July 21/Puerto Rico decides to look after its citizens before servicing its debt/dollar plummets/Gold and silver rebound from poor access pricing/

Good evening Ladies and Gentlemen:



First I would like to apologize to you as yesterday I could not get access to my internet and thus I was frozen out of the data that I usually provide for you.


My problem has been fixed by the good folks over at Rogers communication!



Here are the following closes for gold and silver today:



Gold:  $1103.40 down $3.30  (comex closing time)

Silver $14.77 up 2 cents.



In the access market 5:15 pm

Gold $1101.05

Silver:  $14.84



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

At the gold comex today, we had a good delivery day, registering 193 notices for 19,300 ounces . Silver saw 25 notices filed for 125,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 242.46 tonnes for a loss of 61 tonnes over that period.

In silver, the open interest shockingly rose by 1469 contracts despite the fact that yesterday’s price was down by 8 cents.  The total silver OI continues to remain extremely high, with today’s reading at 190,241 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .951 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 bankers contemplating falling off the roof due to silver’s refusal to buckle with respect to open interest.

In silver we had 25 notices served upon for 125,000 oz.

In gold, the total comex gold OI rests tonight at 467,672 for a loss of 6659 contracts as  gold was down $25.10 yesterday. We had 193 notices filed for 19,300 oz  today.

We had a massive withdrawal in gold tonnage at the GLD to the tune of 6.56 tonnes/  thus the inventory rests tonight at 689.69 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 GLD 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 a huge addition of 1.241 million oz of inventory at the SLV / Inventory now rests at 328.834 million oz.

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

1. Today, we had the open interest in silver rise by 1,469 contracts to 190,241 despite the fact that silver was down by 8 cents yesterday in a massive bear raid. We again must have had some shortcovering by the bankers as they feared something was brewing in the silver arena.  The OI for gold fell by 6659 contracts down to 467,672 contracts as the price of gold was down by $25.10 yesterday.The bankers were expecting a bigger liquidation in gold OI. Something big is going on behind the scenes as both silver and gold are being accumulated.

(report Harvey)

2 Today, 7 important commentaries on Greece

(zero hedge, Bloomberg/Reuters/)

3. The accounting scandal in Japan:

(zero hedge)

4. Gold trading overnight

(Goldcore/Mark O’Byrne/)

(zero hedge)

5 Trading of equities/ New York

(zero hedge)

6  USA stories:  i)Puerto Rico decides to look after their citizens first before dealing with their creditors

ii) why the dollar slid today

(zero hedge)

7. John Kerry visibly upset with Iran.

(zero hedge)

plus other topics…


Here are today’s comex results:


The total gold comex open interest fell by 6659 contracts from 474,331 down to 467,672 as gold was down $25.10 in price yesterday (at the comex close). The bankers were expecting a much bigger liquidation. We are now in the next contract month of July and here the OI rose by 97 contracts to 315 contracts. We had 0 notices filed yesterday and thus we gained 97 contracts or an additional 9,700 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI decreased by 12,197 contracts down to 214,782. We have a little over one week before first day notice for the big August active gold contract. 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 good at 218,742 contracts.Today we had 193 notices filed for 19,300 oz.


And now for the wild silver comex results. Silver OI rose by 1469 contracts from 188,772 up to 190,241 despite the fact that the price of silver was down by 8 cents with respect to yesterday’s trading. We continue to have our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver (and gold ) arena. The next delivery month is July and here the OI fell by 5 contracts down to 132. We had 25 notices served upon yesterday and thus we gained 20 contracts or an additional 100,000 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 1280 contracts to 129,837. The estimated volume today was fair at 28,206 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 63,398 contracts which is huge in volume.  We had 25 notices filed for 125,000 oz.

July initial standing

July 20.2015



Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz 1221.700  (Scotia, Manfra)  and includes 3 kilobarsand 38 kilobars
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 32,150.000 (Scotia)(1000 kilobars)
No of oz served (contracts) today 193 contracts (19,300 oz)
No of oz to be served (notices) 122 contracts (12,200 oz)
Total monthly oz gold served (contracts) so far this month 605 contracts(60,500 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

and the farce with respect to kilobars continues…

we had 2 customer withdrawal

i) out of Scotia: 1221.700 oz (38 kilobars)

ii) Out of Manfra:  96.45 oz  (3 kilobars)

total customer withdrawal: 1221.700 oz (41 kilobars)

We had 1 customer deposit:

i) Into Scotia:  32,150.000 oz or 1000 kilobars

Total customer deposit: 32,150.00 ounces

We had 0 adjustments.

Today, 0 notices was issued from JPMorgan dealer account and 102 notices were issued from their client or customer account. The total of all issuance by all participants equates to 193 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 (605) x 100 oz  or 60,500 oz , to which we add the difference between the open interest for the front month of July (315) and the number of notices served upon today (193) 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 (605) x 100 oz  or ounces + {OI for the front month (315) – the number of  notices served upon today (193) x 100 oz which equals 71,700  oz standing so far in this month of July (2.230 tonnes of gold).

we gained 97 contracts or an additional 9,700 oz will stand in this non active delivery month of JULY. Somebody was in great need of physical gold.

Total dealer inventory 482,778.738 or 15.016 tonnes

Total gold inventory (dealer and customer) = 7,795,349.037 oz  or 242.46 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 242.46 tonnes for a loss of 61 tonnes over that period.




And now for silver

July silver initial standings

July 20 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 598,171.720  oz (CNT, )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 601,935.400 oz (JPM)
No of oz served (contracts) 25 contracts  (125,000 oz)
No of oz to be served (notices) 107 contracts (535,000 oz)
Total monthly oz silver served (contracts) 3329 contracts (16,645,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 6,981,333.7 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:  601,935.400 oz


total customer deposit: 601,935.400 oz

We had 1 customer withdrawals:

i)Out of  CNT: 598,171.720 oz

total withdrawals from customer:  598,171.720  oz

we had 0  adjustments


Total dealer inventory: 58.764 million oz

Total of all silver inventory (dealer and customer) 178.550 million oz

The total number of notices filed today for the July contract month is represented by 25 contracts for 125,000 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 (3329) x 5,000 oz  = 16,645,000 oz to which we add the difference between the open interest for the front month of July (132) and the number of notices served upon today (25) x 5000 oz equals the number of ounces standing.

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

3329 (notices served so far) + { OI for front month of July (132) -number of notices served upon today (25} x 5000 oz ,= 17,180,000 oz of silver standing for the July contract month.

We gained 20 contracts or an additional 100,000 ounces will stand in this active delivery month of July. Again, somebody was in great need of silver today.

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 21.2015: a massive withdrawal of 6.56 tonnes of gold from the GLD.

Inventory rests at 689.69 tonnes.  China and Russia need their physical gold badly and they are drawing their physical from this facility.

July 20.2015: no change in inventory


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 21 GLD : 689.69 tonnes


And now for silver (SLV)

July 21.we had a massive addition of 1.241 million oz into the SLV/Inventory rests tonight at 328.834 million oz.

Please note the difference between gold and silver (GLD and SLV).  In GLD gold is being depleted and sent to the east.  In silver: no depletions, as I guess this vehicle cannot supply physical metal.

July 20/no change

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 21/2015:  tonight inventory rests at 328.834 million oz



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

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

1. Central Fund of Canada: traded at Negative 10.4 percent to NAV usa funds and Negative 11.50% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.6%

cash .4%

( July 21/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to 0.50%!!!! NAV (July 21/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV falls to – .81% toNAV(July 21/2015

Note: Sprott silver trust back  into positive territory at  0.50%

Sprott physical gold trust is back into negative territory at -.81%

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)


Gold Hammered Down In Sunday Night’s 2-Minute, $2.7 Billion “Unprecedented Attack”


– Gold market comes under “unprecedented attack” – Telegraph
– “Sharp drop bore similarities to bear raids by Chinese funds” – FT
– Paper contracts for 57 tonnes of gold dumped onto market in two minutes
– Gold still holding up in euros, Canadian dollar and other currencies
– Very negative sentiment towards gold signals close to bottom
– Physical gold still vital financial insurance despite simplistic anti gold narrative


FT Front Page Today – July 21, 2015

The post mortem continues and many are once again proclaiming the death of gold … as was done in 1999 and again in 2007 … prior to the start of gold’s multi-year bull market and the resumption of the bull market in 2007.

Sentiment is as bad as we have ever seen it and worse than in 2007, after the price of gold fell nearly 5% or $50 with many markets closed and in illiquid market conditions on Sunday night.

Some $2.7 billion worth of gold futures contracts were sold on the COMEX in less than two minutes.

The Financial Times had an interesting article with the wonderfully-balanced headline, Gold bugs squashed by aggressive selling, which speculated that “Chinese funds” may have been responsible for ‘bear raids’:

“Traders and analysts said, however, that the nature and timing of the selling suggested there was more at play than investors responding to a slight strengthening in the US dollar or lower central bank purchases.”

The Telegraph too asked questions about the highly unusual nature of the concentrated selling and described it as an “unprecedented attack” by “speculators”:

Powerful speculators have launched an unprecedented attack on the world gold market, driving prices to a five-year low  …  anonymous funds sold 57 tonnes of gold in Shanghai and New York, choosing the moment of minimum market liquidity in what appears to have been a synchronized strike intended to smash confidence.”

While the price recovered somewhat throughout the remainder of the day, the manipulative hammering of the price in the futures market once again has served to undermine confidence in the gold market in the short term.

Paper contracts, the equivalent of 24 tonnes of gold were dumped onto the Globex electronic trading exchange in New York in less than 2 minutes. The action took place at around 9.30 Shanghai time. Japanese markets were closed ensuring a minimal amount of liquidity and potential buyers to support the price. There is some discrepancy in the figures reported by different analysts and media.

Astute analyst Bron Suchecki of the Perth Mint points out that the selling began on the COMEX in the August futures contract:

Below is a 1 second time interval chart of the August futures contract from Reuters. The area in the red circle is the 4 seconds of the Nanex chart above, which puts the move into context.


Note that the volume traded in this one minute was 7,164 contracts, which at 100 ounces a contract is about 22 tonnes.”

That a single entity or a group acting in concert would choose to sell a position in huge volumes at a time when an absence of buyers would guarantee them a poor price is a sign that forcing down the price was the likely objective of the concentrated selling.

Who these “anonymous funds” may be is unclear – the Telegraph describes them as “speculators”. There appears to be little appetite to uncover who they were among the media. Hopefully, financial regulators will see the importance of stamping out such illegal practices.

Already financial markets and the financial system have all the hallmarks of a global casino and this is likely to worsen if such manipulations continue to be tolerated.

Close observers of the gold market will have noticed a slew of particularly negative, and often ill-informed, commentary on gold in recent days and sentiment is as poor as we have seen it.

Since yesterday there has been another of wave of negative, misleading and almost triumphalist commentary on gold most of which studiously ignores the clear evidence of manipulation of the price on Sunday night.

This negativity is unwarranted given the reasonable performance of gold this year in currencies other than the dollar. Even following the smash gold is up 4.4% in euros this year. It is also up in Australian and Canadian dollars – not too mention in Latin American currencies which are again under pressure.

The current negative sentiment towards gold is unjustified given the backdrop of gobal currency debasement and a global economy being force-fed debt to keep it a very fragile recovery from ending and a new global recession or indeed Depression.

Further, technical damage has been inflicted by Sunday night’s manipulation and prices may yet fall further.

However, given the importance of diversification and of holding physical gold as financial insurance – rather than as a speculative tool – the current price weakness may be viewed as an opportunity.

The conditions which led to the 2008 crisis – i.e. excessive debt – have not been dealt with.

They have been papered over with more electronically ‘printed’ currency and debt. The narrative that gold is now irrelevant because the “recovery” has taken hold is not reflected in the conditions of people living in the real world  – be they people in most Middle Eastern countries, the majority of people in Ireland, Spain, Italy, Portugal and of course Greece. Nor indeed, the 45 million Americans, 15% of the U.S. population,  currently unemployed and having to live on food stamps.

The notion that gold is set to decline further as the Fed raises rates is based on the highly optimistic assumption that the Fed will actually raise rates voluntarily and not continue to defer doing so until forced to by circumstances.

At any rate, the historical record shows that gold tends to rise with nominal interest rate rises – as was seen from 2004 to 2008 and in the 1970s – and the Fed are unlikely to raise rates in any meaningful way while deflationary forces persist.

We advise clients to ignore the noise and pay attention to the factors that caused them to diversify into gold. These conditions have actually deepened in recent years.

Physical gold will protect wealth in the event of banking crises,bank bail-ins, systemic crises caused by cyber warfare and other risks that ourselves and well placed commentators have highlighted in recent months

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



(courtesy UKTelegraph/Ambrose Evans Pritchard/GATA)


Telegraph sniffs out a little disinformation surrounding gold smash


But might not those “powerful speculators” be central banks themselves?




Speculators Smash Gold as Dollar Squeeze Tightens


By Ambrose Evans-Pritchard
The Telegraph, London
Monday, July 20, 2015

Powerful speculators have launched an unprecedented attack on the world gold market, driving prices to a five-year low as commodities wilt and the U.S. Federal Reserve prepares to tighten monetary policy.

Spot prices slumped by more than 4 percent to $1,086 an ounce in overnight trading after anonymous funds sold 57 tonnes of gold in Shanghai and New York, choosing the moment of minimum market liquidity in what appears to have been a synchronized strike intended to smash confidence.

The move came after China’s central bank dismayed “gold bugs” by revealing that the country’s bullion reserves stand at just 1,658 tonnes, far lower than widely assumed. While holdings have risen 60 percent since the last update in 2009, they are still a fraction of China’s total $3.7 trillion foreign exchange reserves.

Ross Norman, a veteran gold analyst at brokers Sharps Pixley, said sellers dumped 7,600 contracts covering 24 tonnes on the Globex exchange in New York in a two-minute span after it opened late on Sunday night.

A further 33 tonnes were sold at almost exactly the same time in Shanghai. The combined hit of 57 tonnes in such a short period is an extraordinary event in the world’s relatively small gold market. …

Mr Norman said the level of gold reserves announced by China massively understates the country’s true holdings. “We think they have at least twice as much, maybe even 4,000 tonnes,” he said.

A division of the People’s Liberation Army mines gold and transfers the metal to the Chinese finance ministry, acting outside normal commercial channels. The government also buys gold directly from Chinese producers. This is an internal transaction and is therefore not necessarily recorded in China’s external reserves.

There is suspicion that China is talking down its true gold holdings as it prepares to join the big league as part of the International Monetary Fund’s currency basket, SDRs.

David Marsh, from the monetary forum OMFIF, said China would risk unsettling the world gold market if it revealed bullion reserves of 2,000 or 3,000 tonnes. This might be interpreted as an unfriendly move against the dollar at a “delicate time,” he said.

Sharps Pixley said a “seismic change” is under way in the bullion markets as economic power shifts to the East, boosting gold prices over time. …

… For the remainder of the report:



(courtesy Dave Kranzler/IRD)

Dave Kranzler: Gold and silver shortages acute, GLD is being looted again


3:07p ET Monay, July 20, 2015

Dear Friend of GATA and Gold:

The biggest bubble in the financial markets, Dave Kranzler of Investment Research Dynamics writes today, is the bubble in paper gold and silver. The brazenness of the recent raids on the monetary metals, Kranzler adds, is starting to open the eyes of otherwise respectable people in the financial markets. His commentary is headlined “Gold And Silver Shortages Become Acute — GLD Is Being Looted Again” and it’s posted at the Investment Research Dynamics Internet site here:


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



(courtesy James Turk/Kingworldnews/GATA)

With gold flash crash U.S. aims to embarrass China, Turk says


2:50p ET Monday, July 20, 2015

Dear Friend of GATA and Gold:

GoldMoney founder James Turk, interviewed today by King World News, construes the overnight flash crash in gold as an embarrassing punishment inflicted by the United States on China for announcing an increase in its gold reserves.

Turk adds: “The intervention also had two other objectives. It was meant to scare any remaining weak hands into thinking that the United States still holds all the monetary cards and can bend the price of gold to its will. It also provided an opportunity for the bullion banks to cover short positions with massive profits by creating a selling climax with huge volumes being traded as the gold price fell.”

Turk’s interview is excerpted at the KWN blog here:


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




(courtesy John Embry/Kingworldnews/GATA)

Gold paper dump signifies sinking world economy, Embry tells KWN


12:30p ET Monday, July 20, 2015

Dear Friend of GATA and Gold:

The more that gold is clobbered by the sudden dumping of futures contracts, Sprott Asset Management’s John Embry tells King World News, the worse real conditions in the world economy must be. An excerpt from Embry’s interview is posted at the KWN blog here:


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




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

1 Chinese yuan vs USA dollar/yuan strengthens to 6.2095/Shanghai bourse green and Hang Sang: red

2 Nikkei up 191.05  or.93%

3. Europe stocks in the red /USA dollar index up to 97.27/Euro up to 1.0950

3b Japan 10 year bond yield: remains at 42% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.84

3c Nikkei still just above 20,000

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

3e WTI 50.51 and Brent:  56.57

3f Gold well up (from access closing) /Yen up

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

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

3h Oil up for WTI and 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 .78 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rises to 21.80%/Greek stocks this morning: stock exchange closed again/ still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield falls to: 11.56%

3k Gold at 1104.00 dollars/silver $14.80

3l USA vs Russian rouble; (Russian rouble up 1/10 in  roubles/dollar in value) 56.90,

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 .9573 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0483 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 +.78%

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 2.33% 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)


Commodity Rout Halted On Dollar Weakness, Equities Unchanged

If yesterday’s market action was boring, today has been a virtual carbon copy which started with the usual early Chinese selloff levitating into a mildly positive close, with the SHCOMP closing just above the psychological 4,000 level: the next big hurdle will be 4058, the 38.2% Fib correction of the recent fall.

The Nikkei likewise rallied into the close after a massive Toshiba accounting scandal sent the stock higher, even if it cost the CEO his position. European equities are mixed with an early push lower becoming a flattish morning. The Euro Stoxx 50 future is down small, still eyeing its April 13 high at 3769, above which the future would be trading at 200 levels.

In the US equity futures are currently unchanged ahead of a day in which there is no macro economic data but lots of corporate earnings led by Microsoft, Verizon, UTX and of course Apple. Most importantly, some modest USD weakness overnight (DXY -0.1%) has helped the commodity complex, with gold rebounding from overnight lows, while crude has at least stopped the recent carnage which sent WTI below $50.

Asian equities rose following modest gains on Wall Street, as technology names bolstered US indices ahead of earnings from tech giants Apple and Microsoft, which saw the NASDAQ Comp print fresh record highs . Consequently, the Nikkei 225 (+0.9%) rose and is now on course to post its 2nd longest winning streak of the year as participants played catch up on return from their elongated break. Hang Seng (+0.5%) and Shanghai Comp (+0.6%) traded in volatile fashion, with initial weakness following reports that some margin lenders are to require clients sell stocks purchased through margin debt. However, Chinese stocks then shrugged off losses and are on course for its longest run of gains since May. JGB’s traded relatively flat with minor gains seen as the BoJ conducted its large JGB purchase program.

Less than impressive earnings by blue-chip names including Novartis (-2.6%) this morning and IBM after yesterday’s close weighed on sentiment in Europe this morning . As a result, stocks traded lower since the get-go (Euro Stoxx: -0.1 %), with health-care and information technology sectors underperforming as a result. Consequently, this supported the bid tone by Bunds, with market participants failing to react positively to the reports that the Greek government has submitted a bill on bailout prior measures to parliament as per the request of Greece’s creditors, measures including actions such as bank restructuring.

In FX, despite the growing expectations of a rate hike by the Fed, the USD index traded lower, albeit marginally (-0.1%), driven by the upside by EUR/USD after stops were tripped on the break of overnight high, which in turn supported GBP/USD and subsequently saw USD/JPY move into negative territory.

Antipodeans were in focus in the Asia-Pacific session with AUD/NZD notably underperforming in the wake of RBA minutes, where the RBA reiterated that further AUD depreciation is likely and needed. Elsewhere, NZD continued to extend on gains after NZ finance minister English stated that dairy prices could recover by year-end coupled with reports of Tokyo-based banks buying in NZD/JPY.

Precious metals have seen a paring of some of yesterday’s heavy losses, with spot gold and platinum both up over USD 10/oz on the day. However gold still remains near 5 year lows, with analysts at ABN Amro suggesting that gold will reach USD 1,000/oz due to the firmer USD amid Fed’s rate outlook. Elsewhere, WTI and Brent crude futures have swung between gains and losses amid light fundamental news, with WTI Sep’15 crude futures briefly falling below the psychological USD 50/bbl handle ahead of today’s API crude oil inventories (Prey. -7300k).

There is little in terms of tier-1 data releases, however market participants will be looking out for comments from BoE’s Carney, especially following a raft a hawkish comments by the fellow MPC and ahead of tomorrow’s release of the BoE July meeting minutes.

Today’s most notable US earnings report comes in the form of Apple, who are scheduled to report after markets with the likes of Microsoft, Verizon and United Technologies also scheduled to report.

US Event Calendar From Bloomberg and RanSquawk

  • Less than impressive earnings by blue-chip names has weighed on sentiment in Europe
  • Despite the growing expectations of a rate hike by the Fed, the USD index traded lower, albeit marginally
  • Today sees comments from BoE’s Carney and earnings from Apple, Microsoft and United Technologies
  • Treasury curve steepens overnight amid “commodity rout” that has sent Bloomberg Commodity Index to 13-year low; no economic data releases today.
  • Volumes were reported light in futures (40% normal) and cash (60%), ED&F Man head of U.S. rates Tom DiGaloma writes
  • The worst isn’t over yet for gold. That’s what options trading is signaling, at least, as two of the three gold options attracting the most volume on Monday were wagers on further declines
  • European Commissioner Pierre Moscovici said Greece’s European creditors have agreed to provide debt relief so long as the country’s government can deliver on the terms of its third bailout package
  • Puerto Rico’s budget director ratcheted up the risk of a default on some agency securities, saying cash from the commonwealth’s operating budget won’t be redirected to make debt payments due next month
  • Treasury investors are starting to believe in a September interest-rate increase again. Futures show a 42% chance the Federal Reserve will raise borrowing costs in that month, up from 35% odds a week ago
  • BoE close to taking concrete step toward first interest-rate increase in eight years as at least one Monetary Policy Committee member will vote next month to raise the key rate from a record low, according to 65% of 26 economists in a Bloomberg survey
  • Sovereign 10Y bond yields mostly steady. European stocks mixed, Asia higher; U.S.equity- index futures mixed. Crude oil drops, copper and gold rise


DB’s Jim Reid concludes the overnight event recap as usual



With Greece now paying its bills with freshly borrowed money and few serious players allowed to short or sell the Chinese stock market it does feel like markets are becalmed again and have been allowed to settle into a typical summer lull. Yesterday was pretty dull but we did see the S&P 500 (+0.08%) briefly pass its record closing high intra-day before retracing gains into the close. It seemed Energy was to blame for the softer close as the recent commodity rout continued quietly in the background. WTI (-1.45%) dipped below $50 at one stage for the first time in over 3 months and Gold (-3.32%) fell further to five-year lows.

The move in Gold supported a selloff across most of the precious metal space with Silver (-1.22%), Platinum (-1.62%) and Palladium (-1.47%) also dipping lower. The move has largely been attributed to the prospect of Fed liftoff and the recent strong run in the Dollar with attention moving back to the Fed after recent events in Greece and China. Reuters are also suggesting that the mini flash crash experienced in trading in Asia yesterday (when Gold tumbled nearly 5%) was exaggerated with the relatively low liquidity as CME circuit breakers triggered twice in just one minute with suggestions of large amounts of stop-loss selling. So this will give all of us worried about a lack of trading liquidity more ammunition that this cycle is behaving quite differently in this respect.

The moves in Gold also come on the back of the lower than expected reserves data out of China on Friday which we touched on yesterday. The latest leg lower in the commodity complex has now helped take the Bloomberg commodity index to the lowest level since March 2002. In the S&P 500, energy (-1.29%) and material names (-0.90%) were the main decliners yesterday with the likes of Newmont Mining (-12%) hardest hit. The pain was felt elsewhere too with AngloGold falling to all time lows in South Africa and the world’s largest producer Barrick Gold crashing 16% lower in Canada to the lowest level since the early 90s.

Despite this, further supportive earnings reports out of Halliburton, Lockheed and Hasbro in particular helped offset much of the pressure in the commodity space, while in Europe we saw the Stoxx 600 (+0.28%), DAX (+0.53%) and CAC (+0.35%) all close up. Europe credit markets also ended a touch better with Crossover 5bps tighter at the close while across the pond CDX IG was +0.4bps.

We remain positive on credit and equities due to what is still huge global central bank liquidity but prefer Europe equities to the US as QE related trades build again. In European credit we continue to prefer HY to IG but as we showed in our HY monthly at the start of the month the valuation of HY and IG have converged for the first time in 18 months. In the first 6 months of 2014, HY traded increasingly expensive to IG and then reversed this trend completely in H2 to be left very cheap to IG at the start of this year. As we stand now they’re broadly fair value to each other so our HY overweight is more based on the extra carry and the extra spread tightening that HY will bring in a spread compression period. We still think the financial world is a bit of a manipulated mess but for now liquidity is likely to be the dominant theme. We’ll revisit as the Fed gets closer to potential lift-off meetings but we still think a delay into 2016 is marginally more likely.

Taking a look at markets this morning now, we’ve seen a small bounce back in Gold (+0.73%) although WTI (-0.34%) and Brent (-0.04%) have continued to move lower. Having closed for a public holiday yesterday, the Nikkei (+0.54%) is leading the equity gains in Asia this morning followed by the ASX (+0.38%) and Hang Seng (+0.38%) while the Kospi (-0.14%) is slightly lower. It’s another volatile session in China. Having initially plunged some 2% at the open, the Shanghai Comp (+0.26%) has bounced back along with the CSI 300 (+0.13%) and Shenzhen (+0.92%) with 543 mainland companies still suspended from trading. S&P 500 futures are unchanged while Asia credit is around half a basis point wider.

Moving on, comments out of St Louis Fed President Bullard yesterday helped support a modest move up in Treasury yields and the Dollar. The benchmark 10y yield closed 2.5bps higher at 2.373% while 5y (+3.6bps) and 30y (+1.2bps) yields also moved slightly higher, while the Dollar index closed the session +0.17% for the fourth consecutive daily gain with the index now extending its MTD gains to +2.7%. Bullard said that the US economy is closer to normal than it has been over the last five years and that ‘I’d see September having more than a 50% probability right now’. Bullard also said that he expects unemployment to probably move below 5% and that, consistent with other Fedspeak, any decision will be on a meeting by meeting basis.

Staying on the Fed, yesterday the Central Bank approved a final rule requiring the largest and most systematically important banks to further strengthen their capital positions. The findings found that the 8 largest banks have extra capital requirements of between 1% and 4.5% with JP Morgan at the top end of that range at 4.5% (a shortfall of $12.5bn although lower than initial estimates). Citigroup, Goldman Sachs, Morgan Stanley and Bank of America are the other notable institutions next in line with the surcharges due to be phased in from 2016 and becoming fully effective from 2019.

Wrapping up markets yesterday in Europe, 10y Bund yields closed the session 2.6bps lower at 0.761% while yields in the periphery were more mixed with Spain (+0.9bps) a touch higher but Italy (-1bp) and Portugal (-4.3bps) lower. As mentioned earlier yesterday we got confirmation that Greece repaid €6.8bn owed to the ECB and IMF as banks reopened under continued strict capital controls. According to Bloomberg Greek parliament is set to vote tomorrow on a second set of prerequisites for further aid.

It’s set to be another quiet day ahead for data with just UK public sector net borrowing prints expected this morning in Europe and no data due out of the US this afternoon. Corporate earnings will likely retain much of the focus with Apple, Microsoft and Verizon the big names due up.







Early this morning, Japan rocked by a huge accounting scandal:


Japan Inc Rocked By Massive Accounting Fraud: Toshiba CEO Quits After Admitting 7 Years Of Cooked Books

While Abenomics has been an unmitigated disaster for Japan’s ordinary population, where the soaring stock market has benefited the top decile of the population while everyone has been slammed by a record 25 consecutive months of declining real wages and soaring input costs, there had been one bright spot: corporate earnings, which unlike in Europe or even the US, have been growing at a steady double-digit clip. What was surprising is that Japan was perhaps the one place where currency debasement was leading to an immediate flow through to rising EPS.

Then on Friday, a report out of Reuters caught our attention when news hit that 140 year old electronics conglomerate, and “pillar of Japan Inc“, Toshiba had inflated profits by a stunning $1.2 billion for a whopping 7 years, with fabricated figures amounting to 30% of the company’s “profits” since 2008!

Suddenly we saw Japan’s profitability “renaissance” in a very different light as Toshiba’s scandal suggested that, if endemic,  Japan Inc’s house of soaring profits was built on nothing more than fabricated foundations.

And while we await to see which other companies will admit they too had been cooking their books in the past few years, we will have to do it without Toshiba’s CEO Hisao Tanaka, who together with five members of his senior staff, resigned earlier today.

According to the FT, “Tanaka said on Tuesday at a news conference, following a 15-second bow of contrition, that he “felt the need to carry out a major overhaul in our management team in order to build anew our company.” “We have suffered what could be the biggest erosion of our brand image in our 140-year history.”

Tanaka et al: “Sorry we got caught”

Of course, the only reason Mr. Tanaka apologized and resigned is not because he was actually cooking books the for an unprecedented 7 years, a period during which the CEO most certainly received tens if not hundreds of millions in equity and profit-linked compensation, but because he was caught.

We very much doubt he will have much if any of his generous bonuses clawed back even as “a panel of external lawyers and accountants said on Monday there was a “systematic” and “deliberate” attempt to inflate profit figures amid a corporate culture in which employees were afraid to speak out against bosses’ pushes for unrealistic earnings targets.”

The panel said Mr Tanaka, who joined Toshiba four decades ago, and vice-chairman Norio Sasaki were aware that profits were being overstated and did not take any action to end the improper accounting.

The only action he did was bow down to suckers, aka investors, and offer a 15 second apology after which he was most likely on a one-way chartered flight out of Tokyo to some non-extradition island where his millions in ill-gotten comp will buy a lifetime supply of Mai-Tais.

As FT adds,the panel said Toshiba, which makes laptops, memory chips and nuclear reactors, “needed to revise its pre-tax profit figures by Y152bn ($1.2bn) over a seven-year period beginning in 2008, in addition to Y4.4bn in inflated profits estimated by Toshiba for three quarters of the 2014 financial year. The Y152bn accounts for nearly 30 per cent of the total pre-tax profit during the period.”

Taro Aso, finance minister, said the scandal highlighted the need for corporate governance reform in corporate Japan. “We could lose trust in Japanese markets and the Tokyo Stock Exchange unless true corporate governance is in place,” he told reporters.

This is not the first massive accounting scandal involving a Japanese corporations: “the government has been seeking to improve investor confidence in Japanese corporate governance since 2011 when Michael Woodford, then Olympus chief executive, blew the whistle on Y117.7bn of covered up losses at the company dating back to the 1990s.”

It won’t be the last. In the meantime, investors are cautioned to take any numbers out of a country where cooking the books appears to be a daily occurrence with a huge grain of radioactive salt. Take the following example example of “dubious practices” as the company: during a meeting in December 2008 ahead of the third-quarter results for the financial year, the execs were told the operating profit forecast was a Y18.4bn loss, to which Mr Nishida said: “The figure is so embarrassing that we cannot announce it this coming January”. Accountants were forced to manipulate the figures to turn the forecast into a Y0.5bn profit.

The other executives who resigned are vice-presidents Hidejiro Shimomitsu, Masahiko Fukakushi, Kiyoshi Kobayashi and Toshio Masaki, and Keizo Maeda, representative executive officer. All were board members.

Yet despite the changes at the top nothing will change as the same culture of fraud and corruption that tainted the current executive team will persist in the future. The only question is who is next to admit that the only “working” aspect of Abenomics has also been a total fabrication.




The street is now talking about a GREXIT:


(courtesy zero hedge)


“Something Revolutionary Is In The Air”: Grexit By “Insurrection” Is The “Most Probable” Outcome

A week ago, we said the following about the situation faced by Greek PM Alexis Tsipras when he and his new finance minister arrived in Brussels for the final round of bailout negotiations earlier this month:

…the entire world looked on in horror as Alexis Tsipras – who just days earlier secured a crucial referendum victory which by all accounts empowered him to ride into Brussels a conquering hero – was eviscerated by German FinMin Wolfgang Schaeuble and several like-minded EU finance ministers who smelled blood after Greece submitted a proposal that betrayed the Greek PM’s lack of conviction.

In short, Tsipras made a fatal error. In an act of alarming defiance, he boldly called for a referendum on creditors’ proposals, campaigned for a “no” vote, and then, once 61% of the Greek populace gave their leader a mandate to reject more austerity, he proceeded to resubmit the very same proposal Greeks had just voted against. That told EU officials that Tsipras had no intention of leveraging the referendum outcome and from there, the “mental waterboarding” was on.

Now, Greece is stuck with a deal that promises more of the same austerity measures that have so far served only to prolong an intractable recession and indeed, without some manner of debt relief or re-profiling, the new program has no chance of success.

Given all of this, it isn’t surprising that economists are once again beginning to talk about Grexit, and indeed, who can blame them? It’s difficult to take seriously the idea that the new “deal” has taken a Greek exit off the table when German FinMin Wolfgang Schaeuble still claims that a Greek exit from the EMU might be the country’s best chance at a “classic” haircut and economic recovery. Here’s Bloomberg with more on why Grexit is “back on the agenda”:

Don’t pack away the currency presses just yet, Greece’s euro exit may be back on the table next year.


There’s still a danger that Greece will be forced out of the euro region by the end of 2016, according to 71 percent of respondents in a Bloomberg survey of 34 economists. Seventy percent said they reckon Greece should be safe for the rest of 2015, though almost half said they thought the 86 billion-euro ($93 billion) bailout package Prime Minister Alexis Tsipras is targeting will prove to be too small.


While Tsipras is checking off the requirements to qualify for a third bailout, the flaws in the agreement he hammered out with euro-area leaders last week are fueling concerns that Greece will struggle to implement the three-year program.


The European creditors are refusing to firm up their commitment to restructuring Greece’s debts, a move the International Monetary Fund says is essential for the country to stabilize its finances. There are also doubts about the 50 billion-euro target for asset sales and, more fundamentally, the merits of forcing more austerity on a shattered economy.


‘Without some form of debt relief, the package will never be big enough,” Peter Dixon, a global economist at Commerzbank AG in London, said in his response to the survey.“Loading additional loans onto a country which cannot afford to repay them corresponds to Einstein’s definition of insanity: Trying the same thing over and over again in the expectation of different results.”


“Apart from Germany, it appears that most people are in agreement that Greece needs a substantial debt writedown,” said Alan McQuaid, chief economist at Merrion Capital Group Ltd. in Dublin. “Unless they get it, it is hard to see the country surviving within the euro zone indefinitely.”

Well, no. It’s not that Germany isn’t in agreement about whether Greece could use a debt writedown.

In fact, Schaeuble explicitly acknowledgedthat Athens needs debt relief less than a week ago. For the Germans it isn’t about whether Greece needs a writedown, it’s about whether Greece will get a writedown, and as long as the country remains in the currency bloc and Germany still holds the purse strings, there will be no haircut for the Greeks.

If, however, Greece were to take Schaeuble’s “time-out” from the euro, Germany has hinted writedowns might be possible and that, in and of itself, shows that indeed, the idea of a Grexit has by no means been confined to the annals of European history.

Here with more on all of the above including Tsipras’ tactical error and the country’s inevitable break with Brussels is Eurointelligence’s Wolfgang Münchau:

Originally published in FT:

Alexis Tsipras should never have hired Yanis Varoufakis as his finance minister. Or he should have listened to him, and kept him on.But instead the Greek prime minister chose the worst of all options. He followed Mr Varoufakis’ advice of rejecting the offer of the creditors — until last week. But having done this, Mr Tsipras committed a critical error by rejecting Mr Varoufakis’ plan B for the moment when the country’s banks closed down: the immediate introduction of a parallel currency — IOUs issues by the Greek state but denominated in euros. A parallel currency would have allowed the Greeks to pay for their daily transactions when cash withdrawals were limited to €60 a day. A total economic collapse would have been avoided.


But Mr Tsipras did not go for this, or indeed any other plan B. Instead he capitulated. At that point, he was no longer even in a position to choose a Grexit — a Greek exit from the eurozone. The economic precondition for a smooth departure would have been a primary surplus — before debt service — and an equivalent surplus in the private sector. Greece has no foreign exchange reserves. If the Greeks were to reintroduce the drachma, they would have had to pay for all of their imports with the foreign exchange earnings of their exports. These minimum preconditions were in place in March but not in July.


So, like his predecessors, Mr Tsipras ended up with another very lousy bailout deal. And this one suffers from the same fundamental flaws as its predecessors. This leads me to conclude that Grexit remains the most likely ultimate outcome after all.


There are three principal ways in which this can happen. The first is that a deal is simply not concluded. All that was agreed last week is for negotiations to start, plus some interim financing. A deal might fail because principal participants themselves are sceptical. Wolfgang Schäuble, the German finance minister, says he will keep up his offer of a Grexit in his drawer, just in case the negotiations fail. Mr Tsipras denounced the agreement on several occasions last week. And the International Monetary Fund is telling us that the numbers do not add up, and that it will not sign unless the European creditors agree to debt relief.


A more likely Grexit scenario is that a programme is agreed and then fails. The Athens government may implement all the measures the creditors demand, but the economy fails to recover and debt targets remain elusive. Mr Tsipras already agreed last week that if this situation arose, he would pile on more austerity. So, unless the economy behaves in future in a very different way from the way it behaved in the past, it will remain trapped in a vicious circle for many years to come. At that point, Mr Tsipras, or his successor, could concede defeat and opt for a negotiated Grexit as the least painful option. Grexit could also be forced on them by the creditors.


My own most likely Grexit scenario is a different one yet again. Donald Tusk, the president of the European Council, hinted at this in his interview with the Financial Times last week when he said that he felt “something revolutionary” in the air. He is on to something. The most probable scenario for me is Grexit through insurrection.

In other words, after suffering untold humiliation at the hands of creditors, Greeks will eventually be pushed to their breaking point.

Scavenging through the trash for food, lining up at banks to receive rationed euros, scarcities of imported goods – eventually enough will be enough. Once Greek society reaches the tipping point, a popular revolt – an “insurrection” or “something revolutionary” – will follow.

At that juncture, officials in Brussels will proceed to the 13th floor of the Berlaymont building, open the safe a few meters down from EU President Jean-Claude Juncker’s office, and dust off the Grexit “Black Book.”

Next, the streets of Athens will “fill with the sounds of tanks.”



And more on those same lines:  The Greek economy is finished as 1/4 of firms are shifting abroad:

(courtesy zero hedge)

The Greek Economy Is Finished! A Quarter Of Firms Shifting Abroad

Capital controls imposed by the Greek government are taking a heavy toll on Greek businesses,according to a new report from Endeavour Greece. With over two-thirds of respondents reporting a “significant drop in revenues,” and 1 in 9 firms forced to suspend production due to shortages of raw materials (unable to buy due to capital controls), the problems created by The Greek government’s action seem asymmetric as almost a quarter (23%) of firms are now “planning to transfer their headquarters abroad for security, cashflow, and stability reasons.”



As ekathimerini reports,

Endeavour Greece, a non-profit group that supports entrepreneurs, found that 58 percent of the 300 companies it surveyed between July 13 and July 17 reported a “significant impact on their operations caused by the limitations imposed to cross-border transactions.”


“Many of these companies cannot import raw material or have access to foreign services and infrastructure,” the group said in a statement, adding that 23 percent “plan to transfer their headquarters abroad for security, cash flow and stability reasons.”


More than two thirds of the companies – 69 percent – reported a “significant drop in turnover,” with 11 percent forced to decrease or suspend production due to shortages of raw materials.


Greece imposed a raft of capital controls on July 29, closing the banks and restricting cash withdrawals in a bid to prevent a disastrous bank run from draining money out of the financial system.


Banks reopened on Monday and restrictions on cash withdrawals have been partially relaxed, though the capital controls remain in place.


Endeavour Greece reported that businesses were facing “significant impediments” due to the continuing ATM limits, but on “a smaller scale.”


Nearly half of the companies – 45 percent – said they had been forced to postpone payments to suppliers.

This offers little hope for a silver lining as the nation is hollowed out. As Jeffrey Sachs notes, the formula for success is to match reforms with debt relief, in line with the real needs of the economy.

A smart creditor of Greece would ask some serious and probing questions. How can we help Greece to get credit moving again within the banking system? How can we help Greece to spur exports? What is needed to promote the rapid growth of small and medium-size Greek enterprises?


For five years now, Germany has not asked these questions. Indeed, over time, questions have been replaced by German frustration at Greeks’ alleged indolence, corruption, and incorrigibility. It has become ugly and personal on both sides. And the creditors have failed to propose a realistic approach to Greece’s debts, perhaps out of Germany’s fear that Italy, Portugal, and Spain might ask for relief down the line.


Whatever the reason, Germany has treated Greece badly, failing to offer the empathy, analysis, and debt relief that are required. And if it did so to scare Italy and Spain, it should be reminded of Kant’s categorical imperative: Countries, like individuals, should be treated as ends, not means.


Creditors are sometimes wise and sometimes incredibly stupid. America, Britain, and France were incredibly stupid in the 1920s to impose excessive reparations payments on Germany after World War I. In the 1940s and 1950s, the United States was a wise creditor, giving Germany new funds under the Marshall Plan, followed by debt relief in 1953.


In the 1980s, the US was a bad creditor when it demanded excessive debt payments from Latin America and Africa; in the 1990s and later, it smartened up, putting debt relief on the table. In 1989, the US was smart to give Poland debt relief (and Germany went along, albeit grudgingly). In 1992, its stupid insistence on strict Russian debt servicing of Soviet-era debts sowed the seeds for today’s bitter relations.

Germany’s demands have brought Greece to the point of near-collapse, with potentially disastrous consequences for Greece, Europe, and Germany’s global reputation. This is a time for wisdom, not rigidity. And wisdom is not softness. Maintaining a peaceful and prosperous Europe is Germany’s most vital responsibility; but it is surely its most vital national interest as well.



Citibank strongly believes that Greece needs a 130 billion euro haircut to survive in the Euro zone. they are right, but a haircut will blow up the EU, the ECB + our huge derivative underwriters:


(courtesy zero hedge/Citibank)

Greece Needs A €130 Billion Debt Haircut: Citi

Over 4 years ago, following the first Greek bailout when the global propaganda was pushing the Troika’s party line that Greek debt would magically become sustainable by 2022, we presented a far more skeptical analysis by Citigroup which accurately postulated that Greece would need a 76% debt haircut immediately if it hopes to reduce its debt/GDP to a credible 60%, a number which rose to 95% if Greece waited until, well, now.

Fast forward to today, when Citi’s Guillaume Menuet repeats what Citi (and many others) said back then: without a debt haircut, Greece was doomed, is doomed, and explains “Why Greece’s Third Bailout Will Probably Fail (Eventually.)”

The punchline of the analysis, as before, is that Greece desperately needs one simple thing to survive: a massive debt “haircut” and lots of it. In fact, far more than even the IMF (which now is also wearing its own tinfoil hat with honor) recommends and which eliminates between €110 and €130 billion (or 60%-72% of GDP) in debt.  

(Harvey:  good luck for this to happen!!)

Citi’s thoughts:

The Euro Summit proposal does not include a clear commitment to debt restructuring, and essentially blames previous policy failures for Greece’s ‘insurmountable’ debt problems. It notes that “there are serious concerns regarding the sustainability of Greek debt. This is due to the easing of policies during the last twelve months, which resulted in the recent deterioration in the domestic macroeconomic and financial environment.” The proposal offers an agreement to consider ‘soft’ debt restructuring after the first positive assessment of the programme implementation, noting that “the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level”, and highlighting that “nominal haircuts on the debt cannot be undertaken”.


This position contrasts noticeably with that of the Greek government and the IMF. According to Greek PM Tsipras, the institutions had agreed to start discussing a reprofiling of Greek public liabilities this coming autumn, by ‘transferring’ to the ESM €27bn in ECB debt and €20bn in IMF debt. This process would have been conditional on full compliance with the bailout targets in the next few months (both in terms of budget and structural reforms). In an update of IMF staff’s preliminary debt sustainability analysis, the IMF concluded that an upfront debt relief agreement is needed because Greece’s public debt “has become highly unsustainable”. The IMF noted that Greek public debt is projected to peak close to 200% of GDP by 2017, and to remain elevated (170% of GDP) by 2022, while pointing to considerable downside risks to these projections. The IMF calls for debt relief on a scale that would need to go well beyond what has been considered to date, noting three main options: i) a “dramatic” extension with grace periods of, say, 30 years on the entire stock of European debt (including new assistance), ii) explicit annual transfers to the Greek budget, or iii) deep upfront haircuts.


The European Commission, in its assessment (dated July 10) of Greece’s request for a ESM bailout programme, is also recommending meaningful debt re-profiling, noting “serious concerns regarding the sustainability of Greece’s public debt”. The EU Commission recommends addressing these concerns either i) through a far reaching and credible reform programme (envisaging very strong ownership by the Greek government and debt-mitigating measures that would be granted only once reform commitments have been achieved), or ii) through “a very substantial reprofiling, such as a long extension of maturities of existing and new loans interest deferral, and financing at AAA rates”.



Based on our more conservative GDP and inflation baseline (and assuming no Grexit by 2022), and targeting a debt-to-GDP ratio of 120% by 2022, we estimate the size of the required ‘upfront’ (i.e. to be introduced in 2016) principal haircut to be €110bn (60% of annual Greek nominal GDP in 2014). Note that we do not see much difference in an alternative scenario based on a ‘tranched’ principal haircut framework (of around €15bn per year), also starting in 2016. However, a ‘backloaded’ (i.e. to be introduced in 2022) approach relying on a single haircut would be more expensive, amounting to €130bn (72% of annual Greek nominal GDP in 2014). All these scenarios illustrate how difficult, politically, principal debt reduction will be given the amount involved. The corresponding re-profiling (maturity extension, coupon reduction) would likely require grace periods extending into many decades.

Of course, none of what is said above is impossible.

In fact, Angela Merkel already said it can be done however Greece would first need to exit the Eurozone (in this way the ECB will not suffer a default by a currentEurozone member thus impairing Europe’s “political capital”).

Will it be allowed back? Probably – perhaps a better question is whether it will ever want to go back. But for the Greek government, the path forward could not be clearer – default, exit the Eurozone, introduce your own currency, write down the debt, and emerge with a clean balance sheet. Only then can Greece be viable: either as a country inside the Eurozone, or on its own.

We truly hope Tsipras has finally learned his harsh lesson and is doing two things: i) preparing for the “Varoufakis endgame”, namely the reintroduction of the drachma and ii) arranging a Debtor In Possession loan with the AIIB (as we semi-jokingly suggested weeks ago). Once those two are in place, then and only then, does Greece have some hope to continue its existence as anything more than a European vassal state in perpetuity.





In this second report by Citibank, they believe that Greece will undergo hyperinflation in two years even with the EURO.  They also calculate that by 2018, Greece will have a debt/GDP ratio of 238%.


(courtesy Citibank/zero hedge)

Citi Predicts Greek Hyperinflation Breaks Out In Two Years


Earlier, we showed that according to Citigroup (among many) for Greece to have any hope of surviving, it needs a masive debt haircut: the bigger, the better, with Citi tossing out numbers as high as €130 billion. Still, even if Greece does get debt relief, as long as it remains in the Eurozone, its economy has nothing but hell to look forward to.

Here is how Citi previews the next few years:

From an economic and financial sector angle, the success or failure of a third programme will depend on i) the strength of a possible economic recovery in coming quarters, following an overhaul of the Greek banking system, and on ii) whether debt re-profiling discussions look likely and take place as envisaged. On the first item, the degree of fiscal austerity and outright reforms to be implemented in a short period of time is likely to result in a prolongation of economic recession in coming quarters.And we need to factor in the economic costs from the (very likely) persistence of stringent capital controls and the lack of liquidity in the economy. We recently updated our real GDP growth forecasts and now expect the Greek economy to contract by at least 2.4% YY in 2015 (compared with -0.2% YY projected in June), with the economy likely to remain in recession at least until Q1 2016. Such a poor performance in terms of economic activity would mean a higher risk that Greek economic and fiscal performance would undershoot its programme targets, which could likely challenge its membership in the Eurozone. In addition, debt re-profiling is likely to be deferred, conditional and tranched, and is unlikely to boost the government’s fiscal space for public spending increases or tax cuts. Failure by the Greek authorities to lift capital controls in a meaningful way and a further increase in unemployment (we forecast that the jobless rate will rise from 27% in 2015 to 29% in 2016) could also increase social tensions, in our view.


In the near term, the government probably will face a continued cash shortage, given the likelihood that bank liquidity will remain heavily restricted, that tax payments will be delayed (or not made), and that financing assistance will be kept to a minimum. As a result, we continue to see significant near term risks (before a third programme begins)that the government will have to slash spending further, accumulate further arrears and even – as a last resort – to issue scrip.

And while the one line item everyone traditionally looks for in every Greek economic forecast is what its debt will be now that reality is finally allowed to creep in, a number that Citi now expects to hit 238% by 2018 as highlighted in the row below…

… it was another number that caught our attention: Citi’s estimate for Greek HICP (inflation) in 2017.

  • 22.5%

In other words, Citi predicts that by 2017 Greece will have hyperinflation even if it remains in the Eurozone.

But… but… the whole point of not reverting to Drachme was to have a “stable” currency and to avoid the country’s collapse into a hyperinflationary abyss.

It appears that what Tsipras has done is gotten the worst of all possible worlds: not only will Greece somehow have an imploding economy (with 30% unemployment) and hyperinflation, but it will also remain forever a vassal state of Germany, which will be able to purchase trophy Greek assets at even cheaper prices once the entire economy finally locks up permanently some time in the next two years.

But at least it will have the Euro.



(courtesy Keep Talking Greece)

Greeks Laugh As Bankers Beg Depositors To Return Money


Via Keep Talking Greece,

President of Greek Banks Association Louka Katseli appealed at the citizens to return their money to the banks. “Banks are absolutely trustworthy,” Katseli told Mega TV “as guaranteed by the ECB and the Bank Association, but they would have been even more powerful if 40 billion euros had not been withdrawn in the last months.

Katseli, a former PASOK Minister, appealed to citizens to return their deposits  to the banks “now that the banks are open” after a three-week holiday and capital controls.

“Let’s all help our economy,” Katseli urged Greeks and added “If you take your money out of your chests and houses – which are not safe in any case – and deposit at banks, this will enhance liquidity.”

“There will be no need to “haircut” deposits in the future if we all act responsibly,” she added -cheerfully I suppose.

Katseli’s appeal triggered laughter among Greeks and one stressed with hint to capital controls “Oh yes! I will bring my money back to the bank and get it back 60 by 60 euro.”

Another one noted “Ah sure! Banks will never see my money again, I prefer to buy tonnes of peanuts with it.”

A third commented “Certainly. And the banks will go bust after a while…”

A fourth reckoned a very unfortunate incident in 2010 and busted into tears and laughter. Back then Finance Minister Evangelos Venizelos had appealed to the Greeks to buy Greek bonds. The man invested 10,000 euro to help Greece. Two years later, his investment underwent a 53%-Haircut due to the PSI. Now the nominal value of his investment is …”I don’t even open the envelopes coming from the bank anymore, too frustrating,” he told me.

How can Greeks trust the banks after what has happened? Already many worry about their deposits as mergers of Greek banks are reportedly due. Even though they know that merger do not end in losing your money. Or does it? huh?

* * *

Incidentally, this is just as we predicted last week. In “Greek Banks Just Became A “Strong Sell” At Any Price” we wrote:

… even as an “unsustainable” Greece meanders day to day with yet another capital infusion to avoid a sovereign default, its insolvent banks just became the first casualty of reality. However, they may not be the only ones: recall that bank depositors are nothing more than unsecured creditors. If and when the reality of the Greek economic collapse is fully tabulated (as the IMF appears to have finally done) it won’t be just the equity that is wiped out – depositors themselves face the risk of creeping haircuts to their “liabilities.”


Which is why we doubt that Greek savers will rush to put their money in the banks, and why we think Draghi is taking a huge gamble by putting even more ELA into Greek banks just before the same banks will announce at any possible moment they are forced to liquidate existing shareholders. The popular outcry against the banking system once a bail in is confirmed, even if it does not involve depositors initially, will send shock waves through society and rekindle the bank run once more.


Ironically, the one thing that would help preserve confidence in the Greek banking system, is more transparency about the “performing” nature of Greek bank loans: if this amount has hit 50% (or more) on the total €210 billion of loans, then depositor haircuts become virtually inevitable – anything well below that and there would still be a modest cushion before bail-ins have to go up in the cap structure.


Which is also why we fear no transparency will be forthcoming and why we expect that people may be fooled once again into believing their savings are, well, safe only to find out the hard way they are anything but – a hard lesson that investors in insolvent Greek banks are about to learn first hand.

Sure enough, so far the score is transparency 0 – propaganda: +∞. And as duly predicted, the bank runs continue.







Define Irony: Greek Banks Refuse To Buy ESM Bonds To Fund Greek Bailout


Assuming there are no complete breakdowns or abrupt U-turns among Greek and/or German lawmakers, it appears as though formal discussions on the new Greek bailout package will commence and, in all likelihood, the country will enter a new €86 billion program.

A large portion of the funding will come from the ESM – Europe’s rescue fund. On Tuesday, the ESM sold €2 billion worth of bonds via its dealer group. Nothing too notable about that.

What is notable however, is that one of the 39 dealer banks refused to participate. That bank was none other than National Bank of Greece. Here’s Reuters:

National Bank of Greece declined to buy bonds from the euro zone’s bailout fundin a sale on Tuesday because of Greece’s capital controls, bankers said, a sign of the country’s financial isolation.


NBG is one of 39 dealer banks the European Stability Mechanism routinely uses to help distribute its bonds.


The banks, called the Market Group, underwrite the bonds and sell them on to investors in a process known as syndication. Banks earn a flat fee plus any margin they make in the process.


Sources at two dealer banks said that NBG declined when it was asked in an online chat forum to take part in Tuesday’s bond sale, citing the capital controls.


The bankers said it was very rare for dealer banks to decline an offer to participate.

Presumably what’s happened here is that because Greek depositors can’t buy bonds due to capital controls, National Bank of Greece would end up having to inventory its allotment of ESM paper, as there would be no one to sell it to.

We’re not sure what is more hilariously ironic, the fact that Greek banks are refusing to help fund the bailout mechanism that will be used for their own recapitalization, or the possibility that the capital controls effectively imposed on Greece by creditors are making it harder to raise funds for the bailout.




Why Russia and China said no to Greece as it sought 10 billion dollars in order to print drachmas in place of euros:



Greek Prime Minister Asked Putin For $10 Billion To “Print Drachmas”, Greek Media Reports

Back in January, when we reported what the very first official act of open European defiance by the then-brand new Greek prime minister Tsipras was (as a reminder it was his visit of a local rifle range where Nazis executed 200 Greeks on May 1, 1944) we noted that this was the start of a clear Greek pivot away from Europe and toward Russia.

We further commented on many of the things that have since come to pass:

Europe, for one, will be most displeased that Greece has decided to put its people first in the chain of priority over offshore bidders of Greek assets. Most displeased,especially since the liquidation sale of Greece is part of the Greek bailout agreement: an agreement which as the Troika has repeatedly stated, is not up for renegotiation

But most importantly, even back then we explicitly said that in order for Greece to preserve its leverage (something it found out the hard way it did not have 6 months later), it would need a Plan B, one that involves an alternative source of funds, i.e., Russia and/or China, which could be the source of the much needed interim cash Greece needs as it prints its own currency and prepares for life outside the European prison.

The Germans were not happy: A German central banker warned of dire problems should the new government call the country’s aid program into question,jeopardizing funding for the banks. “That would have fatal consequences for Greece’s financial system. Greek banks would then lose their access to central bank money,” Bundesbank board member Joachim Nagel told Handelsblatt newspaper.


Well, maybe…. Unless of course Greece finds a new, alternative source of funding, one that has nothing to do with the establishmentarian IMF, whose “bailouts” are merely a smokescreen to implement pro-western policies and to allow the rapid liquidation of any “bailed out” society… Which naturally means that now Russia (and China) are set to become critical allies for Greece, which would immediately explain the logical pivot toward Moscow.

Somewhat jokingly, on June 27, the day after Tsipras announced the shocking referendum decision, we repeated precisely this:

As it turns out, none of this was a joke, and, if Greek newspaper “To Vima” is to be trusted, a “Plan B” involving an emergency $10 billion loan from Vladimir Putin which would be used to fund a new Greek currency, is precisely what Greece had been contemplating!

According to Greek Reporter, Greek Prime Minister Alexis Tsipras has asked Russian President Vladimir Putin for 10 billion dollars in order to print drachmas.

In other words, if true, then Greece did just as we said it should: approach Russia and the BRICs with a request for funding to be able to exit Europe’s gravitational pull…

The newspaper report cited Tsipras saying in his last major interview to Greek national broadcaster ERT that “in order for a country to print its own national currency, it needs reserves in a strong currency.

… however, somewhat surprisingly, both Moscow and Beijing said no:

Moscow’s response was a vague mention of a 5-billion-dollar advance on the new South Stream natural gas pipeline construction that will pass through Greece. Tsipras also sent similar loan requests to China and Iran, but to no avail, the report said.

The report continues:

Tsipras was planning the return to the drachma since early 2015 and was counting on Russia’s help to achieve this goal.According to the report, Panos Kammenos, Yiannis Dragasakis, Yanis Varoufakis, Nikos Pappas, Panagiotis Lafazanis and other key coalition members were aware of his plan.


In his first visit to Moscow, Tsipras condemned the European Union policy in Ukraine and supported the referendum of east Ukraine seeking secession. It was then that Germany realized Greece was prepared to shift alliances, something that would threaten the Eurozone cohesion. Tsipras was hoping that Germany would back down under that threat and offer Greece a generous debt haircut. At the time, Tsipras had the rookie ambition that he could change Europe, the report continued.


It also spoke of a “geopolitical matchmaking” as Tsipras was introduced to Leonid Resetnikof, Director of the Russian Institute of Strategic Studies, before the European Parliament elections in May 2014. The introduction was made by Professor of Russian Studies Nikos Kotzias, who later cashed in on his services by getting the chair of Foreign Affairs Minister.

But the biggest stunner: it was Putin who declined the offer on the night of the referendum.

The July 5 referendum was a test for Tsipras to see what the Greek
people were thinking about Europe and the Eurozone. However, on the
night of the referendum, word came from Russia that Putin did not want
to support Greece’s return to the drachma
. That was confirmed the days
that followed. After that, Tsipras had no choice left but to “surrender”
to German Chancellor Angela Merkel and sign the third bailout package.

In other words it was not Tsipras’ failure to predict how Greece would react to the Greek referendum nor was it his secret desire to lose it as previously suggested(expecting a Yes vote and getting 61% “No”s instead),but a last minute rejection by Putin that lead to the Greek government’s capitulation, and the expulsion of Varoufakis who most certainly was the propagator of this plan.

It also means that Merkel suddenly has a massive debt of gratitude to pay to Vladimir, whose betrayal of the Greek “marxists” is what allowed the Eurozone to continue in its current form. The question then is what is Vlad’s pro quo in exchange for letting down the Greek government (and handing over its choicest assets to the (s)quid), whose fate was in the hands of the former KGB spy.

Finally, it is very possible that To Vima is taking some liberties with truth. For confirmation we would suggest to get the official story from Varoufakis, who lately has been anything but radio silent. If confirmed, this will certainly be the biggest and most underreported story of the year, one which suggests that the perpetuation of Merkel’s dream of a united Europe was only possible thanks to this man.


If confirmed, first and foremost look for a growing schism between Europe and the US (which has clearly been pushing Merkel’s buttons via the IMF’s ever louder demands for a debt haircut not to mention Jack Lew’s rather direct intervention in the Greek bailout negotiations) and an increasing sense of friendly proximity between Berlin (and Brussels) and Moscow.

The biggest loser in this game of realpolitik, once again, are the ordinary Greek people.






What was Obama thinking by advocating the Iran deal?:


(courtesy zero hedge)

John Kerry “Very Disturbed” By Iran Vow To Defy American Policies

Surprise! Just days after the ‘deal’ to bring world peace a little closer amid much crowing by the Obama administration (ahead of Congress’ 60-day decision process), Iranian Supreme Leader Ali Khamenei on Saturday vowed to defy American policies in a speech punctuated by chants of “Death to America” and “Death to Israel”. As Reuters reports, US Secretary of State John Kerry said the speech was “if it is the policy, it’s very disturbing, it’s very troubling,”seemingly surprised at the rhetoric.



Ayatollah Khamenei told supporters on Saturday that U.S. policies in the region were “180 degrees” opposed to Iran’s, at a speech in a Tehran mosque punctuated by chants of “Death to America” and “Death to Israel”.“Even after this deal our policy toward the arrogant U.S. will not change,” Khamenei said. As Reuters reports,

“I don’t know how to interpret it at this point in time, except to take it at face value, that that’s his policy,” John Kerry said in the interview with Saudi-owned Al Arabiya television, parts of which the network quoted on Tuesday.


“But I do know that often comments are made publicly and things can evolve that are different. If it is the policy, it’s very disturbing, it’s very troubling,” he added.

*  *  *

Somewhere Bibi is doing the “told you so” dance…



Your early morning currency, and interest rate moves (at 1 pm)

Euro/USA 1.0950 up .0166

USA/JAPAN YEN 123.84 down .454

GBP/USA 1.5558 down .0017

USA/CAN 1.2950 up .0021

Early this afternoon in Europe, the Euro rose by a 166 basis points, trading now well above the 1.09 level at 1.0950; 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 45 basis points and trading just below the 124 level to 123.84 yen to the dollar.

The pound was down this morning by 9 basis points as it now trades just below the 1.56 level at 1.5558, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is up by 45 basis points at 1.2950 to the dollar.

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

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

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

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

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

The NIKKEI: this morning: up 191.05 or .93%

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

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

Gold very early morning trading: $1105.65


Early Tuesday morning USA 10 year bond yield: 2.33% !!!  down 2 in basis points from Monday night and it is trading well above  resistance at 2.27-2.32%

USA dollar index early Tuesday morning: 97.27 down 78 cents from Monday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Tuesday morning


And now for your closing numbers for Tuesday:

Closing Portuguese 10 year bond yield: 2.64%  down 4 in basis points from Monday

Closing Japanese 10 year bond yield: .43% !!! down 2 in basis points from Monday/still very ominous

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

Spanish 10 year bond yield: 1.94% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 1.92% down 7 in basis points from Monday: (very ominous)

trading 2 basis point lower than Spain.



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


Euro/USA: 1.0942 up .0111 ( Euro up 111 basis points)

USA/Japan: 123.91 down  .387 ( yen up 39 basis points)

Great Britain/USA: 1.55555 down .0012 (Pound down 12 basis points)

USA/Canada: 1.2959 down .0037 (Can dollar up 37 basis points)

The euro rose considerably today. It settled up 111 basis points against the dollar to 1.0942 as the dollar traded  southbound  today against all the various major currencies. The yen was up by 39 basis points and closing just below the 124 cross at 123.91. The British pound was down a tiny 12 basis points, closing at 1.5555. The Canadian dollar went up slightly by 37 basis points closing at 1.2959.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.

Your closing 10 yr USA bond yield: 2.33% down 1 in basis point from Thursday// (well above the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

97.31 down 73 cents on the day


European and Dow Jones stock index closes:


England FTSE down 19.62 points or 0.29%

Paris CAC down 35.92 points or 0.70%

German Dax down 130.92 points or 1.12%

Spain’s Ibex down 97.50 points or 0.84%

Italian FTSE-MIB down 318.29 or 1.32%


The Dow down 181.12  or 1.00%

Nasdaq; down 10.74 or 0.21%


OIL: WTI 50.82 !!!!!!!


Closing USA/Russian rouble cross: 56.88  up 1/10 roubles per dollar on the day



And now for your more important USA stories.


Your closing numbers from New York

Dollar Dumped & Stocks Thumped As Bonds & Bullion Bounce

Nothing to see here, move along….


And this seemed to sum the mainstream media’s perspective up nicely….

Overnight saw stocks ramp once again towards highs to run stops… but having failed to make higher highs on this surge, combined with weak data and BoJ comments, sent USDJPY sprawling and thus stocks…


Nasdaq failed to ghold green for the week leaving just Trannies up since Friday…


On the day… The Dow suffered (with IBM and UTX accounting for over half of the losses).. every rally was sold and the late day lift on th eback of the S&P upgrade of Greece wass a joke…


Late day saw the e-mini S&P 500 futures ramp perfectly to VWAP to enable sell orders to be efficiently executed…oh and look at the volume rush as selling begins!


No improvement at all in Nasdaq breadth…


Stocks caught down to VIX decoupling…


And then there was LifeLock… sent reeling by an FTC Tweet…

Treasury yields pumped-n-dumped in what is clearly indicative of thin liquidity and a lack of conviction…


Are stocks starting to catch down to bonds?


Major Dollar weakness on the day…


Commodities gained amid the Dollar weakness…


On a side note, we point out the decoupling of equity and gold VIX as we saw during The Taper Tantrum and the post-QE3-end period…


But crude roundtripped… fo rno good reason = once again testing the spike highs on Sunday night as algos were in charge again


Charts: Bloomberg





We warned you about this:

(courtesy zero hedge)

Pay Attention Greece: Puerto Rico Refuses To Pay Creditors Before It Fully Funds Its Citizens’ Needs

While Greece may be “contained” for the time being, the only reason why its creditors were eager to collaborate on an expedited basis with the humiliated Syriza government is because as we noted earlier, of the €7.1 billion bridge loan released to Greece €6.8 billion would promptly be used to repay Greece’s creditors including the ECB for whom an event of default would be unthinkable unlike the IMF.

The sad part, as we laid out in “The Unspoken Tragedy In The Upcoming Greek Bailout” is that both with the bridge loan(s) and the actual €86 billion (or more) EFSF bailout still to come, the vast majority of funds will be used to repay creditors, and even that wouldn’t be sufficient hence the need to put €50 billion in Greek assets in escrow as a repayment pledge for all incremental overages.

Said otherwise, very little if anything from Europe’s generous third bailout would actually reach the Greek people yet again (and quite likely there would be a funding deficiency hence the need to sell assets).

Compare that to the position taken by Puerto Rico today, when its budget director said the commonwealth won’t redirect cash from its operating budget to make debt payments, in the process “ratcheting up the pressure to restructure the island’s $72 billion debt burden” as Bloomberg reports.

The comments from Luis Cruz, director of the Office of Management and Budget, come as Standard & Poor’s slashed its rating on the Public Finance Corp.’s bonds to CC from CCC-, calling an Aug. 1 default on the securities a “virtual certainty.”

Puerto Rico has $36.3 million of Public Finance Corp. debt maturing Aug. 1 that needs to be repaid through legislative appropriation and as previously reported, Puerto Rico said last week the agency failed to transfer $36.3 million to a trustee to cover the Aug. 1 debt payment because the legislature didn’t appropriate the funds.

The junk-rated island must first pay health, security and education expenses, Luis Cruz, director of the Office of Management and Budget, said during a press conference Monday in San Juan.

“It is the government’s priority to provide public services and we will not be transferring funds from these assignments to pay the debt,” Cruz said.

“We all know the difficult situation we are facing in terms of cash flow,” Cruz added, “And we have to decide how we handle that cash flow and our priority is to provide services to citizens: health, safety, education.

Bloomberg adds that last month the island’s legislators approved a budget for the fiscal year that began July 1 that doesn’t include $93.7 million to repay debt-service costs on PFC bonds. “The legislature did create a fund that the Government Development Bank can use to repay debt. The bank, which handles the island’s borrowing deals, must ask the legislature before it can access that money. The legislature doesn’t reconvene again until mid-August, after the bonds mature. Governor Alejandro Garcia Padilla doesn’t plan to call a special legislative session to bring lawmakers back earlier to discuss the Aug. 1 payment, Cruz said.”

David Hitchcock, a S&P analyst in New York, wrote that “A default on the PFC bonds would be further demonstration of increasing unwillingness to pay debt in full and also raises the potential for future unequal treatment between various types of bondholders.”

And while it would be easy to say that Puerto Rico and Greece are comparable, the reality is that unlike the soon to be default island, Greece truly did have, and still has, a gun to its head, as a result of its unwillingness to prepare for the Plan B it itself was eager to escalate to, namely existing in a world without the financial backing of the ECB which it found the hard way, means capital controls, bank runs, and a paralyzed financial system.

Which is why Puerto Rico is lucky that its creditors are largely inert entities – mostly municipal funds and a few activist hedge funds – who have no leverage over the island. Which is why PR can default on them without fear of retaliation – surely the US will never throw the commonwealth out of the Dollarzone, whether permanently or “temporarily”, and why Greece can only stand and watch as two case studies emerge: one of an insolvent state which can at least prioritize its own population over the demands of foreign creditors, and another insolvent state, whose creditors can take advantage of the European monetary “union” which for Greece is now a prison, and set any and every demand they want, knowing full well they can crush the local economy all over again with just one ELA-limiting press release.

In this regard, it is quite clear that Schauble was joking when he offered to trade Greece, which has zero leverage over its creditors (at least until it implements plans for existence outside of the Eurozone) for Puerto Rico, whose creditors have zero leverage over the island.

Finally, we hope the Greek government is watching and learning, and taking appropriate measures so that it too can, at least once, prioritize its own people’s needs over those of a global banking oligarchy.



Why the dollar is collapsing today:


Is This Why The Dollar Is Sliding?

Stocks, bond yields, and the Dollar suddenly started dropping right as The Fed unveiled its revisions for industrial production and capacity utlization.


Already at weak levels, both were revised notably lower, slowing the market’s rate-hike expectations and stalling any hope that the recovery is gathering pace.

Judging by the chart below, the June payrolls report was right: snowfall in the summer was indeed much worse than most remember.



Which begs the question: after double-seasonally adjusted GDP numbers is “Toshiba-adjusted” GDP coming next?





After hours earnings:


Earnings Avalanche: CMG, GPRO, YHOO, MSFT All Lower After Hours



Unleash the talking head spin…


Yahoo misses and cuts guidance...

  • *YAHOO 2Q ADJ. EPS 16C, EST. 19C
  • *YAHOO SEES 3Q ADJ. EBITDA $200M-$240M, EST. $279.7M
  • *YAHOO SEES 3Q REV EX-TAC $1B-$1.04B, EST. $1.07B

Micorosft beat bottom, missed top line...

  • *MICROSOFT 4Q UNEARNED REV. $25.32B, EST. $25.96B

Chipotle beat bottom line but missed comps and revenues...

  • *CHIPOTLE 2Q EPS $4.45 , EST. $4.43
  • *CHIPOTLE 2Q REV. $1.2B, EST. $1.22B

GoPro beats but fails to raise guidance, reiterating prior margins

  • *GOPRO 2Q REV. $419.9M, EST. $395.2M
  • *GOPRO 2Q ADJ. EPS 35C, EST. 26C

And the result…

Then it was Apple’s turn:

Apple Plunges Despite EPS Beat On iPhone Sales Miss, Drop In China Sales, Weak Guidance And Strong Dollar Warning

Apple is important. Perhaps the most important company not only for the Dow Jones, but because it also happens to be the largest company by market cap, in the world. As such nobody will be happy that moments ago AAPL reported results which were in a word, lousy.

It wasn’t so much the earnings, because the EPS of $1.85 was a modest beat of expectations of $1.81, while revenues also beat consensus of $49.4 billion fractionally, printing at $49.6 billion; the margin also beat slightly coming at 39.7% above the exp. 39.5%.

The problem was in the detail, with 47.5 million iPhone shipments missing expectations by 1.3 million units, even as both iPad (whose ASP came at $415 below the $426 expected), and Mac units coming in as expected.

But the biggest surprise was in China, where as we warned previously, the Apple euphoria appears to have ended with a bang, with greater China sales tumbling by 21% from $16.8 billion to $13.2 billion. And keep in mind this was in the quarter when the Composite was hitting multi year highs, and the July crash was not even on the horizon.

As for the cherry on top it was the company’s guidance which now sees Q4 revenue at $49-$51 billion, or below the $51.1 bn consensus estimate, with the CFO adding that the strong USD is finally getting to the company, warning that Apple “faced a difficult foreign exchange environment.”

And all this happened in a quarter in which AAPL bought back $10 billion of its own stock.

The above in charts:



Unit shipments:


Geographic breakdown:




Finally, AAPL’s net cash (excluding steadily rising debt) remains flat:


As expected, there was no mention of either the iWatch or Apple TV. Or a new buyback.

* * *

And here, from the WSJ, is a reminder why AAPL is so very crucial to not only the tech sector, but the entire market:

No company produces bigger profits than Apple Inc. Likewise, no company contributes more to the profit picture of the S&P 500 than Apple.


Apple is a leviathan of a company that is a major contributor of profits in corporate America. Its fortunes, also, are inextricably intertwined with two of the biggest growth markets that exist, smartphones and China. That makes it a bellwether. Because of its success, Apple is also an out-sized member of the S&P 500. We noted yesterday that the stock comprises about one percentage point of the S&P 500’s 3.5% gain for this year (before Tuesday’s selloff). It is also, due to its massive profits and market-cap weighting within the index, the largest single contributor to S&P 500 profits. By a long shot.


Now, there certainly isn’t anything to be worried about here. Apple is expected to earn about $1.80 a share, or about $10.4 billion, on nearly $50 billion in sales, and as usual with this company, the only real question is by how far will it exceed Street estimates.


Apple is projected to single-handedly give the tech sector all of its earnings growth this quarter, just edging it up by 0.2%. Without Apple, the sector would see a contraction of 6%.


It has a big impact on the overall market as well. Since the third quarter of 2011, Apple, for every single quarter, has comprised no less than 3% of the S&P 500’s operating earnings, according to data from S&P Dow Jones Indices. It accounted for 2.87% of the index’s operating earnings of $25.29 in September 2011, and has ranged higher since then. In the first quarter of 2015, it comprised 5.97% of the $25.81 operating profit. In the fourth quarter of 2014, it was 7.62% of the $26.75 profit.


Think of its this way. If all 500 of the companies in the index contributed an even amount, Apple’s earnings would account for about 0.2% of the overall profit. On the contrary, Apple is by far the single biggest contributor to the index’s earnings. The next largest contributor is J.P. Morgan, which is contributed about half of that, at 64 cents. For comparison sake, this is what other tech names are contributing: Microsoft Inc. (estimated): 52 cents, IBM: 42 cents, Google Inc.: 38 cents; Cisco Systems Inc. (estimated): 32 cents, Intel Corp.: 32 cents.

As of this moment the stock is down $10 or about 7% in the after hours, so for all those hoping for the leviathan break out, will have to wait until the next quarter, or the release of the iWatch 2.0, whichever comes first.


Well that is all for today
I will see you tomorrow night


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