June 15/Both the iMF and various members of the EU state the need for a Greek debt cut but Germany says no/The EMU try to use 28 nation EU money for a Greek bridge loan but England rebels/Riots on the streets of Athens ahead of tonight’s vote/Italy;s non performing loans escalate to 13%/USA industrial output falters and does NY Empire manufacturing/

Good evening Ladies and Gentlemen:


Here are the following closes for gold and silver today:

Gold:  $1147.20 down $6.10  (comex closing time)

Silver $15.03 down 16 cents.

In the access market 5:15 pm

Gold $1149.60

Silver: $15.12

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 1 notice filed for 5,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.05 tonnes for a loss of 58 tonnes over that period.

In silver, the open interest fell by only 584 contracts despite the fact that yesterday’s price was down by  14 cents.  The total silver OI continues to remain extremely high, with today’s reading at 185,716 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .928 billion oz or 132% 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 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI rests tonight at 462,664 for a gain of 8,368 contracts despite the fact that gold was down $1.90 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 a tiny 584 contracts to 185,716 as silver was down by 12 cents on yesterday. We again must have had considerable shortcovering by the bankers as they feared something was brewing in the silver arena. The OI for gold rose by another 8,368 contracts up to 462,664 contracts as the price of gold was down by $1.90 yesterday.

(report Harvey)

2 Today, 7 important commentaries on Greece

(zero hedge, Bloomberg/Reuters/)

3. Two commentaries on the crumbling economy inside China:

(zero hedge/Bloomberg)

4. Bad debts rising exponentially in Italy

(Pater Tenebrarum/Acting Man Blog)


5. Gold trading overnight

(Goldcore/Mark O’Byrne/)

6 Trading from Asia and Europe overnight

(zero hedge)

7. Trading of equities/ New York

(zero hedge)

7.  USA stories:

i)Poor Empire (NY) manufacturing report

ii)industrial production falls to 5 year lows

iii) USA PPI rises setting the stage for the USA to raise interest rates

8. Greg Hunter interviews Rob Kirby

9. Bill Holter’s commentary tonight is titled:

“Is anything solvent? ”

10 Paul Mylcreest delivers another fine lengthy commentary on gold and he focuses mainly on the long Nikkei/short paper gold thesis

(Paul Mylcreest)

11. Dave Kranzler of IRD discusses the huge gain in gold OI

(Dave Kranzler/IRD)

plus other important topics….


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

Here are today’s comex results:

The total gold comex open interest rose by 8,368 contracts from 454,296 up to 462,664 despite gold being down $1.90 in price yesterday (at the comex close).  We are now in the next contract month of July and here the OI rose by one contract to 158 contracts. We had 0 notices filed yesterday and thus we gained 1 contract or an additional 100 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI fell by 7,735 contracts down to 235,061 as the players continue 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 120,482. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 148,767 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI fell by a tiny 582  contracts from 186,300 down to 185,716 despite the fact that the price of silver was down by 14 cents in price with respect to yesterday’s trading and in total contrast to gold. 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 fell by 322 contracts down to 117. We had 319 notices served upon yesterday and thus we lost 3 contracts or an additional 15,000 ounces of silver will not 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 1 contract down to 173. The next major active delivery month is September and here the OI rose by 34 contracts to 126,789. The estimated volume today was very poor at 24,320 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 32,832 contracts which is fair in volume.  We had 1 notice filed for 5,000 oz.

July initial standing

July 15.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 4097.55 oz  (Scotia,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 39,204.962 (Scotia)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 158 contracts 15,800 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 222,198.4   oz

Today, we had 0 dealer transactions

we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

we had 0 dealer deposits

total dealer deposit: zero
we had 2 customer withdrawals

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

ii) out of Scotia: 4001.100 oz

total customer withdrawal: 4097.55 oz


We had 1 customer deposit:

i) Into Scotia:

39,204.962 oz

Total customer deposit: 39,204.962 ounces

We had 0 adjustments.


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 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 (158) 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 (158) – the number of  notices served upon today (0) x 100 oz which equals 57,000  oz standing so far in this month of July (1.7729 tonnes of gold).

we gained 100 additional 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) = 7,878,406.542 oz  or 245.05 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.05 tonnes for a loss of 58 tonnes over that period.



And now for silver

July silver initial standings

July 15 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 343,508.67  oz (CNT, HSBC,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 25,018.700 oz (brinks)
No of oz served (contracts) 1 contract  (5,000 oz)
No of oz to be served (notices) 116 contracts (580,000 oz)
Total monthly oz silver served (contracts) 3267 contracts (16,335,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 5,787,381.2 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz


We had 1 customer deposit:

i) Into Brinks: 25,018.700 oz

total customer deposit: 25,018.700  oz


We had 3 customer withdrawals:

i)Out of  CNT: 5174.08 oz

ii) Out of Scotia 313,315.89 oz

iii) Out of HSBC;  25,018.700 oz

total withdrawals from customer:  343,508.67  oz


we had 0  adjustments


Total dealer inventory: 58.96 million oz

Total of all silver inventory (dealer and customer) 179.004 million oz

The total number of notices filed today for the July contract month is represented by 1 contract for 5,000 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 (3267) x 5,000 oz  = 16,335,000 oz to which we add the difference between the open interest for the front month of July (117) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing.

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

3267 (notices served so far) + { OI for front month of July (117) -number of notices served upon today (1} x 5000 oz ,= 16,915,000 oz of silver standing for the July contract month.

We lost 15,000 ounces standing in this active delivery month of July. .

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 15/no change in inventory/gold inventory rests tonight at 709.07 tonnes.

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


July 15 GLD : 709.07 tonnes




And now for silver (SLV)

July 15./no change in silver inventory/rests tonight at 327.593 million oz/

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




July 15/2015:  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 15/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 2.21%!!!! NAV (July 15/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV rises to – .66% toNAV(July 15/2015

Note: Sprott silver trust back  into positive territory at  2.21%

Sprott physical gold trust is back into negative territory at -.66%

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)

‘Black Swan’ Taleb Warns “Calm Before The Storm”

– Is the apparent calm of the West a signal of latent instability?
– Increasing symptoms of instability in West as proposed by Nassim Taleb
– Wider public and mainstream press believe “experts” have everything under control
– Black Swan approaches and we may be experiencing “the calm before the storm”


Western countries are increasingly displaying symptoms of instability as described by Nassim Taleb, the author of the The Black Swan, even since the publication of an essay written with Gregory Treverton entitled “The Calm Before the Storm.”

The piece was published in the January/February edition of Foreign Affairs – the official magazine of the Council on Foreign Relations.

In their essay, Taleb and Treverton highlight five characteristics that could help identify states that – while appearing stable on the surface – may actually be quite fragile.

“Fragility”, they write, “is aversion to disorder”. Under this criterion they view Italy as a stable state.

The five characteristics they view as major factors in instability are:

– centralised decision making,

– lack of economic diversity

– high levels of debt and leverage

– absence of political variability

– lack of track record in surviving shocks

“Italy, paradoxically, shows no signs of fragility. It is effectively decentralized and has bounced back from perennial political crises. It also experiences a great deal of harmless political variability, cycling through 14 prime ministerial terms in the past 25 years.”

With regards to centralised decision making the article points to the autocratic Arab states which while appearing strong on the surface quickly succumbed to the “Arab Spring” uprisings before degenerating into chaos – albeit compounded by external influences.

“Although centralization reduces deviations from the norm, making things appear to run more smoothly, it magnifies the consequences of those deviations that do occur. It concentrates turmoil in fewer but more severe episodes, which are disproportionately more harmful than cumulative small variations.

In other words, centralization decreases local risks, such as provincial barons pocketing public funds, at the price of increasing systemic risks, such as disastrous national-level reforms.”

“On the other hand, Switzerland – often viewed as a model of stability -is composed of multiple smaller semi-autonomous states.”

Other states they look at are Middle Eastern, African and China.

Recent events would suggest that EU is increasingly centralising authority and decision making in Brussels. Indeed, Greek Prime Minister Alexis Tsipras recently stated that Greece’s creditors had made it clear that bailed-out countries had no right to self determination.

In terms of economic diversity, the authors warn of the risks associated with over-reliance on a particular sector such as tourism and on a single commodity or industry. The cite Botswana’s over-reliance on the diamond trade and Japan’s car manufacturing sector.

Over-reliance on any sector has obvious implications. “Specialization makes a state more vulnerable in the face of random events.”

An African country that is completely reliant on cocoa production, for example, is vulnerable to the predations of large confectionary corporations who can demand unreasonably low prices leading to hardship, poverty and civil unrest.

The U.S. is slightly vulnerable in this regard having relocated the bulk of its manufacturing sector overseas in recent years although it remains well diversified.

The entire western world is incredibly vulnerable to the third factor – over-indebtedness – which is described as “the single most critical source of fragility.”

Since the 2008 crisis – caused by excessive debt –  global debt has increased by one third. In May the McKinsey Institute reported that total global debt was now around $199 trillion – $27,204 for every person alive today.

The U.S. is particularly vulnerable in this regard. It’s total Federal debt is over $18 trillion while its GDP is estimated to be $17.71 trillion. At the same time its unfunded liabilities are estimated to be a more than a staggering $100 trillion – a sure source of instability as these payments come due.

According to the authors, political variability contributes to stability “by responding to pressures in the body politic”. While western leaders like to promote the notion of political pluralism it is clear from the consistently low levels of participation of voters at election time that the people who live with the consequences of their decisions that the public do not generally see credible alternatives.

It becomes increasingly apparent that decisions are made by lobby groups and vested interests only to be rubber stamped by governments of varying persuasions.

How the fifth characteristic pertains to the western world is more difficult to identify.

What constitutes a major shock and what constitutes a survival of a shock? Can the Western world be said to have experienced a major shock in the post war period prior to the 2008 crisis? Can they be said to have survived that shock when in reality they appear to be on life-support? It is true that the powers that be have done a remarkable job at averting the day of reckoning but does that constitute a track record of surviving shocks?

The authors believe that exposure to any one of these factors is a symptom of instability. They add that exposure to multiple factors presents an exponential increase in risk.

The wider public and the press seem unjustifiably complacent at this time. It seems likely that the seemingly unending “recovery” is simply the calm before the storm.

The article in Foreign Affairs can be read here

Must read guide:  7 Key Gold Must Haves



Today’s AM LBMA Gold Price was USD 1,115.75, EUR 1,047.58 and GBP 739.09 per ounce.

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

Gold in EUR – 1 Year

Yesterday, gold fell $2.70 to $1,155.20 an ounce and silver slipped $0.12 to $15.38 an ounce. Gold in Singapore for immediate delivery traded sideways as did gold in Switzerland.

Silver for immediate delivery was 0.2 percent lower at $15.41 an ounce, dropping for a third day. Spot platinum climbed 0.5 percent to $1,031.51 an ounce, while palladium advanced 0.6 percent to $656.95 an ounce.

Breaking News and Research Here


If you have a lot of time, I encourage you to read the entire commentary from Paul Mylchreest.   He is the fellow who advanced the theory that the huge trade out there is long the Nikkei and short paper gold.  He strongly believes now that this trade will be unwinding with great trouble for our gold shorters and he explains why!!

(courtesy Paul Mylchreest/GATA)


Paul Mylchreest: Signs of a trend change in the monetary metals


12:30a ET Wednesday, July 15, 2015

Dear Friend of GATA and Gold:

Market analyst Paul Mylchreest of ADM Investor Services International Ltd. in London, who a year and a half ago speculated that gold was being shorted and suppressed as part of a trade that was long the Japanese stock index —


— reports this week that the correlation is breaking down, that there are other signs of a trend change in the monetary metals, and that more anomalies are developing in the financial markets.

Mylchreest’s new report, titled “Gold and the Silver Standoff: De-marketing and Deep Value,” is posted in PDF format at GATA’s Internet site here:


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


Two heavy weights disscuss the big anomalies in our precious metals

(courtesy Mike Maloney/Ed Steer/GATA)

GATA’s Ed Steer interviewed on the big anomaly in monetary metals prices


9:30p ET Tuesday, July 14, 2015

Dear Friend of GATA and Gold:

Interviewed by GoldSilver.com’s Mike Maloney, GATA board member Ed Steer discusses the anomaly of rising demand for monetary metals amid their declining futures prices, the price suppression undertaken by central banks and their bullion bank agents to sustain the fiat, debt-based world financial system, and the prospects for a big change in the system. The interview is 26 minutes long and is posted in two parts at GoldSilver.com here:



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


(courtesy Bullionstar)


Posted on 15 Jul 2015 by

The Difference in Paper and Physical Gold and Silver in times of Crisis

The Past Fortnight

It has been a tense, volatile and dramatic fortnight to say the least. In fickle fashion, Greece went from ‘No!’ to ‘Yes!’ with the terms of the deal seemingly less in their favour then before. In volatile fashion, the Shanghai Composite Index crashed and “recovered” when the Chinese government tighten margin requirements for speculating and then subsequently banning major shareholders from selling shares for six months, ordering state companies to buy equities and “allowing” more than half of the listed firms to suspend trading.

Yet, amidst all this, what do we see in paper markets? The VIX, a volatility index on the S&P500, was rather unfazed and still hovering around its lows at the 13 to 14 handle, the S&P500 recovered in dramatic fashion to return towards its highs in the 2100s, the spot price of Gold fell to USD 1147/oz. and the spot price of Silver fell to USD 14.65/oz.. How can this be? You might ask. The reason is that for all the products listed above, the price movement was utterly driven and dominated by the paper derivatives market. This is because the trading volume and notional value of the derivatives market far exceeds physical market due to incredible amounts of leverage. As an example, for the week ending 7 July 2015, the notional amount of Silver that was traded on COMEX was 1,160,760,000 troy ounces according to the CFTC COT report, compared to approximately 600,000,000 to 700,000,000 troy ounces of Silver mined on average each year across the world according to GFMS Ltd.  That is almost TWICE the amount of Silver traded on one derivative market over one week compared to all physical Silver mined in one year!

In this dichotomy, the key question remains – what is the difference between holding paper vs. physical Gold and Silver during times of crisis?

Paper vs Physical Gold and Silver

One important aspect of the physical market that is often overlooked is the premium it commands over spot price. Right before the Global Financial Crisis in 2008, the spot Silver price fell as low as USD 9 per oz., whereas the price of a 1 oz. Silver Eagle was around USD 17 on the wholesale market and even higher on the retail market! That’s a price premium of 188%!

That means that if you had held 100 oz. of paper Silver, you might have had to liquidate that for USD 900 (assuming the market was not halted for trading then), whereas if you had held 100 pieces of 1 oz. Silver Eagle coins, you would have gotten at least USD 1700 for them if not more.

Silver Eaglesamerican_silver_eagle_2014_reverse_1oz_wm

Note that as of 7th of July, the U.S. Mint has annouced that it has sold out of the 2015 American Silver Eagle and will not be taking any orders for at least several weeks. BullionStar still has these coins in stock and are taking orders here.

E-mail BullionStar on: support@bullionstar.com



As you saw with today’s figures, the open interest on gold has been rising quite nicely despite the price falling.  Obviously the big boys are using paper derivatives to lower the paper price of gold.

Dave Kranzler of IRD explains:

(courtesy Dave Kranzler/IRD)

Comex Paper Precious Metals Open Interest Is Going Parabolic

Since the end of May open interest has risen 14.23% while gold basis the stock market close has fallen 2.69%. Gold has been battered by a powerful short-selling campaign. MKS Geneva last night furnished the colorful remark:  “Shorts grew 12% last week to a new all time high. The position is about 3.6 times the size of the last 20 years average!!” – from John Brimelow’s Gold Jottings Report

The price level and trading activity in the precious metals market – gold and silver specifically – has reached mind-blowing absurdity.  Make no mistake about it, the fact that the U.S. mint had to suspend sales of 1 oz Silver Eagles until at least early August is definitive evidence that the natural market function of price as a mechanism to balance supply/demand has been completely destroyed by the western Central Banks using the big bullion banks as their agents of manipulation.
As we already know, the silver open interest on the Comex has soared to preposterous levels to an open futures level which far exceeds the amount of silver produced by mines globally in a year:

Silver OI 062415As you can see from this graph to the left, the open interest in silver is historically correlated with the directional price movement of silver.  This correlation blew up and the amount of paper silver open interest on the Comex began to go parabolic last summer, while the price continued to head south.  This is direct evidence that that Comex paper silver is being used to push down the price of silver.

In fact, as we all know from the work by SRSRocco, India finds the price of silver so attractive that it is on track to import a record a amount of silver this year.

The gold paper open interest on the Comex has now begun to go parabolic.  As recently as April 3, the total gold paper open interest on the Comex was 382k contracts, or 38.2 million ounces of gold.  As of yesterday – July 14 – the open interest in paper gold had soared to 462k contracts, or 46.2 million ounces.  This is a 21% increase in the amount of paper gold. In fact, China finds the price so attractive that it is on track to “consume” a record amount of gold this year.

To put the gold paper open interest in perspective, as of yesterday Comex vault custodians were reporting an alleged 482k ozs of gold in the “registered” account and 7.8 million in total gold.  The open interest just for the August front-month gold contract is 235k, or 23.5 million ounces.  This is 48x the amount of physical gold that has been made available to back the August open interest.  The total open interest in paper gold on the Comex is 600% greater than the amount of total gold that couldpotentially back that open interest.

To describe as “absurd” this imbalance between the paper gold and silver contracts on the Comex and the condition of the global supply/demand for physical gold and silver is an insult the word “absurd.”  This is nothing less than complete criminal and fraudulent manipulation of the gold and silver markets by elitists and bankers who are now officially above all Rule of Law.

As my friend and colleague, John Titus, has concluded after pouring over several transcripts from the 2009 FOMC meetings around the time that QE started and which were recently released at the beginning of 2015:

The more I learn, the more I realize that the Fed is nothing but a criminal enterprise and the guys at the top know it.   Everyone within breathing distance of top slots at the NY Fed is a criminal. Remember, the NY Fed shares space with the ESF even though the latter’s formally part of the Treasury.

The real underlying issue with this manic and blatant manipulation of gold and silver is yet to be determined.  But when Janet Yellen announces that the Fed is on track to raise interest rates this year, when the economic reports released daily show an economy starting to collapse, and when an obscure and opaque “military exercise” across the United States begins on July 15, 2015 – yes, Jade Helm begins today – and the S&P 500 spikes higher while the price of gold and silver are slammed – then you know your system is doomed.

It’s pretty obvious by looking at the numbers above that the bullion banks – JP Morgan, Scotia and HSBC – are using paper futures to loot the gold and silver on the Comex.  If that’s not the case then I would urge them to allow us to conduct a physical audit of their vaults.  Otherwise please explain how the mint can run out of silver.   It’s also quite obvious that the Comex is headed for a force majeur cash settlement of the open interest.  There is no other explanation.

Several years ago a good friend and colleague of mine and I both asserted that we would know they’re ready to let the system collapse when they let the Comex default.  I would suggest that we drawing close to that time.

When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.  – Ayn Rand, “Atlas Shrugged”



Tonight’s big commentary courtesy of Bill Holter/Holter-Sinclair collaboration:

Bill Holter……

Is anything solvent?


So Mr. Tsipras has sold out his countrymen.  He called for a referendum fully expecting a “yes” only to receive a resounding no vote.  No matter though, what was already “planned” has already gone forward to kick the can down the road.  As overwhelming as the referendum was and as in your face the following proposed agreement is, outright rioting, violence and even civil war has a high probability of resulting.  A “convenient  coup” (remember Ukraine?) could even be in the works?
  Looking at Greece from a grand standpoint, what’s the deal?  First, Greece is really not much worse off than Portugal, Spain (the West’s newest police state), Italy or even France.  Truth be told, Greece has less debt per capita than us “rich” Americans.  No doubt Greece is symptomatic of the West’s position of too much debt …not enough GDP but this is not really what I’d like to talk about today.
  Greece initially was bailed out in 2010 and again in 2012, two can kicks if you will.  The current episode has been going on for well over six months, it is not a surprise to anyone by any means.  My point is this, we have seen lines outside of ATM’s for over two weeks but the situation has been known about and well publicized for quite some time.  Other than pensioners who are trying to retrieve their latest monthly or bi weekly payment, who else should be standing in these lines?
  Certainly money has bled from their banking system over the last year, a number around 100 billion euros …but there is still over 100 billion euros left?  Who would have left any cash in Greek banks as wide spread and “early” as the bad news on the banks has been?  Were the Greek people sleeping?  Did they have the American “can’t happen here” syndrome?  Who would have been stupid enough to leave capital in the bankrupt banking system of a bankrupt nation?  Mindboggling isn’t it?
  Let’s switch gears and now look in the mirror.  Have we not had enough information here in the U.S. to understand we face the same fate …only much bigger and far worse from a leverage standpoint?  Yes I know, mainstream media works overtime to keep the cattle penned in their “everything is fine” corral, but isn’t it obvious to anyone who bothers to wipe the fog from the window?
  Think about it, the financial world almost ended in 2008.  Nothing was fixed, nothing even changed.  In fact, the only change has been the degree to which unsound monetary, fiscal and banking practices have been since then.  It is as if we hit a brick wall in 2008 yet pressed the accelerator harder ever since!
  This article is not about groundbreaking thought, it is meant to ask “why”.  Why is there no panic or fear?  Why if the real global economy is slowing and shrinking do we not see any financial reaction?  Why if the financial markets are far more levered than they were in 2008 have the wheels remained in place and few questions are asked?
  I think the answer to this is pretty simple and can be summed up with the old saying “nothing matters until it does”.  Over the last two or three months I have fielded so many questions like “why can’t this go on forever with the central banks just papering everything over”?  I believe your answer lies in this question!  “Papering” being the key word.  There is such a thing as “reality” or “truth”.  Yes this can be hidden for a time but always, water will seek it’s own level.
  Let’s take a look at Greece again, a “deal” has been struck and the fear in the “reality community” is the can got kicked again and it will go on forever.  First, has a deal really been struck?  If so, what is it exactly?  Think about what has come out this week.  Their banks are still closed (and will most likely be bailed in), “safe” deposit boxes cannot be accessed, talk of a 30 year extension in debt has been tossed around and the IMF now says they may not be able to participate in any bailout because they cannot give aid to an insolvent entity.  Is anything fixed?  Has anything been done to make Greece an ongoing concern?  What sort of deal can be made that even looks doable?  The answer to the above of course is nothing can be done and no deal is really doable because Greece is broke and simply cannot pay.  You see, any deal that is done must at least appear feasible, there is no such thing!
  Markets so far have been kept fairly well under control.  This has been done via the use of derivatives but these are what caused many of the problems in the first place.  How do you think Greece, a financial deadbeat, was allowed into the Eurozone to begin with?  Derivatives!  Derivatives were used to hide much of their debt.  (Now Goldman Sachs may be sued for their aid in the fraudulent entry of Greece via bogus derivatives).  Though it was hidden, did the debt go away?  No, the debt and the service on same has jumped up and brought forth the reality of bankruptcy.
  To finish, you can call dog crap whatever you would like.  Call it a rose, call it beautiful, call it whatever.  No matter the name, it is unpleasant to look at, smell or especially step in.  Greece is simply the first one to be realized, all the others up to and including the U.S. are in the same insolvent boat.  If you are sitting tight and believe “it can’t happen here”, you are making the same mistake the many Greeks who are standing in line made.  It can and will happen here, it mathematically has to as there is no other alternative.  Anyone with enough sense to step around a pile of dog pooh should have enough sense to get out of the system NOW to the best of their ability.  Ask any Greek if this is good advice!  They are no different from any other Western nation except they cannot print what they need to pay.
   The final question then is this, does printing actually create “value”?  Can printing turn anything insolvent in to solvent?  The only thing printing (or borrowing more) can do is allow for current payment …which only makes future payments larger.  This is the state of the entire West and being previewed by Greece, only digging the 2008 hole deeper and deeper!  Greece is merely a symptom of bad policy, they are also the poster boy the world will see as not having any real solution.  If there is no real solution to Greece, how can there be a solution to any other bankrupt nation from that very same flawed policy?
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

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

1 Chinese yuan vs USA dollar/yuan weakens to 6.2091/Shanghai bourse red and Hang Sang: red

2 Nikkei closed up by 78.00   points or 0.38%

3. Europe stocks all in the green (barely) /USA dollar index up to 96.66/Euro up to 1.1019

3b Japan 10 year bond yield: falls to 46% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.54

3c Nikkei still just above 20,000

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

3e WTI 52.63 and Brent:  57.98

3f Gold up /Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .89 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rises to 27.12%/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: 12.56%

3k Gold at 1155.35 dollars/silver $15.32

3l USA vs Russian rouble; (Russian rouble down 1/3 in  roubles/dollar in value) 56.71,

3m oil into the 52 dollar handle for WTI and 57 handle for Brent/Saudi Arabia increases production to drive out competition.

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

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9484 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0451 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 further from negativity at +.89%

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 2.46% early this morning. Thirty year rate above 3% at 3.18% / yield curve flatten/foreshadowing recession.

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


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

Chinese Stock Plunge Resumes With 1200 Stocks Halted Limit Down; Yellen, Greek Elections On Deck

Just when the Chinese plunge protection team (and “arrest shortie” task force) seemed to be finally getting “malicious selling” under control, first we saw a crack yesterday when the composite broke the surge of the past three days as a result of yet another spike in margin debt funded purchases, but it was last night’s reminder that “good news is bad news” that really confused the stock trading farmers and grandmas, which goalseeked Chinese economic “data” beat across the board, with Q2 GDP coming solidly above expectations at 7.0%, and retail sales and industrial production both beating, but in the process raising doubts that the PBOC will continue supporting stocks.

After all, the only purpose of the stock bubble was to deflect attention from the bursting of the housing bubble and the collapse elsewhere in the economy. So if Beijing is willing to telegraph that the worst is over for the economy, there is no further need for SHCOMP 5000 which can now be carefully deflated, as otherwise a violent bursting threatens China’s social stability.

As a result the Shanghai Comp tumbled -3.0% and Hang Seng slid -0.3% with markets showing a subdued reaction as the data does dampen calls for further actions by the PBoC. However that does not do justice to yet another day of Chinese stock insanity. This does:

Elsewhere in Asia equities traded mixed following a positive Wall Street close as soft retail sales data casted doubts over the viability of a Fed rate lift-off this year. Nikkei 225 (+0.4%) rose albeit off intra-day highs as the BoJ lowered its GDP and CPI forecasts for 2015, while the central bank also maintained its monetary base target at an annual rise of JPY 80trl. JGBs traded relatively flat in what has been a subdued session for fixed income markets.

European Equites have trended higher after kicking off the session relatively mixed (Euro Stoxx: 0.0%) as many market participants await the main risk events later in the day, namely the Greek parliamentary vote and over in the US, Fed’s Yellen’s semi-annual testimony.

While Yellen’s testimony will hardly provide any major new data points (Fed Dow Jones data driven, ongoing bad news 6 years after the “end of the recession”, such as the payrolls and retail sales misses are explained by snow in June and so on) and the only popcorn-worthy moment will be Hensaerling asking Yellen who at the Fed keeps leaking market-moving data to the market (now that Tim Geithner is gone) the best summary we have seen of the upcoming Greek vote,  which is expected to pass through the parliament with support of the pro-European opposition parties, is the following:

Equities have benefitted from positive sentiment stemming from comments regarding the EFSM, with it appearing that Greece will be supported during the interim period ahead of further negotiations for a medium term plan.

In the US, today sees the busiest day of earning season so far, with large cap names scheduled to report including Bank of America, Delta Air Lines, Intel, Kinder Morgan, Nefflix, PNC Financial Services and US Bancorp. Fixed income markets see Bunds trade higher today despite a technically uncovered Bund auction as participants position themselves ahead of the aforementioned Greek parliamentary vote. Bunds are also supported by the aforementioned comments regarding interim support for Greece, with this likely to lead to an increase in demand for fixed income products.

In FX markets the GBP dominates proceedings after worse than expected employment data UK (UK ILO Unemployment Rate 5.6% vs. Exp. 5.5%, Average Weekly Earnings 3.2% vs. Exp. 3.3%) saw the first increase in unemployment rate for over two years. This saw GBP/USD immediately fall 50 pips to give back all the gains of the day which comes after the recent spate of hawkish BoE comments, with a rate hike now looking further away.

Away from GBP, AUD outperformed during Asian hours after the aforementioned better than expected Chinese data, however failed to sustain this move when European participants entered the market. This choppy price action has seen the USD index fairly unmoved on the day (-0.1%) heading into the US crossover, with participants awaiting the key risk events of the day, the Greek parliamentary vote and the semi-annual testimony to congress from Fed’s Yellen.

Other notable events today include comments from Fed’s Mester and Williams as well as BoC rate decision and US PPI final demand, empire manufacturing and industrial production.

Fed’s George (non-voter, Hawk) stated that it is time for a Fed rate lift-off, adding that the central bank will make policy decision on a meeting-by-meeting basis

In commodities, the energy complex trades lower today, still weighed on by the Iran nuclear deal despite yesterday’s API crude inventory report showing a drawdown of 7300K vs. the previous drawdown of 958K. Looking ahead, todays DoE crude oil inventories are expected to show a drawdown of 1900k. The metals complex saw copper rise after Chinese GDP and industrial production beat expectations while Dalian iron ore futures rose with Chinese steel mills cutting production to reduce surplus.

In summary: European shares little changed, having risen from earlier lows, with the basic resources and utilities sectors outperforming and autos, industrials underperforming. China 2Q GDP growth, June industrial output, June retail sales above estimates. Bank of Japan leaves monetary policy unchanged as forecast. U.K. unemployment above estimates. The Italian and Dutch markets are the best-performing larger bourses, Swedish the worst. The euro is little changed against the dollar. German 10yr bond yields rise; French yields decline. Commodities decline, with wheat, Brent crude underperforming and zinc outperforming.

On the economic calendar today are U.S. mortgage applications, Empire manufacturing, industrial production, capacity utilization, PPI due later.

Market Wrap

  • S&P 500 futures up 0.1% to 2103.5
  • Stoxx 600 up 0.1% to 398.6
  • US 10Yr yield up 0bps to 2.4%
  • German 10Yr yield up 4bps to 0.88%
  • MSCI Asia Pacific up 0.2% to 143.8
  • Gold spot down 0% to $1155.7/oz
  • 12 out of 19 Stoxx 600 sectors rise; basic resources, utilities outperform, autos, industrials underperform
  • Eurostoxx 50 little changed, FTSE 100 little changed, CAC 40 little changed, DAX little changed, IBEX +0.2%, FTSEMIB +0.4%, SMI +0.2%
  • Asian stocks rise with the ASX outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific up 0.2% to 143.8
  • Nikkei 225 up 0.4%, Hang Seng down 0.3%, Kospi up 0.7%, Shanghai Composite down 3%, ASX up 1.1%, Sensex up 1%
    Euro up 0.1% to $1.102
  • Dollar Index up 0.02% to 96.66
  • Italian 10Yr yield down 5bps to 2.02%
  • Spanish 10Yr yield down 5bps to 2.04%
  • French 10Yr yield down 4bps to 1.18%
  • S&P GSCI Index down 0.5% to 412.7
  • Brent Futures down 1.1% to $57.9/bbl, WTI Futures down 0.9% to $52.5/bbl
  • LME 3m Copper up 1.4% to $5644/MT
  • LME 3m Nickel up 1.4% to $11780/MT
  • Wheat futures down 1.1% to 564.5 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

  • USD index is flat heading into the North America crossover, while GBP/USD fell 50 pips to give back all gains on the day after disappointing UK wage growth data.
  • Shanghai Comp and Hang Seng failed to flourish following strong Chinese GDP, industrial production and retail sales readings, with markets showing a subdued reaction as the data dampens calls for further actions by the PBoC.
  • Today sees the Greek parliament vote on their deal with creditors, Fed’s Yellen’s semi-annual testimony, comments from Fed’s Mester and Williams as well as BoC rate decision and US PPI final demand, empire manufacturing and industrial production.
  • Treasuries little changed before Yellen testimony, Beige Book as Greece’s Tsipras started pitch for a bailout that’s sparked a Syriza revolt and international officials asked new questions about country’s finances.
  • As Tsipras went on TV to argue for a deal that he only agreed to with “a knife at my neck,” European officials were at a loss over how to put together a bridge loan that will keep Greece from defaulting next week
  • One person familiar with the matter said that Greece’s finances seem to get worse with every meeting and governments are now reluctant to help out with even short-term funds
  • Tsipras’s TV comments undermined trust that Greek govt will take ownership of economic adjustments in new bailout program, German Deputy Finance Minister Jens Spahn said on ARD public TV; “what the Greek prime minister did on Greek television yesterday irritates me”
  • China GDP expanded 7% in 2Q, more than expected, with industrial production and retail sales also topping projections, according to government reports
  • China’s “triple bubble” of credit, investment, real estate  represent biggest risk to global economy, Credit Suisse equity strategists write in note
  • The Iran accord that took seven nations almost two years to negotiate now depends on Obama’s ability to defend it against efforts from Capitol Hill to Jerusalem to kill it
  • Also now comes the question of whether, after 12 years of debilitating sanctions, a resurgent Iran can avoid escalating its confrontation with a more assertive Saudi Arabia
  • Sovereign 10Y bond yields lower. Asian stocks mixed, Shanghai falls 3%, other markets little changed. European stocks mostly higher, U.S. equity-index futures gain. Crude oil lower, copper higher, gold little changed

Central Banks

  • 2:00pm: Fed’s Beige Book

DB’s Jim Reid completes the overnight event summary

Today the lens will be firmly focused on Janet Yellen at the first of her semi-annual testimonies in front of the House Financial Services Committee. The reality is that she will probably keep all her options open but will probably want to get across that the committee expects the normalisation process to start soon. Whether or not it can in reality is another matter and it will be interesting to hear how much she comments on recent events in Greece and China. While I acknowledge the reasons why the Fed feel they ought to raise rates I can’t help but think that with nominal activity still so weak relative to history, in another time and another place the argument could be actually spun towards more easing being required rather than hikes. In an ideal world this perhaps would be more directed at the real economy rather than asset markets but it’s worth remembering that a hike at these low levels of normal activity is almost unprecedented in the history of the Federal Reserve. However I appreciate that further easing is certainly not up for any discussion in this world but it does feel to me that the narrative is slightly too skewed towards the fact that they have to raise rates simply because they’ve been at rock bottom levels for too long and not because of the normal drivers of rate rises (ie a combination of growth and inflation).

The retail sales number yesterday encouraged investors that a more patient approach might be considered by the Fed which both equity and bond markets generally liked across the globe. The number saw broad-based softness across the board with the June headline (-0.3% mom vs. +0.3% expected), ex auto and gas (-0.2% mom vs. +0.4% expected) and retail control (-0.1% mom vs. +0.3% expected) prints all declining more than expected with the headline reading in particular also seeing two-tenths downward revisions to May and April. The data helped take 10y Treasuries 5.3bps lower to 2.402% and halt three consecutive days of rising yields. Fed Funds Dec 15, 16 and 17 contracts fell 1.5bps, 3.0bps and 3.5bps in yield respectively. The Dollar index also dropped immediately following the print, initially falling as low as -0.7% although paring those losses slightly into the close to eventually finish -0.21%. US equities rose steadily over the course of the day meanwhile, with the S&P 500 and Dow finishing +0.45% and +0.42% after energy stocks in particular gained following a turnaround in oil markets on the back of the Iran nuclear agreement which we’ll touch on shortly.

Before we get there though, China’s monthly data dump has been the focus of attention this morning and it’s made for better reading after Q2 GDP printed at 7.0% for the quarter, in line with Q1 and ahead of expectations of 6.8%. The rest of the data has been supportive also. Retail sales (10.6% yoy vs. 10.2% expected), industrial production (6.8% yoy vs. 6.0% expected) and fixed asset investment (11.4% ytd yoy vs. 11.2%) have all come in ahead of consensus with retail sales and IP in particular at YTD highs and showing signs of momentum. With the data perhaps lessening the need for more aggressive stimulus however, Chinese equities have marched lower with the Shanghai Comp (-2.40%), Shenzhen (-2.30%) and CSI 300 (-2.43%) all falling. The Hang Seng (-0.41%) is also down but the Nikkei (+0.29%), Kospi (+0.55%) and ASX (+0.93%) have all firmed. S&P 500 futures (+0.1%) have reversed earlier losses while China-sensitive industrial metals including Copper (+0.4%) and Zinc (+0.8%) are both up in Shanghai this morning. The data has also helped support the AUD (+0.3%) while oil markets are around +0.6% firmer. There’s been little change in the Yen meanwhile after the BoJ left policy unchanged but trimmed its inflation outlook for the 2016 fiscal year.

Closer to home, there was some reasonably hawkish rhetoric out of the BoE yesterday. It was interesting to see a Fed-like reference from policymaker David Miles in particular who said that ‘the time to start normalisation is soon’ and that ‘I attach more weight to the risks of waiting too long and then not being able to take a gradual path’. These comments were backed up Governor Carney who, citing above normal growth and higher wages, suggested that a hike may not be too far away after saying ‘the point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter balanced somewhat by disinflation imported from abroad’. The comments suggest that the BoE is set to look through another soft CPI print last month (0.0% vs. +0.1% expected), taking the annualised rate down to zero after a modest rise to +0.1% yoy in May.

Those comments helped take Gilt yields modestly higher yesterday 5y (+1bp) and 10y (+0.5bps) while the Pound gained just shy of a percent (+0.96%) versus the Dollar. Elsewhere in Europe it was fairly subdued for the most part with markets taking something of a breather before the Greek parliamentary vote and Yellen’s testimony. 10y Bunds closed -1.8bps lower in yield at 0.834% while the peripherals ended 1-5bps lower. A late boost from energy stocks helped European equities close in positive territory with the Stoxx 600 (+0.46%), DAX (+0.28%) and CAC (+0.69%) all up. Meanwhile in the oil complex, Brent (+1.14%) and WTI (+1.61%) surged 4 and 5% off the day’s lows respectively on the back of the Iran nuclear accord developments. With a deal finally reached after nearly two years of negotiations with world powers, the complex initially dropped on fears that the removal of sanctions would see a surge in supply, however these concerns soon abated as more details emerged that a supply response would likely be gradual and unlikely to happen before 2016 which in turn helped to lift oil off its lows.

In terms of the remainder of data yesterday, along with soft US retail sales the June NFIB small business optimism survey (94.1 vs. 98.5 expected) and import price index (-0.1% mom vs. +0.1% expected) were also disappointing, while business inventories printed in line at +0.3% mom. Meanwhile the Atlanta Fed were busy revising their Q2 GDP forecast following the recent batch of data since the last forecast of 2.3% on July 7th. After an initial boost from Friday’s wholesale data (to 2.5%) and Monday’s Treasury Statement (to 2.6%), yesterdays softer retail sales and import price data offset some of that move higher and saw the model revised back down to 2.4%, still at the bottom end of current market expectations. Elsewhere in the US both JP Morgan and Wells Fargo kicked off earnings season for the major banks with beats, while we saw suggestions of a stronger Dollar as being the reason for a drop in revenue for Johnson & Johnson yesterday. Data wise in Europe, there were no surprises to the final June CPI reading for Germany which stayed unchanged at -0.1% mom and +0.3% yoy. There was some upside surprise to the July ZEW survey however with both the current situations (63.9 vs. 60.0 expected) and expectations reading (29.7 vs. 29.0 expected) ahead of consensus, although both continuing a downward trend. Euro area industrial production for May disappointed at -0.4% mom (vs. +0.2 expected).

Surprisingly it’s taken us until the 7th paragraph to run through the latest Greek developments, but in truth this reflects what was a relatively quiet day for headlines in the saga ahead of today’s Greek parliament vote today. In an interview on Greek TV, Greek PM Tsipras admitted that he takes ‘full responsibility’ for mistakes over the last six months while also saying that his priority now is to make sure the agreement is finalised. There was also some focus on an IMF paper which showed Greece needs debt relief ‘far beyond’ what the Creditors have so far been willing to consider on the back of the bank closures and capital controls enacting a ‘heavy toll’ on Greece’s finances with the Fund suggesting a 30-year interest rate holiday period may be needed. Meanwhile, talks continue around bridge financing with Eurogroup President Dijsselbloem saying that ‘we are looking at all the instruments and funds that we could use’. For now though focus will be on the Greek vote in parliament tonight with Bloomberg suggesting that this will take place around 10pm Athens time. With opposition in the Syriza ranks as well as in the coalition partners Independent Greeks, it is likely that any changes in government are decided after the vote with the possibility of a minority government or government of national unity being put in place.

Before we take a look at today’s calendar, yesterday’s ECB quarterly bank lending survey showed further support for a recovery in bank credit conditions with the pace of easing now only slightly behind the strongest reading in the history of the survey (in 2006). In particular, net demand for housing loans was said to have ‘continued to increase substantially’ while credit standards on loans to households for house purchases ‘eased considerably’ with Italy in particular the standout performer from a country perspective after a material acceleration in easing pace pointing to potential upside to Italian growth.

Looking ahead to today’s calendar now, French CPI and various UK employment indicators will be the highlight in the European session this morning. The focus this afternoon will of course be on Yellen’s semiannual testimony while it’s also a busy session for data in the US with PPI, empire manufacturing, industrial production, capacity utilization and manufacturing production all expected. The Fed’s Beige Book is also due to be released tonight. As well as Yellen we’ve also got George, Mester and Williams due up while the corporate earnings highlights are Bank of America and Intel.


China stocks resumes its downward spiral as discussed above:

(courtesy Bloomberg)


China Stocks Resume Rout as GDP Fails to Lift Investor Sentiment

July 14, 2015 — 9:26 PM EDTUpdated on July 15, 2015 — 4:05 AM EDT

China’s stocks fell for a second day after better-than-expected economic data failed to boost investor confidence in the world’s worst-performing equity market over the past month.

The Shanghai Composite Index slid 3 percent to 3,805.70 at the close, paring earlier declines of 4.7 percent as the nation’s largest companies climbed. With 701 stocks halted on mainland exchanges and at least another 1,240 falling by the 10 percent daily limit, sellers were locked out of about 67 percent of the Chinese market. The two-day losses pared the gauge’s rebound from its July 8 low to 8.5 percent.

Stock market gains sparked by unprecedented government intervention are reversing as hundreds of companies resume trading after suspending their shares during the recent market turmoil. The benchmark equity index has declined 25 percent in four weeks, the biggest loss among global gauges, as investors bet valuations are unsustainable. Gross domestic product rose 7 percent in the second quarter, compared with economist estimates of 6.8 percent in a Bloomberg survey.

“There’s profit taking after the market’s recent rebound,” said Jeffrey Chiu, a Hong Kong-based trader at Winnington Capital Ltd. “The market will slowly come down again and we will see more consolidation. There are people who believe into the government’s measures and those who don’t.”

The CSI 300 Index lost 3.5 percent as gauges of utilities, drugmakers and industrial companies fell at least 6 percent. The CSI 500 Index of smaller companies sank 3.5 percent. Hong Kong’s Hang Seng China Enterprises Index slid 1.3 percent, while the Hang Seng Index dropped 0.3 percent.

GDP Data

Over the past month, policy makers have introduced a slew of market-support measures including banning large shareholders from selling stakes, ordering state-run institutions to buy equities, allowing the central bank to finance stock purchases and letting more than half of companies on mainland exchanges halt trading.

Concern that valuations are still too expensive has helped fuel a record stretch of foreign outflows through the Shanghai-Hong Kong exchange link over seven days.

Even after the rout, the median price-to-earnings ratio on China’s bourses is 63, higher than in any of the world’s 10 largest markets. The ratio was 68 at the peak of the bubble in 2007, according to data compiled by Bloomberg.

The GDP data was unchanged from the first quarter and was in line with the government’s annual target. Industrial output in June rose 6.8 percent, while fixed-asset investment increased 11.4 percent in the first half, beating estimates, the National Bureau of Statistics data also showed. Retail sales increased 10.6 percent in June, topping a median forecast of 10.2 percent.

Industrials Drop

“The GDP numbers are really good,” said Bernard Aw, a Singapore-based strategist at IG Asia Pte. “The better-than-expected GDP reading suggested that Beijing may take its foot off the pedal on more stimulus measures for the time being. This will affect sentiment in the stock market.”

The People’s Bank of China has cut interest rates four times since last November, with the latest to a record low announced June 27, to cushion the slowdown.

A gauge of industrial stocks in the CSI 300 slid 6 percent, paring gains over the past year to 121 percent. China Eastern Airlines Corp. plunged 10 percent. Juneyao Airlines, a budget carrier, also slid by the limit after saying it plans to sell up to 58 million shares to raise 3.57 billion yuan ($574 million).

Among utilities and drugmakers, Huaneng Power International Inc., the biggest power producer, declined 9.9 percent, while Beijing Tongrentang Co. dropped 10 percent. Leshi Internet Information & Technology (Beijing) Co. led declines for small companies in the ChiNext index, tumbling 10 percent. The ChiNext slid 5 percent.

Big Caps

PetroChina Co. jumped 10 percent, while Bank of China Ltd. advanced 2.7 percent. Large-cap shares climbed over the past two weeks on speculation of buying by government state-linked funds.

About 60 percent of analysts surveyed at 19 Chinese brokerages and asset management companies expect A shares to gain in the third quarter, the Shanghai Securities News reported. The market may gradually bottom amid government support measures and as the leverage ratio declines, the newspaper said.

Margin traders increased holdings of shares purchased with borrowed money for a third day on Tuesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 936.8 billion yuan. A five-fold surge in borrowing had helped propel the Shanghai gauge to a 150 percent advance in the 12 months through June 12.




Zero hedge comments on the strange data release!!

(courtesy zero hedge)

“Everything Is Awesome” In China – Retail Sales, Industrial Production, & GDP All Mysteriously Crush Expectations

Retail Sales increased 10.6% YoY (smashing expectations of a 10.2% YoY Gain); Industrial Production rose 6.8% (crushing expectations of a 6.0% YoY gain); and the big daddy of goalseeked data, China GDP managed to rise 7.0% (comfortably beating expectations of just 6.8% but still the lowest since Q1 2009). Now it is up to the markets to decide if good data is bad news because it gives the government less excuses to throw more “measures” at the market; or is good data, good news as it “proves” the economic fundamentals underlying massively exponential gains in Chinese stocks (and excessive valuations compared to the rest of the world) are justified. When the data hit Chinese stocks were at the lows of the day, and for now, it appears good data is bad news as stocks are not bouncing at all.



Why would we ever think that?

Everything Is Awesome!!!


One quick question… What exactly are the Chinese suddenly producing so much of? Because its not steel, its not houses, and its not being exported overseas…


Do not question this!!


China – we are going to need some worse data than that…


*  *  *

Finally here is Cornerstone Macro with a less ‘optimistic’ look ahead…

  • PBOC easing hasn’t worked b/c investment and credit are bubbles, lowering demand for credit and slowing investment, Cornerstone Macro economists led by Nancy Lazar write in note.
  • Expect China official real GDP by 4Q to have 5% handle
  • Inventory destocking likely to be drag on 2H growth; industrial production will probably slow further
  • Implications of Chinese hard landing incl. slower global growth; risk of disappointing multinational earnings; inflation and rates, both lower for longer; continued decline in commodity prices; rising USD trend
  • Potential ramifications for China incl. PBOC continues to ease, cutting base lending rate to zero from 4.85%, loweringRRR to 6% from 18.5%; weaker outbound investment, which presents problem for other EMs; weaker FDI into China; downturn in employment, retail sales; social unrest and geopolitical turmoil

One last thing – we’re going to need a lot more betterer data…


Charts: Bloomberg




Now onto the huge Greek crisis:


Late yesterday afternoon, the IMF again presented a paper where they demand Greek debt relief basically stating that their debt is unsustainable.  They then hinted that they may walk away from the table and not participate in the 3rd Greek bailout.  The problem, of course, is that the EU and ECB is counting on their support for money. Also the German Bundestag would not OK another bailout unless the IMF is part of the deal and guiding Greece:

(courtesy zero hedge)


IMF Rips Pandora’s Box To Shreds, Demands Greek Debt Relief “Far Beyond What Europe Has Been Willing To Consider”

Last night, Reuters first leaked that just two weeks after the IMF released its first revised Greek debt sustainability report, one which the Eurogroup desperately tried to squash as it urged for a 30% debt haircut and came hours before the Greek referendum vote giving the Oxi camp hope and crushing Tsipras’ carefully laid plan to lose the vote and capitulate with integrity instead of having to capitulate a week later after 17 hours of “mental waterboarding” and have his reputation torn to shreds, the IMF would release a follow up report updating its view on the Greek economy which in just two short weeks of capital controls has utterly imploded.

Just like the first IMF report, which we correctly compared to the opening of a Pandora’s box, and with which the IMF also obliterated the careful plans of the Troika, so with this follow up the IMF effectively crushes the glideslope of the latest Greek bailout process barely scraped together on Monday morning and has torn Pandora’s box to shreds with the following summary assessment: “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.”

Yes, debt relief… just the others’ debt: not the IMF’s, please.

So what just happened?

As of this moment the IMF is telling Greece that if nothing changes, it will die of cancer with 100% certainty; on the other hand the Eurogroup is telling Greece it will die of a heart attack also wih 100% certainty if anything changes.

Good luck with the choice.

Here are the report punchlines:

  • Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at Euro 85 billion and debt is expected to peak at close to 200 percent of GDP in the next two years,provided that there is an early agreement on a program. 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.
  • … significant shortfalls in program implementation during the last year led to a significant increase in the financing need—by more than Euro 60 billion—estimated only a few weeks ago. As a result, debt-to-GDP by 2022 was projected to increase from an estimate less than a year ago of about 105 percent to a revised estimate of 142 percent, significantly above the target of 110 percent of GDP. This would under the November 2012 agreement have implied significant additional measures to reduce the face-value of debt.
  • Greece cannot return to markets anytime soon at interest rates that it can afford from a medium-term perspective.
  • The events of the past two weeks—the closure of banks and imposition of capital controls—are extracting a heavy toll on the banking system and the economy, leading to a further significant deterioration in debt sustainability relative to what was projected in our recently published DSA. A full and comprehensive revision of this debt sustainability analysis can only be done at a later stage, taking into account the deterioration in the economic situation as a result of the closing of the banking system and the details of policies yet to be agreed. However, it is already clear at this stage that there will be a significant increase in the financing need. The preliminary (mutually agreed) assessment of the three institutions is that total financing need through end-2018 will increase to Euro 85 billion, or some Euro 25 billion above what was projected in the IMF’s published DSA only two weeks ago, largely on account of the estimated need for a larger banking sector backstop for Euro 25 billion. Adjusting our recent DSA mechanically for these changes, and taking into account the agreed weaker growth path for the next two years, gives rise to the following main revisions:
    • Debt would peak at close to 200 percent of GDP in the next two years. This contrasts with earlier projections that the peak in debt—at 177 percent of GDP in 2014—is already behind us.
    • By 2022, debt is now projected to be at 170 percent of GDP, compared to an estimate of 142 percent of GDP projected in our published DSA.
    • Gross financing needs would rise to levels well above what they were at the last review (and above the 15 percent of GDP  threshold deemed safe) and continue rising in the long term.

In other words, for every week that the Greek capital controls remain , the total cost of the Greek bailout (the funding needs) increases by €10 billion.

Another way of putting it: with every passing day, another 1% of Greece’s €210 billion in bank loans becomes “non-performing.”

It gets worse: “these projections remain subject to considerable downside risk, suggesting that there could be a need for additional further exceptional financing from Member States with an attendant deterioration in the debt dynamics.”

  • Medium-term primary surplus target: Greece is expected to maintain primary surpluses for the next several decades of 3.5 percent of GDP. Few countries have managed to do so. The reversal of key public sector reforms already in place— notably pension and civil service reforms—without yet any specification of alternative reforms raises concerns about Greece’s ability to reach this target. Moreover, the failure to resist political pressures to ease the target that became evident as soon as the primary balance swung into surplus also raise doubts about the assumption that such targets can be sustained for prolonged periods. The Government and its European partners need to address these concerns in the coming months.
  • Growth: Greece is still assumed to go from the lowest to among the highest productivity growth and labor force participation rates in the euro area, which will require very ambitious and steadfast reforms. For this to happen, the Government— which has put on hold key structural reforms—would need to specify strong and credible alternatives in the context of the forthcoming program discussions.
  • Bank support: the proposed additional injection of large-scale support for the banking system would be the third such publicly funded rescue in the last 5 years. Further capital injections could be needed in the future, absent a radical solution to the  governance issues that are at the root of the problems of the Greek banking system. There are at this stage no concrete plans in this regard.

The conclusion:

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. There are several options. If Europe prefers to again provide debt relief through maturity extension, there would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt, including new assistance. This reflects the basic premise that debt cannot be assumed to migrate back onto the balance sheet of the private sector at interest rates close to the current AAA rates before debt levels have been brought to much lower levels; borrowing at anything but AAA rates in the near term will bring about an unsustainable debt dynamic for the next several decades. Other options include explicit annual transfers to the Greek budget or deep upfront haircuts.The choice between the various options is for Greece and its European partners to decide.

Actually, it is no longer Greece’s: Greece is about to hand over its sovereignty to Brussels on a silver platter. The choice is now all up to the European “partners” to decide.

Full report (pdf)




Then this morning: Juncker also echoes the IMF call for debt relief.

The problem of course is that the huge derivative players will be blown up especially Deutsche bank if the EMU provides debt relief!!

(courtesy zero hedge)

Juncker Echoes IMF Call For Greek Debt Re-Profiling

 Tuesday was all about debt relief for Greece.To recap, a new “secret” report on Greek debt sustainability leaked to Reuters on Tuesday morning suggested that the IMF Fund believes the country requires “debt relief measures that go far beyond what Europe has been willing to consider so far.” The report goes on to paint a rather bleak picture of Greece’s economic and financial situation:

Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at Euro 85 billion and debt is expected to peak at close to 200 percent of GDP in the next two years. Debt would peak at close to 200 percent of GDP in the next two years. This contrasts with earlier projections that the peak in debt—at 177 percent of GDP in 2014—is already behind us. By 2022, debt is now projected to be at 170 percent of GDP, compared to an estimate of 142 percent of GDP projected in our published DSA. Borrowing at anything but AAA rates in the near term will bring about an unsustainable debt dynamic for the next several decades. Other options include explicit annual transfers to the Greek budget or deep upfront haircuts. The choice between the various options is for Greece and its European partners to decide.

The EMU leaders and finance ministers who gathered in Brussels last weekend were supposedly made aware of the IMF’s assessment on Sunday or early Monday, and indeed the timing of the report looks to be rather convenient, much like the timing of the original IMF Greek debt assessment which leaked just three days before the referendum and may well have bolstered the case for the “no” vote. It would appear that the US may be pulling the strings behind the scenes in order to pressure Germany on writedowns for Greece’s debt burden, or, as The Telegraph’s Ambrose Evans-Pritchard put it, “the backdrop to this sudden shift in position is almost certainly political [and] follows an intense push for debt relief over recent days by the US Treasury, the dominant voice on the IMF Board in Washington.” 

The report was billed by FT and others as the first suggestion that Christine Lagarde might take her ball and go home in the absence of debt relief for the Greeks, something the Fund has threatened in the past.

On Wednesday, the European Commission published their own assessment of Greece’s debt sustainability which reveals (surprise!) that some manner of debt relief will like be necessary going forward. Here are the highlights from the document (dated July 10):

The economic and financial situation in Greece has strongly deteriorated following policy uncertainty, shortfall in government revenues, the authorities’ decisions that made the bank holidays and the imposition of capital controls necessary, and the missed payments to the IMF and Bank of Greece.


The failure to complete the review, the missed debt service payments, the expiration of the EFSF programme and the introduction of capital controls have created new circumstances which have led to a further strong deterioration in debt sustainability. The following paragraphs present the different assumptions according to a baseline and an adverse scenario and give the respective numbers in these two scenarios:

  • Growth estimates have been further revised downwards: preliminary revised projections point to a strong decline in economic activity in 2015. Real GDP growth expectations now range from -2% to -4.0% in 2015, compared with 0.5% in the Spring forecast. 2016 should also see negative growth -0.5% to -1.75% with growth picking up only in the course of 2017, assuming that political stability is restored soon and a gradual relaxation of the administrative measures on the banking sector. Long-term growth is assumed at 1.8% in the base line and at 1.5% in the adverse scenario.
  • The expected primary surplus outcomes have been revised downwards. The fiscal programme, which had been on track until the third quarter of 2014, was de-railed in the last quarter of 2014. The weaker implementation of reforms in the second half of 2014 and the turn of the economic cycle led to a primary balance rather than a primary surplus. Moreover, the political uncertainties and the severe policy slippages of the first half of 2015 have led to a strong deterioration of economic growth and hence to weaker primary balance outcomes. Furthermore, the imposition of capital controls and the severe liquidity shortage in the Greek economy now require a further downward revision of the fiscal targets at least for 2015- 2017. It is now expected that primary balance outcomes would decrease substantially. A primary deficit of 0% to 1% is expected in 2015, a primary balance of 1% to 0.5% in 2016 and a primary surplus of 2.25 to 2% in 2017, before moving to 3.5% from 2018 onwards.The expected outcomes have been lowered in view of the developments of the Greek economy.
  • Privatisation receipts are likely to be lower than envisage when the last review was completed. The strong deterioration in the banking sector outlook, heightened economic and political uncertainty, more challenging financing conditions for potential investors together with reduced prospects for the privatisation programme result in lower expected privatisation proceeds, though the government intends to proceeds with privatisation projects. We could expect until 2022 EUR 10 bn would materialise in the baseline scenario going down to EUR 4 bn in the adverse scenario (compared to EUR 22 bn before).
  • Financing needs for the banking sector have increased considerably. The capital situation of Greek banks is coming under increasing pressure due to worsening asset quality that is related to the significantly weaker macro-economic development, high political uncertainty, the delayed NPL resolution process and the significant adverse impact of capital controls on economic activity and payment culture. In view of this banks will face substantial capital needs. As they will likely have no market access in the near future, an adequate capital backstop as part of a next financial assistance programme is needed. The estimated size of the required capital backstop amounts on a preliminary basis to EUR 25 bn. Further work on 8 the calibration and terms of such capital backstop is currently ongoing among the different institutions.

Based on the developments above, the debt-to-GDP ratio is expected to reach 165% in 2020, 150% in 2022 and 111% in 2030 in the baseline scenario. The respective debt/GDP ratios in the adverse scenario are: 187% in 2020, 176% in 2022 and 142% in 2030..


The high debt to GDP and the gross financing needs resulting from this analysis point to serious concerns regarding the sustainability of Greece’s public debt. The concerns could be addressed through a far reaching and credible reform programme, very strong ownership of the Greek authorities for such a programme and, after full restoration of the loans agreements, debt-mitigating measures that would be granted only once the commitments to reform from the Greek authorities has been demonstrated. A very substantial re-profiling, such as a long extension of maturities of existing and new loans, interest deferral, and financing at AAA rates would allow to cater for these concerns from a gross financing requirements perspective, though they would still leave Greece with very high debt-to-GDP levels for an extended period. 

So in short, Greece’s debt is unsustainable. The IMF knows it, and Europe knows it.

The difference appears to be in how each side believes the situation should be mitigated. The IMF uses language that is absolutely abhorrent to Germany. The idea of “deep upfront haircuts” or perhaps worse “explicit annual transfers to the Greek budget,” would not only be politically unpopular in the Bundestag, but would send the “wrong” message to sypathetic debtor states and periphery countries where political parties with ideological parallels to Syriza enjoy strong support.

Nevertheless, something will clearly have to give if Europe expects the third program for Greece to be less blackhole-ish than two bailouts that came before.

So once Tsipras forces Greek lawmakers to legislate away their sovereignty, discussions of “re-profiling” will need to begin. The only question is whether the IMF (and tacitly, the US) will succeed to forcing Germany tomark it zero.”



My goodness.  The EMU is now scrambling to find 7 billion euros as a bridge loan.  So where do they go: to the EFSM route to which the funds belong to the entire 28 nation EU.  Britain is angry as they were promised that they would never again have to fund the EMU out of any bailouts.

One question:  if they are having trouble with 7 billion euros where are they going to get the 86 billion euros and counting.  It seems that all of the 19 nation EMU are tired and do not want to fund Greece:

(courtesy zero hedge)


UK Furious At Proposed €7 Billion Greek Ponzi-Perpetuating Bridge Loan

The two most important stories out of Greece on Tuesday were: 1) the IMF’s leaked report on Greek debt sustainability, and 2) the race to secure between €7 and €12 billion in bridge financing to hold Greece over until the ESM gets off the ground.

Although a new program is in the works and should get the greenlight once Tsipras succeeds in forcing Greek lawmakers to legislate away their sovereignty and any semblance of pride they have left, Athens has bills that need paying, the most important of which comes due to the ECB (on its SMP holdings) on July 20. The Greeks must make the payment to Mario Draghi – otherwise the central would be compelled to interrupt the liquidity drip that’s keeping the Greek banking sector from collapsing altogether. There’s also the issue of public sector salaries and pension payments which Greeks would prefer to receive in euros as opposed to the IOUs suggested by German FinMin Wolfgang Schaeuble.

We outlined the options available for bridge financing on Tuesday morning, noting that all alternatives 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).

On Wednesday, the EU Commission decided to go the EFSM route and will look to tap €7 billion of the €11-12 billion that remains in the fund. The formal request by the EU Commission says the funds from the EFSM “aim to provide a bridge financing to allow Greece to face some urgent financial obligations until it starts receiving financial assistance under a new programme from the ESM [and] would safeguard financial stability in the Union and in the euro area.”

This isn’t as simple as it sounds. The EFSM was replaced by the ESM and wasn’t really supposed to be used again, so going back to the well is problematic from a political perspective. There are a number of issues here, but for the sake of brevity, here’s FT’s summary:

The European Commission has submitted a formal proposal to use an EU-wide rescue fund to rush aid to Greece to ensure Athens does not default on €7bn it owes on Monday, a proposal that will require Britain to rally allies if it wants to block it.


If Athens were to default on the ECB bond, the eurozone central bank would be forced to pull emergency loans keeping the Greek banking sector afloat. “It’s the most European, politically and economically sound, readily available option,” said the EU official. “Without it, there is a risk the euro summit [agreement] won’t work.”


The commission’s decision comes despite angry objections to the plan by George Osborne, the UK chancellor, who at a meeting of EU finance ministers in Brussels on Tuesday called it “a non-starter”.


London is furious that the commission is risking inflaming British public opinion ahead of the UK’s referendum on EU membership, which will be held by 2017.


What funds would be used for an additional €5bn that comes due in August has not yet been decided, he added. The EFSM bridge loan would be for three months.


“This is not an easy option,” Mr Dombrovskis said. “We are aware of serious concerns by non-euro member states.”


If officials fail to reach a compromise, Mr Osborne will have to rally a number of EU members to block the proposal. Although he has the support of some other non-euro countries — both Denmark and Sweden registered their objections at Tuesday’s meeting — it is unlikely that Downing Street has enough allies at present to block the plan.


Even the formal attempt by Brussels to use this fund is a big political setback. Mr Cameron has trumpeted securing a “black and white” promise in 2011 that the fund would be mothballed so British taxpayers would not be part of eurozone bailouts.


The EU-wide EFSM was set up at the onset of the eurozone crisis with €60bn in lending capacity. When the eurozone moved to set up a new, permanent rescue fund for the currency union’s 19 members, Mr Cameron won agreement at an EU summit that the EFSM would never be used again for eurozone rescues.

In short: the UK isn’t keen on being roped into this fiasco via implicit participation through the EFSM.

In order to mitigate this, the EU will look to insure non-euro nations against losses on the bridge loan by pledging certain collateral as a guarantee. Here’s FT again:

One compromise EU officials are discussing involves indemnifying non-euro countries from any losses from the loans to Greece. It is not yet clear whether the move would be legally feasible and whether pledging collateral would be politically acceptable to eurozone countries.

And here is the punchline:

As collateral, the eurozone could pledge the €3.6bn in profits from Greek bonds owned by the ECB.

So Europe will pledge profits from the ECB’s Greek debt holdings as collateral for a loan to Greece that will be used to make a payment to the ECB for the very same Greek debt holdings.

As if that’s not absurd enough, consider also that one of the alternative options to using the EFSM was returing SMP profits to Greece, so effectively, one bridge financing option is being used to collateralize another bridge financing option.

Just when you think the Greek tragicomedy has reached peak absurdity, Europe one-ups itself.

Efsm Request Formal Comm


Yesterday we highlighted to you Tsipras television interview where he stated that the EU warlords told him that in a bailout situation, elections do not matter. He also stated that he signed the deal under extreme duress.  This irritated the EU boys to no end:
(courtesy zero hedge)

Greece’s New German Overlords “Irritated” By Tsipras “I Don’t Support What I’m Doing” Comment

Yesterday Tsipras uttered two stunners during his life interview on national TV: one was the admission that after today Greece will no longer be a sovereign, democratic nation and will instead be ruled by the Troika.


This is a problem for the Greeks: if they allow their government to hand over Greek sovereignty to Germany for at least the next three years (in reality much less since the next and final Greek default will be imminent for the nation whose banks will also be controlled by the ECB), they will have nobody to blame but themselves.

But it was his other statement that also managed to stun Germany when he said:


It wasn’t just that: according to Bloomberg Tsipras also said he only agreed to the deal with “a knife at my neck, wo which we said that we expect “Schauble to burst at few capillaries” after reading this.

Sure enough, just a few hours later the response did come, only not from Schauble who now has more pressing matters to attend to, but one of his subordinated. According to Bloomberg, comments by Greek Prime Minister Alexis Tsipras on Tuesday evening undermined trust that Greek govt will take ownership of economic adjustments in new bailout program, German Deputy Finance Minister Jens Spahn says on ARD public television. Spahn is a member of Chancellor Angela Merkel’s CDU party.

“The decisive point for today is that the Greek government, the Greek parliament show that they back these agreements, that they’re taking unilateral steps upfront, that they want to rebuild confidence; then one can talk about all follow-up measures”: Spahn

What the Greek prime minister did on Greek television yesterday irritates me. It’s not just about cutting back.  It’s about that this country needs an idea of how it will grow again economically, how it wants to be successful, how it wants to change structures, how it wants to gain trust.”

But that’s the whole point: Greece could care less about trust – it just wants some “deal” so the ECB raises the ELA so people can withdraw some more cash from locked bank accounts. Everything else is noise.

For now Spahn does not get it: “And when someone says “I actually don’t really support what I’m doing now“, then I think that’s a problem — this doesn’t necessarily create trust.”

He will in a few months, or maybe less, because not only is the shape of the full Greek bailout in doubt, so is the modest €7 billion bridge loan that is supposed to “carry” Greece for the next few weeks (recall Greece needs €22 billion in funds just through August) and whose proceeds will be used entirely just to repay the ECB and IMF.

Here is the reason again from Bloomberg (and common sense):

European officials were at a loss over how to put together a bridging loan that will keep Greece from defaulting on the European Central Bank and its own citizens next week.


One person familiar with the matter said that Greece’s finances seem to get worse with every meeting and governments are now reluctant to help out with even short-term funds.


“The Greek government has not received a bridge-financing program yet because some try to block this,” Tsipras said in an interview with ERT-TV before a parliamentary vote on the deal on Wednesday. “My priority is to make sure that the choice I made the other day, with a knife at my neck, is finalized.”

In other words, in a few hours Greece will vote to hand over its sovereignty to Europe (and mostly Germany) even as the same Europe is still unsure how to fund a €7 Greek bridge loan that will barely last the country for one week, let alone the next 3 years.

As for the math, with every passing day that Greece does not have a deal, even an interim one, its funding needs increase by about €2 billion. Here is the math as laid out by the IMF yesterday:

The preliminary (mutually agreed) assessment of the three institutions is that total financing need through end-2018 will increase to Euro 85 billion, or some Euro 25 billion above what was projected in the IMF’s published DSA only two weeks ago, largely on account of the estimated need for a larger banking sector backstop for Euro 25 billion.

So two weeks of capital controls deteriorated the banking situation so much, Greece now needs an additional €25 billion in funds to keep both the state and its banks alive, which amounts to a little over €2 billion per day. Assuming all of this is from the ongoing deterioration of the banking balance sheets (as capital controls tend to result in a surge in NPLs from 40% to almost 100% since nobody has any money to pay down any debt obligations), it means that Greek NPLs are deteriorating at the pace of 1% per day.

This also means that the total Greek bailout funding needs increase with every passing day that Europe is unable to decide on just how to bail out Greece, which in turn means capital controls continue indefinitely. And perhaps most importantly, since Greek banks simply will not open if this results in just another bank run surge which will soak up whatever deposits are available for withdrawal, capital controls will continue, leading to ongoing deteriorating in bank balance sheets until they can deteriorate no more and NPLs hit 100%. At that point Greece will officially have no banking system left, and will become, no matter how the government votes, a full bailed out vassal state of Europe.

One can see why Greece’s new overlord, Germany, which no longer wants to be associated with the insolvent nation, is “irritated.”

And Greece, since you are literally about to sell yourself for the privilege of repaying your creditors (the same creditors who will shortly impose the dreaded deposit haircuts you hope to avoid by selling out) you should be more careful: without sovereignty you want to keep your vassal rulers as happy as possible…




Now we witness huge numbers of Syriza defections ahead of tonight’s vote:
(courtesy zero hedge)

Syriza Defections Mount Ahead Of Greek Parliament Vote On “Humiliating” Bailout

On Tuesday, in “Complete Humiliation: Greek Parliament Pressed To ‘Approve’ German ‘Coup’“, we said that every lawmaker in Athens is now fully aware of the fact that what has happened to Greece is nothing short of a ruthless political coup executed by Germany.

Today, the Greek parliament is being asked to legislate away its sovereignty in exchange for a bridge loan and a third program that should allow the country to remain in the euro, stave off the complete collapse of the banking sector, and prevent the country from sliding further into depression than it already is.

That said, it’s a Faustian bargain. The trade off looks like this: “No” means a lot of pain now and recovery later; “Yes” means less pain now but no hope of recovery ever.

And although the bailout will likely go through, the divisions within Syriza betray the true extent to which Germany has managed to effect political change in Greece by keeping a tight grip on the purse strings. Indeed, some reports suggest that nearly half of the party is now calling for a “no” vote.

Here’s Reuters with more color on the impending vote:

Prime Minister Alexis Tsipras battled to win lawmakers’ approval on Wednesday for a bailout deal to keep Greece in the euro, while the country’s creditors, pressed by the IMF to provide massive debt relief, struggled to agree a financial lifeline.


Having reluctantly conceded to negotiating a third bailout from international lenders on stringent terms, Tsipras must face down a rebellion in his anti-austerity Syriza party to push sweeping pro-market reforms and spending cuts through parliament.


“It’s a difficult deal, a deal for which only time will show if it is economically viable,” his finance minister, Euclid Tsakalotos, told lawmakers during a debate on reforms.


Dozens of MPs, including senior Syriza figures and the government’s junior coalition partner, may partially or fully reject the bailout, forcing Tsipras to rely on pro-European opposition lawmakers to carry the vote, which is expected after midnight.


A snap election could follow if the prime minister’s majority collapses, and in an early sign of trouble in store, the deputy finance minister abruptly submitted her resignation and the energy minister said he would not back the deal.


“The choice between a bailout or catastrophe is a choice made in the face of terror,” Panagiotis Lafazanis, who heads the far-left flank of Syriza, told reporters.


And here’s some further color from Bloomberg:

The toughest conditions ever attached to a Greek loan agreement could sail easily through Greece’s turbulent parliament when a vote is held Wednesday, even as widespread defections from Alexis Tsipras’s governing coalition threaten his government.

That’s because Greece’s main opposition political parties, conservative New Democracy, centrist To Potami and Socialist Pasok, have united in supporting the sweeping reform agenda that is a prerequisite to keeping the country in the euro.

Tsipras had already won the parliament’s nod to negotiate a deal in return for austerity measures before he left for Brussels. The government’s proposal secured an overwhelming 251 votes in Greece’s 300-seat chamber Saturday, even without the backing more than a dozen lawmakers from Tsipras’s Coalition of the Radical Left, or Syriza, party.

Greece must hold a similar vote by Wednesday to enact the first set of reforms demanded by its creditors as a sign of rebuilding trust after six months of often acrimonious talks. While more members of Tsipras’s Syriza party are threatening to defect, a look at the numbers shows that Greece may escape this time the cliffhanger of past bailout votes.

Tsipras’s coalition government commands 149 seats in parliament held by Syriza lawmakers and another 13 seats held by members of right-wing Independent Greeks, the junior coalition partner. Their combined 12-seat majority evaporated Saturday, when 17 lawmakers from Syriza refused to back Tsipras’s proposals to creditors and may be eroded further if another 15 Syriza lawmakers, who said they wouldn’t consent to further austerity, also vote against the package Wednesday.

Tsipras may not be able to rely either on the backing of his junior partner, after Independent Greeks’ leader Panos Kammenos wrote on twitter “enough is enough,” once the creditors’ demands became known. Kammenos said Tuesday he would only vote for measures already approved by the Greek parliament. If all of Kammenos’s lawmakers vote against the deal, and there are no more defections from Syriza, the ruling coalition may be left with the support of just over 100 lawmakers.

Still, unless a full scale mutiny against Tsipras unfolds within Syriza, any further defections could be more than offset by the combined 106 votes of the three opposition parties that fully support the measures, ensuring a majority of over 200 votes or two thirds of the chamber. A simple majority of 151 votes or over is required for the measures to pass.

The question then, seems to be what happens next. That is, if Tsipras is forced to rely on Syriza’s opposition to pass the bailout package, it’s as yet unclear what that will mean for the embattled PM’s political capital and for the future of politics in Greece.

On Tuesday, a government official told Reuters that Tsipras would not resign following the vote meaning, to quote Bloomberg again, he will be forced to “preside over a minority government with the help of opposition parties [on the way to] implementing the very austerity [he] came to power to abolish.”

And that folks, is “democracy”, EMU style.



Tsipras states that it will be difficult for him to remain in power.

I wonder how he got that in his head?

(courtesy zero hedge)

Tsipras Says Will Be Difficult To Remain In Power As More Than Half Of Syriza Slam Deal

Update: As noted below, Greek PM Alexis Tsipras faces a party rebellion ahead of today’s vote in parliament. According to multiple reports, more than half of Syriza lawmakers have indicated they will vote against the deal, leaving Tsipras to depend on opposition support to pass the new term sheet and throwing the future of Greek politics into question. As Bloomberg notes, the best case scenario will find Tsipras presiding over a minority government with the help of opposition parties. As for the worst case (for Tsipras anyway), here’s Reuters:



The question then, seems to be what happens next. That is, if Tsipras is forced to rely on Syriza’s opposition to pass the bailout package, it’s as yet unclear what that will mean for the embattled PM’s political capital and for the future of politics in Greece.

On Tuesday, a government official told Reuters that Tsipras would not resign following the vote meaning, to quote Bloomberg again, he will be forced to “preside over a minority government with the help of opposition parties [on the way to] implementing the very austerity [he] came to power to abolish.”

And that folks, is “democracy”, EMU style.

the revolt begins:
(courtesy zero hedge)

Greek Protesters And Riot Police Clash, Molotov Cocktails Thrown – Live Feed

pdate: Things have deteriorated with protesters throwing petrol bombs at police.


(Live feed)

Ahead of today’s perhaps most critical vote in recent Greek history, one which may cede the nation’s sovereignty and control of its banks to European bureaucrats and the ECB, demonstrators are again starting to congregate on Syntagma square where anti-austerity protesters are commingling with civil servants and pharmacists who previously called a 24 hour strike.



While the Athens riot police is quietly preparing for the worst:

For now the situation is peaceful, although once the public understands that the government has passed the “deal” the sense of calm may promptly disappear.

And on the same subject as above:
(courtesy Bloomberg)

Greek Lawmakers Weigh Bailout as Tear Gas Fired in Athens

July 15, 2015 — 2:40 PM EDTUpdated on July 15, 2015 —

Riot police officers run through fire as anti-austerity protesters throw petrol bombs, during clashes in Athens on July 15, 2015.

Photographer: Emilio Morenatti/AP Photo

Greek police clashed with protesters in central Athens as lawmakers debated a new bailout of up to 86 billion euros ($94 billion) that will impose further austerity on a country already ravaged by recession.

Riot police fired tear gas to disperse crowds gathered in Syntagma Square, across the road from the Greek parliament, at the start of the debate at about 9:15 p.m. local time. Lawmakers are due to vote on the bailout bill, which will endorse tax increases and spending cuts, by about midnight.

The protests show the challenges Prime Minister Alexis Tsipras faces convincing a country whose economy has shrunk by a quarter in the last five years to accept further spending cuts. In a July 5 referendum, 61 percent of Greeks voted “no” to a package of cuts less onerous than the one Tsipras accepted on Monday after capitulating to creditors’ demands.

“I want to say something to my comrades,” Greek Finance Minister Euclid Tsakalotos told lawmakers. “On Monday morning, at 9:30 a.m., it was the most difficult moment of my life. It was a decision which will be a burden for me for the rest of my life. I don’t know if we did the right thing. But I know we did something to which there was no alternative.”

Riot police detains an anti-austerity protester during clashes in Athens on July 15, 2015.
Photographer: Petros Karadjias/AP Photo

Echoes of 2011

U.S. stocks fell after the violence started, with the Standard & Poor’s 500 Index slipping as much as 0.3 percent. The euro was little changed at $1.1095.

The scenes outside parliament were reminiscent of the turmoilthat rocked Greece at the height of the crisis in 2011, when hooded protestors in gas masks fought running battles with police. About 13,000 people gathered to protest in central Athens tonight, police spokesman Takis Papapetropoulos said, though by about 9:45 p.m. many had been dispersed by riot officers.

Hotels and shops around the square pulled down shutters and deployed security guards as night fell. A few blocks away, business continued as normal in the tourist-heavy Plaka district.

A protester clashes with riot police in front of the Greek Parliament in Athens on July 15, 2015.
Photographer: Andreas Solaro/AFP via Getty Images

Television images showed a protester throwing a Molotov cocktail shortly before the tear gas was fired.

The events highlight how Greek politics have gone through the looking glass since Tsipras and his Coalition of the Radical Left, or Syriza, came to power in January. As the sound of percussion grenades reverberated across Syntagma Square, lawmakers who had campaigned against austerity just six months before now prepared to vote for just the opposite.

Syriza Defections

Tsipras is likely to lose the support of 30 to 40 Syriza lawmakers in tonight’s vote, and to be forced to rely on opposition lawmakers to pass the bill, Eurasia Group analyst Mujtaba Rahman said in a note to clients.

As a result, “Tsipras will reshuffle his cabinet and may call a vote of confidence,” allowing him to rule with a minority of the legislature at least for a few weeks, Rahman said. After that, a “national unity” government comprising the major Greek parties could be formed.

The vote is a key milestone in the plan to unlock fresh aid for Greece. Banks have been closed for more than two weeks to stem withdrawals and without an injection of funds the government will miss a July 20 payment of 3.5 billion euros to the European Central Bank.

The Frankfurt-based ECB plans to make a decision on extending emergency liquidity to Greek banks on Thursday, after the parliamentary vote, which may allow Greek lenders to gradually re-open. The bailout deal must also still be approved by six other euro-area national parliaments, including the lower house in Germany.

Less you think that only Greece is in trouble: guess again. The bad loans rose in May from 165 billion euros to 195 billion euros.  Prior to May the ratio was 10%, now it is greater than 12%.  Generally anything over 10% and the nation is in trouble! If you add substandard,  restructured, and past due loans (not yet NPL) then the total is 295 billion euros or 17.8%
(courtesy Pater Tenebrarum/Acting- Man.com)

Italy – Non-Performing Loans Hit A New Record High

Submitted by Pater Tenebrarum via Acting-Man.com,

While all Eyes are on Greece, Italy’s Banks are Drowning in Bad Debt

The real danger to the euro area probably doesn’t emanate from Greece, but from two of its heavyweights, namely France and Italy.A small note in the European press reminds us that all is not well in at least one of these countries, least of all with its banks (currently this is only a “page 16 story”, but it has great potential to eventually move to the front page).


NPLs by region

Regional distribution of non-performing loans in Italy



The note reads as follows:

“Rome – because of the recession of recent years and corporate bankruptcies, the total of bad loans has continued to rise in Italy. According to Italy’s banking association ABI, non-performing loans amounted to 193.7 billion euro in May, 25.1 billion more than in the same month in 2014. This is the highest level since 1996.


Non-performing loans represent 10.1 percent of all loans granted by Italian banks, ABI said on Tuesday. Especially small and medium enterprises continue to be under pressure due to bad loans, so will take a long time before banks will see the bad loan situation ease, the ABI report stated. Italian companies are currently struggling with the effects of the longest economic crisis since World War II and are therefore often no longer able to service their loans.”

(emphasis added)

If our calculator can be trusted, this means that bad loans in Italy’s banking system have increased by roughly 14.9% over just the past year – by no means a peak crisis year, although Italy’s listing economy continued to contract slightly.

As the following chart shows (unfortunately we were only able to obtain this slightly dated version), Italian NPLs stood at € 165 bn. in Q1 2014. However, to this one must actually add all sorts of loans that are otherwise delinquent/dubious or sub-standard, but haven’t yet reached “full” NPL status. These are summarized together with NPLs under the term impaired loans below.



The growth of impaired loans in Italy’s banking system until Q1 2014. At the time, NPLs stood at €165 billion – now they are towering at nearly €194 billion.


While Italy’s banks are drowning in NPLs and otherwise impaired debt (from the above one can probably infer that the new total is close to €350 billion), its government is buried under ever more debt as well. Of course, the government’s debt is considered “risk-free” in the Bizarro universe we have entered since the ECB has decided to join the global printathon. Note that we are dating this ECB decision to late 2011, as its money printing efforts started well before it announced full-blown “QE” (previously there were LTROs, TLTROs, several covered bond purchase programs, an ABS purchase program, the SMP and the as yet unused threat of “OMT” or “outright monetary transactions”).



The trend in Italy’s general government debt – it remains a one-way street.


However, Italy is not the worst country in the euro zone with respect to bad loans in the banking system. The next chart shows the percentage impaired bank loans (loans that are delinquent 90 days+) represent of total bank loans outstanding in a number of countries.

Not surprisingly, Greece is inhabiting the top spot, followed by Ireland, Slovenia and Italy. In most of these countries a variety of measures has been taken (mainly via the creation of “bad banks”) to get the problem under control. Italy seems to largely have disappeared from the radar, but strikes us a potential powder keg – especially once the recent monetary-pumping-induced pseudo recovery implodes in another bust.



Bad loans as a percentage of all outstanding bank loans in various countries



If one thinks things properly through, Greece is really a side-show. The euro zone remains full of accidents waiting to happen and some of them have the potential to become truly gigantic accidents. Italy has a twin debt problem and it is probably only a question of time before its giant government debtberg becomes a concern again – this would put the country’s banks into an untenable situation, given they have amassed a great deal of government since early 2012.

As long as the ECB continues to pump €60 billion in newly created money into the system every month, such problems can probably be kept at bay. However, this comes at a price, as monetary pumping distorts prices and falsifies economic calculation, which in turn leads to malinvestment and capital consumption that is masquerading as an “economic recovery”. The structure on which all this debt rests becomes ever weaker.



What will happen when the pumping eventually stops?

Now it is my country to get into trouble.  The Bank of Canada clashes GDP forecasts and unexpectedly cuts interest rates.  The Canadian dollar plummets today:
(courtesy zero hedge)

USDCAD Surges To 6 Year Highs As Bank Of Canada Slashes GDP Forecasts, Unexpectedly Cuts Rates

In what seems to have surprised FX trader, Bank of Canada has taken an ax to growth forecasts and rates…


Furthermore, it warns that “consumer debt vulnerabilities are edging higher” and export weakness is “puzzling.”

USDCAD exploded to 6 year highs..

Full Statement (link):

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

Total CPI inflation in Canada has been around 1 per cent in recent months, reflecting year-over-year price declines for consumer energy products. Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors. Setting aside these transitory effects, the Bank judges that the underlying trend in inflation is about 1.5 to 1.7 per cent.

Global growth faltered in early 2015, principally in the United States and China.  Recent indicators suggest a rebound in the U.S. economy in the second half of this year, and growth is expected to be solid through the projection. In contrast, China is slowing amid an ongoing process of rebalancing to a more sustainable growth path. This has pulled down prices of certain commodities that are important to Canada’s exports. Financial conditions in major economies remain very accommodative and continue to provide much-needed support to economic activity. Global growth is expected to strengthen over the second half of 2015, averaging about 3 per cent for the year, and accelerate to around 3 1/2 per cent in 2016 and 2017.

The Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection. The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities.  Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.

The Bank expects growth to resume in the third quarter and begin to exceed potential again in the fourth quarter, led by the non-resource sectors of Canada’s economy. Outside the energy-producing regions, consumer confidence remains high and labour markets continue to improve. This will support consumption, which will also receive a fiscal boost. Recent evidence suggests a pickup in activity and rising capacity pressures among manufacturers, particularly those exporters that are most sensitive to movements in the Canadian dollar. Financial conditions for households and businesses remain very stimulative.

The Bank now projects Canada’s real GDP will grow by just over 1 per cent in 2015 and about 2 1/2 per cent in 2016 and 2017. With this revised growth profile, the output gap is significantly larger than was expected in April, and closes somewhat later. The Bank anticipates that the economy will return to full capacity and inflation to 2 per cent on a sustained basis in the first half of 2017.

The lower outlook for Canadian growth has increased the downside risks to inflation. While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.

*  *  *

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

Euro/USA 1.1019 up .0013

USA/JAPAN YEN 123.54 up .215

GBP/USA 1.5517 down .0016

USA/CAN 1.2757 up .0021

This morning in Europe, the Euro rose by a tiny 13 basis points, trading now well below the 1.11 level at 1.1019; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank,  an imminent  default of Greece and the Ukraine, rising peripheral bond yields 

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 22 basis points and trading just above the 123 level to 123.54 yen to the dollar.

The pound was down  this morning by 16 basis points as it now trades well above the 1.56 level at 1.5617, 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 21 basis points at 1.2757 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 78.00 points or 0.38%

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

2/ Asian bourses mixed … 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 green/

Gold very early morning trading: $1155.35



Early Wednesday morning USA 10 year bond yield: 2.40% !!! down 1 in basis points from Tuesday night and it is trading well above  resistance at 2.27-2.32%

USA dollar index early Wednesday morning: 96.66 up 6 cents from Monday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning

And now for your closing numbers for Wednesday:

Closing Portuguese 10 year bond yield: 2.69%  down 6 in basis points from Tuesday

Closing Japanese 10 year bond yield: .46% !!! down 1 in basis points from Tuesday/still very ominous

Your closing Spanish 10 year government bond, Wednesday, down 8 in basis points

Spanish 10 year bond yield: 2.01% !!!!!!

Your Wednesday closing Italian 10 year bond yield: 2.00% down 6 in basis points from Tuesday: (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: 1.0947 down .0059 ( Euro down 59 basis points)

USA/Japan: 123.79 down  .458 ( yen down 46 basis points)

Great Britain/USA: 1.5637 up .0003 (Pound up 3 basis points)

USA/Canada: 1.2937 up .0204 (Can dollar down 211 basis points)

The euro fell considerably today. It settled down 59 basis points against the dollar to 1.0947 as the dollar traded  northbound  today against all the various major currencies. The yen was down by 46 basis points and closing well above the 123 cross at 123.79. The British pound was up a tiny 3 basis points, closing at 1.5637. The Canadian dollar went back into the toilet by 211 basis points closing at 1.2937.

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: 2.35% down 6 in basis point from Tuesday// (well above the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

97.14 up 54 cents on the day


European and Dow Jones stock index closes:

England FTSE up 00.00 points or 0.00%

Paris CAC up 14.77 points or 0.29%

German Dax up 22.76 points or 0.20%

Spain’s Ibex up 77.40 points or 0.69%

Italian FTSE-MIB up 295.24 or 1.28%


The Dow down 3.41  or 0.02%

Nasdaq; down 5.95 or 0.12%


OIL: WTI 51.67 !!!!!!!



Closing USA/Russian rouble cross: 56.94  down 1/2  rouble per dollar on the day


And now for your more important USA stories.


 NY trading for today:


Bonds Bid, Stocks Skid, & Crude Crushed As Yellen Pleads & Greece Bleeds

China loses momentum in its manipulation overnight… US industrial production data was dismal… Yellen admits The Fed needs to raise rates sooner or may be forced to raise rates more aggressively… and stocks did not drop until TV images showed blood on the streets of Athens… This just seemed appropriate…

“hearts on fire” indeed – can the small undersize reality of the real market overcome the juicing monstrosity of the Central Banks? Stay tuned…

Stocks flatlined on negligible volume overnight in futures (just like yesterday), were jerked up at the open then tumbled when Greek burning images started to appear..


On the day, Trannies and Small Caps were the laggards early on…


Since the Friday close, Trannies and Small Caps are the biggest losers with NASDAQ suppoprted by biotech


On a side note they tried hard to close S&P green – to make it 5 days in a row higher – the first time since Dec 2014 – BUT FAILED


Stocks and bonds continue in a world of their own… who is right?


As chaos reigned in Greece, the Greek ETF decided it was time to rally and the initial dip on images of teargas and molotov coktails was bought – but the picture is still ugly…


VIX surged on the Greek TV Images… then smashed to try and get S&P green


Treasury yields are now notably lower on the week…


The dollar surged thanks to CAD weakness (surprise rate cut) and EUR weakness (more Greece concerns)


CAD collapsed to near 6 year lows after BoC surprised…


As EURUSD continues to nosedive post-deal


Silver and Gold were clubbed early on as EURUSD plunged…


Leaving GLD at 5 year lows….


Inventories saw a big draw and production dropped BUT after an initial pop, crudeprices collapse – giving back all the “buy the news” Iran Deal gains from yesterday…



Charts: Bloomberg

Bonus Chart: h/t @Not_Jim_Cramer points out that buybacks are now underperforming the market (as he notes “when everyone is doing it….”


Bonus Clip: Absolutely NSFW – Seems appropriate for practically everything going on right now…


Empire Manufacturing Beats Despite Slump In New Orders & Employment

After printing negative for the last 3 months and falling to the lowest since Jan 2013, Empire Manufacturing jumped to 3.86 (beating expectations of a 3.0 print for the first time since Jan). While some will celebrate (and others fear good news is bad news), both New Orders and Number of Employees fell in July, as inventories plunged. The main driver of the jump in the headline index was “hope” once again, rising for the first time since March.



New orders hover near 2 year lows…


Charts: Bloomberg


Producer Prices Rise Again Driven By Surge In Energy Costs

If low oil pries are great for America “unequivocally,” then the continued surge in Energy costs (+2.4% MoM in June) must be [fill in the blank]? PPI Final Demand rose 0.4% MoM – near the fatest pace in 3 years (beating expectations of a 0.2% rise) but fell 0.7% YoY. The huge gap between core and headline PPI continues to grow with PPI Ex Food and Energy rising 0.8% YoY, its first acceleration in 2015.


PPI Final Demand rises MoM once again at near the fastest pace in 3 years


PPI Ex Food and Energy saw its YoY rise from the previous month for the first time this year…


The breakdown is as follows…


Final demand goods: The index for final demand goods moved up 0.7 percent in June after rising 1.3 percent a month earlier. Almost 60 percent of the broad-based advance in June is attributable to prices for final demand energy, which climbed 2.4 percent. The indexes for final demand goods less foods and energy and for final demand foods increased 0.4 percent and 0.6 percent, respectively.

Product detail: Thirty percent of the June advance in prices for final demand goods can be traced to the gasoline index, which rose 4.3 percent. Prices for chicken eggs, pharmaceutical preparations, residential electric power, residential natural gas, and cigarettes also moved higher. In contrast, the index for fresh and dry vegetables fell 6.0 percent. Prices for liquefied petroleum gas and electronic computers also decreased.

Final demand services: The index for final demand services moved up 0.3 percent in June following no change in May. Over half of the broad-based advance can be traced to a 0.2-percent increase in the index for final demand services less trade, transportation, and warehousing. Margins for final demand trade services rose 0.2 percent, and the index for final demand transportation and warehousing services advanced 0.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Thirty percent of the June increase in the index for final demand services can be attributed to prices for loan services (partial), which climbed 2.4 percent. The indexes for machinery and equipment wholesaling, fuels and lubricants retailing, truck transportation of freight, deposit services (partial), and portfolio management also moved higher. Conversely, margins for food and alcohol wholesaling declined 3.7 percent. The indexes for traveler accommodation services and passenger car rental also declined


Charts: Bloomberg



Industrial output growth plunges to 5 year lows;

(courtesy zero hedge)

Recession Watch – Industrial Output Growth Plunges To 5 Year Lows

Industrial Production rose just 1.54% YoY, the weakest growth since Feb 2010 and flashing a major recessionary red light. Utilities were the biggest contributor, as Manufacturing output ended June unchanged (against expectations of a modest 0.1% rise), missing for the 2nd month in a row. Notably vehicle production tumbled 5.5% MoM. Not exactly the end to Q2 that GDP hockey-stick’rs will be wanting.


Worst industrial production growth since Feb 2010…


Worst manufacturing output growth since February…



Let us close with one of my favourite individuals, Torontonian Rob Kirby being interviewed by Greg Hunter:

(courtesy Greg Hunter/Rob Kirby/USAWatchdog)



Greek Debt Deal a Financial Coup-Rob Kirby

4thBy Greg Hunter’s USAWatchdog.com 

Macroeconomic analyst Rob Kirby thinks that everybody should take notice of what is happening with the Greek debt crisis drama.  Kirby contends, “What has occurred in Greece, make no mistake, it is a financial coup.  It is not a bailout.  It’s a takeover by force.  The leader of Greece has obviously been told, and effectively has a gun to his head, the way it’s going to be.  The Greek people voted for what they want, and we know what the Greek people’s wishes are, and they don’t want more austerity.  They want to divorce themselves from the IMF and the European Central Bank (ECB).  We know that clear as day, but that is not acceptable to the global elitists and the globalist bankers.  They have said we don’t really care what you think.  It’s going to be the way we say.  The rest of Europe should sit up and take note of this because there are other countries whose finances are also not in good shape, namely, Portugal, Spain, France and Italy. . . . If global bankers are allowed to get away with this, then this is what you can expect in your country real soon.”

So, is Greece the template for other counties around the world with extreme debt problems?  Kirby says, “This is very aggressive, and to suggest this is a template for what’s going to be done in other countries is sort of like saying a mugging has a template.  Muggings are very aggressive, nasty acts, and when you are being mugged, you have fight or flight reflexes.  When you get into a dustup with anyone, how it is going to end is anybody’s guess. . . . It seems to me the bankers will use anything at their disposal, including threats and including offing people.  This is a very nasty, nasty game.  What is at stake here is world domination.”

What do central bankers fear?  Kirby says, “What is in danger here is the integrity of fiat money.  All these bonds are expressed in fiat terms.  The euro is a fiat currency, just like the US dollar is a fiat currency.  The reason why they can’t allow Greece out of the euro is because the European Union is a construct of globalists whose ultimate goal is a one-world government with a one-world currency.  The rationale goes something like this:  If you can’t manage and keep together the Eurozone, how can you possibly rationalize one-world government and bringing the rest of the world onto this platform?  So, they must keep Greece in the union; otherwise, it would expose their globalist plan for being threadbare as it truly is.  And they can’t allow the default or the restructuring of the Greek debt because following closely on a Greek restructuring would be requests from, Portugal, Spain, Italy and France, as well.  In my view, this is unworkable.  In my view, this whole euro concept and whole notion of one-world government and one-world currency is a dog that will not hunt in the end.  We are starting to see concrete proof that this is indeed the case.”

Kirby’s view on the recent secret trade deal signed into US law by President Obama is well beyond dollar negative.  Kirby contends, “I think it is humanity negative.  It is very, very bad for humanity.  Anything that is hidden from plain view cannot be very good for anybody.  I think it is humanity negative.  It goes much deeper than dollar negative.  I think it is fiat regime negative.  If we see the details of what is being negotiated behind the curtain, I think it would become very clear to an awful lot of people just how fragile, insolvent and how broken our financial system truly is.  I think what they are trying to do is build a net under a failing edifice.  I think they are trying to put a safety net in with these trade agreements.  So, when the inevitable tripwires are hit, we don’t fall into an abyss.  This is a fool’s errand.  You cannot solve an issue of indebtedness by adding more debt.  That is exactly, in a nutshell, what they are trying to do with Greece.  They are trying to fix the Greek debt problem by giving them more debt, and that cannot be done.”

Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.

(There is much more in the video interview.)


Well that about does it for tonight

I will see you tomorrow night




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