Total customer deposit: nil oz

(courtesy the Silver Institute)

Truth, Justice, and (no longer) The American Way!

While taking a short vacation last week, this article was intended to be my first one upon returning.  That plan was squashed a week ago with the brutal “interventions” upon gold and silver during the illiquid overnight hours earlySunday morning.  Let me add to what I wrote last Friday by saying the phrase “TIME AND SALES“!  For anyone who does not know what this means, any trade on any market anywhere in the world has a “paper trail”.  It is called a “time and sales report”.  Very simply, it reports who traded what, in what amounts and to whom.  Once the broker is identified, then regulators can query as to who the customer was for whatever trade in question.  If they want to know “whodunit”, it’s quite simple.

This is not rocket science.  It is not hocus pocus or even anything “special”.  Time and sales have been around since the dawn of trading.  Even prior to computers, handwritten records were taken to record who traded what, when and in what quantities.  Should the SEC, NYSE, CFTC or anyone else want to know who is doing what, it takes five seconds or less to find out.. (This includes the Chinese who have outlawed selling under the penalty of firing squad!!!  So who is doing all the selling?)  In my opinion, the regulators should be strung up on lampposts for their lack of doing the jobs they are being paid public tax money to do.  They have turned a blind eye, presumably because they are told or believe it is for “the greater good”?  …the greater good… sounds like something out of Russia or China back in the day when I was a youngster in the 1960’s – or even something in the history books we read as kids in school regarding Nazi Germany. 

Do you remember this time period?  I still remember this time frame very well and pine for it every day.  Back in those days we couldn’t wait to get home from school so we could get to play baseball, football, basketball or even hike it to the nearest pond in winter time to play some pickup hockey.  Back in those days our parents knew where we were by where our bicycle was. 

 There were no cell phones and if we needed to make a call from a public place, we would pull the dime out of our pocket our parents always insisted we have. 

We could sell (or even buy) lemonade without a health department license and had no fear of arrest – we even gave the police free samples.  We walked a half mile or even a full mile to get to school (but not uphill both ways nor always in the snow).  We did this with friends or if we were late we did it alone.  Back then this was the norm.  Today, parents are regularly being arrested for allowing a child to go two blocks away on their own… not to mention the nine-year-olds for selling lemonade!!!
After playing, we’d all head home for dinner and get to watch some TV.  Remember?  ” TV” where no cussing was allowed.  Most shows had a “theme” or an underlying lesson that taught kids “good always triumphed over evil”.  We watched Batman, Superman and others.  Western’s were in vogue and there was always a lesson to be learned from watching The Rifleman or Gunsmoke.  I have said several times over the years when writing on this subject, “Leave it to Beaver cannot even be found on syndicated reruns anymore”.  My point is, the “wholesome” world we grew up in is so far gone, current history books don’t even mention it as a footnote! 

Think about where we are today.  Where handshakes used to suffice, contracts are now drawn up to be purposely broken.  More than half of our population “takes” while less than half the population supports this spending habit.  Worse, it is the “supporters” who are vilified today because they don’t “give enough.”  We used to have free speech as outlined in The Constitution, now there is only free speech for the “special” groups.  Anyone who speaks against any of these very special groups is branded a racist, sexist, homophobe, or religious persecutor (except of course, unless you’re speaking against Christians – that’s OK… even seemingly encouraged).  Or worst of all, you could be labeled a “CONSERVATIVE!” 

   Today it is OK to burn the American flag, outlaw the quaint historical  Confederate flag …while flying the flag of any other nation (here in Texas the favorite to fly is that of Mexico) on our own sovereign soil.  I noticed yesterday while in a very long  U.S. Customs line upon returning home, how much longer, formal and probably difficult it was rather than just swimming across the river!  Many states no longer require a voter registration card to vote or even a driver’s license, so the motto “vote early and often” applies.  Citizens who pay for “old” health insurance now get “charged” extra on their taxes, while those who can’t afford insurance get it for free… along with cellphones, housing, food, stipends for each child etc. …and anyone who speaks out about it is branded a “crazy.”  Please let me remind you, this country was originally formed because of oppression and the practice of “taxation without representation.”  Have we pretty much gone full circle?

You could not have told me even 20 years ago we would be where we are today.  We have a system where the president makes up laws as he goes along, the Supreme Court rubber stamps his illusions and Congress has been relegated to irrelevance.  Speaking of Congress, didn’t “We the People” just throw the bums out?  Didn’t the Republicans run on a ticket that said they would overturn all sorts of ridiculous (and if you ask me) tyrannical laws?  Have they overturned anything?  No, they just passed the fast track trade bill which will gut our economy even further …while the Democrats voted against it …?  Forget about the giant sucking sound Ross Perot spoke of, we will soon hear the wheezing and gurgling last breaths of a nation, in my sad opinion.  In the interest of not losing you as a reader, I could go on and on about subjects like guns, GMO’s, baby parts for sale or whatever but I think you get the point and I’ll stop here.

From an economic and financial standpoint, it is funny that while away I read “The Scarlet Woman of Wall Street.”  This was the story of Daniel Drew, Vanderbilt, Fisk, Gould and Erie railroad during the mid to late 1800’s.  There were no financial laws back then that prevented anything with the exception of bribery which was impossible to prove unless the giver and receivers were both stupid beyond their years.  Then all sorts of laws were written and the playing field was somewhat leveled (as much as it could have been).  Now, there are so many laws on the books, it is impossible not to break one of them.  The thing is, financial institutions do not care.  Since no one goes to jail (except for a couple of hedge fund managers), it is more profitable to illegally and blatantly swipe $10 billion because you know your fine will only be $100 million.  If you think about it, management in today’s world could probably be held accountable in today’s civil legal system for NOT BREAKING THE LAW and leaving money on the table.  Why play fair when everything is rigged, while you can steal and pay only 1% or less of what you made?  It is almost management’s “fiduciary duty” to lie, cheat and steal in order to not fall behind!

To wrap this piece up I would like to say this, if you don’t believe or cannot see that all markets are rigged all of the time I’m sorry.  If I offended anyone for any reason, again I’m sorry.  If you believe today is “normal” in any way, I am sorry.  Actually, let me clarify this: I am not sorry, but I am sorry you don’t understand the point I am trying to get across and sorry you cannot see it.  Unfortunately, the American people have been slow boiled into believing our lives are normal and things are “just the way they are.”  We have been lulled into believing we are an “exceptional” people and “deserve” the finer things in life.  What we have forgotten is that hard work, hard money, and innovation is what made this country great to begin with.  Many today don’t remember or never knew this very basic tenet…but ignorance does not change the fact.  Truth and justice (and for the most part “business”) was what America was once all about.  Please do not tell me I am naïve.  I am not.  Please do not tell me this is not being done according to a plan.  It is.  There is zero percent probability the policies in place today are by mistake.  They are not by mistake and no one could be so stupid which leaves only one option …”purposeful” is the operative word.

  The United States was the shining light of the world in so many ways.  We are no longer.  We were built as a Republic that followed The Constitution which was written mainly by God fearing Christians.  We have evolved into a perverted, apologetic, weak and slovenly society with little to no values regarding anything from our ethics, morals, constitutions, or anything else.  We believe we deserve the best and should work the least (if at all).  It’s the American WAY!!!  Unfortunately, what I write here is now considered by the majority as either anti-government or unpatriotic.  It is neither.  In fact, all I advocate is following The Constitution.  You know, that “thing” our politicians “swear to God to uphold” (did you catch that?  They swear to God!  Not to Walt Disney, Facebook or even the almighty Google!) while raising their right hand with their left hand on The Bible?  I am a true patriot in a world where burning the flag, shredding The Constitution and spitting on The Bible is considered sane and normal.  I am here to remind you it certainly is not!  I am not writing this to convert the perverts, only to let those who are still sane know that yes, you are still sane.  That said, in today’s ludicrous world, what I write here can be used as proof of my “insanity” and my lack of “patriotism.”  You decide.

    

I guess I would sum it all up by twisting the words of Superman, “Truth, Justice and (is no longer) The American Way! 

 

Standing watch (with tears in my eyes),

Bill Holter
Holter -Sinclair collaboration
Comments welcome! 

bholter@Hotmail.com  

  

For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw acoordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday’s losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.

As Bloomberg’s Richard Breslow comments, the majority of Asian equity indexes finished with losses but on an upbeat note, helping most European markets to start with modest gains that have increased with the morning, thanks to the aforementioned domestic and global mood stabilization. S&P futures have been positive all day other than a brief dip negative at the worst of the day’s China levels. Chinese equities opened quite weak and were down another 5% before the authorities assured the market that speculation they would withdraw from market supportive measures was misguided. This began a rally of over 6% before a mid-afternoon swoon.

There was the usual propaganda out of China, which requested traders rat out any “malicious sellers” and appears to have been inundated with responses…

… mixed with the facts that China also reported that margin leveraged positions were reported to have been reduced on Monday by the most in two week. Additionally, the PBOC injected CNY 50 billion worth of funds, marking the 10th consecutive injection of liquidity by the central bank.

There was some discussion early over comments by Tom DeMark, popular for predicting the 2013 bottom in the Shanghai Composite, who wrote that “Chinese stocks will decline by an additional 14% over the next three weeks as the market demonstrates a trading pattern that mimics that of the U.S. crash in 1929.”

More troubling was the WSJ’s assessment that the continuing “losses are casting doubt on Beijing’s ability to contain the slide, and has left investors and analysts wondering what officials might do next to reverse it.

 

 

Whether the government’s rescue measures are successful or not hinges on performance through the rest of the week, said Zhou Xu, an analyst at Nanjing Securities. “The market consensus that the bottom line for the government is around the 3400 point. If the market slides further, it will be a real disaster.”

 

Government measures to step up purchases of stocks, announced late Monday, appeared to reassure some investors shaken earlier by the steep losses the day before, when the Shanghai benchmark fell 8.5%. That marked its worst one-day percentage decline since 2007.

 

On Tuesday afternoon, China’s securities regulator announced it would launch an investigation into Monday’s selloff.

 

“Right now the [Chinese] central government is trying to maintain the confidence of the individual investors” that drive China’s stock market, said Castor Pang, head of research for Core Pacific-Yamaichi International. If the government “can maintain their confidence, everything can be solved.”

Good luck China, your dazed and confused central planning overlords need it now more than ever.

Elsewhere, the Nikkei 225 (+0.1%) saw a choppy price action, led by sentiment in China. Finally, JGBs traded higher following spill over buying in USTs and Bunds.

With Macro news fairly light in terms of Europe, price action today has shrugged off the ongoing tensions surround the volatility in Chinese equity markets, to focus on stock specific news and specifically earning season, with indices trading higher (Euro Stoxx: +1.1%) supported by consumer discretionary sector following an encouraging earnings report by Kering (7.0%), with a weaker EUR continuing to provide supportive tailwind. The risk on sentiment ensured that Bunds edged lower, with T-Notes moving in sympathy, while peripheral bond yield spreads narrowed, albeit marginally.

In FX, there was little in terms of macroeconomic data, but the advanced UK GDP report came in line with estimates at 0.7% Q/Q and 2.6% Y/Y and has seen GBP supported despite a stronger USD weighing on other major pairs . The USD-index resides in positive territory (+0.2%) to pare back some of yesterday’s losses with price action relatively subdued during the European Morning.

Looking ahead, today sees the release of the latest US services and composite PMIs, consumer confidence report and S&P/Case-Shiller House Price Index. Also of note, Greek negotiations with creditors are set to kick off today after a week long delay due to logistical issues, while the FOMC are also set to begin their 2 day meeting today, with a rate decision scheduled for tomorrow.

Brent and WTI head into the NYMEX pit open trading firmly in negative territory as bearish sentiment continues, with Brent Crude at its lowest level since Feb 2nd , weighed on by firmer USD as well as ongoing concerns surrounding the economic slowdown in China. The latest DOE estimates have stockpiles for Crude, Cushing OK, Gasoline and Distillate all show a build, while participants will be looking out for today’s API Crude oil inventories (Prey. +2300K). NatGas has bucked the trend of the as a spate of hotter Weather is about to hit the eastern coast of USA. Gold trades in modest negative territory, however remaining below the USD 1100 handle.

Today’s US earnings include 40 S&P500 companies among which Merck, Ford, Reynolds American and Pfizer pre market, with Twitter and Gilead scheduled to report after market. This afternoon the two-day FOMC meeting begins today while data wise we get the flash composite and services PMI’s for July, S&P/Case Shiller house price index, consumer confidence and finally the Richmond Fed manufacturing activity reading.

Bulletin headline summary from Bloomberg and RanSquawk

• European equities trade in positive territory, taking the lead from earnings specific news.
• USD is stronger against most major pairs with the exception of GBP, which saw strength after Q2 GDP printed in line with expectations
• Today’s highlights include US services and composite PMIs, consumer confidence report and the latest API crude oil inventories after the closing bell on Wall Street with earnings expected from Pfizer, Gilead Sciences and Merck.
• Treasuries decline before Fed begins two-day meeting in Washington and week’s auctions begin with $26b 2Y notes; WI 0.695%, highest since Dec., vs 0.692% in June.
• Economists remain somewhat divided over when Fed will begin to hike rates after this week’s FOMC meeting, though most see Sept. liftoff, based on published research
• Chinese stocks extended yesterday’s losses, with the Shanghai Composite closing with a 1.7% loss after sinking as much as 5.1%
• China’s securities regulator is investigating yesterday’s stocks selloff, the latest effort by the government to crack down on reports of market manipulation after a recent equities rout wiped out nearly $4t
• Greece’s latest cycle of talks with its creditors started     with a quarrel, as officials argued over what upfront commitments the government has yet to implement in order to tap emergency loans next month
• U.K. GDP increased 0.7% in 2Q, in line with median forecast; growth in services accelerated while manufacturing declined and construction was unchanged
• Sovereign 10Y bond yields higher. Asian stocks extend yesterday’s losses; European stocks, U.S.equity- index futures rise. Crude oil lower, copper and gold gain

DB’s Jim Reid completes the overnight wrap

When we went to press yesterday Chinese equities were down about 1.5% broadly in line with the rest of the region. A couple of hours later at the close the Shanghai Comp was down -8.5% – the 2nd worst day in history. These violent late day movements are something we’ve highlighted a few times in recent weeks so by the time you’re reading this the China’s words below could be completely out of date. In total over 60% of the Shanghai and Shenzhen were limit-down at the -10% floor which means the end result could have been even worse. There was no obvious explanation for the timing or magnitude of the slump. It ceased to be a free market a long time ago so analysing it is tough. Does the slump really reflect concerns over weaker economic growth when the dramatic bubble ascent occurred at a time of sharply weaker growth in the first half? It all seems pretty random to me.

Confusion around support from the China Securities Finance Corporation (CSFC) was a talking point yesterday. According to Reuters early chatter in markets suggested that the CSFC had returned ahead of schedule some of the loans it had taken to stabilise the market while other commentaries at the same time highlighted the suspicious absence of any support from the Corporation. Following the market close however the China Securities Regulatory Commission (CSRC) put out a statement denying any such retreat from the CSFC and instead reinforced that the Commission will ‘continue efforts to stabilise market and investor sentiment and prevent systematic risk’. Interestingly yesterday’s selloff comes after the IMF on Friday urged China to eventually unwind its support to the equity market and allow prices to settle through market forces.

This morning we’ve seen more huge swings in the Chinese equity markets. Having initially plunged some 5% lower at the open, the Shanghai Comp briefly moved about a percent into positive territory only to then decline once again into the midday break to -1.00%. There’s been similar volatile moves for the CSI 300 (-0.21%), Shenzhen (-1.30%) and ChiNext (-2.18%) this morning while the PBoC has announced that it will inject 50bn yuan into money markets, its largest liquidity boost since early July. The volatility this morning has seen a large range of price action across the rest of Asia. In Japan the Nikkei (-0.04%) and Topix (-0.34%) have both declined slightly along with the ASX (-0.21%) in Australia while in Hong Kong the Hang Seng (+1.52%) has completely reversed a weak start to trade firmer. Elsewhere, in Korea the Kospi (-0.03%) is more or less unchanged. Credit markets have reflected the choppy trading this morning with Asia CDS currently unchanged while Japan is 2bps tighter and Australia half a basis point wider. Oil markets have weakened with WTI -0.5% while Treasury yields have moved 2.7bps higher.

China aside, the wider theme in markets at present continues to be the commodities slump and yesterday we saw another decent leg lower for Oil markets in particular with Brent (-2.11%) now joining WTI (-0.68%) in re-entering a bear market having slumped to $53.47/bbl. It has now lost 20% from the June 10th high of $67.00, declining to a four-month low in the process. The turbulence in China certainly isn’t helping matters while export data showing Southern Iraq output rising to an all-time high added to the weakness. Meanwhile Gold (-0.47%) did its best to wipe out the bulk of Friday’s gains while Silver (-0.78%) and Platinum (-0.53%) also moved lower. Copper (-1.43%) added to the broad-based weakness, extending its record lows while Aluminum (-0.21%) also declined. All-told that’s seen the Bloomberg commodity index fall further, declining 1.22% overnight for its fourth consecutive down day and 10th in the last 11 sessions and in turn extending its 13-year lows.

The equity selloff stemming from China helped support a decent drop across most global equity markets yesterday. In Europe we saw the Stoxx 600 fall 2.21% while the DAX (-2.56%), CAC (-2.57%), IBEX (-1.45%) and FTSE MIB (-2.97%) also fell. In the US the S&P 500 (-0.58%) completed five-days of declines now for the first time since January (down 2.9% in that time) with nine out of ten sectors closing in negative territory, led unsurprisingly by energy (-3.31%) and materials (-3.29%). The Dow (-0.73%) and NASDAQ (-0.96%) also suffered similar falls. There was little help from the bottom-up earnings releases after a reasonably quiet day. The latest count on our earnings monitor shows EPS beats at 76% (a modest rise from Friday at 75%) while sales beats have ticked down again to 51% now (from 53% on Friday).

Credit markets also suffered with the weakness in risk assets. CDX IG moved +1.5bps wider while in Europe Main and Crossover were +2bps and +9bps wider respectively. Treasury yields on the other hand continue to march lower with the benchmark 10y yield ending 4.5bps lower at 2.218% and just a couple of basis points off the MTD lows while 30y yields (-2.9bps) fell to a near two-month low at 2.933%. That came despite an OK day for data. Durable goods orders for June rose 3.4% mom (vs. +3.2% expected) while the ex transportation print also increased above consensus during the month (+0.8% mom vs. +0.5% expected) although we did see downward revisions to prior months. Core capex orders rose +0.9% mom during June and also above expectations of +0.5% for just the second monthly increase this year, although shipments edged down during the month (-0.1% mom vs. +0.6% expected). Finally there was a 2.4pt improvement in the Dallas Fed manufacturing activity print for July but to a still weak -4.6 (vs. -3.5 expected), the eight consecutive sub-zero reading.

There was reason for optimism out of the European data flow yesterday following a better German IFO survey reading. The 108.0 reading (vs. 107.2 expected) was up 0.5pts from an upwardly revised June print, signaling an easing of concerns around Greece, while both the current assessment (113.9 vs. 112.9 expected) and expectations (102.4 vs. 101.8 expected) surveys also came in above market. That helped support a strong day for the Euro which finished +0.95% against the Dollar while 10y Bunds finished unchanged at 0.691% after a choppy session. Elsewhere, in its annual report published yesterday the IMF warned that developments in Greece still remain a risk and that authorities shouldn’t become too complacent. The fund did however ‘urge policymakers to use all the available instruments, if needed, to manage contagion risks’ while strongly supporting the ECB’s current plans to keep QE running through September 2016.

Taking a look at today’s calendar now, this morning’s dataflow is centered on the UK where we get the Q2 GDP reading while over in Italy consumer and business confidence readings are expected. Over in the US this afternoon the two-day FOMC meeting begins today while data wise we get the flash composite and services PMI’s for July, S&P/Case Shiller house price index, consumer confidence and finally the Richmond Fed manufacturing activity reading. It’s a busier day for earnings with 40 S&P 500 companies due to report including Gilead Sciences, Ford and Pfizer.

(courtesy zero hedge)

Stuck In Market Purgatory: How China’s Citizens Lash Out At The Broken Market, In Their Own Words

The Economic And Financial Problems In Europe Are Only Just Beginning…

By Michael Snyder, on July 27th, 2015

Right now, the financial world is focused on the breathtaking stock market crash in China, but don’t forget to keep an eye on what is happening in Europe.  Collectively, the European Union has a larger population than the United States, a larger economy than either the U.S. or China, and the banking system in Europe is the biggest on the planet by far.  So what happens in Europe really matters, and at this point the European economy is absolutely primed for a meltdown.  European debt levels have never been higher, European banks are absolutely loaded with non-performing loans and high-risk derivatives, and the unemployment rate in the eurozone is currently more than double the unemployment rate in the United States.  In all the euphoria surrounding the “deal” that temporarily kept Greece in the eurozone, I think that people have forgotten that the economic and financial fundamentals in Europe have continued to deteriorate.  Whether Greece ultimately leaves the eurozone or not, a great financial crisis is inevitably coming to Europe.  It is just a matter of time.

In many ways, the economy of Europe is in significantly worse shape than the U.S. economy.  Just recently, the IMF issued a report which warned that the eurozone is “susceptible to negative shocks” and could be facing very tough economic times in the near future.  The following comes from the Guardian…

The International Monetary Fund has warned the eurozone faces a gloomy economic outlook thanks to lingering worries over Greece, high unemployment and a banking sector still battling to shake off the financial crisis.

The IMF’s latest healthcheck on the eurozone found it was“susceptible to negative shocks” as growth continues to falter and monetary policymakers run out of ways to help. It called for an urgent “collective push” from the currency union to speed up reforms or else risk years of lost growth.

“A moderate shock to confidence – whether from lower expected future growth or heightened geopolitical tensions –could tip the bloc into prolonged stagnation,” said Mahmood Pradhan, the IMF’s mission chief for the eurozone.

But even if there are no “shocks” to the European economy in the months ahead, the truth is that it is already in terrible shape and much of the continent is already mired in an ongoing economic depression.

Today, the official unemployment rate in the United States is just 5.3 percent, but the unemployment rate for the eurozone as a whole is sitting at 11.1 percent.  That is an absolutely terrible number, but most Europeans have come to accept it as “the new normal”.  The following are some of the prominent nations in Europe that currently have an unemployment rate of above 10 percent…

France: 10.3 percent

Italy: 12.4 percent

Portugal: 13.7 percent

Spain: 22.37 percent

Greece: 25.6 percent

And remember, these unemployment numbers often greatly understate the true scope of the problem.

For instance, in Italy the number of people “willing to work but not actively searching” is much higher than the number of Italians that are officially unemployed…

For every 100 working Italians, there are 15 people seeking a job and another 20 willing to work but not actively searching, the highest level among the 28 EU countries, according to statistics agency Eurostat.

So would the true rate of unemployment in Italy be greater than 30 percent if honest numbers were being used?

That is something to think about.

Meanwhile, debt levels in virtually all European nations have shot up substantially since the last financial crisis.  Just consider the staggering debt to GDP ratios in the following nations…

France: 95.0 percent

Spain: 97.7 percent

Belgium: 106.5 percent

Ireland: 109.7 percent

Portugal: 130.2 percent

Italy: 132.1 percent

Greece: 177.1 percent

Greece is not the only debt crisis that Europe is facing by a long shot.  All of the other nations on that list are going down the exact same path that Greece has gone down.

So whether or not a “permanent solution” can be found for Greece, the reality of the matter is that Europe’s debt problems are only just beginning.

Meanwhile, the economic crisis in Greece continues to become even more dire.  At this point, nearly half of all loans in the country are non-performing, authorities are warning that bank account holders may be forced to take 30 percent haircuts when the banks are finally “bailed in”, and it is being reported that Greek banks may keep current restrictions on cash “in place for months”…

Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe.

Rehabilitating the country’s banks poses a difficult question. Should the eurozone take a stake in the lenders, first requiring bondholders and even big depositors to shoulder a loss, or should the bill for fixing the banks instead be added to Greece’s debt mountain?

Answering this could hold up agreement on a third bailout deal for Greece that negotiators want to conclude within weeks.

The longer it takes, the more critical the banks’ condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers’ ability to repay loans.

Nothing has been “solved” in Greece.  The only thing that has been accomplished so far is that Greece has been kept in the euro (at least for the moment).  But for the average person on the street things continue to go from bad to worse.

How soon will it be until we see similar scenarios play out in Italy, Spain, Portugal and France?

As things in the eurozone continue to deteriorate, nations that were planning to join the euro are suddenly not so eager to do so…

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.

Yes, definitely keep an eye on what is happening in China.  Without a doubt, it is very big news.

But I believe that what is going on in Europe will ultimately prove to be an even bigger story.

The greatest financial crisis that Europe has ever seen is coming, and it is going to shake up the entire planet.

Oil related stories

 

(courtesy Arthur Berman/Oil price.com)

Has The E&P Industry Lost Touch With Reality?

Submitted by Arthur Berman via OilPrice.com,

The U.S. rig count increased by 19 this week as oil prices dropped below $48 per barrel – the latest sign that the E&P industry is out of touch with reality.

Getty Images from The New York Times (July 26, 2015)

The last time the rig count increased this much was the week ending August 8, 2014 when WTI was $98 and Brent was $103 per barrel.

What are they thinking?

In fairness, the contracts to add more rigs were probably signed in May and June when WTI prices were around $60 per barrel (Figure 1) and some felt that a bottom had been found, left behind in January through March, and that prices would continue to increase.

Figure 1. Daily WTI crude oil prices, January 2-July 24, 2015. Source: EIA and NYMEX futures prices (July 21-24).

(click image to enlarge)

Even then, however, the fundamentals of supply, demand and inventories pointed toward lower prices–and still, companies decided to add rigs.

In mid-May, I wrote in a post called “Oil Prices Will Fall: A Lesson in Gravity”,
“The data so far says that the problem that moved prices to almost $40 per barrel in January has only gotten worse. That means that recent gains may vanish and old lows might be replaced by lower lows.”

In mid-June, I wrote in a post called “For Oil Price, Bad Is The New Good”,
“Right now, oil prices are profoundly out of balance with fundamentals. Look for a correction.”

Oil prices began falling in early July and fell another 6% last week. Some of that was because of the Iran nuclear deal, the Greek debt crisis and the drop in Chinese stock markets. But everyone knew that the first two were coming, and there were plenty of warnings about the Chinese stock exchanges long before July.

The likelihood of lower oil prices should not have been a surprise to anyone.

Of the 19 rigs added this week, 12 were for horizontal wells (Figure 2) and 7 of those were in the Bakken, Eagle Ford and Permian plays that account for most of the tight oil production in the U.S.

Figure 2. Rig count change table for horizontal wells. Source: Baker-Hughes and Labyrinth Consulting Services, Inc.

Horizontal shale gas plays added 8 rigs. That is as out-of-touch as the tight oil rig additions since gas prices averaged only $2.75 in the second quarter of 2015 (Figure 3) and are almost half of what they were in the first quarter of 2014.

Figure 3. Henry Hub natural gas daily prices and quarterly average prices. Source: EIA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

The U.S. E&P industry is really good at spending other people’s money to increase production. It doesn’t matter if there is a market for the oil and gas. As long as the capital keeps flowing, they will do what they do best.

Don’t be distracted by the noisy chatter about savings through efficiency or re-fracking. Just look at the income statements and balance sheets from first quarter and it’s pretty clear that most companies are hemorrhaging cash at these prices. Second quarter is likely to be worse and it gets uglier when credit is re-determined in Q3, hedges expire, and reserves are written down after Q4.

This is an industry in crisis despite the talk about showing OPEC a thing or two about American ingenuity. Increasing drilling when you’re losing money and prices are falling doesn’t sound very ingenious to anyone.

Watch for the markets to agree as oil prices fall lower in coming weeks.