August 3/Chinese demand for last reporting week: 73 tonnes/Huge demand for gold from India at 155 tonnes over last two months/Puerto Rico defaults/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1089.40 down $5.50 cents  (comex closing time)

Silver $14.52 down 23 cents.

In the access market 5:15 pm

Gold $1085.00

Silver:  $14.50


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


At the gold comex today, we had a good delivery day, registering 256 notices for 25,600 ounces and on Friday we had 16 notices for 80,000 oz . Silver saw 1 notice for 5,000 oz for Friday.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 235.52 tonnes for a loss of 59 tonnes over that period.

In silver, the open interest fell by 1159  contracts. The total silver OI continues to remain extremely high, with today’s reading at 185,926 contracts   In ounces, the OI is represented by .930 billion oz or 132% 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.

In silver we had 16 notices served upon for 80,000 oz.

In gold, the total comex gold OI rests tonight at 435,095. We had 256 notices filed for 25,600 oz today.

We had no withdrawals in gold tonnage at the GLD today /  thus the inventory rests tonight at 672.70 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 silver  inventory at the SLV / Inventory rests at 326.829 million oz.

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

1. Today, we had the open interest in silver fall by 1159 contracts down to 185,926.  We again must have had some shortcovering by the bankers as they feared something was brewing in the silver arena.  The OI for gold rose to 435,095 contracts

(report Harvey)


2.  Two big commentaries from Bill Holter

first commentary title:


“I Dare You!”

and the second commentary:

“The Great Call.”


(Bill Holter/Holter-Sinclair collaboration)

3. Two important stories on Greece

(zero hedge)

4.One story on Ukraine

(zero hedge)

5.Is GLD being raided to supply China?

(TF Metals, Craig Hemke/Dave Kranzler ird)

6. A superb Ted Butler commentary

(Ted Butler)

7. Huge Chinese demand this past reporting week: 73 tonnes

(Jessie/Americain cafe)

8 Huge demand for gold from India/155 tonnes of demand over the first two months of their fiscal year.

(times of India)

9 Trading of equities/ New York

(zero hedge)

10. Oil related stories  (3)

zero hedge/ Andy Tully

11.  USA stories:

Data for today:


i). Personal spending down

ii). ISM manufacturing slumps

iii). Construction spending also slumps

b). Puerto Rico defaults on its bonds

c).  Another casualty in the coal space: Alpha Natural

(zero hedge)


Here are today’s comex results:


The total gold comex open interest rose  from 427,678 contracts up to 435,095 for a gain of 7417 contracts. For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month,   and today the latter was again 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 contract month of August and here the OI fell by 920 contracts falling to 8,295 contracts. We had 3 notices filed upon on Friday and thus we lost 917 contracts or 91,700 ounces will not stand for delivery.The next delivery month is September and here the OI fell by 73 contracts down to 1993.  The next active delivery month if October and here the OI  rose by 167 contracts up to 25,194.  The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 121,608. The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day was fair at 196,300 contracts. Today we had 256 notices filed for 25600 oz.

And now for the wild silver comex results. Silver OI fell by 1159 contracts from 187,085 down to 185,926 contracts despite the fact that silver was up by 6 cents yesterday .  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 August and here the OI fell by 20 contracts down to 89. We had one delivery notice filed on Friday and thus we lost 19 contracts or 95,000 ounces will not stand for delivery in this non active August contract month.The next major active delivery month is September and here the OI fell by 2639 contracts to 120,622. The estimated volume today was fair at 26,105 contracts (just comex sales during regular business hours). The confirmed volume on Friday (regular plus access market) came in at 55,076 contracts which is excellent in volume.  We had 16 notices filed for 80,000 oz.

August contract month: initial standing

August 3.2015



Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  1477.46 oz (Scotia,Manfra) 
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 256 contracts (25,600 oz)
No of oz to be served (notices) 8036 contracts (803,600 oz)
Total monthly oz gold served (contracts) so far this month 259 contracts(25,900 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 272,871.421   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 Scotia: 95.01  oz
ii) Out of Manfra: 1,382.45 oz  (43 kilobars)

total customer withdrawal: 1,477.46  oz

We had 0 customer deposits:


Total customer deposit: nil oz

We had 1  adjustments

i) Out of Scotia:  200.732 oz was adjusted out of the customer and this landed into the dealer account of Scotia


JPMorgan has only 3.098 tonnes left in its registered or dealer inventory.


Today, 0 notices was issued from JPMorgan dealer account and 48 notices were issued from their client or customer account. The total of all issuance by all participants equates to 256 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 August contract month, we take the total number of notices filed so far for the month (259) x 100 oz  or 25900 oz , to which we add the difference between the open interest for the front month of August (8295) and the number of notices served upon today (256) x 100 oz equals the number of ounces standing

Thus the initial standings for gold for the August contract month:

No of notices served so far (259) x 100 oz  or ounces + {OI for the front month (8295) – the number of  notices served upon today (256) x 100 oz which equals 921,200  oz standing so far in this month of July (25.80 tonnes of gold).

We lost 917 contracts or an additional 91700 oz will not stand for delivery in this active month of August.

Total dealer inventory 351,720.09 or 10.939 tonnes

Total gold inventory (dealer and customer) = 7,570,807.473 oz  or 235.48 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 235.48 tonnes for a loss of 67 tonnes over that period.




And now for silver

August silver initial standings

August 3 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 1,040433.342  oz (CNT,Delaware,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 16 contract  (80,000 oz)
No of oz to be served (notices) 73 contracts (365,000 oz)
Total monthly oz silver served (contracts) 17 contracts (85,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 1,446,601.7oz

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 0 customer deposits:

total customer deposits:  nil  oz


We had 3 customer withdrawals:

i)Out of Delaware:  1,968.800  oz

ii) Out of CNT  321,429.900 oz

iii) Out of Scotia; 717,037.642 oz

total withdrawals from customer: 1,040,433.342  oz


we had 1  adjustment

 Out of Brinks:
25,959.13 oz leaves the dealer and lands into the customer account of Brinks

Total dealer inventory: 56.568 million oz

Total of all silver inventory (dealer and customer) 174.630 million oz


The total number of notices filed today for the August contract month is represented by 16 contracts for 80,000 oz. To calculate the number of silver ounces that will stand for delivery in August, we take the total number of notices filed for the month so far at (17) x 5,000 oz  = 85,000 oz to which we add the difference between the open interest for the front month of July (89) and the number of notices served upon today (16) x 5000 oz equals the number of ounces standing.

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

17 (notices served so far)x 5000 oz + { OI for front month of August (89) -number of notices served upon today (16} x 5000 oz ,= 450,000 oz of silver standing for the August contract month.

we lost 19 contracts or an additional 95,000 oz will not stand in this delivery month of August.

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:



August 3.2015: no change in inventory at the GLD./Inventory remains at 672.70 tonnes

 July 31/we had a huge withdrawal of 7.45 tonnes/Inventory rests this weekend at 672.70 tonnes

July 29/no change in inventory/rests tonight at 680.13 tonnes

July 28/no change in inventory/rests tonight at 680.13 tonnes

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


August 1 GLD : 672.70 tonnes


August 3.2015; no change in inventory at the SLV/inventory remains at 326.829 million oz

And now for silver (SLV)  July 31/no change in inventory/rests tonight at 326.829 million oz

July 29/no change in silver inventory/326.829 million oz

July 28/we had a huge withdrawal of 2.005 million oz from the SLV/Inventory rests at 326.829 oz

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


August 3/2015:  tonight inventory rests at 326.829 million oz



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

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

1. Central Fund of Canada: traded at Negative 11.4 percent to NAV usa funds and Negative 11.0% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62/2%

Percentage of fund in silver:37.5%

cash .4%

( July 31/2015) Cdn holiday

2. Sprott silver fund (PSLV): Premium to NAV rises to -.55%!!!! NAV (August 3/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV falls to – .90% to NAV(July August/2015)

Note: Sprott silver trust back  into negative territory at-  0.55%

Sprott physical gold trust is back into negative territory at -.90%

Central fund of Canada’s is still in jail.

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

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


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

on gold and silver issues:

Goldcore blog off today.

(courtesy/Mark O’Byrne/Goldcore)


(courtesy Craig Hemke/TFMetalsReport)

TF Metals Report: July 19 raid on gold was meant to drain GLD


2:37p ET Sunday, August 2, 2015

Dear Friend of GATA and Gold:

The raid on gold of Sunday night, July 19, was staged by bullion banks to drain more tonnage from the exchange-traded fund GLD to be sent to Asia, the TF Metals Report’s Turd Ferguson writes.

“As GLD is a readily-accessible source of instantly available gold,” Ferguson writes, “its authorized participant bullion banks are once again redeeming their 100,000-share lots for physical gold from the GLD ‘inventory.’ That this gold is then utilized to settle physical demand from around the globe is hardly arguable, given recent history.”

Ferguson’s commentary is headlined “The Gold Raid of July 19” and it’s posted at the TF Metals Report here:

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


And on the same subject as above


(courtesy Dave Kranzler/IRD)

Was The July 19 Paper Raid On Gold Implemented To Remove Gold From GLD?

Craig Hemke of the TF Metals Report wrote an article which has sniffed out the probable motive behind the shamelessly blatant paper smash of gold on Sunday evening July 19 at one of the quietest trading periods of the week:

As a readily-accessible source of instantly-available gold, The Authorized Participant Bullion Banks are once again redeeming their 100,000 share lots for physical gold from the GLD “inventory”. That this gold is then utilized to settle physical demand from around the globe is hardly arguable, given recent history.  – Craig Hemke,

I believe Craig has hit the nail on head here.  Ever since first reading James Turk’s original dissection of the GLD Trust legal structure from the Prospectus, it’s been pretty obvious that GLD was created to act as a “holding reservoir” of physical gold that would be used by the Central Banks/bullion banks as a source of gold to required to settle LBMA forward commitments to buyers (i.e. China, India and Russia) who would refuse to settle in cash.  99% of all Comex trades are settled in cash.

The one unresolved question, for me anyway, is the issue of how much gold really still exists in unencumbered (e.g. leases or hypothecation agreements) physical bar form in HSBC’s vault or the vaults of designated subcustodians.  It’s an question that won’t be answered until the system implodes because GLD, by design, has made it impossible for anyone to conduct a bona fide, independent audit.

This is an excerpt from a post I wrote on the The Golden Truth, the predecessor blog to Investment Research Dynamics – it looks like my analysis was correct back then which reaffirms Craig’s analysis of what happened two weeks ago:

We have witnessed a stunning drain of gold from the GLD ETF trust.  Through last Friday, an incredible 479 tonnes – more than 35% – of GLD’s gold has been removed and has disappeared, most likely to Asia – in the space of about 10 months.  The biggest chunk of that 479 tonnes was removed shortly after Germany’s Bundesbank issued it’s feeble and hopeless request to the U.S. that the Federal Reserve start shipping back some portion of the 1500 tonnes of gold that is supposedly being “safe-kept” on behalf of Germany by the Fed in its vault in New York City.   Gold luck, Angela…

I have looked at GLD suspiciously ever since James Turk issued the first analysis of GLD’s prospectus back in 2004.  Those of us who are familiar with securities laws and investor “safe guards” supposedly enforced by the SEC were absolutely shocked that the SEC approved the GLD prospectus as it was filed because of the egregious lack of GLD sponsor and custodian legal accountability standards typically required by the SEC for publicly traded securities.

Given this fact, I believed at the time that GLD was a scheme devised to suck  in retail and institutional cash that might otherwise flow in massive quantities into actual physical gold that would be safe-kept in private vaults in this country.  Although GLD has a mechanism to enable investors with a minimum of 100,000 shares to convert those shares into gold that would be delivered to the investor, the procedure is exceedingly cumbersome and expensive and there’s a mechanism embedded in the language of the prospectus that enables the trustee of GLD to deny such requests.

But I also knew – through GATA’s invaluable research – that there would eventually be a shortage of physical gold that would be available to allow the western Central Banks and bullion banks to maintain their oppressive and incessant manipulation of the paper gold market for the purposes of maintaining a cap on the price of gold, for the purposes of defending the credibility of the U.S. dollar.  I figured that at some point the gold in GLD would used for this purpose once the Central Bank stocks of gold were largely if not fully depleted.  In this context, please recall that about three years, the ECB system, which had been selling 400 tonnes per year on average, pretty much stopped selling any gold.  That’s sign-post #1 that I was right.

Then along comes the Bundesbank in early 2013, with a request that the Fed start shipping Germany’s gold held in in New York back to Germany.  That’s when all hell broke loose:

(The graph above is from the

There’s something really wrong with that picture because the intuitive response from the market by Germany’s request of the Fed should have been a quickly rising price of gold.  But as you we all know, the Fed defaulted on the request – for all intents and purposes – and that’s when the massive drain of gold from GLD commenced.

The truth is that my original hunch was correct.  100% correct.  The gold in the GLD trust is being used to satisfy the enormous physical delivery demands from China and the other big gold buying countries because the western Central Banks have run out of gold to deliver.  That is an unmistakable fact. Reports and data ad nauseum have been published in the last six months describing and verifying the voluminous, unprecedented amount of gold bars that have been moved – literally physical transferred – from the Comex in NY and  the LBMA and Bank of England vaults in London to Switzerland and then on to Hong Kong, where it flows to its ultimate destinations in China.  Anyone who would deny that this is the case has a blatant and catastrophic disregard for the truth as supported by provable facts.

So the question is, how much longer can the depletion of gold from GLD continue before this scheme falls apart?  Let me first say that it is likely that the U.S Government’s “Waterloo” in this situation will be the gross miscalculation – when GLD was originally devised – of the growth and size of China’s appetite for physical gold for which actual physical delivery is demanded.

Along with all the other manipulated schemes of the western Central Banks/Governments, I believe that the GLD fraud is starting to unravel.  I would argue that the ability to execute successfully the intervention  in interest rates, currencies and equities requires the unfettered ability to manipulate the price of gold.  In my view, the western Central Banks are losing their grips on gold and this will likely bring the entire western financial system down.



My goodness, India is ramping up physical gold deliveries.  For the first two months of their fiscal season, the citizens of India (not sovereign) purchased 155 tonnes or an average of 77.5 tonnes per month.


For a recap of the major buyers of gold:


1.China is averaging 252 tonnes per month now.

2. Russia:  averaging 30 tonnes per month

3  India:  77 tonnes per month.


total for the three :359 tonnes per month.  If they continue at this pace: 4308 tonnes.  The world produces 2200 tonnes ex Russia ex China (who both keep every ounce produced)


(courtesy Press Trust of India/Times of India/Mumbai/GATA)

India’s gold imports up 61% at 155 tonnes in April-May


From the Press Trust of India
via The Times of India, Mumbai
Sunday, August 2, 2015

NEW DELHI — India’s gold imports shot up by about 61 percent to 155 tonnes in the first two months of the current fiscal mainly due to weak prices globally and the easing of restrictions by the Reserve Bank.

In April-May of the last fiscal years, gold imports had aggregated about 96 tonnes, an official said.

In the international market, gold has been trading weakly over the past few months. On Friday, it closed at US$1,095.10 in New York market. …

… For the remainder of the report:…




And now for China’s demand last week:  A monstrous 73.289 tonnes of gold.  Ladies and Gentlemen:  this is citizen gold demand.  Sovereign gold is not included in this mix;


(courtesy Jessie/Americain cafe)

31 July 2015

Shanghai Gold Exchange Has 73.3 Tonnes of Bullion Withdrawn Its Third Largest WeekFor the week ending July 24th there were 73.289 tonnes of gold bullion withdrawn from the Shanghai Exchange into China.

That is about 2,356,296 troy ounces in one week.

I have included the most recent statistics from the Comex Gold Warehouses below. There are currently 351,519 ounces of gold available for delivery at these prices there for the month of August.

Nine out of ten Americans will notice that in terms of technical analysis this is ‘a lot less.’

But as the very serious people like to point out, the Comex is not really ‘a physical exchange.’ Yep.

And as you may have seen in the posting from earlier today showing the sea change in leverage over even the past ten years there, it is seemingly getting a lot less physical all the time, even compared to just five or six years ago. Winning…

Even the US Mint seems to be getting in on the act. The mint sold 202,000 ounces of gold in the form of coins for the month of July, one of its largest monthly sales totals in several years.

That’s a lot of pet rocks.

Do the math. I wonder where the poor, deluded ignoramuses who obviously do not understand finance are getting all that money to spend on such worthless trifles. Does the US Mint take food stamps?

While they last.

This chart is from the date wrangler Nick Laird at

Gold and the Grave Dancers

August 1, 2015 | Author Pater Tenebrarum





(courtesy zero hedge)



Comex On The Edge? There Are Now A Record 124 Ounces Of Paper Gold For Every Ounce Of Physical

Over the weekend, we got what was merely the latest confirmation that when it comes to sliding gold prices, consumer of physical gold just can’t get enough. As theTimes of India reported over the weekend, India’s gold imports shot up by about 61 per cent to 155 tonnes in the first two months of the current fiscal “due to weak prices globally and the easing of restrictions by the Reserve Bank. In April-May of the last fiscal, gold imports had aggregated about 96 tonnes, an official said.”

This follows confirmations previously that with the price of gold sliding, physical demand has been through the roof, case in point: “US Mint Sells Most Physical Gold In Two Years On Same Day Gold Price Hits Five Year Low“, “Gold Bullion Demand Surges – Perth Mint and U.S. Mint Cannot Meet Demand“, “Gold Tumbles Despite UK Mint Seeing Europeans Rush To Buy Bullion” and so on. Indicatively, as of Friday, the US Mint had sold 170,000 ounces of gold bullion in July: the fifth highest on record, and we expect today’s month-end update to push that number even higher.

But while the dislocation between demand for physical and the price of paper gold has been extensively discussed here over the years, most recently in “Gold And The Silver Stand-Off: Is The Selling Of Paper Gold And Silver Finally Ending?”, something unexpected happened at the CME on Friday afternoon which may be the most important observation yet.

Recall that in the middle of 2013, in an extensive series of articles, we covered what was then a complete collapse in Comex vaulted holding of registered (i.e., deliverable) gold.  At the time the culprit was JPM, where for some still unexplained reason, the gold held in the newest Comex’ vault plunged by nearly 2 million ounces in just six short months.

More importantly, the collapse in registered Comex gold sent the gold coverage ratio (the number of ounces of “paper” gold open interest to the ounces of “physical” registered gold) soaring from under 20 where, or roughly in line with its long-term average, to a whopping 112x. This means that there were a total of 112 ounces of claims for every ounces of physical gold that could be delivered at any given moment.

Gradually, the Comex raid was relegated to the backburner when starting in 2014 the amount of registered gold tripled from the upper 300k range to 1.15 million ounces one year ago, at which point the slide in Comex registered gold started anew.

Which brings us to Friday afternoon, also known as month end position squaring, when in the latest daily Comex gold vault depository update we found that while some 270K in Eligible gold had been withdrawn mostly from JPM vaults, what caught our attention was the25,386 ounces of Registered gold that had been “adjusted” out of registered and into eligible. As a reminder, eligible gold is “gold” that can not be used to satisfy inbound delivery requests without it being converted back to registered gold first, which makes it mostly inert for delivery satisfaction purposes.


Most importantly, this 25,386 oz reduction in deliverable Comex gold from 376,906 on Thursday pushed the amount of registered Comex gold to an all time low: at 351,519 ounces, or just barely over 10 tons,registered Comex gold has never been lower!


Incidentally, as part of the month-end redemption requests, we saw a whopping 22% of the eligible gold in Kilo-bar format (where there is no registered, just eligible) be quietly whisked away from Brink’s vaults: unlike traditional ounce-based contracts, the kilo format traditionally serves as an indication of Chinese demand, and if withdrawals on par with those seen on July 31 persist, it will soon become clear that Chinese buyers are once again scrambling for the safety of gold now that their stock market bubble has blown up.

This covers the sudden surge in demand for physical gold as manifested by CME data.

Meanwhile, over in “paper gold” land, things remained unchanged: as shown in the chart below, the aggregate gold open interest rose modestly to 43.5 million ounces up from 42.9 million the day before.


While on its own, gold open interest – which merely represents the total potential claims on gold if exercised – is hardly exciting, as we have shown previously it has to be observed in conjunction with the physical gold that “backs” such potential delivery requests, also known as the “coverage ratio” of deliverable gold.

It is here that things get a little out of hand, because as the chart below shows, all else equal, the 43.5 million ounces of gold open interest and the record low 351,519 ounces of registered gold imply that as of Friday’s close there was a whopping 123.8 ounces in potential paper claims to every ounces ofphysical gold.

This is an all time record high, and surpasses the previous period record seen in January 2014 following the JPM gold vault liquidation.

Another way of stating this unprecedented ratio is that the dilution ratio between physical gold and paper gold has hit a record low 0.8%.

Indicatively, the average paper-to-physical coverage ratio since January 1, 2000 is a “modest” 19.1x. As of Friday it had soared to more than 6 times greater.

Which brings us to the usual concluding observations:

First: as we have said previously, at a time when all the gold selling (and naked shorting) is in the paper markets and when demand for physical gold is once again off the charts, with soaring purchases not only in India but also in the US, where is this gold going? Clearly not into CME gold vaults, which are once again asource of physical gold, and as the above shows, have never had less deliverable gold.

Second, total Comex gold has dropped to such precarious levels in the past and while on many occasions market observers have asked if the Comex is close to a failure to deliver, aka a default of the CME’s gold warehouse, it has always avoided such a fate. Still, one wonders: the 10+ tons of deliverable gold at the Comex are now worth a paltry $383 million. It would not be very complicated for a next generation “Hunt Brother” to buy some $400 million in Comex gold, and promptly demand delivery: after all the gold crash of two weeks ago saw some $2.7 billion in paper gold dumped in the most illiquid market – why can’t it be done in reverse. What would happen next is unknown, but unless somehow the Comex found a way of converting millions of ounces of Eligible gold into Registered, the CME would simply be unable to satisfy such a delivery request.

Third: while there are still over 7 million ounces of Eligible gold, why the recent spike in “adjustments” of eligible to registered gold (i.e., missing a warehouse receipt)?

Finally, we assume the mainstream press will once again start paying close attention to the total, and especially registered, gold held at the Comex: at a pace of 25K a day, the gold vaults that make up the CME’s vaulting system would be depleted in just under two weeks of daily withdrawals.

In any case, we are very curious to see how this latest dramatic face off in the long-running war between paper and physical gold, concludes.


This should hurt the supply side of the equation:


(courtesy GATA)

South African mineworkers union rejects wage hike from gold producers


By Zandi Shabalala
Sunday, August 2, 2015…

Members of South Africa’s Association of Mineworkers and Construction Union on Sunday rejected a wage offer from gold producers of increases of up to 17 percent, spokesman Manzini Zungu said.

Gold firms Sibanye Gold and AngloGold Ashanti last week offered an additional 1,000 rand ($80) a month to entry-level workers, while Harmony Gold offered 500 rand a month.

“Harmony’s offer has messed it up — the offer is too low for the members,” Zungu said after a mass rally at Sibanye’s Beatrix mine.

The union is demanding a more than doubling in wages but gold companies say they cannot afford such increases as they battle falling prices and rising costs.

The union will meet with the Chamber of Mines on Tuesday to officially reject what the gold companies called a “final offer.”

“The final offer is just that — final,” Chamber spokeswoman Charmane Russell said. The Chamber would wait until Tuesday to hear from the union, she said.





(courtesy Wall Street Journal/GATA)

China’s stock plunge burnishes gold’s appeal


By Biman Mukherji
The Wall Street Journal
Sunday, August 2, 2015

HONG KONG — Until recently, every time Hong Kong-based bullion supplier Padraig Seif would inquire about demand from customers, the answer would be the same: Business is quiet as all eyes — and money — turned to the surging stock market.

Suddenly, though, his sales are booming again in the wake of a plunge in Chinese equities and sliding gold prices.

“It has really taken us by surprise,” says Mr. Seif, co-owner of bullion supplier Finemetal Asia. “We are looking at three times the revenue in June as in May.”

He said demand is particularly strong for small gold bars weighing 250 grams and 500 grams that are popular with price-conscious smaller investors. …

… For the remainder of the report:…




Ted Butler…



(courtesy Ted Butler/

Price Takers and Price Makers

Theodore Butler


July 30, 2015 – 9:09am

In the world of basic commodities nearly every market participant, whether a producer or consumer, is a price taker, accepting the general price level prevailing at the time. For example, the individual consumer of gasoline has little choice but to take the price at the pump or go elsewhere. Same with corporate consumers like airlines and other transportation entities. They can hedge and fix their costs, but that hedging must be based upon current prevailing prices. Even large producers like the oil companies must take what prices the market provides, although the largest oil producers, like Saudi Arabia, could set (make) oil prices if it wanted to (at least temporarily).

That’s the way it is and should be with world commodities – 99.9% of all consumers and producers are price takers, that is, accepting whatever the prevailing price happens to be. Generally, this shouldn’t be considered a problem as it dovetails perfectly with our vision of how a free market sets prices through the magic of aggregate supply and demand. Too much world demand and not enough supply, prices have to rise; not enough demand and/or too much supply and prices must fall enough to regain fundamental balance. If that was occurring currently in the pricing of many world commodities, namely, that actual supply and demand was determining price, I would end this article here. But that is not the case.

Oh, it’s true enough that more than 99.9% of all world consumers and producers are price takers and not price setters. While that is good in terms of how free markets should operate, their total consumption and production has little to do with how prices of many world commodities are determined; and that is bad. How can this be? How can there be no dominant producer or consumer of world commodities capable of making a price; and still I contend that prices are being set to the point of being artificially fixed?

The answer lies in the fact that a great force is setting (making) the price of many world commodities completely apart from the influence of aggregate actual supply and demand. Seemingly out of nowhere, this great force has come to push aside the price effect of the law of supply and demand and render it as almost non-existent.

The great pricing force that I speak of is excessive speculative positioning in the regulated futures markets, mostly exchanges owned and run by the CME Group. Simply put, speculative futures trading has come to supplant actual commodity supply and demand as the main pricing force. Although such excessive speculation is strictly against commodity law, the primary commodities regulator, the CFTC, looks the other way. Ironically, it is the data published by the federal regulator that proves that excessive speculation is setting prices for many world commodities.

Let me be clear – there is nothing wrong with speculation and without it, there would be no functioning commodity market possible. But there is something very wrong when excessive speculation sets prices.

The excessive speculation that I refer to is quite specific – it involves only two types of modern day futures traders. One group are the traders in the category the CFTC refers to as managed money and the other group includes commercial traders (mostly banks) which take the other side of whatever the managed money traders wish to buy or sell. And it’s even more specific than that – I’m only referring to the managed money traders which operate strictly on technical considerations, like moving averages.

In a nutshell, here’s the problem – because managed money technical traders generally do the same thing (buy or sell) under similar pricing circumstances (buying on rising prices and selling on declining prices), even though each technical trader is operating independent of other technical traders, the net effect is that their collective actions transform them into one massive trader – the largest such trader ever known to markets. The price-setting influence the unified managed money traders is having on world commodities is undeniable. Whereas I usually talk in terms of what this collective influence has on silver and gold prices, it has now gone much further than that.

The proof that collective managed money positioning has been the dominate price force in recent moves in corn, crude oil and copper (in addition to silver and gold) can be seen in the data in the CFTC’s Commitments of Traders (COT) report. Other commodities are similarly affected by collective managed money futures market positioning, but let me stick to just these five commodities for the sake of brevity.

On the recent 20%+ jump in corn prices (now reversing), managed money traders bought (mostly in the form of short covering) roughly 400,000 net futures contracts in a matter of weeks, or nearly 30% of the total open interest in the Chicago Board of Trade’s corn futures market . In addition, that’s the equivalent of two billion bushels of corn, nearly 15% of US corn production and the US is the largest corn producer in the world with half the world output. If one trader, effectively and suddenly, bought 30% of an entire major futures market, could there be a more obvious force for driving prices higher?

On the recent $12 plunge in the price of crude oil, managed money traders sold 150,000 net contracts in a matter of weeks. That’s the equivalent of 150 million barrels of oil and close to 10% of the total NYMEX crude oil market. If any one trader sold 150 million barrels of crude oil in a hurry, what would the effect on prices be?

On the plunge in copper prices since May 19 from over $2.90 to under $2.40, managed money traders sold more than 66,000 net COMEX copper futures contracts, an astounding 40% of the total open interest. That’s also the equivalent of 825,000 tons of copper or more than double the combined COMEX and LME inventories. If one trader sold the equivalent of 40% of a major market in a matter of two months, wouldn’t prices drop sharply? (By the way – I’m using data from the most recent COT reports).

On the drop in gold prices of $140 from May 19, managed money traders sold 93,000 net COMEX futures contracts (mostly in the form of new shorts) or more than 20% of the entire COMEX market and the equivalent of 9.3 million oz, worth more than $10 billion. If one large trader sold more than 20% of the world’s largest gold exchange in a little over two months, would you be surprised that prices dropped by 11%?

On the $3 price drop in silver from May 19, managed money traders sold 57,000 net COMEX silver futures contracts (also mostly in the form of new short sales) or roughly 30% of the entire COMEX market, also the largest silver exchange in the world. That’s the equivalent of 285 million oz or close to 35% of world annual silver mine production. How could a large trader selling such incredible percentages of both the COMEX and world mine production not send prices lower?

I know that what I just reported on involves trading in futures contracts and not in the actual commodities, but therein lies the rub. Because all commodity producers and consumers are price takers and not price makers, physical commodities are priced off the futures price. Make the price of silver $3 lower on the COMEX and that automatically becomes the price for all silver producers and consumers. It’s nuts (and illegal) for pure speculators to dictate prices to real producers and consumers, but we live in a mad, mad world. (Perhaps only until real producers stand up against the madness).

Who are these traders that move in lockstep and hold such a dominant role in setting commodity prices? And why are the regulators looking the other way as managed money technical traders evolve into the unquestioned price makers that the data indicate? The answers to these questions have to do with gradualism and not wanting to admit to a problem that should have been rectified long ago.

First off, no one managed money technical trader is responsible for setting prices; but when many different managed money traders do the same thing at the same time, the collective effect is price making and distortion. As a whole, managed money traders control upwards of $300 billion in assets devoted to futures trading. They even have their own powerful lobbying organization, which like any such organization fights any attempt to restrict their activities, even if their collective activities undermine the integrity of our markets.

And as for the CFTC, it has denied so often that there is anything amiss in the silver market that there is no chance it can admit to anything I allege under any circumstances. Unfortunately, because the CFTC is afraid to even discuss this issue, now the silver manipulation disease has spread to most markets controlled by the CME Group. That’s too bad, because there is a simple solution to the problem of collective managed money trading making the price that all consumers and producers of world commodities must take. (For the purpose of this article, I’m leaving out my contention that the commercials are tricking the managed money traders into and out from futures positions, as that’s a separate issue).

The solution (as I’ve maintained for years) is to treat the managed money traders who are buying and selling in unison as the one trading entity that they are effectively functioning as. There is no question that these traders are speculators and, therefore, there is no question that they should be treated as a single speculative entity and be governed by a single collective speculative position limit.

No one speculative trader would be allowed to buy or sell 10%, 20% or 40% of any commodity market in a short period of time and neither should a small group of traders, trading in lockstep, be allowed to do the same. Remember we’re talking about a very small number of managed money traders, close to 30 or 50 traders in most markets. Why should 30 or 50 purely speculative CME traders be allowed to set the price for the millions and even billions of world participants who must then take the prices dictated to them?

Ted Butler

July 30, 2015






I Dare You!

Let’s look at two different topics where we are seeing contradictory “evidence”.  First up is what’s happening in the gold and silver markets.  Never before have I seen sentiment as poor as it is today.  Nor have I seen so many negative articles about gold in the various mainstream publications.  It has gotten so bad, gold has even been compared to “pet rocks”!  While we have seen food fights before, the name calling as of late has become deafening led recently by Martin Armstrong and Cliff Droke.  I wonder how or what their response is to the physical side of the argument?
  As you know, there have been “air pockets” in the price of gold over the last three years.  Nearly always, these takedowns occur at night and in particularSunday nights.  The last one a couple of weeks back, saw $2.7 billion worth of gold sold over a two minute span.  I have asked the question many times, “who” controls this much gold and if we could identify someone or some entity, “who” would ever sell in a manner to destroy pricing if a profit motive truly exists?  Can anyone conjure up an answer to this while including the phrase “profit motive”?  I dare any of the gold bashers to answer these two very simple questions!  Front running just a bit, any real answer I would imagine must have “desired lower gold price” as part of the explanation.

A very real problem or flaw in logic exists in the current gold and silver markets.  If there is in fact so much selling (panic selling), how is it possible the U.S. Mint had to stop selling Silver Eagles nearly a month ago?  It can only be for one of two reasons.  Either they had enough silver but could not produce coins fast enough to satisfy demand, or, they could not source enough silver to make the coins.  But this does not make any sense.  How could there be “too much demand” if everyone is selling?  Also, how could there not be enough silver available if everyone is selling and has sold?  Where did all of this “sold” silver go to?  Again, I dare anyone to come up with a logical answer to this.
We are also seeing the same thing in gold.  It is trading in backwardation ($7 plus) in London and with substantial premiums in India and throughout Asia.  If the masses are dumping gold then supply should be plentiful, how can physical tightness exist or premiums over the paper price exist if recently sold gold is falling out of dump trucks on their way to refineries?  Any logical answers for this?  The gold bashers say “see, the price is down, there is your proof”.  Do Armstrong and crew deny that the only thing necessary to sell a COMEX gold or silver contract short is the ability to post margin?  Do they deny that “money” (margin) can be and is created for free ?  And then used to “water down” the futures in the same manner as a company over issues stock or a country over issues money supply?

There is a very real distinction between paper gold and physical gold, this will soon become apparent.  The difference is physical in your own control is no one else’s liability.  Paper gold on the other hand is the liability of the issuer of the contract.  Currently, COMEX has a whopping 11.7 tons left of deliverable gold left.  JP Morgan claims to have less than four tons, these are the lowest numbers I can ever remember.  To put it in perspective, 11.7 tons of gold is worth less than $400 million dollars.  The COMEX can now be broken and exposed with petty cash!  As sure as the Sun will rise tomorrow, there will eventually be a “call” on real gold.  Not only on COMEX gold but ALL paper gold …any call will not be met because the gold does not exist to meet the call.  There are now more than 100 paper ounces of gold sold for every one ounce of real gold that exists to deliver.  If there were 100 fake shares of IBM trading and watering down every one real share in existence, the price of IBM stock would be trading in the low single digits!  The fake shares would alter perception but not the reality of what the company is worth as an ongoing concern.

Another area to touch on is the “threat” of the Fed raising interest rates.  I view a rate hike as ONLY a threat at this point and will get into that shortly.  Looking back, the Fed has floated the idea of rate normalization ever since early 2010.  It was always six months out …and continually extended.  But this time they really mean it?  The consensus is now for a rate hike in September.  I can only say one thing to Janet Yellen and the gang, I DARE YOU!  In my opinion, if the Fed were to raise rates we might only have a functioning financial system for about 48 hours, I cannot see more than a week or two at the most.

Why is this you ask?  Let’s count the ways … First, global trade is already imploding.  China is entering a margin call scenario on many fronts.  An already strong dollar is pressuring an over indebted world that owes in dollars.  Internally, the U.S. is missing on many cylinders, retail sales and housing turnover already weak will become disastrous.  Reported economic numbers are barely treading water even with bogus assumptions and accounting.  Tightening credit will also have a negative effect on the banking system with razor thin margins and even more so in the derivatives complex.  Higher rates on their own will create margin calls, not to mention investors scrambling for the door in fear of even more rate hikes.  Panic begets panic in other words. The way I see it, there is a very real probability the Fed not only does not raise rates in September, a very real chance exits for QE4 to be announced and implemented in a panic. It should be added that the possibility of forced US Treasury sales by China is a distinct possibility. They may be forced to do this to shore up their panicky markets. Who will be the buyer?  Yes of course, the Fed and only the Fed.  It is my belief the Fed is about to be tested beyond breaking not only as lender of last resort but also “buyer of only resort” when it comes to the Treasury market.  Liquidity is already quite tight world wide, can the Fed really exacerbate the situation by raising rates? Is any economy anywhere in the world strong enough to bare higher rates?  Any financial system solid enough? I DARE THEM to raise rates…I bet they will be forced to do the opposite and pump unprecedented new liquidity!!
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome!
The Great Call.
The world is awash with “promises”  Nearly everything we think of as having “value” is because of a promise behind it.  A few examples: your bank accounts, retirement funds, bonds and even the dollar bills in your pocket.  Your bank account for example, once you deposit the money, it is no longer yours. You can argue this if you wish but we now know this is true for sure after recent “bail in” legislations passed throughout the west. When you deposit funds into a bank, it then becomes “their money” held for you…they “owe” it to you. Do not take this lightly, lawmakers around the world have made this the new reality. A little know fact, in 1845, Britain passed a banking law that made depositors (unsecured creditors); this is still precedent to this day.  When you deposit money you “accept a liability”  from your bank and are classified as an unsecured creditor.  In other words, “get in line with everyone else”!!
Same thing with many retirement accounts. Think about Social Security.  When you get your annual statement form, it comes with an asterisk.  This is to inform you they “might need to reduce benefits”.
With any retirement account you are relying on the custodian to make payments to you upon retirement.  Think about state and municipal retirement accounts promising the good life, they are nearly ALL underfunded. Meaning there is not enough money in there to make (promised) future payments unless some sort of magically higher returns are realized. These are underfunded by the TRILLIONS of dollars!!
Bonds are an obvious asset class where a “promise” is relied on.  Dollars on the other hand seem the most misunderstood by the public while being the biggest leap of faith in all asset classes. dollars rely on the “full faith and credit” of the US government (a bankrupt entity) yet the populace sleeps through the night secure knowing they own dollars. ALL non backed, fiat currencies in the past have failed. The dollar is the widest spread and widely owned fiat the world has ever know, its failure will be spectacular upon arrival! I wanted to point out the above “promises” as a basis to speak about trust or confidence.  The financial world turns on the axix of “trust”.  This trust was nearly broken in 2008
and is the reason the Federal Reserve needed to secretly lend $16 trillion all over the world.  If the Fed had not come up with these funds, failures would have spread and trust would have been broken amongst the banks/other financial institutions and even between the central banks themselves! The Fed’s largess worked and trust was maintained.
Now, I believe we are set for another “test” of trust.  We have gone five+ years with QE this and QE that, the reality being outright monetization/ In fact, central banks today are buying more sovereign bonds than are being issued.  The public and even the professional funds have backed away from the debt markets, you can’t blame them because the interest
received does not even cover inflation, not to mention a risk premium. Globally, the pace of trade and business activity is slowing or even declining which will bring to a head the difficulties in meeting debt service and other “promises”
I ask, what will happen when inevitably “trust” begins to wane? Or even fully break?  It is at this point the system goes into “The Great Call”.  Margin call? Of course, because nearly everything financial has leverage behind it but there is more to it than this.  The “call” I am speaking of is for contracts of all sorts to “perform”.  In particular I am thinking “derivatives” contracts will be called on to perform their contractual duties.
All in all, there are over 1 quadrillion worth of derivatives outstanding.  The problem with this  is the “tail” is bigger than the dog.  In other words, the amount of derivatives outstanding dwarfs the total amount of money outstanding and thus the ability to “pay” and make good on the contracts.  The other side of this coin are contracts promising to deliver something. Here I am thinking both gold and silver.  There are far more (100-1 or more) obligations outstanding than there are ounces or kilos available to deliver.  This is a default just waiting to happen.
If you listen to the Harry Dents of the world, the dollar will be the safe haven and where all fear capital will go.  In a world based on nothing but trust and promises, will fear capital pile into a currency based ONLY on trust and promises…when “trust” is exactly what is come into question.  Actually, it can be said the dollar was originally set up in 1971 on a “never pay” model.  The dollar (and bonds) only promise to pay “more dollars” and nothing else.  This game worked for many years, now it looks like the Saudis after doing many deals with both Russia and China may be set to transact in currency other than dollars.  Are they displaying confidence?
The Chinses are now net sellers of US Treasuries. Ask yourself this question, if China could sell all of their treasuries and turn it all into
gold, silver, oil, copper and other real tangible assets (without destroying the treasury market or making gold go no offer), would they?  I say yes, they absolutely would love to be out from under their treasury position. Apologetic others might say China is comfortable, we will soon see.
Because confidence is the only thing at this point holding the game together…and its fickle nature, it is important for you to think this through.  What will be standing when confidence breaks?  Can commodity exchanges deliver all they promise? Can borrowers “borrow more” if they cannot redeem past issues with new debt?  This is where we are headed both systemically and globally.
Before finishing, I want to tie two connected thoughts together. First, the great Paul Craig Roberts said last week, he feared precious metals could be suppressed forever. I received MANY fearful emails regarding this thought process. Mr Roberts would be entirely correct if it were not for one small detail, REAL gold and REAL silver must be available to deliver.  Otherwise the game comes to an end and the fraud is exposed. He is entirely correct, “price” can be jammed or rammed with enough “margin” posted. Dan Norcini once upon a time had it correct when he said, nothing willunnerve the shorts more than the longs standing for delivery..and making a call for the product. I would like to remind you, COMEX currently has only 11.7 tonnes of gold for delivery.  This is rougly 400 million dollars. If I were short, this paltry sum would not add to my confidence.
Another thought going hand in hand with this is where we are now versus 2008  Back then we were within overnight hours of the entire system coming down, this is fact.  What has changed since then? “Nothing”, but in reality quite a bit.  Nothing has changed from the standpoint of “tools used”  We have not altered or changed anything that “got us to the brink”…only done more of it!! We have far more debt and more derivatives outstanding now. In fact, central banks and sovereign nations have even sacrificed their balance sheets to prolong the game. It has far.  The only problem is the entire arsenal of the central banks have already been tried and failed to provide the real economy with any stimulus. The result has been capital pushed into financial markets and blowing the bubble(s) far larger than they were.  Now we have far larger markets with far more leverage than 2008. These will need to be met with central banks and sovereign treasuries with weaker balance sheets and almost no ability to borrow in an effort to reflate.  It is a recipe for disaster.
We already know the sovereign debt markets are very thin on the bid side as liquidity has dried up. We also know equity markets are displaying horrible internal breadth. China is actually nearing a 1929 scenario and will be there shortly if they cannot steady. Confidence is a fickle girl, if it breaks, then we go back to the 2008 scenario and we’ll find out just how powerful the central banks really are.  I believe the coming”Great Call” cannot nor will be met and only then will we see what is left standing.  It is imperative here and now tp position yourself in assets that do not stand on their own, everything else will be a broken promise!!
Standing watch
Bill Holter/
(Holter Sinclair collaboration)

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

1 Chinese yuan vs USA dollar/yuan remains constant at  6.2096/Shanghai bourse: red and Hang Sang: red

2 Nikkei down 37.13 or 0.18%

3. Europe stocks mostly in the green  /USA dollar index up to 97.56/Euro down to 1.0946

3b Japan 10 year bond yield: rises to 42% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 124.29

3c Nikkei still just above 20,000

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

3e WTI 46.42 and Brent:  51.10

3f Gold down  /Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund slightly rises to .65 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate falls to 21.340%/Greek stocks this morning:  still expect continual bank runs on Greek banks /stock markets will be allowed to be open as per ECB but restrictions

3j Greek 10 year bond yield remains constant at : 12.12%

3k Gold at $1091.31 /silver $14.71

3l USA vs Russian rouble; (Russian rouble down 83/100 in  roubles/dollar) 62.63,

3m oil into the 46 dollar handle for WTI and 51 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 .9669 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0596 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 further away from negativity at +.65%

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 2.19% early this morning. Thirty year rate below 3% at 2.90% / yield curve flatten/foreshadowing recession.

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

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


Chinese Stocks Slide Again, Copper Tumbles To 6 Year Low; Greek Market Crashes After One Month Trading Halt

If China had hoped it would root out intervention by eliminating Citadel’s rigging algos, and unleash a buying spree it was wrong: the Shanghai Composite opened negative, and never managed to cross into the green, despite the usual last hour push higher, ending down -1.1% and down for 6 of the past 7 days.

Worse, the high-beta Chinext (Harvey: equals China’s Nasdaq) tumbled 8% from Friday’s late day highs upon opening. Surprisingly, this happened even as China’s final Caixin/Markit manufacturing PMItumbled to 47.8, the lowest since July 2013 as reported previously, a collapse which normally would have been very bullish for stocks as it guarantees even more PBOC intervention. The trouble is that with the PBOC losing the market’s faith, not to mention control, bad economic news are becoming even worse news for stocks.

Adding commodity insult to stock injury, earlier today copper plunged to a fresh 6 year low, and like crude, is back in its second bear market of the past year.

Elsewhere in Asia equities fell with Chinese bourses at the forefront in the wake of disappointing Chinese Official and Caixin Mfg PMI readings. Hang Seng (-0.9%) traded in negative territory as the poor data increased concerns over China’s growth with a PBoC official adding that downward economic pressures are ‘not small’ and further revealing China had fabricated its local government debt numbers. Nikkei 225 (-0.4%) and ASX 200 (-0.4%) fell, as mining and energy names felt the effects of weak commodity prices. JGBs were flat having initially opening higher following the gains seen in USTs, however later pared gains amid a mild bounce back in Japanese equities.

The real action, however, was not in Asia but in Europe, and specifically Greece, where the stock market finally reopened after a 1+ month “capital control” hiatus. Granted, numerous conditions still remained, such as no short selling, and extensive limitations to just what could be sold, but despite the attempt to micro manage the reopening, the result was not pretty, with stocks crashing 23% at the open and staging barely a rebound trading -17% as of this moment, even as banks promptly traded down to the -30% limit as the realization that an equity-eviscerating recapitalization (or bail-in) is now inevitable.

Worse, just as the Greek stock market reopened, the Greek Markit data and at 30.2, down from 46.9 the month before, the best reaction anyone could muster to this complete shutdown in the Greek economy was laughter. The chart below hardly needs commentary…

… but here is some anyway from Phil Smith, Economist at Markit:

“Manufacturing output collapsed in July as the debt crisis came to a head. Factories faced a record drop in new orders and were often unable to acquire the inputs they needed, particularly from abroad, as bank closures and capital restrictions badly hampered normal business activity.


“Demand was hit amid the heightened uncertainty surrounding Greece’s future, leading both total new business and exports to contract sharply, and it remains to be seen how long it takes these to recover.”


“Although manufacturing represents only a small proportion of Greece’s total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole.”

Don’t expect a quick rebound: Greek economic sentiment likewise tumbled, however it could be worse: unlike the unprecedented collapse in the PMI, this was only at a 3 year low:

The Greek pain was largely confined just to one country as European equities (Euro Stoxx: +0.2%) were bolstered during the European morning as a consequence of the better than expected PMI’s , while also benefiting from stock specific news, with earnings today generally better than expected, with , with HSBC (+0.6%) trading higher after their earnings.

Fixed income markets have seen tight price action in Europe with volumes starting the week in light fashion, while the Greek spread is tighter against its German counterparts on their reopening. Of note, seasonally we are entering the most bullish month of the year for bonds. Treasury Futures have been up 14 of the last 15 Augusts, and have averaged a 1.14% gain over the last 20 years . Interestingly, the curve continues to flatten, as 12-month yields hits a six-year high and 30-year yields touched a two-month low last week.

In FX, the week has kicked off with Manufacturing PM’s from around Europe and the UK, with the data generally better than expected (Eurozone Manufacturing PMI 52.4 vs. Exp. 52.2, UK Manufacturing PMI 51.9 vs. Exp. 51.5). However price action has been fairly muted, with both EUR and GBP down under 10 pips throughout the majority of the session against the USD, which trades flat on the day (USD-Index 0.0%).

Elsewhere the aforementioned lower than expected Chinese PMIs has weighed on AUD/USD to see the pair trade below the 0.7300 handle, while USD/CAD broke above the 1.3100 level to trade at its highest level in 10yrs amid CAD weakness after the commodity currency fell in sympathy with AUD and as a consequence of the ongoing commodity weakness.

Commodities have continued their recent decline this week with both the metals and energy markets experiencing weakness so far. As such, Brent Sep15 futures reside in close proximity to the USD 51.00 handle having earlier touched USD 50.85 , its lowest level since January, while gold remains firmly below the USD 1,100/oz handle amid fears of a China slow down and concerns around a Fed rate hike.

Overall, the story from last week remains the same: crashing commodity demand, sliding Chinese stocks, Europe treading water and ignoring what may still be Greek contagion for the broader economy, with the biggest wildcard now Friday’s US nonfarm payrolls report, which will either be a superstart and send 10Y yield soaring yet again, or confirm the record low ECI print last week and steamroll over the latest batch of Treasury shorts.

In summary: European stocks rise for fifth day while U.S. equity index futures decline with oil, gold. Asian stocks decline. Greek stocks on ASE Index paring losses after 23% drop in early trading; for list of halted Greek stocks, click here. European bourses outperforming include Netherlands, Spain, Germany. Yields on most euro-zone 10-yr notes fall; Italian yields rise. U.S. Markit U.S. manufacturing PMI, ISM manufacturing, construction spending, vehicle sales, personal income, personal spending due later.

Market Wrap

  • S&P 500 futures down 0.1% to 2096.5
  • Stoxx 600 up 0.4% to 398.1
  • US 10Yr yield up 3bps to 2.21%
  • German 10Yr yield up 3bps to 0.67%
  • MSCI Asia Pacific down 0.8% to 141
  • Gold spot down 0.2% to $1093.9/oz
  • 15 out of 19 Stoxx 600 sectors rise; food, telecomms outperform; basic resources, autos underperform
    Eurostoxx 50 +0.3%, FTSE 100 -0.2%, CAC 40 +0.1%, DAX +0.3%, IBEX +0.4%, FTSEMIB +0.2%, SMI +0.4%
  • Asian stocks fall with the CSI 300 outperforming and the Shenzhen Composite underperforming; MSCI Asia Pacific down 0.8% to 141
  • Nikkei 225 down 0.2%, Hang Seng down 0.9%, Kospi down 1.1%, Shanghai Composite down 1.1%, ASX down 0.3%, Sensex up 0.4%
  • German Carmakers to Buy Nokia’s HERE Maps for $3.1b
  • Euro down 0.16% to $1.0966
  • Dollar Index up 0.06% to 97.4
  • Italian 10Yr yield down 1bps to 1.77%
  • Spanish 10Yr yield up 9bps to 1.94%
  • French 10Yr yield up 2bps to 0.96%
  • S&P GSCI Index down 1.4% to 373.1
  • Brent Futures down 2.2% to $51.1/bbl, WTI Futures down 1.7% to $46.3/bbl
  • LME 3m Copper down 1.4% to $5158/MT
  • LME 3m Nickel down 2.9% to $10725/MT
  • Wheat futures down 0.9% to 494.8 USd/bu

Bulletin headline Summary from Bloomberg and RanSquawk:

  • European equities were bolstered during the European morning as a consequence of the better than expected Manufacturing PMIs
  • Today saw the Athens Stock Exchange open for the first time and immediately fell to around 20% in line with expectations
  • Today sees US Personal Income, Real Personal Spending, Construction Spending and ISM Manufacturing as well as comments expected from Fed’s Powell
  • Treasuries ease before reports on personal income and spending; rose Friday after 2Q ECI increased at slowest pace on record, curbing expectations Fed will begin raising rates in September.
  • Caixin/Markit’s China PMI came in at 47.8, less than forecast; followed a reading of 50 for the official Purchasing Managers’ Index on Saturday, compared with analysts’ projections for 50.1
  • The Shanghai Stock Exchange said on its microblog Monday that two trading accounts got verbal warnings for a “large amount of sell orders affecting security prices or volume”
  • The bourse said the trading was “abnormal,” but didn’t give any details on the two accounts or indicate whether any laws were broken
  • Greek stocks fell by as much as 23% as the market reopened after five weeks to the most savage wave of selling in decades, underlining a crisis that’s crippled the economy and pushed the country’s euro membership to the brink
  • Obama will today finalize measures that force states and utilities to use less coal and more wind power, solar and natural gas; the plan is estimated to cost $8.4b and is among the most complex in agency history
  • There’s been no respite in the commodity rout that’s seen prices tumble to a 13-year low — and that’s sending the currencies of nations that rely on exporting resources toward their worst year since the financial crisis
  • Sovereign 10Y bond yields mostly higher. Asian stocks fall, European stocks gain, U.S. equity- index futures retreat. Crude oil, copper and gold lower


DB’s Jim Reid completes the overnight event wrap

With liquidity structurally lower in this cycle anyway, we could do without any big surprises. The main hurdle on this front this week could be US payrolls on Friday where we all have to make a judgement as to whether the report shows “SOME” improvement in the labour market. We still think its a big gamble to raise rates with the global data as it is and commodities and China/EM in a state of flux. Having said this if we get two decent payroll reports in the next 5 weeks then the trigger could very easily be pulled. As you’ll see in the week ahead there’s a lot of other data out this week but it will all reach a crescendo on Friday.

The heavy data week has started with the final reading of China’s Caixin manufacturing index falling short of the flash reading. The final read came in at 47.8 versus the flash of 48.2 and market expectations of 48.3. Accordingly to Bloomberg this marks the fifth consecutive month of contraction and puts the reading at its lowest since July 2013. This clearly does little to reverse what seems to be a broadening worry of Chinese economic slowdown which is also having a considerable impact on growth commodities. As we show in our July recap below it certainly has been a woeful month for these proxies.

As for markets, Asian investors are reacting negatively to the bad China print. In China, the Shanghai and Shenzhen bourses are down 2.4% and 2.9% respectively as we go to print (let’s see where they end the day!). Away from China, equity benchmarks in HK (-1.0%), Korea (-1.1%) and Japan (-0.4%) are also down as we write. Credit spreads are little changed in Asia while Oil markets are touch softer overnight. US Treasuries are about 2-3bp higher to 2.20% in 10yr yields to retrace some of the 8bp rally we saw on Friday.

The bond rally on Friday was helped by the data as the latest wage numbers in the US were soft. The US employment cost index in Q2 rose +0.2% qoq, its smallest increase since data started in 1982 and also fell short of +0.6% qoq expected by the market. Our economists noted that this brings annual labour cost inflation back to 2.0% yoy – which was where it stood a year ago.

Data aside it was also a rather soft finish for US equities on Friday. The S&P 500 fell -0.23% not helped by some weaker energy sector earnings. A Baker Hughes report which noted that the number of US oil rigs count rose for its second consecutive week also did not help. Brent and WTI closed -2.0% and -1.4% lower, respectively. Brent and WTI were some of the worst performers in July (more below) and this capped a bad month. The downturn in commodity prices seems to be also affecting appetite for capex. Per the FT, S&P now expects that global capex will fall more than 10% this year and decline further in 2016 largely driven by belt tightening measures by commodity related sectors.

A quick recap of the current earnings season now. Over 330 US companies have reported so far and the trend is more or less similar to what we’ve been observing in the past. 74% of them have beaten EPS estimates but only 50% have beaten revenue forecasts. The trend is more balanced in Europe with about 63% and 65% of those that have reported so far beating EPS and revenue consensus, respectively.

Staying with Europe, today marks the reopening of the Athens stock exchange after a five week suspension while bailout talks continue. Local traders will be able to buy stocks, bonds, derivatives, and warrants under certain conditions. International investors won’t be restricted as long as they were active in the markets before markets were closed in June (Bloomberg). So it will be interesting to watch today.



Overnight, this very reliable indicator is signalling a total global collapse:



Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week

One of the few silver linings surrounding the hard-landing Chinese economy in recent weeks has been the surprising resilience and strength of the Baltic Dry Index: even as Chinese commodity demand has cratered in 2015, this “index” has more than doubled in the past few months from all time lows, and at last check was hovering just over 1,100.


Many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible.

We may have the answer.

It appears that the recent spike in shipping rates was analogous to the dead cat bounce in crude oil prices: a speculator-driven anticipation for a sustainable rebound that never took place. And now, just like with crude prices, it is all crashing down…. again.

According to Reuters, shipping freight rates for transporting containers from ports in Asia to Northern Europe dropped 22.8 per cent to $400 per 20-foot container (TEU) in the week ended last Friday, data from the Shanghai Containerized Freight Index showed.

Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand for transported goods. Rates generally deemed profitable for shipping companies on the route are at about US$800-US$1,000 per TEU. In other words, at current prices shippers are losing half a dollar on every booked contractual dollar at current rates.

According to Shanghai data, it was the third consecutive week of falling freight rates on the world’s busiest route.Container freight rates have so far increased in 5 weeks this year but fallen in 23 weeks.

In the week to Friday, container freight rates fell 24 percent from Asia to ports in the Mediterranean, fell 4.4 per cent to ports on the US West Coast and were down 3.7 per cent to ports on the US East Coast.

Maersk Line, the global market leader with more than 600 vessels and part of Danish oil and shipping group AP Moller-Maersk, was one of the few container shipping companies to make a profit last year. The company controls around one fifth of all transported containers from Asia to Europe.

Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes, which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession.

Unless, of course, central planners learn how to print trade and quite soon at that…

Citadel is the trading arm of the Fed:  They have just been barred from trading in China:
(courtesy zero hedge)

Citadel Barred From Trading In China After Regulator Accuses “Automated Trading” Unit Of Manipulation

Define irony: for the past 7 years, Wall Street’s worst kept secret is that Citadel, the world’s most levered hedge fund, has been the NY Fed’s just slightly more than arms-length enforcer of market stability, by which we mean spoofer, buyer and otherwise “plunge protector” in the equity and E-mini futures markets. The secret got even less “secret” when of all the possible hedge funds blogger Ben Bernanke could have gone to, he picked the Chicago HFT powerhouse, confirming the cozy and tight relationship between the Federal Reserve and the firm which has been increasingly linked to market manipulation not only in equities but bonds and virtually all other asset classes.

Which is why Citadel must have been shocked to learn late last week that China had suspended trading at a brokerage account used by Citadel in China.

When the news first broke last Friday, we asked, somewhat rhetorically, the following question:

Today, the WSJ had more detail on the surprising snafu involving the Fed’s favorite market intervention vehicle, confirming that Citadel said trading in one of its China accounts has been suspended, as Chinese regulators battle a steep slide in stock prices.

The reason: China’s securities regulator said Friday it has launched a probe into automated trading and has restricted 24 stock accounts suspected of influencing stock prices. The government didn’t name any of the companies behind the restricted stock accounts. Citadel said Sunday that one of its accounts was among them.

Of course, China’s crackdown on foreign trading is not news, and had been reported about a week ago: in its endless list of scapegoatees, China had decided that blaming “evil”, if faceless, foreign sellers would be just as effective to boost confidence in a rigged market as accusing “malicious” sellers. That remains to be seen, but what is surprising is that while Citadel is best known for propping the US market higher, China is suggesting that the same NY Fed Plunge Protection Team extension was implicated in the recent downward move, using “automated trading” or otherwise. Surely, China’s regulator would not utter a peep if like in the US, Citadel had been used to support stock prices.

In comments on its website, the China Securities Regulatory Commission said it is investigating more than 50 instances of suspected securities violations and broken promises not to sell down share holdings as the country’s stock markets plunged in June and July. It wasn’t immediately clear why Citadel’s account had been targeted.

WSJ quotes a Citadel spokesman who notes that “We can confirm that while one account managed by Guosen Futures Ltd.—Citadel (Shanghai) Trading Ltd.—has had its trading on the Shenzhen Exchange suspended, we continue to otherwise operate normally from our offices, and we continue to comply with all local laws and regulations.”

What a difference a year makes: recall that in May 2014, Citadel became only the first international hedge fund to complete yuan fundraising from Chinese wealthy individuals and companies through a local unit.

Citadel (Shanghai) Foreign Investment won regulatory approval for currency exchange on March 26, marking the first qualified domestic limited partner, or QDLP, to have successfully completed fundraising in China, according to a statement from the Shanghai government’s information office.

The irony:

China’s leaders have pledged to promote freer movement of capital in and out of the country and make the exchange rate more market-based for investment purposes. Shanghai started the QDLP program last year to allow international hedge funds to raise capital in the local currency in China for overseas investments, aiding the government’s experiment with capital account convertibility and advancing its plan to build Shanghai into a financial center.

Why irony? Because a little over a year later, we find out that China is only interested in “promoting freer movement of capital” as long as it involved its stock market going higher, and the capital flowing into China, not out of it at a record pace as we commented previously.

But still the question remains – how did Citadel attract attention to itself. The answer: “The firm has recently expanded its quantitative hedge funds there, and its securities trading business traded options this year in a trial program on the China Financial Futures Exchange.”

Chinese media reported over the weekend that one of the restricted accounts was co-owned by Citadel and major Chinese brokerage firm Citic Securities. Citic Securities said Sunday it invested in the account in 2010, but it sold off its stake in November 2014 and no longer owns stock in the account, according to China’s official Xinhua News Agency. Citic Securities didn’t immediately reply to a request for comment.

And while a Citadel spokesman didn’t respond to a request for comment on which side of the firm’s business was affected by the suspension, it appears that Citadel’s infatuation with market rigging via algos and “automated trading” is what set China off. Or rather the “selling” via automated trading.

Moments ago Bloomberg confirmed as much when it reported that an official Chinese regulator urges further algorithm trading regulation, adding that China should be prudent on developing algorithm trading, Shanghai Securities News cites an unidentified official with China Securities Regulatory Commission as saying.

Market stability were “seriously damaged” by algorithm trading combined with some abnormal trading activities, the official was cited as saying. Algorithm trading may lead to systematic risks and result would be catastrophic when algorithm trading was used to manipulate market, the official was cited as saying.

Why are none of these risks ever brought up vis-a-vis Citadel’s market manipulation in the US? The answer is glaringly simple: because in the US, unlike China, Citadel always manipulates the market higher.

Which leads to an even more interesting, follow up question: if Citadel’s HFT algos were indeed caught red-handed selling in China, then someone in the US must have given the local Citadel brokerage the green light to spoof Chinese stocks lower. And since by definition Citadel does not do anything market-moving without the Fed’s preapproval, one wonders if China’s paranoia that foreigners are eager to crush its market is not at least partially grounded in reality?

Greek stocks collapse on first day of trading.  Data coming out of Greece is basically horrific:
(courtesy zero hedge)

Greek Stocks, Economy Collapse, Suffer Worst Declines In History

The Athens Stock Exchange reopened on Monday and unsurprisingly, some folks were selling.

Trading was suspended five weeks ago after PM Alexis Tsipras’ dramatic midnight referendum call precipitated capital controls and a lengthy bank “holiday.” Shares opened lower by nearly 23% and the country’s banks traded limit-down, which makes sense because they are, after all, largely insolvent. Here’s NY Times:

The Athens Stock Exchange plunged 22.8 percent when it reopened on Monday after a five-week shutdown imposed by Greek authorities as part of efforts to prevent a financial collapse.


Bank stocks, which are particularly vulnerable as Greek lenders are set for new recapitalization in the coming months, took a battering, falling by as much as 30 percent.


Although foreign investors face no restrictions in the Athens exchange, local traders can only use existing cash holdings to buy shares; they are prohibited from tapping local bank deposits to buy shares as the authorities seek to prevent capital flight.

Asked about the harrowing decline, European Commission spokeswoman Mina Andreeva had no comment but did say that Brussels has “taken note” of the reopening. Amusingly, she also said the decision was made by “competent” Greek officials. A ban on short-selling was due to expire on Monday but will be extended, an unnamed official told Reuters.

Meanwhile, monthly PMI data from Markit confirmed that the Greek economy suffered an outright collapse in July. Last month marked the 11th consecutive month of contraction, but it was the depth of the downturn that was truly shocking as the index plummeted to 30.2 from 46.9 in June. It was the lowest print on record. New orders plunged to 17.9 from 43.2. 

“July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials,” Markit said. Here’s more from the report:

Record contractions were registered for almost all variables monitored by the survey, including output, new orders, employment and stocks. 


The drop in output in July was led by the capital goods sector, while there were also sharp contractions in the production of intermediate and consumer goods. The latest decrease in output was the seventh in successive months.


July’s sharp decrease in the level of new business at manufacturers surpassed the previous record set in February 2012. Panel members commented on the impact of capital controls on demand, and also cited a generally uncertain operating environment which further weighed on sales. A sharp and accelerated decrease in new export orders (also a series record) added to the overall reduction in new work. 


Manufacturers’ buying levels decreased to the greatest extent in the survey’s history in July.Panel member reports indicated that companies commonly faced difficulties sourcing inputs due to capital restrictions and the limited availability of some items. Accordingly, stocks of purchases contracted sharply on the month, as did postproduction inventories. 


The troubles goods producers had in obtaining inputs was further highlighted by a marked increase in average supplier delivery times. The degree of deterioration in vendor performance was by far the most pronounced in the series history. Panellists mentioned in particular the difficulty in receiving items from abroad. 


July’s survey signalled the steepest drop in factory employment ever recorded during the 16-plus years of data collection. 

Note that the commentary here underscores what we’ve been warning about since the imposition of capital controls; namely that an acute credit crunch would eventually lead to a shortage of imported goods.

The data is also emblematic of the sheer desperation that’s taken hold. “Although manufacturing represents only a small proportion of Greece’s total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole,”Markit’s Phil Smith said.

Yes it most certainly does, and indeed, as we noted last week, there may be no modern economy left in Greece by the time this is all over as many Greeks have alreadyreverted to the barter system in an effort to grease the wheels of commerce and skirt the frozen banking system.

So in sum, a complete and total disaster on all fronts to start the week. And because this is Greece we’re talking about, we’ll give the last word here to Socrates:

Via Bloomberg and ForexLive:

Share price falls seen after open are logical given 5-week close Athens Stock Exchange CEO Socrates Lazaridis says in Bloomberg TV interview with Hans Nichols.


ASE doesn’t expect at this point in time any companies to express wish to move listing from Greek exchange.


Expects some shares to bounce tomorrow.


It sure looks like Greece will need another bridge loan as there is not enough time to secure a deal.  Also remember that the IMF will not partake in the deal unless there is a debt haircut, and the Bundestag will not OK a deal unless the IMF is in on the deal
(courtesy zero hedge)

Greece May Miss ECB Payment As Germany Says Bailout Timeline Is Unrealistic

Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete.

Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.

Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that “were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum.”

Lafazanis refused to go along with the idea. “How many referenda are we going to hold? We’ve already done one and we won with 62 per cent of the vote”, he said. Ultimately, the party approved a September congress. This gives Tsipras some “breathing space,” FT notes, “but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a ‘Grexit’ from the euro, would continue to oppose a fresh bailout.”

And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday,FT reported that according to “strictly confidential” minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece “has the institutional and political capacity to implement economic reforms.”

Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it’s either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government. The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks.

Now, according to Focus magazine, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says. Here’s more (Google translated):

The timetable for the negotiations on a third aid package in favor of Greece is to look for an internal assessment of the federal government any more. According to the already contemplated for mid-August special session of the German Bundestag must be moved, according to government sources in Berlin.


The objective pursued by the EU Commission scheduling is too closely knit, criticize experts.This was reported in its latest issue of FOCUS.


Accordingly, the negotiations should be completed before August 10.On August 11, the euro zone finance ministers would approve the results before the agreement of other euro countries ratified and approved by the Parliament in Athens.Also, the Bundestag must still approve.


Due to delay Greece threatens a serious cash problem.The government in Athens must, at the latest on August 20, 3.2 billion euros, the European Central Bank to transfer (ECB), which should be possible without new loans from the third aid package barely.


Therefore already searched in circles of the EU Commission for ways to temporarily raise money from another pot. Speaking here a renewed bailout from the European Financial Stabilisation Mechanism is (EFSM)


This is difficult, however, because the EU states will again require an indemnity outside the euro-zone in this case. As early as September Greece must further loans operate: The International Monetary Fund (IMF) then expected repayments totaling € 1.56 billion in four tranches.In addition, running on 4 September from short-term government bonds in the amount of 1.4 billion euros, which Greece must also refinance.

And here’s the summary from Bloomberg:

German parliament meeting that was considered for mid-August might have to be postponed as European Commission’s schedule for aid talks is “much too tight,”Focus magazine reports, citing unidentified people in German govt.


Greece has to pay EU3.2b to the ECB by Aug. 20, which it may not be able to do without third aid package.

In other words, Greece will likely need yet another bridge loan from the EFSM and that will once again require the approval of non-euro countries that will, for the second time in a month, be asked to put their taxpayers at risk in order to keep the ill-fated EMU project alive and preserve the now thoroughly discredited notion that the currency union is “indissoluble.” 

And make no mistake, Greece and its EMU “partners” had better hope things go smoothly after August because one more bridge loan and the EFSM is tapped out, which means Brussels will have to devise some other circular funding mechanism in the event the third program (which is itself nothing more than a dressed up ponzi scheme) isn’t in place by September.

Or, summarized in one picture:

The fall guy has been found guilty of manipulating Libor:
(courtesy zero hedge)

LIBOR Scapegoat Found Guilty By London Jury

Tom Hayes, the former UBS trader standing trial for his role in manipulating LIBOR, was found guilty on eight counts in a London court. The jury, which deliberated for a week, was unanimous in its decision. To wit, from Bloomberg:

Former UBS Group AG and Citigroup Inc. trader Tom Hayes, the first person to stand trial for manipulating Libor, was found guilty of eight counts of conspiracy to rig the benchmark rate.


After a week of deliberations, jurors unanimously found that the 35-year-old conspired with traders at brokers to dishonestly game the London interbank offered rate to benefit his own trading positions.

As Bloomberg notes, Hayes is the first person to stand trial for rigging the benchmark and had contended that he only pleaded guilty in the first place because he had an intense fear of having to serve a lengthy prison sentence in the US.

Hayes was also quick to remind the court that the practice of gaming the submissions to benefit trading books was so ubiquitous as to be enshrined in an official LIBOR rigging guide called “Guide to Publishing Libor Rates” that was distributed to UBS employees. It was also revealed during the trial that Hayes has been diagnosed with Asperger’s syndrome, which means he tends to “only see the world in black and white” – apparently that was supposed to be seen as a mitigating factor.

In the end, it appears that the public needed a head (not literally we hope), and because prosecuting senior executives for such things is absolutely out of the question even when, as we saw last week with Anshu Jain, they were not only supportive of the practice but in fact physically moved desks around to facilitate it, Hayes will be the fall guy.

Or, as we put it in June: “Will Hayes’ quest to diffuse responsibility and bring down more senior executives with him succeed? Hardly.”

We’ll give Tom the last word here and although we’re not entirely sure what this quote means, we’re sure there’s a lesson in it somewhere:

“I’ve always wanted to do my job as perfectly as I could, whether I was cleaning a deep fat fryer or deboning a chicken. They always gave me those jobs because they knew there would be no chicken left on the bone and no fat left in the fryer.”



This is interesting!!
(courtesy zero hedge)

S&P Dares To Go There: Downgrades European Union To Negative Outlook

Just a few short years after they dared to downgrade the US, S&P has unleashed their worst on Europe:


We are sure this will be met by S&P office raids throughout Europe, litigation over somethhing or other, and denials broadly from any and every unelected member of EU’s elite… because “when it’s serious you have to lie.”

As Bloomberg reports,

Outlook revision reflects S&P’s expectation that the EU will provide first-loss guarantee support for financing connected to the Juncker Plan and further downward pressure on the average weighted rating on net budgetary contributors to the EU.


S&P also cites the EU’s repeated use of its balance sheet to provide higher-risk financing to EU member states (most recently including Greece), without the member states’ paying in capital


S&P sees greater than one-in-three likelihood of a rating change on the EU during the next two years EU’s AA+ rating affirmed.

*  *  *


And this also does not look good:

(courtesy zero hedge)

“It May Come To A Military Coup”: Ukraine’s “Nazis” Threaten To Overthrow Government

“It may come to a military coup.”

That rather ominous assessment of the political situation in Ukraine comes courtesy of a Right Sector fighter who spoke to FT last week.

Like Saint Mary (the militia which recently pledged to create a “Christian Taliban” and insists that “Moscow must burn”), The Right Sector is one of the many volunteer battalions fighting to rout the Russian-backed separatists operating in eastern Ukraine.

As discussed here on Sunday by Justin Raimondo, “the Right Sector and allied far-rightist militias are the core of [Kiev’s] military operation against the east. Right Sector provided the muscle of the Maidan revolution, standing in the front lines against the widely feared Berkut special forces loyal to Yanukovych. If these thugs must be reined in, then the success of the ‘anti-terrorist’ campaign is doubtful: yet Kiev is increasingly unwilling to pay the high price of appeasing their increasingly troublesome Praetorians.”

To let FT tell it, these “troublesome Praetorians” may be set to overthrow the government in what Right Sector leader Dmytro Yarosh calls a “new phase of the Ukrainian revolution.”

The problem, as the battalion leaders see it, is that the revolution simply didn’t usher in much change, and that’s primary due to the fact that all of the “patriots” got sidetracked by defending the country from a Kremlin-assisted uprising. “The (Maidan) revolution was interrupted by the aggression (in the east) and the patriots left Maidan and went to the east to protect Ukraine. Only 10 percent of people in positions of power are new; the rest are all the same, pursuing the same schemes they always did,” Serhiy Melnychuk, an MP and volunteer battalion founder recently told Reuters.

But in some ways, Melnychuk exemplifies why the volunteer militias and their agenda are so dangerous. “The Aidar Battalion has been accused by Amnesty International of committing war crimes [and its leader] member of parliament Serhiy Melnychuk has been stripped of immunity from prosecution and charged with kidnapping, issuing threats, and operating a criminal gang,” Raimondo notes.

Among the volunteer contingents, Right Sector stands out and indeed, its fighters are revered by some soldiers in the regular Ukrainian army. Here’s FT:

The troops are members of Right Sector, the far-right group that evolved from among the most militant wing of the protesters who toppled Viktor Yanukovich, the country’s pro-Russian president, in its pro-democracy revolution last year.


But fears are growing that Right Sector — the only major volunteer battalion Kiev has not yet managed to bring under regular army control — could turn its fire on the new government itself.


Dmytro Yarosh, Right Sector’s leader, called late last month for a nationwide no-confidence referendum in President Petro Poroshenko. He was addressing a rally in Kiev of up to 5,000 Right Sector activists, angry over what they say is the government’s slow progress in fighting corruption and excessive concessions to Moscow as it attempts to reach a settlement over eastern Ukraine.



And earlier last month, two people were left dead in a shootout between off-duty Right Sector fighters and police near Ukraine’s previously peaceful western border — 1,500km away from the eastern conflict. The group claimed it was acting to destroy an illicit cross-border cigarette trade. Some observers have suggested Right Sector was actually trying to take it over.


Russian officials and media have long demonised Right Sector as neo-Nazis who, they claim, were the real driving force behind Ukraine’s revolution. Moscow media’s obsession led some Ukrainian officials to suggest privately that Right Sector might have been penetrated by Russian intelligence as a subversive “project” aimed at undermining the government.


Popular support for the group remains low, although a poll found it had risen from 1.8 per cent last October to 5.4 per cent by July.


Yet as Mr Umland notes, the bravery shown in the east Ukraine conflict by the Right Sector battalion has earned it the esteem of many regular soldiers — posing a dilemma for Kiev.

While it’s as yet unclear whether the referendum call will garner enough support to further embolden Right Sector as it ponders a military coup, it’s certainly worth noting that Ukraine appears to be headed for a similar fate as that which has befallen many a state in the wake of US-supported “deomcratic revolutions.” In short, it almost never ends well and on that note, we’ll close with the following quote from a Right Sector “instructor” who spoke to FT:

“Having lived in [western] Europe, I realise that they often confuse Nazism with nationalism, which for us Ukrainians is more akin to patriotism. It’s not about considering your own ethnic group as superior, but being proud of it, and of defending your country.”

Oil related stories;
first WTI crashes into the 45 dollar handle:

WTI Crude Crashes To $45 Handle – Lowest Since March

Spending and Income data appears to have been the trigger sending WTI and Brent crude prices dramatically lower. WTI has now broken to a $45 handle, its lowest since mid-March..

WTI $45 handle…


Copper is also joining the party…


Charts: Bloomberg






And now Brent breaks below 50 dollars:


Brent Crude Tumbles Below $50 For First Time Since Jan


Unequivocally good for someone, somewhere surely… Following WTI’s drop to a $45 handle, Brent just broke below $50 (to $49.80 lows) for the first time since January…



Charts: Bloomberg




And the layoffs keep coming


(courtesy Andy Tully/

Layoffs Surge As Oil Price Outlook Remains Sober

Submitted by Andy Tully via,

Lately the leaders of some of the world’s biggest energy companies have been saying oil prices will remain depressed for some time – perhaps for the next five years – and now they’ve decided to cut their costs in the most painful way possible: massive job cuts.

Royal Dutch Shell announced July 30 that it expects to eliminate 6,500 positions. The announcement came the same day it reported that earnings in the second quarter were $3.4 billion, 33 percent lower than the $5.1 billion it made during the same period of 2014.

The same day, the British utility Centrica said it plans to cut fully 6,000 jobs and reduce the size of its division for producing oil and gas. The day before, Chevron Corp. of the United States expected to eliminate 1,500 positions.

And as oil producers struggle to rein in spending elsewhere in their operations, the pain is being shared by the oil service companies they rely on. The Italian energy contractor Saipem, for example, says it plans to cut 8,800 jobs in two years.

“We have to be resilient in a world where oil prices remain low for some time,” Shell CEO Ben van Beurden said in the statement. “These are challenging times for the industry, and we are responding with urgency and determination.”

It may be too early to determine whether the price of oil, which began falling a year ago, was now forcing the energy industry to go beyond cutting fat and is now gouging into the very sinew of its operations, but it’s clear that they’re convinced that other economies simply weren’t enough to keep themselves afloat.

And all because of the steep decline in the price of oil. In June 2014, its average global price was more than $110 per barrel. Now it’s around $50 per barrel, despite a brief, small spike recently that brought it up to around $60 per barrel.

The price fall began because drillers in the United States had increased oil production, mostly from shale deposits, which are more expensive to exploit. Instead of reducing its own production to help boost prices, OPEC, under Saudi leadership, decided at its semiannual meeting in November to keep production at 30 million barrels a day in an effort to make shale drilling unprofitable.

To make matters worse, OPEC members are exceeding that cap by about 1 million barrels a day. And the future doesn’t look any brighter, as Iran is expected to return to the global oil market next year, thanks to an agreement with six world powers over limiting its nuclear program.

The job losses probably should come as no surprise. Two weeks ago, van Beurden said that “prices could stay low for longer” unless energy companies produce less. He wasn’t more specific, but Andy Brown, Shell’s director of oil and gas production outside America, said he expects only a gradual recovery over the next five years, not only because of the oil glut but also lower demand in China.

And Bob Dudley, the CEO of BP, also says he expects oil prices to stay “lower for longer.” His chief financial officer, Brian Gilvary, used the same words on July 28, the day their company reported the second-quarter loss of $6.27 billion. Much of that loss was due to the company’s spending to remedy the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, but clearly BP’s leadership doesn’t expect to make it up by selling oil at rock-bottom prices.


Your early Monday morning currency, and interest rate moves

Euro/USA 1.0946 down .0036

USA/JAPAN YEN 124.26 up .441

GBP/USA 1.5571 down .0044

USA/CAN 1.3162 up .0075

Early this Monday morning in Europe, the Euro fell by 36 basis points, trading now well below the 1.10 level at 1.0946; 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 down again in Japan by 44 basis points and trading well above the 124 level to 124.26 yen to the dollar.

The pound was down this morning by 44 basis points as it now trades just below the 1.56 level at 1.5571, 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 continues to host the toilet as it fell again by 75 basis points at 1.3163 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 Thursday morning: down by 37.13 or 0.18%

Trading from Europe and Asia:
1. Europe stocks mostly in the green (except London) 

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

Gold very early morning trading: $1090.70


Early Monday morning USA 10 year bond yield: 2.19% !!!  up 1 in basis points from Friday night and it is trading below   resistance at 2.27-2.32%

USA dollar index early Thursday morning: 97.56 up 32 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: 2.40% up 1 in basis points from Friday

Closing Japanese 10 year bond yield: .42% !! par in basis points from Friday

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

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

Your Monday closing Italian 10 year bond yield: 1.77% par in basis points from Friday: 

trading 17 basis point lower than Spain.



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

Euro/USA: 1.0948  down .0035   (Euro down 35 basis points) 

USA/Japan: 123.94  up .122  (Yen down 12 basis points)

Great Britain/USA: 1.5583  down .0032 (Pound down 32 basis points

USA/Canada: 1.3155 up .0069  (Canadian dollar down 69 basis points)

Your closing 10 yr USA bond yield: 2.146% down 4 in basis point from Friday// (at the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

97.50 up 25 cents on the day


European and Dow Jones stock index closes:

England FTSE down 7.66 points or 0.11%

Paris CAC up 37.91 points or 0.75%

German Dax up 134.73 points or 1.19%

Spain’s Ibex up 85.20 points or 0.76%

Italian FTSE-MIB up 176.35 or 0.75%

The Dow down 91.66  or 0.52%

Nasdaq; down 12.90 or 0.25%

OIL: WTI 45.31 !!!!!!!



Closing USA/Russian rouble cross: 63.47 down 2  roubles per dollar on the day



And now for your more important USA stories.


Your closing numbers from New York

Despite VIX Flash-Crash, Stocks Slammed As Crude Crashes To 5-Month Lows

“We got this…” Right up until around 55 seconds in the following clip…

China was ugly…


And Greece crashed 30% at the open…


An early bounce and the ubiquitous pre-EU close ramp both failed to hold stocks which had an ugly day… notice the dump after Europ closed and the ramp after 330ET… as VIX was smashed


Energy stocks led the downturn…


As WTI led stocks broadly…


Carnage in AAPL and TWTR…


as stocks catch down to bond yields…


VIX flash crashed in a desprate bid to get S&P back to VWAP… right as PR defaulted


AND sure enough S&P Futs tagged VWAP and turned around…


It appears hope is fading that Macro will help us…


Treasury yields leaked higher overnight but plunged after weak data…


The US Dollar pushed generally higher today with a retracement into the EU close that then recovered to the days highs…


Commodities continueed to get clobbered…


But crude was utterly carnaged today…


Charts: Bloomberg

Bonus Chart: Main Street Lost!!




Personal spending in the uSA is flat-lining:

(courtesy zero hedge)

Real Personal Spending Growth Weakest Since Feb, Savings Rate Rises

The good news, personal income rose a better than expected 0.4% MoM (flat to the previous month’s revised lower growth). The ‘meh’ news, personal spending rose just 0.2% – meeting expectations – but slowing its growth dramatically from the 0.7% revised May data. And the bad news, real personal spending was unchanged in June, its weakest growth (or lack of it) since February.



This means the savings rate rose from 4.6% in May to 4.8% in June – its second lowest in 2015 (but increasing just as The Fed hopes for excape velocity consumption confirmed by their rate hikes in a circular logic fallacy).


Charts: Bloomberg

ISM manufacturing stumbles again:
(courtesy ISM/zero hedge)

ISM Manufacturing Slumps To 3-Month Lows Led By Plunge In Employment

It appears ISM Manufacturing data has been ‘leaked’ early and is reportedly printing 52.7 in July, down from 53.5 prior and missing expectations. This is the weakest print since March as the Q2 bounce is now officially dead. Both imports (lowest since Jan 2013) and new export orders (lowest in 3 years) declined as employment tumbled. In fact every subcomponent fell aside from new orders, production, and supplier deliveries with order backlogs at their lowest since Nov 2012.

The bounce is dead…


with broad-based weakness….

What the respondents were saying:

  • “AI [Avian Influenza] fears in poultry industry [are] killing exports.” (Food, Beverage & Tobacco Products)
  • “The market is in the summer slow-down.” (Fabricated Metal Products)
  • “Oil price decline continues to negatively impact Oil & Gas industry in North America as many projects are not economically viable. Oil & Gas jobs outlook is in retrenchment. Petrochemical (refining and chemical manufacturing) is positive from a margin perspective, but focus is steady on safe cost containment.” (Petroleum & Coal Products)
  • “Falling oil prices are once again driving chemical raw materials prices lower and creating an expectation of even lower prices in the coming months.” (Chemical Products)
  • “The month of July was really slow, slower than the previous month. We are optimistic for the remainder of the year.” (Computer & Electronic Products)
  • “Global orders still holding up in the wake of international uncertainties.” (Fabricated Metal Products)
  • “Business conditions are stable, little change from last month.” (Miscellaneous Manufacturing)
  • “There’s an abundance of containerboard in the global markets.” (Paper Products)
  • “Inbound logistics are almost back to normal.” (Machinery)
  • “Business continues to be strong.” (Furniture and Related Products)

And while one can doubt in the current rout there are any commodities in short supply, according to the ISM for the second consecutive month there was an egg shortage across the US.

and now construction spending growth slumps:
(courtesy zero hedge)

Construction Spending Growth Slumps To 2015 Lows

A dramatic upward revision from 0.8% MoM to 1.8% MoM (after March’s biggest jump since 1998), may be a small silver lining in the rear view mirror as construction spending growth tumbled to just 0.1% in May – the weakest since Nov 2014. It seems the climactic malinvestment boom in the last 3 months is faltering fast and is entirely unsustainable.



Charts: Bloomberg

Another big USA coal producer will file for bankruptcy protection:
(courtesy zero hedge)

Another One Bites The Coal Dust – Alpha Natural Files For Bankruptcy

Amid the collapse in coal prices, not helped by the ‘China situation’ and President Obama’s nudge, WSJ reports that the ailing US coal just got another black eye as Alpha Natural Resources is expected to file for chapter 11 bankruptcy protection early Monday to cut its more than $3 billion debt load. After four straight annual losses, Alpha – one of America’s largest coal producers – has secured $692mm in DIP financing as it prepares its restructuring plan expected to sell some of the best mines and shutter others. It appears the Arch Coal’s CEO’s ominous words last week were prophetic – “Coal markets are as difficult as I’ve seen them during my 30 years in the industry.”

From bad to worse…

On top of Australia’s mining industry collapse…Now, the US industry’s plunge is gathering pace, as The Wall Street Journal reports,

Alpha Natural Resources Inc. is expected to file for chapter 11 bankruptcy protection early Monday to cut its more than $3 billion debt load, according to people familiar with the matter, as a severe slump in coal prices continues to wreak havoc on the industry.


The Bristol, Va., company, one of the largest U.S. coal producers, hasn’t completed the terms of a restructuring plan but will likely sell some of its best mines or turn them over to creditors and close others during its trip through bankruptcy court, the people said.


Alpha has secured as much as $600 million in bankruptcy financing from senior lenders and secured bondholders to fund its operations during its chapter 11 case, some of the people said.


A steep drop in coal prices has Alpha and its rivals bleeding cash and choking on debt taken on to finance acquisitions around the start of the decade, when the industry’s outlook was rosier. In 2011, Alpha paid $7.1 billion for rival mining company Massey Energy Inc., a deal that extended Alpha’s lead as the largest miner of the type of coal used in steelmaking.


As the price of metallurgical coal has hit an 11-year low amid an economic slowdown in China, the world’s largest producer of steel. Thermal-coal prices have also plummeted as power plants switch to abundant and relatively clean-burning natural gas.


The slump has a number of coal companies at risk. Walter Energy Inc. filed for bankruptcy protection last month with a plan to hand control of the company to senior creditors, after chapter 11 filings by Patriot Coal Corp. and Xinergy Ltd. earlier this year. Arch Coal Inc., meanwhile, is working with bankers and lawyers who specialize in helping struggling companies, The Wall Street Journal has reported, and is facing lender pushback on a proposed debt-for-debt exchange meant to reduce its borrowings and interest costs.

*  *  *

But but but low commodity prices are unequivocally good for America right?




Another must read…we are heading for a massive deflationary shock as billions of bottled up assets disappear:


(courtesy David Stockman/)


“The Worldwide Credit Boom Is Over, Now Comes The Tidal Wave Of Global Deflation”

Submitted by David Stockman via Contra Corner blog,

If you want a cogent metaphor for the central bank enabled crack-up boom now underway on a global basis, look no further than today’s scheduled chapter 11 filling of met coal supplier Alpha Natural Resources (ANRZ). After becoming a public company in 2005, its market cap soared from practically nothing to $11 billion exactly four years ago. Now it’s back at the zero bound.

ANRZ Market Cap Chart

ANRZ Market Cap data by YCharts

Yes, bankruptcies happen, and this is most surely a case of horrendous mismanagement. But the mismanagement at issue is that of the world’s central bank cartel.

The latter have insured that there will be thousands of such filings in the years ahead because since the mid-1990s the central banks has engulfed the global economy in an unsustainable credit based spending boom, while utterly disabling and falsifying the financial system that is supposed to price assets honestly, allocate capital efficiently and keep risk and greed in check.

Accordingly, the ANRZ stock bubble depicted above does not merely show that the boys, girls and robo-traders in the casino got way too rambunctious chasing the “BRICs will grow to the sky” tommyrot fed to them by Goldman Sachs. What was actually happening is that the central banks were feeding the world economy with so much phony liquidity and dirt cheap capital that for a time the physical economy seemed to be doing a veritable jack-and-the-beanstalk number.

In fact, the central banks generated a double-pumped boom——first in the form of a credit-fueled consumption spree in the DM economies that energized the great export machine of China and its satellite suppliers; and then after the DM consumption boom crashed in 2008-2009 and threatened to bring the export-mercantilism of China’s red capitalism crashing down on Beijing’s rulers, the PBOC unleashed an even more fantastic investment and infrastructure boom in China and the rest of the EM.

During the interval between 1992 and 1994 the world’s monetary system—–which had grown increasingly unstable since the destruction of Bretton Woods in 1971——took a decided turn for the worst. This was fueled by the bailout of the Wall Street banks during the Mexican peso crisis; Mr. Deng’s ignition of export mercantilism in China and his discovery that communist party power could better by maintained from the end of the central bank’s printing presses, rather than Mao’s proverbial gun;  and Alan Greenspan’s 1994 panic when the bond vigilante’s dumped over-valued government bonds after the Fed finally let money market rates rise from the ridiculously low level where Greenspan had pegged them in the interest of re-electing George Bush Sr. in 1992.

From that inflection point onward, the global central banks were off to the races and what can only be described as a credit supernova exploded throughout the warp and woof of the world’s economy. To wit, there was about $40 trillion of debt outstanding in the worldwide economy during 1994, but this figure reached $85 trillion by the year 2000, and then erupted to $200 trillion by 2014. That is, in hardly two decades the world debt increased by 5X.

To be sure, in the interim a lot of phony GDP was created in the world economy. This came first in the credit-bloated housing and commercial real estate sectors of the DM economies through 2008; and then in the explosion of infrastructure and industrial asset investment in the EM world in the aftermath of the financial crisis and Great Recession. But even then, the growth of unsustainable debt fueled GDP was no match for the tsunami of debt itself.

At the 1994 inflection point, world GDP was about $25 trillion and its nominal value today is in the range of $70 trillion—-including the last gasp of credit fueled spending (fixed asset investment) that continues to deliver iron ore mines, container ships, earthmovers, utility power plants, deep sea drilling platforms and Chinese airports, highways and high rises which have negligible economic value. Still, even counting all the capital assets which were artificially delivered to the spending (GDP) accounts, and which will eventually be written-down or liquidated on balance sheets, GDP grew by only $45 trillion in the last two decades or by just 28% of the $160 trillion debt supernova.

Here is what sound money men have known for decades, if not centuries. Namely, that this kind of runaway credit growth feeds on itself by creating bloated, artificial demand for materials and industrial commodities that, in turn, generate shortages of capital assets like mines, ships, smelters, factories, ports and warehouses that require even more materials to construct. In a word, massive artificial credit sets the world digging, building, constructing, investing and gambling like there is no tomorrow.

In the case of Alpha Natural Resources, for example, the bloated demand for material took the form of met coal. And the price trend shown below is not at all surprising in light of what happened to steel capacity in China alone. At the 1994 inflection point met coal sold for about $35/ton, but at that point the Chinese steel industry amounted to only 100 million tons. By the time of the met coal peak in 2011, the Chinese industry was 11X larger and met coal prices had soared ten-fold to $340 per ton.

And here is where the self-feeding dynamic comes in. That is, how we get monumental waste and malinvestment from a credit boom. In a word, the initial explosion of demand for commodities generates capacity shortages and therefore soaring windfall profits on in-place capacity and resource reserves in the ground.

These false profits, in turn, lead speculators to believe that what are actually destructive and temporary economic rents represents permanent value streams that can be capitalized by equity owners.

But as shown below, eventually the credit bubble stops growing, materials demand flattens-out and begins to rollover, thereby causing windfall prices and profits to disappear. This happens slowly at first and then with a rush toward the drain.

ANRZ is thus rushing toward the drain because it got capitalized as if the insanely uneconomic met coal prices of 2011 would be permanent.

Needless to say, an honest equity market would never have mistaken the peak met coal price of $340/ton in early 2011 as indicative of the true economics of coking coal. After all, freshman engineering students know that the planet is blessed (cursed?) with virtually endless coal reserves including grades suitable for coking.

Yet in markets completely broken and falsified by central bank manipulation and repression, the fast money traders know nothing accept the short-run “price action” and chart points. In the case of ANZR, this led its peak free cash flow of $380 million in early 2011 to be valued at 29X.
ANRZ Free Cash Flow (TTM) Chart

ANRZ Free Cash Flow (TTM) data by YCharts

Self-evidently, a company that had averaged $50 to $75 million of free cash flow in the already booming met coal market of 2005-2008 was hardly worth $1 billion. The subsequent surge of free cash flow was nothing more than windfall rents on ANZR’s existing reserves, and, accordingly, merited no increase in its market capitalization or trading multiple at all.

In fact, even superficial knowledge of the met coal supply curve and production economics at the time would have established that even prices of $100 per ton would be hard  to sustain after the long-term capacity expansion than underway came to fruition.

This means that ANRZ’s sustainable free cash flow never exceeded about $80 million, and that at its peak 2011 capitalization of $11 billion it was being traded at 140X. In a word, that’s how falsified markets go completely haywire in a central bank driven credit boom.

As it happened, the full ANZR story is far worse. During the last 10 years it generated $3.2 billion in cash flow from operations——including the peak cycle profit windfalls embedded in its reported results.   Yet it spent $5 billion on CapEx and acquisitions during the same period, while spending nearly another $750 million that it didn’t have on stock buybacks and dividends.

Yes, it was the magic elixir of debt that made ends appear to meet in its financial statements. Needless to say, the climb of its debt from $635 million in 2005 to $3.3 billion presently was reported in plain sight and made no sense whatsoever for a company dependent upon the volatile margins and cash flows inherent in the global met coal trade.

So when we insist that markets are broken and the equities have been consigned to the gambling casinos, look no farther than today’s filing by Alpha Natural Resources.

Markets which were this wrong on a prominent name like ANRZ at the center of the global credit boom did not make a one-time mistake; they are the mistake.

As it now happens, the global credit boom is over; DM consumers are stranded at peak debt; and the China/EM investment frenzy is winding down rapidly.

Now comes the tidal wave of global deflation. The $11 billion of bottled air that disappeared from the Wall Street casino this morning is just the poster boy—–the foreshock of the thundering collapse of inflated asset values the lies ahead.



Puerto Rico defaults:


(courtesy zero hedge)


Puerto Rico Makes Only 1% Of Required Payment On Public Finance Corporation Bonds – Full Statement

Over the weekend Puerto Rico was supposed to make a modest principal and interest payment of some $58 million due on Public Finance Corp. bonds, which however few expected would be satisfied. As a reminder, on Friday, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, said during a press conference in San Juan that the government simply does not have the money.

Moments ago Melba Acosta, president of the Government Development Bank, confirmed as much, when he announced that only $628,000 of the $58 million payment, or just about 1%, had been paid.

Below is the full statement from Acosta on the service of PFC Bonds:

Today, Government Development Bank for Puerto Rico (“GDR”) President Melba Acosta Febo issued the following statement on the service of Public Finance Corporation (PFC) bonds:


Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today. This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.


“PFC did make a partial payment of Interest in respect of its outstanding bonds. The partial payment was made from funds remaining from prior legislative appropriations in respect of the outstanding promissory notes securing the PFC bonds. In accordance with the terms of these bonds, which stipulate that these obligations are payable solely from funds specifically appropriated by the Legislature, PFC applied these funds—totaling approximately $628.000—to the August 1 payment.”

In other words, small or not, PR has failed a mandatory principal repayment and is now in default under the PFC bonds. Up next, as per Bloomberg’s preview “the default promises to escalate the debt crisis racking the island, where officials are pushing for what may be the biggest restructuring ever in the municipal market.”

“An event like this is significant enough that it could hurt prices for Puerto Rico bonds,” said Richard Larkin, director of credit analysis at Herbert J Sims & Co. in Boca Raton, Florida. “I can’t believe a default on debt with Puerto Rico’s name will go unnoticed.”

It is unclear if creditors will now threaten the commonwealth with a “temporary” expulsion from the dollarzone as part of their hardball negotiating tactics.

Friday morning saw the employment cost index crash to its smallest increase on record.  Many saw this as a seal that the Fed will not hike rates for the balance of 2015.  That was until the mouthpiece for the Fed spoke:
(courtesy Hilsenrath/zero hedge)

Hilsenrath: Fed Doesn’t “Demand” Wage Growth Before Rate Hike

If last week’s shocking crash in the Employment Cost Index (ECI) to the smallest increase on record, was enough for some to seal the deal that the Fed will not hike rates for the balance of 2015 (and perhaps ever), here comes the Fed’s unofficial mouthpiece, WSJ’s Jon “Stingy Consumers” Hilsenrath, to debunk any such speculation with a note which likely came straight from the Fed titled the “Fed Doesn’t Demand Wage Growth Before Increasing Interest Rate.”

Here is how the Fed is willing to goalseek its constantly shifting “data dependency” just so it can hike rates at least 1-2 times in a rerun of “ghost of 1937” before it can then unleash a repeat of the “1939” scenario or worse.

Federal Reserve officials have fuzzy views on how wage growth fits in with their objectives for the economy. They would like to see wages growing faster. It would give them confidence that the economy is closer to their dual goals of producing healthy job growth and modestly rising inflation. But the linkages between wages, jobs and inflation are unclear, and so they’re not banking on faster wage growth materializing.

It gets better: the Fed which has been “convential data dependent”, is now suggesting the conventional data has been all wrong.


In classical models of the economy, as the unemployment rate falls, slack in the job market diminishes, producing upward pressure on wages. Because wages are such a large component of business costs, wage pressures in turn get passed on to consumers in the form of higher consumer prices. But a growing body of research suggests the economy hasn’t been working like this for decades. Other factors — including global pressures, in addition to household and business views about the stability of inflation — have large effects that potentially outweigh any impact from domestic wages on prices.

Enter the goalseeked “explanation” why suddenly wage growth does not matter:

A recent paper by Fed board economists Ekaterina Peneva and Jeremy Rudd finds little evidence that the ups and downs of wages had large effects on broader consumer price trends either before or after the 2007-2009 recession. “Wage developments are unlikely to be an important independent driver of (or an especially good guide to) future price developments,” they conclude.

So what would the Fed want you to know as a result of all these conflicting data points? Here is the mouthpiece again:

Ms. Yellen said explicitly in that March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster.“That said,” she added, “I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken.”


Given her stance, Friday’s employment cost report doesn’t look like a deal breaker for the Fed in its long-running debate about when to raise short-term interest rates. Wages appear to be stagnant but not clearly weakening, which is what she set out as her threshold for not acting. Still, it creates new doubts for officials and doesn’t help them build the confidence they’re hoping to build that the job market is nearing full employment and inflation rising toward 2%.


The September policy meeting is thus shaping up to be a cliffhanger for the Fed and markets. Officials could decide they want to take a bit more time to makes sense of all of this. Still, other evidence could emerge before then that convinces them to look past the report and act on rates. This coming Friday’s jobs report, and its measures of average hourly earnings of workers, now becomes all the more important for the Fed in its continued search for evidence that the economy is truly on the mend.

So another “most important jobs report ever” coming up. Great.

One thing that Hilsenrath did not touch upon however, is that there are only 3 months left before it snows. And everyone know by now the Fed never hikes when it snows. Inquiring minds want to know how the climatic conditions factor into the Fed’s thinking. We are confident Jon can relay the Fed’s position on US weather forecasts shortly.



The following does not augur well for the USA economy as the 30 yr bond breaks below 2.85% yield:




(courtesy zero hedge)


30Y Treasury Yield Plunges To 3-Month Lows As S&P Breaks Key Technical Support

The carnage is contagious. The S&P 500 just broke down below its 50- and 100-day moving averagesunable to hold the ubiquitous pre-EU-close ramp highs. Treasury yields have plunged since the weak spending and ISM data with the 5Y breaking below its 200-day moving average and 30Y yields testing 3-month lows



and as stocks fall, so are bond yields… With 30Y breaking to 3-month lows…

Charts: Bloomberg





Just look at what is going on in San Francisco:


(courtesy Mike Krieger)


The Rent is Too Damn High: San Fran Residents Pay $1,000/Mth To Live In Shipping Containers


Submitted by Mike Krieger via Liberty Blitzkrieg blog,

There’s nothing quite like a grotesquely lopsided “economic recovery” in which a handful of cities boom, while the rest of the nation stagnates. Even worse, millennials living in such chosen cities face one of two options. Either live in mom and dad’s basement, or face a standard of living far more similar to 19th tenement standards than the late 1990’s tech boom.

With that out of the way, I want to introduce you to what a $1,000 per month rental in the San Francisco Bay area looks like. Shipping containers:

Screen Shot 2015-08-03 at 10.41.45 AM

Don’t worry, there’s a lovely garden out back:


Screen Shot 2015-08-03 at 10.41.59 AM

We learn more from Bloomberg:

Luke Iseman has figured out how to afford the San Francisco Bay area. He lives in a shipping container.


The Wharton School graduate’s 160-square-foot box has a camp stove and a shower made of old boat hulls. It’s one of 11 miniature residences inside a warehouse he leases across the Bay Bridge from the city, where his tenants share communal toilets and a sense of adventure. Legal? No, but he’s eluded code enforcers who rousted what he calls cargotopia from two other sites. If all goes according to plan, he’ll get a startup out of his response to the most expensive U.S. housing market.


“It’s not making us much money yet, but it allows us to live in the Bay Area, which is a feat,” said Iseman, 31, who’s developing a container-house business. “We have an opportunity here to create a new model for urban development that’s more sustainable, more affordable and more enjoyable.”


As many as 60,000 San Franciscans live in illegal housing, according to the Department of Building Inspection.


Iseman collects $1,000 a month for each of the 11 structures parked in the 17,000-square-foot warehouse he rents for $9,100. Tenants include a Facebook Inc. engineer, a SolarCity Corp. programmer and a bicycle messenger.

It’s not even San Francisco proper either, this is in Oakland. You could probably catch $2k per month for a cargo box in the Mission.

Iseman used to pay $4,200 a month in San Francisco’s Mission District for a two-bedroom apartment with a slanted floor and mosquito-breeding puddles.

He bought his metal box for $2,300, delivery included, then cut out windows with a plasma torch and installed a loft bed, shower and bamboo flooring. He estimates his all-in cost at $12,000, and plans to sell refashioned containers for about $20,000 through his company, Boxouse.


“What we’re doing is converting industrial waste into a house in a couple of weeks,” said Iseman, who also founded a pedicab fleet. Meanwhile, he doesn’t plan on seeking city approval for cargotopia, whose location he asked not be identified. “I’d rather ask forgiveness than ask permission.”

I want to be clear that I’m not knocking Mr. Iseman for starting this project. He seems to be a well-meaning, entrepreneurial guy trying to make the best out of a bad situation and solve a very real problem on his own. What I am knocking is the criminally corrupt American oligarchy, which left this legacy to our youth due to their unfathomable greed, cronyism and nearsightedness.

Of course, I’ve covered this trend several times over the past several years…




(courtesy Michael Snyder/EconomicCollapse Blog)


11 Red Flag Events That Just Happened As We Enter The Pivotal Month Of August 2015

By Michael Snyder, on July 31st, 2015


Red Flags - Public Domain

Are you ready for what is coming in August? All over America, economic, political and social tensions are building, and the next 30 days could turn out to be pivotal. In July, we saw things start to turn. As you will read about below, a major six year trendline for the S&P 500 was finally broken this month, Chinese stocks crashed, commodities crashed, and debt problems started erupting all over the planet. I fully expect that this next month (August) will be a month of transition as we enter an extremely chaotic time in the fall and winter. Things are unfolding in textbook fashion for another major global financial crisis in the months ahead, and yet most people refuse to see what is happening. In their blind optimism, they want to believe that things will somehow be different this time. Well, the coming months will definitely reveal who was right and who was wrong. The following are 11 red flag events that just happened as we enter the pivotal month of August 2015…

#1 Puerto Rico is going to default on a 58 million dollar debt payment that is due on Saturday. Even though this has serious implications for the U.S. financial system, Barack Obama has said that there will be no bailout for “America’s Greece”.

#2 As James Bailey has pointed out, the most important trendline for the S&P 500 has finally been broken after holding up for six years. This is a critical technical signal that will likely motivate a significant number of investors to sell off their holdings in the weeks ahead.

#3 The IMF is indicating that it will not take part in the new Greek debt deal. As a result, the whole thing may completely fall apart…

Leaked minutes of the fund’s latest board meeting, which took place on Wednesday, showed staff “cannot reach agreement at this stage” on whether to take part in the new €86bn (£60bn) bailout for Greece. The document said there were doubts over the capacity of the Athens Government to implement economic reforms, as well as the over the sustainability of the country’s sovereign debt pile, which is now projected to hit 200 percent of GDP.

The German Chancellor, Angela Merkel, only sanctioned a new Greek deal earlier this month on the condition that the IMF takes part.

#4 Italy is going down the exact same path as Greece, but Italy is going to be a much larger problem for Europe because it has a far, far larger economy. This week, we learned that youth unemployment in Italy has reached a 38-year high of 44 percent, and Italy’s debt to GDP ratio has now hit 135 percent.

#5 The Canadian economy has officially entered a new recession. This is something that was not supposed to happen.

#6 The price of oil plummeted close to 20 percent during the month of July. It was the worst month for the price of oil that we have seen since October 2008, which just happened to be during the height of the last financial crisis.

#7 Commodities just had their worst month in almost four years. As I have written about previously, we witnessed a collapse in commodity prices just before the stock market crash of 2008 too.

#8 Thanks to Barack Obama, the U.S. coal industry is imploding, and some of the largest coal producers in the entire country have just announced that they are declaring bankruptcy…

On Thursday, Bloomberg reported that the biggest American producer of coking coal, Alpha Natural Resources, could file for bankruptcy as soon as Monday.

Competitor Walter Energy filed for bankruptcy earlier this month, and several others have done the same this year.

#9 For the month of July, the Shanghai Composite Index was down 13.4 percent. Despite unprecedented government intervention to prop up the market, it was the worst month for Chinese stocks since October 2009.

#10 A major red flag that a recession in the United States is fast approaching is the fact that Exxon Mobile just announced their worst earnings for a single quarter since 2009. Compared to the same time period one year ago, Exxon Mobile’s earnings were down 51 percent.

#11 Chevron is another oil giant that has seen earnings plunge. In the second quarter of this year, Chevron’s earnings were down an eye-popping 90 percent from a year ago.

And in this list I didn’t even mention the economic chaos that is happening down in South America. For full coverage of that, please see my previous article entitled “The South American Financial Crisis Of 2015”.

To a certain extent, I can understand why most Americans are not alarmed about the months ahead. The relative stability of the past several years has lulled most of us into a false sense of security, and the mainstream media is assuring everyone that everything is going to be just fine and that brighter days are ahead. At this point, many believe that it is patently absurd to suggest that we could see an economic collapse in 2015. But of course even though the signs were glaringly apparent, very few of us anticipated the financial crisis of 2008 either.

A few weeks ago, I authored a piece entitled “The Last Days Of ‘Normal Life’ In America”, and I stand by every single word of that article. I truly believe that the era of debt-fueled prosperity that we have been enjoying for so long is coming to an end, and our standard of living will never again get back to this level.

Just yesterday, I had the chance to go over and stock up on some emergency supplies at a dollar store. It always astounds me what you can still buy for a dollar. The combined cost of raw materials, manufacturing, packaging, shipping and retailing most of these items shouldn’t be less than a dollar, but thanks to having the reserve currency of the world we are still able to go to these big box stores and fill up our carts with lots and lots of extremely inexpensive merchandise.

Unfortunately, this massively inflated standard of living is going to come crashing to a halt. This next financial crisis is going to destroy the system that is currently producing such comfortable lifestyles for the vast majority of us, and that will be an extremely painful experience.

So enjoy this summer for as long as it lasts. Even though August threatens to be pivotal, it is going to be nothing compared to what will follow.

Fall and winter are coming.

Prepare while there is still time to do so.





Well that about does it for today

I will see you tomorrow night






  2. Paul Whitesman · · Reply

    About all this hedging against silver and that when people can actually demand the actual silver but can be fobbed off with cash instead. I wondered if this was all bankroller by the US fed and other treasuries through Quantative Easing? I just wondered if the governments behind all the QEs are actually complicit in the hedge agianst silver? It would be amazing if all QEs were really about helping to hide the tracks of frauduent hedges with silver and gold with companies not having the quantities they say they have. The tax payers of the world paying out to help wealthly people and institutes stay afloat.

    I think what I’m asking is whether the US treasury is the lucky owner of about five trillion dollars worth of shorts on silver and gold?


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