July 14/IMF may walk away from Greek bailout as they demand debt relief as Greek debt is unsustainable/Germans require the IMF as the bundestag will not OK bailouts unless IMF is part of the bailout procedure/Puerto Rico in trouble again with hedge funds/Retail sales in USA plummet/Small business optimism falters/ USAbusiness inventories rise as sales fall sending strong signal of a deepening recession/

Good evening Ladies and Gentlemen:


Here are the following closes for gold and silver today:

Gold:  $1153.30 down $1.90  (comex closing time)

Silver $15.29 down 14 cents.

In the access market 5:15 pm

Gold $1155.65

Silver: $15.36

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

At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces . Silver saw 309 notices filed for 1,545,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.96.17 tonnes for a loss of 57 tonnes over that period.

In silver, the open interest fell by a considerable 1002 contracts despite the fact that yesterday’s price was down by only 4 cents.  The total silver OI continues to remain extremely high, with today’s reading at 186,300 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .931 billion oz or 133% 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. Today again, we had banker shortcovering.

In silver we had 319 notices served upon for 1,545,000 oz.

In gold, the total comex gold OI rests tonight at 454,296 for a gain of 8,268 contracts despite the fact that gold was down $2.50 yesterday. We had 0 notices filed for nil oz  today.

We had no change in gold  tonnage  at the GLD /  thus the inventory rests tonight at 709.07 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 327.593 million oz.

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

1. Today, we had the open interest in silver fall by 1421 contracts to 186,302 despite the fact that silver was up by 12 cents on Friday. We must have had considerable shortcovering by the bankers as they feared something was brewing in the silver arena. The OI for gold fell by another 2,842 contracts down to 446,028 contracts as the price of gold was down by $5.20 on Friday.

(report Harvey)

2 Today, 10 important commentaries on Greece

(zero hedge, BloombergReuters/)

3. One commentary on the agreement with Iran

(zero hedge)


4. Gold trading overnight

(Goldcore/Mark O’Byrne/)

5 Trading from Asia and Europe overnight

(zero hedge)

6. Trading of equities/ New York

(zero hedge)

7.  USA stories:

i) Retail sales falter

ii) Business inventories rise/ratio of inventories to sales rise indicates recession

iii) small business optimism falters

iv/ Dave Kranzler on the Puerto Rico mess where Oppenheimer hedge funds have almost 14% of their entire assets in Puerto Rico bonds.


plus other important topics….

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

Here are today’s comex results:

The total gold comex open interest rose by 8,268 contracts from 446,028 up to 454,296 despite gold being down $2.50 in price yesterday (at the comex close).  We are now in the next contract month of July and here the OI remained at 157 contracts. We had 0 notices filed yesterday and thus we gained 0 contracts or an additional nil ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI fell by 5,308 contracts down to 242,796 as the players start to roll into October or December. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 163,401. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 149,707 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI fell by a large 1,002 contracts from 187,302 down to 186,300 despite the fact that the price of silver was down by only 4 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 as today we have in all probability a huge shortcovering by the bankers as they sensed something was brewing in the silver arena. The next delivery month is July and here the OI rose by 49 contracts up to 439. We had 24 notices served upon yesterday and thus we gained 73 contracts or an additional 365,000 ounces of silver will stand for delivery in this active month of July. This is the first time in quite some time that we have not lost any silver ounces standing immediately after first day notice. The August contract month saw it’s OI fall by 33 contracts down to 174. The next major active delivery month is September and here the OI fall by 779 contracts to 126,755. The estimated volume today was very poor at 27,089 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 42,151 contracts which is excellent  in volume.  We had 319 notices filed for 1,545,000 oz.

July initial standing

July 14.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 132.17 oz  (Scotia,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 157 contracts 15,700 oz
Total monthly oz gold served (contracts) so far this month 412 contracts(41,200 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 218,100.8   oz

Today, we had 0 dealer transactions

we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

we had 0 dealer deposits

total dealer deposit: zero
we had 2 customer withdrawals

i) Out of Manfra; 32.15 oz (one kilobar)

ii) out of Scotia: 100.021 oz

total customer withdrawal: 132.170 oz

We had 0 customer deposits:

Total customer deposit: 0 ounces

We had 1 adjustment.

i) Out of Delaware:  96.45 oz was adjusted out of the dealer and this landed into the customer account of Delaware.

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the July contract month, we take the total number of notices filed so far for the month (412) x 100 oz  or 41,200 oz , to which we add the difference between the open interest for the front month of July (157) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

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

No of notices served so far (412) x 100 oz  or ounces + {OI for the front month (157) – the number of  notices served upon today (0) x 100 oz which equals 56,900  oz standing so far in this month of July (1.7698 tonnes of gold).

we neither gained nor lost any gold ounces standing in this non active delivery month of July..

Total dealer inventory 482,982.338 or 15.022 tonnes

Total gold inventory (dealer and customer) = 7,843,299.130 oz  or 243.959 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.96 tonnes for a loss of 57 tonnes over that period.


And now for silver

July silver initial standings

July 14 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,902,357.07  oz (CNT, Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 482,103.800 oz (Scotia)
No of oz served (contracts) 319 contracts  (1,545,000 oz)
No of oz to be served (notices) 120 contracts (600,000 oz)
Total monthly oz silver served (contracts) 3266 contracts (16,330,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 5,443,872.5 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz


We had 1 customer deposit:

i) Into Scotia: 482,103.800 oz

total customer deposit: 482,103.800  oz


We had 2 customer withdrawals:

i)Out of  CNT: 100,143.970 oz

ii) Out of Scotia: 1,802,213.100 oz

total withdrawals from customer:  1,902,357.07  oz


we had 0  adjustments

Total dealer inventory: 58.96 million oz

Total of all silver inventory (dealer and customer) 180.743 million oz

The total number of notices filed today for the July contract month is represented by 319 contracts for 1,545,000 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 (3266) x 5,000 oz  = 16,330,000 oz to which we add the difference between the open interest for the front month of July (439) and the number of notices served upon today (319) x 5000 oz equals the number of ounces standing.

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

3266 (notices served so far) + { OI for front month of July (439) -number of notices served upon today (319} x 5000 oz ,= 16,930,000 oz of silver standing for the July contract month.

We gained 365,000 ounces standing in this active delivery month of July. Somebody, again, 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 14.2015:no change in inventory/gold inventory rests at 709.07 tonnes

July 13.2015: a big inventory gain of 1.49 tonnes/Inventory rests tonight at 709.07 tonnes

July 10/ we had a big withdrawal of 2.07 tonnes of gold from the GLD/Inventory rests this weekend at 707.58 tonnes

July 9/ no change in gold inventory at the GLD/Inventory at 709.65 tonnes

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 14 GLD : 709.07 tonnes



And now for silver (SLV)

July 14.2015: no change in silver inventory/rests tonight at 327.593 million oz.

July 13./an inventory gain of 1.051 million oz/Inventory rests at 327.593 million oz

july 10/no change in silver inventory at the SLV tonight/inventory 326.542 million oz/

July 9/ a huge increase in inventory at the SLV of 1.337 million oz. Inventory rests tonight at 326.542 million oz

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 14/2015:  tonight inventory rests at 327.593 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 9.5 percent to NAV usa funds and Negative 9.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.3%

Percentage of fund in silver:37.4%

cash .3%

( July 14/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 1.74%!!!! NAV (July 14/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV falls to – .69% toNAV(July 14/2015

Note: Sprott silver trust back  into positive territory at +1.72%

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

Central fund of Canada’s is still in jail.

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

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



And now for your overnight trading in gold and silver plus stories

on gold and silver issues:


(courtesy/Mark O’Byrne/Goldcore)


Greeks Can’t Tap Cash, Gold, Silver In Bank Safety Deposit Boxes

– Greek capital controls also prevent access to contents of safe deposit boxes
– Restrictions on safe deposit access doesn’t protect banking system unless contents confiscated
– Readers should heed warnings by Marc Faber and Ian Spreadbury of Fidelity
– Important to own assets outside banking system and not in bank safe deposit boxes
– Own physical bullion in private safety deposit boxes and the safest private vaults

Capital controls have been in place in Greece since the start of the month to protect the banks from mass withdrawals by nervous Greeks. They have rightly been concerned about their savings, the collapse of the banking system and the loss of their savings in deposit confiscations or bail-ins.

Pic 2 - SDB

Many Greeks were also withdrawing their cash because they fear the country might be forced back onto the drachma. However a little known fact is that, Greeks who had prepared for bank runs by withdrawing cash and buying gold and silver bullion and then lodging that bullion and indeed cash into safety deposit boxes have also been caught up in the draconian capital controls.

We have warned about this for many years and warned as recently as April this year that people should avoid using safety deposit boxes in banks.

“Greeks cannot withdraw cash left in safe deposit boxes at Greek banks as long as capital restrictions remain in place”, Nadia Valavani, a Deputy Finance Minister in Greece told local television station according to a Reuters report.

The report (Greeks cannot tap cash in safe deposit boxes under capital controls) was little noticed at it was published on the less trafficked ‘Bonds’ section of Reuters.com on Sunday July 5th at 1:58 pm EDT or 6:58 pm GMT. Sunday afternoon and evening is a time when traders, investors and even eagle eyed news junkies are likely to be taking a well earned break.

The notion that safe deposit boxes – facilities that are used by many precious metals investors and others seeking to safeguard their wealth and valuables – need to come under capital controls to protect against bank runs is a dubious one.

This cash is not in the banking system – its withdrawal would have no negative impact on the system. Its availability to its owner might bring cash into circulation which would benefit the wider community.

The only reason to put access to safe deposit boxes under capital controls – measures which were agreed between the government and the banks – is because the banks and governments wish to retain the option of confiscating the contents of those boxes should the crisis deepen.

The low level war on cash and gold looks set to intensify, and governments look likely to wish to prevent savers and investors taking their cash out of the bank and putting them in safe deposit boxes.
This draconian move may be part of an endeavour to do that.

Safety deposit boxes are a convenient facility to store a small quantity of precious metals. However – as the Greek situation demonstrates – the convenience of ease of access to a local safe deposit box can be offset by the fact that governments and banks can lay claim to their contents at the stroke of a pen.

It would be unwise to view Greece as an exceptional case.

Such complacency is not shared by respected economic historian Marc Faber who recently warned Bloomberg viewers that “Greece is coming to your neighbourhood very soon” because “the world is over-indebted”.

This view has been echoed by many well placed observers from HSBC, Goldman Sachs and Fidelity in recent months. Most recently Fidelity’s Ian Spreadbury made the highly unorthodox recommendation that savers should keep some precious metals and cash “under the mattress”.

What happens next in Greece will determine the fate of the deposit box holders and indeed all citizens in Greece and indeed the wider Eurozone.

The ECB, reneging on its duty of lender of last resort, has put Syriza in an untenable position. It should be remembered that Mario Draghi came to the ECB from Goldman Sachs despite the fact that Goldman were found to have aided the previous Greek government in order to cook the books in order to borrow €1 billion that it could not afford in 2008 and indeed to join the monetary union. Indeed it is alleged the Draghi himself helped cook the books but he denies this and says Goldman did this prior to his joining.

The Telegraph’s AEP writes, “The Greek banks are on the verge of collapse. There is not enough cash left to cover ATM withdrawals of €60 billion each day through this week, or to cover weekly payments of €120 to pensioners and the unemployed – that is the to say, the tiny fraction of the jobless who receive anything at all.”

In the run up to the referendum former Finance Minister Varoufakis had made assurances that the EU had no legal power to expel Greece from the euro – a statement which likely encouraged the electorate to vote “No”. True though this may be, the EU institutions have instead created the conditions whereby Greece either capitulates completely or is forced to leave the euro of its own accord.

The “deal” which Tsipras must now get through parliament in Athens may save the banking system for now – or not, depending on the reaction of the public to the deal – but at great cost to Greece.

Pensions will will be slashed, Value Added Tax (VAT) or sales tax will be imposed on goods and services.

Vital elements of Greece’s infrastructure will be sold off to businesses with close links to the financial institutions who played a key role in creating the crisis – and yet have only benefitted from the repercussions – following the typical IMF template for debt colonialism.

Whatever the outcome with regards to the contents of safe deposit boxes in Greece – while not forgetting that there are far more pressing issues at stake for the people of Greece and Greek society – there is a clear lesson from recent events.

As we consistently warn gold, silver and cash stored within the financial and banking system is in no way secure in the event of a crisis.

Investors should hold some physical gold and silver outside of the banking system in secure and private safe deposit boxfacilities. Precious metals should also be held in jurisdictions with a reputation for respecting private property such as Switzerland, Hong Kong and Singapore.

Must Read Guide:  7 Key Gold Must Haves


Today’s AM LBMA Gold Price was USD 1,153.20, EUR 1,046.89 and GBP 745.27 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,154.95, EUR 1,043.13 and GBP 741.59 per ounce.


Pic 1 - Chart1
Silver in USD – 5 Years

Gold fell $5.10 or 0.44 percent Friday to $1,157.90 an ounce. Silver slipped $0.08 or 0.51 percent to $15.50 an ounce.

Gold in Singapore for immediate delivery ticked lower and gold in Switzerland also weakened despite considerable uncertainty regarding the Greek “deal”.

Gold prices are down for a second day after ending yesterday down half a percent in dollar terms but 1% higher in euro terms as the euro fell on international markets. Support is at $1,155 and that level is holding for now.

Asian shares were  mixed and future contracts tracking China’s key stock indexes fell sharply, suggesting a three-day rebound may be losing momentum.

European stocks are lower today on concerns that Tsipras may not be able to get the debt deal over the line in the Greek parliament. Even if he does, his government may not last long thereafter and a subsequent Greek government may elect to honour the will of the Greek people and rip up what most fair minded people see as a very unfair and completely impractical “bail out”.

Euro zone finance ministers will hold a telephone conference to discuss Greek bridge financing tomorrow, Austria’s finance minister said on today. It does not necessarily need a euro group summit to agree on bridge financing, Hans Joerg Schelling said. “If a reasonable proposal comes up, the euro zone finance ministers probably can decide about it in a conference call,” Schelling said.

The  world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rise 1.5 tonnes on Monday, its first inflow since June 25.

Silver’s underperforming, down 1%, putting it on track for a fourth straight week of losses – if it ends this week in the red, it will have fallen in eight out of the last nine weeks.

Platinum and palladium are also marginally weaker, after both bucked the falling trend in gold and silver yesterday to rise 0.3% and 1.2% respectively.

Breaking News and Research Here



(courtesy James Turk/Kingworldnews/Eric King)

Latest bailout of Greece piles debt on unpayable debt, Turk tells KWN


8:50p ET Monday, July 13, 2015

Dear Friend of GATA and Gold:

More debt on top of the debt it already can never repay is no solution for Greece, GoldMoney’s James Turk tells King World News tonight, adding that since the latest bailout is all conjured money, it will only devalue the currency of the lenders. The comments made by Turk, a GATA consultant, are excerpted at the KWN Internet site here:


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



(courtesy Lawrence Williams/Mineweb/GATA)


MineWeb’s Lawrence Williams: GATA’s evidence of gold-price suppression is ‘conclusive’


8:45p ET Monday, July 13, 2015

Dear Friend of GATA and Gold:

GATA’s evidence that central banks and their bullion bank agents are suppressing the gold price is “conclusive,” MineWeb’s Lawrence Williams writes tonight.

“GATA’s arguments,” Williams writes, “have been treated with scorn by the gold-sector establishment for the most part and by the mainstream media, although its arguments do seem to be being taken a little more seriously by the latter more recently. Scorn and contempt have always been the weapons the establishment has employed to try to suppress unwelcome fact and theory.”

Williams’ commentary is headlined “Gold Price Manipulation: Who Really Calls the Tune?” and it’s posted at MineWeb here:


Williams’ tin-foil hat with first gold nugget cluster is in the mail.

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



And now your overnight trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan weakens to 6.2088/Shanghai bourse red and Hang Sang: red

2 Nikkei closed up by 295.56  points or 1.47%

3. Europe stocks all in the red /USA dollar index down to 96.64/Euro down to 1.1028

3b Japan 10 year bond yield: rises to  47% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.38

3c Nikkei still just above 20,000

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

3e WTI 51.13 and Brent:  56.78

3f Gold down /Yen down

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

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

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

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

Except Greece which sees its 2 year rate rises to 27.08%/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: 12.44%

3k Gold at 1154.00 dollars/silver $15.33

3l USA vs Russian rouble; (Russian rouble down 1/4 in  roubles/dollar in value) 56.85,

3m oil into the 51 dollar handle for WTI and 56 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 .9455 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0428 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 4 year German bund remains in negative territory with the 10 year moving closer negativity at +.85%

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”. Greece agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.44% early this morning. Thirty year rate above 3% at 3.22% / yield curve flatten/foreshadowing recession.

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

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




Stocks Get Second Thoughts About Greek Deal: Turn Red From China To Europe

One day after the Greek “pre-deal” was announced and the world breathed a sigh of relief, sending US stocks soaring and Greek halted stocks, well, tumbling (via ETFs and ADRs), things are oddly quiet and in fact quite red in Europe, with futures in the US modestly lower, following both China’s first red close in several days (SHCOMP -1.2%), and a Europe which is hardly looking very euphoric at this moment: it is almost as if the algos finally got to read the fine print of the Greek deal after trading all day on just the headlines.

As Bloomberg’s Richard Breslow summarizes, with so much economically important news coming tomorrow, equity markets opened today trading yesterday’s events. Stock markets from Japan to Australia gapped higher on their open getting in on the rallies in Europe and North America that followed the Greece news. Interestingly, China and India, open late enough to benefit from yesterday’s events, showed a lack of conviction today, mirroring E-Mini, down a bit in a tight range, and Euro Stoxx 50 futures that failed to keep an opening bid and have sagged since

Breslow notes, and we agree, that the most notable market so far today has been Italy, underperforming the rest of Europe with a .7% decline right from the get go. Peripheral bond yields are also underperforming core on the open and EURCHF flirted with 1.0400 after spiking above 1.0500 on the early Greek headlines.

Chinese equities had a bit of a roller coaster of a day with the Shanghai Composite opening down, rallying 1.6% after strong money supply figures only to sag all afternoon before a rally and swoon near the end left the index down 1.2% on the day.  Money market rates also increased, with the catalyst for the equity drop according to some was the PBoC injecting less liquidity. More companies have resumed trading, leaving still about one-quarter of mainland listed companies frozen. The market closed before it was announced that China is considering allowing another 1 trillion yuan ($161 billion) of local government debt swaps. Yet another policy to aid the economy. Tomorrow GDP and IP will be released.

Japanese equities opened strong and pretty much stayed that way, with both the Topix and Nikkei 225 closing up about 1.5%. Headlines about Greece dominated the coverage. Tomorrow the BOJ is expected to stay on hold but is likely to downgrade its economic assessment

European equities have sagged from the opening but so far are trading fairly quietly. The DAX remains above its 55-DMA (11,367), which it gapped above yesterday is the pivot level to watch . Italian shares which also rose yesterday have crossed  back below their 55-DMA (23,025), and that too is an important pivot to watch. How these two indices perform will be an important clue as to optimism within Europe. U.K. equities are pretty much flat and out performing the rest of Europe, as CPI and factory output prices were pretty benign and on expectation. Tomorrow unemployment will be released.

In FX, GBP (+107 pips) saw a fairly muted reaction to the in-line with expectation CPI data (Y/Y 0.0% vs. Exp. 0.0% Prey. 0.1%), but did strengthen significantly after BoE’s Carney stated that a rate hike is moving closer, while ZEW Survey Expectations (29.7 vs. Exp. 29) failed to see a reaction in EUR, which trended higher from the European open. The USD index heads into the US session lower by around 0.2% weighed on by EUR/USD as the pair trades back above 1.1000. FX markets have seen weakness in commodity currencies including CAD, NOK and RUB as a consequence of lower oil prices due to the Iranian nuclear deal with INR and TRY notable stronger this morning, as the net importers of oil set to benefit from lower prices.Looking ahead, this afternoon sees US retail sales advance, BoE’s Miles and ECB’s Mersch.

In commodities, WTI (USD -1.01) and Brent Crude (USD-1.04) futures traded lower during the first half of the European trading session after it was announced that Iran have come to an agreement regarding their ongoing nuclear deal, meaning eventually sanctions will be listed, with Iran then able to supply more oil to global markets. However, the trade embargo is not to be lifted until countries are satisfied it has fulfilled its obligations and this will take many months, while several major investment banks have estimated it will be 6-12 months before production returns to 2012 levels of around 500kbpd. While the metals complex saw gold trade slightly lower overnight amid a dampening of safe haven demand, while copper traded flat to remain near yesterday’s lows and Dalian iron ore rose by more than 1% in tandem with the recovery in steel rebar prices.

U.S. equity futures are down small and doing very little. Retail sales will be released later today and are expected to soften from last month’s strong upside surprise. Tomorrow will be about Chai Yellen before Congress

In summary: European shares remain lower with the autos and financial services sectors underperforming and food & beverage, health care outperforming. Iran reaches nuclear agreement. Greek Prime Minister Alexis Tsipras faces two days of parliamentary maneuvering in Athens to secure approval for bailout package. U.K. June inflation rate falls to zero matching median est. Carney says time for BOE rate increase is moving closer. German ZEW above estimates. China said to consider extra 1 trillion yuan debt-swap quota. Singapore 2Q GDP below estimates. The Italian and Spanish markets are the worst-performing larger bourses, the Swiss the best. The euro is stronger against the dollar. Greek 10yr bond yields rise; U.K. yields increase. Commodities decline, with WTI crude, Brent crude underperforming and soybeans outperforming. U.S. small business optimism, retail sales,  import price index, business inventories due later.

Market Wrap

  • S&P 500 futures down 0.1% to 2093
  • Stoxx 600 down 0.3% to 395.2
  • US 10Yr yield down 1bps to 2.45%
  • German 10Yr yield up 1bps to 0.87%
  • MSCI Asia Pacific up 0.7% to 143.4
  • Gold spot down 0.3% to $1154.3/oz
  • 3 out of 19 Stoxx 600 sectors rise; food & beverage, health care outperform, autos, financial services underperform
  • 22.2% of Stoxx 600 members gain, 75.3% decline
  • Eurostoxx 50 -0.5%, FTSE 100 -0.4%, CAC 40 -0.3%, DAX -0.6%, IBEX -0.6%, FTSEMIB -0.9%, SMI +0.1%
  • Asian stocks rise with the ASX outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific up 0.7% to 143.4
  • Nikkei 225 up 1.5%, Hang Seng down 0.4%, Kospi down 0.1%, Shanghai Composite down 1.2%, ASX up 1.9%, Sensex down 0.3%
  • Euro up 0.33% to $1.1038
  • Dollar Index down 0.39% to 96.58
  • Italian 10Yr yield up 2bps to 2.13%
  • Spanish 10Yr yield up 3bps to 2.14%
  • French 10Yr yield up 0bps to 1.26%
  • S&P GSCI Index down 1.1% to 409.2
  • Brent Futures down 1.8% to $56.8/bbl, WTI Futures down 1.9% to $51.2/bbl
  • LME 3m Copper down 0.9% to $5540.5/MT
  • LME 3m Nickel down 1.7% to $11550/MT
  • Wheat futures up 0.5% to 578.8 USd/bu

Bulletin Headlines from RanSquawk and Bloomberg

  • Iran’s nuclear deal has weighed on energy with WTI residing near the USD 51 handle while commodity currencies have also seen weakness as a result of the deal.
  • European Equities trade in the red in a paring of yesterday’s sharp gains as the initial positive sentiment regarding the provisional Greek deal dampens.
  • Looking ahead, this afternoon sees US retail sales advance, earnings from JP Morgan, Johnson & Johnson and Wells Fargo and comments from BoE’s Miles and ECB’s Mersch.
  • Treasuries gain as Greek PM Tsipras faces Syriza rebellion against austerity measures, Iran and six world powers reach nuclear accord to end sanctions.
  • Tsipras is set to submit a bill to parliament today containing sales-tax increases and pension cuts that go against his party’s pledges; with dozens of Syriza lawmakers saying they will rebel, Tsipras must rely on opposition support
  • Greece’s last-ditch bailout requires the country to sell EU50b of assets, an ambition it hasn’t come close to achieving under previous restructuring plans
  • Tsipras’s government is considering stepping down after Wednesday’s parliamentary vote, Bild Zeitung reports, without saying how it obtained the information
  • Germany’s Schaeuble proposed Greece could issue debt certificates to pay part of its domestic bills in coming weeks, Handelsblatt reports, citing people who took part in meeting of Eurogroup finance ministers
  • The nuclear deal with Iran, if approved by the U.S. Congress, promises to end a 12-year standoff that has crippled Iran’s economy and drawn threats of military action from the U.S. and Israel
  • Accord could eventually reshape global oil markets; Iran’s oil minister says country can increase exports by 500k bbl/day as soon as sanctions lifted, additional 500k/day in following six months
  • German investor confidence fell to 29.7, from 31.5 in June
  • Bank of England Governor Mark Carney said officials are edging closer to tightening policy as the economic recovery continues
  • China’s broadest measure of new credit increased the most since January after the government stepped in to boost provincial finances and the central bank accelerated monetary easing
  • Sovereign 10Y bond yields mixed; Greek 10Y yield +48bp to 12.496%. Asian stocks mixed, European stocks mostly lower, U.S. equity-index futures flat. Crude oil, gold and copper lower


We conclude with the overnight recap by DB’s Jim Reid

So it seems the Europeans are going to be babysitting Greece for a long period to come and although we always felt a Greek deal was by the smallest margin the most likely option all the way through its fair to say that we didn’t expect anything like the anguish it has taken to get us here or the heavy conditionality. The risk is that the economy will have seen enough damage that problems will arise much earlier in any new deal than had it been struck a few weeks or better still a few months ago. After speaking to George Saravelos last night my interpretation is that we’ve probably removed almost all of the risks over the remainder of the summer but that the autumn could bring fresh elections, ESM squabbling and a wider understanding of the recent damage done to the domestic economy.

Indeed it was 17 consecutive hours of talks which finally saw us arrive at agreement with a set of highly detailed milestones which Greece will now need to deliver upon to secure financing. The overall size of the program has been set at €82-86bn and IMF participation will stay. George notes that there are three major components to the new agreement. The first is the set of detailed milestones which will now need to be passed through Greek parliament, inclusive of VAT and pension reform which will then allow for the national parliamentary approval processes to take place. Different sets of legislation will then need to be delivered by Greece over the next few weeks which in turn will allow for disbursements to be made under the bridge financing arrangements and ESM negotiations to proceed. The second component is a framework of debt relief with the statement referencing the potential for additional official sector debt restructuring through longer debt maturities and interest holidays. This is set to be subject to Greece delivering on its commitments by the conclusion of the first review of the ESM program after September however. The third component is the agreement to the creation of a new privatisation fund in Greece, believed to be as much as €50bn. It’s expected that €12.5bn of this will be used for paying back ESM funds used for bank recap, €12.5bn for growth initiatives and €25bn for debt repayments. George thinks that given the experience of the last few years’ privatisation programme, these targets appear overly optimistic and serve as a signalling mechanism of the government’s commitment to privatisation more so than a meaningful source for bank recap, growth and debt reduction.

So looking at the timeline from now, a Wednesday deadline for the Greek parliament vote has been set. Assuming this passes, focus will be on the ECB and whether they adjust the ELA cap (there was no change in the cap yesterday). Attention will then turn to the European parliamentary approval process with Reuters suggesting the Bundestag is set to vote on Friday. This will allow for formal negotiations to start and discussions of bridge financing which will likely cover July and August obligations before more proposals will need to be passed in September allowing for a full ESM program.

For now though the focus will be on the Greek parliamentary vote. Tsipras’s coalition partners the Independent Greeks, as well as the Left Platform faction of Syriza have already voiced their objection and so it’s looking likely that Tsipras will need to rely on opposition votes. George ultimately believes that a minority government or government of national unity will be the most likely outcome with a major cabinet reshuffle.

So an obvious positive step forward but implementation risks remain high and in the meantime the Greek economy will face significant pressure on the back of fiscal tightening and a bank recap program. It’s also likely that we see a significant change in the political landscape in Greece which could remain a persistent source of risk as the year progresses.

Now let’s try to move on with our lives (a little) as it’s a big week ahead of important US data, the first part of Yellen’s testimony tomorrow, German/UK inflation data today and JP Morgan being the first big US bank to report also today. We’ll come back to this at the end but let’s look at the latest in China and Asia. Equity bourses are mixed in China although it’s been a fairly volatile session with the Shanghai Comp (-0.32%) reversing an earlier gain but the Shenzhen (+2.32%) remaining fairly upbeat. Meanwhile the latest aggregate financing data in the region showed a 1.86tn CNY print, well above the 1.4tn expected and to the highest level since January. Elsewhere there’s a generally positive start in markets in Asia with the Nikkei (+1.69%), ASX (+1.97%) and Kospi (+0.08%) all up. S&P 500 futures are currently unchanged while 10y Treasuries are 1.5bps lower at 2.439%.

Back to yesterday, there was an unsurprisingly better tone in markets on the whole. European equity markets rose although the move up in the Stoxx 600 (+1.97%) was actually smaller than the moves we saw on Thursday and Friday last week. The DAX (+1.49%), CAC (+1.94%), IBEX (+1.70%) and FTSE MIB (+1.00%) also moved higher while the better sentiment filtered over into the US session with the S&P 500 (+1.11%) and Dow (+1.22%) both ending firmer. There were gains also for credit markets as we saw Crossover close 17bps tighter (its tights for the session) and CDX IG move 2bps tighter. In the FX space the Euro initially jumped a fairly modest +0.5% as the agreement headlines broke, only to then sell off as the day wore on as focus quickly shifted to what this meant for Fed rate tightening expectations with the single currency eventually finishing -1.43% versus the Dollar at $1.100. There was a similar turnaround in sovereign bond markets with 10y Bunds initially jumping nearly 9bps in yield to hit 0.984%, only to then rally back and close 4.2bps lower at 0.852% at the close. 10y Treasuries were also choppy, but held on to the move higher in yields to close +5.7bps at 2.455%. A rally across the Greek curve helped support a tightening for Spain (-2.2bps), Italy (-2.4bps) and Portugal (-8.6bps) meanwhile.

Elsewhere it was reasonably quiet data wise with no releases in Europe and just a slightly higher than expected budget surplus for June in the US ($51.8bn vs. $50.5bn expected). Oil has continued to remain under pressure this morning meanwhile with WTI and Brent -0.84% and -0.52% respectively after diplomats are said to be preparing to present the final text of an expected deal with Iran following extended talks in a move that could see sanctions lifted on Iranian oil exports.

Onto today’s calendar now, as mentioned German and UK CPI data will be the main focus in the European session while RPI and PPI in the latter is also expected. There will also be a lot of attention on the German ZEW survey for July while Euro area industrial production is also due. Looking ahead to the US session, the June retail sales print is the top tier release in the US this afternoon. Our US colleagues expect headline sales to be unchanged on the back of slower auto sales. They do however expect retail control (the key input into GDP) to rise +0.5% mom which would mean the Q2 annualized growth rate would be nearly 5% and consistent with the view that total inflation adjusted consumer spending increased at 3% annualized last quarter, underpinning their estimate of a 2.5% annualized gain in Q2 real GDP. Elsewhere the NFIB small business optimism survey, import price index and business inventories are also expected. Earnings in the US are highlighted by JP Morgan, Wells Fargo and Johnson & Johnson. It’s early days so far but of the 23 S&P 500 companies to have reported, 17 have cited a negative impact from a stronger dollar with 5 referring to higher labour costs. There has been just the 1 mention each of China and Greece. Shame that hasn’t been the count in this report over the last few weeks.


The deal with Iran has now been signed:
Zero hedge discusses this landmark deal:
(courtesy zero hedge)

World Powers Reach Landmark Nuclear Deal With Iran, Oil Slides – Full Deal Text

It is only fitting that almost exactly 24 hours after the Greek “pre-deal”, which may and will end up crashing and burning in very short notice, another long expected “deal”, one which has been about a decade in the making, was reached, when Iran reached a landmark nuclear agreement with the U.S. and five other world powers, a long-sought foreign policy goal of the Obama administration. However, just like with the Greek deal celebrations, these too will likely be short lived as the outcome sets the White House on course for months of political strife with dissenters in Congress and in allied Middle Eastern nations.

In the end, however, the reality is that with little oversight both Iran and the West will maintain the status quo, even if the chances of a middle-east “preemptive” war involving Israel and/or Saudi Arabia increase substantially.

Here are some of the deal highlight bullets from Reuters and Bloomberg:

  • Iran ballistic missile embargo seen in place for 8 years
  • Conventional weapon embargo seen in place for 5 years
  • Iran to cut 98% of enriched uranium stockpile under deal
  • Iran will eliminate two-thirds of centrifuges under deal
  • EU to lift sanctions on Iran as it meets nuclear obligations
  • Iran deal implementation will take months, officials say
  • Iran won’t receive sanctions relief until it complies with terms of agreement

In terms of the next steps timeline, Bloomberg adds that oil sanctions on Iran unlikely to be lifted before December 2015, according to most optimistic assessment of steps involved in draft of nuclear agreement obtained by Bloomberg. Most analysts expect this to happen sometime in 2016.

Key steps as follows: the Joint Comprehensive Plan of Action, or JCPOA, will be adopted 90 days after endorsement by UN Security Council resolution, or sooner by unanimous consent of all parties.

After Adoption Day, U.S., EU will issue waivers, introduce legislation to lift oil and other sanctions on so-called Implementation Day. Implementation Day is when Intl Atomic Energy Agency verifies that Iran has met key nuclear-related obligations.  Implementation day likely to be at least ~2 months after Adoption Day, according to U.S. administration officials; less optimistic scenarios suggest implementation sometime in 2016.

The background on what for many years had seemed like a neverending discussion is largely known by most, buthere is the WSJ with a quick rundown:

The Obama administration and its partners hope the deal will resolve a dispute that at times threatened to spark a military conflict. In the optimistic view, it would ease tensions with Tehran over time and pave the way for fresh attempts to resolve some of the region’s many other conflicts.


In a Twitter post, Iranian President Hassan Rouhani said the deal showed that “constructive engagement works,” adding “with this unnecessary crisis resolved, new horizons emerge with a focus on shared challenges.”


However, critics in Washington, Israel and the Gulf nations that neighbor Iran say the deal will merely delay Iran’s path to nuclear weapons. After 10 years of restraint on its activities mandated by the agreement, Tehran will then be able to ratchet up its nuclear program and potentially unleash a nuclear arms race in the region, they fear.


Israeli Prime Minister Benjamin Netanyahu called the deal a “historic mistake.”


“Wide-ranging concessions were made in all of the areas which should have prevented Iran from getting the ability to arm itself with a nuclear weapon,’’ Mr. Netanyahu said. “The desire to sign an agreement was stronger than everything else.”

The amusing irony is that according to the WSJ, the agreement could provoke new strains in U.S. ties with its traditional Middle Eastern allies in Israel and the Gulf states led by Saudi Arabia. Why is this ironic? Because as we reported in May, the US just sold “Over $4 Billion In Weapons To Israel, Iran And Saudi Arabia.” A more cynical person could be almost inclined to assume the US is eagerly seeking an outcome that destabilizes the already “ISIS ravaged” region even further.

In the meantime, US arms customers, “have warned that lifting tight international sanctions will deliver an economic windfall that enables Iran to expand its regional influence by boosting funding for proxies in Syria, Lebanon, Yemen and elsewhere.”

Meanwhile, the diplomats are happy:

French Prime Minister Manuel Valls hailed a deal as an important step in calming tensions. “Everyone is aware of the change this represents,” Mr. Valls said in a television interview on the sidelines of France’s Bastille Day celebrations.


“There’s been a tension with Iran for ten years or so. Of course, it’s not over, but a very important step has been taken,” he added.


The final round of negotiations stretched for more than two weeks and was punctuated by tensions and setbacks, at times devolving into shouting matches among international officials. The U.S. repeatedly warned it was willing to walk away from a bad deal while Iranians threatened to rev back up their nuclear program.

The quid:

At the heart of the agreement between Iran and the six powers—the U.S., U.K., Russia, China, Germany and France—is Tehran’s acceptance of strict limits on its nuclear activities for 10 years. These are supposed to ensure that the country remains a minimum of 12 months away from amassing enough nuclear fuel for a bomb. After the 10-year period, those constraints will ease in the subsequent five years.


In exchange, the U.S., the European Union and the United Nations will lift tight international sanctions on Tehran, a move that Western diplomats say could help Iran’s economy to expand by 7% to 8% annually for years to come.


Iran, which analysts say could double oil exports quickly after sanctions are lifted, will also receive more than $100 billion in assets locked overseas under U.S. sanctions.

… and the pro quo:

Iran must take an array of specific steps. It must disable two-thirds of its centrifuge machines used to enrich uranium, which can be used as fuel for nuclear energy or nuclear weapons. It must slash its stockpile of enriched uranium and redesign its nuclear reactor in the city of Arak so that it produces less plutonium, which can also be used in a weapon.


Oil-rich Iran has always insisted its nuclear program is for entirely peaceful purposes, such as producing electricity and medical isotopes.


After years of stalling, Iran also must disclose information on its past nuclear activities, which many Western officials believe was aimed at gaining nuclear weapons know-how. Iran must provisionally implement an agreement giving United Nations inspectors much broader access to sites inside the country and eventually get parliamentary approval for that agreement.

But the biggest hurdle for implementation will be the US itself, where a vocal republican-controlled Congress has said it would fight the deal:

The nuclear deal will fan intense political debate in Washington, where Congress may vote within 60 days on the agreement. As a last resort, the Obama administration may have to rely on the support of Democrats to uphold a presidential veto if the Republican-led Congress votes to overturn the agreement.

At the end of the day, the “deal” – just like Greece’s pyrrhic defeat, will be mostly watercooler talk with little actual implementation:


“The technical obstacles can be surpassed with goodwill and diligence, but political hurdles can turn into poison pills,” said Ali Vaez, senior Iran analyst at Crisis International, an international conflict resolution group.


Iran nor the U.S. has ever implemented such a complex quid pro quo. In
an atmosphere of mistrust, misunderstandings are inevitable—thus the
need for preserving the positive diplomatic momentum even after the deal
is sealed.”

For now however, the biggest loser from a potential deal, oil, is sliding on concerns what the imminent surge in Iran deliveries to the global market will do to prices: as aresult oil slid nearly 2 percent after Tuesday’s deal.  Brent crude was last down $1.35 a barrel, or 2.3 percent, at $56.50 a barrel.

“Sanctions have crippled Iran’s oil production, halving oil exports and severely limiting new development projects. The prospect of them being lifted is creating great excitement … as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production,” said Sarosh Zaiwalla, a London-based sanctions lawyer.

The fall in crude prices hit oil producers’ currencies. The Norwegian crown fell 0.3 percent to 8.11 per dollar, having earlier fallen to 8.14, while the Canadian dollar fell 0.4 percent against the greenback to a four-month low of C$1.2796.

But the biggest winner, if only for the time being is Obama, who will make a statement wihin the hour to show the American people just what a strong diplomat he really is.

* * *

For those searching, below is the full text of the 159 page deal as leaked by Iran’s Tabnak news site.



Here is an artist’s impression as to how negotiations with the Iranians proceeded:



and Trust…


Source: Investors.com



Now let us head over and witness the key Greek developments;

Schauble believes that in order to pay salaries, then Greece must use IOU’s.

(courtesy zero hedge)


Schaeuble’s Modest Proposal For Greek Bridge Loan: Pay Salaries In IOUs

While Greek PM Alexis Tsipras is busy figuring out how best to go about pushing the “deal” he reached on Monday morning in Brussels through parliament, EU finance ministers are scrambling to put together billions in bridge financing that will hold Athens over until the activation of the ESM program which is likely at least four months away. Greece needs between €7 and €12 billion in the interim according to most estimates, and faces a critical payment to the ECB on July 20 – with Greek banks dependent solely on ECB liquidity, missing this payment isn’t an option. 

Of course any “payments” made by Greece to external creditors (i.e. to anyone other than former or current Greek public sector employees) will only be possible by way of circular funding schemes much like the SDR reserve raid that allowed Greece to pay the IMF with its own money in May. Here’s Open Europe with a rundown of the options under consideration for the bridge loan:

  1. European Financial Stabilisation Mechanism:Using the EFSM (an EU wide bailout fund) has been suggested since it can be activated by Qualified Majority Voting.
  2. Profits from Eurosystem held bonds: An option for financing which was included in the last bailout was the transferral to Greece of profits from Greek bonds bought under the Securities Markets Programme (SMP) by the ECB and National Central Banks. This can be done fairly simply via a decision of member states and the central banks. However, they have previously wanted conditionality hence why it was tied into the bailout. Furthermore, this is only expected to yield around €3.5bn so falls well short of what is needed for the bridge.
  3. Bilateral loans: Some Eurozone member states could give Greece short term bilateral loans to tide it over. So far though France is the only country that seems serious about this. Given the size of the loans and the fact they would need to be provided immediately in cash it seems likely only the largest states would be able to provide them. Furthermore, such loans would need parliamentary approval in any state that provided them (tough in Germany, Netherlands, Finland and the Baltics), while they would also show up in debt levels for these countries.
  4. Short term debt: Another alternative would be to allow Greece to issue more short term debt combined with ECB liquidity which would allow Greek banks to take more of it on. However, this would run counter to the views of the ECB supervisory arm.
  5. IMF and ECB delay repayment: Over the weekend there were rumours of the ECB agreeing to delay the repayment of bonds it holds due over the summer. However, this would mark a significant change of stance for the ECB and foment German concerns over monetary financing. Since Greece is already in arrears to the IMF it could simply delay this further, though this would not be seen as acting in good faith.

As you can see, all of these options involve creditors effectively paying themselves either literally or in spirit or otherwise entail the perpetuation of some manner of ponzi scheme (i.e. allowing Greece to sell T-bills to Greek banks). And while that’s unavoidable in terms of Greece’s near-term external debts, German FinMin, and architect of the great Greek humiliation Wolfgang Schaeuble has other ideas in mind for how Greece might go about paying pensioners and government employees. Handelsblatt (Google translated) has more:

In discussing the euro zone finance ministers on a possible bridge financing Schäuble have suggested that the Athens government could spend IOUs to serve part of their domestic payment obligations, told the Handelsblatt (Tuesday edition) from participating districts. 


In the euro group on Monday this so-called “IOU” papers were re-issue.


Finance ministers consider a range of options for a bridge loan. Because to Greece money from a possible ESM bailout program will receive, it could take up to four weeks. The use of IOUs is controversial. Some experts warn that it could be a first step to a parallel currency.


The promissory notes were also located only internal payment obligations, such as bills or salaries, operate. For the external debt they are not fit. But already on July 20, has to operate, which are held by the European Central Bank (ECB) Athens expiring bonds of 3.5 billion euros.

And here’s Open Europe on the IOU option:

IOUs: An idea reported by Handelsblatt overnight and said to be proposed by German Finance Minister Wolfgang Schäuble is that Greece issue IOUs to meet some of its payments. This is a bit of a non-issue though as such an approach could only be used to meet internal payments, while most of the bridge financing is needed to meet external debts to the ECB and IMF.

So it appears as though Schaeuble and Yanis Varoufakis do agree on at least one thing: that Greece may be forced to resort to the “California” IOU option to meet its domestic obligations. 

Of course Greek public sector employees have already suffered untold humiliation over the course of their government’s negotiations with creditors.

Most recently, pensioners were forced to line up at banks – which reopened briefly earlier this month to disburse pension payments – only to receive a third (around €120) of their promised payouts. The following rather haunting image is indicative of the scene the played out at banks across the country when pensioners besieged bank officials in a desperate attempt to get what little of their money was available.

*  *  *

Now, it appears Schaeuble is angling to complete the Greek pensioner degradation by ensuring that this month, retirees will receive nothing but an IOU signed by Syriza, a not-so-subtle reminder to Greek public sector workers that when you elect a belligerent government unwilling to cede to the demands of the EU paymaster, you do so at your own economic peril.


No comment necessary on this latest development with the IMF:

(courtesy zero hedge)


IMF Declares War On Germany: In “Secret” Report Lagarde Says Greece Will Need Massive Debt Relief

A divide between the IMF and Europe (read: Germany), regarding writedowns on Greece’s debt to the EU has been brewing for quite some time and recently returned to the international spotlight when, a few months back, the Fund indicated debt relief was a precondition for its participation in any further aid for Athens.

More recently, the IMF released a report on Greece’s debt sustainability just prior to the referendum. The timing appeared to be strategic and may have helped secure the “no” vote for Tsipras.

Unfortunately, the IMF didn’t appear to anticipate the PM’s complete capitulation and now, the subject of debt relief has again been put off, this time until Greece officially passes the new “deal” through parliament and legislates its terms.

Now, another “secret” IMF document on the sustainability of Greece’s debt burden has surfaced and not surprisingly, the Fund is once again pounding the table on a haircut. One is certainly left to wonder if the US (and its veto power) are pulling the strings behind the scenes and orchestrating “leaks” at opportune times. Here’s more from Reuters:

Greece will need debt relief far beyond what euro zone partners have been prepared to consider due to the devastation of its economy and banks in the last two weeks, a confidential study by the International Monetary Fund seen by Reuters shows.


The updated debt sustainability analysis was sent to euro zone governments late on Monday, hours after Athens and its 18 partners agreed in principle to open negotiations on a third bailout programme of up to 86 billion euros in return for tougher austerity measures and structural reforms.


“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date – and what has been proposed by the ESM,” the IMF said, referring to the European Stability Mechanism bailout fund.


European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a very dramatic maturity extension, or else make explicit annual fiscal transfers to the Greek budget or accept “deep upfront haircuts” on their loans to Athens, the report said.

In other words, the IMF is now openly at war with Germany (and its sound money compatriots like Finland) over the debt forgiveness, which futher underscores the split in Europe between the German bloc and the those who favored leniency for Greece, and, by extension, a relaxation of the doctrine of strict fiscal discipline that has dominated EU politics (in word if certainly not in deed in the periphery) since the onset of the European debt crisis.
Of course any debt haircut for Greece will only serve to embolden other periphery debtor states, especially those where Syriza sympathizers enjoy growing support ahead of elections. In short, if parties like Podemos in Spain perceive that Germany has blinked on debt relief they too will push for writedowns, something we outlined in detail after the
last IMF “leak” in “Did IMF Just Open Pandora’s Box.”
Varoufakis describes correctly that the “deal” turned Greece into a “Vassal State” and will eventually be the decisive blow that breaks up the European project.
(courtesy Yanis Varoufakis/zero hedge)

Varoufakis: Greek Deal Is “Coup”, Turns Greece Into “Vassal” State, And Deals “Decisive Blow” To European Project

Yanis Varoufakis, fresh off a few relaxing days at his island getaway, will be back in the Greek parliament this week to weigh in on the “compromise” deal his successor Euclid Tsakalotos and PM Alexis Tsipras struck in Brussels over the weekend.

Considering the eyewitness accounts of the highly contentious Eurogroup meeting – out of which came the exceedingly punitive term sheet which would serve as the basis for Greece’s agreement with creditors – one can only imagine what might have unfolded if Varoufakis had been present for the “crazy kindergarten” finance minister free-for-all which reportedly took place on Saturday night.

For those curious to know what Yanis thinks about the deal, below are some “impressionistic thoughts” from the man himself. Highlights include the characterization of the Greek deal as a “decisive blow against the Euorpean project”, a “statement confirming that Greece acquiesces to becoming a vassal of the Eurogroup”, and the “culmination of a coup”.

*  *  *

On the Euro Summit’s Statement on Greece: First thoughts via Yanis Varoufakis

In the next hours and days, I shall be sitting in Parliament to assess the legislation that is part of the recent Euro Summit agreement on Greece. I am also looking forward to hearing in person from my comrades, Alexis Tsipras and Euclid Tsakalotos, who have been through so much over the past few days. Till then, I shall reserve judgment regarding the legislation before us. Meanwhile, here are some first, impressionistic thoughts stirred up by the Euro Summit’s Statement.

  • A New Versailles Treaty is haunting Europe – I used that expression back in the Spring of 2010 to describe the first Greek ‘bailout’ that was being prepared at that time. If that allegory was pertinent then it is, sadly, all too germane now.
  • Never before has the European Union made a decision that undermines so fundamentally the project of European Integration. Europe’s leaders, in treating Alexis Tsipras and our government the way they did, dealt a decisive blow against the European project.
  • The project of European integration has, indeed, been fatally wounded over the past few days. And as Paul Krugman rightly says, whatever you think of Syriza, or Greece, it wasn’t the Greeks or Syriza who killed off the dream of a democratic, united Europe.
  • Back in 1971 Nick Kaldor, the noted Cambridge economist, had warned that forging monetary union before a political union was possible would lead not only to a failed monetary union but also to the deconstruction of the European political project. Later on, in 1999, German-British sociologist Ralf Dahrendorf also warned that economic and monetary union would split rather than unite Europe. All these years I hoped that they were wrong. Now, the powers that be in Brussels, in Berlin and in Frankfurt have conspired to prove them right.
  • The Euro Summit statement of yesterday morning reads like a document committing to paper Greece’s Terms of Surrender. It is meant as a statement confirming that Greece acquiesces to becoming a vassal of the Eurogroup.
  • The Euro Summit statement of yesterday morning has nothing to do with economics, nor with any concern for the type of reform agenda capable of lifting Greece out of its mire. It is purely and simply a manifestation of the politics of humiliation in action. Even if one loathes our government one must see that the Eurogroup’s list of demands represents a major departure from decency and reason.
  • The Euro Summit statement of yesterday morning signalled a complete annulment of national sovereignty, without putting in its place a supra-national, pan-European, sovereign body politic. Europeans, even those who give not a damn for Greece, ought to beware.
  • Much energy is expended by the media on whether the Terms of Surrender will pass through Greek Parliament, and in particular on whether MPs like myself will toe the line and vote in favour of the relevant legislation. I do not think this is the most interesting of questions. The crucial question is: Does the Greek economy stand any chance of recovery under these terms? This is the question that will preoccupy me during the Parliamentary sessions that follow in the next hours and days. The greatest worry is that even a complete surrender on our part would lead to a deepening of the never-ending crisis.
  • The recent Euro Summit is indeed nothing short of the culmination of a coup. In 1967 it was the tanks that foreign powers used to end Greek democracy. In my interview with Philip Adams, on ABC Radio National’s LNL, I claimed that in 2015 another coup was staged by foreign powers using, instead of tanks, Greece’s banks. Perhaps the main economic difference is that, whereas in 1967 Greece’s public property was not targeted, in 2015 the powers behind the coup demanded the handing over of all remaining public assets, so that they would be put into the servicing of our un-payble, unsustainable debt.
Greece decided to pay their Samurai bond due today.  Thus so far they stiff the IMF but private holders of bonds are paid off
(courtesy zero hedge)

Greece Just Gave Everyone The Best Trade Opportunity Of The Year

At an annualized return of approximately 20,622,184,553,370,800,000,000,000,000,000,000,000,000,000%, Greece just gave everyone the best trade opportunity of the year…

Yesterday we highlighted the most important security for Greece and why it was so crucial that this Samurai bond be fully paid.

Overnight, as The FT reports, Mizuho Bank, acting as the agent for the yen-denominated note, confirmed that the outstanding Y11.7bn ($94.5m) payment was made on Tuesday morning in Tokyo.

Rating agencies including Fitch and Standard & Poor’s had separately stressed that payments missed to bodies such as the IMF or the European Central Bank would not constitute a ratings default; but as The FT goes on to note, when Fitch most recently lowered its sovereign rating on Greece to triple C, it said a default on privately held bonds was “a real possibility”.


Credit analysts in Tokyo had warned that a default on the samurai note could have led to defaults on public bonds that Greece had issued in other currencies.

*  *  *

With hours to go before payment was due, the market had shown a 50:50 chance of default, as according to Bloomberg data, the bond’s last trade was at 58.50 yesterday.


Today it has matured at Par, fully repaid (as Greece fails to pay another IMF tranche)… for a 71% overnight return.

*  *  *

Chart: Bloomberg



In just 10 years, if everything remains status quo, Greece debt to GDP will be 336%:

Greek Debt/GDP: 336% By 2025

Back in 2012, when the IMF forecast that by 2022 Greek debt would become sustainable (under 120%) we laughed, and laughed, then laughed some more (see: The Farcical Tragicomedy Of The “Sustainable” Greek Debt/GDP “Denominator from November, 2012)

Three years later the IMF itself not only admitted its original Greek debt “sustainability” predictions were total garbage (hence our quarterly humor series presenting the latest and greatest IMF projections about world growth), of which the most humorous was its forecast of Greek 2016 GDP growth as the highest in the entire Eurozone…


… but the IMF itself, under pressure from Washington, has become the biggest advocate of debt forgiveness, just not its own debt: that of the ECB will do nicely.

Unfortunately, while these global financial institutions conduct their monetary experiments, it is ordinary people who are used like Guinea pigs, in this specific case, the people of Greece, whose fate once they vote through the third and final bailout (there will not be a fourth) will be a world of absolute misery.

And to show just how absolute said misery will be, we present an analysis that layers on what we said several days ago when we first calculated that the new Greek debt/GDP post bailout #3 will promptly hit 200%, something the IMF agreed with earlier today.

But it won’t stop here, and as the following analysis fromMichael Lebowitz at 720 Global shows, just based on the country’s negative growth rate and positive interest rate, Greek debt/GDP will keep rising indefinitely and will likely hit 336% in about one decade, at which point Greece will, for all intents and purposes, cease to exist.


“The Simple Math Behind Greece’s Complicated Situation

“Life is really simple, but we insist on making it complicated.” – Confucius

Occam’s Razor is a frequently quoted principle which states that when one is faced with a multitude of seemingly complex possibilities, the simplest approach or explanation is best. As the ECB and Greece fight over terms of yet another bailout we employ this principle to help better grasp Greece’s dire situation.

The ratio of debt to GDP is one of the most basic and popular measures used to determine the ultimate ability of a sovereign nation to service its debt. Consider a country which has a debt to GDP ratio of 100%, and a balanced budget (excluding interest payments). In this country, it can be said that the interest rate on its debt and the growth rate of its GDP must be equal for the ratio to stay unchanged. In this example a 2% interest rate with a 1% GDP growth rate would result in an increase from 100% to 101% in the debt to GDP ratio. As the ratio rises above 100%, the interest rate must be lower than the GDP growth rate or the ratio will continue to rise. At a debt to GDP ratio of 150%, a 2% interest rate would require a 3% growth rate to remain stable at 150%.

Greece has a current debt to GDP ratio of 170%, and based on current bailout terms, it will likely grow to well over 200%. So applying the logic from above, Greece’s GDP growth rate prior to the current bailout needed to be 1.70 times greater than the rate of interest Greece pays on its debt just to keep its ratio constant. Following are some facts which will allow us make judgements on Greece’s ability to improve or at least sustain their debt to GDP ratio:

Since 1970 Greece’s best 5-year annualized GDP growth rate was +1.50% with an average of +.46%. Over the past 10 years growth has averaged -0.50%.

Since 1997 Greece’s lowest 5-year average interest rate on 10 year bonds was 3.41% with an average of 7.50%. Over the past 10 years the average annual 10 year interest rate was 8.16%

Using Greece’s current debt to GDP ratio as summarized above, we present a best case forecast and a likely forecast for debt to GDP over the ensuing 10 years. For the best case we assumed Greece’s highest 1 year GDP growth rate (+2.74%) and lowest interest rate (3.58%). The likely case uses Greece’s average 1 year GDP growth rate (+0.45%) and average interest rate (7.55%).

In both examples we make the very bold assumption that Greece will run a balanced budget excluding interest expense. The results, as plotted below, are not encouraging.

Greek bonds have rallied sharply on hopes that a bailout will help Greece avoid default. We believe the current terms simply delay the inevitable. In the scenarios above we were very generous with the assumption that Greece will run a balanced budget. Consider that since 1990, Greece has averaged a total budget deficit equal to 8.17% of GDP and has never run a surplus going back to at least 1990. One of the goals of the current round of negotiations are structural reforms designed to help Greece reverse its troubling debt to GDP ratio. Reforms are imperative if Greece is to ever become economically viable.

That said, reforms are widely unpopular, take time to enact and take even longer to show results. We believe default, or the politically correct term “debt forgiveness”, is the most likely outcome. When combined with reforms, Default is the only option which leaves Greece with a fighting chance to avoid being in the same situation a few years from now. The CDS and bond markets are likely over-reacting today as they did with the prior bailouts of 2011 and 2012.

Wow!! the ECB has a serious problem:
Greek total loans on the books of the banks whether current or deficient is 210 billion euros.  With today’s report showing that 100 billion euros are bad and 70% of total loans are non performing.
Also remember that Greece has 90 billion euros in emergency funding and only 120 billion euros of total deposits today.
(courtesy zero hedge)

Greek Bad Loans Soar To €100 Billion

Just when you thought it was safe to buy Greek Banks (which it is not!) based on the mainstream media narrative that Greece is now fixed, ekathimerini reportsthat not only are deposits flying out the door at unprecedented pace (albeit stalled by capital controls) but non-performing loans have increased dramatically in the last few weeks as hundreds of households and enterprises have stopped making their repayments either due to a genuine inability to pay or because of the general uncertainty in the economy that has seen transactions freeze.

Data from banks show that repayments declined to between 20 and 50 percent of performing loans, creating the conditions for a major increase in bad loans. This trend is in line with the estimates of the Bank of Greece, according to which NPLs amounted to 40 percent of the total at the end of 2014, with the likelihood they will grow further in the first half of the year.

As a reference point, there is a little over €210 billion in total Greek loans, both performing and non-performing, currently and about €120 billion in deposits. There is also about €90 billion in Emergency Liquidity Assistance from the ECB.

The total amount of bad loans (those which have remained unserviced for at least 90 days) has reached 100 billion euros, and the BoG data show that 70 percent of the loans that have entered payment programs remain nonperforming.

This is a major problem for the Greek Banks but even more so for The ECB as there is not much it can do to ‘control’ NPLs and given provisions for bad loans are a mere EUR40bn – there is a big hole here that no one is accounting for.


Although the recent deterioration is not yet reflected in the official indices, as it concerns payment delays of one or two months, the picture banks present is one of hundreds of households in payment schemes freezing their payments and entering the stage of partial delay. However, we will not get an idea of the full picture as long as banks remain closed.

But aside from that, Greece is fixed.

Unbelievable!! and he does not resign yet?
(courtesy zero hedge)

Tsipras Interviewed, Sticks Foot In Mouth: “I Signed A Deal I Do Not Believe In But Am Willing To Implement”

Here is the punchline and the only thing the German, Finns, Dutch, Slovenians, Slovaks, and the Baltic states will hear:


And now over to Schauble.

* * *

Greek Prime Minister Alexis Tsipras is being interviewed on Greek TV:


and then this from Tsipras:


Tsipras Stunner: Creditors Said In Countries Under A Bailout “There Is No Point In Holding Elections”

While Germany’s finmin Schauble is about to burst a few capillaries after reading the latest provocation from Tsipras in which he said, according to Reuters, that:


It should be the Greek people that are reeling by another, even greater stunner, just spoken by the Greek PM during his TV interview: an admission from the chosen Greek “leader” that Greece, as a
sovereign nation, no longer exists:


So the Troika makes it clear that countries under a bailout, such as a Greece was and is about to be indefinitely again, democracy is finished and the country becomes a sovereign ward of a few unelected bureaucrats, and the Greek “prime minister” who also just admitted he is now nothing but a puppet of Greece’s new unelected leaders, is Ok with this.

Perhaps it is only fitting that democracy officially dies in the country in which it was born, a country which clearly demonstrates to the rest of the world that in this day and age, banks have more power that countries.

As for Greeks: enjoy your now official “second-rate citizen” status as slaves of Brussels bureaucrats even as you sell all your islands, and hand over your gold for the privilege of repaying the Troika’s debt.

And Mike Kreiger on the same subject as above:
(courtesy Mike Kreiger)

Everything You Need To Know About The Greek Crisis And ECB Fascism In Two Paragraphs

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Yanis Varoufakis just sat down for his first interview since resigning as Finance Minister of Greece. He talked frankly with Harry Lambert of the New Statesman. Here are the two most important paragraphs from the transcript.

There is no democracy in Europe. None.

Varoufakis said that Schäuble, Germany’s finance minister and the architect of the deals Greece signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not discussing the programme – this was accepted by the previous [Greek] government and we can’t possibly allow an election to change anything.


“So at that point I said ‘Well perhaps we should simply not hold elections anymore for indebted countries’, and there was no answer. The only interpretation I can give [of their view] is, ‘Yes, that would be a good idea, but it would be difficult. So you either sign on the dotted line or you are out.’”

Any questions?


Then late tonight, we learn that the iMF may abandon the Greek 3rd bailout due to the fact that their debt is unsustainable:


(courtesy zero hedge)

IMF May Walk Away From Greek Bailout

Earlier today, a “secret” IMF paper surfaced in which the Fund reiterates the need for EU creditors to writedown their holdings of Greek debt.

According to Reuters, who broke the story after reviewing the document, “the updated debt sustainability analysis was sent to euro zone governments late on Monday, and argues that ‘the dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date – and what has been proposed by the ESM.'” The IMF goes on to say that Greece’s debt will likely hit 200% of GDP over the next two years and will sit at a still-elevated 170% of output in 2022.

As a refresher, here’s a (very) brief recap of the IMFs position on haircuts for Greece:

A divide between the IMF and Europe (read: Germany), regarding writedowns on Greece’s debt to the EU has been brewing for quite some time and recently returned to the international spotlight when, a few months back, the Fund indicated debt relief was a precondition for its participation in any further aid for Athens. More recently, the IMF released a report on Greece’s debt sustainability just prior to the referendum. The timing appeared to be strategic and may have helped secure the “no” vote for Tsipras. Today, another “secret” IMF document on the sustainability of Greece’s debt burden has surfaced and not surprisingly, the Fund is once again pounding the table on a haircut.

Although Tsipras had resisted IMF involvement in the country’s third program, Germany made it clear that the Fund’s participation was mandatory. Now, FT says Chrsitine Lagarge may consider pulling out of the deal in light of the fact that Athens’ debt is not seen as sustainable. Here’s more:

The International Monetary Fund has sent its strongest signal that it may walk away from Greece’s new bailout programme, arguing in a confidential analysis that the country’s debt is skyrocketing and budget surplus targets set by Athens cannot be achieved.


“Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far,” the memo reads. Under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the memo suggests it can no longer do so.


IMF involvement in Greece’s rescue has been critical to a German-led group of eurozone hardliners who believe the European Commission, one of the other Greek bailout monitors, is not sufficiently rigorous in its evaluations.


The issue became one of the major sticking points during all-night negotiations between Alexis Tsipras, the Greek prime minister, and Angela Merkel, his German counterpart, at the weekend, with Mr Tsipras repeatedly refusing to accept IMF participation in a new bailout.


According to EU officials, Ms Merkel stood firm on the issue, telling the Greek premier there would be no bailout — and therefore “Grexit” from the eurozone — without a formal request made to the IMF for participation in a new programme. The final bailout deal states that “Greece will request continued IMF support” once its current IMF programme expires.

What happens if the IMF walks away you ask? Well, the entire “deal” could fall apart, as the Fund is expected to put up a not insignificant portion of the bailout money, and in the absence of that funding, the gap would have to be filled with “privitization proceeds” which the IMF itself has projected will come to just €2 billion over the next three years. Furthermore, German lawmakers, already exasperated with the protracted negotiations, would likely pull their support altogether. Here’s FT again:

If the IMF were to walk away from the Greek programme, it could cause significant political and financial problems for Berlin and other eurozone creditors. Without the IMF’s imprimatur, German officials have said they would struggle to win approval for any new bailout funding in the Bundestag. German MPs must approve both the reopening of new talks and the final terms of the third bailout.


In addition, an EU official said that of the €86bn in Greek financing requirements, the European Stability Mechanism — the eurozone’s €500bn bailout fund — was expected to put up only €40bn-€50bn.


The current IMF programme, which still has €16.4bn in undisbursed funds and runs through March 2016, is expected to make up some of the difference, and eurozone officials had been assuming a follow-on IMF programme would contribute as well.


Any shortfall would have to be made up through Greek privatisation proceeds, which have repeatedly fallen short of expectations, or through Greek borrowing on the bond market, which has dried up since the Syriza-led government took power in Athens in January — and which the IMF memo said was highly unlikely to materialise.


“Greece cannot return to markets anytime soon at interest rates that it can afford from a medium-term perspective,” the IMF wrote.


So in addition to a parliamentary revolt and uncertainty surround urgently needed bridge financing, Greece also faces the possibility that the IMF may walk away, throwing the entire “deal” into question. Here’s The Telegraph’s Ambrose Evans-Pritchard summing up the ramifications of the IMF’s analysis and reinforcing our contention that the US (and its IMF veto power) are pulling the strings behind the scenes and orchestrating “leaks” at opportune times.

The findings are explosive. The document amounts to a warning that the IMF will not take part in any EMU-led rescue package for Greece unless Germany and the EMU creditor powers finally agree to sweeping debt relief.


This vastly complicates the rescue deal agreed by eurozone leaders in marathon talks over the weekend since Germany insists that the bail-out cannot go ahead unless the IMF is involved. 


It claimed that capital controls and the shutdown of the Greek banking system had entirely changed the picture for debt dynamics, an implicit criticism of both the Greek government and the eurozone authorities for letting the political dispute get out of hand. 


 Debt forgiveness alone would not be enough. There would also have to be “new assistance”, and perhaps “explicit annual transfers to the Greek budget”.


This is the worst nightmare of the northern creditor states. The term “Transfer Union” has been dirty in the German political debate ever since the debt crisis erupted in 2010. 


The backdrop to this sudden shift in position is almost certainly political. It follows an intense push for debt relief over recent days by the US Treasury, the dominant voice on the IMF Board in Washington. 

Should the Fund threaten to pull its support, Germany would face a tough decision: remain belligerent in the face of pressure from IMF (and tacitly from the US), or concede to writedowns which could open the door for Italy, Spain, and Portugal to demand debt relief. 


Raul Meijer is in Athens and gives his account on what is going on there
(courtesy Raul Meijer)

Germany Just Killed Its Golden Goose

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Personally, like most of you, I always thought Germany, besides all its other talents, good or bad, was a nation of solid calculus and accounting.Gründlichkeit. And that they knew a thing or two about psychology. But I stand corrected.

The Germans just made their biggest mistake in a long time (how about some 75 years) over the weekend. Now, when all you have to bring to a conversation slash negotiation is bullying and strong arming and brute force, that should perhaps not be overly surprising. But it’s a behemoth failure all by itself regardless.

First though, I want to switch to what Yanis Varoufakis told the New Statesman in an interview published today, because it’s crucial to what happened this weekend. Varoufakis talks about how he was pushing for a plan to introduce an alternative currency in Greece rather than giving in to the Troika. But Tsipras refused. And Yanis understands why:

“Varoufakis could not guarantee that a Grexit would work …


…[he] knows Tsipras has an obligation to “not let this country become a failed state”.

What this means is that Tsipras was told by the Troika behind closed doors, to put it crudely: “we’re going to kill your people”. He was made an offer he couldn’t refuse. And Tsipras could never take that upon himself, even though the deals now proposed will perhaps be worse in the medium to long term, even though it may cost him his career.

Criticism of the man is easy, but it all comes from people never put in that position. Varoufakis understands, and sort of hints he might have had second thoughts too if he were ever put in that position.

There’s not much that separates Schäuble and the EU from the five families that rule (used to rule?!) New York City. If you need proof of that, come to Athens and check out the devastated parts of the city. Germany and the Troika are as ruthless as the mob. Or, rather, they’re worse.

My point is, their attitude and antics will backfire. You can’t run a political and/or monetary union that way. And only fools would try.

The structure of the EU itself guarantees that Germany will always come out on top. But they can only stay on top by being lenient and above all fair, by letting the other countries share some of the loot.

To know how this works, watch Marlon Brando, as Don Corleone, talk to the heads of the five families in the Godfather. You need to know what to do to, as he puts it, “keep the peace”. He’s accepted as the top leader precisely because the other capos understand he knows how.

The Germans have shown that they don’t know this. And therefore, here comes a prediction, it’ll be all downhill from here for them. Germany’s period of -relative- economic strength effectively ended this weekend. The flaws in its economy will now be exposed, and the cracks will begin to show. If you want to be the godfather, the very first requirement is you need to be seen as fair. Or you will have no trust. And without trust you have nothing. It is not difficult.

Germany will never get a deal like the EU has been for them, again. It was the best deal ever. And now they blew it, and they have no-one to blame but themselves. And really, the Godfather metaphor is a very apt one, in more ways than one. Schäuble could never be the capo di tutti capi, no-one would ever trust him in that role. Because he’s not a fair man. But he still tries to play the role. Big mistake.

The people here in Greece are being forced to pay for years for something they were never a part of, and that they never profited from. The profits all went to a corrupt elite. And if there’s one thing Don Corleone could tell you, it’s that that’s a bad business model. Because it leads to war, to people being killed, to unrest, and all of that is bad for business.

I must admit, I thought the Germans were smarter than this. They’re not. That much is overly obvious now. No matter what happens next, deal or no deal on Greece, and that’s by no means a given yet, don’t let the headlines fool you, no matter what happens, Germany loses.

It’s not just about Greece, it’s about the whole EU.The Troika thinks that by scaring the living daylights out of the periphery, its power will increase. They even think it’ll work with France. Good luck with that. They’ll be facing Marine Le Pen soon, and Podemos, and M5S, and these antics will not work on them.

I guess the main thing here is that Don Corleone was not a psychopath or sociopath, and that’s more than you can say for Schäuble and Dijsselbloem and Juncker and their ilk. These people simply lack the social skills to lead any organization, because all they understand is power and force, and that is simply not enough. While brute force may look attractive and decisive and all, in the end it will be their undoing.

I’m sure the vast majority of them have seen the Godfather films, but they’ve just never understood what they depict; they don’t have the skillset for it.

Germany just killed its golden goose. And boy, is that ever stupid. They could have had -again, relative, we’re in a recession- peace and prosperity, and they’re blowing it all away.

Tsipras for obvious reasons cannot talk about the threats he’s been receiving, but he did give up some hints early this morning:

• “We took the responsibility for the decision to avert the most extreme plans by conservative circles in Europe..”

• “I promise you that as hard as we fought here, we will now fight at home, to finish the oligarchy which brought us to this state.”

• “We resisted demands for the transfer of state assets abroad and averted a banking collapse which had been meticulously planned.”

• “… decision to avert the most extreme plans by most extreme circles in Europe”

The Italians and Spanish and French have noted every word of this, and more. Europe as it is, is already over. Everything from here on in is a mere death rattle.

Oil related stories:
Despite the Iran agreement, oil rises today:

Crude Extends Gains After API Reports Large Drop In Inventories

After a brief respite of 2 weeks of inventory builds, API just reported a major 7.3 million barrel inventory draw (far bigger than the 1.2mm barrel expected) and the biggest since July 2014…



WTI Crude has jumped back above $53 on the news…


Charts: Bloomberg



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

Euro/USA 1.1028 down .0043

USA/JAPAN YEN 123.28 up .227

GBP/USA 1.5583 up .01066

USA/CAN 1.2788 up .0037

This morning in Europe, the Euro fell by  43 basis points, trading now well below the 1.11 level at 1.1028; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank,  an imminent  default of Greece and the Ukraine, rising peripheral bond yields and today crumbling bourses.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 23 basis points and trading just above the 123 level to 123.28 yen to the dollar.

The pound was up smartly this morning by 106 basis points as it now trades well above the 1.55 level at 1.5583, 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 in the toilet again by 37 basis points at 1.2788 to the dollar.

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

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

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

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).

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


The NIKKEI: this morning : up 117.86 points or 0.60%

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

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

Gold very early morning trading: $1154.00



Early Tuesday morning USA 10 year bond yield: 2.44% !!! down 2 in basis points from Friday night and it is trading well above  resistance at 2.27-2.32%

USA dollar index early Tuesday morning: 96.64 down 17 cents from Monday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Tuesday morning

And now for your closing numbers for Tuesday:

Closing Portuguese 10 year bond yield: 2.75%  down 5 in basis points from Monday

Closing Japanese 10 year bond yield: .47% !!! up 1 in basis points from Monday/still very ominous

Your closing Spanish 10 year government bond, Tuesday, down 2 in basis points

Spanish 10 year bond yield: 2.09% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 2.06% down 5 in basis points from Monday: (very ominous)

trading 3 basis point lower than Spain.


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

Euro/USA: 1.1008 up .0026 ( Euro up 26 basis points)

USA/Japan: 123.31 down  .294 ( yen up 29 basis points)

Great Britain/USA: 1.5632 up .0156 (Pound up 156 basis points)

USA/Canada: 1.2747 down .0004 (Can dollar up 4 basis points)

The euro rose by a small today. It settled up 26 basis points against the dollar to 1.1008 as the dollar traded  southbound  today against most of the various major currencies. The yen was up by 29 basis points and closing well above the 123 cross at 123.31. The British pound gained back more ground today, 156 basis points, closing at 1.5632. The Canadian dollar gained back some more ground against the USA dollar, 104 basis points closing at 1.2747.

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: 2.41% down 2 in basis point from Monday// (well above the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

96.65 down 15 cents on the day


European and Dow Jones stock index closes:

England FTSE up 15.80 points or 0.23%

Paris CAC up 34.37 points or 0.69%

German Dax up 32.52 points or 0.28%

Spain’s Ibex up 34.10 points or 0.30%

Italian FTSE-MIB down 69.53 or 0.30%


The Dow up 217.27  or 1.22%

Nasdaq; up 33.38 or 0.66%


OIL: WTI 52.96 !!!!!!!



Closing USA/Russian rouble cross: 56.47  up 1/10  rouble per dollar on the day

And now for your more important USA stories.

 NY trading for today:

Recessionary Retail Sales & Broken Markets Spark Volumeless Buying In Stocks, Bonds, & Crude

Recessionary retail sales bad news is good news, broken markets rigging VIX, and Tsipras lying to his people about the Greek deal…


Volume was practically non-existent…(less than 50% of average in e-minis)


And futures show that overnight trading was in a tiny range – until retail sales hit and bad news was good news…


As Nasdaq led stocks higher and higherer – because that’s what stocks do…


Post Greferendum announcement, all but Small Caps are now higher…


US equities are rallying because Greece is fixed…


This continues…


VIX was hammered back to a 12 handle (and just as risk started to build markets broke to ensure the plunger continued)…as VIX plunged away from backwardation once again (VIX > 3-month VIX)…


Twitter was manipulated (we await SEC comment in 2 years)


Treasury yields tumbled lower all day starting at the retail sales print and are now unchanged on the week…


The Dollar leaked lower (despite some vol around the retail sales data) with cable strength the biggest drag…


Commodities drifted lower – except for crude…


Crude surged on a “buy the news” of the Iran deal…having tumbled all night… (though we suspect this is algos filling the gap again to Friday’s close)…


*  *  *

So to summarise: The US equity markets are up 3-4% on hopes of a Greek Deal.. Greek stocks are collapsing on the reality of the deal… Treaasury bond yields are unchanged on the news… and Retail Sales data is practically as bad as it has been since the recession… pass the ouzo!

Charts: Bloomberg

Bonus Chart: Mission Accomplished Mr.Draghi

Retail sales tumble!!
(courtesy zero hedge)

Snow In The Summer Confirmed – Retail Sales Tumble Most Since February

Following May’s bounce in retail sales (thanks to a rise in gas prices), June’s headline data printed a 0.3% plunge – the most since Feb 2015 – against expectations of a 0.3% rise. Retail Sales ex-Autos also fell MoM (down 0.1% against expectations of a 0.5% rise). This is exactly in line with our warnings last week that spending was likely to drop following a slide in credit and debit card spending as retail sales declined in autos; furniture; building materials; clothing; general merchandise; restaurants; online and miscellaneous. The control grouop data showed a mere 2.1% rise YoY – confirming recessionary signals from wholesale sales data.


Last week we reported Bank of America’s internal card data revealed that after rising for 3 consecutive months,
retail spending ex autos just posted its first monthly drop, declining -0.1% from May. Based on BAC internal data, which tracks aggregate spending on credit and debit cards, retail sales ex-autos declined 0.1% mom in June on a seasonally adjusted basis. This follows a strong 0.8% gain in May.

Moments ago the Dept of Commerce confirmed that this preview was absolutely correct:



Here is BofA’s less than exuberant narrative…

“It is hard to prove if such a distortion exists. Therefore, we are left to conclude that the BAC internal data painted a disappointing picture of the consumer in June, especially considering our forecast for a stronger consumer in the second half of the year.

Charts: Bloomberg





Business inventories continue to creep higher.  Thus the all important inventories to sales ratio continues in recession territory:

(courtesy zero hedge)

May Business Inventories-to-Sales Ratio Remains Stubbornly In Recession Territory

With a 0.3% rise MoM (as expected), Business Inventories grew for the 4th month in a row (but growth slowed in May from April). Sales rose slightly more MoM (+0.4%) but this left the crucial inventories-to-sales ratio deep in recession territory.


Highest level of inventories-to-sales since Lehman…



Charts: Bloomberg



small business optimism, crashes to 15 month lows:

(courtesy NFIB/zero hedge)

Small Business Optimism Crashes To 15 Month Lows

ith all hopes and dreams of economic renaissance in America pinned on small businesses (see ADP’s recent gains), today’s data from the NFIB will strike fear in the heart of the wealth-effect-creating Fed. The NFIB small business optimism index disappointed expectations in June (94.1 vs. consensus 98.5), falling to its lowest level since March 2014 – the biggest drop since 2012. All components were weaker but most notably hiring and plans to raise worker compensation tumbled.



As Goldman details,

All components were weaker, with the largest declines seen in earnings trends (-10pt to -17) and plans to increase inventories (-8pt to -4).


The net percent of firms raising worker compensation (-4pt to +21) and planning to raise worker compensation (-3pt to +11) reached their lowest levels so far this year.


Forward-looking capex plans also declined (-2pt to +23) to its lowest level this year. The index has trended lower since reaching its post-recession high last December.

However, it gets worse. As Yahoo reports, American CFO’s are worried, according to Deloitte’s second quarter ‘CFO Signals’ survey.

The Chief Financial Officers surveyed by Deloitte are particularly worried about earnings and revenue growth, concerned about cyber security and overall less positive than anytime since the third quarter of 2013.



Three factors are driving the skepticism, according to Sanford Cockrell III, global leader of Deloitte’s CFO program and a national managing partner at the firm:concerns about rising interest rates, a potential slowdown in the U.S. economy, and ‘macro’ worries about the global economy. Notably, the survey was conducted in late May, before the China stock market meltdown and fears of ‘Grexit’ rattled global markets, albeit briefly.


“It would be interesting if we asked the same questions today around the global economy, [the answers] would shift,” Cockrell says, noting CFOs are particularly downbeat on the European economy, with only 5% viewing it as “good” and only 30% expecting it to improve much in the next year.


But the “aha moment” in the survey, according to Cockrell, is the combination of big declines in expectations for earnings and revenue, both to the lowest level in the survey’s 5-year history. That, in turn, is leading to what he calls “anemic” hiring expectations and “not great” forecasts for capital spending in the coming year. 


CFOs are “quite concerned about growth cycles over the next six months to a year,” Cockrell says. Just 38% of CFOs express rising optimism, down sharply from last quarter’s 48% and the lowest seen in more than two years.


In addition, the survey found 65% of CFOs believe the U.S. stock market is “overvalued,” up from 46% in the prior quarter.

*  *  *

Not what escape velocity growth is made of..


(courtesy Dave Kranzler/IRD)

 Greece-ification Of Puerto Rico: Get Your Money Out Of Oppenheimer Funds

(Please note:  the term “Greece-ification” was coined by John Titus  of Best Evidence, who will be a guest on the Shadow of Truth podcast show tomorrow).

A big fight is brewing between Oppenheimer Funds and the Governor of Puerto Rico.  The battle is a smaller scale version of the battle between the EU and Greece.  Currently hedge funds own $15 billion in Puerto Rican debt, mutual funds hold $11 billion, and comatose high net worth investors have been stuffed with the rest – $46 billion – by their brain-dead, trusty financial advisors.

Too be sure, there is no doubt many $10’s of billions in credit default swaps connected to the bond insurance on Puerto Rico’s debt underwritten by MBIA, Ambac and Assured Guaranty.  I would not be surprised if Oppenheimer has exposure in this derivative form as well.

Puerto Rico announced on June 28 that it was unable to handle the debt service requirements of $72 billion in debt it has issued over the years.  The debt issued by Puerto Rico is structured as “super” municipal bonds.  This is because it is triple-tax free for everyone in the United States.  Typically muni-bonds are only triple-tax free for residents of the issuing municipality.

Because of this “super” tax-exempt status, the yield hog investors groped for Puerto Rican debt like groping pedophiles running a daycare center.  Despite the junk bond rating status of this debt, investors continue to beg for it like Oliver Twist groveling for gruel.

Puerto Rico’s economy has been sliding for nearly 10 years.   Nearly 50% of the island’s residents are living in poverty.  Yet the buyers of Puerto Rico’s debt continued to have insatiable appetite so Wall Street was more than willing to oblige, naturally.

The Oppenheimer Funds mutual fund complex is the largest bagholder of Puerto Rico’s debt.  including $4.4 billion of uninsured bonds.  Not including tobacco bonds, insured debt and pre-funded bonds, 13.8% of Oppenheimer’s total holding holdings are in Puerto Rico bonds.

This explains why Oppenheimer has assumed the role of Germany in the ongoing battle between creditors and Puerto Rico’s Government.  Puerto Rico’s Governor is seeking to restructure the $72 billion in debt down to a level that will enable Puerto Rico to continue servicing it.  The alternative is to force Puerto Rico to implement draconian budget cuts and tax hikes which would crush the economy and throw even more of its residents in brutal poverty.

Without getting into the details, Puerto Rico can not file bankruptcy in order to force a restructuring of the debt, although Congress is considering legislation which would enable the island to take this route.  If this occurs, 13.8% of Oppenheimer’s asset base will get hammered.  In my experience as junk bond market trader, in this particular asset sector yield hogs almost always lose their shirt.

The message here is clear:  If you own any Oppenheimer mutual funds, you are a complete moron if you do not call up your mutual fund custodian and sell them all tomorrow.  

Source links for this analysis:  Investment News and Vox.com

Well that about does it for tonight

I will see you Wednesday night




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