July 27/Chinese demand for gold in latest week rises to 69 tonnes/so far this year 1366 tonnes for 7 months/Greek banks are in shambles/ECB will not let Greece stock exchange open/Poland and Czech republic say no to the Euro!!

Good evening Ladies and Gentlemen:

 

We are entering options expiry week.

Comex options expiry Tuesday, July 28.

LMBA options expiry:  noon London time July 31.2015

OTC options expiry: midnight July 31.2015

 

 

 

Here are the following closes for gold and silver today:

 

 

 

Gold:  $1096.50 up $10.90  (comex closing time)

Silver $14.59 up 11 cents.

 

 

In the access market 5:15 pm

 

Gold $1095.20

Silver:  $14.57

 

 

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

At the gold comex today, we had a poor delivery day, registering 0 notices for 0 ounces . Silver saw 91 notices filed for 455,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 244.29 tonnes for a loss of 59 tonnes over that period.

In silver, the open interest rose by 55 contracts despite the fact that Friday’s price was down by 20 cents and the gold price was pummeled (down $8.40).  The total silver OI continues to remain extremely high, with today’s reading at 190,439 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 91 notices served upon for 455,000 oz.

In gold, the total comex gold OI rests tonight at 443,402 for a loss of 11,910 contracts as gold was down $8.40 on Friday. We had 0 notices filed for nil oz  today.

We had no withdrawals in gold tonnage at the GLD /  thus the inventory rests tonight at 680.15 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 rise by 55 contracts up to 190,439 despite the fact that silver was down by 20 cents on Friday 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 11,910 contracts down to 443,402 contracts as the price of gold was down by $8.40 on Friday.

(report Harvey)

2 Today, 4 important commentaries on Greece

(zero hedge, Bloomberg/)

3.  Today, 3 stories on the huge fall in Chinese stocks overnight

zero hedge

4. Gold trading overnight

(Goldcore/Mark O’Byrne/)

5. Czech Republic and Poland say no to joining the Euro monetary zone

(zero hedge)

6 Trading of equities/ New York

(zero hedge)

7. we have two oil related stories

(zero hedge/)

8. Dave Kranzler of IRD discusses the criminal actions of GLD

(Dave Kranzler IRD)

 

9 USA stories;
  i) durable goods falter
ii) Dallas Fed Manufacturing Index plummets after rising last month
(zero hedge)
10. Andrew Maguire discusses the gold whacking last Sunday night.  He also informs us that gold is in backwardation in London to the tune of $7.40 spot/over near by month.
(Andrew Maguire/Kingworldnews)
11. Chris Powell on the negligent press
(courtesy Chris Powell./GATA)
12. jessie of American cafe comments that last week China’s demand for gold came in at 69 tonnes, one of the largest on record.  The sum total so far this year 1366 tonnes, a huge 59 tonnes greater demand than last year.
(Jessie/American cafe)
13. Bron Suchecki on why he believes the Chinese undervalued their reserves reporting to the west:
(courtesy Bron Suchecki/Perth Mint)

plus other topics…

Here are today’s comex results:

The total gold comex open interest fell by 11,910 contracts from  455,312 down to 443,402 as gold was down $8.40 in price  on Friday (at the comex close).For the past two years, we have strangely witnessed the gold comex collapse in OI as we enter an active delivery month, and today this again is the norm.  What is interesting is that the LBMA gold is witnessing a 7.40 premium spot/next nearby month as gold is now in backwardation over there.  We are now in the next contract month of July and here the OI rose by 0 contracts remaining at 154 contracts. We had 95 notices filed on Friday and thus we gained 95 gold contracts or an additional 9500 oz will stand in this non active delivery month of July. The next big delivery month is August and here the OI decreased by 28,162 contracts down to 125,568. We have 4 trading days before first day notice for the big August active gold contract (july 31). The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 282,076. However today’s volume was aided by HFT traders. The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day was excellent at 320,593 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI rose by 55 contracts from 190,384 up to 190,439 despite the fact that the price of silver was down by 20 cents with respect to Friday’s price. 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 fell by 73 contracts down to 173. We had 91 notices served upon yesterday and thus we gained 18 contracts or an additional 90,000 ounces of silver will  stand for delivery in this active month of July. This is the first time in quite some time that we have not lost any silver ounces standing immediately after first day notice. The August contract month saw it’s OI fall by 6 contracts down to 166. The next major active delivery month is September and here the OI rose by 66 contracts to 129,666. The estimated volume today was fair at 30,588 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 58,308 contracts which is excellent in volume.  We had 1 notice filed for 5,000 oz.

July initial standing

July 27.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz   66,012.548 oz (HSBC,Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 154 contracts (15,400 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 422,122.6   oz

Today, we had 0 dealer transactions

total Dealer withdrawals: nil  oz

we had 0 dealer deposits

total dealer deposit: zero

 

we had 2 customer withdrawals

i) Out of HSBC:  64,012.533 oz

ii) Out of Scotia: 2000.015 oz

 

total customer withdrawal: 66,012.545 oz

We had 0 customer deposits:

 

Total customer deposit: nil

We had 1 adjustment

 

i) Out of JPMorgan;

we had 104.302.608 oz leave the dealer account and land into the customer account at JPMorgan

JPMorgan has only 3.600 tonnes left in its registered or dealer inventory.

 

.

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

To calculate the total number of gold ounces standing for the July contract month, we take the total number of notices filed so far for the month (702) x 100 oz  or 70,200 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 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 (702) x 100 oz  or ounces + {OI for the front month (154) – the number of  notices served upon today (0) x 100 oz which equals 85,600  oz standing so far in this month of July (2.6625 tonnes of gold).

we gained 95 contracts or an additional 9500 oz will stand in this non active delivery month of JULY.

Total dealer inventory 378,476.13 or 11.77 tonnes

Total gold inventory (dealer and customer) = 7,920,206.028 oz  or 246.35 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 244.29 tonnes for a loss of 59 tonnes over that period.

end

 

And now for silver

July silver initial standings

July 27 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory   oz (CNT, Delaware)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 813,933.710 oz (CNT,Scotia)
No of oz served (contracts) 91 contracts  (455,000 oz)
No of oz to be served (notices) 172 contracts (860,000 oz)
Total monthly oz silver served (contracts) 3474 contracts (17,370,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 9,315,632.0 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz

We had 2 customer deposits:

i) Into Brinks: 13,599.48 oz

ii) Into CNT: 300,146.67

total customer deposit: 313,746.15 oz

We had 2 customer withdrawals:

i)Out of  Scotia: 730,580.97 oz

ii) Out of CNT: 83,352.74 oz

total withdrawals from customer: 813,933.710  oz

we had 1  adjustment

From Delaware:

 

 15,459.639 oz leaves the customer and this lands into the dealer account at Delaware

Total dealer inventory: 58.158 million oz

Total of all silver inventory (dealer and customer) 177.337 million oz

The total number of notices filed today for the July contract month is represented by 1 contract for 5,000 oz. To calculate the number of silver ounces that will stand for delivery in July, we take the total number of notices filed for the month so far at (3474) x 5,000 oz  = 17,370,000 oz to which we add the difference between the open interest for the front month of July (173) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing.

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

3474 (notices served so far) + { OI for front month of July (173) -number of notices served upon today (1} x 5000 oz ,= 18,230,000 oz of silver standing for the July contract month.

We  gained another 90,000 oz that will  stand for delivery in this non active month of July.  Somebody was in great need of silver and gold today.

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

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

end

 

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 27/no change in inventory/rests tonight at 680.13 tonnes

July 24.2015/we had another massive withdrawal of 4.48 tonnes of gold form the GLD/Inventory rests at 680.13 tonnes.

July 23.2015: we had another withdrawal of 2.68 tonnes of gold from the GLD/Inventory rests at 684.63 tonnes

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 27 GLD : 680.13 tonnes

 

end

And now for silver (SLV)

July 27/no change in silver inventory/inventory rests tonight at 328.834 million oz

July 24/no change in silver inventory/inventory rests tonight at 328.834 million oz

July 23.2015; no change in silver inventory/rests tonight at 328.834 million oz

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 27/2015:  tonight inventory rests at 328.834 million oz

 

end

 

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

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

1. Central Fund of Canada: traded at Negative 11.9 percent to NAV usa funds and Negative 11.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.6%

cash .4%

( July 27/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV falls to -.31%!!!! NAV (July 27/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV rises to – .59% to NAV(July 27/2015)

Note: Sprott silver trust back  into positive territory at-  0.32%

Sprott physical gold trust is back into negative territory at -.59%

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.
* * * * *

>end

 

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

on gold and silver issues:

 

(courtesy/Mark O’Byrne/Goldcore)

Gold Bullion “Extremely Rare” – All World’s Gold Fits In Average Four Bedroom House

– Gold is extremely rare and all gold ever mined would fit in giant bar the size of a four bedroom house
– Gold is a tangible asset which always retains value – unlike paper assets
– Growing Chinese, Indian and Asian middle class provide “fundamental pillar of support” to gold
– Jewellery is not a suitable vehicle for gold investment due to high mark-ups and VAT
– “Something romantic about gold” and a “premium product” said Bobby Kerr
– Risk of further weakness in short term but buying opportunity presenting itself
– History and academic research shows gold a “hedging instrument” and safe haven asset

Research Director and founder of GoldCore, Mark O’Byrne, was interviewed by Bobby Kerr on Newstalk’s “Down to Business” on Saturday morning. A range of aspects pertaining to gold and the gold market were discussed including the rarity of physical gold; the enormous demand for gold from China and India and gold’s proven safe haven qualities.

27-07-2015_1
All the gold in the world in a giant gold cube (0.9999 pure)

When explaining the true scarcity of physical gold, Mark was asked whether all the gold ever mined would fit into a 4-bedroom house. Mark agreed, stating that if all above ground gold in existence were refined to 99.9% purity it would fit in a cube with 21-meter sides. This would be comparable to the centre court of Wimbledon or two olympic size swimming pools. It is therefore an extremely rare metal.

Gold is a tangible asset which, regardless of how poorly it may perform in the short term due to the ebb and flow of markets – always retains a value in the long term. When stocks and shares enter into crisis periods there is always the risk that their value can be completely erased as happened with Bear Stearns, Lehman Brothers and as almost happened to some Irish banks.

History and empirical data demonstrate that gold is a time-tested form of financial insurance said Mark O’Byrne. He cites Trinity College Dublin’s Brian Lucey and the work of Dr. Constantin Gurdgiev whose academic research shows that gold is a “hedging instrument” and a “safe haven asset”.

He refers to the old Wall Street adage that one should have 10% of one’s assets in gold and hope that it never works. The implication being that if the gold price is rising it is usually in an environment where stocks and shares, bonds, property and one’s business are suffering.

He emphasises that placing all of one’s wealth in gold is risky but an allocation is essential financial insurance.

When asked by Bobby whether the recent declines in prices were related to the crashing stock market in China, Mark pointed out that there have been a couple of months of weak demand from China but that on a quarterly or yearly basis demand remains robust. Chinese demand for this year is expected to amount to 1,000 metric tonnes.

27-07-2015_2
Four-bedroom house

The Shanghai Gold Exchange sees an average of 50 tonnes of gold bought each week but last week saw demand spike to over 60 tonnes. He points out that the middle classes of China and India do not trust banks or national currencies due to historical crises such as the Chinese hyperinflation of 1949.They therefore view gold as a currency and savings mechanism and prefer to save in that format.

In 1949, Chairman Mao banned ownership of physical gold in China and the market was not liberalised until 2003. Therefore, Chinese demand is coming from a population of 1.3 billion people who had no access to gold only twelve years ago. This offers a “fundamental pillar of support” to the gold price.

Mark explains that jewellery is not way to invest in gold. Investment grade coins and bars are 99.99% pure whereas jewellery in Ireland – mainly 9 carat – is 37.5% pure. The mark-ups on bullion coins and bars range from roughly 2% to 4% whereas the mark-up on jewellery can be as high as 300%. There is no VAT payable on bullion coins and bars whereas there is on jewellery.

Mark believes that some downward risk to the gold price remains due to the momentum of the recent severe correction in price. He points out that GoldCore had suggested on Bloomberg three years ago that a 50% correction in price was not unlikely at that time as is normal in long term bull markets.

However, in the long term gold should perform well due to the fact that the problems that led to the global debt crisis have not been addressed – too much debt globally. Indeed, debt levels have continued to surge which risks compounding the global financial crisis and risks a new and global debt crisis worse than the last one.

27-07-2015_3

The Newstalk interview can be listened to here


MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,098.60, EUR 992.42 and GBP 708.39 per ounce.
Friday’s AM LBMA Gold Price was USD 1,083.75, EUR 990.042 and GBP 699.89 per ounce.

27-07-2015_4
Gold in USD – 1 Week

Gold and silver fell over 3% and 1% respectively last week – to $1,098.70/oz and $14.69/oz.

Today, gold in Singapore ticked lower initially prior to seeing gains in late Asian and early Swiss gold bullion trading.

This morning in European trading, silver for immediate delivery was 0.3 percent lower at $14.78 an ounce. The metal slumped to $14.3842 on Friday, the lowest price since 2009.

Spot platinum fell 0.7% percent to $985 an ounce, while palladium fell 1.1% percent to $622 an ounce.

Must-read bullion guide: Gold and Silver Storage Must Haves

Mark O’Byrne
end
(courtesy Bloomberg/GATA)

Hedge funds are holding first-ever gold net-short position

Section:

By Joe Deaux
Bloomberg News
Saturday, July 25, 2015

Hedge funds are holding the first ever bet on a decline in gold prices since the U.S. government started collecting the data in 2006.

The funds and other speculators shifted to a net-short position of 11,345 contracts in New York futures and options in the week ended July 21, according to figures from the U.S. Commodity Futures Trading Commission.

Gold futures on Friday fell to the lowest since 2010 on the Comex, and the short wagers show investors expect the rout to deepen. Bullion has fallen almost every day in July, leaving the metal poised for the biggest monthly decline since June 2013. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2015-07-24/hedge-funds-hold-first…

end

A very important commentary form Andrew Maguire tonight.  He basically states that the crooked BIS is running attacks on gold and silver.  However expect a short squeeze shortly.  Interestingly he states that gold is in backwardation to the tune of $7.40 spot/next nearby month.

a must read..

 

(courtesy Andrew Maguire/Kingworldnews/GATA)

BIS ran attack on gold and short squeeze is imminent, Maguire tells KWN

Section:

12:50p ET Saturday, July 25, 2015

Dear Friend of GATA and Gold:

In commentary posted today at King World News, London metals trader Andrew Maguire provides evidence that last week’s attack on the gold price was operated through the Bank for International Settlements, that commercial traders have turned speculators short and gotten themselves long, and that a short squeeze is imminent. Maguire’s commentary is posted at KWN here:

http://kingworldnews.com/andrew-maguire-a-gold-and-silver-tsunami-is-for…

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

end

(courtesy Chris Powell/GATA)

Silence from the gold mining industry and timidity from the World Gold Council

Section:

11:33a ET Saturday, July 25, 2015

Dear Friend of GATA and Gold:

On Friday your secretary/treasurer sought comment from the World Gold Council and the investor or media relations offices of six large gold mining companies about last Sunday night’s attack on the gold market. Only Newmont Mining responded, saying it had no comment. Not responding were the gold council, Barrick Gold, Goldcorp, Kinross, Anglogold Ashanti, and Agnico-Eagle.

The gold council’s statement about the attack, conveyed to you by GATA Friday evening —

http://www.gata.org/node/15588

— was discovered by your secretary/treasurer not in the “News and Events” and “Press Releases” section of the council’s Internet site —

http://www.gold.org/news-and-events

— but rather in the “Tweets” section —

https://twitter.com/GOLDCOUNCIL

— where it had been almost immediately overshadowed by an item about jewelry purchases in India. One could have gotten the impression that the council was not eager to be seen addressing the issue.

And yet one GATA supporter was a bit encouraged by the council’s statement. He wrote:

“This was probably the most interesting statement I’ve seen the World Gold Council issue. They acknowledged gold as money, something they’ve been loathe to do. They are acknowledging all our observations about shady activity in the gold market and expressing some rationales, but quietly. It’s almost as if they want to protest but someone is keeping them from making a direct protest and this is the best they are permitted to do. If they really wanted to bury this, why issue a statement at all?

“I think that in the fullness of time someone in the gold council will rat out what is going on over there. Perhaps the council is dominated by government interests but has some people who are sympathetic to gold as money. Yes, gold investors and mining companies needed a full-throated protest of last week’s attack and didn’t get it, and yes, the gold council was still a little defensive about the status quo. Yet my expectations for the gold council are so low that the council actually exceeded them for once. I don’t admire the council by any means, but I do wonder what they’re up to with this statement.”

Well, here’s a guess: The attack on gold was so extreme and so obviously a market manipulation that the council figured that its own relevance would evaporate if it had absolutely nothing to say but that saying anything relevant risked upsetting the market-rigging establishment to which the council is so closely connected. So it said something timid and quickly buried it.

But eventually even the World Gold Council may realize that it will be out of business if the gold price is taken down to zero. Then central banks will no longer need the council’s help in getting the price down.

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

end

 

 

(courtesy Bron Suchecki/Perth Mint Director/GATA)

 

Bron Suchecki: The message behind the Chinese gold reserves announcement

Section:

10:48a ET Saturday, July 25, 2015

Dear Friend of GATA and Gold:

Perth Mint research director Bron Suchecki has done a spectacular job compiling and analyzing interpretations of China’s latest gold reserve announcement, which, he writes, likely was aimed at influencing and even misleading various audiences.

In a particularly astute observation, Suchecki writes:

Knowing that a lower-than-expectations figure would likely be negative for gold prices, China may well have considered it fortuitous that the gold price was weak at the same time they wanted to encourage people to invest in the stock market. As Jim Rickards tweeted, “China is still buying gold and favors a lower price. So timing the big ‘reveal’ for when gold prices are weak anyway makes perfect sense,” both for the State Administration of Foreign Exchange in terms of acquiring more gold and for discouraging domestic investors from shifting money from the stock market to gold.

Suchecki’s analysis is headlined “The Message Behind the Chinese Gold Reserves Announcement” and it’s posted at the Perth Mint’s Internet site here:

http://research.perthmint.com.au/2015/07/24/the-message-behind-the-chine…

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

end

 

Morons!!

 

(courtesy GATA)

World Gold Council dismisses gold price plunge

Section:

5:30p ET Friday, July 24, 2015

Dear Friend of GATA and Gold:

The World Gold Council yesterday published a fairly involved statement responding to this week’s attack on the gold market, acknowledging the suspiciousness of the trading that began the attack last Sunday night but dismissing it as the doings of speculators and emphasizing what the council considers the favorable fundamentals for gold, as if fundamentals might prevail any time soon against surreptitious trading by central banks. The council’s statement is posted in PDF format at GATA’s Internet site here:

http://www.gata.org/files/WorldGoldCouncilStatement-07-23-2015.pdf

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

end

(courtesy Dave Kranzler/Craig Roberts)

 

Supply and Demand in the Gold and Silver Futures Markets – Paul Craig Roberts and Dave Kranzler

This article establishes that the price of gold and silver in the futures markets in which cash is the predominant means of settlement is inconsistent with the conditions of supply and demand in the actual physical or current market where physical bullion is bought and sold as opposed to transactions in uncovered paper claims to bullion in the futures markets. The supply of bullion in the futures markets is increased by printing uncovered contracts representing claims to gold. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply. We will demonstrate with economic analysis and empirical evidence that the bear market in bullion is an artificial creation.

The law of supply and demand is the basis of economics. Yet the price of gold and silver in the Comex futures market, where paper contracts representing 100 troy ounces of gold or 5,000 ounces of silver are traded, is inconsistent with the actual supply and demand conditions in the physical market for bullion. For four years the price of bullion has been falling in the futures market despite rising demand for possession of the physical metal and supply constraints.

We begin with a review of basics. The vertical axis measures price. The horizontal axis measures quantity. Demand curves slope down to the right, the quantity demanded increasing as price falls. Supply curves slope upward to the right, the quantity supplied rising with price. The intersection of supply with demand determines price. (Graph 1)

Supply and Demand Graph 1

A change in quantity demanded or in the quantity supplied refers to a movement along a given curve. A change in demand or a change in supply refers to a shift in the curves. For example, an increase in demand (a shift to the right of the demand curve) causes a movement along the supply curve (an increase in the quantity supplied).

Changes in income and changes in tastes or preferences toward an item can cause the demand curve to shift. For example, if people expect that their fiat currency is going to lose value, the demand for gold and silver would increase (a shift to the right).

Changes in technology and resources can cause the supply curve to shift. New gold discoveries and improvements in gold mining technology would cause the supply curve to shift to the right. Exhaustion of existing mines would cause a reduction in supply (a shift to the left).

What can cause the price of gold to fall? Two things: The demand for gold can fall, that is, the demand curve could shift to the left, intersecting the supply curve at a lower price. The fall in demand results in a reduction in the quantity supplied. A fall in demand means that people want less gold at every price. (Graph 2)

Supply and Demand Graph 2

Alternatively, supply could increase, that is, the supply curve could shift to the right, intersecting the demand curve at a lower price. The increase in supply results in an increase in the quantity demanded. An increase in supply means that more gold is available at every price. (Graph 3)

Supply and Demand Graph 3

To summarize: a decline in the price of gold can be caused by a decline in the demand for gold or by an increase in the supply of gold.

A decline in demand or an increase in supply is not what we are observing in the gold and silver physical markets. The price of bullion in the futures market has been falling as demand for physical bullion increases and supply experiences constraints What we are seeing in the physical market indicates a rising price. Yet in the futures market in which almost all contracts are settled in cash and not with bullion deliveries, the price is falling.

For example, on July 7, 2015, the U.S. Mint said that due to a “significant” increase in demand, it had sold out of Silver Eagles (one ounce silver coin) and was suspending sales until some time in August. The premiums on the coins (the price of the coin above the price of the silver) rose, but the spot price of silver fell 7 percent to its lowest level of the year (as of July 7).

This is the second time in 9 months that the U.S. Mint could not keep up with market demand and had to suspend sales. During the first 5 months of 2015, the U.S. Mint had to ration sales of Silver Eagles. According to Reuters, since 2013 the U.S. Mint has had to ration silver coin sales for 18 months. In 2013 the Royal Canadian Mint announced the rationing of its Silver Maple Leaf coins: “We are carefully managing supply in the face of very high demand. . . . Coming off strong sales volumes in December 2012, demand to date remains very strong for our Silver Maple Leaf and Gold Maple Leaf bullion coins.” During this entire period when mints could not keep up with demand for coins, the price of silver consistently fell on the Comex futures market. On July 24, 2015 the price of gold in the futures market fell to its lowest level in 5 years despite an increase in the demand for gold in the physical market. On that day U.S. Mint sales of Gold Eagles (one ounce gold coin) were the highest in more than two years, yet the price of gold fell in the futures market.

How can this be explained? The financial press says that the drop in precious metals prices unleashed a surge in global demand for coins. This explanation is nonsensical to an economist. Price is not a determinant of demand but of quantity demanded. A lower price does not shift the demand curve. Moreover, if demand increases, price goes up, not down.

Perhaps what the financial press means is that the lower price resulted in an increase in the quantity demanded. If so, what caused the lower price? In economic analysis, the answer would have to be an increase in supply, either new supplies from new discoveries and new mines or mining technology advances that lower the cost of producing bullion.

There are no reports of any such supply increasing developments. To the contrary, the lower prices of bullion have been causing reductions in mining output as falling prices make existing operations unprofitable.

There are abundant other signs of high demand for bullion, yet the prices continue their four-year decline on the Comex. Even as massive uncovered shorts (sales of gold contracts that are not covered by physical bullion) on the bullion futures market are driving down price, strong demand for physical bullion has been depleting the holdings of GLD, the largest exchange traded gold fund. Since February 27, 2015, the authorized bullion banks (principally JPMorganChase, HSBC, and Scotia) have removed 10 percent of GLD’s gold holdings. Similarly, strong demand in China and India has resulted in a 19% increase of purchases from the Shanghai Gold Exchange, a physical bullion market, during the first quarter of 2015. Through the week ending July 10, 2015, purchases from the Shanghai Gold Exchange alone are occurring at an annualized rate approximately equal to the annual supply of global mining output.

India’s silver imports for the first four months of 2015 are 30% higher than 2014. In the first quarter of 2015 Canadian Silver Maple Leaf sales increased 8.5% compared to sales for the same period of 2014. Sales of Gold Eagles in June, 2015, were more than triple the sales for May. During the first 10 days of July, Gold Eagles sales were 2.5 times greater than during the first 10 days of June.

Clearly the demand for physical metal is very high, and the ability to meet this demand is constrained. Yet, the prices of bullion in the futures market have consistently fallen during this entire period. The only possible explanation is manipulation.

Precious metal prices are determined in the futures market, where paper contracts representing bullion are settled in cash, not in markets where the actual metals are bought and sold. As the Comex is predominantly a cash settlement market, there is little risk in uncovered contracts (an uncovered contract is a promise to deliver gold that the seller of the contract does not possess). This means that it is easy to increase the supply of gold in the futures market where price is established simply by printing uncovered (naked) contracts. Selling naked shorts is a way to artificially increase the supply of bullion in the futures market where price is determined. The supply of paper contracts representing gold increases, but not the supply of physical bullion.

As we have documented on a number of occasions (see, for example,http://www.paulcraigroberts.org/2014/12/22/lawless-manipulation-bullion-markets-public-authorities-paul-craig-roberts-dave-kranzler/ ), the prices of bullion are being systematically driven down by the sudden appearance and sale during thinly traded times of day and night of uncovered future contracts representing massive amounts of bullion. In the space of a few minutes or less massive amounts of gold and silver shorts are dumped into the Comex market, dramatically increasing the supply of paper claims to bullion. If purchasers of these shorts stood for delivery, the Comex would fail. Comex bullion futures are used for speculation and by hedge funds to manage the risk/return characteristics of metrics like the Sharpe Ratio. The hedge funds are concerned with indexing the price of gold and silver and not with the rate of return performance of their bullion contracts.

A rational speculator faced with strong demand for bullion and constrained supply would not short the market. Moreover, no rational actor who wished to unwind a large gold position would dump the entirety of his position on the market all at once. What then explains the massive naked shorts that are hurled into the market during thinly traded times?

The bullion banks are the primary market-makers in bullion futures. they are also clearing members of the Comex, which gives them access to data such as the positions of the hedge funds and the prices at which stop-loss orders are triggered. They time their sales of uncovered shorts to trigger stop-loss sales and then cover their short sales by purchasing contracts at the price that they have forced down, pocketing the profits from the manipulation

The manipulation is obvious. The question is why do the authorities tolerate it?

Perhaps the answer is that a free gold market serves both to protect against the loss of a fiat currency’s purchasing power from exchange rate decline and inflation and as a warning that destabilizing systemic events are on the horizon. The current round of on-going massive short sales compressed into a few minutes during thinly traded periods began after gold hit $1,900 per ounce in response to the build-up of troubled debt and the Federal Reserve’s policy of Quantitative Easing. Washington’s power is heavily dependent on the role of the dollar as world reserve currency. The rising dollar price of gold indicated rising discomfort with the dollar. Whereas the dollar’s exchange value is carefully managed with help from the Japanese and European central banks, the supply of such help is not unlimited. If gold kept moving up, exchange rate weakness was likely to show up in the dollar, thus forcing the Fed off its policy of using QE to rescue the “banks too big to fail.”

The bullion banks’ attack on gold is being augmented with a spate of stories in the financial media denying any usefulness of gold. On July 17 the Wall Street Journal declared that honesty about gold requires recognition that gold is nothing but a pet rock. Other commentators declare gold to be in a bear market despite the strong demand for physical metal and supply constraints, and some influential party is determined that gold not be regarded as money.

Why a sudden spate of claims that gold is not money? Gold is considered a part of the United States’ official monetary reserves, which is also the case for central banks and the IMF. The IMF accepts gold as repayment for credit extended. The US Treasury’s Office of the Comptroller of the Currency classifies gold as a currency, as can be seen in the OCC’s latest quarterly report on bank derivatives activities in which the OCC places gold futures in the foreign exchange derivatives classification.

The manipulation of the gold price by injecting large quantities of freshly printed uncovered contracts into the Comex market is an empirical fact. The sudden debunking of gold in the financial press is circumstantial evidence that a full-scale attack on gold’s function as a systemic warning signal is underway.

It is unlikely that regulatory authorities are unaware of the fraudulent manipulation of bullion prices. The fact that nothing is done about it is an indication of the lawlessness that prevails in US financial markets.

Paul Craig Roberts, Ph.D., is a former Assistant Secretary of the U.S. Treasury.

Dave Kranzler is a University of Chicago MBA and is an active participant in financial markets.

 

end

(courtesy Martin Armstrong/Peter Cooper/Arabian Money)

Martin Armstrong calls cyclical bottom for gold prices, now to $5,000?

Posted on 26 July 2015

Famously controversial futurologist, economist and business cycle expert Martin Armstrong, who forecast ‘$5,000+’ an ounce gold for 2016 on November 7th 2009 more than five years ago, now says gold touched rock bottom last week.

His website comment last week said: ‘If we hold $1,084 for the weekly closing, then we can see a two week bounce and everyone will proclaim the low, so hurry up and buy more.’

Gold’s rising now

Gold bounced back to $1,099 at the close of last week, comfortably beating this bottom-marker and proclaiming the end of the recent sell-off.

The precious metal has tested a critical 50 per cent retracement of its bull market run. That is to say it fell to the mid-point between its $1,923 top in 2011 and $247 starting point in 2000.

Dr. Armstrong’s doomsday downside to the gold price is now not going to happen. He had warned: ‘If we close below these numbers, then we can see a two week panic to the downside and a test of the 1980 high. If that unfolds, then the latter target may be further down. So we play it by the numbers.’

So will gold prices now head to $5,000-plus as the world enters a second global financial crisis of unimaginable dimensions? That is what this forecaster said would happen next year more than five years ago (click here).

He’s been right many times before, and his prognosis for the gold price outlook in 2009 was also very accurate… Back then he commented: ‘We should see a temporary high in 2010-11 with a retest of support in 2012-13 with a rally into 2016.’ He also got the ‘explosive rally’ of 2011 spot on target.

Debt deflation spiral

The crucial difference between Dr. Armstrong and most gold forecasters is that he has always argued that it would not be consumer price inflation that sent gold prices rocketing upwards but a general loss of confidence in governments and by extension paper money or sovereign bonds in a period of deflation.

And what are we seeing today as China deals with its stock market crash and the eurozone struggles with Greece? Deflation led by commodity prices and a loss of liquidity as bond markets dry up. The US is not going to be immune from these pressures, and is also carrying a huge debt.

Gold may have just had its nemesis, the real problems are just starting for other asset classes.

http://www.arabianmoney.net/gold-silver/2015/07/26/martin-armstrong-calls-cyclical-bottom-for-gold-prices-now-to-5000/

 

 

end

 

Shanghai’s demand for gold (equals withdrawals) hit 69 tonnes, or one of the highest on record.  For the totals up to the July 17, total gold demand equals 1366 tonnes or we are running 59 tonnes higher than last year:

 

 

(courtesy Jessie’s Americain cafe)

 

 

 

 

 

Shanghai On Track For Record Year With 69 Tonnes Gold Withdrawn In Latest Week

“A lie would make no sense unless the truth were felt to be dangerous.”

Alfred Adler

Pet rocks.

***

 

 

end

 

 

I have been saying for years that the GLD is a fraudulent vehicle.

Kranzler concurs!!

 

(courtesy Dave Kranzler/IRD)

 

GLD Continues To Be Looted While The Public Loads Up With Physical

From the day back in 2004 that I first read James Turk’s analysis of the GLD ETF, I had suspected that GLD had been created to take investor money and accumulate a large pile of 400 oz bullion bars that would be used eventually to manage the growing western Central Bank short position in paper gold.  Paper gold being the fraudulent, blunt instrument used to illegally manipulate the price of gold.

GLD’s objective is not to provide investors with the opportunity to own gold bullion by investing in the shares of an ETF. Rather, GLD is designed to track the price of gold. That objective is no different than what is accomplished by a gold futures contract or any of the dozens of numerous gold derivatives available these days. More to the point, futures and derivatives are sold even if the seller does not own the underlying gold bullion needed to deliver on its obligation. They are in practice fractional reserve systems, which allow liabilities for gold to far exceed the quantity of gold owned by the seller of that liability.  – James Turk, “Where Is The ETF’s Gold,” November 2004

In 2009 I wrote a reseach report on GLD in which I went through the GLD prospectus line by line and determined that the prospectus was specifically set up to enable the bullion banks – with HSBC suspiciously designated as the custodian of the GLD, as HSBC is the LBMA gold market counterpart in London to JP Morgan’s Comex silver market function – to amass gold in a legal structure that would enable the banks to finance the purchase of 400 oz ounce bars which could be leased or hypothecated via the “backdoor” web of subcustodians.   Shockingly, even the trustee and sponsor of the the GLD trust,  Bank of New York Mellon and the World Gold Council respectively, are not permitted to inspect the contents of HSBC’s vault without significant notice.  And inspection is allowed according the prospectus only intermittently.  Furthermore, no outside party is entitled to inspect any gold held by any subcustodian.  The list of horrors is endless and eventually I’ll update and republish my report from 2009.

Everyone likely remembers the infamous scene on CNBC back in 2011 when CNBC made a big production of putting Bob Pisani inside the GLD vault to show the world GLD’s gold. Pisani was directed toward a stack of bars that were in the GLD “allocated” section of the vault. Pisani randomly picked up a bar and it turned out that – much to the horror of everyone watching live – based on the bar’s serial number, the bar did not belong to the GLD Trust despite sitting on the GLD stack.

In a world governed by Rule of Law, the operations of GLD should have been suspended and a full independent audit of all of the GLD vaults, including the subcustodial vaults, would have commenced immediately.   But the world is governed by Rule Banks And Thieves and the episode was summarily dismissed.

It now looks like the looting of GLD is in full motion.  The “reported” holdings of GLD peaked in December 2012 at 1351 bars.  Since then, through last Friday, the number of bars “reported” has declined to 680.  The last time there were this many bars reported by the GLD Trust was September 19, 2008 (679 bars) and the price of gold was $869.

I say “reported” because the integrity of the daily reports are dependent on the reliability of HSBC.  See what I mean?  HSBC has been found guilty of fraud and market manipulation of almost all of its major business segments.  It would be highly improbable that the one area of its business that HSBC conducts honestly and ethically is in its precious metals operations.  More likely the fraud and corruption in this business segment is the nexus of the bank’s criminal behavior.

But let’s suspend disbelief for a moment.  According to the prospectus, the only mechanism by which gold bars can be removed is to amass shares in 100,000 “baskets” and turn them in to the Trust – BNY Mellon – in exchange for the equivalent amount of bars. It’s the only way gold is supposed to leave the Trust – in theory.  Of course, the language in the Prospectus enables the Trustee to deny share for gold redemption and I have heard of a few large funds who have tried to redeem shares for gold but have been denied.  In all probability, any gold redeemed and removed from the GLD vault has gone to the bullion banks for their use in delivering gold committed to large Asian buyers of paper gold issued and shorted in London.

It does not make sense that the amount of gold in GLD would decline with the recent paper smashing of gold.  This is because, based on every other indicator of physical gold trading activity, the public and investors are buying physical gold – not selling.

As an example, we know that China is currently on pace to buy a record annual amount of gold based on the YTD withdrawals from the Shanghai Gold Exchange.  Contrary to reports from the World Gold Council and Reuters, movement into and out of the Shanghai Gold Exchange – LINK.  In fact, China is on pace to buy up the total amount of gold produced annually by mines globally.  Then there’s India…base on recent premiums, with the recent smash in the price of gold, India’s buy appetite has stepped up significantly well ahead of its traditional autumn seasonal buying period.  According John Brimelow’s “Gold Jottings” report, ex-duty premiums in India were as high as $13.59 last Friday.  When this metric is positive, it indicates healthy import volume.  When it’s in the teens, it indicates aggressive buying.  This fact is confirmed by this article from the Hindu Times – Brisk Sales At Jewelry Shops As Gold Price Dips.

Furthermore, the U.S. Mint report record gold eagle sales in July:  Gold Eagles Hit Monthly Record In July.  It seems Americans are starting to understand what is happening to their system. This is confirmed by this fact – 1/10th of an ounce gold eagle sales soared in July to their highest level since 1999 (sourece:  Smaulgold.com, edits are mine):

july-one-tenth-american-gold-eagle-july

Part of that surge can attributed to the fact that the U.S. mint has suspended sales of silver eagles – aka “poor man’s gold” – until mid-August.  Clearly the “poor man” in the United States still wants to convert fraudulent money into real money and has instead resorted to buying 1/10th of an ounce gold eagles.  It’s the old income and substitution law of economics, along with law of supply and demand – the foundation of economics.

The point here is that the lower price of gold has triggered an avalanche of physical gold accumulation both globally and in the United States.  This means that the behavior of the gold holdings of the GLD Trust are behaving inversely to the observed behavior of the global market for physical gold – i.e. the amount of gold held in “trust” at GLD should be rising, not falling.

The ONLY explanation for this is that GLD is being looted by the bullion banks.

 

 

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

 

1 Chinese yuan vs USA dollar/yuan remains constant at  6.2095/Shanghai bourse: red and Hang Sang: red

2 Nikkei down 194.43 or 0.95%

3. Europe stocks all in the red  /USA dollar index down to 96.66/Euro up to 1.1067

3b Japan 10 year bond yield: rises to 42% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.27

3c Nikkei still just above 20,000

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

3e WTI 47.49 and Brent:  53.62

3f Gold up /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 .695 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rises to 20.35%/Greek stocks this morning:  still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield rises to: 11.65%

3k Gold at $1095.70 /silver $14.67

3l USA vs Russian rouble; (Russian rouble down 1,33 in  roubles/dollar in value) 59.65,

3m oil into the 47 dollar handle for WTI and 53 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 .9517 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0591 well above 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 +.695%

3s The ELA rose another 900 million euros to 90.4 billion euros.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes again and agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.24% early this morning. Thirty year rate above 3% at 2.93% / yield curve flatten/foreshadowing recession.

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

 

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

Global Stocks, US Equity Futures Slide Following China Crash

It all started in China, where as we noted previously, the Shanghai Composite plunged by 8.5% in closing hour, suffering its biggest one day drop since February 2007 and the second biggest in history. The Hang Seng, while spared the worst of the drubbing, was also down 3.1%. There were numerous theories about the risk off catalyst, including fears the PPT was gradually being withdrawn, a decline in industrial profits, as well as an influx in IPOs which drained liquidity from the market. At the same time, Nikkei 225 (-0.95%) and ASX 200 (-0.16%) traded in negative territory underpinned by softness in commodity prices.

Heading to Europe, while the release of better than expected German IFO data saw stocks in Europe come off the worst levels of the session, the major indices remain broadly lower. The initial weakness in stocks saw the DAX break below the 50% Fibonacci retracement of the July low to high, before bouncing back above the level following IFO release. However the recovery was short-lived, as EUR remained bid and in turn prevented a pick in sentiment as European exporters remained firmly in the red. Elsewhere, the cautious sentiment saw Bunds trade higher, albeit marginally, while EU peripheral bond yield spreads widened as a result.

Of note, Phillips (+3.74%) traded sharply higher following earnings, while UBS (-1.5%) failed to sustain initial bid tone as combination of profit taking and general risk averse tone saw shares fall. In terms of notable US based equity stories, Teva (TEVA) announced that it will acquire Allergan Generics (AGN) for USD 40.5bIn and have withdrawn offer to acquire Mylan (MYL).

Finally, while the US session has seen some support in the stock of Allergan which is up 13% on news of its divestment of generic drugs to Teva, futures have been slowly taking on water and were down over 10 points, at their lowest level of the session, as of this writing.

Despite the risk averse sentiment, EUR traded bid, in part due to technical factors but also due to short-position squaring given the currency’s funding currency status. The upside traction by the pair resulted in the USD index trading lower by -0.74%, while EUR/CHF remained bid, highlighting that fact that there is scope for recovery in riskier assets. The Yen has also been stronger on comments by the BOJ’s Nakaso that Japan inflation will hit 2% by the first half of 2016, further pushing back on hopes of a boost to Japan’s QE (this however may now be driven more by the unpopularity of the Abe regime, which has seen its disapproval rating soar above 50% for the first time, which has led analysts to comment that ongoing disappointment with Abenomics may lead to more QEasing).

WTI crude futures remained under pressure, amid the ongoing concerns over the slowdown in China, with prices breaking below the USD 48/bbl mark to remain near 6-year lows. Of note, analysts at Goldman Sachs lowered their H2 2015 US natural gas price forecast to USD 2.75/mmBtu and lowered their 2016 forecast to USD 3.00/mmBtu.

On today’s US event docket, we have capital goods orders at 8:30 am for June as well as the Dallas Fed manufacturing activity index two hours later.

In summary: European shares remain lower, though off intraday lows, with the financial services and media sectors underperforming and utilities, basic resources outperforming. German IFO above expectations. Shanghai Composite falls most since 2007. The French and German markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with corn, nickel underperforming and silver outperforming. U.S. Dallas Fed index, durable goods orders, capital goods orders due later.

Market Wrap

  • S&P 500 futures down 0.3% to 2071.2
  • Stoxx 600 down 1.2% to 389.8
  • US 10Yr yield down 2bps to 2.24%
  • German 10Yr yield down 2bps to 0.67%
  • MSCI Asia Pacific down 1.3% to 140.8
  • Gold spot little changed at $1099.6/oz
  • All 19 Stoxx 600 sectors fall; utilities, basic resources outperform, financial services, media underperform; 12.8% of Stoxx 600 members gain, 86.2% decline
  • Eurostoxx 50 -1.3%, FTSE 100 -0.2%, CAC 40 -1.4%, DAX -1.3%, IBEX -0.8%, FTSEMIB -1.3%, SMI -0.9%
  • Asian stocks fall with the ASX outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific down 1.3% to 140.8
  • Nikkei 225 down 0.9%, Hang Seng down 3.1%, Kospi down 0.3%, Shanghai Composite down 8.5%, ASX up 0.4%, Sensex down 2%
  • Teva to Buy Allergan’s Generic-Drug Unit for $40.5 Billion
  • Pearson Nears Business-Publishing Exit With Economist Sale Talks
  • Euro up 0.79% to $1.1071
  • Dollar Index down 0.62% to 96.64
  • Italian 10Yr yield down 0bps to 1.87%
  • Spanish 10Yr yield down 0bps to 1.9%
  • French 10Yr yield down 2bps to 0.95%
  • S&P GSCI Index down 0.7% to 384
  • Brent Futures down 1% to $54.1/bbl, WTI Futures down 0.7% to $47.8/bbl
  • LME 3m Copper down 0.7% to $5225/MT
  • LME 3m Nickel down 2.2% to $11050/MT
  • Wheat futures down 0.8% to 507.8 USd/bu

Bulletin headline summary from RanSquawk and Bloomberg

  • The sell-off by Asian equity indices continued today, with Shanghai Composite closing down 8.5% at 3,726 (the largest one day fall since June 2007) and Hang Seng down 3.1 %
  • Ongoing concerns over the slowdown in China weighs on sentiment, with stocks lower despite encouraging earnings reports by UBS and Phillips
  • The focus going forward will be on the latest Durables Goods Orders release, as well as earnings by Baidu and Norforlk Southern
  • Treasuries gain as Shanghai Composite plunges 8.5%, biggest drop in eight years, leading global rout in stocks; copper extended its decline from the lowest close in six years and industrial metals fell.
  • The tumble shattered the sense of calm that had fallen over China’s mainland markets last week and raised questions over the viability of government efforts to prop up share prices as the economy slows
  • PetroChina Co., long considered a target of state-linked market support funds, slid by a record 9.6%
  • Greece is set to begin talks with creditors on a new bailout agreement as capital controls and the shutdown of its financial markets enter a fifth week
  • Germany’s Ifo institute business climate index climbed to 108, the first increase in three months, from a revised 107.5 in June; median est. in Bloomberg survey was for decline to 107.2
  • The Japanese economy likely contracted last quarter, dragged down by weak consumer spending and a slump in exports, according to a top forecaster
  • The slump in gold that took prices to a five-year low may have further to run after hedge funds swung into a net-short position for the first time
  • Sovereign 10Y bond yields lower. Asian stocks plunge, European stocks; U.S.equity- index futures decline. Crude oil and copper fall, gold steady

DB’s Jim Reid completes the overnight event summary

It’s going to be raining data and earnings this week with also an FOMC meeting which may give us a few clues as to September’s more important meeting. However it’s unlikely they’ll change their tune too much but it will be interesting to see if the recent slump in commodities and its impact on inflation attract much comment? As for the data, look out for Q2 US GDP on Thursday (expectations in the week ahead at the end) where we’ll see three years of back revisions attached and the BEA’s attempt at fixing what has been thought to be faulty seasonals which has been especially brutal on Q1’s in recent years. So we may see recent history being rewritten.

We start in China this morning though and fresh off the back of the news from Friday that the State Council has published a set of policy initiatives aimed at promoting trade. In this, the Council has stated that the PBoC shall allow the RMB exchange rate to trade in a wider range. Our colleagues in China see this as a signal that the government will allow the RMB to depreciate modestly against the US Dollar and in turn have revised their CNY/USD forecast to 6.3 by year-end and 6.5 by end-2016 (from 6.2 for both). They suggest that the initiative is unlikely to generate double-digit depreciation and that the RMB is likely to remain strong relative to many major currencies. Having said that, one wonders whether it will raise questions about this being some sort of soft entry into the global currency wars. They are clearly trying to promote exports.

Looking at markets this morning, it’s a weak start to the week across most Asian bourses. In China the Shanghai Comp (-1.44%), CSI 300 (-1.52%) and Shenzhen (-0.30%) have all fallen in early trading, while elsewhere the Nikkei (-0.73%), Hang Seng (-2.10%), Kospi (-0.33%) and ASX (-0.13%) are also off to weak starts. Early data releases haven’t helped sentiment. China’s June industrial profits fell 0.3% yoy after two previous positive readings in the prior two months while in Japan PPI Services data for the same month came in below consensus (+0.4% yoy vs. +0.6% expected). Commodity markets are off to a slow start with WTI down another 0.3% and Gold off 0.1%. US Treasuries are half a basis point higher in yield and the Dollar index has fallen 0.2%.

Recapping markets on Friday, there was a similar theme which played out across equity markets as bourses weakened once again on the back of further softness in commodities and some mixed earnings reports, while a generally soft day for global data didn’t help matters. The S&P 500 (-1.07%) slumped for the fourth consecutive session with energy (-1.98%) and materials (-2.22%) weighing notably on sentiment. In Europe it was a similar story with the Stoxx 600 (-0.87%), DAX (-1.43%) and CAC (-0.58%) also down. A fresh cycle low for WTI (-0.64%) at $48.14/bl, extending the bear market run highlighted another weak day in the commodity space, while Copper (-0.18%) hit a new six-year low. Gold (+0.77%) actually sparked a late turnaround rallying into the close having traded as much as 1% down intraday, although the late bounce wasn’t enough to support a rise elsewhere.

In fact it looks like we are starting to see signs of similar Oil-related headlines to the ones which dominated markets seven to eight months ago. The FT is running with a story suggesting that the world’s biggest energy companies have delayed $200bn worth of spending on new projects following the latest selloff. Meanwhile the WSJ is suggesting that US energy companies are planning more layoffs with ConocoPhillips in particular looking to potentially cut headcount by ‘thousands’ in addition to the 1500 jobs cut so far.

One of the additional problems with the recent slump in commodity prices is the impact this is having on the related sectors in the US HY market. As the chart in this morning’s EMR shows, the US HY Energy sector is back close to the wides seen at the back end of 2014, some 200bps wider than where we were when Oil peaked in May. However this time the broader commodity sector has also been hit and mining bonds are also seeing some fairly brutal moves. The US HY market is much more commodity focused than in Europe and the total return difference so far in July highlights this with the latter experiencing a healthy 1.2% lift and the former seeing a -0.6% decline. We still like European HY but the commodity weakness is bleeding into broader US HY so it’s one to watch again.

Back to markets, Friday’s soft data added to the weaker tone across risk assets. As well as the soft July flash manufacturing PMI out of China, flash PMI’s out of Europe also disappointed. The composite reading for the Euro area fell 0.5pts to 53.7 (vs. 54.0 expected) weighed down by a 0.3pt fall for the manufacturing print to 52.2 (vs. 52.5 expected) and 0.6pt fall for the services reading to 53.8 (vs. 54.2 expected). Regionally it was France who led the weakness with a 1.8pt fall in the composite to 51.5 after expectations of an unchanged reading, while Germany (-0.3pts to 53.4) also fell. DB’s Marco Stringa noted that on the upside, the flash reading suggests that outside of the core countries there were marginal improvements in the non-core countries (Spain, Italy and Ireland) led by the services index. Over in the US on Friday the flash manufacturing PMI did see a better than expected 0.2pt rise to 53.8 (vs. 53.6 expected) however new home sales data for June was a large disappointment, falling 6.8% mom (vs. +0.3% expected) during the month to an annualized rate of 482k – the lowest since November last year including downward revisions to the prior three months.

The data helped support a reasonable bid for Bunds with the 10y yield moving 5.1bps lower to 0.689% while Spain (-4.7bps), Italy (-3.1bps) and Portugal (- 5.8bps) also ended lower in yield. It was a much more choppy session for US Treasuries however with the benchmark 10y eventually closing more or less unchanged (-0.5bps) at 2.263%. Some of that choppiness can be attributed to a Fed statement regarding the inadvertent release of Fed economic staff forecasts. The forecasts showed a slightly more dovish picture than those released as part of the official projections by the Fed Presidents and Governors. In particular, the staff saw the Fed Funds rate averaging 0.35% in the fourth quarter of this year, before rising to 1.26% by 2016 and 2.12% by 2017, a more gradual path of rate increases relative to policy maker’s expectations. On top of this, staff also project inflation to stay below the Fed’s 2% target through 2020. That saw some movement in Fed Funds contracts with the Dec16 and 17 contract yields falling 2.5bps and 3.5bps respectively to 1.030% and 1.665% while the Dec15 contract stayed unchanged at 0.320%.

Earnings on Friday were largely mixed for the most part but it was a revenue miss and downward revision to full year forecasts from Biogen which attracted the bulk of the headlines with the stock falling over 22%. Updating our US earnings monitor now with 185 S&P 500 companies having reported, there’s been a modest fall in the number of EPS beats to 75% (from 77% at the last read) while sales beats also ticked down a notch to 53% (from 54%). In Europe with 102 Stoxx 600 companies now having reported, 63% have reported a beat at the earnings level and 69% at the sales line (from 64% and 66% respectively).

Taking a look at this week’s calendar now. We kick off this morning in Germany where we get the German IFO survey while Euro area money supply data and UK CBI orders for July are due. After a quiet week last week in the US, durable and capital goods orders for June starts a busier week for data while the Dallas Fed manufacturing activity index is also expected. Moving to tomorrow, the advanced Q2 GDP reading for the UK is the highlight in the morning session before we get the S&P/Case Shiller house price index, flash composite and services PMI, consumer confidence and Richmond Fed manufacturing index readings out of the US in the afternoon. Tuesday of course also marks the start of the two-day FOMC meeting which will clearly be a big focus. We start in Asia on Wednesday with Japan retail sales and China consumer sentiment data. In Europe we get German and French consumer confidence data before we turn over to the UK again with consumer credit and mortgage approvals. The focus on Wednesday in the US will be the conclusion of the FOMC meeting although there is no associated post-meeting statement scheduled from Fed Chair Yellen. However will the statement give any small hints as to whether September is a realistic lift-off point? US pending home sales for June is also due Wednesday. Thursday starts in Japan again where we get industrial production data before we move to Europe where German CPI and unemployment data for July are due along with Euro area consumer and investor confidence. It’s busy again in the US with the much anticipated Q2 GDP reading (Bloomberg consensus currently at 2.5%) which includes the latest annual revisions so it will attract a lot of attention. Meanwhile personal consumption, core PCE and initial jobless claims are also due. We end the week with another bumper day for data in Japan, highlighted by the June CPI print while employment data and housing starts are also expected. Closer to home on Friday we get CPI prints for the Euro area and Italy as well as French PPI and UK consumer confidence. It’s a busy end to the week in the US with the Q2 employment cost index, ISM Milwaukee, Chicago PMI and University of Michigan consumer sentiment reading. Away from the data, the other main focus will be on results season where 168 S&P 500 companies are due to report with the highlights including Berkshire Hathaway, Exxon Mobil, Facebook, Proctor & Gamble and Pfizer. Over in Europe 192 Stoxx 600 companies are to report including Royal Dutch Shell and a number of the European banks.

end
Let us start off with trading overnight in China
Sunday night
(courtesy zero hedge)

Chinese Stocks Extend Friday’s Losses Following Drop In Corporate Profits

Following the weakness in Friday’s afternoon (China) session, tonight’s open is decidedly shaky as Shanghai Composite open down over 2% and CSI-300 (China’s S&P 500) is now down over 5%. This follows a year-over-year drop in China Industrial profits (-0.3%), the first since March as the small bounce in April and May is now done. Commodities are lower and silver saw a minor flash-crash shortlty after China opened.

 

  • *SHANGHAI COMPOSITE FALLS 2.4% AT OPEN

 

  • *CHINA JUNE INDUSTRIAL COMPANIES’ PROFIT FALLS 0.3% Y/Y

 

Silver saw a mini flash crash…

 

But PMs are bouncing back now…

 

 

Charts: Bloomberg

end

 

 Early Monday morning: Chinese stocks suffer second biggest crash in their history!

1.  Total none performing loans equate to 100 billion euros.

2.  Greek  banks need 50 billion euros to recapitalize their banks.

3.  NONE performing are rising  by 1 billion euros per day.

4.  The total of  all deposits over the 100,000 “guarantee” equates to 20 billion euros.

5.   However, all of  these  deposits are from  small companies. The large companies have already moved their funds offshore.

6..  Thus at a minimum we will witness a 30 billion haircut for small depositors, which will no doubt set off rioting on Greek streets

 

(courtesy zero hedge)

Europe’s New Colonialism: ECB Rejects Greek Request To Reopen Stock Market

It has been one month since Greek capital controls were imposed, and as we explained earlier, Greece is nowhere closer to having its deposit limits lifted. In fact, with several more months of capital controls at least, the Greek banks are likely to suffer ongoing balance sheet impairments which will ultimately result in depositor bail-ins, with Germany already pushing for haircuts on deposits over €100,000.

However, when it comes to banks there is at least still the illusion that Greece has some residual sovereignty. The reality is that it does not, as Greece is no longer an independent nation, and as of July 15, the Greek “In Dependence” day, every Greek decision needs to get pre-approval from both the ECB, Brussels and, naturally, Berlin.

This was made very clear earlier today when Reuters reported that the Greek stock exchange will remain closed on Monday but might reopen on Tuesday after a one-month shutdown which started on June 29. “It’s certain that it will not open on Monday, maybe on Tuesday,” a spokesperson for the Athens Stock Exchange told Reuters on condition of anonymity.

A spokesman for the Athens Stock Exchange said on Friday a proposal to reopen the bourse had been submitted to the European Central Bank for an opinion before a decision on the matter is made by the Greek finance ministry.

 

Another person with direct knowledge of the matter confirmed that Greek authorities aimed to reopen the bourse on Tuesday.

However, to understand what really happened, one should read the Bloomberg explanation, according to which it was the ECB which rejected proposals by Greek authorities to reopen country’s financial markets with no restrictions in place for both Greek and foreign traders, citing an Athens Exchange spokeswoman.

Ministerial decree is now expected, setting some restrictions in use of money from Greek bank accounts for trading.

And just like that, we wave goodbye to the Hellenic Republic, and greet the Mediterranean Vassal Province of Mario and Merkel. Because as of this moment, no Greek decision can be taken without the direct or indirect express prior approval of either the ECB and/or Berlin.

Oh, and incidentally, Greece may be better off leaving its markets closed indefinitely because since the day Greece was “fixed”, the GREK ETF, which has been the only equity way to trade Greece, has sunk 15%.

It has also managed to drag down the S&P 500 with it despite the Greek can having supposedly been kicked for at least a few more months.

And once the locals can finally cash out of the local banks which as we explained are an assured “doughnut” for existing equity investors pending either bankruptcy or massive dilution which will wipe out all existing stakeholders (the fate of depositors depends on whether a €25 billion source of liquidity can be found in very short notice) they will, which in turn will lead to another market closure for Greek stocks, only this time it will most likely be permanent.

end
Greece may have to think twice about wanting to open their stock exchange:
(courtesy zero hedge)

Why Greece May Want To Reconsider Reopening Its Stock Market

As The Greek government presses The ECB for ‘permission’ to reopen its stock market, it may want to reconsider. GREK, the Greek Stock Index ETF trading in US markets, is down over 3% today and has plunged to its lowest since the peak of the crisis in 2012 (near its lowest since 1989). Just as in China, The ECB (who is now very much in charge) seems to believe that if markets are not open for locals, then they have no ‘real’ idea just how bad things are.. and with National Bank of Greece stock trading at record lows (below $1), and the expectations of bail-ins looming, that is not what The ECB wants the people to see…

Greece appears not to be ‘fixed’…

 

as Greek Stocks near their lowest since 1989

 

As we noted previously,

However, to understand what really happened, one should read the Bloomberg explanation,according to which it was the ECB whichrejected proposals by Greek authoritiesto reopen country’s financial markets with no restrictions in place for both Greek and foreign traders, citing an Athens Exchange spokeswoman.

 

Ministerial decree is now expected, setting some restrictions in use of money from Greek bank accounts for trading.

 

And just like that, we wave goodbye to the Hellenic Republic, and greet the Mediterranean Vassal Province of Mario and Merkel. Because as of this moment, no Greek decision can be taken without the direct or indirect express prior approval of either the ECB and/or Berlin.

 

And once the locals can finally cash out of the local banks which as we explained are an assured “doughnut” for existing equity investors pending either bankruptcy or massive dilution which will wipe out all existing stakeholders (the fate of depositors depends on whether a €25 billion source of liquidity can be found in very short notice) they will, which in turn will lead to another market closure for Greek stocks, only this time it will most likely be permanent.

Charts: Bloomberg

end

 

Reports Of Secret Drachma Plots Leave Tsipras Facing Fresh Crisis

On Friday, we brought you the shocking story of the rebellion that never was in Greece.

According to FT, Former Greek Energy Minister and maverick among mavericks Panayotis Lafazanis convened a “secret” meeting at the Oscar Hotel in Athens on July 14 at which he attempted to convince Syriza hardliners (including, in FT’s words, “supporters of the late Venezuelan president Hugo Chávez [and some] old-fashioned communists”) to storm the Greek mint, seize the country’s currency reserves, and, if necessary, arrest central bank governor Yannis Stournaras.

(Lafazanis)

Obviously, the plan was never implemented, but if the story is even partly true it betrays the degree to which Greece teetered on the edge of social upheaval and even civil war in the days that followed PM Alexis Tsipras’ decision to concede to creditors’ demands and abandon not only Syriza’s election mandate but the very referendum outcome he had himself campaigned for just days prior.

Now that Tsipras has succeeded in compelling Greek lawmakers to cede the country’s sovereignty to Brussels in exchange for the right to use the euro, tales of unrealized redenomination plots have come out of the woodwork so to speak, and now, in addition to the scheme described above and rumors that a return to the drachma was nearly financed by a loan from the Kremlin, we get a glimpse at yet another plan hatched behind the scenes, this time courtesy of a recorded conference call between Yanis Varoufakis and “members of international hedge funds.”

Here’s the story from Kathimerini:

Former Finance Minister Yanis Varoufakis has claimed that he was authorized by Alexis Tsipras last December to look into a parallel payment system that would operate using wiretapped tax registration numbers (AFMs) and could eventually work as a parallel banking system, Kathimerini has learned.

 

In a teleconference call with members of international hedge funds that was allegedly coordinated by former British Chancellor of the Exchequer Norman Lamont, Varoufakis claimed to have been given the okay by Tsipras last December – a month before general elections that brought SYRIZA to power – to plan a payment system that could operate in euros but which could be changed into drachmas “overnight” if necessary, Kathimerini understands.

 

Varoufakis worked with a small team to prepare the plan, which would have required a staff of 1,000 to implement but did not get the final go-ahead from Tsipras to proceed, he said.

 

The call took place on July 16, more than a week after Varoufakis left his post as finance minister.

 

The plan would involve hijacking the AFMs of taxpayers and corporations by hacking into General Secretariat of Public Revenues website, Varoufakis told his interlocutors. This would allow the creation of a parallel system that could operate if banks were forced to close and which would allow payments to be made between third parties and the state and could eventually lead to the creation of a parallel banking system, he said.

 

As the general secretariat is a system that is monitored by Greece’s creditors and is therefore difficult to access, Varoufakis said he assigned a childhood friend of his, an information technology expert who became a professor at Columbia University, to hack into the system. A week after Varouakis took over the ministry, he said the friend telephoned him and said he had “control” of the hardware but not the software “which belongs to the troika.”

 

Apparently, Varoufakis planned to take control of the computers first, then hack into the ministry’s software, steal the code, and design the parallel payments system. Here are excerpts from the call, again from Kathimerini, quoting Varoufakis:

“The prime minister before he became PM, before we won the election in January, had given me the green light to come up with a Plan B. And I assembled a very able team, a small team as it had to be because that had to be kept completely under wraps for obvious reasons. And we had been working since the end of December or beginning of January on creating one.

 

“What we planned to do was the following. There is the website of the tax office like there is in Britain and everywhere else, where citizens, taxpayers go into the website they use their tax file number and they transfer through web banking monies from the bank account to their tax file number so as to make payments on VAT, income tax and so on and so forth.

 

“We were planning to create, surreptitiously, reserve accounts attached to every tax file number, without telling anyone, just to have this system in a function under wraps. And, at the touch of a button, to allow us to give PIN numbers to tax file number holders, to taxpayers. 

 

“That would have created a parallel banking system while the banks were shut as a result of the ECBs aggressive action to deny us some breathing space.

 

“This was very well developed and I think it would have made a very big difference because very soon we could have extended it, using apps on smartphones and it could become a functioning parallel system and of course this would be euro denominated but at the drop of a hat it could be converted to a new drachma.

 

“But let me tell you – and this is quite a fascinating story – what difficulties I faced. The General Secretary of Public Revenues within my ministry is controlled fully and directly by the troika. It was not under control of my ministry, of me as minister, it was controlled by Brussels. 

 

Ok, so problem number one: The general secretary of information systems on the other hand was controlled by me, as minister. I appointed a good friend of mine, a childhood friend of mine who had become professor of IT at Columbia University in the States and so on.  I put him in because I trusted him to develop this.

 

 

“At some point, a week or so after we moved into the ministry, he calls me up and says to me: ‘You know what? I control the machines, I control the hardware but I do not control the software. The software belongs to the troika controlled General Secretary of Public Revenues. What do I do?’

 

“So we decided to hack into my ministry’s own software program in order to be able break it up to just copy just to copy the code of the tax systems website onto a large computer in his office so that he can work out how to design and implement this parallel payment system.

 

“And we were ready to get the green light from the PM when the banks closed in order to move into the General Secretariat of Public Revenues, which is not controlled by us but is controlled by Brussels, and to plug this laptop in and to energize the system.

In short, Varoufakis claims Tsipras had pre-approved the creation of secret accounts for every tax filer (which, knowing Greece, might have left Varoufakis short on accounts for quite a few citizens). Greeks would be made aware of the accounts’ existence in the event the banking system ceased to function altogether, and Athens would effectively facilitate payments through the new system in defiance of the EMU. Clearly, this would not have been well received by Brussels – especially the bit about hacking their software – but ultimately, because the new system would be entirely controlled by Varoufakis’ finance ministry, it could be converted to the drachma immediately.

Kathimerini goes on the quote Varoufakis as saying that German FinMin Wolfgang Schaeuble intended to use Grexit as leverage to force France into supporting a system that ceded fiscal decision making to Brussels (which would of course mean giving Berlin more say over EMU countries’ finances):

“Schaeuble has a plan. The way he described it to me is very simple. He believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes that for that political union to work without federation, without the legitimacy that a properly elected federal parliament can render, can bestow upon an executive, it will have to be done in a very disciplinary way. And he said explicitly to me that a Grexit is going to equip him with sufficient bargaining, sufficient terrorising power in order to impose upon the French that which Paris has been resisting. And what is that? A degree of transfer of budget making powers from Paris to Brussels.”

The new revelations raise serious concerns for Alexis Tsipras. The deep divisions within Syriza are by now well publicized, but reports of covert plans to establish parallel banking systems using tax filers’ IDs and the idea that elements within the ruling party plotted to seize billions in currency reserves and take control of the central bank have left some lawmakers demanding answers. Here’s Reuters:

The center-right New Democracy party and the centrist To Potami and the Socialist Pasok parties, which all backed Tsipras in parliamentary votes on the bailout this month, demanded a response to the reports.

 

“The revelations that are coming out raise a major political, economic and moral issue for the government which needs in-depth examination,” it said in a statement.

 

“Is it true that a designated team in the finance ministry had undertaken work on a backup plan? Is it true they had planned to raid the national Mint and that they prepared for a parallel currency by hacking the tax registration numbers of the taxpayers?”

 


Tsipras thus finds himself in an extraordinarily difficult spot. Passing two sets of prior bailout actions through parliament cost him dearly on the political front as more than 30 Syriza MPs defected on both votes. This means he’ll be forced to rely on the support of opposition lawmakers to govern going forward or at least until he can call for elections and get a “clean start” after the third troika program is formally in place.

If Syriza’s political opponents come to believe that their efforts to back Tsipras on the way to keeping Greece in the euro are being subverted in secret by members of Tsipras’ own party, their support could dry up quickly leaving the PM with no support from either side of the aisle.

Given all of this, it’s easy to see why many analysts and commentators still belive that Grexit – and everything that comes with it both for Greece and for the EMU – is still the most likely outcome.

 

end
 Ladies and Gentlemen:  Get use to a new institution arriving in Athens.  It is now the ESM and then join the old troika to become the QUADRIGA
(courtesy zero hedge)

Goodbye Troika: Germany Rides Into Its Greek Colony On The “Quadriga”

With creditors’ motorcades having officially returned to the streets of Athens in the wake of Greek lawmakers’ approval of the second set of bailout prior actions last Wednesday, tensions are understandably high.

After all, these are the same “institutions” which Yanis Varoufakis famously booted from Greece after Syriza swept to power in January, and they’ve come to represent the oppression of the Greek people and are now a symbol of the country’s debt servitude.

Although an absurd attempt was made to rebrand the dreaded “troika” earlier this year, the new and rather amorphous moniker – “the institutions” – never really stuck and perhaps because everyone involved felt the need to put a new name to the group that Greeks regard as the scourge of the Aegean in order to make negotiators feel safer on their trips to Athens, creditors have now added the ESM to their collective and rebranded themselves “The Quadriga.” 

Apparently (and unfortunately), this is not a joke. Here’s MNI:

The source from the Commission also noted that the group formerly known as Troika is now being renamed as “Quadriga”, to note the inclusion of the ESM in the talks. 

 

“Quadriga is the name inspired by Commission President, Jean-Claude Juncker for the new Greek project” the Commission source said, adding that “the EU side is a bit nervous of not knowing the IMF stance.”

We assume the reference to the IMF’s “stance” there refers to the size of the bailout and the prospects for debt relief and not to the new nickname choice, but whatever the case, here’s the definition of “quadriga” from Wikipedia:

A quadriga (Latin quadri-, four, and iugum, yoke) is a car or chariot drawn by four horses abreast (the Roman Empire’s equivalent of Ancient Greek tethrippon). It was raced in the Ancient Olympic Games and other contests. It is represented in profile as the chariot of gods and heroes on Greek vases and in bas-relief. The quadriga was adopted in ancient Roman chariot racing. Quadrigas were emblems of triumph; Victory and Fame often are depicted as the triumphant woman driving it. In classical mythology, the quadriga is the chariot of the gods; Apollo was depicted driving his quadriga across the heavens, delivering daylight and dispersing the night.

We’re not sure what’s more ironic there, the fact that an image which once appeared on Greek ceramics is now the symbol of serfdom or the fact that it’s the “chariot of the gods”, who in this case would be eurocrats and IMF officials.

As amusing – and somewhat sad – as this is, perhaps the most tragically ironic part of the entire rebranding effort is that one of the most significant representations of a quadriga the world over sits atop the Brandenburg Gate in Berlin.

Behold Greece, the new symbol of your perpetual debt slavery:

end
Poland and the Czech Republic will not join to what they call the “burning” Euro.
(courtesy zero hedge)

Poland, Czech Republic Won’t Join “Burning” Euro

With the turmoil in Greece proving once and for all that in the absence of a fiscal union, the EMU simply cannot function or if it does, it will be subject to episodic crises stemming from endemic differences of opinion on fiscal policy, outsiders could be forgiven for looking upon the currency experiment as an abject failure.

Indeed, the struggle to secure a bridge loan for Athens last week underscored the degree to which non-euro countries are reluctant to put their taxpayers on the hook for problems which they believe are the result of an ill-fated attempt to unite fundamentally different economies and governments under a single currency.

Given the above, we weren’t surprised to learn that Poland and the Czech Republic are out voicing their reservations about running into what is effectively a burning building. Here’s The Telegraph on Poland:

Poland will not join the euro while the bloc remains in danger of “burning”, its central bank governor said.

 

Marek Belka, who has also served as the country’s prime minister, said the turmoil in Greece had weakened confidence in the single currency.

 

“You shouldn’t rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, don’t expect us to be enthusiastic about joining,” he said. 

 


 

The governor suggested that Poland, which is obliged to join the euro as part of its EU membership, would not become a member for many years. He said interest would wane further if the political environment continued to shift to the Right. 

 

Mr Belka, a former head of the International Monetary Fund’s European division, said the eurozone was at risk of becoming trapped in a “vicious circle” where closer fiscal integration became more difficult because of splits over structural reforms and austerity.

And from Bloomberg on the Czechs:

Czechs should postpone euro adoption until Greece leaves currency bloc, Czech President Milos Zeman told Mlada Fronta Dnes.

 

While “Greece is a eurozone member and other taxpayers including Czechs, would pay for its debt, I’m for postponing the euro adoption. Until Greece leaves the eurozone. I wish it would happen as early as possible.”

So while Poland supports Greek debt relief – and, as you’ll see in the interview excerpts below, opposes a further shift towards the fiscal doctrines of the EMU’s northern bloc – while the Czechs apparently want Greece out sooner rather than later, one thing they agree on is that charging into a burning building is a bad idea and as we’ve been keen to point out for the better part of three years, the EU is certainly on fire.

*  *  *

Full interview with Poland’s Marek Belka as originally posted in The Telegraph:

What do you think about the situation in Greece?

I think that what has been achieved provides temporary respite but not a solution. The real problem for Greece is how to reinvigorate sustainable growth. Without sustainable growth Greece will periodically fall into problems. But of course we expect that the reforms are going in a good direction. The problem is that normally it takes a lot of time for these reforms to have positive consequences.

Do you believe that Greece needs debt relief?

I would call it a debt reprofiling, rather than debt relief which is the same but sounds better and politically more acceptable. Either way, I think at one point sooner or later Greece needs it.

What are the chances of Poland joining the euro?

You shouldn’t rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, don’t expect us to be enthusiastic about joining.

Does the eurozone need fiscal union to ensure it survives?

I think it does. I don’t think the euro area is solid enough without some elements of fiscal union. The only problem is, the more divergent the euro members are, the more difficult it is politically and economically to build such a union. I’m sure there will be no problem in setting up a fiscal union of some sort between countries of the north, so as long as there is divergence or as long as we have problems in some countries, it’s more difficult to build up a solid foundation for the real fiscal union in the eurozone. So this is a little bit of a vicious circle, but this is how we see it from our side.

What needs to happen in the eurozone to make it attractive for Poland to join?

The eurozone needs to grow solidly and build up a solid foundation for its currency, including elements of fiscal union and common economic policy. This is something that we cannot say fully determine upfront. It’s more of a moving target.

What is the mood music like in Poland for joining the euro?

The situation around Greece does not increase confidence in the euro, that’s for sure, and if we have a political change more into the right, then the enthusiasm to join the euro is going to be even weaker.

How long will it take for the eurozone to fix its problems. Can it be done within a generation?

We don’t have as much time as a generation. But it will take a while.

What does your time working at the IMF tell you about its role in the debt crisis?

I think it was quite unusual for the IMF to be part of a team of three, rather than doing it on its own. The programme was a compromise between what the IMF thought was most proper and the exigencies of European integration. So this is an uneasy alliance in the sense that the priorities of Brussels might be slightly different than the priorities of Washington. So it’s an uneasy task and unusual task. But on the other hand how can the IMF ignore the situation in Greece and other European countries? This would make the IMF less relevant in the world. So this is the product of certain circumstances and compromises.

end
Oil related stories:
(courtesy zero hedge)

Who Is To Blame For The Global Oil Supply Glut In Charts (Hint: Not Iran)

When crude oil decidedly broke its recent support level, and slid right back into the $40-handle range which served as a springboard for the dead oil bounce earlier this year, many blamed the imminent surge of Iran oil deliveries for as a the downside catalyst. The reality, however, is that a long time will pass before significant Iran oil may flood developed markets, and yet even without Iran oil the market has recently seen a surge in supply and production over the past few months – it is this sudden oil glut that has been the true driver of most recent slide in prices.

But who is the culprit? We present the answer on the following several charts showing oil exports from both OPEC and non-OPEC oil producing countries. Note that Iran has gone exactly nowhere – it is “others” who are to blame for the most recent downturn in oil prices.

 

What about non-OPEC production: despite speculation that the US production is peaking (and Saudi Arabia is winning), US production is virtually at its all time highs.

 

So with everyone is overproducing, is global oil demand rising? Nope. In fact, while everyone knows that the US has just a modest oil “glut”, this has moderated in recent months, but as the highlighted chart the oil glut across the entire OECD region has never been greater.

 

End result? This:

Absent either a dramatic slowdown in oil production, mostly by Saudi and Iraq, (where we hope the marginal producer is not ISIS) or a just as dramatic surge in oil consumption (now that the world is rapidly running out of places to store drilled oil) the price is going lower.

end

 

Interesting: Hedge funds are now dumping oil at the fastest pace:

(courtesy zero hedge)

Knife-Catching Hedge Fund Oil Bulls Dump Crude At Fastest Pace In 3 Years

Hedge Funds’ net long position in WTI Crude collapsed 27% (the biggest single ‘dump’ in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month – the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. Withcrude supplies still almost 100 million barrels above the five-year average, “there’s a lot more room for prices to slide,” warned one trader, “it’s going to take a long time for this to work itself out.”

 

Speculators’ conviction that oil will rally weakened at the fastest pace in three years, just before futures tumbled into a bear market.

As Bloomberg details, the net-long position in West Texas Intermediate contracted 28 percent in the seven days ended July 21, U.S. Commodity Futures Trading Commission data show. Long positions dropped to a two-year low while short holdings climbed 25 percent.

 

Hedge Funds dumped their spec longs en masse…

 

“Supply is still in excess of what would balance the market,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone July 24. “We see the global balance improving in the second half of this year and in 2016 but it hasn’t happened yet.”

 

“The Saudis are pursuing their interests,”Sarah Emerson, managing principal of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts, said by phone July 24. “The Saudis see the U.S., Iraq and Iran raising production and aren’t going to lose market share.”

As we noted previously, there’s a chance that the downturn in the world’s oil industry may be more severe than in 1986, when business endured the deepest slump in 45 years, according to Morgan Stanley.

The global oil market is seen coming into balance in the second half of 2017 at the earliest if OPEC continues pumping crude at present levels and U.S. output remains flat, Deutsche Bank strategist Michael Hsueh said in a report last week. Hsueh said that equilibrium is more likely in 2018.

“There’s a lot more room for prices to slide,” Emerson said. “It’s going to take a long time for this to work itself out.”

 

end

Your early morning currency, and interest rate moves

 

Euro/USA 1.1067 up .0100

USA/JAPAN YEN 123.27 down .398

GBP/USA 1.5505 up .0025

USA/CAN 1.3015 down .0013

Early this morning in Europe, the Euro rose by 100 basis points, trading now well above the 1.10 level at 1.1067; 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 flash crashes. 

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 40 basis points and trading just below the 124 level to 123.27 yen to the dollar.

The pound was down this morning by 25 basis points as it now trades just below the 1.55 level at 1.5492, 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 rose  by 13 basis points at 1.3015 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 194.43. or 0.94%

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

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

Gold very early morning trading: $1095.70

silver:$14.65

Early Monday morning USA 10 year bond yield: 2.24% !!!  down 3 in basis points from Friday night and it is trading just at  resistance at 2.27-2.32%

USA dollar index early Monday morning: 96.60 down 66 cents from Friday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Monday morning

And now for your closing numbers for Monday:

 

Closing Portuguese 10 year bond yield: 2.53%  up 2 in basis points from Friday

Closing Japanese 10 year bond yield: .41% !!! par in basis points from Friday/still very ominous

Your closing Spanish 10 year government bond, Monday, up 3 in basis points

Spanish 10 year bond yield: 1.93% !!!!!!

Your Monday closing Italian 10 year bond yield: 1.90% up 3 in basis points from Friday: (very ominous)

trading 3 basis point lower than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

 

Euro/USA: 1.1102 up .0135 ( Euro up 135 basis points)

USA/Japan: 123.22 down  .456 ( yen up 46 basis points)

Great Britain/USA: 1.5554 up .0074 (Pound up 74 basis points)

USA/Canada: 1.3036 up .0006 (Can dollar down 6 basis points)

The euro rose today. It settled up 135 basis points against the dollar to 1.1102 as the dollar traded  southbound  today against most of the various major currencies. The yen was up by 46 basis points and closing well below the 124 cross at 123.22. The British pound was up by 74 basis points, closing at 1.5554. The Canadian dollar was back in the toilet again falling by 6 basis points closing at 1.3036.

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: 2.24% par in basis point from Friday// (at the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

96.49 down 77 cents on the day

.

European and Dow Jones stock index closes:

 

England FTSE down 74.68 points or 1.13%

Paris CAC down 129.76 points or 2.57%

German Dax down 291.05 points or 2.56%

Spain’s Ibex down 163.90 points or 1.45%

Italian FTSE-MIB down 698.40 or 2.97%

 

The Dow down 127.94  or 0.73%

Nasdaq; down 48.85 or 0.96%

 

OIL: WTI 47.37 !!!!!!!

Brent:53.40!!!

Closing USA/Russian rouble cross: 59.43  down 1 rouble per dollar on the day

end

 

And now for your more important USA stories.

 

Your closing numbers from New York

“Uncontained” Shanghai Shafting Slams Global Stocks & Commodities Silly

We apologize for repetition but if ever there was a need for this clip (as analogy for the complacent confidence that PBoC, ECB, Fed, BoJ, or SNB would save the world no matter what in the face of last night’s epic collapse in China and uncontained follow through in Europe and US…)

Fwd to 2:00 and ‘enjoy’…

 

Everything is not awesome and everything is notcontained..

In China…

 

Or Europe…

 

Or ‘Murica…

 

On the day, US equities staged their standard JPY ignited momo bounce off the 200DMA – running perfectly to VWAP in the S&P, before limping lower…and a mini algo meltup to VWAP at the close… all completely human!!

 

Cash indices rasmped into the European close then faded to lows…

 

But Breadth continues to be terrible – 414 New 52-Week Lows is the most since October!!

 

 

Futyures show the weakness started in China, accelerated in Europe and extended in US…

 

The S&P 500 closed red 5 days in a row – the longest such streak since January… And The Dow is the furthest below the 200DMA since the Buillard bounce…

 

The S&P is gettung very close to negative YTD once again…

 

The chart that many are looking at for the S&P 500…

 

Since Greece capitulated and the world celebrated a “fixed” Europe, the exuberance has faded… but gold has been monkey-hammered…

 

Treasury yields continued to slide… but were magically bid at the US cash open…

 

The US Dollar dumped but bounced after Europe’s close…

 

PMs outperformed but still closed lower (despite the weaker dollar) as Crude and Copper were clubbed…

 

 

Don’t forget – China opens in 6 hours!!

Charts: Bloomberg

Bonus Chart: Bar Breadther-er…

Average:

4.75

durable goods drop for the 5th month in a row. USA is in a deep recession now!

(courtesy zero hedge)

all the best

Harvey

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2 comments

  1. Cathey McCowin · · Reply

    Nice blog post ! I was enlightened by the insight ! Does someone know where I might locate a fillable MI DC 100a document to use ?

    Like

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