandate to redouble our efforts to get a socially just and economically sustainable solution to the Greek problem, without repeating the mistakes of the past which condemn the Greek economy to a period of never-ending impasse of austerity which trapped our economy in a recessionary vicious circle.


Let me assure the house that, quite apart from the crisis, we will continue with our reform undertakings. Let’s not forget that for the past five years the Greek people have made a tremendous effort for adjustment but this has exhausted the resilience and the patience of the Greek people.


We demand an agreement with our neighbours but one which gives us a sign that we are on a long-lasting basis exiting from the crisis, which will demonstrate that there’s light at the end of the tunnel.


The proposals we have made to our partners are credible reforms with an acceptable degree of burden sharing without recessionary effects. We need to ensure the medium term funding of our country with a development and growth programme because otherwise we won’t exit from this crisis. Our prime objective must be to combat unemployment and to encourage entrepreneurship.


I am not one of those politicians who claim that those responsible for the woes of Greece have been wicked foreigners. Greece has got to the verge of bankruptcy because for many many years, the governments of Greece have been creating a clientelist governments, they have strengthened the hands of corruption, they have created and nurtured a nexus between political and economic power.


They have allowed tax evasion to run riot and it’s not right. In accordance with a survey by Credit Suisse, 10 percent of Greeks currently have 56 percent of the national wealth and 10 percent in a time of austerity, they have not shared the pressure.


This is a major injustice and the programmes, the bailout programmes have not made things better. They were supposed to bring about reforms but those reforms have not made things better, on the contrary they have made things worse. We were supposed to bring about reforms but those reforms have not, and too, the tax collection mechanisms which collapsed under the excessive zeal of enlightened terrified national officials.


None of the reforms have helped when it comes to the nexus between the political establishments, the oligarchs and the banks in that three-sided ring. None of the reforms have improved the functioning, the efficiency of the mechanisms of the state which have now become inured to working in the selfish interests, the vested interests rather than the common good.


European history is a history of conflict but conflict leading to compromise, it’s also a history of convergence and enlargements, it is a history of unity and not divisions, and this is why we talk about a united Europe and let us not allow it to become a divided Europe.


At this time, we are called upon to produce a productive and fair compromise which will avoid a break-off in negotiations and this is in line with the traditions of European Union.


All of us have taken the measure of the situation and I believe that together we can rise to this historical challenge.

While Tsipras’ 12 minute speech was full of the same bravado and bluster the world has come to expect from the Greek PM, it paled in comparison to the tongue lashing he received from others in attendance. German MEP Manfred Weber for instance, accused Tsipras of “looking for failure” and trying to hurt “nurses in Poland” before warning the PM about the perils of associating with Fidel Castro. Here’s are some choice excerpts courtesy of FT:

The prime minister of Greece should apologise for those utterly unacceptable statements [terrorists]. Unfortunately he has passed over them in silence


You are destroying confidence in Europe. You’re talking about dignity, but dignity means truth, honesty. You said that the banks are closing because the evil ECB is ratcheting up pressure. You said the banks would be open on Tuesday, it is now Wednesday, you are not being honest with the Greek people.


Mr Tsipras, the extremists of Europe are applauding you. Fidel Castro wrote a message to congratulate you on your triumph. It seems to me you are surrounding yourself with the wrong friends.


If you’re talking about a debt haircut, be honest. Its not extraneous financial institutions that will pay. It’s Portugal… Spain… It’s the nurses in Poland. You have to think about the dignity of people in other European countries


How can you tell Bulgaria in terms of solidarity that Greece cannot countenance further cuts, when in at least 5 other European countries the standard of living is lower than in Greece. The PM of Slovakia is also thinking about a referendum because the citizens are sick of shelling out for the Greeks.


You engage in confrontation, we engage in compromise. You are looking for failure, we are looking for success.

But perhaps the most damning criticism came from former Belgian PM Guy Verhofstadt who, after essentially daring Tsipras to show up on Twitter Tuesday, proceeded to lambast the Greek premier in an 8 minute speech which culminated in Verhofstadt suggesting that Tsipras was a “false prophet.”

Nigel Farage also spoke, calling the situation the result of an “irreconcilable cultural difference between Greece and Germany.” Farage then proceeded to say quite matter-of-factly, that the “European project is beginning to die.” Here’s the speech:

We’ll close with the following quote from Farage which may well prove quite prescient in the days and weeks ahead:

“You should lead the Greek people out of the eurozone with your head held high, get back your democracy, get back control of your country, give your people the leadership and the hope that they crave. Yes it will be tough for the first few months, but with a devalued currency and friends of Greece all over the world, you will recover.”


Germany crushes all hope of getting debt relief:
(courtesy zero hedge)

Germany Crushes All Hope Of Greece Getting Debt Relief

As the Grexit debate is falling into the background a new, far more powerful conflict emerges: one between Germany on one side, and the IMF, France, Italy, and perhaps even the US, when it comes to the all important issue of debt relief.

As a reminder, it was the unexpected release of the IMF’s debt (un)sustainability draft late last week (with US support over the vocal objections of Europe) that not only gave Tsipras a Greferendum win (he did not desire), but showed clearly that without a debt haircut of at least 30%, any Greek deal will merely lead to another, even more violent Greek default down the line.

Of course, it is not only Greece that needs debt reduction but so do all the other peripheral nations:

Overnight, the Telegraph reported that the “debt-haircut” axis has even more supporters in Europe:

French leaders are working in concert with the White House. Washington is bringing its immense diplomatic power to bear, calling openly on the EU to put “Greece on a path toward debt sustainability” and sort out the festering problem once and for all.


The Franco-American push is backed by Italy’s Matteo Renzi, who said the eurozone has to go back to the drawing board and rethink its whole austerity doctrine after the democratic revolt in Greece. He too now backs debt relief for Greece.

Finally, it was none other than Tsipras who piggybacked on the IMF’s imlicit recommendation and in the hours following the “victorious” Greferendum, made a clear demand of Europe:


Fast forward to this morning when shortly after the latest Greek capitulation, when in Tsipras’ official request for ESM bailout he said timidly that “as part of a broader discussion to be held, Greece welcomes the opportunity to explore potential measures to be taken so that its official sector related debt becomes both sustainable and viable over the long term” Germany made it very clear whether there will be any debt haircuts, or reprofiling in the coming years.


Reuters just reported that “the German government does not see any reason to grant Greece either a classic debt haircut or any other measures that would slash the value of money on loan to the crisis-ridden country, a spokesman for the finance ministry said on Wednesday.

“At the moment and in principle we see, as the chancellor said expressly in her press conference in Brussels, no occasion at all to discuss this issue – there is no leverage or basis for that,” Martin Jaeger said at a news conference.


“That refers to a haircut in the classic sense but I explicitly add we also take that to mean measures that aim to bring about a reduction in the cash value of debt – those are things that you hear in discussions under profiling, restructuring and similar things.”

In other words, the only thing one needs to add here is a Greek expiration date, because as the table which we will not tire of showing shows, Greece has zero hope of ever repaying all of its debt stretching well into the second half of the 21st century.


The only quesiton is whether the German hard-line stance against Greek debt reduction also means that the Troika as we know it is finished, and even more importantly, whether the two European camps, one for and one against debt reduction are now on terminal collision course. This is what the Telegraph concluded on this open item:

The two sides are talking past each other, clinging to long-entrenched narratives, no longer willing to question their own assumptions. The result could be costly. RBS puts the direct financial losses for the eurozone from a Greek default at €227bn, compared with €140bn if they bite the bullet on an IMF-style debt restructuring.


But that is a detail compared with the damage to the European political project and the Nato alliance if Greece is thrown to wolves against the strenuous objections of France, Italy and the US.


It is hard to imagine what would remain of Franco-German condominium. Washington might start to turn its back on Nato in disgust, leaving Germany and the Baltic states to fend for themselves against Vladimir Putin’s Russia, a condign punishment for such loss of strategic vision in Greece.

And all to preserve the equity “wealth” of a few banker oligarchs because as we showed on Tuesday, saving the banks is what this has been all about from day one.

Countdown to Sunday
(Courtesy Leonid Bershidsky/Bloomberg)
JUL 08, 2015 9:30AM EDT

Contrary to expectations, Greece yesterday didn’t present a coherent reform plan to justify a third bailout. New Greek Finance Minister Euclid Tsakalotos only made a brief oral presentation to his European peers, speaking from scribbled notes and mainly repeating old proposals that the creditors had already rejected. No proposal came today, either — just a short document that says Greece wants a three-year loan from the European Union bailout fund, on top of the 240 billion euros ($265 billion) Greece has received in two previous bailouts. It also says a detailed reform agenda will follow on Thursday.

European leaders are no longer trying to hide their irritation with Greek attempts to proceed on its own terms and at its own pace, and are openly discussing the possibility of forcing Greece out of the single-currency club. “This really and truly is the final wake-up call,” European Council President Donald Tusk said in a speech to the European Parliament today. Greek Prime Minister Alexis Tsipras also spoke to the parliamentarians today (hisses were heard), and he tweeted up a storm, saying that Greece’s forthcoming proposals would include “a strong investment program” to combat unemployment and insist on “a solution to the problem of sustainability of Greece’s public debt.”

None of this was particularly encouraging to the creditors. Their new deadline for a deal that would provide Greece with money to reopen banks and make good on its arrears, both international and domestic, is now Sunday. It’s not quite clear why this particular day is any different from all the previous “final” dates, since the unproductive talks will probably go on, even after Greece is forced to introduce a parallel currency. As before, the Europeans face a trade-off between the politically convenient determination to keep Greece in the euro and adherence to financial rules imposed on its members.

Late in the morning, we learn that Greece is preparing for an alternative currency:  either IOU’s or new drachmas:
(courtesy Kathimerini/zero hedge)

Greece Preparing “Alternative Currency”, Kathimerini Says

On Tuesday, Latvia’s central bank chief Ilmars Rimsevics called the introduction of a new currency in Greece the “most realistic scenario.”

The country is in its second week of capital controls and banks remain shut in the wake of a referendum which saw some 61% of Greeks vote against the terms of the latest bailout deal proposed by the troika.

Now, Germany has indicated that any new proposal will come with harsher terms to reflect the recent deterioration in the Greek economy. Furthermore, Berlin’s stance on debt writedowns for Greece (which the IMF deems necessary if Athens is to return to fiscal sustainability) has hardened, meaning it will now be exceptionally difficult for Tsipras to fulfill the implicit promise he made to his people when he campaigned for a referendum “no” vote.

Given all of this, it now appears increasingly likely that Greece will be forced to return to the drachma or will at least be compelled to issue some manner of scrip in the face of an acute cash shortage and a worsening credit crunch which together threaten to leave government employees in the lurch and cut off the flow of imported goods. 

Sure enough, Kathimerini says the Greek government is indeed preparing for the launch of an “alternative currency.” Here’s more (Google translated):

In full preparedness is the government the possibility to require the use of a parallel currency euro. 


According to reports, the Ministry of Finance of the parallel currency design process has begun and left deliberations these days with lenders about whether it will require the implementation of that measure. By today’s standards, government funds fail to service the obligation to pay wages and pensions at the end of the month.


According to reports, the first half of the salaries of civil servants (about 300 mil. Euros) is no way to cover euro. In this regard, the Deputy Finance Minister D. Mardas assured that payment of a fortnight is secured. However, today nobody can assure that it is also guaranteed the payment by the State of about 2 billion. euros at the end of the month for salaries, pensions and subsidies to social security funds. 


Apart from the apparent lack of liquidity on wages, the state can not serve longer and pensions.Every month, for the payment of 4,551,074 pensions (information system data “Sun” for May) required 2.3 billion. Euros, of which at least 850 million. Euro is direct government funding. Under these difficulties, many are those who have suggested for months the possibility of a parallel currency use. 

This comes on the heels of a story run by The Telegraph which suggested that the resignation of Yanis Varoufakis was directly related to comments the former FinMin made regarding the government’s preparations for the introduction of a parallel currency.

Not surprisingly, the Greek finance ministry has categorically denied the Kathimerini story calling it “completely unsubstantiated.”

Ironically, the notion of a Greek redenomination may indeed be “unsubstantiated” — just not in the sense suggested by the finance ministry. To let Credit Suisse tell it, a return to a “shiny new devaluation mechanism” is simply a “pipe dream.” As a reminder, here is the bank’s take:

We again want to be clear: “leaving EMU” is not a policy choice and, if enforced by referendum, materially reduces Greece’s freedom of action. Introducing a new currency is a pipe dream and the likely result is a broken financial system reliant on a neighbor’s currency (the euro) and banking system.. 


This is the nature of “Grexit”; it is not a choice to circulate a shiny new devaluation mechanism, it is a decision to reject the (local, to begin with) financial system and start again. 


We have always pointed out that the new “currency” mismatches involved in any attempt to exit the euro would be so “toxic” for the banking system as to make it not a practical alternative. 

And here’s Reuters with more on the ‘California’ option:

Yannis Varoufakis, who quit on Monday as Greece’s finance minister, [suggested] that Athens might issue IOUs like the state of California did during a budget impasse in 2009, could amount to the same thing.


Facing a massive budget shortfall, California’s then governor Arnold Schwarzenegger issued more than 300,000 IOUs, known as warrants, with a value of almost $2 billion, to pay taxpayer refunds and others due money from the state.


After a few months, the state struck a new budget deal and started to redeem the notes. But unlike California, Greece cannot fix its financial problems simply by passing a new budget; if it issues IOUs, it could probably redeem them only if it receives a future international bailout. Otherwise, the warrants could turn into a permanent parallel currency.


“There was never any possibility that California would leave the dollar. It was more a way to replace bonds and financing on the market than to replace a currency,” said Gregory Claeys of Brussels’ Bruegel think-tank.


“In Greece, it’s a different issue. Once they produced these IOUs there would be no turning back. It would de facto end up in Grexit.”


Although the Greek government appears not to have planned for a parallel currency, officials both in Brussels, home to the European Union’s executive, and Frankfurt, headquarters of the European Central Bank, believe that it could happen.

In case all of the above isn’t clear enough, we’ll leave you with the following bullet points (once again from Credit Suisse) which paint a rather grim(bo) picture of the redenomination endgame:

  • Countries don’t leave the euro.
  • If countries try to leave, or show signs that they might, the euro leaves them first.
  • To avoid getting trapped, devalued or defaulted.
  • A liquidity crisis occurs and domestic liabilities are replaced by foreign ones that cannot be redenominated. So on exit a solvency crisis appears certain.
  • As “the euro leaves”, it takes the country’s banking system, and country’s credit, with it.
  • So a Greek “failure” would mean sovereign and banking sector default more than it would mean a new currency, we think. 
  • If it decides to default systemically, the Greek state could pass a law (illegal under the EU Treaties) converting domestic assets and liabilities to new drachma (GRN).
  • This would presumably make the Bank of Greece insolvent (GRN assets and foreign EUR liabilities).
  • So at the national level there would be a default on the intra-Eurosystem liabilities as well as government debt.
  • It would be challenging to settle money electronically, but the effect would be to convert the balance sheet of Greek banks into a new unconvertible currency which would trade, if at all, at a discount to the euro.
  • The government would have large unresolved euro debts. How it could re-establish its credit, and so recapitalise the banking system without foreign assistance, is unclear.
  • The core expectation would be a “broken” banking system paying out on deposit guarantees through the GRN.

Oh!! we were waiting for this!!!! The IMF slams Germany who refuses to budge.  I guess the Deutsche bank has an oceanful of Greek credit default swaps plus other toxic debt belonging to Greece:
(courtesy zero hedge)

IMF Slams Germany, Says Greece “Needs Debt Restructuring”

 Earlier today, confirming that Germany sternly refuses to change its tune about a Greek debt haircut or even a debt “reprofiling” of Greece and would not budge an inch on Tsipras tacit request for at least some debt leeway, we reported that “the German government does not see any reason to grant Greece either a classic debt haircut or any other measures that would slash the value of money on loan to the crisis-ridden country, a spokesman for the finance ministry said on Wednesday.”“At the moment and in principle we see, as the chancellor said expressly in her press conference in Brussels, no occasion at all to discuss this issue – there is no leverage or basis for that,” Martin Jaeger said at a news conference.”That refers to a haircut in the classic sense but I explicitly add we also take that to mean measures that aim to bring about a reduction in the cash value of debt – those are things that you hear in discussions under profiling, restructuring and similar things.This put Gremany in clear confrontation with the IMF (and various other European countries who are far more inclined to consider debt haircuts for others and for themselves) so we, and many others, were wondering how Christine Lagarde would react.We got the answer moments ago and here it is:


… thereby starting a very clear, and very determined war of words with Germany and the “no-haircut” axis which is also waging a cold war against none other than the US, under whose guidance the IMF released its debt sustainability report last week over the objections of Merkel, Schauble and company.

To be sure, this statement makes life for Tsipras very difficult as the local population will demand why he didn’t fight for the debt haircut he promised, a haircut which even the IMF says is not critical.

But the ball is now in Germany’s court, and of course Greece’s, which now has a very determined, and very unexpected ally, one which Tsipras called “criminal” three short weeks ago.


Late this afternoon:

Europe Readies Emergency “Humanitarian” Action Plan For Greece

On Tuesday evening, a flood of headlines from Brusselsindicated that German Chancellor Angela Merkel was set to tighten the screws on Greek PM Alexis Tsipras by standing firm on debt haircuts and ensuring that any new proposal from the troika would include harsher conditions than those that comprised the pre-referendum deal.

Among the other headlines to hit the wires as Merkel’s “nein” comments poured in, was the following rather disconcerting bit from Jean-Claude Juncker:


“Just in case Greece decides to disobey, Europe is ready to treat Greece as an African nation,” we quipped.

Minutes ago, the “humanitarian” plan commentary was back:


Clearly, Europe is now preparing for an imminent Grexit and if the above is any indication, the fallout will be an economic catastrophe that’s orders of magnitude worse than what Greeks have experienced over the last several weeks.

From Bloomberg: 


Euro-area officials have informally discussed a contingency arrangement whereby the ECB maintains liquidity to the Greek banking system in return for a guarantee for the loans, people familiar with the matter say


Officials at finance ministries and ECB have exchanged views on need for keeping or increasing liquidity to respond to humanitarian situation in the country


Arrangement would help Greek banks to keep operating if negotiations over the country’s bailout drag on

Graham Summers has it right:
(courtesy Graham Summers/Phoenix Capital Research)

Greece is Just the First of MANY Countries That Will Be Going Belly-Up

ALL of the so called, “economic recovery” that began in 2009 has been based on the Central Banks’ abilities to rein in the collapse.


The first round of interventions (2007-early 2009) was performed in the name of saving the system. The second round (2010-2012) was done because it was generally believed that the first round hadn’t completed the task of getting the world back to recovery.


However, from 2012 onward, everything changed. At that point the Central Banks went “all in” on the Keynesian lunacy that they’d been employing since 2008. We no longer had QE plans with definitive deadlines. Instead phrases like “open-ended” and doing “whatever it takes” began to emanate from Central Bankers’ mouths.


However, the insanity was in fact greater than this. It is one thing to bluff your way through the weakest recovery in 80+ years with empty promises; but it’s another thing entirely to roll the dice on your entire country’s solvency just to see what happens.


In 2013, the Bank of Japan launched a single QE program equal to 25% of Japan’s GDP. This was unheard of in the history of the world. Never before had a country spent so much money relative to its size so rapidly… and with so little results: a few quarters of increased economic growth while household spending collapsed and misery rose alongside inflation.


This was the beginning of the end. Japan nearly broke its bond market launching this program (the circuit breakers tripped multiple times in that first week). However it wasn’t until late 2014 that things truly became completely and utterly broken.


We are, of course, referring to the Bank of Japan’s decision to increase its already far too big QE program, not because doing so would benefit the country, but because it would bring economists’ forecast inline with governor Kuroda’s intended inflation numbers.


This was the “Rubicon” moment: the instant at which Central Banks gave up pretending that their actions or policies were aimed at anything resembling public good or stability. It was now about forcing reality to match Central Bankers’ theories and forecasts. If reality didn’t react as intended, it wasn’t because the theories were misguided… it was because Central Bankers simply hadn’t left the paperweight on the “print” button long enough.


At this point the current financial system was irrevocably broken. We simply had yet to feel it.


That is, until, January 2015, when the Swiss National Bank lost control, breaking a promise, and a currency peg, losing an amount of money equal to somewhere between 10% and 15% of Swiss GDP in a single day, and showing, once and for all, that there are problems so big that even the ability to print money can’t fix them.


This process is now accelerating in Europe where a country that comprises less than 2% of the EU’s total GDP (Greece) has managed to be FIVE-YEAR problem that cannot be resolved through more debt or money printing.


The ECB and EU have tried everything to kick the Greek “can” down the road. History has shown us time and again that Central Banks first attempt to deal with a debt problem by printing money… but eventually the debt default/haircut has to occur.


This process has now begun in Greece. The fact the markets are imploding should give you an idea of how fragile the system is. One can only imagine what will happen when a larger player such as Spain or France or even Japan goes belly up.


The Big Crisis, the one in which entire countries go bust, has begun. It will not unfold in a matter of weeks; these sorts of things take months to complete. But it has begun.



I guess many of you are aware that the NYSE had been shut down for 4 hours today (supposed computer glitch); United Airlines had grounded all flights due to a computer glitch, zero hedge was off line for this morning, as well as the Wall Street Journal.

Dave Kranzler of IRD comments:

(courtesy Dave Kranzler/IRD)

The Fuse Has Been Lit


Yesterday the US Mint runs out of silver eagles. Of course, the US Mint/Govt was the last one to announce the news. Everyone in the alternative media/blogosphere heard about it through silver eagle dealers who heard about it from their US mint approved participant supplies (A-mark, etc).

Then today the news hits that all trading on the NYSE is “suspended” due to a “technical glitch.” Just overlook the fact that the trading halt occurred just as the the entire stock market was about do an “elevator shaft” plunge. Funny that – the market never seems to “break” or incur a “technical glitch” when the stock market is spiking higher in inexorable parabolic fashion on some bogus economic report.

If you want to see what an elevator shaft plunge looks like when a “breakage” or “glitch” is not imposed on a market, look no further than what happened to silver yesterday:


This is what selective capital controls look like. A colleague asked me just now if the NYSE had resumed trading yet (2:15 p.m. EST).  I replied: “Does it really matter? It’s irrelevant. The fuse has been lit. This is the start of capital controls. It’s no different from what China is doing. Just wait till they start lowering the gate on mutual funds…then banks….”

I warned last summer that it was time to get your money out of all fixed income mutual funds. I’m sure no one listened. Now it’s time to get your money out of ALL mutual funds. In fact, anyone with half a brain would get their money entirely out of the retirement fund system.

They are in the process of looting retirement funds, only they are using a method that did not occur to me until I applied the same methodology being used on Greece: impose an amount of leverage on the entity in a manner which enables the elitists to “gut” the entity from the inside out.

Most large pension funds – Public and Private – are severely to catastrophically underfunded. This means that the net worth of the fund is below 50%. What’s amusing is that many big pension funds are still throwing money hand over fist at Private Equity firms. These PE firms are paying retarded valuation multiples to invest in businesses, especially tech start-ups. When the stock market crashes despite attempts to “break” the market, PE investments will be wiped out and pension fund net worths will be wiped out. That’s how they are gutting the retirement system.

The Fuse has been lit – it’s only a matter of time before there’s a huge financial mushroom nuclear cloud – to be followed by nuclear mushroom clouds…



Another CEO exits as “CEO-EXIT” continues for our major bankers:

(courtesy zero hedge)


Barclays Fires CEO In Latest Rate-Rigging Euro Bank Shakeup

It’s shaping up to be a rough year for CEOs at Europe’s most notorious rate rigging, scandal-laden investment banks.

Just three months after Brady Dougan left Credit Suisse and barely 30 days since Anshu Jain and Jürgen Fitschen tendered their resignations at Deutsche Bank, Barclays has shown CEO Antony Jenkins the door. 

The move comes as Chairman John McFarlane (who took over as Chairman in April) looks to restructure what he calls a “cumbersome bureauacracy.” The bank did not mince words in its press release announcing the shakeup:

“It became clear to all of us that a new set of skills were required for the period ahead. New leadership is required to accelerate the pace of execution going forward. Mr. McFarlane is ideally qualified in this respect.”

(Harvey:  how about stopping the manipulation on gold/silver)


Here’s WSJ with a look back at the outgoing Jenkins’ stint at the helm:

  1. Despite recent calls of dissatisfaction, the decision to name Mr. Jenkins as chief executive in August 2012 was broadly supported by analysts, and was described as “sensible”, “cool-headed” and “intelligent.” However, the honeymoon period was short-lived. One month later, Barclays was downgraded by Credit Suisse and J.P. Morgan over concerns about the profitability of its investment bank.
  2. Mr. Jenkins was a Barclays man. He joined the bank as a graduate trainee in 1983. After a six-year spell at Citigroup, he returned in 2006 and by 2009 headed up its retail and business banking. This lack of investment banking acumen led some analysts to speculate that Mr. Jenkins might cut back the unit after its growth under Mr. Diamond. But this never really materialized. Despite some cut backs in fixed-income and commodities, Barclays remains one of the largest investment banks in Europe, despite underperforming its rivals in recent years. Mr. Jenkins defended the high-pay for the unit in 2014 after a poor year, stating that he had to avoid a “death spiral” of rainmakers leaving for rivals.
  3. Mr. Jenkins didn’t waste time installing a number of projects aimed at moving Barclays away from the Libor-scandal that rocked the bank in 2012. First there was program dubbed “Transform”, aiming to “turnaround, return acceptable numbers, and sustain forward momentum”. Then there was Project Mango, a review of business practices in its investment bank. And then there was Project Electra, another review of the investment bank. During this, Barclays was dubbed itself a ‘go-to’ bank, with reviews into culture, pay, and performance reviews of managers.
  4. On a long enough time frame, Mr. Jenkins seemed to be the right man for the job. Since he joined in August 2012, Barclays share price is up 52.68%, in comparison the FTSE 100 is up around 15%. On this basis – his reign has been success.  However, from August 2013 the share price has fallen 1.12%, compared with an increase of 2.5% for the FTSE 100. During this period Barclays has paid billion-dollar fines for forex rigging, Libor rigging, and failing to keep client assets segregated. It is still facing investigations from the Serious Fraud Office around its capital raising in 2008. While not related to Mr. Jenkins’ tenure, the fines have weighed down the bank’s share price.
  5. But despite his rocky road, Mr. Jenkins is in good company, joining a group of blue-chip bank chief executives looking for new employment, including Anshu Jain, the former head of Deutsche Bank, and Peter Sands the former head of Standard Chartered. During Mr. Jenkins’s time as chief executive, he was paid a total of £10,011,000. He making money from his own exit: part of his pay, which continues until July 7 2016, is share-based. Shares are up more that 3% on news of his exit.

It’s too bad, really. We’re sure Jenkins was looking forward to a long and fruitful relationship with Richard Fisher, the former Dallas Fed chief Barclays hired last week as a “senior advisor.”

*  *  *

Full statement from Barclays:

Antony Jenkins to leave Barclays; John McFarlane to become Executive Chairman

Barclays PLC and Barclays Bank PLC (Barclays) announce the departure of Antony Jenkins as Chief Executive and the appointment of John McFarlane as Executive Chairman pending the appointment of a new Chief Executive.  Subject to regulatory approval the change will come fully into effect on 17 July 2015 when John retires from FirstGroup.  A search for Mr Jenkins’ successor is underway.  The interim results will be announced as planned on 29 July 2015.

The Non-Executive Directors led by Sir Michael Rake, Deputy Chairman and Senior Independent Director,  concluded that new leadership is required to accelerate the pace of execution going forward and that John McFarlane is ideally qualified in this respect until a permanent successor is appointed.  This development does not signal any major change in strategy.

The Board recognises the contribution made by Antony Jenkins as Chief Executive over the past three years in incredibly difficult circumstances for the Group, and is extremely grateful to him in bringing the company to a much stronger position.  The situation he inherited would have challenged anyone facing the same issues.  This continued a period of achievement as head of Barclaycard and our Retail and Business Banking businesses.

Members of the Group Executive Committee will now report to Mr McFarlane, who will work particularly closely with Tushar Morzaria, Group Finance Director.

Sir Michael Rake commented, “I reflected long and hard on the issue of Group leadership and discussed this with each of the Non-Executive Directors.  Notwithstanding Antony’s significant achievements, it became clear to all of us that a new set of skills were required for the period ahead.  This does not take away from our appreciation of Antony’s contribution at a critical time for the company.”

Mr McFarlane said, “Whilst it is unfortunate that I have had little time to work with Antony, I respect and endorse the position of the Board in deciding that a change in leadership is required at this time.  I would add my personal thanks for everything that Antony has done for us.  He can be proud of his heritage, especially his excellent work on culture and values that we will continue.  I wish him well.”

“Arriving at Barclays with a fresh perspective, it is evident that we have a standout brand with first-class retail, commercial and investment banking businesses.  Nevertheless, we are leaving value on the table and a new approach is required.  As a Group, if we aspire to bring shareholder returns forward, we need to be much more focused on what is attractive, what we are good at, and where we are good at it.”

“We therefore need to improve revenue, costs and capital performance.  We also need to become more externally focused and deal with the internal bureaucracy by becoming leaner and more agile.  I have experienced good results in dealing with these matters elsewhere,” he added.

Antony Jenkins said, “In the summer of 2012, I became Group Chief Executive at a particularly difficult time for Barclays.  It is easy to forget just how bad things were three years ago both for our industry and even more so for us.  I am very proud of the significant progress we have made since then.  Our capital position is much stronger, our business model is more balanced, we are much more disciplined on cost management, we have made good progress in rebuilding our reputation and we are seen as a leader in the application of technology to our business.  While the external environment has continued to be, and will remain, challenging the Group now has the resilience to overcome these challenges.

“Most of all, I am proud that we have defined our culture through a common set of values for the Group and that the progress we have made and the tough decisions we have needed to take have all been achieved by applying these values and by focusing on the needs of all our stakeholders.

“I want to thank the people of Barclays for their tireless efforts and support in achieving these results and for my own part I am looking forward to the professional opportunities that lie ahead.”

Here is the first person to be charged criminally with manipulation of the Libor rate:
(courtesy BBC)
Libor trader tells court managers knew what he was doingBy Mark BroadBBC News, Southwark Crown Court

  • 7 July 2015

35-year-old Tom Hayes arriving for his trial at Southwark Crown Court on Wednesday 3rd JuneTom Hayes denied that what he was doing was “clandestine”

A trader accused of manipulating the Libor rate has told a court that senior managers knew what he was doing.

Tom Hayes is the first trader to be tried by a jury for his part in the manipulation of the key interest rate.

“I acted with complete transparency… My managers knew, my manager’s manager knew. In some cases the CEO [chief executive] was aware of it,” he said.

The former UBS and Citigroup trader denies eight counts of conspiracy to defraud over the period 2006-2010.

‘Hunger’Mr Hayes denied that what he was doing was “clandestine” and said that he made no attempts to “cover his tracks”.

The 35-year-old said that he did not believe that at the time that what he was doing as a Libor trader was “wrong”.

He said he was motivated by his determination to make as much money as possible for his bank.

“Greed was the wrong word, hunger is a better word.

“I was hungry to do the best job I could do – because of the performance metric, because that is how you are judged,” he told the jury at Southwark Crown Court.

$300mMr Hayes also said that others bankers at UBS seemed to be fixing the Libor rate for commercial gain before he arrived at the bank.

He said that a group of senior managers at UBS discussed manipulating the Libor rate and that “nobody batted an eye lid”.

Mr Hayes told the court that he was frustrated by the pay he was getting at UBS

He said he had calculated that he had made $300m for UBS over three years and that the bank had not paid him what he felt he was owed for his success.

He said that very little of his profit for the bank actually came from Libor trading.

‘Frozen with fear’During his time at Citi Bank in August 2010, Mr Hayes was called into meeting with lawyers who were looking into the Libor market.

Mr Hayes said that he could not work out what he rules he might have broken.

‘I could not work out what I had or had not done wrong. They could not tell me what rule I had broken.’

Mr Hayes also told the court that he gave interviews to the Serious Fraud Office in 2013 cataloguing his actions as a Libor trader in order to prevent him being extradited to the US where he was being charged by the Department of Justice.

He said that he was “frozen with fear” and “petrified” when he learned that he was to be charged by the US Authorities.

Mr Hayes is the first person in the global investigation to stand trial for allegedly rigging the rate.?

Mr Hayes’s trading activities were based around movements in the Libor rate – an interest rate used by banks around the world to set the price of financial products worth trillions of pounds.

The trial continues.


Oil related stories

Crude Carnage Continues After Another Inventory Build & Production Rise

For the 2nd week in a row, crude oil inventories saw a build (after 8 weeks of draws) albeit a modest 384k barrels. Cushing also saw an inventory build. At the same time, production rose very modestly back to near cycle record highs (thouygh we note an extremely small drop in Lower 48 production). Crude prices have tumbled on the news as apparently yesterday’s exuberance over better demand data from EIA has been long forgotten…

Another build (and near record production)…

And prices give back yesterday’s exuberant gains…

Charts: Bloomberg


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



Euro/USA 1.1012 up .0004

USA/JAPAN YEN 121.56 down .965

GBP/USA 1.5356 down .01048

USA/CAN 1.2720 down .0001

This morning in Europe, the Euro rose by a microscopic 4 basis points, trading now just above the 1.10 level at 1.1012; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent  default of Greece and the Ukraine, rising peripheral bond yields.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 97 basis points and trading just below the 122 level to 121.56 yen to the dollar.

The pound was down badly this morning as it now trades just below the 1.54 level at 1.5356, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is up slightly by 1 basis points at 1.2720 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 a whopping 638.95 points or 3.14%

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

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

Gold very early morning trading: $1154.50


Early Tuesday morning USA 10 year bond yield: 2.21% !!! down 2 in basis points from Monday night and it is trading just below  resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Tuesday morning: 96.68 down 8 cents from Tuesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning

And now for your closing numbers for Wednesday:


Closing Portuguese 10 year bond yield: 3.02%  down 12 in basis points from Tuesday

Closing Japanese 10 year bond yield: .42% !!! down 4 in basis points from Tuesday/still very ominous

Your closing Spanish 10 year government bond, Wednesday, down 4 in basis points

Spanish 10 year bond yield: 2.22% !!!!!!

Your Wednesday closing Italian 10 year bond yield: 2.22% down 5 in basis points from Tuesday: (very ominous)

trading 0 basis point higher than Spain.



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


Euro/USA: 1.1067 up .0060 ( Euro up 60 basis points)

USA/Japan: 120.61 down  1.9064 ( yen up 191 basis points)

Great Britain/USA: 1.5362 down .0098 (Pound down 98 basis points)

USA/Canada: 1.27360 up .0016 (Can dollar down 16 basis points)

The euro rose by a fair amount today. It settled up 60 basis points against the dollar to 1.1067 as the dollar traded in all directions today against most of the various major currencies. The yen was up by 191 basis points and closing well below the 121 cross at 120.61, creating havoc to our short yen traders. The British pound lost huge ground today, 98 basis points, closing at 1.5362. The Canadian dollar lost some more ground against the USA dollar, 16 basis points closing at 1.2736.

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: 2.21% down 5 in basis point from Wednesday// (below the resistance level of 2.27-2.32%)/

Your closing USA dollar index:

96.26 down 51 cents on the day


European and Dow Jones stock index closes:


England FTSE up 58.49 points or 0.91%

Paris CAC up 34.38 points or 0.75%

German Dax up 70.52 points or 0.66%

Spain’s Ibex up 84.30 points or 0.81%

Italian FTSE-MIB up 553.91 or 2.64%


The Dow down 261.49  or 1.47%

Nasdaq; down 87.70 or 1.75%


OIL: WTI 51.65 !!!!!!!



Closing USA/Russian rouble cross: 57.50  down 9/10  rouble per dollar on the day



And now for your more important USA stories.


NY trading for today:

Summing today up perfectly…

*  *  *


Shit Broke…


The Dow and S&P both close back below their 200DMA…


Stocks plunged and eviscerated all of the v-shaped recovery gains from yesterday…


Cash markets remain notably lower post the “OXI” vote…


Post-FOMC Minutes today… Bonds outperform and gold and stocks leaked lower…


VIX surged back above 19.5…


Treasury yields fell post minutes ending near the week’s lows so far…


The US Dollar leaked lower all day as early efforts by The SNB to stabilize Europe sent EURUSD higher…


USDJPY plunged by the most in over 2 years…


Commodities were once again very noisy. Copper, Silver, and Gold surged as stocks opened and crude slipped after DOE data…


Crude gave up all of yesterday’s “Iran deal is off” gains…


Charts: Bloomberg

Bonus Chart: The 1962-1966 S&P Analog (via @TheChartMeister )



Wow!! the economy must be booming as Microsoft fires 7800 workers, the 2nd biggest mass layoff in its history:

(courtesy zero hedge)

Microsoft Fires 7,800: Second Biggest Mass Layoff In Its History

It has been almost exactly one year since Micorsoft announced it would fire a record 18,000 people (surpassing the previous all time high layoff round of 5,800 in 2009) form a company that one upon a time seen as infallible as AAPL. So perhaps in order to release more funds with which to buy back its struggling stock, moments ago Microsoft did what it had to do to make corporate executives richer, and reported it would lay off another 7,700 workers.

From the press release:

Microsoft Corp. today announced plans to restructure the company’s phone hardware business to better focus and align resources. Microsoft also announced the reduction of up to 7,800 positions, primarily in the phone business. As a result, the company will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business in addition to a restructuring charge of approximately $750 million to $850 million.


Today’s announcement follows recent moves by Microsoft to better align with company priorities, including recent changes to Microsoft’s engineering teams and leadership, plans to transfer the company’s imagery acquisition operations to Uber, and shifts in Microsoft’s display advertising business that enable the company to further invest in search as its core advertising technology and service.


Today’s plans were outlined in an email from Microsoft CEO Satya Nadella to Microsoft employees.


“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family,” Nadella said. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”


Microsoft will record a charge in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the NDS business. This charge has no impact on cash flow from operations and is nondeductible for income tax purposes. Based on the new plans, the future prospects for the Phone Hardware segment are below original expectations. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.

We hope Satya Nadella at least has the courtesy to wait a week before announcing a comparable $7.6 billion or so buyback authorization.

Today is the day for the Beige book or the FOMC minutes of the previous meeting.  The minutes suggest a rate hike in September despite the global turmoil in China and Greece:
(courtesy zero hedge)

FOMC Minutes Suggest September Rate Hike Despite Global Turmoil

Since The FOMC’s supposedly dovish June meeting, bonds have outperformed stocks rather notably and crude has crashed. The crucial aspect for the Minutes is the balance they struck between market turmoil overseas (dovish) and the domestic economic and housing recovery (hawkish) as to how that fits with an expectation for a ‘gradual’ post-September lift-off…


With macro data having beaten expectations since then, the last best hope for stocks is that global turmoil picks up (as it has in Greece) to keep The Fed on hold (as they remain cornered to regain some ammo before the next ‘event’ happens). As SF Fed’s Williams notes today the“safer course” for raising rates would be to start sooner and proceed gradually.

Pre-Minutes: S&P Futs 2052, 10Y 2.233%, EUR 1.1050, Gold $1163

Further headlines:





Since The June meeting…

And here is why anyone hoping the “dots” will push liftoff in September or December will be disappointed:

During their discussion of economic conditions and monetary policy, participants commented on a number of considerations associated with the timing and pace of policy normalization.Most participants judged that the conditions for policy firming had not yet been achieved; a number of them cautioned against a premature decision.

Stocks were higher on June 17 tthan they are now, so…

Also, wage growth, or lack thereof:

Many participants emphasized that, in order to determine that the criteria for beginning policy normalization had been met, they would need additional information indicating that economic growth was strengthening, that labor market conditions were continuing to improve, and that inflation was moving back toward the Committee’s objective.

And yet:

Many expected that labor market underutilization would be largely eliminated around year-end if economic activity strengthened as they expected.

But it gets worse: for the first time the Fed is actually worried about its credibility:

Other concerns that were mentioned were the potential erosion of the Committee’s credibility if inflation were to persist below 2 percent and the limited ability of monetary policy to offset downside shocks to inflation and economic activity when the federal funds rate was at its effective lower bound.”

And here is why this is bad:

Inflation had been well below the Committee’s longer-run objective, but, with oil prices and the foreign exchange value of the dollar stabilizing, members expected that inflation would gradually rise toward 2 percent over the medium term.

May want to hit F5 there…

And finally, Greece:

  • Several mentioned their uncertainty about whetherGreece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly in China and other emerging market economies.
  • many participants expressed concern that a failure of Greece and its official creditors to resolve their differences could result in disruptions in financial markets in the euro area, with possible spillover effects on the United States.
  • The rise in yields was also supported by the release of some stronger-than-expected inflation data in the euro area and by European Central Bank communications that volatility in yields was to be expected. Against this backdrop and with a step-up in concerns about developments in Greece, equity prices declined in most countries.

That’s the bad news. In mid-June there was some good news on the stock front…

Stock prices in Japan and especially in China were the main exceptions.

… the Fed may want to hit F5 on that too.

*  *  *

Full Minutes see zero hedge





And the reaction:


FOMC Minutes Reaction: Stocks, USDollar, & Bond Yields Tumble

Gold is unchanged but stocks and bond yields are sliding post the somewhat more hawkish FOMC minutes. The USD index is falling (which suggests the minutes were more dovish) just to add some confusion…


Fed Mouthpiece Hilsenrath Confirms Fed “Cautious” But “Unalarmed” About Overseas Turmoil

While a skim of the FOMC Minutes suggest the committee is balanced on when (or if) to raise rates, WSJ’s Jon Hilsenrath has just provided some more color confirming that “Fed officials are cautious about overseas developments but appear unalarmed,” suggesting their confident economic growth forecasts point to a September rate hike (unless the whole world collapses obviously).


As The Wall Street Journal reports,

Worries about global turbulence and soft spots in the domestic economy weighed on Federal Reserve officials when they gathered at their June policy meeting, trepidations that could cause them to wait longer before raising short-term interest rates increases in the months ahead.


“While participants generally saw the risks to their projections of economic activity and the labor market as balanced, they gave a number of reasons to be cautious in assessing the outlook,” the Fed said in minutes of its June 16-17 policy meeting, released Wednesday with its regular three-week lag.

But many are confident…

The central bank effectively left its options open for now. Though the global outlook is uncertain and shifting, officials pointed to signs of progress in the domestic economy as reason to begin raising U.S. rates this year. Several had concluded that slack in the U.S. labor market had already disappeared, while others saw it being gone by year-end.


“The ongoing rise in labor demand appeared to have begun to result in a firming of wage increases,” the minutes said.


Moreover, some worried that if the Fed waits too long before raising rates, it might need to move abruptly later, which could cause financial instability. Some participants viewed the economic conditions for increasing the target range for the federal funds rate as having been met or were confident that they would be met shortly.

And as Hilsenrath concludes,

For now, Fed officials are cautious about overseas developments but appear unalarmed.

Finally, we have SF Fed Williams recent comments which seem windblowing…

“I visited China recently, and I arrived fully cognizant of the concerns people highlight—slower growth, the unsustainability of the current export-driven model, debt buildup, bubbles in the equity and housing markets, the risk of falling investment, and the overall international implications of those risks,” John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech in Los Angeles Wednesday. “But I have to say that, after talking to officials and academics there, I was a lot less concerned about China’s near-term economic outlook on my return flight than I was heading over.”

*  *  *

Well we are just glad he spoke to academics and policy makers…




Well that about does it for tonight


I will see you Thursday night



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