Another banking raid on gold/gold equity shares plummet

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1106.80  (comex closing time)

Silver $14.67

In the access market 5:15 pm

Gold $1096.70

Silver:  $14.67

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 27 notices filed for 135,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 243.49 tonnes for a loss of 60 tonnes over that period.

In silver, the open interest rose by 1,113 contracts despite the fact that Friday’s price was down by 14 cents.  The total silver OI continues to remain extremely high, with today’s reading at 188,772 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .944 billion oz or 135% 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 must have had banker shortcovering.

In silver we had 27 notices served upon for 135,000 oz.

In gold, the total comex gold OI rests tonight at 474,057 for a gain of 3,337 contracts despite the fact that gold was down $12.00 on Friday. We had 0 notices filed for nil oz  today.

We had a massive withdrawal in gold tonnage at the GLD to the tune of 11.63 tonnes/  thus the inventory rests tonight at 696.25 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 thought that 700 tonnes is the rock bottom inventory in gold, but I guess I was wrong. However we must be coming pretty close to a level of only paper gold and the GLD being totally void of physical gold.  In silver, we had no change in inventory at the SLV / Inventory now rests at 327.593 million oz.

 

 

Here are today’s comex results:

The total gold comex open interest rose by 274 contracts from 474,057  up to 474,331 despite the fact that gold was down $12.00 in price yesterday (at the comex close).  We are now in the next contract month of July and here the OI rose by 60 contracts to 218 contracts. We had 0 notices filed yesterday and thus we gained 60 contracts or an additional 6,000 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI decreased by 1560 contracts down to 226,979.  The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 329,371.However today’s volume was aided by HFT traders. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 195,751 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI rose by 1113 contracts from 187,659 up to 188,772 despite the fact that the price of silver was down by 14 cents with respect to Friday’s trading and now the OI is rising in total sympathy with gold. We continue to have our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver (and gold ) arena. The next delivery month is July and here the OI rose by 22 contracts down to 137. We had 0 notices served upon yesterday and thus we gained 22 contracts or an additional 110,000 ounces of silver will stand for delivery in this active month of July. This is the first time in quite some time that we have not lost any silver ounces standing immediately after first day notice. The August contract month saw it’s OI rise by 57 contracts down to 174. The next major active delivery month is September and here the OI rose by 710 contracts to 128,557. The estimated volume today was excellent at 67,208 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 30,878contracts which is fair in volume.  We had 27 notices filed for 135,000 oz.

July initial standing

July 20.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz 64,196.711  (Scotia, Manfra)  and includes 5 kilobars
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 16,075.000 (Scotia)(500 kilobars)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 218 contracts 21,800 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   203.60 oz
Total accumulative withdrawal of gold from the Customer inventory this month 288,163.4   oz

Today, we had 0 dealer transactions

total Dealer withdrawals: nil  oz

we had 0 dealer deposits

total dealer deposit: zero
we had 2 customer withdrawal

i) out of Scotia: 64,196.711 oz

ii) Out of Manfra:  160.75 oz  (5 kilobars)

total customer withdrawal: 64,357.461 oz

We had 1 customer deposit:

i) Into Scotia:  16,075.000 oz or 500 kilobars

Total customer deposit: 16,075.000 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 (218) 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 (218) – the number of  notices served upon today (0) x 100 oz which equals 63,000  oz standing so far in this month of July (1.9595 tonnes of gold).

we gained 60 contracts or an additional 6000 oz will stand in this non active delivery month of JULY.

Total dealer inventory 482,778.738 or 15.016 tonnes

Total gold inventory (dealer and customer) = 7,828,512.94 oz  or 243.49 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 243.49 tonnes for a loss of 60 tonnes over that period.

end

And now for silver

July silver initial standings

July 20 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 116,978.120  oz (CNT, Delaware,Brinks,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  587,971.400 oz (JPM)
No of oz served (contracts) 27 contracts  (135,000 oz)
No of oz to be served (notices) 110 contracts (550000 oz)
Total monthly oz silver served (contracts) 3304 contracts (16,520,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 6,383,162.0 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 deposits:

i) Into JPMorgan:  587,971.400 oz

total customer deposit: 587,971.400 oz

We had 4 customer withdrawals:

i)Out of  CNT: 10,472.84 oz

ii) Out of Delaware:  980.700 oz

iii) Out of Brinks:  29,351.48 oz

iv) Scotia; 76,173.100 oz

total withdrawals from customer:  116,978.120  oz

we had 0  adjustments

 

Total dealer inventory: 58.96 million oz

Total of all silver inventory (dealer and customer) 178.879 million oz

The total number of notices filed today for the July contract month is represented by 27 contracts for 135,000 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 (3304) x 5,000 oz  = 16,520,000 oz to which we add the difference between the open interest for the front month of July (137) and the number of notices served upon today (27) x 5000 oz equals the number of ounces standing.

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

3304 (notices served so far) + { OI for front month of July (137) -number of notices served upon today (27} x 5000 oz ,= 17,070,000 oz of silver standing for the July contract month.

We gained 22 contracts or an additional 110,000 ounces will stand in this active delivery month of July.

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

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

end

 

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 20

July 17./a massive withdrawal of 11.63 tonnes  in gold tonnage tonight from the GLD/Inventory rests at 696.25 tonnes

July 16./we lost 1.19 tonnes of gold tonight/Inventory rests at 707.88 tonnes

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 20 GLD : 696.25 tonnes

end

And now for silver (SLV)

July 20

july 17.2015/no change in silver inventory tonight/inventory at 327.593 million oz

July 16./no change in silver inventory/rests tonight at 327.593 million oz

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 20/2015:  tonight inventory rests at 327.593 million oz

end

 

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

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

1. Central Fund of Canada: traded at Negative 10.3 percent to NAV usa funds and Negative 10.40% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.2%

Percentage of fund in silver:37.4%

cash .4%

( July 20/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to 1.58%!!!! NAV (July 20/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV falls to – .73% toNAV(July 20/2015

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

Sprott physical gold trust is back into negative territory at -.73%

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)

China’s Total Gold Holdings Much Higher – Owns Gold In SAFE and CIC

– China revises up its stated gold reserves in bid for IMF membership and reserve currency status
– China announces a 604 tonne increase in gold reserves
– First public disclosure re reserves in since 2009
– China officially owns around 1,660 tonnes of gold reserves –  true total figure is likely much larger
– Playing long game – protecting USD reserves and positioning RMB as global reserve currency
– China true gold holdings much higher as also owns gold in SAFE and CIC

20-07-2015_1

China officially revised its gold reserves upward for the first time since 2009 on Friday. The People’s Bank of China (PBOC) stated on Friday that it had added 604 tonnes of gold to its official reserves last month.

Gold is no longer used to back paper and digital money of today, however it remains an important part of monetary reserves internationally. This can be seen in the People’s Bank of China’s (PBOC) announcement of an increase in their gold reserves.

China’s official reserves are now almost 1660 tonnes of gold.  Analysts, including Bloomberg and ourselves, had been expecting a sharp jump to at least 2,000 tonnes and possibly as high as 3,000 or 4,000 tonnes.

It is clear by the secrecy surrounding China’s reserves that they view gold as a vital strategic asset. Chinese gold reserves increased by 57 percent and China’s holdings have now surpassed those of Russia to become the fifth-largest. The U.S. is believed to have the biggest reserves at 8,133.5 tons. The current official holdings rank them as the fifth largest holder of gold in the world (see chart).

Many analysts believe this figure to be an understatement given the enormous volumes of gold that have been passing through Hong Kong – and through Shanghai in more recent years – and the large amounts that have been produced and bought domestically.

It is important to remember that as we have long pointed out two other entities, besides the PBOC, have also been buying gold – the State Administration of Foreign Exchange (SAFE) and theChina Investment Corporation (CIC).

 

20-07-2015_2

Although if the combined holdings of the PBOC, SAFE and CIC were added together, China may well be the second largest holder of gold bullion – after the U.S. – assuming that U.S. gold reserve figures, which have not been publicly audited in over 60 years, are accurate.

It is likely, that in total and between the three China’s financial institutions, China may in fact be holding between 3,000 tonnes and 6,000 tonnes of gold.

China is playing the long game and they could be low balling their total gold holdings – official central bank reserves and non official holdings – in order to maintain confidence in their substantial US dollar holdings and to aid their bid to join the IMF.

China became the world’s second-largest economy in 2010 and has stepped up efforts to internationalize its currency – the yuan. The Chinese are pushing for full convertibility of the RMB and increasing their gold holdings will create confidence in the fledgling reserve currency and aid them in this regard.

China, regardless of its ambitions, is not currently in a position to challenge the the dollar’s reserve currency supremacy. The absence of a deep and liquid bond market is one impediment that they need to overcome on this regard.

On the other hand, it certainly is strong enough to take its place at the IMF and have the yuan included in the currency basket that makes up Special Drawing Rights (SDRs).

Whoever has the gold makes the rules. While gold is denigrated at every opportunity by some commentators – frequently Keynesians anti gold ideologues – it is clear that the true power-brokers in the world – leading international banks and central banks – still adhere to that adage.

To demonstrate its fitness to join the IMF, China must demonstrate its financial and monetary strength by declaring sufficient gold reserves which it has now done.

20-07-2015_3

The bloated, debt-based international monetary system faces huge challenges and the scale of debts globally could indeed lead to collapse. In time China may disclose its true gold holdings and partially back its currency with gold to discourage capital flight.

Gold is no longer used to back the trillions and trillions of paper and digital money of today, however it clearly remains money contrary to assertions to the contrary. Gold bullion remains a substantial part of central bank reserves in the U.S. and Europe.

The PBOC gold announcement is the continuation of the trend of China positioning the yuan as global reserve currency. China’s gold reserves remain miniscule as a percent of their massive $3.7 trillion foreign exchange reserves – less than 2%.  In marked contrast to the U.S., Germany and even France and Italy when gold’s share of national forex reserves is over 70%.

We would not be surprised if the PBOC begins to accumulate a minimum of 100 metric tonnes in gold reserves a month going forward as the Russians have done in recent years. Alternatively, they may elect to continue accumulating gold bullion quietly through SAFE and the CIC – indeed they have been buying hundreds of gold mines in South America, Africa and internationally in recent years – likely securing another important source of supply.

Central banks internationally still hold physical gold as financial insurance. Investors and savers should do the same and have an allocation to gold bullion outside of the banking system, in the safest vaults in the world.

Must-read guides to international bullion storage:
Essential Guide to Gold Storage in Switzerland
Essential Guide to Gold Storage in Singapore

 

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,115.00, EUR 1,029.17 and GBP 717.41 per ounce.
Friday’s AM LBMA Gold Price was USD 1,143.00, EUR 1,049.25 and GBP 730.68 per ounce.

For the week, gold was lower in dollars and pounds but eked out slight gains in euros. Gold fell 2.5% to $1133.90 per ounce and silver fell 4.4% to $14.89 per ounce.

20-07-2015_4

This morning, massive concentrated selling in the futures market again led to sharp price falls and at one stage gold fell nearly 5% to below $1,100 per ounce. Gold in Singapore for immediate delivery fell sharply  while gold in Switzerland bounced higher from the intra day lows.

In what looked like another successful bid to manipulate the gold market lower, there was massive selling of gold futures contracts – some 700,000 ounces worth of gold futures in mere seconds. The equivalent of one-fifth of a whole day’s trade in a normal session, was sold in a concentrated manner in less than two minutes – pushing prices lower again.

ANZ Bank analyst Victor Thianpiriya said in a note that the“nature, size and timing of the heavy selling” suggests someone “was taking advantage of low liquidity or some sort of forced selling had taken place.“

The sell off in the gold market spooked other commodities and most commodities are seeing sharp selling today, while stocks have continued to eke out further gains.

This is somewhat counter intuitive as the sharp falls in commodities in recent days suggest the global economy is weakening and threatened by deflation. Thus, stocks should be falling too. However, it appears that stocks are being supported by ultra loose monetary policies and currency debasement for now.

Gold looks horrible technically after having a fourth weekly loss last week. This is the longest series of price falls  since February.The price falls are despite strong coin and bar demand internationally. U.S. Mint gold bullion coin sales remain very robust and dealers, mints and refineries report robust demand – particularly in Germany and wider Europe and indeed in the U.S.

This suggests that we are close to capitulation and a bottom and gold looks very oversold. Gold mining stocks absolutely collapsed last week with the XAU index down 8.1% and the HUI index down 9.3% – another indication that we may be close to a bottom.

Although as ever we caution to never ‘catch a falling knife’ and $1,000 per ounce remains possible on the down side. Dollar cost averaging into a physical position remains prudent.

Silver for immediate delivery fell 0.6% to $14.84 an ounce. Spot platinum fell 1.1 percent to $984.51 an ounce, while palladium fell 1 percent to $611 an ounce.

Breaking News and Research Here

end

Gata responds to China’s official gold holdings:

(courtesy GATA)

China’s official gold reserves total is still phony — and so is most everybody else’s

Section:

7:41p ET Friday, July 17, 2015

Dear Friend of GATA and Gold:

Most people in the gold business seems disappointed with China’s announcement today of its gold reserve total, which, as Sharps Pixley CEO Ross Norman told The Wall Street Journal, was only about half of what the market expected, since it was the first updating of gold reserves by the People’s Bank of China in six years:

http://www.wsj.com/articles/china-discloses-its-gold-holdings-1437144149

But this expectation was probably always unrealistic, for as Zero Hedge writes —

http://www.zerohedge.com/news/2015-07-17/china-increases-gold-holdings-5…

— China’s announcement today was also an admission that its gold reserve figures have been misleading. Indeed, the announcement was almost certainly hugely misleading, China’s true gold reserves likely being far larger.

That is, for six years, right through yesterday, China asserted that its official gold reserves were 1.054 tonnes, but today China reported its official reserves as 1,658 tonnes, an increase of 604 tonnes or 57 percent —

http://www.reuters.com/article/2015/07/17/china-gold-reserves-idUSL4N0ZX…

— and of course that much additional metal was not obtained in the last 24 hours.

Zero Hedge writes: “China has finally admitted that its official gold numbers were fabricated (alongside all other official data released from the communist country), as it is impossible that the People’s Bank of China could have bought 600 tons of gold in the open market in June when the price of the yellow metal actually dropped by 2 percent.”

But China has not “finally” admitted anything, as these are the same circumstances that prevailed when China updated its reserve report in 2009. For from 2003 to 2009 China maintained that its gold reserves were just 454 tonnes. Then one day in April 2009 the reserves report jumped 146 tonnes to 600 tonnes:

http://www.gata.org/node/7380

end

 

China adds a whopping 62 tonnes in the latest week.  This is a big increase from the week before.

 

(courtesy Jessie/American Cafe/GATA)

Shanghai Gold Exchange Sees 61.8 Tonnes Withdrawn In
Eighth Largest Week Ever – Talk To the Hand

Asia continues to add significant amounts of gold bullion to their wealth reserves.

Wall Street and its sycophants would like us to consider gold to be just ‘a pet rock’ or ‘like trading sardines.’   And yet central banks have turned to be net buyers, and Asia and the Mideast continue to buy bullion in record amounts.   Talk to the Chan.

One of the few coherent things Alan Greenspan said was that statists of all persuasions, both right and left, have ‘an almost hysterical antagonism towards gold.’ This is because gold resists their will to power over others.

So why isn’t gold ‘working’ at this moment in history?

“We hypothesize that, having learned from the misadventures of the 1960s, the policy elites, well-versed in the practice of financial engineering and market manipulation, would have seen no need to dump stocks of government gold reserves onto the market, 1960s style, to keep the price in check.

Instead, synthetic gold, sourced in pyramids of credit extended to bullion bankers by central banks with little or no claim on physical substance, have provided a more efficient, better-camouflaged form of intervention. COMEX synthetic gold and related over-the-counter derivatives are traded in macro strategies implemented by hedge funds, high-frequency trades, and commodity funds in pair trades with interest-rate, currencies, equity futures, or even more exotic offsets. The volumes traded are huge, and bear little resemblance to actual flows of physical metal.

We suspect that shorting gold has come to seem like a riskless proposition as long as there is confidence in the Fed. Synthetic gold is the perfect substance for a carry trade: an easy borrow with very low carrying cost and little upside basis risk. Such a hypothesis, in our opinion, does much to explain the incongruity of a declining gold price while fundamentals for paper currency, and the U.S. dollar in particular, obviously deteriorate; while demand for physical gold has exceeded new mine supply for several years running; and while above-ground 400-ounce .995-gold bars located in London, New York, and other financial capitals (in cohabitation with speculative trading activity in paper markets) have steadily dwindled and disappeared into Asian financial centers reformulated as .9999 kilo bars.”

Tocqueville Gold Newsletter 2Q 2015

The dumping at market of very large amounts of paper assets into quiet market hours has been well documented in many places. It is a well worn market manipulating strategy abused by some very large trading desks, often playing with other people’s money. Citi privately called it their ‘Dr. Evil Strategy.’

It is funny how the systematic rigging of so many financially related markets has been revealed, but the blatant manipulation of the precious metals market, which is certainly knowable by anyone with a basic knowledge of the markets and a computer terminal, is so willfully ignored. A love of money, lust for power, and a lack of integrity will alloy to make people hypocrites.

When we see such trash articles being written, and passed along mindlessly by those who yearn to warm themselves by the fires of the oligarchs, we know that gold has cast a cold fear into the hearts of those who would be kings, or their privileged servants.

And considering the long, cynical rally in paper assets that culminated in the financial crisis of 2008, when people start believing in the power of fraud and willful distortion of markets, we can only say as we did then, this will end badly.

A man cannot serve two masters. He will love the one and come to hate the other.  You love what you serve.

end

(courtesy Bix Weir)

Good Sign for Silver in the Short Term

Bix Weir

A few weeks back the US Mint announced that US Treasury Secretary, Jack Lew, had ordered them to stop selling the #1 retail silver coin in the world…the 1oz Silver Eagle. He ordered it because too many were being sold at the low, manipulated silver price below $15/oz and he knew that there was more pain to come in the silver price suppression so he cut off supply to slow the physical dishoarding of the remaining stockpiles of silver.

That’s the truth and there is no other way to describe it.

Yesterday, the US Mint announced that the sales of US Silver Eagles will resume on July 27th on an allocated basis as mandated by US Treasury Secretary, Jack Lew.

US Mint to Resume Silver Eagle Sales July 27
http://www.kitco.com/news/2015-07-17/U-S-Mint-To-Restart-Silver-Sales-July-27-Gold-Demand-Remains-Strong.html

Silver bullion investors will have to wait one more week to buy more 2015 U.S. American Eagle Silver coins from the U.S. Mint.

Friday, the U.S. Mint said announced that it would resume sales of their popular silver coin, on an allocated basis, July 27.

The mint sold out of its American eagle coins July 7 after silver prices dropped below $15 an ounce, creating “significant demand” for the bullion coins. According to sales data compiled by the mint, more than 2.7 million silver coins have been sold in July, completely surpassing sales of 1.98 million coins in 2014. For the year, the mint has sold more than 24.5 million silver coins.

The mint’s sales data also shows strong demand for gold bullion coins. The mint has seen its busy month since April 2013 in only the first few weeks of July. The data shows that so far the mint has sold a total of 101,000 ounces of gold so far this month. Last year the mint sold 30,000 ounces of gold for the entire July 2014.

END

So let me get this straight, the price of silver is plummeting and the demand for silver is going through the roof so much so that the US Treasury Secretary, Jack Lew, found it necessary to halt the production (ie demand) for the #1 use of retail physical silver. His other choice, and the one that is mandated by the Bullion Coin Act of 1985, was to continue purchasing silver blanks to fill demand even though it may drive the price of silver much higher.

BY DEFINITION: US Treasury Secretary, Jack Lew, is artificially manipulating the silver market as his actions are meant to STOP the upward pressure on the price of silver and support the manipulation actions.

US Treasury Secretary, Jack Lew, should be charged for the illegal act of willfully manipulating the silver market!

The bright side of all this: Jack Lew is telegraphing just how long we should expect to see the silver price held down until the next leg up begins – July 27th!

Tick, tick, Tick.

May the Road you choose be the Right Road.

Bix Weir
www.RoadtoRoota.com

 

 

end

(courtesy Stephen Leeb/Egon Von Greyerz/Kingowrld news)

At KWN, China’s gold reserves announcement ridiculed by Leeb, von Greyerz, Maguire

Section:

11:34a ET Saturday, July 18, 2015

Dear Friend of GATA and Gold:

In interviews with King World News, fund managers Stephen Leeb and Egon von Greyerz and London metals trader Andrew Maguire ridicule Friday’s announcement by China about its gold reserves, which, they maintain, are much greater than announced. The interviews are posted here:

http://kingworldnews.com/andrew-maguire-egon-von-greyerz-and-stephen-lee…

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

end

(courtesy John Hathaway/Tocqueville Asset Management/GATA)

Tocqueville’s Hathaway summarizes and updates the gold suppression scheme

Section:

10:55a ET Saturday, July 18, 2015

Dear Friend of GATA and Gold:

In his new gold strategy letter, Tocqueville Asset Management’s senior portfolio manager, John Hathaway, updates and summarizes the central bank gold price suppression scheme, which is getting more obvious every day with the counterintuitive behavior of the markets.

Hathaway writes:

“We and others have commented at length about the contradictions between the markets for paper (synthetic) and physical gold. The declining price of paper gold quotes in NY and London doesn’t square with worldwide physical flows that reflect demand far in excess of mine production. It appears to us that gold positions traded in London and New York among bullion banks, high-frequency traders, hedge funds, and commodity traders constitute highly levered derivatives with only distant and notional relationships to the physical substance. The power of synthetic gold markets (COMEX in New York and over-the-counter in London, in conjunction with the London Bullion Market Association fix) to determine gold prices could start to ebb as physical gold migrates to Asian financial centers.

“China has built an institutional infrastructure in the form of the Shanghai Gold Exchange, shortly to be merged with the Hong Kong Gold Exchange, which will facilitate settlement of international transactions in physical, not synthetic, gold, as described by Yao Yudong in his recent LBMA presentation. We expect an increasing percentage of gold transactions to be denominated in renminbi.

“The well-documented disappearance of bullion from Western vaults may mean that credit required for transactions in synthetic gold — that is, some sort of claim on underlying physical gold — will become increasingly difficult to obtain. …

“Evidence of possible stress on this system of credit links between physical gold and derivatives may have been revealed by the first-quarter Office of the Comptroller of the Currency (OCC) report, which showed that JPMorgan’s commodities derivative contracts (less than one year) exploded from $131 million to $3.8 trillion in just one quarter — a staggering and unprecedented change.

“The mystery deepens because the OCC for the first time inexplicably obfuscated the reporting categories by eliminating the separate, long-standing category (at least 10 years) for gold by including it together with foreign exchange. This curious retreat from transparency by the OCC suggests to us attempted deception. By whom and for what reasons we can only speculate.

“For our part, it makes us wonder whether we are witnessing the final moments of a second, more sophisticated version of the 1960s London Gold Pool (the ‘Gold Pool’), a scheme organized by the U.S. and European governments to suppress the free-market gold price to camouflage the growing adverse fundamentals for the U.S. dollar. …

“A bit of history is instructive here: The collapse of the 1960s Gold Pool, the aforementioned secret and collusive effort by seven central banks to keep a lid on the gold price, preceded a most difficult decade for financial assets. A lesson to be learned from the 1960s is the unpredictability of government actions, their inherently anti-free-market nature, and the unintended consequences that can arise from them.

“The Gold Pool was, in retrospect, a clumsy attempt by Western democracies to disguise the deteriorating fundamentals of the U.S. dollar stemming from the Vietnam War, rising inflation, and the weakening balance of payments. The dollar had been pegged to gold at $35/ounce since the end of World War II, a number that proved too low in light of the changing fiscal realities for U.S. sovereign credit caused by the escalation of the Vietnam War and the introduction of large scale welfare policies under the umbrella of the Johnson administration’s ‘Great Society’ initiative.

“In retrospect, the scheme was clumsy because the manipulation of the gold price was accomplished by the exchange of physical gold for dollars held by foreign creditors who saw the writing on the wall. The objective of the Gold Pool was to disguise reality. In the long run, that price-suppression scheme did not work. The failure of the Gold Pool of course was resolved by the suspension of dollar/gold convertibility in 1971. When free-market gold trading resumed in 1974, the gold price rose by nearly 20 fold over the next eight years.

“The present-day magnitude of fiscal and monetary irresponsibility in our view exceeds the precedent of the 1960s by multiples. It is only fitting that the elaboration and complexity of disguise required to beautify the underlying realities would be proportional. Government intervention via price suppression (interest rates, currencies) or price inflation (financial assets) seems to pervade all financial markets. Why should gold be exempt?

“At some basic level, all investors are aware of the gold price. Unruly behavior by the metal could render the ‘Truman Show’ dysfunctional. Allowing free-market expression of gold prices may have been seen as a serious risk at the highest policy levels. The strong rise of the gold price amidst liberal doses of QE post-2008 through 2011 would have been a note discordant with an otherwise happy fable. Gold strength might confirm what many investors suspect: QE and ZIRP have failed to produce economic growth and may well have jeopardized future prospects for a return to solid economic footing.

“We hypothesize that, having learned from the misadventures of the 1960s, the policy elites, well-versed in the practice of financial engineering and market manipulation, would have seen no need to dump stocks of government gold reserves onto the market, 1960s style, to keep the price in check. Instead, synthetic gold, sourced in pyramids of credit extended to bullion bankers by central banks with little or no claim on physical substance, have provided a more efficient, better-camouflaged form of intervention. COMEX synthetic gold and related over-the-counter derivatives are traded in macro strategies implemented by hedge funds, high-frequency trades, and commodity funds in pair trades with interest-rate, currencies, equity futures, or even more exotic offsets. The volumes traded are huge, and bear little resemblance to actual flows of physical metal.

“We suspect that shorting gold has come to seem like a riskless proposition as long as there is confidence in the Fed. Synthetic gold is the perfect substance for a carry trade: an easy borrow with very low carrying cost and little upside basis risk. Such a hypothesis, in our opinion, does much to explain the incongruity of a declining gold price while fundamentals for paper currency, and the U.S. dollar in particular, obviously deteriorate; while demand for physical gold has exceeded new mine supply for several years running; and while above-ground 400-ounce .995-gold bars located in London, New York, and other financial capitals (in cohabitation with speculative trading activity in paper markets) have steadily dwindled and disappeared into Asian financial centers reformulated as .9999 kilo bars.”

Hathaway’s letter is posted at the Tocqueville Internet site here:

http://tocqueville.com/insights/tocqueville-gold-strategy-2Q15-partII

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

end

 

Sunday night: Flash crash on gold

Gold, Precious Metals Flash Crash Following $2.7 Billion Notional Dump

The last time gold plummeted by just over $30 per ounce (dragging down silver and bitcoin with it) and resulted in a crash so furious it led to a “Velocity Logic” market halt for 10 seconds, was in February 2014. Many said this was just perfectly normal selling, although we explicitly said (and showed) that it was a clear case of an HFT algo gone wild (following an order to do just that and slam all sell stops) when someone manipulated the market and repriced gold substantially lower.

Precisely one month ago, some 18 months after the incident, the Comex admitted as much, when it blamed the collapse on “unusually large and atypical trading activity by several of the Firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 Gold Futures market and prompted a Velocity Logic event.” Curiously despite the “errant” order, gold did not rebound because the entire purpose of the selling slam was to reset the prevailing price far lower. This is what the Comex said in Disciplinary action 14-9807-BC:

Pursuant to an offer of settlement Mirus Futures LLC (“Mirus” or the “Firm”) presented at a hearing on June 16, 2015, in which Mirus neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over Mirus pursuant to Exchange Rule 418 and that on January 6, 2014, Mirus failed to adequately monitor the operation of its trading platform (Zenfire), and connectivity of its trading system (Zenfire) with Globex. This failure resulted in unusually large and atypical trading activity by several of the Firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 Gold Futures market and prompted a Velocity Logic event.

 

The Panel found that as a result, Mirus violated Rules 432.Q. (Conduct Detrimental to the Exchange) and 432.W.

We bring this up because moments ago, just before 9:30pm Eastern time or right as China opened for trading, gold (as well as platinum, silver, and virtually all precious metals) flashed crashed when “someone” sold $2.7 billion notional in gold, resulting in a 4.2% crash in gold, which tumbled to the lowest level since March 2010.

Gold:

 

Silver:

 

Platinum:

 

Once again, as in February 2014 and on various prior cases, the fact that someone meant to take out the entire bid stack reveals that this was not a normal order and price discovery was the last thing on the seller’s mind, but an intentional HFT-induced slam with one purpose: force the sell stops.

So what caused it?

The answer is probably irrelevant: it could be another HFT-orchestrated smash a la February 2014, or it could be the BIS’ gold and FX trading desk under Benoit Gilson, or it could be just a massive commodity fund unwind, or it could be simply Citigroup, which as we showed earlier this month has now captured the precious metals market via derivatives.

 

Whatever the reason, gold just had its biggest flash crash in nearly two years, as a targeted stop hunt launched by the dumping of $2.7 billion notional in product, accelerates the capitulation of the momentum buyers (and in this case sellers) pushing gold to a level not seen almost since 2009.

The price appears to have rebounded after the initial shock, up about $20 from the intraday low of $1,086 but we expect that to be retested shortly, and for gold to plunge further into triple digits, at which point gold miners will simply cease to produce the metal show all-in production costs are in the $1200 and higher range, at which point it will be clear that only derivatives and “paper” are in play.

But perhaps the biggest irony of the night is that moments before the flash crash, the PBOC revised its shocking Friday announcement revealing its gold holdings had increased by 57%. As Bloomberg said:

  • CHINA PBOC REVISES GOLD RESERVES TO 53.32M FINE TROY OUNCES

Previously, this was said to be 53.31 million ounces or 10,000 ounces lower, confirming China is just making up gold inventory “numbers” as it goes along, and clearly buying ever more physical while the price of paper precious metals conveniently plunge ever lower. One thing is certain: the PBOC will be quite grateful to whoever (or whatever) was the catalyst for the latest and greatest gold flash crash as well.

end

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

1 Chinese yuan vs USA dollar/yuan weakens to 6.2097/Shanghai bourse green and Hang Sang: red

2 Nikkei closed 

3. Europe stocks in the green /USA dollar index up to 97.97/Euro down to 1.0837

3b Japan 10 year bond yield: remains at 43% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.22

3c Nikkei still just above 20,000

3d USA/Yen rate now just above the 124 barrier this morning

3e WTI 50.80 and Brent:  56.99

3f Gold well down /Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .80 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate falls to 21.02%/Greek stocks this morning: stock exchange closed again/ still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield falls to: 11.34%

3k Gold at 1114.65 dollars/silver $14.82

3l USA vs Russian rouble; (Russian rouble down 1/5 in  roubles/dollar in value) 57.01,

3m oil into the 50 dollar handle for WTI and 56 handle for Brent/Saudi Arabia increases production to drive out competition.

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

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9619 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0431 well below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 4 year German bund remains in negative territory with the 10 year moving closer to negativity at +.80%

3s The ELA is still frozen today at 88.6 billion euros.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes and agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.34% early this morning. Thirty year rate above 3% at 3.07% / yield curve flatten/foreshadowing recession.

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

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

 

end

Futures Levitate After Greek Creditors Repay Themselves; Commodities Tumble To 13 Year Low

As we said in our Friday morning wrap, a low volume levitation coupled with a stronger dollar managed to lift stocks to yet another green close, while the Nasdaq soared to a new all time high on terrible breadth with decliners far outpacing advancers however it was all about Google which added in value more than the market cap of about 80% of S&P companies.

The dollar’s resumed strength means corporate revenues are about to slide again, confirming the revenue recession that the S&P has found itself will last a long time. However, judging by recent non-GAAP revenue numbers, the algos will gladly ignore the 2-3% recurring decline in top-line number because USD strength is expected to be “one-time” non-recurring which is somewhat of a paradox in a world in which, according to economists, the Fed is poised to hike rates as soon as September.

Today’s action is so far an exact replica of Friday’s zero-volume ES overnight levitation higher (even if Europe’s derivatives market, the EUREX exchange, did break at the open for good measure leading to a delayed market open just to make sure nobody sells) with the “catalyst” today being the official Greek repayment to both the ECB and the IMF which will use up €6.8 billion of the €7.2 billion bridge loan the EU just handed over Athens so it can immediately repay its creditors. In other words, Greek creditors including the ECB, just repaid themselves once again.

One thing which is not “one-time” or “non-recurring” is the total collapse in commodities, which after last night’s precious metals flash crash has sent the Bloomberg commodity complex to a 13 year low.

Finally, of the notable overnight items, when Chinese stocks swooned following comments in Caijing that China’s plunge protection vehicle, the CSF, is studying an exit plan for the stock stabilization plan, China’s Securities Regulatory Commission had no choice but to immediately come out and deny this, which it did: shortly before the Chinese close, the CSRC said it would “continue to focus on stabilizing market and preventing systemic risks.” As a result, the early weakness was BTFDed, and Chinese stocks closed just off intraday highs, up 0.88% to 3,992.

The re-opening of Greek banks after being shut for 3 weeks amid the fall-out between Greece and its creditors failed to spur volatility, with stocks opening up the week in a very muted and contained price action (Euro Stoxx: +1.1%) . More so, the delayed open by EUREX exchange did little to anguish market participants, as the absence of any new pertinent macroeconomic news-flow did little to provide an incentive for sharp moves. As a result, stocks are seen broadly higher, with information tech and energy sectors leading the gains.

At the same time Bunds edged lower, with peripheral bond yield spreads also tighter, albeit marginally as market participants reacted to the re-opening of Greek banks , as well as source comments suggesting that Greece have given the order to make the EUR 6.8bIn repayment to its creditors.

Asian equities shrugged off the positive lead from Wall Street , which saw the NASDAQ-100 hit fresh record highs following a slew of strong earnings from large tech names including Intel and Google . ASX 200 (+0.3%) initially fell amid weakness in miners after the slump in commodity prices, before paring the move late in the session. Shanghai Comp (+0.9%) fluctuated between gains and losses with the index having briefly broke above 4,000, with Chinese property prices over the weekend showing a 2nd consecutive monthly increase, while Y/Y figures continued to decline albeit at a slower pace . Finally markets in Japan remained closed due to Marine day holiday.

In FX, EUR/USD edged higher, with the 1-month implied volatility falling to its lowest level since March , supporting other EUR related crosses such as EUR/JPY and EUR/GBP, which in turn saw GBP/USD move through the 50DMA to the downside. The apparent risk on sentiment meant that EUR/CHF remained bid since the open, while USD/JPY grinded to its higher level since 24th June.

In commodities, the most notable move was the previously noted Gold flash crash which trades lower, albeit off the overnight lows where prices fell by as much as USD 43/oz in a minute to hit the lowest level since March’10. Some analysts noted that the move was exacerbated by stops being tripped on the break of last week’s lows and through USD 1100 which was also the lowest in 5 years . For a summary of the selling seen in Gold please click here. Elsewhere in the metals complex Platinum fell below USD 1000/oz for the first time since February 2009 while analysts at Goldman Sachs have said that they are still extremely bearish on copper and consider the current nickel price as an opportunity to buy or hedge. The energy markets trades relatively range bound amid light news flow, with Brent underperforming WTI amid concerns over increasing Iranian crude supplies.

Going forward, the ongoing earnings reporting season will regain the focus, with the attention centred on IBM and Morgan Stanley.

In summary: European shares rise with the tech and health care sectors outperforming and basic resources, media underperforming. Greece gave order to repay EU6.8b to creditors after last week’s tentative bailout deal as Greek banks reopened. Gold drops, dollar trades near a 3-month high versus euro. The Italian and Swedish markets are the best-performing larger bourses, U.K. the worst. The euro is little changed against the dollar. Irish 10yr bond yields fall; French yields decline. Commodities decline, with gold, natural gas underperforming and WTI crude outperforming.

Market Wrap

  • S&P 500 futures up 0.1% to 2121.5
  • Stoxx 600 up 0.6% to 408.1
  • US 10Yr yield little changed at 2.35%
  • German 10Yr yield down 3bps to 0.76%
  • MSCI Asia Pacific down 0.3% to 144.2
  • Gold spot down 1.9% to $1112.5/oz
  • 18 out of 19 Stoxx 600 sectors rise; tech, health care outperform, basic resources, media underperform
  • Asian stocks fall with the Shanghai Composite outperforming and the Kospi underperforming; MSCI Asia Pacific down 0.3% to 144.2
  • Nikkei closed, Hang Seng down 0%, Kospi down 0.2%, Shanghai Composite up 0.9%, ASX up 0.3%, Sensex down 0.2%
  • Euro up 0.07% to $1.0838
  • Dollar Index up 0.13% to 97.99
  • Italian 10Yr yield down 6bps to 1.86%
  • Spanish 10Yr yield down 6bps to 1.88%
  • French 10Yr yield down 4bps to 1.03%
  • S&P GSCI Index down 0.7% to 401.8
  • Brent Futures down 0.8% to $56.6/bbl, WTI Futures down 0.3% to $50.7/bbl
  • LME 3m Copper down 0.5% to $5455/MT
  • LME 3m Nickel down 0.4% to $11450/MT
  • Wheat futures down 1.4% to 546 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • Gold trades lower, albeit off the overnight lows where prices fell by as much as USD 43/oz in a minute to hit the lowest level since March’10.
  • The re-opening of Greek banks after being shut for 3 weeks amid the fall-out between Greece and its creditors failed to spur volatility, with stocks opening up the week in a very muted and contained price action.
  • Going forward, the ongoing earnings reporting season will regain the focus, with the attention centred on IBM and Morgan Stanley.
  • Treasury curve little changed in overnight trading, today offers no economic data nor Fed speakers ahead of next week’s FOMC meeting; 3M and 6M bill auctions today; Japan closed for Marine Day.
  • Greece gave the order to repay €6.8b ($7.4b) to creditors after last week’s tentative bailout deal, the Finance Ministry said, as Greek banks reopened
  • BlackRock, which oversees about $4.7t, bought Greek debt last week, benefiting from prices that were overly depressed by investor concern that the nation would struggle to implement requirements of its latest bailout deal
  • Barclays is considering deeper job cuts that could see its workforce shrink by about a quarter over the coming years, said a person with knowledge of the matter
  • Job vacancies in London’s financial services industry jumped 56% in June, reversing a drop in the previous month, led by compliance hiring, a survey showed
  • The business of financing China’s trade is shrinking, curbing what had been a fast-growing revenue stream for banks in Hong Kong and Singapore over the past decade
  • A fifth of China’s stock market remains frozen as 576 companies were suspended on mainland exchanges as of the midday break on Monday, equivalent to 20% of total listings, and down from 635 at the close on Friday
  • Gold fell to the lowest level in more than five years on the outlook for higher U.S. interest rates and as China said it held less of the metal in reserves than some analysts forecast
  • Gold pared losses amid speculation the sudden slump in prices in morning trade in Asia was driven by larger- than-usual volumes being sold in China and New York
  • Sovereign 10Y bond yields mostly lower. European stocks rise, China drops and Japan closed for Marine Day, U.S. equity- index futures rises. Crude oil, copper and gold fall

US Event Calendar

  • No major reports

DB’s Jim Reid completes the overnight summary

After three successive Sundays spent ruminating about Greece, it felt like there was a big void in my life yesterday. A very heavy England loss in the cricket deepened it. Given that the last three Sunday evenings had been spent working, I offered my wife her choice of how we spent last night. She suggested I cook dinner and we watch “Fifty Shades of Grey”. All I can say is that it was a terrible movie and that I longed for a Greece conference call to distract me. I nearly tried to invent a fake one!

Talking of Greece, the banks re-open today for the first time in three weeks. Greece is unlikely to be a huge macro influence now for a couple of months but events like this are certainly worth keeping an eye on to assess the likelihood of future progress or lack of it. Aside from the banks we also heard from German Chancellor Merkel who suggested that it would be possible to discuss Greek debt relief through extending maturities once the ESM deal has been negotiated, but she once again reiterated the ruling out of any haircuts. Merkel also dismissed any suggestions of a dispute with German Finance Minister Schaeuble who had said in a Der Spiegel interview over the weekend that the two had differences, although he downplayed any talks of a potential resignation. Meanwhile, late on Friday we also saw Greek PM Tsipras announce a cabinet reshuffle as largely expected, replacing various members of the Syriza party who had previously opposed the proposals at the parliamentary vote last week, including the more outspoken Left Platform faction leader Lafazanis.

Looking at how markets have kicked off the week in Asia this morning, as well as most equity bourses starting on a soft-ish note Gold (-2.26%) has taken a steep leg lower to a five-year low of $1109/oz after a report out of the PBoC on Friday shedding light on the amount of reserves China was holding. Despite a 60% rise relative to the last report in 2009, the amount of reserves have seemingly disappointed the market relative to expectations with bullion at once stage falling nearly 5% this morning. The tumble follows a 1% fall on Friday. Elsewhere the Dollar index is +0.2% in early trading while equity bourses are mostly trading down. In China the Shanghai Comp (-0.43%) and CSI 300 (-0.93%) have reversed earlier gains, while the Shenzhen (+0.12%) is fluctuating between gains and losses with 633 companies (around 22% of listings) still suspended from trading on the mainland exchanges. The Hang Seng (-0.24%) and Kospi (-0.25%) are also down while bourses in Japan are closed for a public holiday. Asia credit is unchanged this morning.

Back to Friday, it was a reasonably quiet day on the whole in markets with investors seemingly taking something of a breather following the Greece and China driven moves of the last few weeks. In the US the S&P 500 closed +0.11%, although this hid what was largely broad based declines with all sectors closing in negative territory aside from tech stocks which benefited from a 16% rally for Google following Thursday’s post market close earnings report. This helped support the NASDAQ (+0.91%) which extended its recent record high while the Dow (-0.19%) finished a touch lower. The Dollar benefited from a post-CPI print boost with the Dollar index finishing +0.20% having initially traded lower on Friday to close out a solid week (+1.91%). Just on the data, the June headline (+0.3% mom) and core (+0.2% mom) both came in as expected, helping to lift the annualized rates to +0.1% yoy and 1.8% yoy respectively, a 0.1% increase for both relative to May. A decent lift in shelter costs during the month was cited as contributing significantly to the month’s print, while the 6-month annualized core print of 2.3% is now the highest since January 2012.

Elsewhere on the data front, housing starts (+9.8% mom vs. +6.7% expected) and building permits (+7.4% vs. -8.0% expected) for June both came in well ahead of expectations with the latter in particular rising to a 8-year high on an annualized basis although the expiring tax abatement program in the Northeast has been a large reason for the recent surge in permits. The preliminary University of Michigan reading for July was slightly disappointing however, falling 2.8pts to 93.3 (vs. 96.0 expected). Declines were fairly evenly split across the current conditions (-2.9pts to 106.0) and expectations (-2.6pts to 85.2) surveys although we did see +0.1% increases for the 1yr (+2.8%) and 5-10yr (+2.7%) inflation expectations surveys. 10yr Treasuries closed virtually unchanged on the day at 2.348% having traded in a tight range.
There was an equally subdued feeling to trading in European markets on Friday. The Stoxx 600 saw a modest +0.06% gain to help cap a 4.3% return for the week, while regionally it was reasonably mixed with the CAC (+0.06%) up but with declines for the DAX (-0.37%), IBEX (-0.26%) and FTSE MIB (-0.07%). Despite no data in the region, bond yields declined with 10y Bunds closing 4.4bps lower at 0.786% while Italy (-7.0bps), Spain (-4.8bps) and Portugal (-4.1bps) were all led lower with also a decline in yields across the Greek curve.

Elsewhere, with Greek headlines abating, some of that focus is now turning to Ukraine where the FT is reporting that the nation has extended talks with creditors amid precautions that the country could default as soon as Friday if no agreement is reached. A joint statement issued last week suggested that progress has been made, however a deal to restructure Ukraine’s $70bn debt load has still yet to have been reached. The FT is reporting that Ukraine is looking for a 40% haircut on bonds in order to make the debt load sustainable, however the group of four creditors, much like the Greek situation, continue to insist that a haircut is not needed and instead have proposed maturity extensions and coupon reductions. One to keep an eye on for now.

Taking a look at this week’s calendar. With no data due in the US it’s a reasonably quiet start to proceedings today with just German PPI for June the only notable release. Tuesday starts in Japan where we get the Conference Board leading index before we turn over to the UK where we get public sector net borrowing data. It’s quiet once again in the US tomorrow with no data due. We kick off the Asia session on Wednesday with the June Conference Board leading indicator out of China. French business and manufacturing confidence and Italian industrial orders follow before we get the Bank of England minutes. In the US on Wednesday we’ve got existing home sales for June along with the FHFA house price index due. Turning to Thursday, Japan trade data will be closely watched in the morning while we get UK retail sales and Euro area consumer confidence closer to home. Initial jobless claims, Chicago Fed National activity index, Conference Board leading indicator and the Kansas City Fed manufacturing activity print are all due in the US. We end the week on Friday with the flash July PMI indicators for the Euro area as well as regionally in Germany and France. Meanwhile in the US we conclude the week with new home sales for June as well the flash manufacturing PMI for July. With a fairly quiet calendar for data, there will be much focus on earnings where we see 131 S&P 500 companies reporting this week including Apple, Microsoft, Amazon, Verizon, AT&T and Coca-Cola.

end

The huge losses in the stock market is having a devastating effect on the Chinese property market as we are witnessing massive cancellations on property deals:

 

China Stock Rout “Rocks” Property Market: “Massive” Cancellations Expected

To be sure, we’ve had our fair share of laughs at the expense of China’s newly-minted day traders.

Back in March, Bloomberg highlighted a study which suggested that some 31% of new investors in China’s equity markets had an elementary school education or less. Shortly thereafter, we began to look at data from the China Securities Depository and Clearing Co which showed that millions of new stock trading accounts were being created in China every single month. Once reports began to come in from the front lines of China’s inexorable equity rally, it became clear that (to say the least) not everyone pouring money into the SHCOMP and The Shenzhen was what you might call a “seasoned” investor.

From there, all it took was the suggestion from Bloombergthat in some cases, Chinese housewives had traded in the crochet kit for technical analysis and the race was on to see who could come up with the most entertaining characterization of China’s day trading hordes. Although the mainstream media has been careful not to be terribly explicit in their ridicule, the increasingly hilarious pictures of bemused Chinese grandmas staring at ticker tapes that have appeared atop WSJ and Reuters articles betray the fact that everyone, everywhere sees the humor in a multi-trillion dollar stock bubble driven by margin-trading hairdressers.

Admittedly, all of the above was even more amusing on days when Chinese stocks closed red, as it became quickly apparent that many Chinese investors might not have fully appreciated the fact that stocks can go down as well as up.

In the good old days of the China stock rally (so, around two months ago), down days were few and far between and the outright confusion that reigned in the wake of a rare close lower served as a much needed comic interlude for the slow motion train wreck unfolding in the Aegean and, on the weekends, at various Euro summits.

However, once the unwind began in China’s CNY1 trillion backdoor margin lending channels, we couldn’t help but feel slightly sorry for the millions of Chinese who quickly went from bewildered to dejected after watching their life savings evaporate over the course of a brutal three week sell-off that totaled more than 30% on some exchanges.

Due to significant retail participation and due to the fact that the equity mania had served as a distraction for a nation coping with decelerating economic growth and a bursting property bubble, some (and we were among the first) began to suggest that the broader economy, and indeed, social stability, may be at risk in China if stocks continued to fall.

The extent to which this suggestion represented a real concern (as opposed to the ravings of a tin foil hat fringe blog) was underscored by the extraordinary measuresChina adopted in a desperate attempt to stop the bleeding and later by several sellside strategists who began to warn about possible spillovers into the real economy.

Now, with Beijing still struggling to restore the stock bubble, the first signs of knock-on effects are beginning to emerge. Here’s Nikkei with more:

Turbulence on China’s equity market is starting to rock the country’s property market. Investors are quickly pulling their cash out of housing they purchased to cover losses incurred by stock investments. Some have begun offering discounts on property due to difficulties with finding buyers. Continued turmoil on the stock market looks as though it will have a heavy impact on the country’s real estate market.

 

China’s stock market rally also helped drive up sales of domestic homes. The Shanghai Composite Index surged 60% from its low of around 3,200 in early March, rising to 5,166 logged on June 12. China Securities Depository and Clearing said that the number of accounts opened to trade yuan-denominated A-shares reached 980,000 in May in Shenzhen, where property prices are climbing faster than other areas. The figure accounted for roughly 80% of the total 1170,000 accounts in Guangdong Province, where large numbers of such account holders reside.

 

Many newbie investors, who have just jumped into the stock market, likely gave a fresh impetus to the property market.China’s share price upswing prompted investors to reach out for new investments, including houses and other properties. A property analyst at major Chinese brokerage Guotai Junan Securities said that sales of luxury properties worth over 10 million yuan ($1.61 million) each for the first half of the year topped annual sales last year in Shanghai and Beijing.

 

After this, Chinese stocks began to crumble. In early July, the Shanghai Composite Index dropped more than 30%, after hitting a seven-year high in mid-June. Investors who suffered big losses on the stock market were forced to sell property and cancel real estate purchase agreements. The Hong Kong Economic Times said that consumers are increasingly asking real estate firms for grace periods on down payments for mortgage loans, as they run out of cash because of weak stocks.

 

Some canceled home purchase contracts, while others canceled mortgage loans,according to China’s largest property developer China Vanke, which has a strong foothold in Shenzhen. Local media reported that an official at China Vanke is concerned about massive numbers of cancellations in the future.

So no, the damage isn’t “contained” and indeed it’s somewhat ironic that the first place the contagion is showing up is in China’s property market. What’s particularly interesting here is that one argument for why the collapse of China’s equity bubble would not spill over into the real economy revolved around the fact that the majority of Chinese household wealth is concentrated in real estate. “Ultimately, we think the impact of the sell-off in Chinese equities on the real economy will be relatively limited. This is because equities are only 10% of household wealth (at peak; just over 5% at the turn of the year),” Credit Suisse noted last week.

If, however, what Nikkei says about the knock-on effect in property is true, it could put further pressure on an already fragile housing market. On that note, we’ll close with the following excerpt which is, ironically, from the same Credit Suisse note cited above.

 
 

House prices are now falling at a record annual rate – the first time they have fallen without it being policy induced. With housing accounting for just over half of total household assets, the negative wealth impact could be significant.

 

end

 

Greek banks are now set to open as Tsipras’s new cabinet takes over. However capital controls will still be in place.  The only difference is that if a depositor misses a day they can make it up the following day. Greeks are allowed to withdraw only 60 euros per day or 420 euros per week.  The citizens are not happy campers.

(courtesy Bloomberg/Chrepa)

Greek Banks to Reopen as Tsipras’s New Cabinet Takes Over

Greek banks will reopen on Monday as Prime Minister Alexis Tsipras rebuilds his government to shore up support for a bailout agreed upon with the country’s creditors.

The banks, which have remained closed since June 29, will open July 20, the government said on Saturday. Most capital controls concerning withdrawals and money transfers will remain, and while the daily limit was held at 60 euros ($65), a cumulative limit of 420 euros a week was set, it said.

Lenders will reopen a week after Tsipras and creditors agreed to a bailout program and Greek lawmakers approved legislation needed to release funding for the country. Hours after the vote, the European Central Bank approved emergency financing for the country’s lenders and the European Union finalized a bridge loan on Friday to provide a stop-gap until a full three-year rescue program, worth as much as 86 billion euros, is settled.

“This will improve the image of the economy for Greeks inside the country,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “It’s just the beginning and a more ambitious option wasn’t possible.”

The prime minister’s office said Panagiotis Skourletis will replace Panagiotis Lafazanis, who heads the Left Platform fraction of Tsipras’s Syriza party, as energy minister. George Katrougalos will succeed Skourletis as labor minister. Nadia Valavani, Dimitris Stratoulis, Kostas Isichos and Nikos Chountis, who also, as Lafazanis, voted against the legislation, were removed from the government.

Held Hostage

Following Thursday’s vote, Tsipras told his associates that he would be forced to lead a minority government until a final deal with creditors is concluded. In all, 64 of the parliament’s 300 lawmakers voted against the bill. Half of the “no” votes came from Syriza, including former Finance Minister Yanis Varoufakis.

Tsipras is “being held hostage by both his lawmakers, who refuse to vote for the measures, and by the opposition, whose support he needs to pass the measures through parliament,” Hatzis said. “The only way out is elections.” His new government will probably last “a maximum of two months,” he said.

The German parliament also cleared the way for talks on a third bailout after Chancellor Angela Merkel warned that failing to try would be reckless and sow chaos. Finland’s parliament gave its approval Thursday, while Austrian lawmakers also backed negotiations.

“What we are witnessing is European solidarity in action,” Valdis Dombrovskis, EU Commission vice president for euro policy, said Friday. “This agreement backed by 28 European Union member states prevents Greece from an immediate default.”

end

Greeks Get First Look At Their Future: Long Bank Lines And Punishing Taxes

Although the details of Greece’s third bailout program have yet to be finalized, Monday marked the beginning of a new dawn for Greeks. Last week, PM Alexis Tsipras forced a set of draconian “reforms” through parliament and sacked political rivals, effectively legislating away the country’s sovereignty while condemning the Greek people to a fate of even tougher austerity and ensuring that despite rhetoric out of Athens, “normality” will not return to Greece for a very long time.

Greek banks reopened and as expected there were long lines. On the bright side, the queues were described as “orderly.” From AP:

In downtown Athens, people lined up in an orderly fashion as the banks unlocked their doors at 8 a.m., taking a number and reading the paper as they waited for their turn at the till.

 

Many restrictions on transactions, including cash withdrawals, remained, however.

 

The Greek government kept the daily cash withdrawal limit at 60 euros ($65) but added a weekly limit of 420 euros ($455) that will be available beginning Sunday. This means depositors who don’t make it to the bank on Monday to withdraw cash could pull out 120 euros ($130) on Tuesday instead, and so on, so Greeks don’t have to feel they need to visit an ATM every day.

 

Bank customers will still not be able to cash checks, only deposit them into their accounts, and they will not be able to get cash abroad with their credit or cash cards, only make purchases. There are also restrictions on opening new accounts or activating dormant ones.

 

 

 

 

Meanwhile, the VAT hike – one of the most contentious “red lines” from Greece’s negotiations with creditors – kicked in. The tax rose to 23% from 13% on everything from salt to firewood. Restaurants and taxi fares are also affected. Just call it an EMU member fee.

Additionally, Greece gave the go ahead for Europe to pay itself back for previous loans to Athens. Over the weekend, the country received an EFSM bridge loan for €7 billion – €6.8 billion was used on Monday to repay creditors, including the ECB. As noted on Sunday, “now that a new circular funding scheme has been devised that will allow Greece to make a €3.5 billion (€4.2 billion with interest) payment to Mario Draghi on Monday, the ELA liquidity drip can continue.

As for the possibility that Greece could see its debt written down as part of a push by Brussels to appease the IMF (and by extension, the US Treasury), Angela Merkel looks to have driven the final nail in that coffin on Sunday. Here’s Bloomberg:

“A classic haircut — writing down 30 or 40 percent of the debt — this cannot happen in a currency union,” Merkel says in interview with German broadcaster ARD. “You can have it outside a currency union, but you can’t have it in a currency union.

 

“Part of the wish for Greece to remain in the euro area is that such a haircut is not possible,” Merkel says

 

Merkel says euro leaders will discuss extension of Greek debt maturities and easing interest rates “when the first successful assessment of the program being negotiated now is completed.”

 

“Exactly this question will be discussed then,” Merkel says on debt relief. “Not now, but then.”

In other words, there can be “re-profiling” (as suggested by the EU Commission), but there will be no writedown, and indeed Christine Lagarde seemed resigned to the impossibility of a haircut last week.

So that’s it – a rather depressing and anticlimactic end to the Syriza “revolution” and, by extension, to “hope” in Greece. More austerity is now the law and Athens is once again completely beholden to the German purse string.

But hey, at least there are no tanks in the streets.

 

end

Greece today in 9 charts:

(courtesy zero hedge)

Greece Is Now A Full-Blown Humanitarian Crisis – In 9 Charts

The people of Greece are facing further years of economic hardship following a Eurozone agreement over the terms of a third bailout. The deal included more tax rises and spending cuts, despite the Syriza government coming to power promising to end what it described as the “humiliation and pain” of austerity. With the country having already endured years of economic contraction since the global downturn, The BBC asks, justhow does Greece’s ordeal compare with other recessions and how have the lives of the country’s people been affected?

The long recession

It is now generally agreed that Greece has experienced an economic crisis on the scale of the US Great Depression of the 1930s.

According to the Greek government’s own figures, the economy first contracted in the final quarter of 2008 and – apart from some weak growth in 2014 – has been shrinking ever since. The recession has cut the size of the Greek economy by around a quarter, the largest contraction of an advanced economy since the 1950s.

Although the Greek recession has not been quite as deep as the Great Depression from peak to trough, it has gone on longer and many observers now believe Greek GDP will drop further in 2015.

Dwindling jobs

Jobs are increasingly difficult to come by in Greece – especially for the young. While a quarter of the population are out of work, youth unemployment is running much higher.

Half of those under 25 are out of work. In some regions of western Greece, the youth unemployment rate is well above 60%.

To make matters worse, long-term unemployment is at particularly high levels in Greece.

Being out of work for significant periods of time has severe consequences, according to a report by the European Parliament. The longer a person is unemployed, the less employable they become. Re-entering the workforce also becomes more difficult and more expensive.

Young people have been particularly affected by long-term unemployment: one out of three has been jobless for more than a year.

After two years out of work, the unemployed also lose their health insurance.

This persistent unemployment also means pension funds receive fewer contributions from the working population. As more Greeks are without jobs, more pensioners are having to sustain families on a reduced income.

According to the latest figures from the Greek government, 45% of pensioners receive monthly payments below the poverty line of €665.

Plummeting income

The Greek people are also facing dropping wages.

In the five years from 2008 to 2013, Greeks became on average 40% poorer, according to data from the country’s statistical agency analysed by Reuters. As well as job losses and wage cuts, the decline can also be explained by steep cuts in workers’ compensation and social benefits.

In 2014, disposable household income in Greece sunk to below 2003 levels.

Rising poverty

Like during all recessions, the poor and vulnerable have been hardest hit.

One in five Greeks are experiencing severe material deprivation, a figure that has nearly doubled since 2008.

Almost four million people living in Greece, more than a third of the country’s total population, were classed as being ‘at risk of poverty or social exclusion’ in 2014.

According to Dr Panos Tsakloglou, economist and professor at the Athens University of Economics and Business, the crisis has exposed Greece’s lack of social safety nets.

“The welfare state in Greece has historically been very weak, driven primarily by clientelistic calculations rather than an assessment of needs. In the past this was not really urgent because there were rarely any particularly explosive social conditions. The family was substituting the welfare state,” he told the BBC.

Typically, if a young person lost his or her job or could not find a job after graduating, they would receive support from the family until their situation improved.

But as more and more people have become jobless and with pensions slashed as part of the austerity imposed on Greece from its creditors, ordinary Greeks are feeling the impact.

“This has led to many more unemployed people falling into poverty much faster,” Dr Tsakloglou said.

Cuts to essential services

Healthcare is one of the public services that has been hit hardest by the crisis. An estimated 800,000 Greeks are without medical access due to a lack of insurance or poverty.

A 2014 report in the Lancet medical journal highlighted the devastating social and health consequences of the financial crisis and resulting austerity on the country’s population.

At a time of heightened demand, the report said, “the scale and speed of imposed change have constrained the capacity of the public health system to respond to the needs of the population”.

While a number of social initiatives and volunteer-led health clinics have emerged to ease the burden, many drug prevention and treatment centres and psychiatric clinics have been forced to close due to budget cuts.

HIV infections among injecting drug users rose from 15 in 2009 to 484 people in 2012.

Mental wellbeing

The crisis also appears to have taken its toll on people’s wellbeing.

Figures suggest that the prevalence of major depression almost trebled from 3% to 8% of the population in the three years to 2011, during the onset of the crisis.

While starting from a low initial figure, the suicide rate rose by 35% in Greece between 2010 and 2012, according to a study published in the British Medical Journal.

Researchers concluded that suicides among those of working age coincided with austerity measures.

Greece’s public and non-profit mental health service providers have been forced to scale back operations, shut down, or reduce staff, while plans for development of child psychiatric services have been abandoned.

Funding for mental health decreased by 20% between 2010 and 2011, and by a further 55% the following year.

The brain drain

Faced with the prospect of dwindling incomes or unemployment, many Greeks have been forced to look for work elsewhere. In the last five years, Greece’s population has declined, falling by about 400,000.

A 2013 study found that more than 120,000 professionals, including doctors, engineers and scientists, had left Greece since the start of the crisis in 2010.

A more recent European University Institute survey found that of those who emigrated, nine in 10 hold a university degree and more than 60% of those have a master’s degree, while 11% hold a PhD.

Foteini Ploumbi was in her early thirties when she lost her job as a warehouse supervisor in Athens after the owner could no longer afford to pay his staff.

After a year looking for a new job in Greece, she moved to the UK in 2013 and immediately found work as a business analyst in London.

“I had no choice but leave if I wanted to work, I had no prospect of employment in Greece. I would love to go back, my whole life is back there. But logic stops me from returning at the moment,” she said.

“In the UK, I can get by – I can’t even do that in Greece.”

end
Varoufakis slams the bailout no 3 as a huge macroeconomic disaster
(courtesy Y. Varoufakis/zero hedge)

Varoufakis Slams Bailout #3 As “Greatest Macroeconomic Disaster In History” While Tsipras “Doesn’t Eat Or Sleep”

In an rare convergence of Greek and German viewpoints, overnight former Greek finance minister Yanis Varoufakistold the BBC that “economic reforms imposed on his country by creditors are “going to fail”, ahead of talks on a huge bailout. At the same time, Germany’s most noted Eurosceptic, Hans-Werner Sinn, in an interview with the newspaper “Passauer Neue Presse” also earlier today warned that any new aid would be “totally worthless” and “would never come back.”

In what was practically a race who can find harsher terms to describe the Greek bailout, Varoufakis said that Greece was subject to a programme that will “go down in history as the greatest disaster of macroeconomic management ever”.

As reported yesterday, the German parliament approved the opening of negotiations of Greece’s third €86 billion bailout when it rushed to vote through a bridge loan to Greece so the insolvent nation had some funds to repay the ECB’s Monday debt maturity, as well as repay the roughly €2 billion for Greece is in default to the IMF. Of note was the jump in German MPs who voted “no” to 119 from just 32 in the February vote to extend the Greek bailout.

In a damning assessment, Varoufakis told the BBC’s Mark Lobel: “This programme is going to fail whoever undertakes its implementation.”

Asked how long that would take, he replied: “It has failed already.”

He also said Greek Prime Minister Alexis Tsipras, who has admitted that he does not believe in the bailout, had little option but to sign. “We were given a choice between being executed and capitulating. And he decided that capitulation was the ultimate strategy.”

Which also happens to be Varoufakis’ biggest failure: his strategy was accurate and his math was correct that to Europe a Grexit would be far more expensive than keeping Greece in the Euro, however Europe was just as accurate in realizing Greece has no Plan B for its banking system as Greece had never prepared either a plan for a parallel currency nor how to obtain Debtor in Possession funding, which is what a bankrupt Greece would need – ostensibly either from China or Russia – to fund it in the interim period in which it was ending its tumultuous relationship with Europe.

Understandably Greece did not want to push the Grexit line too hard for obvious reasons – it was all part of the “blame game” – however now that Germany itself has opened a Pandora’s box it can’t close ever again when it brought up the possibility of a temporary Grexit, Greece should most certainly prepare for the worst case the next time it has to rerun the entire bailout tragedy in 6-9 months, or perhaps sooner.

However, none of this will be Varoufakis’ problem any more – instead we hope his successor learns from Yanis’ mistakes. And speaking of his successors, late yesterday Tsipras has announced a cabinet reshuffle, sacking several ministers who voted against the reforms in parliament this week. But he opted not to bring in technocrats or opposition politicians as replacements.

As a result, it now seems that Tsipras will preside over ministers who, like himself, harbor serious doubts about the reform program. Which is why we truly hope they are prepared to implement the missing Plan B when the time comes next.

Finally, in what is perhaps the best anecdote about Greece right now, AFP reported that “embattled Greek Prime Minister Alexis Tsipras eats and sleeps poorly and rarely manages to see his family, his mother told a tabloid on Saturday.”

Alexis lately does not eat, does not sleep, but he has no choice — he has a debt to the people who put their faith in him,” Aristi Tsipras, 73, told Parapolitika weekly.

“I rarely see him any more. He goes from the airport straight to parliament. He has no time to see his children, how can he see me?” Aristi Tsipras said.

“When we speak, I tell him to do the best for the country and take care of himself. He tells me not to worry, and that everything will be fine,” she said.

Unfortunately it won’t be, however that will only be revealed when not only the PM can “no longer eat or sleep”, but the entire country of Greece, too.

end

 

The following is a must read:   was Greece in 2009 set up to take the huge bailout on the road to failure.

you decide with the data:

 

(courtesy Raul Meijer)

Was Greece Set Up To Fail?

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

An entire economy is being deliberately suffocated, and all in all it’s just total madness. Quiet madness, though (update: and then the riots broke out..).

Two things I’ve been repeatedly asked to convey to you are that:

1) you can’t trust any Greek poll or media, because the media are so skewed to one side of the political spectrum, and that side is not SYRIZA (can you imagine any other country where almost all the media are against the government, tell outright lies, use any trick in and outside the book, and the government still gets massive public support?!),

 

and:

 

2) Athens is the safest city on the planet.I can fully attest to that. Not one single moment of even a hint of a threat, and that in a city that feels very much under siege (don’t underestimate that). And people should come here, and thereby support the country’s economy. Don’t go to Spain or France this year, go to Greece. Europe is trying to blow this country up; don’t allow them to.

*  *  *  *

Then: I was reminded of something a few days ago that has me thinking -all over- ever since. That is, to what extent has Greece simply been a set-up, and a lab rat, for years now? I’m not sure I can get to the bottom of this all in one go, but maybe I don’t have to either. Maybe the details will fill themselves in as we go along.

One Daniel Neun wrote on Twitter, in German, translation mine, that:

Greece’s 2009 deficit was retroactively manipulated upward through a collaboration of the EU, IMF, PASOK, Eurostat (EU statistics bureau) and Elstat (Greek statistics bureau). That is the only reason why interest rates on Greek sovereign bonds skyrocketed in the markets, which in turn made Greek debt levels skyrocket.

The political and media narrative has consistently been that Greece “unexpectedly” and “all of a sudden” in late 2009, when a new government came in, was “found out” to have much higher debt levels than “previously thought”. And then had to appeal for a massive bailout. Obviously, Neun’s version is quite different. His doesn’t look like just another wild assumption, since he names a few sources, among which this from Kathimerini dated January 22, 2013:

Greece’s Statistics Chief Faces Charges Over Claims Of Inflated 2009 Deficit Figure

The head of Greece’s statistics service, Andreas Georgiou, and two board members at the Hellenic Statistical Authority (ELSTAT) are to face felony charges regarding the alleged manipulation of the country’s deficit figure in 2009.

 

Financial prosecutors Spyros Mouzakitis and Grigoris Peponis have asked a special magistrate who deals with corruption issues to investigate whether claims that Georgiou, the head of the national accounts department Constantinos Morfetas and the head of statistical research, Aspasia Xenaki, were responsible for massaging the figures so that Greece’s deficit appeared larger than it actually was, triggering Athens’s appeal for a bailout.

 

The three face charges of dereliction of duty and making false statements. Ex-ELSTAT official Zoe Georganta caused a storm in 2011 when she accused Georgiou of pumping up Greece’s deficit to over 15% of GDP, which was more than three times higher than the government had forecast in 2009.

 

However, she told a panel of MPs last March that she knew of no organized plan behind this alleged manipulation of statistics, instead blaming the politicians that handled Greece’s passage to the EU-IMF bailout of “inexperience, inability or maybe some of them profited.” The former ELSTAT official claimed that the deficit for 2009 should have been 12.5% of GDP and could have easily been brought to below 10% with immediate measures.

As well as this from Greek Reporter dated June 18 2015:

The 2009 Deficit Was Artificially Inflated, Former ELSTAT Official Tells Greek Parliament

Greece’s deficit figures for 2009 and 2010 were deliberately and artificially inflated, and this was at least partly responsible for the imposition of bailouts and austerity programs on the country, a former vice president of the Hellenic Statistical Authority (ELSTAT), Nikos Logothetis, said.

 

Testifying before a Parliamentary Investigation Committee on examining and clarifying the conditions under which Greece entered its bailout programs and the accompanying Memorandums, Logothetis called ELSTAT president Andreas Georgiou a “Eurostat pawn” that had converted the statistics service into a “one-man show.” He also accused Georgiou of bending the rules and “using tricks” to bump up the deficit’s size.

 

“A lot of the criteria were violated in order to include public utilities in the deficits. The deficit was enlarged even more by the one-sided fiscal logic of ELSTAT president Andreas Georgiou. It should not have been above 10%. The ‘alchemy’ that was carried out demolished our credibility, drove spreads sky high and we were unable to borrow from the markets. The enlargement of the deficits legitimized the first Memorandum and justified the second for the implementation of odious measures,” Logothetis said.

 

Noting that this was the third time he was testifying, Logothetis pointed out that Georgiou’s practices had been questioned by himself and other ELSTAT board members (most prominently by Zoe Georganta) butGeorgiou had chosen to silence them so that the deficit figure was released only with his own approval and that of Eurostat.

 

Logothetis claimed that Georgiou had avoided meeting with ELSTAT’s board, even after Logothetis resigned, because the board’s majority would have questioned his actions. He also insisted that“centers” outside of Greece had played a role and needed someone on the “inside,”while he suggested that “someone wanted to bring the IMF into Europe.”

 

The former ELSTAT official said he was led to this conclusion by “seeing spreads rise as a result of the statistical figures until we reached a real enlargement of the deficits, violating the until-then not violated Eurostat criteria.”

A view from the ground was provided earlier today by my friend Dimitri Galanis in Athens when I asked him about this:

Let me help you a bit: September 2008 Wall Street crashes. For a whole year the whole planet is furious against TBTF banks and filthy rich bank CEOs. A year later – 2009 – the Deus ex machina – Georges Papandreou, then the newly elected Greek PM, “discovers” all of a sudden that Greek debt was bigger than everybody “imagined”.

The EU is “surprised” – Oh nobody knew!!! [everybody knew] Et voila: The Wall Street crisis becomes the Greek and Eurozone crisis. IMF gets a footing in the eurozone. Wall Street, French and German banks get bailed out. Greece suffers – Eurozone on the brink of collapse.

Greece is the tree – the rest is the forest .

And then I saw a piece by former US Secretary of Labor Robert Reich yesterday:

How Goldman Sachs Profited From the Greek Debt Crisis

The Greek debt crisis offers another illustration of Wall Street’s powers of persuasion and predation, although the Street is missing from most accounts. The crisis was exacerbated years ago by a deal with Goldman Sachs, engineered by Goldman’s current CEO, Lloyd Blankfein. Blankfein and his Goldman team helped Greece hide the true extent of its debt, and in the process almost doubled it.

 

And just as with the American subprime crisis, and the current plight of many American cities, Wall Street’s predatory lending played an important although little-recognized role. In 2001, Greece was looking for ways to disguise its mounting financial troubles. The Maastricht Treaty required all eurozone member states to show improvement in their public finances, but Greece was heading in the wrong direction.

 

Then Goldman Sachs came to the rescue, arranging a secret loan of €2.8 billion for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate. As a result, about 2% of Greece’s debt magically disappeared from its national accounts.

For its services, Goldman received a whopping €600 million, according to Spyros Papanicolaou, who took over from Sardelis in 2005. That came to about 12% of Goldman’s revenue from its giant trading and principal-investments unit in 2001—which posted record sales that year. The unit was run by Blankfein.

 

Then the deal turned sour. After the 9/11 attacks, bond yields plunged, resulting in a big loss for Greece because of the formula Goldman had used to compute the country’s debt repayments under the swap. By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from €2.8 billion to €5.1 billion.

 

In 2005, the deal was restructured and that €5.1 billion in debt locked in. Perhaps not incidentally, Mario Draghi, now head of the ECB and a major player in the current Greek drama, was then managing director of Goldman’s international division. Greece wasn’t the only sinner. Until 2008, EU accounting rules allowed member nations to manage their debt with so-called off-market rates in swaps, pushed by Goldman and other Wall Street banks.

 

In the late 1990s, JPMorgan enabled Italy to hide its debt by swapping currency at a favorable exchange rate, thereby committing Italy to future payments that didn’t appear on its national accounts as future liabilities. But Greece was in the worst shape, and Goldman was the biggest enabler.

 

Undoubtedly, Greece suffers from years of corruption and tax avoidance by its wealthy. But Goldman wasn’t an innocent bystander: It padded its profits by leveraging Greece to the hilt—along with much of the rest of the global economy. Other Wall Street banks did the same. When the bubble burst, all that leveraging pulled the world economy to its knees.

 

Even with the global economy reeling from Wall Street’s excesses, Goldman offered Greece another gimmick. In early November 2009, three months before the country’s debt crisis became global news, a Goldman team proposed a financial instrument that would push the debt from Greece’s healthcare system far into the future.

This time, though, Greece didn’t bite.

 

As we know, Wall Street got bailed out by American taxpayers. And in subsequent years, the banks became profitable again and repaid their bailout loans. Bank shares have gone through the roof. Goldman’s were trading at $53 a share in November 2008; they’re now worth over $200. Executives at Goldman and other Wall Street banks have enjoyed huge pay packages and promotions. Blankfein, now Goldman’s CEO, raked in $24 million last year alone.

 

Meanwhile, the people of Greece struggle to buy medicine and food.

Note: when Reich says that “..Goldman wasn’t an innocent bystander: It padded its profits by leveraging Greece to the hilt..”, he describes a tried and true Wall Street model. This is how investment firms like for instance Mitt Romney’s Bain Capital operate: take over a company, load it up with (leveraged) debt, strip its assets and then throw the debt-laden remaining skeleton back unto the public sphere. In this sense, the Troika and its Wall Street connections function as a kind of venture/vulture fund with regards to Greece. Nothing new, other than it’s never been perpetrated on a European Union country before.

So what do you think: was Greece set up to fail from at least 6 years ago, has it all been a coincidence, or did they maybe just get what they deserve?

Here’s a short timeline.

In October 2009, Papandreou becomes the new PM. Shortly thereafter, he “discovers” with the help of Elstat head Andreas Georgiou that the real Greek deficit is not the less than 5% the previous government had predicted, but more than 15%. Within months, salaries and pensions or cut or frozen and taxes are raised. That apparently doesn’t achieve the intended goals, so Papandreou asks for a bailout.

 

Within 10(!) days, ECB, EU and IMF (aka Troika) fork over €110 billion. The conditions the bailout comes with, cause the Greek economy to fall ever further. Moreover, everyone today can agree that no more than 10% of the €110 billion ever reaches Greece; the remainder goes to the banks that had lent it too much money to begin with.

 

The remaining investors -the big bailed out banks had fled by then- agree to a 50% haircut, with even more odious conditions for Greece. Papandreou wants a referendum over this and is unceremoniously removed. Technocrat Lucas Papademos is appointed his successor. As Athens literally burns in protest, a second bailout of €136 billion is pushed through. More and deeper austerity follows.

 

By now, a large segment of the population is unemployed, and pensions are a fraction of what they once were. In an economy that depends to a large extent on domestic consumption, there could hardly be a bigger disaster. Papademos must be replaced because he has no support left, and Samaras comes in.

 

He allegedly posts a budget surplus, but that is somewhat ironically only possible because the entire economy is no longer functioning. Greek debt-to-GDP rises fast. The Greek people this time revolt not by fighting in the streets, but by electing Syriza.

And that brings us back to January 25 2015. And eventually to Thursday, July 16 2015.

What have the bailouts achieved?Well, the Greek economy is doing worse than ever, and the people are poorer than ever. Both have a lot more bad ‘news’ to come. So says the latest bailout imposed on Tsipras at gunpoint.

To go back to 2009, if the Elstat people who testified -multiple times- before the Greek Parliament were right, there would have been either no need for a bailout, or perhaps a much smaller one. Which, crucially, would not have required IMF involvement.

It therefore doesn’t look at all unlikely that Greece was saddled with an artificially raised deficit, and that the intention behind that, all along, was to get the Troika ‘inside’ for the long run. So the country could be stripped of all its assets.

The bailouts needed to be as big as they were to 1) successfully make the international banks ‘whole’ that had lent as much as they had into the Greek economy, 2) get the IMF involved, 3) and absolve the notorious -and cooperative- domestic oligarchy from any pain. And make all the usual suspects a lot more money in the process.

The added benefit was that it was obvious from the start that the Greeks would never be able to pay the Troika back, and would be their debt slaves for as long as the latter wanted, giving up all their treasured possessions in the process.

Or, alternatively, it could all have been a terribly unfortunate coincidence. It would be a curious coincidence, though.

end

 

 

Kathimerini reveals what would have happened if Greece were to have it’s GREXIT:  civil war with tanks filling the streets;

 

 

(courtesy zero hedge)

 

“The Streets Of Athens Will Fill With Tanks”: Kathimerini Reveals Grexit “Black Book” Shocker

Over the course of six painful months, round after round of fraught negotiations between Greece and its creditors produced all manner of speculation about what a “Grexit” would actually entail.

With no precedent to turn to for guidance, mapping out the implications of an exit from the currency bloc was (and still is) a virtually impossible task, but the collective efforts of the sellside, the mainstream media, political analysts, and economists did manage to produce a veritable smorgasbord of diagrams, decision trees, flowcharts, and schematics, in a futile attempt to map the complex interplay of politics, economics, and financial concerns that would invariably follow if Athens decided to finally break off its ill-fated relationship with Brussels.

And it wasn’t just outside observers drawing up Grexit plans. Despite the fact that EU officials denied the existence of a “Plan B” right up until German FinMin Wolfgang Schaeuble’s “swift time-out” alternative was “leaked” last weekend, no one outside of polite eurocrat circles pretends that a Greek exit wasn’t contemplated all along and indeed Yanis Varoufakis contends that Athens was threatened with capital controls as early as February if it did not acquiesce to creditor demands.

Now, in what is perhaps the most shocking revelation yet about what EU officials really thought may happen in the event Greece crashed out of the EMU and unceremoniously reintroduced the drachma, Kathimerini is out with a description of what the Greek daily callsthe “Grexit Black Book,” which purportedly contained the suggestion that civil war would breakout in Greece in the event the country was forced out of the currency bloc.

Here’s more (Google translated):

On the 13th floor of the building Verlaymont in Brussels, a few meters from the office of the European Commission President, Jean-Claude Juncker, stored in a special security room and in a safe Greece’s exit plan from the Eurozone. There, in a multi-page volume, written in less than a month from 15-member team of the European Commission, answered questions on how to tackle such an outflow, including, as shocking as it may sound, even the possibility of the country out of the Treaty Schengen, and not only being driven outside the euro, but also outside the EU

 

According to European official, in that the European Commission Summit already had a bound volume, a multi-page document, which described the Greek prime minister, before the start of the session, by the same Mr. Juncker with all the details of a Grexit , giving him to understand the legal and political context of such a decision. In multipage document in accordance with European official who has the ability to know its contents, there are detailed answers to 200 questions that would arise in case Grexit.

 

These questions, as he explains official, are interrelated, as an exit from the euro would create a cascade of events, which would evolve in a relatively short time. From  the drachmopoiisi economy to foreign exchange controls that would take place at the country’s borders and which will ultimately lead at the exit of Greece from the Schengen Treaty.

 

The authors of the draft, according to European official, conducted under conditions of absolute secrecy. A special group of 15 people of the European Commission, by direct contact with Greece started to prepare, and was also in direct contact with a number of senior officials and DGs in the European Commission who had expertise in specific areas. The writing of the project started when the expiry date of the program (end of June) was approaching, so it is the Commission prepared for every eventuality, and by the time the referendum was announced, Friday, June 26, the relevant procedures were accelerated. The weekend of the work referendum intensified, so now two days later, Tuesday of that Synod, the project has been finalized.

 

According to well-informed source, involved in creating the plan worked “suffer the pain” as typically describe the “K” and “overwhelmed” because they could not believe that things had reached this point, and most of them had direct involvement with the Greek rescue programs. The European Commission also was hoped that even until the last minute solution would be found as members of this group knew better than anyone the consequences exit of Greece from the Eurozone and understand the cost of such a decision. One of those involved with direct knowledge of Greek reality in the critical phase of the training, he said the rest of the group that “if implemented this plan, the streets of Athens will sound tracks of tanks.”

Sight unseen, it’s not entirely clear what is meant by “will sound the tracks of tanks,” and we assume the suggestion is not that the EU and its constituent member states would somehow seek to orchestrate a military takeover of the Greek state in the event Athens makes the ‘wrong’ decision about EMU membership.

Rather, the suggestion seems to be – and again this is simply an interpretation based on the information presented by Kathimerini – that Brussels was of the opinion that the referendum results together with the divergent rhetoric emanating from Greek lawmakers on the right and far-left betrayed the degree to which the Greek people were deeply divided. Although Tsipras’ concessions will undoubtedly have far-reaching implications for politics and Greek society in general, it looks as though Brussels feared that the economic malaise that would have resulted from redenomination might have triggered widespread social unrest that would ultimately have to be brought under control by the Greek army.

We’ll leave it to readers to determine both the accuracy of our interpretation and the degree to which the “secret” document’s mention of “tanks” represented an accurate assessment of the situation versus yet another attempt to scare Tsipras into capitulating, but one thing is for sure, even mentioning the possibility that “the streets of Athens” will be occupied by the military doesn’t seem like something one “partner” would say to another.

end

 

Greek “Hell” Remains After Athens Uses Creditor Money To Repay Creditors

Earlier today, Greece used up virtually its entire €7.1 billion bridge loan from the EU to repay its creditors: between the money due to the ECB, the arrears to the IMF and the cash borrowed from the Greek central bank, Athens had about €300 million left over from the entire inbound wire to use as it sees fit just hours after the money was received, and then promptly sent right back.

Or, as some put it, Greece collected a 4% transaction fee for facilitating a €6.8 billion payment from its creditors to its creditors.

So does this mean things are “fixed” in Greece, if only temporarily? Not exactly, as the following table shows, there is exactly one month until the next €3.2 billion payment is due to the ECB. So unless Europe finalizes the terms of the third €86 billion EFSF bailout in the next 4 weeks, Greece will need another bridge loan just to repay the ECB.

Ok, but if Greece somehow survives until the end of 2015 despite a new government and with blistering VAT hikes, even as bank lines to withdraw money refuse to go away, then will it finally be ok?

Well, no.

As we showed before when we showed the various Greek circle of debt hell, unless Greece finds a way to access the market once again following its “triumphal return” in mid-2014 when it issued bonds that cost investors (with other people’s money) their 2015 bonus, it is only then that the Greek debt repayment hell begins.

Oh, and the table above excludes the €86 billion in new debt that will be incurred as part of Bailout #3 and which too, will have to be “repaid” at some point, if only in theory.

 
end

Another great commentary from Michael Snyder on the huge debt crisis facing the globe;

 

(courtesy Michael Snyder/EconomicCollapseBlog)

 

The Bankruptcy Of The Planet Accelerates – 24 Nations Are Currently Facing A Debt Crisis

Submitted by Michael Snyder via The Economic Collapse blog,

There has been so much attention on Greece in recent weeks, but the truth is that Greece represents only a very tiny fraction of an unprecedented global debt bomb which threatens to explode at any moment.  As you are about to see, there are 24 nations that are currently facing a full-blown debt crisis, and there are 14 more that are rapidly heading toward one.  Right now, the debt to GDP ratio for the entire planet is up to an all-time record high of 286 percent, and globally there is approximately 200 TRILLION dollars of debt on the books.  That breaks down to about $28,000 of debt for every man, woman and child on the entire planet.  And since close to half of the population of the world lives on less than 10 dollars a day, there is no way that all of this debt can ever be repaid.  The only “solution” under our current system is to kick the can down the road for as long as we can until this colossal debt pyramid finally collapses in upon itself.

As we are seeing in Greece, you can eventually accumulate so much debt that there is literally no way out.  The other European nations are attempting to find a way to give Greece a third bailout, but that is like paying one credit card with another credit card because virtually everyone in Europe is absolutely drowning in debt.

Even if some “permanent solution” could be crafted for Greece, that would only solve a very small fraction of the overall problem that we are facing. The nations of the world have never been in this much debt before, and it gets worse with each passing day.

According to a new report from the Jubilee Debt Campaign, there are currently 24 countries in the world that are facing a full-blown debt crisis

  • Armenia
  • Belize
  • Costa Rica
  • Croatia
  • Cyprus
  • Dominican Republic
  • El Salvador
  • The Gambia
  • Greece
  • Grenada
  • Ireland
  • Jamaica
  • Lebanon
  • Macedonia
  • Marshall Islands
  • Montenegro
  • Portugal
  • Spain
  • Sri Lanka
  • St Vincent and the Grenadines
  • Tunisia
  • Ukraine
  • Sudan
  • Zimbabwe

And there are another 14 nations that are right on the verge of one…

  • Bhutan
  • Cape Verde
  • Dominica
  • Ethiopia
  • Ghana
  • Laos
  • Mauritania
  • Mongolia
  • Mozambique
  • Samoa
  • Sao Tome e Principe
  • Senegal
  • Tanzania
  • Uganda

So what should be done about this?

Should we have the “wealthy” countries bail all of them out?

Well, the truth is that the “wealthy” countries are some of the biggest debt offenders of all.  Just consider the United States.  Our national debt has more than doubled since 2007, and at this point it has gotten so large that it ismathematically impossible to pay it off.

Europe is in similar shape.  Members of the eurozone are trying to cobble together a “bailout package” for Greece, but the truth is that most of them will soon need bailouts too

All of those countries will come knocking asking for help at some point. The fact is that their Debt to GDP levels have soared since the EU nearly collapsed in 2012.

Spain’s Debt to GDP has risen from 69% to 98%. Italy’s Debt to GDP has risen from 116% to 132%. France’s has risen from 85% to 95%.

In addition to Spain, Italy and France, let us not forget Belgium (106 percent debt to GDP), Ireland (109 debt to GDP) and Portugal (130 debt to GDP).

Once all of these dominoes start falling, the consequences for our massively overleveraged global financial system will be absolutely catastrophic

Spain has over $1.0 trillion in debt outstanding… and Italy has €2.6 trillion.These bonds are backstopping tens of trillions of Euros’ worth of derivatives trades. A haircut or debt forgiveness for them would trigger systemic failure in Europe.

EU banks as a whole are leveraged at 26-to-1. At these leverage levels, even a 4% drop in asset prices wipes out ALL of your capital.And any haircut of Greek, Spanish, Italian and French debt would be a lot more than 4%.

Things in Asia look quite ominous as well.

According to Bloomberg, debt levels in China have risen to levels never recorded before…

While China’s economic expansion beat analysts’ forecasts in the second quarter, the country’s debt levels increased at an even faster pace.

Outstanding loans for companies and households stood at a record 207 percent of gross domestic product at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.

And remember, that doesn’t even include government debt.  When you throw all forms of debt into the mix, the overall debt to GDP number for China is rapidly approaching 300 percent.

In Japan, things are even worse.  The government debt to GDP ratio in Japan is now up to an astounding 230 percent.  That number has gotten so high that it is hard to believe that it could possibly be true.  At some point an implosion is coming in Japan which is going to shock the world.

Of course the same thing could be said about the entire planet.  Yes, national governments and central banks have been attempting to kick the can down the road for as long as possible, but everyone knows that this is not going to end well.

And when things do really start falling apart, it will be unlike anything that we have ever seen before.  Just consider what Egon von Greyerz recently told King World News

Eric, there are now more problem areas in the world, rather than stable situations. No major nation in the West can repay its debts. The same is true for Japan and most of the emerging markets. Europe is a failed experiment for socialism and deficit spending. China is a massive bubble, in terms of its stock markets, property markets and shadow banking system. Japan is also a basket case and the U.S. is the most indebted country in the world and has lived above its means for over 50 years.

So we will see twin $200 trillion debt and $1.5 quadrillion derivatives implosions. That will lead to the most historic wealth destruction ever in global stock, with bond and property markets declining at least 75 – 95 percent. World trade will also contract dramatically and we will see massive hardship across the globe.

So what do you think is coming, and how bad will things ultimately get once this global debt crisis finally spins totally out of control?

 

end

 

Mexican Peso Plunges To 16/USD – Record Lows

The Mexican Peso has devalued 23.5% in the last 12 months, breaking 16.00/USD for the first time in history today…

 

 

This is the fastest collapse in the currency since Lehman.

 

Charts: Bloomberg

Average:

Your early morning currency, and interest rate moves

Euro/USA 1.0837 down .0021

USA/JAPAN YEN 124.22 up .259

GBP/USA 1.5565 down .0017

USA/CAN 1.2990 up .0021

This morning in Europe, the Euro fell again by a 21 basis points, trading now just below the 1.09 level at 1.0837; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank,  an imminent  default of Greece and the Ukraine, rising peripheral bond yields 

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 10 basis points and trading just above the 124 level to 124.22 yen to the dollar.

The pound was down this morning by 17 basis points as it now trades just below the 1.56 level at 1.5565, 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 1.2990 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: closed

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 green (massive bubble ready to burst), Australia in the green: /Nikkei (Japan) closed/India’s Sensex in the red/

Gold very early morning trading: $1114.65

silver:$14.82

Early Monday morning USA 10 year bond yield: 2.35% !!!  up 1 in basis points from Friday night and it is trading well above  resistance at 2.27-2.32%

USA dollar index early Monday morning: 97.97 up 3 cents from Friday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Monday morning

Let us head over and see our major USA stories for today:

New York trading:

The following commentary is very interesting in that we find that China dumped 143 billion USA treasuries in order to stabilize its economy and stock market:

(courtesy zero hedge)

China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium

When the latest Treasury International Capital data was released yesterday, many were quick to conclude that not only had China’s selling of US Treasury ceased, but that with the addition of $7 billion in US government paper, China’s latest total holdings of $1270.3 billion were the highest since May of 2014. And if one was merely looking at the “China” line item in the major foreign holders table, that would be correct.

However, as we have shown before, when looking at China’s Treasury holdings, one also has to add the “Belgian” Treasuries, which is where China had been anonymously engaging in a record buying spree via the local Euroclear, starting in late 2013, which however concluded with a bang in early 2015.

This is what we said last month:

  • “Belgium” is, or rather, was a front for China: either SAFE, CIC, or the PBOC itself.
  • That Belgium’s holdings, after soaring as high as $381 billion a
    year ago, have since tumbled as China has
    dumped the bulk of its Euroclear custody holdings, and that once this
    number is back to its historical level of around $170-$180 billion,
    “Belgium” will again be just Belgium.
  • China’s foreign reserves plunged concurrently and this was offset by a the
    biggest quarterly drop in Chinese pro-forma treasury holdings, which
    dropped by a record $72 billion in the month of March, and a record $113
    billion for the quarter.

It wasn’t precisely clear just why China, which had historically used
UK-based offshore banks to transact in US paper in addition to the
mainland, would pick Belgium (and Euroclear) or why it chose to hide its transactions in
such a crude way, however the recent acceleration in capital outflow from
China manifesting in a plunge in Chinese forex reserves, coupled with a
record monthly liquidation in total Chinese holdings, exposed just where China was trading.

So with the benefit of the TIC data, we know that China’s Treasury liquidation has not only not stopped, but has continued. Enter, once again, Belgium, only this time it is not a “mystery” buyer behind the small central European country’s holdings, but a seller.

As the chart below shows, after a record $92.5 billion drop in March, “Belgium” sold another $24 billion in April, and another $26 billion last month, bringing the total liquidation to a whopping $142.5 billion for the months of March, April and May.

This means that after adding mainland China’s token increase of $7 billion in May after a $40 billion increase the two months prior, net of Belgium’s liquidation, China has sold a record $96 billion in Treasurys in the last three months.

Just to confirm that one should add the dramatic changes in “Belgium” holdings to mainland China Treasury, here is a chart overlaying China’s Forex reserves, which as we learned today had dramatically increased by 600 tons of gold, but more importantly forex reserves declined to $3.693 trillion, a drop of $17 billion from $3.711 trillion the month before, and the lowest since September 2013!

Putting all of this together, it reveals that China has already dumped a record total $107 billion in US Treasurys in 2015 to offset what is now quite clear capital flight from the mainland, and the most aggressive attempt to keep the Renminbi stable.

end
Another great commentary on the pension shorfall:
(courtesy zero hedge)

Pension Shocker: Plans Face $2 Trillion Shortfall, Moody’s Says

 

Last month, in “Cities, States Shun Moody’s For Blowing The Whistle On Pension Liabilities,” we highlighted a rift between Moody’s and some local governments over the return assumptions for public pension plans.

To recap, when it comes to underfunded pension liabilities, one major concern is that in a world characterized by ZIRP and NIRP, it’s not entirely clear that public pension funds are using realistic investment return assumptions. The lower the return assumption, the larger the unfunded liability. After 2008, Moody’s stopped relying on the investment return assumptions of cities and states opting instead to use its own models. Unsurprisingly, this led the ratings agency to adopt a much less favorable view of state and local government finances and as WSJ reported, rather than admit that their return assumptions are indeed unrealistic, local governments have opted to drop Moody’s instead.

The debate underscores a larger problem in America. Almost half of the states in the union are facingbudget deficits.

Underfunded pension liabilities are one factor, but the reasons for the pervasive shortfall vary from plunging oil revenues to plain old fiscal mismanagement. The pension issue gained national attention after an Illinois Supreme Court decision threw the future of pension reform into question and effectively set a precedent for other states, sending state and local officials back to the drawing board in terms of figuring out how to plug budget gaps. One option is what we have called the “pension ponzi” which involves the issuance of pension obligation bonds. Here is all you need to know about that option:

‘Solving’ this problem by issuing bonds is an enticing option but at heart, it amounts to what one might call a “pension liability-bond arbitrage.” The idea is to borrow the money to plug the pension gap and invest it at a rate of return that’s higher than the coupon on the bonds, thus saving money over the long-haul. Of course, much like transferring a balance on a high interest credit card onto a new card with a teaser rate (or refinancing a high interest credit card via a P2P loan) this gimmick only works if you do not max out the original card again, because if you do, all you’ve done is doubled your debt burden. As it relates to pension liabilities, this means that what you absolutely cannot do is use the cash infusion as an excuse to get lax when it comes to pension funding because after all, that’s what caused the problem in the first place.

And here’s a look at how pervasive the problem has become:

Make no mistake, America’s pension problem isn’t likely to be resolved anytime soon and in fact, with risk-free rates likely to remain subdued even as equity returns face the possibility that the beginning of a Fed rate hike cyclecould trigger a 1937-style equity meltdown (bad news for return assumptions), and with investors set to demand higher yields on muni issuance thanks to deteriorating fiscal circumstances, the financial screws may be set to tighten further on the country’s struggling state and local governments. Bloomberg has more:

The cost to American cities for their cash-strapped pension funds is starting to look a lot worse, and it’s not because the stock-market rally may be losing steam.

 

Houston was warned by Moody’s Investors Service this month that it may be downgraded because of mounting retirement bills, the latest municipality put on notice as the company ignores bookkeeping gimmicks that let cities mask the size of their debt for years. The approach foreshadows accounting rules for even top-rated issuers that are poised to cause pension shortfalls to swell as new financial reports are released.

 

“If you’re AAA or AA rated and you’ve got significant and visible unfunded pension obligations, you’ve only got one direction to go in terms of rating, and that’s potentially down,” said Jeff Lipton, head of municipal research in New York at Oppenheimer & Co. “It’s the presentation on the balance sheet that is now going to drive urgency.”

 

Cities that shortchanged pensions for years are under growing pressure to boost their contributions, even after windfalls from a stock market that’s tripled since early 2009. Janney Montgomery Scott has said growing retirement costs are “the largest cloud overhanging” the $3.6 trillion municipal-bond market, where investors are demanding higher yields from borrowers under the greatest strain.

 

That was on display this week for Chicago, whose credit rating was cut to junk by Moody’s in May because of a $20 billion pension shortfall. The city was forced to pay yields of almost 8 percent on taxable bonds maturing in 2042, about twice what some homeowners can get on a 30-year mortgage.

 

Estimates of the pension-fund deficits facing states and cities vary, depending on the assumptions used to calculate the cost of bills due over the next several decades. According to Federal Reserve figures, they have $1.4 trillion less than needed to cover promised benefits.

 

Officials have been able to lower the size of the liability by counting on investment earnings of more than 7 percent a year, even after they expect to run out of cash. New rules from the Governmental Accounting Standards Board require a lower rate to be used after retirement plans go broke. Many reported shortfalls will grow as a result.

 

Moody’s, which in 2013 began using a lower rate than governments do to calculate future liabilities, has estimated that the 25 largest U.S. public pensions alone have $2 trillion less than they need. Cincinnati and Minneapolis are among cities Moody’s has since downgraded.

 

The California Public Employees’ Retirement System, the largest U.S. pension, this week said it earned just 2.4 percent last fiscal year, one-third of the annual return it projects. The California State Teachers’ Retirement System, the second-biggest fund,gained 4.5 percent, compared with its 7.5 percent goal.

In short: America is facing a fiscal crisis at the state and local government level and it appears as though at least one ratings agency is no longer willing to suspend disbelief by allowing officials to utilize profoundly unrealistic return assumptions in the calculation of liabilities. This means downgrades and as for what comes next, we’ll leave you with a recap of Citi’s vicious “feedback loop”.

From Citi

How does a downgrade create a feedback loop? 

 

Payment induced liquidity shock

For many issuers’ credit contracts, a drop to a speculative grade rating acts as a payments trigger. For instance, the issuer may have commercial paper programs and line of credit agreements as a part of its short term borrowing program and a rating downgrade could qualify as an event of default for these borrowing arrangements. This enables the banks to declare all outstanding obligations as immediately due and payable.

 

A rating downgrade could also force accelerated repayment schedules and penalty bank bond rates on swap contracts and variable-rate debt agreements.

 

Thus, as a result of the rating action, an issuer could face increased liquidity risk at an unfortunate time

when it is working to navigate its way out of a fiscal crisis.

 

 

Knock-on rating downgrade risk

In some instances, rating agencies may disagree on an issuer’s creditworthiness which could result in a split level rating for a prolonged period. But a drastic rating action by one main rating agency (either Moody’s or S&P) which knocks the issuer’s debt to below investment grade could force the other rating agencies to follow with a similar downgrade. While the other rating agencies might feel that underlying credit fundamentals of the issuer do not merit a sub-investment grade rating, their rating action could be dictated by negative implications due to the liquidity pressures posed by the first downgrade to junk status. Recently, S&P downgraded a credit as a result of Moody’s rating action that stated that its rating action reflected its view that the issuer’s efforts “are challenged by short-term interference” that prevents a solid and credible approach to resolving their fiscal problems.

 

Shrinking buyer base

Many investors have mandates to buy investment grade debt only and a fall to speculative grade status could cause existing investors to liquidate the holdings of the fallen credit and shrink the universe of buyers.

 

Rising issuance costs

In many cases the issuer may have been working diligently to reduce its exposure to bank credit risks in the event of a ratings deterioration (for e.g. shifting its variable-rate GOs and sales tax paper to a fixed rate by tapping its short-term paper program then converting it into long-term debt) but the unfortunate timing of the downgrade will make this task much more challenging as a shrunken buyer base for an entity’s debt, quite naturally, translates into a higher cost of debt.

A higher cost of debt exacerbates liquidity problems and thus the feedback loop could continue to gain traction.

Well that about does it for tonight,

I will see you Tuesday night.

Harvey

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4 comments

  1. Good job collecting info without convenient internet access. What happened?

    Like

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