July 22/Another withdrawal of 2.38 tonnes of gold from the GLD heading to Russia and Shanghai/Russia adds 25 tonnes of gold to its arsenal , tripling its month purchases/another raid on gold and silver today/Silver OI remains extremely high despite the raids/China withdraws 1/2 trillion USA in treasuries this past 1/2 year to shore up its balance sheet/

Good evening Ladies and Gentlemen:






Here are the following closes for gold and silver today:



Gold:  $1091.40 down $12.00  (comex closing time)

Silver $14.72 down 5 cents.



In the access market 5:15 pm

Gold $1094.25

Silver:  $14.80



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

At the gold comex today, we had a poor delivery day, registering 2 notices for 200 ounces . Silver saw 0 notices filed for nil 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 fell by a tiny 15 contracts despite the fact that yesterday’s price was up by 2 cents and the gold price was pummeled.  The total silver OI continues to remain extremely high, with today’s reading at 190,226 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 0 notices served upon for nil oz.

In gold, the total comex gold OI rests tonight at 459,760 for a loss of 7912 contracts as gold was down $3.30 yesterday. We had 2 notices filed for 200 oz  today.

We had another withdrawal in gold tonnage at the GLD to the tune of 2.38 tonnes/  thus the inventory rests tonight at 687.31 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 no change in inventory at the SLV / Inventory 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 fall by a tiny 15 contracts to 190,226 despite the fact that silver was up by 2 cents yesterday in another 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 7912 contracts down to 459,760 contracts as the price of gold was down by $3.30 yesterday. The  bigger liquidation in gold OI but not silver as something big is going on behind the scenes.

(report Harvey)

2 Today, 5 important commentaries on Greece

(zero hedge, Bloomberg/Reuters/)

3. A huge story on 500 billion USA treasuries have been liquidated by China.

(zero hedge)

4. Gold trading overnight

Russia adds a whopping 25 tonnes in its latest month/triple from their average of  7-9 tonnnes

(Goldcore/Mark O’Byrne/)

(zero hedge)

5. Caterpillar states we are not in a recession but a depression

Sales in Latin American down a whopping 50%

(zero hedge)

6 Trading of equities/ New York

(zero hedge)

7  USA stories: Hedge funds with huge positions in Caesar’s are burned tonight

(zero hedge)


 8.  Copper and oil plunge
(two stories/zero hedge)
9. Global bond market have zero liquidity. Claims another victim today Bondcube which opened only 3 months ago
(zero hedge)

plus other topics…

Here are today’s comex results:


The total gold comex open interest fell by 7,912 contracts from 467,672 down to 459,760 as gold was down $3.30 in price yesterday (at the comex close). The bankers got their  much bigger liquidation. We are now in the next contract month of July and here the OI fell by 194 contracts to 121 contracts. We had 193 notices filed yesterday and thus we lost 1 contract or an additional 100 ounces will not stand in this non active delivery month of July. The next big delivery month is August and here the OI decreased by 18,602 contracts down to 196,180. 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 good at 236,361.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 219,445 contracts. Today we had 2 notices filed for 200 oz.


And now for the wild silver comex results. Silver OI rose by 15 contracts from 190,241 down to 190,226 despite the fact that the price of silver was up by 2 cents with respect to yesterday’s mulling of gold. We continue to have our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver  arena. We are in the delivery month of July and here the OI rose by 22 contracts up to 154. We had 25 notices served upon yesterday and thus we gained 47 contracts or an additional 235,000 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 3 contracts up to 186. The next major active delivery month is September and here the OI rose by 98 contracts to 129,935. The estimated volume today was fair at 31,707 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 33,989 contracts which is also fair in volume.  We had 0 notices filed for 125,000 oz.

July initial standing

July 22.2015



Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz 257.20  (Manfra)  8 kilobars
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 2 contracts (200 oz)
No of oz to be served (notices) 119 contracts (11,900 oz)
Total monthly oz gold served (contracts) so far this month 607 contracts(60,700 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 288,420.6   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 1 customer withdrawal


i) Out of Manfra:  257.20 oz  (8 kilobars)

total customer withdrawal: 257.20 oz

We had 0 customer deposit:


Total customer deposit: nil 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 2 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 (607) x 100 oz  or 60,700 oz , to which we add the difference between the open interest for the front month of July (121) and the number of notices served upon today (2) 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 (607) x 100 oz  or ounces + {OI for the front month (121) – the number of  notices served upon today (2) x 100 oz which equals 72,600  oz standing so far in this month of July (2.258 tonnes of gold).

we lost 1 contract or an additional 100 oz will not stand in this non active delivery month of JULY.

Total dealer inventory 482,778.738 or 15.016 tonnes

Total gold inventory (dealer and customer) = 7,795,091.837 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 22 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,230,279.798  oz (Scotia )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 599,205.527 oz (Brinks, Delaware)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 154 contracts (770,000 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 8,184,613.5 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz


We had 2 customer deposits:

i) Into Brinks:  598,171.72 oz

ii) Into Delaware: 1033.807 oz


total customer deposit: 599,205.527 oz

We had 1 customer withdrawals:

i)Out of  Scotia: 1,230,279.798 oz

total withdrawals from customer:  1,230,279.798  oz

we had 0  adjustments


Total dealer inventory: 58.107 million oz

Total of all silver inventory (dealer and customer) 177.899 million oz

The total number of notices filed today for the July contract month is represented by 0 contracts for nil 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 (154) and the number of notices served upon today (0) 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 (154) -number of notices served upon today (0} x 5000 oz ,= 17,415,000 oz of silver standing for the July contract month.

We gained 47 contracts or an additional 235,000 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 22/another withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 687.31

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 2o.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 22 GLD : 687.31 tonnes


And now for silver (SLV)

july 22/no change in silver inventory/inventory rests at 328.834 million oz.

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 22/2015:  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 10.3 percent to NAV usa funds and Negative 10.50% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.6%

Percentage of fund in silver:38.0%

cash .4%

( July 22/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 0.54%!!!! NAV (July 22/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV rises to – .73% toNAV(July 22/2015

Note: Sprott silver trust back  into positive territory at  0.54%

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

Central fund of Canada’s is still in jail.

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

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


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

on gold and silver issues:


(courtesy/Mark O’Byrne/Goldcore)


Russians Buy Gold Again In June – Another 25 Tonnes

– Russia adds another 800,000 ounces or 25 tonnes to gold reserves in June
– Russia’s has sixth largest gold reserves in the world
– Allocates 13% of FX reserves to gold
– Central bank buys all Russian gold production
– Other Russian gold demand imported
– If billionaire oligarchs diversify into gold, prices will rise sharply
– Russia views gold bullion as “100% guarantee from legal and political risks”


With all the focus on the Chinese lowballing their total institutional gold holdings, combined CIC, SAFE and PBOC, this week and the continuing attacks and manipulation of the gold market on Sunday night, the latest large increase in Russia’s gold reserves has gone largely unnoticed and barely covered by commentators – especially the more vocal bearish ones.

Russia continues to add to its gold reserves and added another 800,000 ounces in June or another 25 metric tonnes, and analysts believe this buying will continue in the coming months.

Its total gold reserves now amount to 41 million ounces or around 1,275 metric tonnes, with a current value of just $48 billion. Russia’s total FX reserves are $362 billion and their gold allocation is now 13% of their total reserves.

In contrast, the U.S. is believed to have over 8,400 metric tonnes of gold and no foreign exchange reserves. The share of gold in foreign exchange reserves is much lower than in many other countries such as the U.S., Italy and France.

This ranks Russia in sixth place globally in terms of gold reserves behind the U.S., Germany, Italy, France  and China after their PBOC announcement last Friday.

In 2014, Russia bought more gold in than in any year since the break-up of the Soviet Union.  The country acquired over 173 metric tonnes according to World Gold Council figures. Reserve diversification intensified after April — averaging almost 20 tonnes per month.

Much of the gold bought may have come from Russian gold production which is currently at about 25 metric tonnes per month.  In 2014, Russia was the third largest gold miner in the world at 266.2 tonnes, just six tonnes short of Australia in second place and China in first place.

Thus, the Russian central bank is generally consuming all of Russian gold production and sometimes having to import gold. Therefore, all domestic demand for gold and Russia is an increasingly wealthy nation with thousands of millionaires and hundreds of billionaires including mega rich oligarchs.

If any of these oligarchs decide to begin accumulating gold, then the already delicate supply balance in  the physical gold market will be impacted and we will see much higher prices.

Data show that throughout the last year’s financial crisis Russia continued to add to its gold reserves. In December – when the rouble had crashed to 68.5 roubles to the dollar, down from 43 roubles six weeks previously – the Russian central bank intervened by selling $2 billion of currency reserves to support the rouble.

Despite the magnitude of the crisis in Russia – or perhaps because of it – the Russian central bank did not sell any gold. Indeed, since early 2007 has only sold gold on two occasions – both in 2012 and both times for relatively small amounts.

As the pressurised economy began to stabilise the central bank refrained from adding to its reserves buying no gold in January and February. In March it compensated by reentering the market with its second largest purchase in almost five years.

Clearly, Russia puts great strategic importance on its gold reserves. Both President Putin and Prime Minister Medvedev have been photographed on  numerous occasions holding gold bars and coins as a display of economic stability and strength.



The successful stewardship of Russia’s economy out of crisis by its government in spite of sanctions has even led many investors surveyed by Bloomberg to view Russia as a good destination for investment.

While its gold reserves may not be on a par with western nations it is worth noting that neither is Russia’s debt. It’s Government Debt to GDP ratio is less than 18% whereas that of the U.S. and the UK are 101% and 82% respectively. Many European nations have much higher debt levels.

In the event of a new global debt crisis and an international monetary crisis, Russia is less fragile than many debt-laden western economies.

Investors would be wise to follow Russia’s example by reducing their exposure to debt and having an allocation to physical gold.

Must-read guide: Gold and Silver Storage Must Haves



Today’s AM LBMA Gold Price was USD 1,096.80, EUR 1002.468 and GBP 702.38 per ounce.
Yesterday’s AM LBMA Gold Price was  1,108.00, EUR 1,021.15 and GBP 711.47per ounce.

Gold fell a marginal $3  to $1100.20 per ounce and silver rose 0.6% or 10 cents to $14.81 per ounce yesterday.

Today, gold in Singapore ticked lower, prior to gold bullion in Zurich moving sideways..

Silver for immediate delivery fell 0.6% to $14.86 an ounce. Spot platinum rose 1% percent to $973 an ounce, while palladium fell 1.2 percent to $622 an ounce.

Breaking News and Research Here.


A very important commentary from Lawrence Williams of Mineweb

He basically is stating that miners are mining gold at close to their costs:

(courtesy Lawrence Williams/Mineweb)

Gold majors skating close to the precipice

The latest gold price declines are putting even the majors close to loss-making territory, and the industry’s long-term future could be seriously damaged.

| 22 July 2015 12:10


LONDON – Let’s face it, in the light of the latest gold price falls, the gold mining sector now desperately needs something that can set it back on a positive track. Gold stocks are sitting at multi-year lows and for even the gold mining majors their 2015 AISC predictions are now getting perilously close to the levels where gold is currently trading.

Here’s a list of the World’s top 5 gold miners and their announced Q1 AISCs and AISC guidance for the current year.

Rank Company Q1 2015 AISC 2015 AISC costs guidance
1. Barrick Gold (ABX) $927 $860-895
2. Newmont Mining (NEM) $849 $960-1020
3. AngloGold Ashanti (AU or ANG) $926 $1000 – $1050
4. Goldcorp (GG) $895 $875-950
5. Kinross Gold (KGC) $964 $1000-1100

Source: Company reports.

As can be seen from the above, three of the top 5 are already probably looking to an AISC level of close to $1000 an ounce or more this year. But perhaps what is even more worrying for gold stock investors in the companies is that some analysts don’t believe even AISC are a sufficient indicator of the real cost of keeping the company on track, as the figure ignores some capital, permitting, and social costs. In terms of achieved Free Cash Flow, this means that many gold miners will be falling short. Sometimes it is hard for investors to get to grips with the fact that a mining company can report what appear to be profitable mining activities, yet will end up making an overall loss and may even need to dip into financial reserves or sell assets to retain dividend levels.

The World Gold Council also suggests another more rigorous metric – All In Costs (AIC) – which sets the bar a little higher by taking into account costs incurred by a mining company but not necessarily directly relating to current operations, but nonetheless have an impact on overall profit and cash flow figures.

(Additional costs categories in AIC over and above the AISC ones, as set out by the WGC are as follows: Community Costs not related to current operations; Permitting Costs not related to current operations; Reclamation and remediation costs not related to current operations; Exploration and study costs (non-sustaining); Capital exploration (non-sustaining); Capitalised stripping & underground mine development (non-sustaining); and non-sustaining Capital expenditure). Some companies do also report AIC data – notably some of the South African gold miners that mostly report this as a matter of course, but these levels are largely ignored by analysts as they can’t be used for comparisons given the majority of gold mining companies don’t provide comparable figures.

South African Gold Stocks

A couple of months ago Mineweb published an article speculating that South Africa – once the world’s major gold producer by a mile – might have no gold mining industry left to speak of by the end of the decade: Could SA’s gold mining industry be gone by 2020? The country’s gold miners are currently in the throes of wage negotiations with unions which could result in raising their costs base even higher (quite substantially so if the unions don’t moderate their positions and the miners are forced to accede) and in AISC terms the country’s miners are mostly marginal already due to the cost of mining gold at huge depths by world standards and at ever declining grades. AIC metrics reduces the margins even more (if indeed there are any margins to be reduced for most mines), so the earlier article was a particularly prescient one should the gold price remain at current levels – or even fall further.

In AngloGold, the AIC figure is around $100/ounce higher than its already high plus $1000/ounce AISC guidance level. For Gold Fields, which falls just outside the Top 5 noted world gold miners above, the AIC figure is only around $20 higher than AISC – but guidance for the year on the latter comes out at a troubling $1055 an ounce. But these have substantial non-South African operations that are mostly performing better costs-wise than their domestic mines.

Gold Fields spin-off, Sibanye Gold – which is also in the top 10, but with all its mines in South Africa, guides at AISC for the year at $1055-$1100/ounce and AIC $10-15 higher. Thus seemingly marginal at current prices although it may well be currently the most profitable of the South African majors!

Harmony – nowadays no longer in the world’s top 10 gold miners in production terms – reported March quarter AISC of $1258 an ounce which would put it well under water at the current gold price, but it is continuing to make progress in trimming costs and was looking for a better June quarter. The latest gold price collapse will undoubtedly focus management even more on making further costs inroads – and could lead to closures.

All these miners have been helped to an extent by the rising US dollar against the Rand in respect of their South African operations – it currently stands at $1=R12.4 – an 18% rise in the past year – with revenues in dollars and most costs in Rands which gives a little breathing space. But inflation tends eventually to erode these advantages over time.

All these companies do have options that can lower their overall costs levels and keep them operating, but these mostly involve shuttering the most costly operations that may bring them into direct conflict with the nation’s government concerned about the already unacceptably high unemployment situation and, of course with the seemingly increasingly militant mining unions.

The South African situation has in part been mirrored elsewhere with cost pressures increasing, and many mid-tier and junior miners will now be operating close to, or at, break-even levels or worse on their current AISC figures. Most have already been making inroads into their costs structures – so much so that there are few further savings to be made. Gold exploration which has accounted for a perhaps ridiculously high proportion of global exploration expenditures in relation to global mined output value (iron ore, coal, and copper rate far higher in this latter respect) has been trimmed and trimmed. Most of the majors are only conducting exploration drilling in and around existing operations, and the juniors’ capabilities of financing greenfield exploration has been heavily curtailed.

Unless there is a major price turnaround, and soon, gold mining is set for a very severe downturn and the long term damage to the industry’s future will be severe. The industry will be desperately hoping that just perhaps gold has bottomed, and there are better things ahead but there’s little sign of this as yet.






(courtesy Seth Lipsky/the Wall Street Journal)




Seth Lipsky in The Wall Street Journal: Fifty years of debasing money


By Seth Lipsky
The Wall Street Journal
Wednesday, July 22, 2105

July 23 marks the 50th anniversary of the Coinage Act of 1965, which stripped U.S. coins of silver and made legal tender out of base metal slugs. It’s an anniversary that comes at an apt time, as Congress considers monetary reform.

This discussion has been quietly taking place in recent months, in the Senate Banking and House Financial Services committees. Rep. Kevin Brady (.-Texas), vice chairman of the Joint Economic Committee, recently reintroduced a proposal for a Centennial Monetary Commission as the Federal Reserve starts its second century.

The anniversary of the 1965 Coinage Act is a reminder of why reform is needed. Speaking from the White House Rose Garden, President Lyndon B. Johnson called the law he signed a “very rare and historic occasion.” It certainly was; it superseded the coinage act drafted by Alexander Hamilton and passed by Congress in 1792. …

… For the remainder of the commentary:




Gold’s plunge sparks retail demand in China, India


By Biman Mukherji, Alice Kantor, and Rhiannon Hoyle
The Wall Street Journal
Wednesday, July 22, 2015

HONG KONG — Gold’s plunge to five-year lows this week has prompted a swift rise in demand from jewelry retailers in China and India, the world’s top consumers of gold, leading to a doubling of premiums paid on physical gold.

At the same time, sales of gold coins from Australia’s biggest bullion mint have been rising sharply, likely thanks to some bargain hunting.

The increase in demand is expected to provide a cushion to the battering that gold has taken this week, although it may not be enough to offset the bearish outlook on the yellow metal amid growing expectations of a rise in U.S. interest rates and a lack of safe-haven demand. India, together with China, accounts for around half of the global demand. …

… For the remainder of the report:


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


1 Chinese yuan vs USA dollar/yuan strengthens to 6.2093/Shanghai bourse green and Hang Sang: red

2 Nikkei down 248.30 or 1.19%

3. Europe stocks mostly in the red /USA dollar index up to 97.42/Euro down to 1.0922

3b Japan 10 year bond yield: lowers to 41% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.80

3c Nikkei still just above 20,000

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

3e WTI 50.32 and Brent:  56.69

3f Gold down /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 down for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .76 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rises to 21.83%/Greek stocks this morning:  still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield falls to: 11.43%

3k Gold at $1093.30 /silver $14.77

3l USA vs Russian rouble; (Russian rouble down 1/5 in  roubles/dollar in value) 57.09,

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 .9586 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0481 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 +.76%

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)


Apple, Microsoft Plunge Drags Global Markets Lower, Oil Resumes Slide

While this week has been, and continues to be, devoid of macro updates, yesterday’s flurry of mostly disappointing earnings releases both before and after the open, including some of the biggest DJIA companies as well as the current and previously biggest and most important companies in the world, AAPL and MSFT, both of which came crashing down following earnings and forecasts that were well short of market expectations, came as a jolt to a market that was artificially priced by central bank liquidity and HFT momo algos beyond perfection. Add to that yesterday’s downward revision to historical industrial production which confirmed the US economy is a step away from recession, as well as last night’s Crude API inventory build which is once again pressuring WTI lower and on the verge of a 49 handle, and perhaps the biggest question is why are futures not much lower.

Stocks in Europe traded mixed, with information tech and energy sectors underperforming, following less than impressive earnings by Apple and Microsoft after the closing bell on Wall Street, as well as lower energy prices. Of note, Apple’s German listed shares traded lower by as much as 7%, with ARM Holdings down 4% after failing to meet revenue expectations.
Fixed income markets have seen light news flow during the European session, with Bunds opening higher amid soft equities before paring these gains throughout the morning.

Asian equities tracked the weakness seen on Wall Street, after Apple (AAPL) shares declined by 9.1% after-market following their iPhone sales missing expectations (47.5mln vs. Exp. 48.8mIn) and Microsoft posted a record quarterly net loss. Nikkei  225 (-1.2%) was dragged lower by softness in IT, firmer JPY and declines among Apple suppliers. ASX 200 (-1.6%) traded in negative territory amid losses sustained in large banks, following analysts revising their profit forecast downwards, while Chinese markets fluctuated between gains and losses with the Shanghai Comp. consolidating around the 4000 level.

In FX, EUR/GBP continued to trend lower, moving below the 0.7000 in the process, driven by hawkish comments by BoE’s Miles who said that he expects inflation to converge towards the 2% target at the end of 2015. The release of the most recent BoE minutes revealed a 9-0 vote and while a number of MPC members see increasing inflation risks which are skewed to the upside, the minutes also warned that GBP strength could suppress inflation . The rhetoric released in the minutes are more or less a reiteration of the most recent MPC comments and as such proved to be somewhat uneventful.

AUD/USD saw volatile trade as it initially fell after the latest Australian headline CPI figure missed expectations (0.7% vs. Exp. 0.8%). However, AUD then pared some of its losses as RBA’s preferred trimmed mean figure beat expectations (2.2% vs Exp. 2.1%). Later conflicting comments from RBA Governor Stevens also provided a catalyst for price action, as he stated that rate cuts are still on the table but hinted concern of risks from lower rates and that policy was appropriate for the time being.

WTI and Brent Crude futures trended lower overnight and in Europe this morning, weighed on by the ongoing concerns over the slowdown in China, as well as the latest API data release which showed that stockpiles increased by 2.3mln (Prey. -7.3mIn). Elsewhere, gold resumed its downward trend, moving below the psychologically important USD 1,100 level.

Looking ahead, sees the release of RBNZ Rate Decision, DoE crude inventories, Existing Home Sales as well as earnings from Coca Cola, Boeing and Qualcomm

In summary: European shares remain lower with the basic resources and oil & gas sectors underperforming and travel & leisure, retail outperforming. Greek lawmakers voting on a second package of bailout condition measures, ECB to discuss Greek ELA. Bank of England says a number of policy makers see rising inflation risks. Apple’s European suppliers fall after co. missed sales estimates. The U.K. and Swiss markets are the worst-performing larger bourses, the Spanish the best. The euro is little  changed against the dollar. U.K. 10yr bond yields fall; Greek yields increase. Commodities decline, with corn , copper underperforming and soybeans outperforming. U.S. mortgage applications, FHFA house price index, existing  home sales due later.

Market Wrap

  • S&P 500 futures down 0.4% to 2106.3
  • Stoxx 600 down 0.4% to 401
  • US 10Yr yield up 0bps to 2.33%
  • German 10Yr yield down 1bps to 0.77%
  • MSCI Asia Pacific down 0.9% to 143.9
  • Gold spot down 0.5% to $1095.4/oz
  • 3 out of 19 Stoxx 600 sectors rise; travel & leisure, retail outperform, basic resources, oil & gas underperform
  • 32.8% of Stoxx 600 members gain, 65.3% decline
  • Eurostoxx 50 -0.2%, FTSE 100 -1.1%, CAC 40 -0.4%, DAX -0.4%, IBEX +0.2%, FTSEMIB +0.1%, SMI -0.6%
  • Asian stocks fall with the Sensex outperforming and the ASX underperforming; MSCI Asia Pacific down 0.9% to 143.9
  • Nikkei 225 down 1.2%, Hang Seng down 1%, Kospi down 0.9%, Shanghai Composite up 0.2%, ASX down 1.6%, Sensex up 1.1%
  • Euro down 0.02% to $1.0933
  • Dollar Index up 0.01% to 97.33
  • Italian 10Yr yield up 1bps to 1.98%
  • Spanish 10Yr yield up 3bps to 2.03%
  • French 10Yr yield down 1bps to 1.07%
  • S&P GSCI Index down 0.7% to 398.2
  • Brent Futures down 0.6% to $56.7/bbl, WTI Futures down 1.1% to $50.3/bbl
  • LME 3m Copper down 1.1% to $5395/MT
  • LME 3m Nickel down 0.2% to $11650/MT
  • Wheat futures down 1% to 519.5 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • The BoE minutes showed the MPC undertaking a cautious stance by highlighting that inflation risks may be skewed to the upside, while also warning that GBP strength could suppress inflation
  • Downbeat earnings from Apple and Microsoft have filtered through to European stocks with underperformance observed in the IT sector
  • Looking ahead, sees the release of RBNZ Rate Decision, DoE crude inventories, Existing Home Sales as well as earnings from Coca Cola, Boeing and Qualcomm
  • Treasury curve little changed overnight before U.S. economic data calendar comes alive again with FHFA home price index slated for release at 9am ET and existing home sales at 10am ET.
  • BoE said a growing number of policy makers have become concerned about rising inflation pressures, indicating building momentum toward the first rate increase in eight years
  • The ECB is embarking on a third tour of duty in Athens, with victory less certain than ever as officials will hold a telephone call Wednesday to discuss the Emergency Liquidity Assistance that keeps Greece’s financial system alive
  • PM Tsipras returns to the Greek parliament today to seek support from the opposition to help him overcome his own party’s rebellion against the terms of a third bailout
  • The bond market selloff in the second quarter probably dented the capital defenses of many European banks, with lenders in Italy and Spain hit hardest
  • As a Puerto Rico agency veers toward a default as soon as Aug. 1, federal officials in the nation’s capital have echoed a refrain heard during recent state and local fiscal crises: Fix the problem on your own
  • The selloff in gold is infecting copper and zinc, which fell more than 1% and tin, which fell as much as 4.9%, the most this month. Gold futures retreated for a 10th day in the longest run of losses since 1996 as Goldman Sachs predicted further declines
  • Sovereign 10Y bond yields mostly steady with Greek bond +18bps. European and Asian stocks mostly lower; U.S.equity-index futures lower. Crude oil drops, copper and gold drop


DB’s Jim Reid completes the overnight recap

On the subject of Apple, shares dropped nearly 9% in extended trading following the release of their latest quarterly results. Despite a beat at the earnings level and a surge in revenue from China, the market latched onto disappointing overall iPhone shipments relative to street expectations sending the stock tumbling. Combined with a near-4% fall for Microsoft in extended trading after a similarly disappointing report, S&P 500 and NASDAQ futures have fallen -0.4% and -1.2% respectively in Asia this morning.

Indeed yesterday we saw equity markets on both sides of the pond close down as a number of headline names reported disappointing quarterly reports. The S&P 500 (-0.43%) fell from its record high while the DOW (-1.00%) and NASDAQ (-0.21%) also moved lower. Closer to home the Stoxx 600 (-1.02%), DAX (-1.12%) and CAC (-0.70%) also fell once the US session kicked in as earnings reports from IBM, Verizon and United Technologies in particular disappointed the market.

Digging deeper into earnings season so far and taking a look at the beats/miss ratio, despite the softer reports yesterday it’s actually been an OK start to the reporting period. With 89 S&P 500 companies having reported so far, 73% have reported an EPS beat with 26% missing estimates. As per the trend of the last few years, the split is more even at the revenue level with 55% reporting a beat so far. This trend has perhaps been solidified in this reporting period with various companies noting the impact of USD strength on the top line.

Looking at the rest of markets this morning, equity bourses across Asia this morning are broadly weaker. The Nikkei (-1.00%), Hang Seng (-1.12%), Kospi (-0.99%) and ASX (-1.14%) have all fallen while in China the Shanghai Comp (-0.42%), CSI 300 (-0.66%) and Shenzhen (-0.05%) have also declined after an up and down start. Mixed data in China hasn’t helped the lack of direction in markets there. The MNI China Business Indicator for business sentiment slumped 4.7% mom in July to match the YTD low in April of 48.8. The Conference Board Leading Indicator on the other hand rose 1.0% mom during June. Over in Australia a softer than expected headline Q2 CPI print (+0.7% qoq vs. +0.8% expected) has seen the AUD fall 0.5% in early trading. Gold (-0.67%) has taken another leg lower while WTI (-1.40%) is creeping back down closer to the $50/bbl mark. 10y Treasuries are largely unchanged while Asia credit is 2bps wider.

It’s another relatively quiet calendar for data today however Greece is set to step back into focus with the Greek parliament due to vote on a second set of reforms demand by the Creditors, the second such pre-requisite to opening talks on a new bailout package.

In his latest report yesterday, DB’s George Saravelos highlighted the latest on the current political situation in Greece and what his expectations are going forward. George notes that Greece is now in a very unusual political configuration whereby Tsipras has openly stated his disagreement with the effectiveness of the current agreement (although acknowledges that the alternative would be worse), can no longer rely on his own parliamentary group to pass legislation and may no longer control the Syriza party either. Despite this, opposition votes have ensured that the Euro leaders’ agreement and prior actions passed through the Greek parliament with an even larger majority than the first and second Greek programs.

George notes that the current situation could potentially lead to one of three different political outcomes over the next few weeks. The first of these is near-term political instability that would put ESM negotiations on hold and return pressure on the Greek banking system ahead of the August 20th ECB bond redemption. This would likely be provoked by Tsipras tendering his resignation either by losing additional MPs in coming parliament votes or by losing support in the party’s Central Committee although either would not necessarily cause a general election and rather a government of national unity would be more probable until ESM talks concluded. The second possible outcome is a decision from Tsipras to more aggressively position himself against internal party dissent and in favour of program implementation. This move would require the PM to take the risk of more formally splintering the party with potential unpredictable results given his more uncertain influence over the Central Committee. The final outcome and most likely in George’s view is a continuation of the last few days’ status quo with persistent attempts by Tsipras to work through internal party dissent as well as the ESM negotiations, but without precipitating political change meaning Tsipras presides over a de facto minority government.

George ultimately believes that resolution could be led by Tsipras moving Syriza in a more moderate direction followed by an early general election later this year once ESM negotiations have concluded. This would increase the odds of a government with greater commitment to implementation, irrespective of electoral outcome but risk a major splintering of the party. We’ve highlighted that Greece should play less of role in markets this summer, but implementation risks still remain until we get greater clarification around political change. George’s report is attached here for those interested. http://pull.db-gmresearch.com/cgi-bin/pull/DocPull/1196-941A/13242688/DB….

In terms of the rest of markets yesterday, credit markets in the US retreated as Apple results hit the wires with CDX IG finishing 1.5bps wider. In Europe Crossover (+8bps) and Main (+1bp) also had a softer day. The risk-off sentiment yesterday helped fuel a bid for Treasuries as the benchmark 10y closed 4.7bps lower at 2.326%, albeit on seasonally lower volumes. It was a weaker day for the Dollar meanwhile with the Dollar index dropping 0.72% to bring to an end four consecutive daily gains while the Euro rose 1.02%. The softer day for the Dollar wasn’t helped by downward revisions to the latest industrial production (+0.2% mom from +0.3% previously) and capacity utilization (77.8% from 78.4% previously) prints. After the weakness in the commodity space of late Gold (+0.43%) took something of a breather and pared back some of the recent weakness following 6 previous days of declines while WTI (+0.83%) closed back above $50 at $50.86/bbl.

Before we look at today’s calendar, in the UK yesterday we heard once again from the BoE’s Carney who largely reiterated his recent rhetoric saying that ‘the decision as to when to start that process of raising interest rates will likely come into sharper focus around the turn of the year’. Yesterday’s public sector net borrowing data for June was slightly lower than expected (£8.6bn vs. £8.7bn expected) while net borrowing excluding public-sector banks of £9.4bn was slightly higher than the £8.9bn expected. 10y Gilts closed 2.5bps higher yesterday at 2.085%.

Looking at the day ahead now, the BoE minutes from the July meeting will likely garner most of the attention this morning while data wise we’ve just got French business and manufacturing confidence prints expected along with Italian retail sales. In the US this afternoon there’s finally some data to look forward to with June existing home sales and the May FHFA house price index. The corporate earnings calendar is headlined by Boeing, Coca-Cola and American Express.



On Monday, we reported the huge dumping of USA securities from China. No doubt that this was caused by massive losses in the stock market whereby government officials had to liquidate securities in order to stabilize conditions inside China. The big question of course, is who is absorbing this paper.  What happens when it comes a point in time when nobody bids for it?

a very important commentary..

(courtesy zero hedge)


China’s Record Dumping Of US Treasuries Leaves Goldman Speechless

On Friday, alongside China’s announcement that it had bought over 600 tons of gold in “one month”, the PBOC released another very important data point: its total foreign exchange reserves, which declined by $17.3 billion to $3,694 billion.


We then put China’s change in FX reserves alongside the total Treasury holdings of China and its “anonymous” offshore Treasury dealer Euroclear (aka “Belgium”) as released by TIC, and found that the dramatic relationship which we first discovered back in May, has persisted – namely virtually the entire delta in Chinese FX reserves come via China’s US Treasury holdings. As in they are being aggressively sold, to the tune of $107 billion in Treasury sales so far in 2015.


We explained all of his on Friday in “China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium“, and frankly we have been surprised that this extremely important topic has not gotten broader attention.

Then, to our relief, first JPM noticed. This is what Nikolaos Panigirtzoglou, author of Flows and Liquidity had to say on the topic of China’s dramatic reserve liquidation

Looking at China more specifically, it appears that, after adjusting for currency changes, Chinese FX reserves were depleted for a fourth straight quarter by around $50bn in Q2.The cumulative reserve depletion between Q3 2014 and Q2 2015 is $160bn after adjusting for currency changes. At the same time, a current account surplus in Q2 combined with a drawdown in reserves suggests that capital outflows from China continued for the fifth straight quarter. Assuming a current account surplus in Q2 of around $92bn, i.e. $16bn higher than in Q1 due to higher merchandise trade surplus, we estimate that around $142bn of capital left China in Q2, similar to the previous quarter.

JPM conclusion is actually quite stunning:

This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2).

Incidentally, $520 billion is roughly triple what implied Treasury sales would suggest as China’s capital outflow, meaning that China is also liquidating some other USD-denominated asset(s) at a feverish pace. So far we do not know which, but the chart above and the magnitude of the Chinese capital outflow is certainly the biggest story surrounding the world’s most populous nation: what is happening in its stock market is just a diversion.

At this point JPM goes into a tangent explaining what the practical implications of a massive capital outflow from China are for the global economy. Regular readers, especially those who have read our previous piece on the collapse in the Petrodollar, the plunge in EM capital inflows, and their impact on capital markets and global economies can skip this part. Those for whom the interplay of capital flows and the global economy are new, are urged to read the following:

One way that slower EM capital flows and credit creation affect the rest of the world is via trade and trade finance. Trade finance datasets are unfortunately not homogeneous and different measures capture different aspects of trade finance activity. Reuters data on trade finance only aggregates loan syndication deals, which have mandated lead arrangers and thus capture the trends in the large-scale trade lending business, rather than providing an all-inclusive loans database. Perhaps the largest source of regularly collected and methodologically consistent data on trade finance is credit insurers (see “Testing the Trade Credit and Trade Link: Evidence from Data on Export Credit Insurance”, Auboin and Engemann, 2013). The Berne Union, the international trade association for credit and investment insurers with 79 members, includes the world’s largest private credit insurers and public export credit agencies. The volume of trade credit insured by members of the Berne Union covered more than 10% of international trade in 2012. The Berne Union provides data on insured trade credit, for both short-term (ST) and medium- and long-term transactions (MLT). Short-term trade credit insurance accounts for the vast majority at around 90% of new business in line with IMF estimates that the vast majority 80%-90% of trade credit is short term.



Figure 4 shows both the Reuters (quarterly) and the Berne Union (annual) data on trade finance loan syndication and trade credit insurance volumes, respectively. The quarterly Reuters data showed a clear deceleration this year from the very high levels seen at the end of last year. Looking at the first two quarters of the year, Reuters volumes were down by 25% vs. the 2014 average (Figure 4). The more comprehensive Berne Union annual volumes are only available annually and the last observation is for 2014. These data showed a very benign trade finance picture up until the end of 2014. Trade finance volumes had been trending up since 2010 at an annual pace of 8.8% per annum (between 2010 and 2014) which is faster than global nominal GDP growth of 6% per annum, i.e. the trend in trade finance had been rather healthy up until 2014, but there are indications of material slowing this year. This is also reflected in world trade volumes which have also decelerated this year vs. strong growth in previous years (Figure 5).

Summarizing the above as simply as possible: for all those confounded by why not only the US, but the global economy, hit another brick wall in Q1 the answer was neither snow, nor the West Coast strike, nor some other, arbitrary, goal-seeked excuse, but China, and specifically over half a trillion in still largely unexplained Chinese capital outflows.

* * *

But wait, because it wasn’t just JPM whose attention perked up over the weekend. This morning Goldman Sachs itself had a note titled “the Curious Case of China’s Capital Outflows“:

China’s balance of payments has been undergoing important changes in recent quarters. The trade surplus has grown far above previous norms, running around $260bn in the first half of this year, compared with about $100bn during the same period last year and roughly $75bn on average during the previous seven years. Ordinarily, these kinds of numbers would see very rapid reserve accumulation, but this is not the case. Partly that is because China’s services balance has swung into meaningful deficit, so that the current account is quite a bit lower than the headline numbers from trade in goods would suggest. But the more important reason is that capital outflows have become very sizeable and now eclipse anything seen in the recent past.


Headline FX reserves in the second quarter fell $36bn, from $3,730bn at end-March to $3,694bn at end-June. While we estimate that there was a large negative valuation effect in Q1 (due to the drop in EUR/$ on the ECB’s QE announcement), there was likely a positive valuation effect in Q2, which we put around $48bn. That means that our proxy for reserve accumulation in the second quarter is around -$85bn, i.e. the actual “flow” drop in reserves was bigger than the headline numbers suggest because of a flattering valuation effect. If we put that number together with the trade surplus in Q2 of $140bn, net capital outflows could be around -$224bn in the quarter, meaningfully up from the first quarter.There are caveats to this calculation, of course. There is obviously the services deficit that we mention above, which will tend to make this estimate less dramatic. It is also possible that our estimate for valuation effects is wrong. Indeed, there is some indication that valuation-related losses in Q1 were not nearly as large as implied by our calculations. But even if we adjust for these factors, net capital outflows might conceivably have run around -$200bn, an acceleration from Q1 and beyond anything seen historically.

Granted, this is smaller than JPM’s $520 billion number but this also captures a far shorter time period. Annualizing a $224 billion outflow in one quarter would lead to a unprecedented $1 trillion capital outflow out of China for the year. Needless to say, a capital exodus of that pace and magnitude would suggest that something is very, very wrong with not only China’s economy, but its capital markets, and last but not least, its capital controls, which prohibit any substantial outbound capital flight (at least for ordinary people, the Politburo is clearly exempt from the regulations for the “common folk”).

Back to Goldman:

The big question is obviously what is driving these flows and how long they are likely to continue. We continue to take the view that a stock adjustment is at work, although it is clear that the turning point is yet to come. We will look at this in one of our next FX Views. In the interim, we think an easier question is what this means for G10 FX.This is because this shift in China’s balance of payments is sure to depress reserve accumulation across EM as a whole, such that reserve recycling – a factor associated with Euro strength in the past – is unlikely to be sizeable for quite some time.

In other words, for once Goldman is speechless, however it is quick to point out that what traditionally has been a major source of reserve reflow, the Chinese current and capital accounts, is no longer there.

It also means that what may have been one of the biggest drivers of DM FX strength in recent years, if only against the pegged Renminbi, is suddenly no longer present.

While the implications of this on the global FX scene are profound, they tie in to what we said last November when explaining the death of the petrodollar. For the most part, the country most and first impacted from this capital outflow will be China, something its stock market has already noticed in recent weeks.

But what is likely the take home message for non-Chinese readers from all of this, is that while there has been latent speculation over the years that China will dump US treasuries voluntarily because it wants to (as punishment or some other reason), suddenly China isforced to liquidate US Treasury paper even though it does not want to, merely to fund a capital outflow unlike anything it has seen in history. It still has a lot of 10 Year paper, aka FX reserves, left: about $1.3 trillion at last check, however this raises two critical questions: i) what happens to 10 Year rates when whoever has been absorbing China’s Treasury dump no longer bids the paper and ii) how much more paper can China sell before the entire world starts paying attention, besides just JPM and Goldman… and this website of course.

Finally, if China’s selling is only getting started, just what does this mean for future Fed strategy. Because one can easily forget a rate hike if in addition to rising short-term rates, China is about to dump a few hundred billion in paper on a vastly illiquid market.

Or let us paraphrase: how soon until QE 4?



And on the same subject as above:

Ambrose Evans Pritchard/UKTelegraph

Capital exodus from China reaches $800bn as crisis deepens

China is reverting to credit stimulus after attempts to engineer a stock market boom failed horribly. The day of reckoning is delayed again

By the time police were alerted to the operation some 200 people, mostly small business owners, had left deposits of between 100,000 yuan and 20 million yuan

The Chinese central bank is being forced to run down the country’s foreign reserves to defend the yuan Photo: Alamy


China is engineering yet another mini-boom. Credit is picking up again. The Communist Party has helpfully outlawed falling equity prices.

Economic growth will almost certainly accelerate over the next few months, giving global commodity markets a brief reprieve.

Yet the underlying picture in China is going from bad to worse. Robin Brooks at Goldman Sachs estimates that capital outflows topped $224bn in the second quarter, a level “beyond anything seen historically”.

The Chinese central bank (PBOC) is being forced to run down the country’s foreign reserves to defend the yuan. This intervention is becoming chronic. The volume is rising. Mr Brooks calculates that the authorities sold $48bn of bonds between March and June.

Charles Dumas at Lombard Street Research says capital outflows – when will we start calling it capital flight? – have reached $800bn over the past year. These are frighteningly large sums of money.

China’s bond sales automatically entail monetary tightening. What we are seeing is the mirror image of the boom years, when the PBOC was accumulating $4 trillion of reserves in order to hold down the yuan, adding extra stimulus to an economy that was already overheating.

The squeeze earlier this year came at the worst moment, just as the country was struggling to emerge from recession. I use the term recession advisedly. Looking back, we may conclude that the world economy came within a whisker of stalling in the first half of 2015.

The Dutch CPB’s world trade index shows that shipping volumes contracted by 1.2pc in May, and have been negative in four of the past five months. This is extremely rare. It would usually imply a global recession under the World Bank’s definition.

The epicentre of this crunch has clearly been in China, with cascade effects through Russia, Brazil and the commodity nexus.

Chinese industry ground to a halt earlier this year. Electricity use fell. Rail freight dropped at near double-digit rates. What had begun as a deliberate policy by Beijing to rein in excess credit escaped control, escalating into a vicious balance-sheet purge.

The Chinese authorities have tried to counter the slowdown by talking up an irresponsible stock market boom in the state-controlled media. This has been a fiasco of the first order.

The equity surge had no discernable effect on GDP growth, and probably diverted spending away from the real economy. The $4 trillion crash that followed has exposed the true reflexes of President Xi Jinping.

Half the shares traded in Shanghai and Shenzhen were suspended. New floats were halted. Some 300 corporate bosses were strong-armed into buying back their own shares. Police state tactics were used hunt down short sellers.

We know from a vivid account in Caixin magazine that China’s top brokers were shut in a room and ordered to hand over money for an orchestrated buying blitz. A target of 4,500 was set for the Shanghai Composite by Communist Party officials.

Caixin says the China Securities Finance Corporation – a branch of the regulator – now owns an estimated $200bn of Chinese stocks and has authority to buy a further $500bn if necessary to prop up the market.

This use of “brute force” – in the words of Peking University professor Michael Pettis – has done the trick. Equities have recovered. How could they not do so, since selling was illegal, and not to buy was also illegal?

Yet it is hard to see what remains of Xi Jinping’s pledge at the Communist Party’s Third Plenum in 2013 to let market forces play the “decisive role” in the economy. There was always a contradiction in this pledge. Mr Xi was touting free enterprise, even as he tightened control on the internet, academia and political dissent.

His failure to see through his reform strategy is fatal for China’s economy. The World Bank and China’s Development Research Centre – the brain-trust of premier Li Keqiang – published a long report three years ago calling for a market revolution before the Chinese economy hits a brick wall.

It warned that the country’s 30-year growth model is obsolete. The low-hanging fruit of state-driven industrialisation has been picked.

Either China breaks its dependence on export-led growth and imported know-how or it will drift into the “middle income trap” awaiting all catch-up countries that fail to reform in time, and to make this fundamental break it must relinquish political control over the economy and let a hundred flowers bloom.

“The role of the private sector is critical because innovation at the technology frontier is quite different in nature from catching up. It is not something that can be achieved through government planning,” it said.

Lombard Street Research says China’s true economic growth rate is currently below 4pc, using proxy measures of output. Capital Economics and Oxford Economics have reached a similar verdict with their own tracking systems.

The legacy effect of pervasive excess capacity – the country produced more cement between 2011 and 2013 than the US in the entire 20th century – has been a blanket of deflation. Factory gate prices are falling at a rate of 4.6pc.

Mr Dumas says this has pushed one-year market borrowing costs to 10pc in real terms. “Current monetary conditions are extremely tight,” said Mr Dumas.

The Chinese authorities have until now been reluctant to flood the system with fresh stimulus, all too aware that the ratio of private credit to GDP has jumped sixfold to 160pc of GDP since 2007.

This is already far beyond any safe level for a developing economy and has lost its potency, in any case. The extra growth generated by each yuan of new loans has dropped from a ratio of 0.80 in the pre-Lehman era to 0.24pc today. The trade-off has become toxic.

Adam Slater from Oxford Economics says the raft of easing measures since late 2014 have not kept pace with tightening conditions. The real exchange rate has jumped 15pc since mid-2014, chiefly due to China’s dollar peg and Japan’s yen devaluation.

“If the authorities wanted to quickly and radically ease monetary conditions, exchange rate depreciation would be the obvious way to go,” he said.

This relief is blocked – for now – because it would risk other nasty side-effects. Chinese companies have $1.2 trillion of US denominated debt. A yuan devaluation would anger Washington and risk a beggar-thy-neighbour currency war across Asia, with lethal deflationary effects.

Mr Slater says China may instead have to slash interest rates to zero and even resort to “monetary-financed deficit spending” in the end, knowing that this stores up an even greater crisis later.

The early signs are that Mr Xi will now revert to stimulus again – hoping that he can calibrate the dosage, despite the Party’s failure to do so on every previous phase of the stop-go cycle – concluding that it is too dangerous to let market forces do their worst after such vast imbalances have accumulated.

The Communist Party still controls the quantity of credit through the state banking system. It is using the power it knows best. New loans jumped to $205bn in June, up from $145bn in May. Local governments – facing new curbs on bank borrowing – issued a further $113bn in bonds. Taken together, they amount to a sugar rush of fresh credit.

Industrial output and electricity use are coming back from the dead. Sales of property floor space are suddenly spiking.

The great scare of early 2015 appears to be over. The hideous denouement has been averted once again. Mr Xi will surely discover that it won’t be any easier next time.




And now our major Greek stories.

First off:  Tsipras fights to keep his party alive as party rebellion is upon him:

(courtesy zero hedge)


Tsipras Fights To Keep Greek Bailout Alive Amid Party Rebellion: Full Vote Preview

The Greek parliament will vote on a second batch of prior actions on Wednesday including EU rules on bank resolutions and civil justice reform amid protests from public sector union ADEDY which has pledged to “continue the battle so that the new barbaric bailout does not pass and is overturned,” and so that Greece does fall under the “neocolonial control” of Brussels. 

Although there will be a third vote during the first week of August on pension reforms and taxes on farmers (these issues were removed from Wednesday’s bill with Brussels’ blessing), formal discussions around a third program for Greece will begin immediately if, as expected, lawmakers approve today’s bill. 

Although Alexis Tsipras will likely get the votes he needs, Wednesday’s proceedings will be watched closely for signs that Syriza has splintered further after the premier sacked dissenters in a cabinet “reshuffle” following last week’s vote in which 39 Syriza MPs refused to support the new bailout deal. That cut Tsipras support within the coalition government down to 123, meaning he is heavily dependent upon opposition support for the new program and as Reuters notes, there’s some speculation that if his support within the coalition drops below 120 votes, the PM would be forced to resign. Here’s more:

Together with his coalition partners from the right-wing Independent Greeks, Tsipras has 162 seats in the 300-seat parliament. But last week’s rebellion cut his support to just 123 votes and any further defections may be seen as undermining prospects for reform.


Some government officials have suggested that if support dropped below 120 MPs – the minimum required to win a confidence vote if parliament voted with the lowest allowable quorum of 240 lawmakers – Tsipras would have to resign.

And here’s more color from Bloomberg:

The Greek leader is fighting for political survival after abandoning his opposition to austerity earlier this month with his country on the brink of financial collapse. He’s trying to hold off elections long enough to steer the country through the bailout negotiations, Michaelides said.


The plenary debate began at about 9 a.m. in Athens with the vote in the Greek parliament scheduled for around midnight. The bill under consideration includes the transposition of the European Union’s Bank Recovery and Resolution Directive into national law, as well as an overhaul of Code of Civil Procedure.


“There is a risk of the number of rebels growing,” said Michael Michaelides, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “It will be a question of whether Tsipras can maintain the party under control to prevent unwanted political developments.”

Yes, “unwanted political developments,” like a vote of confidence which would be the first step towards early elections.

Although it seems likely that Tsipras would win a confidence vote if it came to that, the fact that the PM is reliant on opposition support to secure the bailout suggests that the political situation is simply untenable going forward. Deutsche Bank has more on the “unprecedented political configuration.”

The agreement has come at a significant political cost to the Greek Prime Minister. Only 122 out of 149 SYRIZA MPs voted in favour of the prior actions in last week’s vote, with legislative approval heavily reliant on 106 affirmative votes from opposition MPs. Notable negative votes included former finance minister Varoufakis, speaker of the house Konstantopoulou and five government ministers. This prompted a small cabinet re-shuffle over the weekend to replace dissenting ministers. Developments ahead need to be analysed against four broader observations relating to Greek politics.


The PM can no longer rely on his own parliamentary group to pass legislation, but despite this the government has legally not lost its parliamentary majority. A government change (and potential early elections) can constitutionally only be precipitated by a formal vote of confidence, but this has not taken place and many dissenting SYRIZA MPs have stated that they still support the government.


The Prime Minister may no longer control the SYRIZA party either. This is a separate entity from the party’s parliamentary group, governed by a 201- strong Central Committee that has the power to call a vote of no confidence on party leader Tsipras as well as deciding on parliamentary candidates during general elections. A letter signed by more than 50% of the party’s central committee last week expressed opposition to the Euro leaders’ agreement. The Committee has yet to convene following last week’s parliamentary vote, though it may do so in coming days. The party’s official reaction to the agreement will need to be closely watched.

Today’s vote is thus a litmus test for Syriza. That is, the key issue is whether the party splinters further or if some of those who broke with Tsipras last week return to the fold on Wednesday.

If Tsipras’ support within the party weakens further, it will have broader implications for how the political landscape will look once the bailout is official. The PM is expected to call a party meeting in September to discuss “the day after” (a reference to the fact that by then, Greece is expected to have formalized the third bailout). At that juncture, Syriza “will split in two groups, the followers of Tsipras and the leftist wing led by Lafazanis,” one unnamed source told MNI on Tuesday.

“The Syriza party must … accept the social concerns and the expectations of the thousands of people that support us,” Tsipras said ahead of the vote.

When it comes to “accepting the social concerns” of the party’s constituents, one good place to start might have been respecting the referendum “no” vote.

Alas, that ship has sailed.

Deutsche bank outlines possible scenarios that may happen in the coming weeks with respect to a Greek failure:
(courtesy zero hedge/Deutsche bank)

Next Steps For Greek Politics: The Syriza “Endgame” According To Deutsche Bank

As detailed here earlier, Greek PM Alexis Tsipras will attempt to win back the support of more than 30 Syriza lawmakers who defected to vote against the first set of bailout prior actions last week. The move destabilized an already tenuous political situation, laid bare the divisions within Tsipras’ party, and raised the possibility that the PM could face a vote of no confidence and early elections.

For now, Tsipras’ plan is to pass the second set of prior actions with the help of opposition lawmakers, begin formal discussions on the third bailout program, and convene a Syriza meeting in September to discuss how the party can move forward considering all that’s happened since the group swept to power in January on an anti-austerity mandate which has largely fallen by the wayside.

Here to help sort out what has become a rather convoluted political situation and discuss next steps and the “endgame” for Syriza is Deutsche Bank’s George Saravelos.

*  *  *

From Deutsche Bank

Potential political paths ahead

We see the situation as potentially leading to three different political outcomes over the next few weeks.

The first is near-term political instability that would put ESM negotiations on hold and return pressure on the Greek banking system ahead of the August 20th ECB bond redemption. This would be provoked by the PM tendering his government’s resignation either by losing additional government MPs in coming parliamentary votes or by losing support in the party’s Central Committee. Either would not necessarily cause a general election, with a government of national unity under very limited SYRIZA MP support possible until ESM talks are concluded (only 48 out of 149 MPs would be needed). Irrespectively, talks would be delayed, and the possibility of a more substantial shift in the SYRIZA position against the agreement could not be ruled out, whether before or after a new general election.

The second potential outcome is a Greek PM decision to more aggressively position himself against internal party dissent and in favour of program implementation. This would likely involve a request from dissenting MPs to resign their parliamentary seats or, in case of refusal, exclusion from the SYRIZA parliamentary group. Such a decision would aim to consolidate the PM’s influence, with the ultimate aim of moving the party towards a more moderate direction in a future general election. Current electoral law stipulates that a general election within 12 months of the last one takes place under a “list” system, providing the Greek PM with the political cover to steer SYRIZA’s candidate list towards a more moderate direction.

Still, any such decisions need to be approved by the party’s Central Committee. The latter is similarly responsible for excluding members from the party, even if the PM excludes MPs from the parliamentary group. Any such decision therefore requires the PM to take the risk of more formally splintering the party, with potential unpredictable results given his more uncertain influence over the party’s Central Committee.

The third – and what we believe the most likely outcome in coming weeks – is a continuation of the last few days’ status quo: persistent attempts by the PM to work through internal party dissent as well as the ESM negotiations, but without actively precipitating political change. In this instance the Greek PM would continue to preside over a de facto minority government, even if this is not explicitly acknowledged. A confidence vote may be called but dissenting MPs would still vote in favour and/or opposition parties would abstain. Any eventual ESM agreement would be ratified by a broad parliamentary majority, but with very strong SYRIZA dissents. Early elections could be called after. The benefit to this outcome is that near-term political uncertainty would be avoided, with dissenting and non-dissenting SYRIZA MPs as well as the opposition likely wanting to avoid near-term political instability. The cost would be that government commitment to the agreement would remain weak, maintaining the risk of a breakdown in negotiations as ESM negotiations get under way.

Whatever the outcome above, events over the next few weeks are most likely to continue to be driven by the PM’s personal decisions as well as internal developments within SYRIZA. This will in turn depend on the ongoing economic and political cost of program implementation, with large upfront fiscal tightening already being legislated but additional fiscal and structural reform commitments needed to conclude the 3rd ESM program negotiations. The PMs own approval ratings will also matter, with opinion polls released after the negotiations continuing to show higher popularity ratings than other political leaders as well as a strong SYRIZA lead over other opposition parties. It remains to be seen how long this persists given the economic costs of the agreement, but the longer support is maintained, the greater the PM’s influence over internal party politics is likely to be.

The endgame

Irrespective of the near-term outcomes above, the inherent contradiction of program implementation by a government from within which the bulk of opposition originates will have to be resolved. It is unlikely that uncertainty around the stability of the Greek economy and banking system recedes until this is the case.

Resolution could be led by Greek PM and current party president Tsipras moving SYRIZA in a more moderate direction followed by an early general election later this year after ESM negotiations have concluded. This would increase the odds of a government with greater commitment to implementation, irrespective of the electoral outcome. It would however risk a major splintering of the party or Tsipras’ own loss of authority in the process. An alternative is that the party retains its own internal contradictions, but that a government of national unity with broader-based participation is formed irrespectively. However, it remains unclear if this could materialize without an early general election, which the opposition may eventually request.

Either way, implementation risks are likely to remain strong until greater political change materializes, likely driven by the strong internal contradictions within the current ruling party, but ultimately settled by the Greek PMs own political initiatives.

Tsipras is to call elections as soon as the bailout is agreed upon. My question is who is going to fund Greece for bailout No 3?
(courtesy zero hedge)

Tsipras To Call For Elections “As Soon Bailout Agreed”, Wants “Clean Start”

Greek politics are back in the spotlight Wednesday as lawmakers are set to vote on a second set of prior actions that would clear the way for formal bailout discussions to begin by the end of the week (see here and here).

Although the package is expected to pass with the help of opposition support, the vote is nonetheless an important indicator for the future of Syriza and for Tsipras’ future as premier.

In short, if Tsipras’ support within the party weakens further, it will have broader implications for how the political landscape will look once the bailout is official. The PM is expected to call a party meeting in September to discuss “the day after” (a reference to the fact that by then, Greece is expected to have formalized the third bailout). At that juncture, Syriza “will split in two groups, the followers of Tsipras and the leftist wing led by Lafazanis,” one unnamed source told MNI on Tuesday.

Now, it looks as though Tsipras will look to call elections as soon as the third bailout is in place. From MNI, citing sources:

The ECB is certainly taking a huge risk on their hands by upping the ELA by another 900 million euros as no Greek returned their cash as a deposit.  They know better.  Bank runs continue unabated:  the new ELA 90.8 billion euros!
(courtesy zero hedge)

ECB Increases Emergency Lending To Greece Again As Deposit Run Continues

Despite the imploring of Greek bankers for Greeks to “take your money out of your chests and houses – which are not safe in any case – and deposit at banks,” it appears the Greek bank deposit run continues. As The ECB just announced another €900 million increase in Emergency Liquidity Assistance, strongly suggesting that in the 2 days since the last increase, banks are once again insolvent facing a liquidity crunch as the “banks are trustworthy” propaganda falls on very deaf Greek ears.

As we noted yesterday, 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.

“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.


“Let’s all help our economy,” Katseli urged Greeks.


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

It is not working.. as ECB ELA continues to soar…

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.

As everyone knows, I like using Caterpillar as a good barometer of global activity.  Today the stated the following:  we do not have a recession.  Instead, a full blown global depression!
(courtesy zero hedge)

Forget Recession: According To Caterpillar There Is A Full-Blown Global Depression

One wouldn’t know it by looking at CAT stock, which has gone very much nowhere in the past 5 years thanks to just one thing – an exponential increase in the company’s share buybacks


… but the company’s publicly disclosed monthly retail sales have just one message for anyone who follows them: forget recession, there is a global depression going on.

And it is not just in China as many would like to scapegoat: in June, in addition to a -19% drop in Asia Pacific (following a 30% Y/Y plunge a year ago, which in turn followed a 21% drop in 2013), US retail sales posted their first Y/Y decline since February, dropping by 5%.

But the real depression is in Latin America, where CAT retail sales plummeted by a whopping 50%: the most in reported history, and follow an 18% drop from a year earlier.


Summarizing it all, after an increasingly shallower series of dead CAT bounces in the past year, first thanks to Latin America, and then the US, global retail sales just dropped by 14% – marching the biggest Y/Y decline since the financial crisis.

And the cherry on top: there has now been an unprecedented 31 consecutive months of CAT retail sales declines. This compares to “only” 19 during the near systemic collapse in 2008.


In other words, if global demand for heavy industrial machinery, as opposed to unemployed millennials’ demands for $0.99 Apple apps, is any indication of the true underlying economy, forget recession: the world is now in a second great depression which is getting worse by the month.

Here is another indicator that things around the globe indicate a huge depression is upon us:  the demand for copper!
(courtesy Bloomberg)
This Measure of Copper Is Another Bad Omen for the Commodities Meltdown
A ratio of demand to inventories is at its worst level in two years.

Another huge problem in all bond markets is the lack of liquidity due to central banks buying up most of the bonds.  Today Bondcube after opening only 3 months ago, bit the dust and folded.  They stated that there was no liquidity whatsoever.  They could not buy nor could they sell any bonds.  Just zero liquidity…

(courtesy zero hedge)

In Case You Needed Any More Proof That There Is No Bond Market Liquidity Left…

Here are just two anecdotes to confirm that not virtually nobody is left to trade bonds any more (as confirmed by the plunging FICC revenues reported by the big banks in Q2), but the reason for this is that there is no bond market liquidity left, a topic extensively covered here for the past 3 years.

First, Bloomberg reports that a startup platform for fixed-income trading which was launched just three months ago with funding from Deutsche Boerse, has promptly liquidated less than 100 days after going live.

A startup fixed-income platform called Bondcube has filed for liquidation just three months after its launch, a sign that entrepreneurs are finding it difficult to ease bond trading.


The London-based company was 30 percent owned by Deutsche Boerse AG, which provided two rounds of investment. It went live for fixed-income trading in the U.S. and Europe in April.


“Although Bondcube succeeded to launch its platform, over recent months sufficient business prospects failed to materialize and as a result the long-term financial viability of the business deteriorated,” Deutsche Boerse said in a statement. “In these circumstances, the shareholders decided not to provide further funding to Bondcube.”


Technology companies are trying to step into a gap in the market created by requirements on banks to hold more capital. Rule changes have restricted the banks’ ability to trade on their own account and have also made it more expensive — and therefore less profitable — for the firms to hold bonds in the expectation that clients will want to buy them.


Paul Reynolds, Bondcube’s chief executive officer, couldn’t immediately be reached for comment.

Perhaps the startup’s backers could have done some research into the “depth” of the market, or total lack thereof, before dumping a couple million into a platform that nobody would need…

And second, also from Bloomberg, we learn that one of the world’s biggest fixed income mutual funds, Fidelity, “plans to keep its exposure to Greek government bonds stable over summer months, sovereign credit analyst Dierk Brandenburg said in phone interview yday.” Why? As it turns out Fidelity kept its exposure to Greece during the country’s negotiations with creditors because it could neither buy nor sell, as market then was very illiquid.

“Liquidity was so low that selling wasn’t really an option and it was very difficult to add” London-based Brandenburg says

Situation for Greece slightly better now; however, investors are unlikely to take any big positions as July and Aug. are very illiquid months for bonds.

Fidelity’s European high-yield fund based in Luxembourg is one of its flagship funds, according to Brandenburg. The fund is primarily exposed to Greek bonds maturing 2028; also holds GGBs with maturity 2019, 2029 2027 and 2025, Bloomberg data shows, or as Norway’s sovereign wealth fund might say “it is investing for infinity.”

According to Fidelity, negotiations on any haircut of Greek debts held by official sector may lead to some volatility. Then again if nobody can buy or sell as there is simply no bond market left, volatility should be subdued. Just look at how successfully China eliminated all market vol after the government took over its own stock market.


Oil related stories:

Oil drifts below 50 dollars after another inventory build.  Crude stocks are the highest in 80 years:

(courtesy zero hedge)


WTI Back Below $50 After Inventory Build Takes Crude Stocks To Highest In 80 Years

Following yesterday’s API data, DOE has confirmed a 2.5 million barrel build in crude inventory – the highest stocks of crude at this time of year in at least 80 years. This was accompanied by a very small drop in production and has squeezed WTI back below $50 (although there was an algo flash-smash up to $50.50 right after the data).


Crude inventories rose by the most in 3 months…



Which we assume means for this time of year…



Dragging Crude lower (despite a flash smash)


Algos are turmoiling…

A must read on oil:
(courtesy zero hedge)

“Far Worse Than 1986”: The Oil Downturn Has No Parallel In Recorded History, Morgan Stanley Says

On Tuesday the market got yet another reminder of just how painful the “current commodity price environment” has been for producers when Chesapeake eliminated its common dividend in order to conserve cash.

After noting the plunge in Chesapeake’s shares (to a 12-year low) we subsequently outlined why the US shale “revolution” is now running out of lifelines as hedges roll off and as the next round of credit line assessments looms in October.

A persistent theme here – as regular readers are no doubt aware – has been the extent to which an ultra-accommodative Fed has contributed to a deflationary supply glut by ensuring that beleaguered producers retain access to capital markets. In short, cash-strapped companies who would have otherwise gone out of business have been able to stay afloat thanks to the fact that Fed policy has herded investors into risk assets.

In a ZIRP world, there’s plenty of demand for new HY issuance and ill-fated secondaries, which means the digging, drilling, and pumping gets to continue indefinitely in what may end up being one of the most dramatic instances of malinvestment the market has ever seen.

Those who contend that the downturn simply cannot last much longer – that the supply/demand imbalance will soon even out, that the market will clear sooner rather than later, and that even if the weaker hands are shaken out, the pain for the majors will be relatively short-lived – are perhaps ignoring the underlying narrative that helps to explain why the situation looks like it does. At heart, this is a struggle between the Fed’s ZIRP and the Saudis, who appear set to outlast the easy money that’s kept US producers alive.

Against that backdrop, and amid Wednesday’s crude carnage, we turn to Morgan Stanley for more on why the current downturn will be “worse than 1986.”

From Morgan Stanley

Worse than 1986? Really?

We have been expecting the current downturn to be as severe as the one in 1986 – the worst for at least 45 years – but not worse than that. Still, if oil prices follow the path suggested by the forward curve, our thesis may yet prove too optimistic.

Our constructive stance on the majors is based on four factors: 1) supply – we expected production growth to moderate following large capex cuts and the sharp decline in the rig count; 2) demand – we anticipated that the fall in price would boost oil products demand; 3) cost and capex – we foresaw both falling sharply, similar to the industry’s response in 1986; and 4) valuation – relative DY and P/BV indicated 35-year lows.


So far this year, we can put a tick against three of them [but] our expectation on supply has not materialised: US tight oil production growth has started to roll over, but this has been more than offset by OPEC, which has added ~1.5 mb/d since February. 

On current trajectory, this downturn could become worse than 1986: An additional +1.5 mb/d is roughly one year of oil demand growth. If sustained, this could delay the rebalancing of oil markets by a year as well. The forward curve has started to price this in: as the chart shows, the forward curve currently points towards a recovery in prices that is far worse than in 1986. This means the industrial downturn could also be worse. In that case, there would be little in analysable history that could be a guide to this cycle. 



[There are] strong similarities between the current oil price downturn and the one that occurred in 1985/86. The trajectory of oil prices is similar on both occasions. There were also common reasons for the collapse. 


A high and stable oil price in the preceding four years stimulated technological innovation and led to a high level of investment. This resulted in strong production growth outside OPEC, exceeding the rate of global demand growth. When it became clear that OPEC would no longer rein in production to balance the market (as it did during both the Nov 1985 and Nov 2014 OPEC meetings) the price collapsed. 

And although MS notes that similar to 1986, costs and capex are likely to come in sharply while demand growth should materialize, the supply side of the equation is not cooperating thanks to increased output from OPEC.

Due to the sharp slowdown in drilling activity and the high decline rate of tight oil wells, we expected production in the US to flatline and start declining in 2H. This seems to be happening: according to the US Department of Energy, tight oil production in June was 94 kb/d below the April level, and it forecasts further falls of 90 kb/d in both July and August.


Now that capex is falling, we anticipated non-US production to be flat at best. Still, this has not yet been the case. At the time of our ‘Looking Beyond the Nadir’ report in February, OPEC production stood at ~30.2 mb/d. This increased substantially to 31.3 mb/d in May and 31.7 mb/d in June, i.e. OPEC has added 1.5 mb/d to global supply in the last four months alone.


Our commodity analyst Adam Longson argues that the oil market is currently ~800,000 b/d oversupplied. This suggests that the current oversupply in the oil market is fully due to OPEC’s production increase since February alone. 

We anticipated that OPEC would not cut, but we didn’t foresee such a sharp increase. In our view, this is the main reason why the rebalancing of oil markets had not yet gained momentum.

If oil prices follow the path suggested by the forward curve, and essentially remain rangebound around levels seen in the last 2-3 months, this downturn would be more severe than that in 1986. As there was no sharp downturn in the ~15 years before that, the current downturn could be the worst of the last 45+ years.


If this were to be the case, there would be nothing in our experience that would be a guide to the next phases of this cycle, especially over the relatively near term. In fact, there may be nothing in analysable history. 


Needless to say, this does not bode well for everyone who has unwittingly thrown good money after bad on the assumption that the Saudis will cut production and trigger a rebound in crude.

In addition to the immense pressure from persistently low prices, US producers also face a Fed rate hike cycle and thus the beginning of the end for easy money.

Of course, the more expensive it is to fund money-losing producers, the less willing investors will be to perpetuate this delay-and-pray scheme, which brings us right back to what we’ve been saying for months: the expiration date for heavily indebted US drillers is fast approaching, and if Morgan Stanley thinks the oil downturn has no parallel in “analysable history,” wait until they see the carnage that will unfold in HY credit when a few high profile defaults in the oil patch send the retail crowd running for the junk bond ETF exits.


Late this afternoon, New Zealand cut interest rates due to low commodity prices.  They need a lower NZ dollar.

And guess what happens?  the NZ dollar rises:

Kiwi Pops After RBNZ Cuts Rates, Citing Commodity Price Pressures

While we know now that Greece is irrelevant, and China is irrelevant (fdrom what we are told by talking heads), it appears the commodity carnage of the last few months is relevant for at least one nation. Having already warned about Australia, it appears New Zealand has got nervous:


The Central bank blames softening economic outlook driven by commodity price pressures. Kiwi interestingly popped on the news to 0.66 before fading back a little, despite RBNZ noting a further NZD drop is necessary.

*  *  *


and finally…


Disappointly, Kiwi is rallying…


RBNZ Governor Graeme Wheeler Cuts Key Rate to 3.0%: Statement

The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 3.0 percent.
Global economic growth remains moderate, with only a gradual pickup in activity forecast. Recent developments in China and Europe led to heightened uncertainty and increased financial market volatility. Particular uncertainty remains around the impact of the expected tightening in US monetary policy.
New Zealand’s economy is currently growing at an annual rate of around 2.5 percent, supported by low interest rates, construction activity, and high net immigration. However, the growth outlook is now softer than at the time of the June Statement. Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand’s dairy exports has fallen sharply.
Headline inflation is currently below the Bank’s 1 to 3 percent target range, due largely to previous strength in the New Zealand dollar and a large decline in world oil prices. Annual CPI inflation is expected to be close to the midpoint of the range in early 2016, due to recent exchange rate depreciation and as the decline in oil prices drops out of the annual figure. A key uncertainty is how quickly the exchange rate pass-through will occur.
House prices in Auckland continue to increase rapidly, but, outside Auckland, house price inflation generally remains low. Increased building activity is underway in the Auckland region, but it will take some time for the imbalances in the housing market to be corrected.
The New Zealand dollar has declined significantly since April and, along with lower interest rates, has led to an easing in monetary conditions. While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.
A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.

*  *  *

And your humour story of the day from our nation’s capital, Ottawa;

Ottawans Outed – 1 In 5 Found To Be “Cheating Dirtbags Who Deserve No Discretion”

Canada’s capital city, Ottawa, is, as MSN reports, also it’s most potentially adulterous. Around 1 in 5 of the population is registered on Ashley Madisonthe recently hacked social network for married people looking for an affair. The hotbed of infidelity was also the seat of power: The top postal code for new members matched that of Parliament Hill, according to Avid Live chief executive Noel Biderman in a newspaper report published earlier this year.

As Reuters reports,

Canada’s prim capital is suddenly focused more on the state of people’s affairs than the affairs of the state.


One in five Ottawa residents allegedly subscribed to adulterers’ website Ashley Madison, making one of the world’s coldest capitals among the hottest for extra-marital hookups – and the most vulnerable to a breach of privacy after hackers targeted the site.


The hackers, who referred to customers as “cheating dirtbags who deserve no discretion,” appear uninterested in blackmailing individual clients, unlike an organized crime outfit.


The website’s Canadian parent, Avid Life Media, said it had since secured the site and was working with law enforcement agencies to trace those behind the attack.


“Everybody says Ottawa is a sleepy town and here we are with 200,000 people running around on each other,” said municipal employee Jon Weaks, 27, as he took a break at an outdoor cafe near the nation’s Parliament.


“I think a lot of people will be questioned tonight at dinner,” added colleague Ali Cross, 28.


Some 189,810 Ashley Madison users were registered in Ottawa, a city with a population of about 883,000, making the capital No. 1 for philanderers in Canada and potentially the highest globally per capita, according to previously published figures from the Toronto-based company.

However, Canada may have bigger problems…

The hotbed of infidelity was also the seat of power: The top postal code for new members matched that of Parliament Hill, according to Avid Live chief executive Noel Biderman in a newspaper report published earlier this year.


Biderman said capital cities around the world typically top subscription rates, a phenomenon he chalks up to “power, fame and opportunity,” along with the risk-taking personalities that find themselves in political cities.


The Ottawa mayor’s office and city council either declined to comment or did not return emails.

*  *  *



We suspect ‘overweighting’ Canadian divorce lawyers and ‘undereweighting’ Canadian hotels would be the optimum pair to profit from this…


Your early morning currency, and interest rate moves

Euro/USA 1.0922 down .0014

USA/JAPAN YEN 123.80 down .067

GBP/USA 1.5609 up .0056

USA/CAN 1.2983 up .0016

Early this morning in Europe, the Euro fell by a 14 basis points, trading now just above the 1.09 level at 1.0922; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank,  an imminent  default of Greece and the Ukraine, rising peripheral bond yields and today crumbling bourses.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled up again in Japan by 7 basis points and trading just below the 124 level to 123.80 yen to the dollar.

The pound was up this morning by 56 basis points as it now trades just above the 1.56 level at 1.5609, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is in the toilet again, falling by 16 basis points at 1.2983 to the dollar.

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

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

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

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

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

The NIKKEI: this morning: down 248.30 or 1.19%

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

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

Gold very early morning trading: $1093.30


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

USA dollar index early Wednesday morning: 97.42 up 10 cents from Tuesday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Wednesday morning

And now for your closing numbers for Wednesday:

Closing Portuguese 10 year bond yield: 2.61%  down 3 in basis points from Tuesday

Closing Japanese 10 year bond yield: .42% !!! down 1 in basis points from Tuesday/still very ominous

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

Spanish 10 year bond yield: 1.99% !!!!!!

Your Wednesday 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 Wednesday night/USA dollar index/USA 10 yr bond: 4 pm


Euro/USA: 1.0910 down .0026 ( Euro down 26 basis points)

USA/Japan: 124.03 up  .164 ( yen up 16 basis points)

Great Britain/USA: 1.5598 up .0044 (Pound up 44 basis points)

USA/Canada: 1.3027 up .0085 (Can dollar down 85 basis points)

The euro fell marginally  today. It settled down 26 basis points against the dollar to 1.0910 as the dollar traded  northbound  today against most of the various major currencies. The yen was up by 16 basis points and closing just above the 124 cross at 124.03. The British pound was up a tiny 44 basis points, closing at 1.5598. The Canadian dollar went down again into the toilet falling by 85 basis points closing at 1.3027.

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% par in basis point from Tuesday// (well above the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

97.57 up 26 cents on the day


European and Dow Jones stock index closes:


England FTSE down 101.73 points or 1.50%

Paris CAC down 24.00 points or 0.47%

German Dax down 84.13 points or 0.72%

Spain’s Ibex up 25.70 points or 0.22%

Italian FTSE-MIB down 31.79 or 0.13%


The Dow down 68.25  or 0.38%

Nasdaq; down 36.35 or 0.70%


OIL: WTI 49.11 !!!!!!!


Closing USA/Russian rouble cross: 57.44  down 1/2 rouble per dollar on the day



And now for your more important USA stories.


Your closing numbers from New York


Peak” Apple?

And a quick message for Caesar’s shareholders… (and AAPL Call buyers)…

Stocks legged lower overnight on AAPL and MSFT, USDJPY helped them stage a rampaplooza as cash markets opened managing to get the S&P unahcnged for a brief moment…


Cash indices on the day saw Small Caps (who have been big losers recently) outperform but the rest ended red..


On the week, Trannies crept back into the green but The Dow remains the biggest loser as CAT, IBM, UTX, MSFT and AAPL weight it down


Leaving The Dow back in the red for 2015…


But that was not acceptable and so VIX was whacked to ensuire The Dow closed green for 2015…


52 Week Lows continue to rise…


As AAPL bounced off the 200DMA again


Stocks decoupled from bonds early on – thanks to JPY – but recoupled later in the day…


Treasury yields were mixed with the long-end testing down to 3.02% and the short-end selling off…


As The Dollar bounced back…


Commodities all suffered…


Though silver held its own…



Gold continues to tumble – 10 down days in a row is now the longest losing streak since 1996…


Crude was clubbed over 3% on the day – testing a $48 handle and back at its lowest in 3 months… down 16 of the last 20 days


Copper clubbed like a baby seal – down 7 of lats 9 days , hovering at cycle lows…


Charts: Bloomberg

Bonus Chart: Even more ominously for Copper – physical demand for withdrawals from inventory have collapsed…


Bonus Bonus Chart: Lumber smashed again today and as a leading indicator is flashing red for new home sales…


Bonus Bonus Bonus Chart: Any day now – clicks will beat bricks…


I really like this commentary as Graham Summers explains in simple English by the Fed can never normalize rates:

(courtesy Graham Summers/Phoenix Research Capital)

Three Huge Reasons Why the Fed Cannot Let Rates Normalize

The Fed continues to dangle hints of a “rate hike” in front of investors… but the reality is that as far as any significant raise in rates, its hands are tied.


True, the Fed may raise rates from 0.25% to 0.3% or possible even 0.5% sometime in the next 24 months… but these moves will be largely symbolic.


There are three reasons for this:


1)   There are over $555 trillion in interest-rate basedderivatives trades sitting on the big banks balance sheets globally.


2)   The US Dollar carry trade is over $9 trillion in size.


3)   Many Western welfare states would go bankrupt if rates normalized.


Regarding #1… the Fed cannot risk a significant rise in rates, as doing so would potentially burst the bond bubble. Bonds have been in a bull market for over 30 years now. Today, globally the bond market is over $100 trillion in size. And there are over $555 trillion in derivatives that trade based on these bonds.


This is why former Fed Chairman Ben Bernanke admitted that rates would not normalize anytime during his“lifetime” during a closed-door luncheon with several hedge funds last year. For rates to normalize (meaning rise to the historic average of 4%+) would trigger a derivatives implosion. Bernanke knows this. And current Fed Chair Janet Yellen knows it too.


Given that ALL of the Fed’s actions over the last seven years have been devoted to propping up the insolvent big banks (insolvent due to their massive derivatives portfolios), the Fed cannot and will not risk any interest rate surprises.


Regarding item #2 (the US Dollar carry trade), there are over $9 trillion in borrowed US Dollars sloshing around the financial system. These are effectively US Dollar (shorts) as when you borrow in one currency to fund a carry trade you are effectively shorting that currency.


US Dollar deposits yield 0.25%. The Yen yields 0.001%, while the Euro yields negative 0.2% and the Swiss Franc yields negative 0.75%.


In simple terms, the US Dollar is extremely attractive as a store of value relative to most major world currencies. This is why capital has been flowing into the US Dollar, pushing the US Dollar to a 10 year high.


The flip side of this is that every upward move the Dollar makes against other currencies puts more pressure on the $9 trillion worth of US Dollar carry trades. This is why the US Dollar’s rally has been so aggressive: because much of it was carry trades blowing up forcing traders to cover their US Dollar shorts.

On that note, the US Dollar is currently breaking out against most major world currencies.



This is already a big enough concern that the Fed has been mentioning it in FOMC communiqués. Any rate hike will only INCREASE the interest rate differential between the US Dollar and other major world currencies… which in turn would drive even more capital to the US Dollar… and put even more pressure on the $9 trillion US Dollar carry trade.


Finally, regarding #3 (the impact of interest rates on welfare states)… it is no secret that most western nations are bankrupt due to excessive social welfare expenses. Most nations rely heavily on the bond markets to fund their social spending patterns as tax revenues don’t come anywhere near enough to cover them.



In the US, a 1% increase in interest rates means over $100 billion more in interest rate payments. The US is already running a deficit (meaning that it spends more than it takes in via taxes) and has been for most of the last 20 years. As the above charts who, most Western developed nations are in similar situations.


If the Fed began to let rates normalize it would render numerous nations insolvent.  Every asset under the sun trades based on its risk relative to Us Treasuries (the so called “risk free rate”). If US yields rise, so will yields around the world.


And the world cannot afford that.


In short, the world is awash with debt. The bond market has ballooned up to $100 trillion in size. And most nations are struggling to service their debt loads even with rates at historic lows.


At some point, the bond bubble will burst. And when it does, entire countries will go bust.




i thought you might find the following story intriguing!

(courtesy zero hedge)


470,000 Vehicles At Risk After Hackers “Take Control & Crash” Jeep Cherokee From A Sofa 10 Miles Away

In what is being called “the first of its kind,” Wired.com reports that hackers, using just a laptop and mobile phone, accessed a Jeep Cherokee’s on-board systems (via its wireless internet connection), took control and crashed the car into a ditch from 10 miles away sitting on their sofa. As The Telegraph details, the breach was revealed by security researchers Charlie Miller, a former staffer at the NSA, and Chris Valasek, who warned that more than 470,000 cars made by Fiat Chrysler could be at risk of being attacked by similar means. Coming just weeks after the FBI claimed a US hacker took control of a passenger jet he was on in the first known such incident of its kind, the incident shows just how vulnerable we are to modern technology.



As The Telegraph reports,the hackers (security experts) worked with Andy Greenberg, a writer with tech website Wired.com, who drove the Jeep Cherokee on public roads in St Louis, Missouri

In his disturbing account Greenberg described how the air vents started blasting out cold air and the radio came on full blast when the hack began.


The windscreen wipers turned on with wiper fluid, blurring the glass, and a picture of the two hackers appeared on the car’s digital display to signify they had gained access.


Greenberg said that the hackers then slowed the car to a halt just as he was getting on the highway, causing a tailback behind him – though it got worse after that.


He wrote: ‘The most disturbing maneuver came when they cut the Jeep’s brakes, leaving me frantically pumping the pedal as the 2-ton SUV slid uncontrollably into a ditch.


‘The researchers say they’re working on perfecting their steering control – for now they can only hijack the wheel when the Jeep is in reverse.


‘Their hack enables surveillance too: They can track a targeted Jeep’s GPS coordinates, measure its speed, and even drop pins on a map to trace its route.’


The hack was possible thanks to Uconnect, the Internet connected computer feature that has been installed in fleets of Fiat Chrysler cars since late 2013.


It controls the entertainment system, deals with navigation and allows phone calls.


The feature also allows owners to start the car remotely, flash the headlights using an app and unlock doors.


But according to Miller and Valasek, the on-board Internet connection is a ‘super nice vulnerability’ for hackers.


All they have to do is work out the car’s IP address and know how to break into its systems and they can take control.

In a statement to Wired.com Fiat Chrysler said:

“Under no circumstances does FCA condone or believe it’s appropriate to disclose ‘how-to information’ that would potentially encourage, or help enable hackers to gain unauthorised and unlawful access to vehicle systems.


‘We appreciate the contributions of cybersecurity advocates to augment the industry’s understanding of potential vulnerabilities. However, we caution advocates that in the pursuit of improved public safety they not, in fact, compromise public safety.”

*  *  *

This is going to hurt a lot of hedge funds:
(courtesy zero hedge)

Biggest “Hedge Fund Hotel” Implodes After Judge Ruling Sends Caesars Stock Plummeting By 40%

Some know it as one of the longest running Las Vegas pre-bankruptcy dramas. But what Caesars Entertainment really is, is the biggest hedge fund hotel in “special situation” history: with “investors” such as Paulson, Omega, Canyon, Soros, JMB, Scoggin, Pentwater, Och Ziff and many others, this is quite literally the who is who of biggest and baddest US hedge funds.


But apparently not bad enough.

Moments ago Bloomberg reported that a judge said Caesars Entertainment must face lawsuits that could force the gambling company into bankruptcy alongside its main operating unit, dealing a blow to efforts to restructure billions in debt.

The immediate result: CZR is now halted after falling record a 40% to lowest since Nov. 2012 on >3.2x avg. daily volume.


The real result is that a whole lot of hail mary’s at the most prominent hedge funds may have just missed ttheir target. It also means that tonight will be an empty bar at Hustler, Penthouse Club and Sapphires.

And another way of showing what just happened at a great many trading desks:

Everyone’s favourite: Michael Snyder:
(courtesy Michael Snyder/EconomicCollapseBlog)

12 Ways The Economy Is In Worse Shape Now Than During The Depths Of The Last Recession

Submitted by Michael Snyder via The Economic Collapse blog,

Did you know that the percentage of children in the United States that are living in poverty is actually significantly higher than it was back in 2008?  When I write about an “economic collapse”, most people think of a collapse of the financial markets.  And without a doubt, one is coming very shortly, but let us not neglect the long-term economic collapse that is already happening all around us.  In this article, I am going to share with you a bunch of charts and statistics that show that economic conditions are already substantially worse than they were during the last financial crisis in a whole bunch of different ways.  Unfortunately, in our 48 hour news cycle world, a slow and steady decline does not produce many “sexy headlines”.  Those of us that are news junkies (myself included) are always looking for things that will shock us. But if you stand back and take a broader view of things, what has been happening to the U.S. economy truly is quite shocking.  The following are 12 ways that the U.S. economy is already in worse shape than it was during the depths of the last recession…

#1 Back in 2008, 18 percent of all Americans kids were living in poverty.  This week, we learned that number has now risen to 22 percent

There are nearly three million more children living in poverty today than during the recession, shocking new figures have revealed.


Nearly a quarter of youngsters in the US (22 percent) or around 16.1 million individuals, were classed as living below the poverty line in 2013.


This has soared from just 18 percent in 2008 – during the height of the economic crisis, the Casey Foundation’s 2015 Kids Count Data Book reported.

#2 In early 2008, the homeownership rate in the U.S. was hovering around 68 percent.  Today, it has plunged below 64 percent.  Incredibly, it has not been this low in more than 20 years.  Just look at this chart – the homeownership rate has continued to plummet throughout Obama’s “economic recovery”…

Homeownership Rate 2015

#3 While Barack Obama has been in the White House, government dependence has skyrocketed to levels that we have never seen before.  In 2008, the federal government was spending about 37 billion dollarsa year on the federal food stamp program.  Today, that number is above 74 billion dollars.  If the economy truly is “recovering”, why is government dependence so much higher than it was during the last recession?

#4 On the chart below, you can see that the U.S. national debt was sitting at about 9 trillion dollars when we entered the last recession.  Since that time, the debt of the federal government has doubled.  We are on the exact same path that Greece has gone down, and what you are looking at below is a recipe for national economic suicide…

Presentation National Debt

#5 During Obama’s “recovery”, real median household income has actually gone down quite a bit.  Just prior to the last recession, it was above $54,000 per year, but now it has dropped to about $52,000 per year…

Median Household Income

#6 Even though our incomes are stagnating, the cost of living just continues to rise steadily.  This is especially true of basic things that we all purchase such as food.  As I wrote about earlier this year, the price of ground beef in the United States has doubled since the last recession.

#7 In a healthy economy, lots of new businesses are opening and not that many are being forced to shut down.  But for each of the past six years, more businesses have closed in the United States than have opened. Prior to 2008, this had never happened before in all of U.S. history.

#8 Barack Obama is constantly telling us about how unemployment is “going down”, but the truth is that the  percentage of working age Americans that are either working or considered to be looking for work has steadily declined since the end of the last recession…

Presentation Labor Force Participation Rate

#9 Some have suggested that the decline in the labor force participation rate is due to large numbers of older people retiring.  But the reality of the matter is that we have seen a spike in the inactivity rate for Americans in their prime working years.  As you can see below, the percentage of males between the ages of 25 and 54 that aren’t working and that aren’t looking for work has surged to record highs since the end of the last recession…

Presentation Inactivity Rate

#10 A big reason why we don’t have enough jobs for everyone is the fact that millions upon millions of good paying jobs have been shipped overseas.  At the end of Barack Obama’s first year in office, our yearly trade deficit with China was 226 billion dollars.  Last year, it was more than 343 billion dollars.

#11 Thanks to all of these factors, the middle class in America is dying In 2008, 53 percent of all Americans considered themselves to be “middle class”.  But by 2014, only 44 percent of all Americans still considered themselves to be “middle class”.

When you take a look at our young people, the numbers become even more pronounced.  In 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”.  But in 2014, an astounding 49 percent of all Americans in that age range considered themselves to be “lower class”.

#12 This is something that I have covered before, but it bears repeating.  The velocity of money is a very important indicator of the health of an economy.  When an economy is functioning smoothly, people generally feel quite good about things and money flows freely through the system.  I buy something from you, then you take that money and buy something from someone else, etc.  But when an economy is in trouble, the velocity of money tends to go down.  As you can see on the chart below, a drop in the velocity of money has been associated with every single recession since 1960.  So why has the velocity of money continued to plummet since the end of the last recession?…

Velocity Of Money M2

If you are waiting for an “economic collapse” to happen, you can stop waiting.

One is unfolding right now before our very eyes.

But what most people really mean when they ask about these things is that they are wondering when the next great financial crisis will happen.  And as I discussedyesterday, things are lining up in textbook fashion for one to happen in our very near future.

Once the next great financial crisis does strike, all of the numbers that I just discussed above are going to get a whole lot worse.

So as bad as things are now, the truth is that this is just the beginning of the pain.


I will leave you tonight with this very important interview with author Nomi Prins and Greg Hunter
(courtesy Nomi Prins/Greg Hunter)

Take More Cash Out of Markets and Banks-Nomi Prins

Nomi PrinsBy Greg Hunter’s USAWatchdog.com 

Best-selling author Nomi Prins says the only thing propping up the system is money printing. The tip of the iceberg was the Greek debt crisis. Prins says, “Before it happened, there was a lot of concern at the central bank level. That wasn’t really discussed very much in the press . . . but I believe behind the scenes there were a lot of fearful conversations about the financial system, not just the relationship of the euro and Greece politically, which was a part of it, but you don’t want any chips to fall off your table. Anything could open the door for a run on liquidity (cash), which is also why I talk about what individuals should do more and more now is try to preserve their own liquidity and to take more cash out of the markets or out of banks to just have on the side before this period of volatility, before we have the actual crash. This is a tenuous situation. I am afraid of things that look like a bail-in up to the level of a bail-in.”

Prins, who was a top Wall Street Banker, says the too-big-to-fail banks are much bigger and will be much harder to save in the next crash. The stats Prins comes up with to illustrate this are stunning. Prins says, “43% more deposits are held by the big six banks in the United States since before the crisis (in 2008). 84% more assets are held by the big six banks and 400% more cash. . . . The point is the big six banks control more deposits, more assets, more trading, more cash than they did before. That’s a fact.”

Prins says, now more than ever before, central bankers are fearful. What are they afraid of? Prins contends, “Their fear is the liquidity that they put into the system through epic unprecedented methods . . . all the money they dumped into the markets to make them appear healthy and the banks controlling much of them, the fear is if they pull that plug, if that liquidity somehow falters . . . that things start to tank and implode very quickly. The only think keeping these markets up, the only thing keeping these banks up is either the artificial funding or the purchasing of bonds. Basically, the central bank interventions is the only thing keeping this going.”

So, if they pull the artificial stimulus from the banks, Prins says the whole system crashes. If they keep going, we still get a crash but just a little later. Prins explains, “You cannot sustain a policy that is so artificial forever. It has been sustained for 7 years. That’s a really long time. If they were to take it away right away, there would be an implosion right away, but they are not doing that and haven’t done that. What they are doing is kind of testing. We’ll give a little, we’ll take a little. It will implode, it is just a question of timing.”

What about all the talk of the Fed raising interest rates this fall? Prins explains, “They have backed themselves into a corner. If you raise interest rates 50 basis points, the market will drop 500 points that day. That’s what you are dealing with. That’s just the reality of the situation that has been created. I think if the Fed does raise rates to save face, it will be by a very small amount. The markets will tank . . . and completely stop raising rates going forward, or they don’t do it at all, which is kind of what’s been happening. . . . If they do raise rates, they create a very big knock on effect.”

So, the Fed is trapped in a never ending money printing policy, and Prins goes on to say, “Yes, they are in the tough spot that they created. They fed into this Frankenstein banking system. . . If they raise rates meaningfully, it will cause a tremendous crash in the markets.”

Join Greg Hunter as he goes One-on-One with Nomi Prins, best-selling author of “All The Presidents’ Bankers.”

(There is much more in the in-depth video interview.)

After the Interview: 

The next book by Nomi Prins will be about “central bank global power and the artificial financial system.” It is a complicated project and will not be out until early 2017. Her current best-selling book is called “All the Presidents’ Bankers” and can be bought by clicking here.


Well that about does it for tonight
I will see you tomorrow

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