April 11/Fed holds secret meeting and will not tell us what they were discussing/1.79 tonnes of gold leave the GLD probably to the safer shores of China/SLV adds 1.427 million oz/Comex silver OI declines despite Friday’s huge rise in price/Gold OI remains relativey constant despite gold’s rise on Friday: obvously the bankers are getting nervous/China’s shadow banking sector in trouble as officials start arresting people/the fun now begins with Heta (Hypo) bank in Austria as bail ins begin!/Big meeting today on how to restructure the huge 360 billion euros worth of bad loans/No word yet on that restructuring/United Health exits two states in Obamacare: state too costly to run/

Gold:  $1,257.50 up $14.10    (comex closing time)

Silver 15.97  up 59 cents

In the access market 5:15 pm

Gold $1239.50

silver:  15.36

 

In the morning hours of Friday, we got word that the Fed was to have a closed meeting with its Presidents and Governors.  Supposedly this meeting was to discuss their interest rate but as I told you on Friday, they generally meet on an emergency meeting if something big has transpired.  The we learned today that Obama was going to meet Yellen.

The one big area for concern for the Fed will be banking stability. The rise in the Yen will will be catastrophic for our bankers and for the past few  weeks, we have seen 3 banks trading southbound in very deep downward sloping trading:

 

i. Deutsche bank

2. Royal Bank of Scotland

3. Credit Suisse

 

with honourable mentions to Italian big bank:  Unicredit.

It sure looks to me like we had a major derivative bust over at Deutsche bank, the world’s largest derivative player at over $75 trillion!

 

On Thursday Eric Sprott announced an addition to his latest offering and he will be purchasing 5 million oz of silver.  Considering that the physical is backwards in London, our banker friends may have a tough time fulfilling his contract.

 

 

 

Let us have a look at the data for today.

At the gold comex today, we had a POOR delivery day, registering 30 notices for 3000 ounces  for gold,and for silver we had 0 notices for nil oz for the non active April delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 211.95 tonnes for a loss of 90 tonnes over that period.

 

In silver, the open interest fell by another surprising  contracts DOWN  to 175,308 DESPITE THE FACT THAT the silver price was UP 23 cents with respect to Friday’s bullish trading. In ounces, the OI is still represented by .876 billion oz or 125% of annual global silver production (ex Russia ex China).

In silver we had 0 notices served upon for NIL oz.

In gold, the total comex gold OI ROSE BY A TINY  351 contracts UP to 483,844 contracts as the price of gold was UP $6.30 with Friday’s trading.(at comex closing).

 

We had another big changes in the GLD,  a withdrawal of 1.79 tonnes / thus the inventory rests tonight at 817.81 tonnes.  The fact that gold has a huge two days, I rather suspect that the bankers need to get their hands on physical quickly and the thus raided the GL:D cookie jar.  The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex.   In silver,we had another huge addition of 1.427 million oz,  and thus the Inventory rests at 336.724 million oz.

.

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

 

1. Today, we had the open interest in silver FALL by 988 contracts DOWN to 175,308 as the price of silver was UP 23 cents with Friday’s trading.Today, the bankers capitulated again and covered some of their shorts. The total OI for gold rose by 351 contracts to 483,844 contracts as gold was UP $6.30 in price from yesterday’s level.

 

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

b) COT report

(Harvey)

3. ASIAN AFFAIRS

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP 48.99 POINTS OR 1.64%  /  Hang Sang closed UP 20.41 OR 0.35%. The Nikkei closed DOWN 70.39 POINTS OR 0.44% . Australia’s all ordinaires  CLOSED DOWN 0.12%. Chinese yuan (ONSHORE) closed UP at 6.4616.  Oil ROSE  to 39.66 dollars per barrel for WTI and 41.84 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.4802 yuan to the dollar vs 6.4616 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS REMAINS AT THE 108 CROSS SETTING OFF GLOBAL TENSIONS WHICH IN TURN IS CAUSING THE SPECIAL MEETING AT THE FED.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

 the high yen value  (low USA/Yen) is causing a special meeting at the Fed toay. No doubt we had a major derivative bust

b) REPORT ON CHINA

ii)The fun begins: the government in China shuts down a high profile P to P  (Peer to Peer)
Lending company and arrested 21 of its key personnel. You will recall that P to P  shadow banking is responsible for providing the down payment money for investors wanting to purchase a home.  We should now shortly see the bubble in the China housing sector burst:
( zero hedge)

iii)China sees its PPI drop for the 49th consecutive month as its deflation “at the gate” is spreading throughout the globe.  CPI also misses:( zero hedge)

 

iv) As we have indicated to you on countless occasions, the shadow banking sector is collapsing, having its bubble financing schemes blow up.  The key indicator for wealth in the Chinese economy is not the stock market but ownership of homes.  We found that in order to provide financing for the homes, Peer to Peer financing was born  ( P to P) and the amounts lent to home buyers was the 30% down payment.  Now this financing is collapsing as noticed by Bank of America:

( Bank of America/zero hedge)

4.EUROPEAN AFFAIRS

i)Such lunacy: after Denmark we now see that Belgium is now paying people to take out a mortgage:  This is the height of stupidity with negative interest rates:

( zero hedge)

ii)Let the bail ins begin.  We have been highlighting the plight of HETA bank to you for our one year.  Today they announced a 54% haircut for senior creditors and if that is not enough they will go over depositors.  Junior bond holders and equity holders are of course wiped out.  The problem is the state of Corinthia guaranteed the amounts and they just do not have the money and sovereign Austria refuses to pay.  It has been and still is, a total mess:

( zero hedge)

iii)The following Mish Shedlock discussion on the possible bailout of the Italian banks is extremely important.Today is the big meeting.

Key notes;  The total of bad Italian loans (and these are not sovereign) amounts to 360 billion euros . That is much and that should cause the entire meltdown of the Italian banks.

They are trying to create a good bank, bad bank scenario and to ring fence perennial basket case Monte di Paschi which has 50 billion euros of bad debt.  The problem here is that the new rules require a bail in and that would cause the biggest bank run in the history of Italy.  So the boys are proposing a back door solution whereby the bad debt is off loaded and then sold.  The problem is that the selling must be done at fair market value..good luck to them on that point.

we will be watching this intensively

( Mish Shedlock)

v)Germany, is reported to be very angry that the ECB is contemplating “helicopter money” as QEs just do not work.  Do not read too much into this:  Germany is benefiting greatly from the ECB policies as their balance sheet would be terribly offside if there was no QE,

( zero hedge)

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)The Ukraine is also a basket case  (along with Venezuela see below). Yesterday, the UKraine Prime Minister resigns and states that destabilization is inevitable and what is needed is a new government:

( zero hedge).

ii)As the Americans deploy B 52 bombers in Syria, they will surely come in contact with Russia.  The USA will come from the Mosul side and Russia will come from the Aleppo side. This is an accident waiting to happen!

( zero hedge)

iii)Iran releases video showing the arrival of long range S 300 missile systems:

( zero hedge)

6.GLOBAL ISSUES

Over the years, i have been harping that in order to have a vibrant economy, you must have savers and these savings are then given to investors to provide your vibrant economy.  Once you remove savers, the bedrock of capitalism has been destroyed.

Negative interest rates destroys savers!!

Now Larry Fink joins Bill Gross describing just that:

( Bill Gross/Larry Fink/Blackrock/zero hedge)

7.EMERGING MARKETS

Venezuela is now shear chaos. They need a revolution fast

( zero hedge)

8.OIL MARKETS

i)Do not expect much from the DOHA meeting states Goldman Sachs. We agree

(courtesy zero hedge)

ii)Oil slides after Algeria Oil Minister admits that Russian refuses to cut output

( zero hedge)

 

iii)Chesapeake is forced to pledge the entire company as collateral to the banks in order to preserve existing credit. The bondholders are going to be screwed:

( zero hedge)

9.PHYSICAL MARKETS

i) a. Gold trading early this morning/yen initially falters and then resumes northbound bringing gold and silver along with it

(zero hedge)

i b) As promised to you:  silver advances the most in almost 6 months as the commercial “hedgers” have decided to cover their shorts:

( zero hedge)

ii) The following is obvious:  comex gold contracts because of suspicion that they are not settling with physical then as far the Islamic financing plan, using gold, these guys are of no use:

(Claudia Carpenter/Bloomberg/GATA)

iii)India subverted customs reporting rules in order to facilitate gold leasing in the 1990’s( GATA)

iv)Jeff Clark is stating what I have been telling you for over 12 years:  that the GLD is a fraud

He states that you should stay away from GLD ETF’s  (and silver as well)

( Jeff Clark/hardassetalliance.com/GATA)

v)Chinese prospectors actively searching for gold mines:

(  Wall Street Journal/GATA)

vi)South African miners are the lowest paid anywhere despite the fact that many are operating at 5,000 feet.  The union accepts the latest wage offer and cancels their strike:

(  Reuters/GATA)

10.USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER

i)Early trading today:

( zero hedge)

ii)A biggy story!!  United Health exits Obama’s ACA in Georgia and Arkansas.  No doubt other insurers will follow.  The reason for the exit is, of course, that they were losing money.

They will probably exit other states as well

( zero hedge)

 

iii) aAnother gem from David Stockman on the USA economy:

( David Stockman/ContraCorner)’
iiib) JPMorgan reaffirms Stockman on the economy
(zero hedge/JPMorgan)_

iv)Our good friends over at Goldman Sachs has been fined 5.1 billion for their ‘serious misconduct” in the Mortgage scandal of 2004-2008.  We still have RBS and Deutsche bank who have been under investigation in this matter has still to be fined:

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 483,844 for a gain of 351 contracts as the price of gold was UP $6.30 in price with respect to Friday’s bullish trading.  We are now entering the active delivery month of April. 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 or for that matter an inactive month, and 2) a continual drop in the amount of gold standing in an active month. We certainly witnessed both parts today . In the front month of April we lost 43 contracts from 3532 contracts down to 3575.  We had 18 notices filed so we lost 25 contracts or an additional 2500 gold ounces that will not stand for delivery. The next non active contract month of May saw its OI rise by 23 contracts up to 2792. The next big active gold contract is June and here the OI FELL by 1558 contracts down to 364,138. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was POOR at 172,897 . The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day was poor at 144,098 contracts. The comex is not in backwardation.

Today we had 30 notices filed for 3000 oz in gold.

 

And now for the wild silver comex results. Silver OI fell by a considerable 988 contracts from 176,296 down to 175,308 despite the fact that the price of silver was up 23 cents with Friday’s rise in price.  We are now in the next contract month of April and here the OI fell by 2 contracts falling to 64. We had 2 notices filed on Friday so we neither lost nor gained any silver ounces standing in this non active month of April.   The next active contract month is May and here the OI fell by 4,417 contracts down to 97,201. This level is exceedingly high. However we do have 3 weeks before first day notice on Friday, April 29.The volume on the comex today (just comex) came in at 64,399, which is excellent. The confirmed volume on Friday (comex + globex) was excellent at 54,924. Silver is not in backwardation.    In London it is in backwardation for several months.
The bankers must be getting very anxious as they attempted a raid today with the obvious objective to loosen many gold and silver leaves from the silver tree as possible.  They failed miserably!! The fact that silver OI fell despite the bullish atmosphere yesterday suggests some bankers decided to throw in the towel and cover some of their massive silver shorts.
 
 
We had 0 notices filed for nil oz.
 

April contract month:

INITIAL standings for APRIL

April 11/2016

 

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 96.45  oz

MANFRA

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil oz
No of oz served (contracts) today 30 contracts
(3000 oz)
No of oz to be served (notices) 3546 contracts 354600 oz/
Total monthly oz gold served (contracts) so far this month 1163 contracts (116,300 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 76,948.4 oz

Today we had 0 dealer deposits

Total dealer deposits; nil oz

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 0 customer deposits:

Total customer deposits:  nil oz

 

 

Today we had 1 customer withdrawal:

 

i) Out of MANFRA:

total customer withdrawals: 96.45 oz

Today we had 0 adjustments:

 

 

 

AGAIN NO GOLD ENTERS THE COMEX AND THIS MONTH IS AN ACTIVE DELIVERY MONTH.

it sure looks to me like the comex has little physical gold inside their facilities.

.
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 30 contracts of which 8 notices was stopped (received) by JPMorgan dealer and 9 notices were stopped (received)  by JPMorgan customer account. 

 

To calculate the initial total number of gold ounces standing for the Mar contract month, we take the total number of notices filed so far for the month (1163) x 100 oz  or 116,300 oz , to which we  add the difference between the open interest for the front month of April (3575 CONTRACTS) minus the number of notices served upon today (30) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the initial standings for gold for the April. contract month:
No of notices served so far (1163) x 100 oz  or ounces + {OI for the front month (3575) minus the number of  notices served upon today (30) x 100 oz which equals 470,900 oz standing in this non  active delivery month of April (14.646 tonnes).
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
 
We thus have 14.646 tonnes of gold standing for April and 10.846 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
We now have partial evidence of gold settling for last months deliveries We now have 14.777 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes   = 22.636 tonnes still standing against 10.846 tonnes available.  .
 
Total dealer inventor 349,358.291 oz or 10.846 tonnes
Total gold inventory (dealer and customer) =6,814215.039 or 211.95 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 211.95 tonnes for a loss of 90 tonnes over that period. 
 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
 end
 
And now for silver
 

APRIL INITIAL standings

/April 11/2016:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 186,724.65 OZ. CNT, Delaware

SCOTIA

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 215,066.900 OZ

SCOTIA

No of oz served today (contracts) 0 contracts

nil  oz

No of oz to be served (notices) 64 contracts)(320,000 oz)
Total monthly oz silver served (contracts) 123 contracts (615,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month 2246993.3 oz

today we had 0 deposits into the dealer account

total dealer deposit: nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

i) Into SCOTIA:  215,066.900 OZ

total customer deposits: 215,066.900 oz

 

 

We had 3 customer withdrawal

i) Out of CNT: 85,513.530 oz

ii) Out of Delaware: 1032.72 oz

iii) Out of Scotia: 100,178.440

:

total customer withdrawals:  186,724.65  oz

 
 

 

 we had 0 adjustments

 

The total number of notices filed today for the April contract month is represented by 2 contracts for 10,000 oz. To calculate the number of silver ounces that will stand for delivery in April., we take the total number of notices filed for the month so far at (123) x 5,000 oz  = 615,000 oz to which we add the difference between the open interest for the front month of April (64) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the April. contract month:  123 (notices served so far)x 5000 oz +(x64{ OI for front month of April ) -number of notices served upon today (0)x 5000 oz  equals 935,000 oz of silver standing for the March contract month.
we neither lost nor gained any silver ounces standing for this non active delivery month.
 

 

 
Total dealer silver:  32.452 million
Total number of dealer and customer silver:   155.267 million oz
The open interest on silver remains high but this time the bankers are capitulating and covering their massive shorts.
 
end
And now the Gold inventory at the GLD
April 11. We had a huge withdrawal of 1.79 tonnes of gold despite the rise in gold. No doubt whatever physical gold the GLD had just went over to China/inventory rests tonight at 817.81 tonnes

 

APRIL 8/no changes in tonnage of gold/rests tonight at 819.60 tonnes

APRIL 7/ a huge deposit of 4.17 tonnes of “paper” gold was added to our GLD/Inventory rests tonight at 819.60 tonnes

APRIL 6/a withdrawal of .29 tonnes of gold and probably this was to pay for fees for the custodian and insurance/inventory rests at 815.43 tones

April 5/ a withdrawal of 2.37 tonnes of gold from the GLD/Inventory rests at 815.72 tonnes

APRIL 4/a withdrawal of 1.19 tonnes from the GLD/Inventory rests at 818.09 tonnes of gold

April 1/no changes in gold inventory at the GLD/Inventory rests at 819.28 tonnes

MARCH 31/a small withdrawal of 1.19 tonnes/inventory rests tonight at 819.28 tonnes

MARCH 30/no changes in inventory/inventory rests tonight at 820,47 tonnes

March 29/a withdrawal of 3.27 tonnes of gold from the GLD/Inventory rests at 820.47 tonnes.  (No doubt we will see a rise in gold inventory with tomorrow’s reading)

March 28/no change in inventory at the GLD/Inventory rests at 823.74 tonnes

March 24.2016: a deposit of 2.08 tonnes of gold into its inventory/and this after a big drubbing these past two days??/Inventory rests at 823.74 tones

March 23/no changes at the GLD today despite the gold drubbing. Inventory rests at 821.66 tonnes

March 22./no changes in inventory at the GLD/Inventory rests at 821.66 tonnes

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

April 11.2016:  inventory rests at 817.81 tonnes

 

 

end

 

Now the SLV Inventory
April 11.2016; a huge addition of 1.427 million oz of “paper” silver entered the SLV/Inventory rests at 336.151 million oz
APRIL 8/no changes in silver inventory/rests tonight at 334.724 million oz
APRIL 7/no change in silver inventory/rests tonight at 334.724 million  oz
April 6/no change in silver inventory/Inventory rests at 334.724 million oz
April 5/ a deposit of 2.146 million oz of silver into the SLV/Inventory rests at 334.724 million oz/
APRIL 4/no change in silver inventory tonight/inventory rests at 332.578 million oz
Apri 1: we had a huge deposit of 2.189 million oz of silver into the SLV (with silver badly down?)/.Inventory rests tonight at 332.578 million oz
MARCH 31/ no change in silver inventory at the SLV tonight/inventory rests at 330.389 million oz
MARCH 30/no change in inventory/inventory rests at 330.389 million oz
March 29.2016: a huge deposit of 1.475 million oz of silver into the SLV/Inventory rests at 330.389 million oz
March 28/no change in silver inventory at the SLV/Inventory rests at 328.914 million oz
March 24.2016/no change in inventory/rests tonight at 328.914 million oz/
March 23/we lost 1.428 million oz as a withdrawal today/SLV inventory rests at 328.914 million oz
.
April 11.2016: Inventory 336.151 million oz
.end
1. Central Fund of Canada: traded at Negative 48 percent to NAV usa funds and Negative 4.7% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.0%
Percentage of fund in silver:35.0%
cash .0%( April 11.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to -.34%%!!!! NAV (April11.2016) 
3. Sprott gold fund (PHYS): premium to NAV falls  to -0.12% to NAV  ( April11.2016)
Note: Sprott silver trust back  into positive territory at -.34%%/Sprott physical gold trust is back into negative territory at -0.12%/Central fund of Canada’s is still in jail.
It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to .34%.  Remember that Eric is to get 5 million oz of silver.
 
 
 end

And now your overnight trading in gold, FRIDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe
 

By Mark O’Byrne

Bank Bail Ins Begin as EU Bank “Bailed In” In Austria

Bank bail ins in the EU are here after Austria’s financial markets regulator FMA imposed a hefty haircut on creditors in an Austrian bank. Creditors in the bank Heta Asset Resolution will receive less than half of their money back according to the country’s financial regulator, the FMA.

euro_drachma

Senior bondholders in the so called “bad bank” could expect to receive around €0.46 for each euro which would be paid from the realisation of assets by 2020, according to the FMA statement. It said that this had been calculated using “very conservative” assumptions.

“This package of measures also ensures the equal treatment of creditors. Orderly resolution is more advantageous than insolvency proceedings,” the FMA said.

Bond maturities, however, will be extended to 31 December 2023 as “all currently outstanding legal disputes will realistically only be concluded by the end of 2023”. “Only at that point will it be possible to finally distribute the assets and to liquidate the company,” the regulator said.

In November 2015, the largest collection of creditors, which included Pacific Investment Management Co (PIMCO), Commerzbank , FMS Wertmanagement AoeR and a collection of distressed debt investors, proposed to extend bond maturities for 30 years in return for repayment in full.

Representatives of Austrian province Carinthia and creditors of the failed regional lender are to meet in London tomorrow to try to break the impasse over a bond buyback scheme, an Austrian newspaper reported. Carinthia, a southern Austrian province, guaranteed the debt of local lender Hypo Alpe Adria before the bank collapsed and now faces the threat of insolvency if it had to honour the 10.8 billion euro ($12.3 billion) debt in full.

Heta Asset Resolution was formed to wind down the bank but regulators froze Heta’s debt repayments after discovering a gaping capital hole at the bad bank.

Heta’s bail-ins pertain to bond holders but it is important to note that recently introduced EU and international bail-in regulation mean that depositors in banks are now exposed to having their deposits bailed in.

Bail-ins are one of the greatest financial risks to investors, savers and indeed companies today. Yet they remain the most poorly covered financial risk and are largely ignored by financial advisers, brokers and not surprisingly banks.

There is a belief that bail-ins only relate to “the rich” and very wealthy depositors as they will be imposed on those with deposits greater than national deposit guarantees. These deposit “guarantees” are generally the ‘big round’, arbitrary number of say €100,000, $250,000 and £75,000. These are not particularly large amounts and could amount to the entire life savings of a family or pensioners or indeed it could be the entire capital of a small to medium size business enterprise.

 

bail-ins-considerationsBail-Ins – Key Considerations (GoldCore Research)

Media internationally has not analysed this growing financial risk and the risk that it poses to the deposits of savers, investors and companies and indeed to our respective economies. In a world already beset with huge deflationary pressures, bail-ins and confiscating deposits  would be extremely deflationary and would likely contribute to severe recessions.

This is something we warned of when we first conducted our extensive research on the developing bail-in regimes. Diversification of deposits remains vital and one important way to protect against bail-ins is owning bullion. Taking delivery of gold and silver coins and bars or owning bullion in allocated and segregated storage in the safest vaults in the world is a prudent way to protect against bail-ins.

Access Protecting your Savings In The Coming Bail-In Era (11 pages)

Access From Bail-Outs to Bail-Ins: Risks and Ramifications – (51 pages)

Gold Prices (LBMA)
11 April: USD 1,247.25, EUR 1,095.84 and GBP 878.96 per ounce
8 April: USD 1,235.00, EUR 1,085.18 and GBP 877.33 per ounce
7 April: USD 1,237.50, EUR 1,086.07 and GBP 879.70 per ounce
6 April: USD 1,225.75, EUR 1,079.76 and GBP 868.38 per ounce
5 April: USD 1,231.50, EUR 1,083.59 and GBP 866.32 per ounce

Silver Prices (LBMA)
11 April: USD 15.16, EUR 13.34 and GBP 10.78 per ounce  (Not updated yet)
8 April: USD 15.16, EUR 13.34 and GBP 10.78 per ounce
7 April: USD 15.22, EUR 13.38 and GBP 10.81 per ounce
6 April: USD 15.07, EUR 13.28 and GBP 10.71 per ounce
5 April: USD 15.19, EUR 13.37 and GBP 10.69 per ounce

silver_britannias
Silver Britannias – VAT Free

Gold News and Commentary

Gold climbs to near 3-week high on safe-haven demand (Reuters)
Gold Nears Three-Week High as Fed Outlook on Rates Erodes Dollar (Bloomberg)
Obama, Yellen in unexpected meeting Monday to talk economy (Marketwatch)
Now, India’s very own gold coins (Hindu Business)
China goes prospecting for world’s gold mines (WSJ)

Gold’s “run is far from over” (CNBC)
Gold Defies Stock Bear Rally (Gold Seek)
Myths About Gold That Just Won’t Die (Zero Hedge)
Standby for terrible news from Wall Street … (Yahoo Finance)
Dead Canaries And Disobedient Falcons: Bad Month Coming, Especially For Banks (Dollar Collapse)

Read More Here

Silver_Britannia_Coins
VAT Free Silver Coins – Delivery In Ireland, UK and EU

 

END-

Gold trading this morning;  they tried to ramp up USA/Yen and it failed as do doubt we have a huge number of offside yen carry traders like Deutsche bank, RBS and Credit Suisse.

(courtesy zero hedge)

Gold Jumps To $1255 As USDJPY Pumps’n’Dumps

Business as usual this morning. In order to sustain the dream into the US Open, USDJPY was ramped – running stops to 108.50 to ensure the smoke-and-mirrors gains on another Italian bank bailout rumor enable just the right amount of retail traders to get muppeted.

Inline image 2Once the open struck, USDJPY dumped sending Gold soaring back above $1250.

It appears Goldman’s “dubious advice” to sell gold was indeed “dubious” after all.

end

As promised to you:  silver advances the most in almost 6 months as the commercial “hedgers” have decided to cover their shorts:
(courtesy zero hedge)

Silver Surges Most In 6 Months As Hedgers Cover

The last 3 days have seen silver prices surge over 6%, testing back towards the psychologically important $16 level.

Having been pressured lower after the ECB bounce, the precious metal jumped perfectly off its critical 200-day moving-average, nearing the highs of the year once again.

It appears some of the recent driver is the largest unwind of commercial hedges since November…

end

The following is obvious:  comex gold contracts because of suspicion that they are not settling with physical then as far the Islamic financing plan, using gold, these guys are of no use:
Claudia Carpenter/Bloomberg)

Comex gold contracts likely no good for Islamic finance plan

Section:

Gold Standard in Islamic Finance ‘Almost There’ for Submission

By Claudia Carpenter
Bloomberg News
Monday, April 10, 2016

Gold products used in Islamic finance would need to be physically-backed and allocated to the underlying asset, according to a draft of a standard for Shariah gold being developed.

“We are almost there” with a final proposal, said Mohd Daud Bakar, a Shariah scholar who is writing the draft for the Accounting and Auditing Organisation for Islamic Financial Institutions, the Bahrain-based industry group that sets Shariah standards in finance.
The committee, formed to develop the gold standard, will meet once more next Sunday and then submit the proposal to AAOIFI’s Shariah Board, he said in an interview in Dubai on Sunday.

A gold standard stands to boost demand for the metal as most Shariah buyers can only invest in real estate, Islamic bonds and some stocks. Because of the physical backing requirement, Comex gold futures wouldn’t qualify to be Shariah-compliant while the Singapore gold contract would, according to Matthew Keen, founder of Evidens Consultancy in Dubai.

“Hundreds of tons” of new demand could be created, said Natalie Dempster, a managing director of the World Gold Council. “The standard would fill an important gap in the market.” …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-04-10/gold-standard-in-islam…

 

 

END

 

India subverted customs reporting rules in order to facilitate gold leasing in the 1990’s

(courtesy zero hedge)

India subverted customs reporting rules to facilitate gold leasing in 1991

Section:

1991’s Golden Transaction

By C. Rangarajan
The Indian Express, Mumbai
Monday, March 28, 2016

India’s balance-of-payments situation had deteriorated sharply by the end of 1990. Even as attempts were being made to obtain normal and extraordinary funding from multilateral institutions, private banks and other market players were also being approached. With frequent changes in government, the responsibility of the Reserve Bank of India increased. Governor S. Venkitaramanan was so active that he was described by an economic daily as “lone (loan) ranger.”

In the course of talking with various market players, one question that came up frequently was: What was India doing on its own to tide over the crisis? The implication was simple. India had a fairly large stock of gold as reserves. Why could not India use it? …

In January 1991 the State Bank of India proposed to raise foreign exchange through the lease of gold held by the government. …

The entire episode was not without its drama. For example, when any commodity is sent out of the country, the nature of the commodity has to be declared. I spoke with the commissioner of customs and a special authorisation from the finance ministry was obtained to send the gold without such a declaration. …

There was no intention on the part of the RBI or the government to hide the transaction from the public. The RBI wanted to make it public once the operation was over. The shipment of gold made everyone aware of the enormity of the crisis facing India, and paved the way for economic reforms.

—–

The writer is a former chairman of the Economic Advisory Council to the prime minister and a former governor of the Reserve Bank of India.

… For the full commentary:

http://indianexpress.com/article/opinion/columns/1991s-golden-transactio..

 

 

 

END

 

Jeff Clark is stating what I have been telling you for over 12 years:  that the GLD is a fraud

He states that you should stay away from GLD ETF’s  (and silver as well)

 

(courtesy Jeff Clark/hardassetalliance.com)

 

Jeff Clark: Here’s why you should stay away from gold ETFs

Section:

1p HKT Sunday, April 10, 2016

Dear Friend of GATA and Gold:

Jeff Clark, senior metals analyst for Hard Assets Alliance, explained this week why gold exchange-traded funds are not really gold at all for the ordinary investor but rather mere claims on an asset that may not be accessible when an investor really wants it.

Citing the exchange-traded fund GLD, Clark notes that it “uses a custodian — without question the most crucial counterparty in a gold ETF — with a history of unethical behavior that many investors aren’t aware of.”

Even GLD investors owning the number of shares necessary to be allowed to convert them to metal — 100,000 — are not fully secure, according to Clark. He writes: “The fund reserves the right to ‘settle in cash.’ Even if you meet all the requirements for delivery, the fund can, for any reason it deems necessary, send you a check instead of bullion.”

Clark’s analysis is headlined “Here’s Why You Should Stay Away from Gold ETFs” and it’s posted at the Hard Assets Alliance Internet site here:

http://www.hardassetsalliance.com/blog/heres-why-you-should-stay-away-fr…

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

 

 

 

END

 

Chinese prospectors actively searching for gold mines:

(courtesy  Wall Street Journal)

China goes prospecting for world’s gold mines

Section:

By Biman Mukerji
The Wall Street Journal
Sunday, April 10, 2016

Chinese gold miners are aggressively scouting for overseas acquisitions, encouraged by historically low gold prices that could help them scoop up assets cheaply.

Though gold prices have risen by more than 16 percent since hitting a six-year low last December, prices are still trading close to levels last seen in 2010, in a range of roughly $1,220-$1,240 per troy ounce.

China is the world’s largest gold consumer and producer, but only a few Chinese companies such as Zijin Mining have ventured abroad to buy mines, unlike their counterparts in industrial metals.

If cash-rich Chinese gold miners embark on an asset-buying spree, China could reduce its dependency on other international producers for supplies and increase its heft in global gold markets. …

A period of low gold prices also means Chinese companies may have more options to buy because several mining companies are facing a credit crunch and have massive debt.

“China has five to six gold companies. I have been in touch with all of them, and they all have plans for increasing assets overseas,” said Peter Grosskopf, chief executive officer of Sprott Asset Management, a Toronto-based company that manages assets including physical bullion trusts.

He says the Chinese companies are well-capitalized and better positioned than their North American counterparts.

Sprott has set up a partnership fund with China’s leading gold company, the Zijin Mining Group, which is called the Zijin Sprott Fund, with the aim of buying overseas gold assets, Mr. Grosskopf said. “The expansion [opportunities] are better globally than in China.” …

… For the remainder of the report:

http://www.wsj.com/articles/china-goes-prospecting-for-worlds-gold-mines..

 

END.

 

South African miners are the lowest paid anywhere despite the fact that many are operating at 5,000 feet.  The union accepts the latest wage offer and cancels their strike:

 

(courtesy  Reuters)

Miners union accepts Sibanye Gold’s wage offer, cancels strike

Section:

By Stella Mapenzauswa and Zandi Shabalala
Reuters
Sunday, April 10, 2016

JOHANNESBURG, South Africa — South Africa’s Association of Mineworkers and Construction Union (AMCU) said on Sunday it had agreed to take a new wage offer from Sibanye Gold and had called off a strike.

AMCU national treasurer Jimmy Gama said the union hoped to sign an agreement with the mining company, probably this week.

“We as AMCU accept Sibanye Gold’s new wage offer as voted for unanimously … by our members today,” AMCU said on its official Twitter account after a mass rally. …

… For the remainder of the report:

 

http://www.reuters.com/article/safrica-sibanye-gold-unions-idUSL5N17D0GR

 

 

 

 

END


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  Dear reader,  as you may know, the delivery and access to my writings changed two weeks back.  In my partnership with Jim Sinclair, we have moved to a subscriber format where my writings, our weekly cross talks, and outside interviews will be found.  Other than one or possibly two public articles per month, Jim Sinclair’s Mineset “gold content” will be the only place my writings will be found.  Should you desire to follow our work, please follow the below link to subscribe for one year at the promotional price of $119.
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end

Your early MONDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 
 

:

1 Chinese yuan vs USA dollar/yuan UP to 6.4616 / Shanghai bourse  CLOSED UP 48.99  OR 1.64% / HANG SANG CLOSED UP 20.41 OR 0.35% 

2 Nikkei closed DOWN 70.41  or UP 0.44% (STILL REACTING TO POOR INDUSTRIAL PRODUCTION/POOR RETAIL SALES/TERRIBLE TANKEN CONFIDENCE INDEX/USA: YEN FALLS SLIGHTLY TO 1.0815)

3. Europe stocks opened ALL IN THE GREEN /USA dollar index UP to 94.18/Euro UP to 1.1396

3b Japan 10 year bond yield: FALLS   TO -.076%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.66

3c Nikkei now WELL BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  39.66  and Brent: 41.84

3f Gold UP   /Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.119%   German bunds in negative yields from 9 years out

 Greece  sees its 2 year rate FALL to 10.59%/: 

3j Greek 10 year bond yield FALL to  : 8.95%   (YIELD CURVE NOW INVERTED)

3k Gold at $1247.75/silver $15.55 (7:45 am est) 

3l USA vs Russian rouble; (Russian rouble UP 34/100 in  roubles/dollar) 66.78

3m oil into the 39 dollar handle for WTI and 41 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN COLLAPSES TO 108.33 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9547 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0888 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 STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 9 Year German bund now  in negative territory with the 10 year RISES to  + .119%

/German 9 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.74% early this morning. Thirty year rate  at 2.57% /POLICY ERROR)

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

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

 

U.S. Futures Jump In Tandem With Soaring Italian Banks On Hopes Of Government Bailout

It has been a rather quiet session, which saw Japan modestly lower dragged again by a lower USDJPY which hit fresh 17 month lows around 107.6 before staging another modest rebound and halting a six-day run of gains; China bounced after a slightly disappointing CPI print gave hope there is more space for the PBOC to ease; European equities rose, led by Italian banks which surged ahead of a meeting to discuss the rescue of various insolvent Italian banks, while mining stocks jumped buoyed by rising metal prices with signs of a pick-up in Chinese industrial demand.

The Italian bank rescue euphoria spilled over to the US where equity futures spent most of the session around the flatline before a sudden buying jolt after the Europen open sent them almost instantly to session highs. WTI started off stong, immediately printing above $40 on the break but has since faded the jump and was down 0.5% at last check even as the USD has dipped, with the DXY sliding once again.

European shares erased earlier losses of as much as 0.8 percent as measures of banking stocks and commodity producers posted the biggest gains of the index’s 19 industry groups. Spain’s Banco  Santander SA and Italy’s Intesa Sanpaolo SpA led the advance, while Anglo American Plc and ArcelorMittal rose at least 3 percent. As a result, the Stoxx Europe 600 Index extended Friday’s gains, putting it on course for the biggest back-to-back advance since March.

The U.S. earnings season unofficially kicks off later Monday, when Alcoa Inc. reports quarterly results after markets close. European peers including Tesco Plc and Sodexo SA are scheduled to release financial reports this week. Analysts are forecasting profit at companies in Europe’s Stoxx 600 index will shrink in 2016, reversing earlier calls for earnings to improve.

Some strategists were concentrated about what this quarter’s earnings season will reveal: “Investors won’t find it easy to believe in the rally until they get more evidence of a business-cycle recovery,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, told Bloomberg. “The good news is that we already know that the beginning of the year was pretty tough for most companies, so the bar has been set pretty low for this earnings season.”

Others were more worried about the ongoing strength of the Japanese currency: “Yen strength is really hurting at the moment,” Steve Brice, chief investment strategist at Standard Chartered Bank, told Bloomberg TV in Singapore. “It’s shaken a lot of people’s confidence in Abenomics and the underlying thesis behind holding Japanese equities. The extent of the strength we’ve seen has surprised pretty much everybody.”

All that really matters, however, is what Janet Yellen and company will say or do, and what the closing price pegged for the S&P500 at the New York Fed is today. And speaking of that,recall that today at 11:30AM the Fed will hold a closed, emergency session behind closed doors where rates will be discussed, followed by an impromtpu meeting between Obama, Biden and Yellen in the afternoon.

Market Wrap

  • S&P 500 futures up 0.3% at 20470
  • Stoxx 600 up 0.3% to 333
  • FTSE 100 +0%
  • DAX +0.7%
  • Euro down 0.11% to $1.1387
  • German 10Yr yield down 1bps to 0.09%
  • Italian 10Yr yield down 1bps to 1.3%
  • Spanish 10Yr yield down 1bps to 1.51%
  • MSCI Asia Pacific down 0% to 126.3
  • Nikkei 225 down 0.4% to 15751.1
  • Hang Seng up 0.3% to 20440.8
  • Kospi down 0.1% to 1970.4
  • Shanghai Composite up 1.6% to 3034
  • US 10Yr yield up 0bps to 1.72%
  • Dollar Index down 0% to 94.23
  • Brent Futures down 0.8% to $41.6/bbl
  • WTI Futures down 0.8% to $39.4/bbl
  • Gold spot up 0.7% to $1248.2/oz

Top Global News

  • Greece Points Finger at IMF as Schaeuble Sees Deal Within Weeks: Greek Minister of State Nikos Pappas speaks in interview
  • Italy Officials, Banks Said to Plan Monday Meeting on Fund Setup: UniCredit would be among investors in possible fund, CEO says
  • Panama Furor Rumbles Into Second Week as Global Pressure Mounts: David Cameron to face parliament over offshore tax havens
  • Daily Mail Says It’s In Early Talks With Potential Yahoo Bidders: Verizon, Google said to be among bidders for Yahoo’s Assets

Looking at regional markets, Asian stocks traded relatively mixed after inflation figures suggested deflationary pressures eased, while Nikkei 225 underperforms on JPY strength. JPY weighed on the Nikkei 225 (-0.4%) with a contraction in Machine Orders adding to the dampened sentiment, while ASX 200 (-0.1%) is also negative, although losses have been stemmed amid advances in energy. Shanghai Comp (+1.6%) was underpinned by commodity strength and a mixed bag of Chinese data in which CPI missed estimates but matched its 22-month high, while PPI was better than expected despite declining for a 49th consecutive month. 10yr JGBs saw muted trade with prices flat despite a cautious tone in Japan, while the BoJ refrained from entering the market under its bond-buying program.

Top Asian News;

  • Standard Chartered Said Selling $4.4 Billion of Asian Assets: Stressed Indian loan portfolio draws interest from SSG Capital
  • Abenomics Rebuked as BlackRock Joins $46 Billion Japan Pullout: BlackRock among cos. ending bullish calls on Japan equities
  • Chinese Authorities Said to Probe Nanjing Peer-to-Peer Lender: Easy Richness raised at least 10b yuan from investors
  • Mystery $9 billion in Extra Cash Perplexes India: Cash spikes during election time, notes RBI’s Rajan
  • HNA Agrees to Buy Airline Caterer Gategroup for $1.5 Billion: HNA makes all-cash offer for Swiss caterer at 20% premium

In Europe, this morning the Eurostoxx (+0.60%) pare opening losses led by gains in financial and material names. The FTSE MIB (+1.2%) outperforms in the region amid reports that Italy is finalising plans for a new multibillion-EUR rescue fund to shore up ailing banks. While upside in the precious metals complex underpinned strength in miners with Anglo American and Arcelormittal notching up gains of over 4%.

Bunds remain elevated as the 10 yield dropped to a fresh 12-month low of 0.077, just shy of the all-time low at 0.074 , however saw a modest pullback amid the turnaround in stocks. Interestingly, this week sees supply as largely net negative with around EUR 36b1n of redemptions (all due to be repaid on Friday) due to offset the circa EUR 10bIn of supply. Furthermore, the latest CFTC report has revealed that markets have placed their largest bet against treasuries in five months, while this week is also set to see USD 56b1n of US paper hit the market. Finally, analysts at RBS expect that the main driver for Bunds will be an acceleration of ECB QE rather than risk sentiment with expectations of outperformance in the periphery.

Top European News

  • Vivendi Agrees to Buy Berlusconi’s Pay-TV Unit in Swap Deal: Vivendi and Mediaset will acquire stakes of ~3.5% in each other
  • Aegon to Sell $8.5b of U.K. Annuity Portfolio to Rothesay: is disposal aimed at freeing up capital
  • SAP Sales Miss Estimates as Some Deals Slip to Next Quarter: co. reiterates operating profit forecast for 2016
  • HNA Agrees to Buy Airline Caterer Gategroup for $1.5b: Shareholders would get CHF53/shr as well as previously declared CHF0.30/shr dividend
  • Standard Chartered Said Selling $4.4b of Asian Assets: Stressed Indian loan portfolio draws interest from SSG Capital
  • CaixaBank, dos Santos Agree on Plan for BPI Angola Exposure: Deal allows Portuguese lender BPI to comply with ECB request
  • Three-O2 Deal Should Be Banned If No Network Sale, U.K. Says: U.K.’s antitrust regulator tells EU concessions fall short
  • Nordea Plans to Sell Baltic Units ‘In Near Future:’ Aripaev: says sale has been prepared for 1.5 yrs
  • Total CEO Interested in Gas Downstream Sales in China: Caixin: Total aims to increase its lubricant market share in China from current 3%

In FX, a few interesting moves in FX this morning, with USD/JPY making a fresh cycle low at 107.61 but this was only a marginal extension of the lows seen last week. Price action suggests some demand ahead of 107.50, but back above 108.00, there seems little momentum for a full blown recovery to 109.00+ levels seen at the end of last week. Some of this support may have come from a reported buy order in GBP/JPY, which saw the recovery from sub 152.00 touching levels just shy of 154.00. Cable ripped through 1.4150-70 stops in the process, taking out 1.4200-10 before the latest dip back under the figure. We saw EUR/GBP back to .8000, but this level has held so far. Relatively tight ranges seen in the commodity currencies, with the CAD weakening temporarily through 1.3000 on a slip in Oil prices. Norwegian inflation pretty much in line with expectations. NOK makes new 4+ week highs vs the EUR.

In commodities, WTI initially opened above $40 but later erased gains as Iraq boosted its March oil production to a record before a meeting in Qatar of OPEC members and other producers on April 17 to discuss capping output. West Texas Intermediate dropped 0.4 percent to $39.57 a barrel and Brent lost 0.3 percent to trade at $41.82.U.S. natural gas futures slid 2.8 percent to $1.935 per million British thermal units, the biggest drop in more than two weeks.

Gold rose to the highest level in almost three weeks. Bullion for immediate delivery advanced 0.6 percent to $1,247.66 an ounce, extending a gain of 1.5 percent last week, as a subdued USD overnight underpinned the commodities complex and supported copper and iron ore prices, with the latter higher by over 3% alongside firm gains in steel prices on lower stockpiles and after a Chinese government official called for more capacity reductions. However, the FT are running a story suggesting that restructuring of the sector will lead to much more capacity than is required and thus the glut of supply will remain. Silver added 0.9 percent.

There is nothing on today’s economic calendar, although the relentless speeches from Fed presidents continue, with Dudley and Kaplan on deck. Of course the actually relevant Fed meetings, those in the close session at 11:30 where the Fed will be discussing rates, and the subsequent in which Yellen will meet Obama, will be entirely behind closed doors.

 

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities enter the US session in positive territory amid outperformance in Italian banks and materials names
  • Despite printing a cycle low of 107.61, USD/JPY ran in to support above 107.50 to reclaim 108.00 while GBP/USD ripped through stops to take out 1.4200 to the upside
  • Looking ahead, the calendar is relatively light with the only notable highlight being potential comments from Fed’s Kaplan
  • Treasuries lower in overnight trading as European equity markets rally on news of Italian bank clean up, Asian markets rise; this week will feature Treasury auctions of $56b 3Y,10Y and 30Y.
  • Italian Treasury and central bank officials will meet with executives of major banks on Monday to discuss the creation of a fund that would buy bank shares and help the institutions tackle non-performing loans
  • Italian industrial production fell 0.6% in February, reflecting concerns about the pace of recovery that prompted the government to cut this year’s growth outlook
  • After correctly predicting the yen’s advance beyond 115 and then 110 per dollar, the former Finance Ministry official in charge of currency intervention in Japan Eisuke Sakakibara now says Japan’s currency may strengthen to 100 by year-end
  • Foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998, dumping $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters
  • Standard Chartered Plc is seeking to sell at least $4.4 billion of assets in Asia, people with knowledge of the matter said, as the lender pares its balance sheet after booking record impairments
  • Five years after Occupy Wall Street protesters spawned a national discussion about the divide between America’s highest and lowest earners, the pay gap has only gotten wider; Wall Street bankers earned five times the national average in 2014
  • The fallout from the Panama leaks showed no sign of abating as U.K. PM David Cameron was forced to provide more transparency over his wealth and European officials pledged measures to require companies to report their offshore bank accounts
  • Brazilian security forces are deploying thousands of troops and erecting barricades in the capital city of Brasilia this week to prevent violent clashes as Congress holds key votes on the impeachment of President Dilma Rousseff
  • Sovereign 10Y bond yields mostly steady; European, Asian equity markets mixed; U.S. equity-index futures rise. WTI crude oil and copper fall, gold rallies

 

DB’s Jim Reid concludes the overnight wrap

In Asia this morning there is some important inflation numbers out of China data to digest. CPI for the month of March has printed at +2.3% yoy which was a smidgen below expectations (of +2.4%) but flat on the prior month which was then the highest since July 2014 and will likely provide for some comfort that the data is stabilising. Meanwhile the latest PPI numbers continue to show improvement after printing at -4.3% yoy (vs. -4.6% expected), and up six-tenths from the prior month. While factory gate prices remain yet again in negative territory, the +0.5% mom reading is the first positive monthly rise in prices since 2013.

Looking at the market reaction, sentiment appears to be buoyed in China post the data where the Shanghai Comp and CSI 300 have bounced +1.82% and +1.74% respectively. Elsewhere, it’s a bit more mixed. Following a 3.24% rally last week for the Yen, further modest gains this morning appear to be weighing on Japanese equity markets where the Nikkei is currently -1.30%. Meanwhile the Kospi and ASX are flat and the Hang Sang (+0.51%) is posting a modest gain. Credit markets are little moved, as are US equity index futures this morning.

Away from the data the newsflow over the weekend has been fairly quiet on the whole. We highlighted on a few occasions in the EMR last week the notable underperformance of European Banks since the ECB bazooka over a month ago now. The notable drag for that asset class has come from Italian banks in particular where concerns for the sector have remained elevated. That said sentiment was greatly improved on Friday (FTSE MIB +4.08%) over hopes that the nation is looking to piece together a bank rescue fund. According to the FT, Italy’s finance minister, Padoan, has called a meeting in Rome today to run over and agree upon the final details of a ‘last resort’ bailout plan. The article suggests that the plan could become official as soon as tonight but there are still concerns about whether or not the proposal will be sufficient enough to ring fence Monte dei Paschi from contagion. One to keep an eye on.

Staying in Europe, our European Economists – in their Focus Europe piece from Friday – also gave their latest thoughts on the current political situations in Greece and Spain which had weighed on fixed income markets (particularly in rates) to some degree last week. With regards to the latter, our colleagues believe their central scenario of a new election in June in Spain has become more likely. Last Thursday negotiation teams from centre-left PSOE, liberal Citizens and left-wing Podemos met to see whether they could find an agreement to form a government. Their pessimism appears to have been justified and the Citizens’ and Podemos’ economic and political agendas continue to appear irreconcilable. Should their prediction prove correct and no PM nominee wins a confidence vote by the 2nd of May then the King will dissolve parliament and call a new election, likely due three days after the Brexit referendum.

Meanwhile, in terms of Greece, our Economists judge that a return of Grexit fears as being unlikely over the coming weeks. While they note that the ongoing disagreements between Greece, the IMF and European creditors suggest that there remains some way to go until agreement is reached, they highlight two important factors as dampening risks. First, both the refugee crisis and the Brexit referendum significantly increases the costs to Europe of a crisis in Greece. Second, the Syriza government has a greater commitment to the program with PM Tsipras having obtained voters’ support for continued cooperation with Europe last September and espousing the benefits of co-operation with European partners over the last six months. The perhaps greatest risk for now is that debt relief negotiations are not completed in time for Greece’s July ECB redemptions, once again deferring full IMF participation in the program and leaving some of Greece’s medium term issues – including the full lifting of capital controls on the banking system – unresolved.

Over to markets and a quick recap of how we closed out last week on Friday. Sentiment was broadly improved with a large part of that owing to the big rally across the Oil complex on Friday. WTI and Brent both closed up more than 6% on the day meaning they finished just shy of $40/bbl and $42/bbl respectively (although they have broken through those respective levels this morning). There didn’t appear to be any fresh news to drive those big moves but the rally did help to conclude the first five-day gain for both (WTI +7.96%, Brent +8.46%) in three weeks. Those gains boosted energy stocks which led the Stoxx 600 firstly to a +1.15% gain, and then helped the S&P 500 get off to a decent start before momentum faded as the session came to close, with the index eventually stumbling to a much more modest +0.28% gain. EM currencies were the big outperformer (Brazilian Real +2.83%, South African Real +1.91%, Russian Ruble +1.39%) while the better tone was reflected in a boost for peripheral rates markets where we saw yields drop 7-8bps, while core markets were little changed.

In terms of the macro, the economic data out of the US on Friday was fairly soft and representative of a further drag on growth this quarter from diminishing inventories. Both wholesale inventories (-0.5% mom vs. -0.2% expected) and trade sales (-0.2% mom vs. +0.2% expected) came in lower than expected and so much so that we saw the Atlanta Fed downgrade their Q1 GDPNow forecast by three-tenths to a lowly 0.1% and the lowest forecast they have predicted so far. After getting back into positive territory not too long ago, US economic surprise indices have now slipped back into negative territory again.

Away from this the latest comments out of the Fed were from NY Fed President Dudley, who certainly came across as more cautious and dovish than some of his colleagues. Dudley noted that risks to the US outlook are ‘slightly’ tilted to the downside and that caution is warranted ‘because of our limited ability to reduce the policy rate to respond to adverse developments, recognizing that we could also use forward guidance and balance sheet policies to provide additional accommodation if that proved warranted’.

Wrapping up the rest of the Friday dataflow, in Europe the highlight was a couple of softer IP reports covering the month of February. Both the UK (-0.3% mom vs. +0.1% expected) and France (-1.0% mom vs. -0.4% expected) missed to the downside which poses some downside risk for the Euro area reading this Wednesday. Finally on Friday, Germany reported a slightly higher than expected trade surplus as of February owing to a notable beat in exports (+1.3% mom vs. +0.5% expected) during the month.

There’s more important Fedspeak to keep an eye on including Dudley and Kaplan today, Harker, Williams and Lacker all tomorrow Lockhart and Powell on Thursday and finally Evans on Friday. Over at the ECB we’ll hear from Knot on Wednesday. Finally this week will also see the unofficial commencement of earnings season in the US with Alcoa due to report today. Also scheduled to report are the banks with JP Morgan (Wednesday), Bank of America (Thursday), Wells Fargo (Thursday) and Citigroup (Friday) all due up. Tuesday will also see the release of the IMF’s World Outlook ahead of its spring meetings.

END

ASIAN AFFAIRS

 

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP 48.99 POINTS OR 1.64%  /  Hang Sang closed UP 20.41 OR 0.35%. The Nikkei closed DOWN 70.39 POINTS OR 0.44% . Australia’s all ordinaires  CLOSED DOWN 0.12%. Chinese yuan (ONSHORE) closed UP at 6.4616.  Oil ROSE  to 39.66 dollars per barrel for WTI and 41.84 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.4802 yuan to the dollar vs 6.4616 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS REMAINS AT THE 108 CROSS SETTING OFF GLOBAL TENSIONS WHICH IN TURN IS CAUSING THE SPECIAL MEETING AT THE FED.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

the high yen value  (low USA/Yen) is causing a special meeting at the Fed toay. No doubt we had a major derivative bust.

b) CHINA ISSUES

China sees its PPI drop for the 49th consecutive month as its deflation “at the gate” is spreading throughout the globe.  CPI also misses:

(courtesy zero hedge)

 

China CPI Misses, Drops Sequentially As PPI Declines For 49 Consecutive Months

There was some good and some bad news in tonight’s Chinese March inflation (and deflation in the case of PPI) data.

The good news, for those who believes that rising inflation is a positive economic outcome, was that Producer Prices declined “only” 4.3% Y/Y, or less than the -4.6% exoected, and better than the -4.9% drop last month. On a sequential basis, PPI rose by 0.5% on the back of various commodity input prices posting a modest increase in the past month on the back of China’s epic January loan injection.

However, putting that rebound in context, on an annual basis, Chinese gate inflation, or rather deflation, has now been negative for 49 consecutive months.

 

The not so good news, was in the CPI print, which rose 2.3% Y/Y, missing expectations, and in line with last month’s identical increase. This tied headline inflation at a 22 month high, even as non-food inflation rose a paltry 1% in March.

 

On a sequential basis, however, CPI dropped by 0.4% M/M, driven by a 0.1% decline in non-food inflation coupled with a much needed 1.8% drop in food inflation. As a reminder, in recent months Chinese food inflation has exploded driven by a 60% jump in pork prices which had risen to the point where the population was starting to grumble about the surging prices of this most popular protein in the mainland.

Still, on a Y/Y basis, food inflation rose once more, increasing 7.6% Y/Y and remains the only stable component of inflation, hardly the “diet” for a stable, growing economy, in which consumers are forced to spend their discretionary income on staples instead of pushing up broader, core prices.

The best news, however, since China’s inflation appears to have once again peaked, is that this means the media will be flooded with expectations of more stimulus from the PBOC in the form of either RRR or interest rate cuts, which in turn pushed the Shanghai Composite more than 1% higher and back over 3000. Then again, whether the PBOC agrees with such an assessment, one which by definition will further weaken the Yuan, remains to be seen.

END
As we have indicated to you on countless occasions, the shadow banking sector is collapsing, having its bubble financing schemes blow up.  The key indicator for wealth in the Chinese economy is not the stock market but ownership of homes.  We found that in order to provide financing for the homes, Peer to Peer financing was born  ( P to P) and the amounts lent to home buyers was the 30% down payment.  Now this financing is collapsing as noticed by Bank of America:
(courtesy Bank of America/zero hedge)

BofA Notices Something Troubling: China’s Debt Bubble Has Burst

It was just a few days ago when we covered most recently that China has created a subprime debt bubble of monstrous proportions. We explained that the exposure isn’t just within the conventional, state-backed banking system, but also within their “wild west” shadow banking system, which has introduced “investors” to a significant amount of risk.

We know that it’s not a question of if, but when will the bubble finally pop (and as we show below, it already has) and introduce a new subprime (and debt in general) financial crisis for the world to deal with.

While it is sometimes difficult to get the data around just how significant a problem NPL defaults have become for China, and more specifically how the shadow banking lenders are faring, Bank of America has done some work to help give clarity around just that.

As BofAML shows below, defaults in the shadow banking sector have accelerated sharply, growing in both size and volume since late 2011.

And just like that, the relaxed credit policies in China, in their desperate desire to reinflate housing prices and stimulate the economy, have created a significant issue for the central planners to contend with , one which seems to be a recurring theme… Needless to say, the government is now scrambling to both suppress the number of defaults, and companies are even taking drastic measures to not have to report that they’re insolvent, but it may be too late.

Because as the chart above clearly shows, China’s debt bubble has officially burst. It’s all downhill from here.

BofA’s David Cui explains:

We have noticed a sharp jump since mid-2015 in the total value of reported defaults of shadow banking products, defined here as non-bank-loan debt instruments that include bonds, trusts, and credit products offered by peer-to-peer (P2P) and various offline wealth management companies (WMCs). While the government and some involved parties are busily trying to suppress defaults, risk exists that at certain point the scale and scope of the task may overwhelm their efforts; which may trigger a credit crunch, in our view. Although the exact timing is difficult to forecast, as defaults pile up, the risk of the debt market reaching a psychological turning point should keep on rising by our assessment.

 

Chart 1 (above) shows the trend of defaulted value in the shadow banking sector, based on data we gathered on noticeable default cases since late 2011 as reported by the media. As of June 2015, the accumulated amount was Rmb53bn; by now, it’s reached Rmb214bn.

 

* * *

 

The government is clearly concerned about the risks in shadow banking. Just today, it’s reported that 1) NDRC had called upon issuers and underwriters of enterprise bonds to assess default risks; 2) the Shanghai municipal government had stopped registration of new WMCs, and will review certain existing ones; 3) the Asset Management Association of China (AMAC) will announce rules by the end of Apr to help investors identify illegal fund raising activities by privately raised funds; and 4) CSRC may require brokers to include their off-balance sheet businesses, including derivatives, in their risk assessment, including leverage. The question is whether the government is closing the stable door after the horse has bolted. We suspect that the answer is yes.

One couldn’t make it any more convoluted, opaque and sadly, entertaining (for when it all unravels) if one tried.

It sounds like an enormous storm is brewing, and once again it’s a direct result of central planners convinced they know best not only how to run an economy, but that they will be able to fix everything once what is China’s most historic debt bubble ever, burst.

Or maybe, what we are told by overeager 17 year old hedge funds is true, and this time it’s different.

 

end
The fun begins: the government in China shuts down a high profile P to P  (Peer to Peer)
Lending company and arrested 21 of its key personnel. You will recall that P to P  shadow banking is responsible for providing the down payment money for investors wanting to purchase a home.  We should now shortly see the bubble in the China housing sector burst:
(courtesy zero hedge)

“Where Else Can I Put My Money?” – China Starts Arresting People As Crisis It Created Comes Full Circle

China has finally come full circle. Recall that last year as equities surged, Chinese “investors”opened enough brokerage accounts for every man, woman, and child in LA. The slowing of the economy and pending devaluation of the currency led the smart money to short the market, putting significant downward pressure on stocks. The answer to all of this was to of course arrest anyone who was involved in short selling stocks.

In the end, as people slowly learned that making money trading stocks isn’t as easy as they’d once thought, they asked where else can they put their money, perhaps real estate if it wasn’t so expensive. To which we pointed out that sadly, people will never learn.

But there remain some always those who will never learn., such as Helen Lu.

Where else can I put my money?” said Helen Lu. “Real estate is so expensive and beyond our reach, and there are no other good investment channels.”

Unfortunately, that proved to be an exchange that foreshadowed where we are today. Real estate prices may still be high, but those “investors” managed to find another place to put their money: Peer to Peer Lending.

As we covered a few days ago, in an effort to push people into owning more homes and juice the economy, the government has eased credit conditions and relaxed tax laws. However this alone hasn’t been quite enough to get buyers enough cash to get the deals done. Enter P2P lending, a shadow banking entity which essentially raises funds from the aforementioned investors, and loans them out as short term loans to buyers so they have enough cash for a down payment on their property. As it turns out, this is has been the answer to the question of “where else can I put my money.”

Just like their foray into stocks, Chinese investors are finding out that it isn’t easy to make money in short-term lending either. Defaults are on the rise and China’s subprime lending bubble has burst.

And just like it responded to “malicious short sellers” when stocks went down, China is now arresting those involved in the shadow banking world.

As Reuters reports, Zhongjin Capital Management was shut down earlier this month on “suspicion of illegal fundraising”, and 21 executives have been arrested. This comes on the heels of the Government stating they were going to crack down on illegal fundraising as part of a broader effort to stem financial risks hide the severity of the crisis. In their promotional material, the fund claimed they handled over 25 billion yuan according to Caixin.

And while they may not have missed any payments to investors as some close to the situation claim, they didn’t do themselves any favors staying off the radar by the way they portrayed themselves.

Zhongjin’s offices were often in some of the most expensive commercial buildings in the country and known for being full of investors eager to put down millions to buy its products. Investors told Reuters they would line up overnight to get a place in the queue, and offices were often full from 8 a.m. until 11 p.m.

 

They looked like banks, and were often located next to banks, giving them an air of reputability – a common practice among Shanghai wealth management firms seeking to burnish their reputations for stability in the face of rising reports of failure and fraud.

 

Local media showed posts from social media accounts featuring a young woman claiming to be a manager at Zhongjin, including pictures of her holding what looked like six 100,000 yuan bricks of cash garnished with thinner 10,000 yuan sheafs. More boxes of cash were in the background. Other posts show her driving a Ferrari and claiming to have just purchased a 2 million yuan investment product from the company.


Investors gather at the office of Zhongjin Capital Management

This is the second notable closing of a P2P firm in the last few months, as back in February China arrested 21 executives of internet finance platform Ezubao for allegedly defrauding investors (see Caught On Tape: Chinese Investors Find Out They Got Fleeced By A $7 Billion Ponzi Scheme).

And each time something like this occurs, as with any bubble, it has a significant impact on those who worked hard to save money and want to try to grow it.

An investor who gave his surname as Jiang told Reuters in a phone interview that he put 300,000 yuan ($46,345) of his family’s money into the company in March because of its perceived trustworthiness and high profile.

 

“The company’s offices were always busy, and they always paid back investments on time. Who would expect this type of company to have problems?” he said.

As China continues to scramble to do damage control relating to the latest bubble it helped create and then pop, these arrests are just the tip of the iceberg.

END

EUROPEAN AFFAIRS

 

Such lunacy: after Denmark we now see that Belgium is now paying people to take out a mortgage:  This is the height of stupidity with negative interest rates:

 

(courtesy zero hedge)

 

First Denmark, Now Belgium Is Paying People To Take Out A Mortgage

Back In January of 2015, we asked “who will offer the first negative rate mortgage?”

We didn’t have to wait long before Denmark’s Nordea Credit unleashed this idiocy. And now two banks in Belgium have followed suit, paying instead of charging interest on mortgages to a handful of customers.

Thanks to Mario Draghi’s generosity with “other generations’ slavery”, the negative rate mortgage is now a reality. As Het Nieuwsblad reports (via Google Translate),

Getting paid to borrow money for your house. It seems too good to be true, but for some clients of BNP Paribas and ING is not a dream but reality. The interest rate on their home loan is dropped below zero and so they get money from the bank.

 

For those who in 2012 closed a mortgage loan with a variable rate at BNP Paribas Fortis or ING are now very lucky. Due to a decline in interest rates, the interest rate on their home loan has also fallen below zero. In other words, the banks pay their customers rather than collect interest. This writes the newspaper De Tijd.

 

When a loan with fixed interest rate you pay a fixed rate for the duration of your loan. But at a variable interest rate, the interest rate can change at any time, depending on the conditions on capital markets. The rate is now so low that is below the zero interest rates for some customers.

 

The European Central Bank (ECB) lowered its deposit rate below zero, after all, and also buys bonds en masse to push market interest rates down.

Careful not cause a stampede of desperate “Belgian Dream” homebuyers (we hear apartments are cheap in Molenbeek), the banks note that it’s ‘limited’ to some clients…

It’s okay but for a limited number of customers. BNP Paribas Fortis is about “a few dozen customers” and ING also speaks of a “very limited number of contracts.” Other banks do not have a customer with a negative interest rate.

And just like that, as we warned in January, what started in Denmark has spread to Belgium, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, are directly funding thenegative interest rate paid to those who wish to take out debt. In fact, the more debt the greater the saver-subsidized windfall.

That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can’t wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, asspending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm.

 

END

 

Let the bail ins begin.  We have been highlighting the plight of HETA bank to you for our one year.  Today they announced a 54% haircut for senior creditors and if that is not enough they will go over depositors.  Junior bond holders and equity holders are of course wiped out.  The problem is the state of Corinthia guaranteed the amounts and they just do not have the money and sovereign Austria refuses to pay.  It has been and still is, a total mess:

 

(courtesy zero hedge)

 

 

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules

Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover.

This was the first official proposed “Bail-In” of creditors, one that took place before similar ad hoc balance sheet restructuring would take place in Greece and Portugal in the coming months. Or rather, it wasn’t a fully executed “Bail-In” for the reason that creditors fought it tooth and nail.

And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

The highlights from the announcement:

Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:

  • a 100% bail-in for all subordinated liabilities,
  • a 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities,
  • the cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG,
  • as well as a harmonisation of the maturities of all eligible liabilities to 31.12.2023.

According to the current resolution plan for HETA, the wind-down process should be concluded by 2020, although the repayment of all claims as well as the legally binding conclusion of all currently outstanding legal disputes will realistically only be concluded by the end of 2023. Only at that point will it be possible to finally distribute the assets and to liquidate the company.

As part of the announcement, Austria has cut Heta’s senior liabilities by 54 percent and extended the maturities of all eligible debt to Dec. 31, 2023 to help cover an 8 billion-euro ($9.1 billion) hole in Heta’s balance sheet. It also wiped out any residual equity and the junior liabilities as well as any supplementary capital. The Finanzmarktaufsicht took control of Heta last year in the first application of European Union rules designed to end taxpayer-funded bank rescues.

While the application of the new European recovery and resolution framework for banks is uncharted territory in both legal and practical terms, we are on target with the resolution of Heta,” the FMA’s co-chiefs, Helmut Ettl and Klaus Kumpfmueller, said in the statement. “Orderly resolution is more advantageous than insolvency proceedings.”

As Bloomberg writes, dealing with failing banks remains a thorny issue in the EU more than seven years after the collapse of Lehman Brothers Holdings Inc. Rescues in Portugal, Greece and Italy carried out before new rules came into force in those countries prompted protests over unequal or arbitrary creditor treatment. The EU’s untested Bank Recovery and Resolution Directive, now in force across the 28-nation bloc, provides rules and tools, including the so-called bail in, to make sure creditors share the burden.

Creditors were not happy, and Heta became a battleground of what the first BRRD implementation would look like. “At the heart of the issue is 11 billion euros of Heta’s debt that’s guaranteed by the province of Carinthia, which owned Heta’s predecessor until 2007. Those guarantees blunt the intent of the new rules because they mean the losses imposed on bondholders become a claim on Carinthia, which says it can’t pay them. Sunday’s haircut means the province faces claims of about 6.4 billion euros, the FMA said.”

Carinthia’s attempt to neutralize the guarantees by buying up the bonds at a discount was rejected by bondholders led by Commerzbank AG and Pacific Investment Management Co. last month. The creditors, who say that Austria should pay up if Carinthia can’t, also sued in a German court, arguing the BRRD’s rules don’t apply to Heta.

The announcement ushers in the next, and even more contentuous phase of creditor negotiations: after initially ruling out a second offer, Austrian officials this week smoothed the way for new negotiations to avoid years of litigation. Gaby Schaunig, Carinthia’s finance secretary, said she will review a recent creditor proposal and that “any out-of-court solution is better than the legal route.”

According to Bloomberg, some of the creditors are planning to make an offer to Austria that would result in a payout of 92 cents on the euro, a person familiar with the bid said Saturday. It’s unclear how many creditors support the offer. On Tuesday, representatives for both sides will also meet in London for talks, according to a report in Der Standard. Many creditors have rejected any haircut as an option over concerns how such an example could impact their investments in comparably impaired financial companies. Others are more willing to negotiate.

Some creditors had already challenged the FMA’s decision to apply European bank resolution rules to Heta. Answering the objections, the FMA said the wind-down remains “fully binding,” adding that creditors are now free to appeal to Austria’s federal administrative court:

Challenges may be submitted to the FMA against the emergency administrative decision of 10.4.2016, which sets out the significant resolution actions under BaSAG, within three months. If applicable, the FMA will initiate ordinary administrative proceedings, will recognise and examine the submitted challenges and will then issue an administrative decision in relation to the challenge procedure.

Changes, if any, to today’s decision will likely take years to pass through the Austrian court system. In the meantime, the precedent has been set and we expect many more banks to follow suit in “bailing in” their senior debt creditors, and ultimately – if there is not enough value to satisfy claims – depositors.

 

END

 

The following Mish Shedlock discussion on the possible bailout of the Italian banks is extremely important.Today is the big meeting.

Key notes;  The total of bad Italian loans (and these are not sovereign) amounts to 360 billion euros . That is much and that should cause the entire meltdown of the Italian banks.

They are trying to create a good bank, bad bank scenario and to ring fence perennial basket case Monte di Paschi which has 50 billion euros of bad debt.  The problem here is that the new rules require a bail in and that would cause the biggest bank run in the history of Italy.  So the boys are proposing a back door solution whereby the bad debt is off loaded and then sold.  The problem is that the selling must be done at fair market value..good luck to them on that point.

we will be watching this intentively

 

(courtesy Mish Shedlock)

Italy Seeks “Last Resort” Bailout Fund To “Ringfence” Troubled Banks, Meeting Monday

Submitted by Mike “Mish” Shedlock of Mishtalk

Italy Seeks “Last Resort” Bailout Fund to “Ringfence” Troubled Banks, Meeting Monday; Italy vs. Austria

Italy’s finance minister, Pier Carlo Padoan, wants to “ringfence” its troubled banks.

Padoan called for a meeting of executive of the troubled banks in Rome on Monday. The banks allegedly will come up with a “Last Resort” bailout fund.

Last resort or first resort, is there a difference at this point in time?

Please consider Italy Pushes for Bank Rescue Fund. I highlight the key buzzwords and phrases italics.

Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.

 

Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.

 

Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.

 

The plan being worked on, which could be officially announced as soon as Monday evening, recalls the Sareb bad bank created in 2012 by the Spanish government to deal with financial crisis in its smaller cajas banks, say people involved.

 

Although the details remain under discussion, it foresees the establishment of a private vehicle that will include upwards of €5bn in equity contributions — mostly from Italy’s banks, insurers and asset managers — and then a larger debt component. The fund will then mop up shares in distressed lenders.

 

A second vehicle will seek to buy non-performing loans at market prices.

 

“It is a backstop fund,” said one person involved in the talks.

 

The Italian government can provide only limited financial backing because of EU state aid rules and because it is already struggling under a public debt load that amounts to 132.5 per cent of GDP.

 

People involved in the talks question whether the plan would have the financial scope to provide a buffer of last resort for Monte dei Paschi di Siena. Italy’s third-largest bank was the worst performer in the 2014 European stress tests, with about €170bn in assets and about €50bn in bad loans. It is considered by many bankers to be the major risk to Italian financial stability and regarded as too big to fail.

 

“Monte Paschi is the elephant in the room,” says one of Italy’s top bankers.

 

Monte Paschi is already trading at zero compared with its tangible equity value if its bad debt disposal is taken into account at current prices, says Johan De Mulder of Bernstein Research. By comparison, when Lehman Brothers collapsed in 2008 it was trading at about 20 per cent of its tangible equity.

 

Berenberg analyst Eion Mullany argued that the “Italian banking sector is at apivotal moment in its history”.

 

“We worry that a bail-in of an Italian bank may cause a chain reaction with ripple effects felt across the European banking system,” Mr Mullany added, referring to the possibility of bondholders and depositors in Italian banks being forced to participate in a rescue.

Key Buzzword and Phrases

  1. Last resort
  2. Ringfence
  3. €360bn pile of non-performing loans
  4. Sareb bad bank
  5. Equity contributions, mostly from Italy’s banks, insurers and asset managers
  6. Backstop fund
  7. Public debt load that amounts to 132.5 per cent of GDP
  8. Buffer of last resort
  9. €170bn in assets and about €50bn in bad loans
  10. Too big to fail
  11. Elephant in the room
  12. Trading at zero compared with its tangible equity
  13. Lehman Brothers
  14. Pivotal moment in its history
  15. Bail-in of an Italian bank may cause a chain reaction with ripple effects

Those were the key buzzwords in order. Using those buzzword in the same order, let’s condense the article down to the essence with as few sentences as possible.

Mish’s Concise Summation

As a last resort to ringfence a massive €360bn pile of non-performing loans of Italian banks, Finance minister Pier Carlo Padoan has called for a meeting of minds in Rome on Monday. Padoan seeks a plan reminiscent of the Sareb bad bank structure in Spain, even though that plan blew up several times.

The bad bank will require equity contributions, mostly from Italy’s banks, insurers and asset managers to build up a backstop fund. This approach is necessary because Italy has public debt load that amounts to 132.5 per cent of GDP in gross violation of Eurozone rules.

The structure needs a buffer of last resort because Monte dei Paschi di Siena, Italy’s third-largest bank, has €170bn in assets and about €50bn in bad loans. Monte dei Paschi di Siena is regarded as too big to fail, a veritable elephant in the room, trading at zero compared with tangible equity. Lehman Brothers collapsed in 2008 it was trading at about 20 per cent of its tangible equity.

This is a pivotal moment in history because a bail-in of an Italian bank may cause a chain reaction with ripple effects that will be felt across the European banking system.

Comparisons

I used 4 paragraphs, the Financial Times used 20. I threw in bonus buzz phrases “meeting of minds” and “blew up several times”.

Italy is desperate to avoid the path Austria announced today, a 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules as commented on by Zerohedge.

  • 100% bail-in for all subordinated liabilities
  • 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities
  • Cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG
  • Harmonization of the maturities of all eligible liabilities to 31.12.2023

In contrast, Italy is the “too big to fail”, “elephant in the room”. Should Italy try Austria’s solution, it presumably would cause a “chain reaction with ripple effects that would be felt across the European banking system.”

Instead, officials will attempt to “ringfence” the problem, hoping to “sweep it under the rug” where presumably a “€360bn pile of non-performing loans” will cure itself, eliminating the need for additional bail-ins

END

Germany, is reported to be very angry that the ECB is contemplating “helicopter money” as QEs just do not work.  Do not read too much into this:  Germany is benefiting greatly from the ECB policies as their balance sheet would be terribly offside if there was no QE,

(courtesy zero hedge)

 

ECB Scrambles To Calm A Furious Germany: “Helicopter Money Was The Straw That Broke The Camel’s Back”

Over the weekend we reported that in a scathing Spiegel article the German financial media outlet let loose at the ECB with a report according to which Germany is now “taking aim” at the ECB as a result of the imminent launch of Helicopter Money by the Frankfurt-based central bank.

Spiegel even suggested that the German finance ministry would go so far as to sue the ECB to prevent this final monetary paradrop in a desperate attempt to stimulate (hyper)inflation:

Were the ECB, as Draghi has indicated it might, to open the monetary policy gates even wider — with, for example, helicopter money — the German finance minister would view it as a breaking point. Such a policy would see the ECB bypass the banking sector and distribute money directly to companies, consumers or states, all of which would stand in violation of the central bank’s own statutes. Should it come to that, sources in the German Finance Ministry say, Berlin would have to consider taking the ECB to court to clarify the limits of its mandate. In other words: the German government and Draghi’s ECB would be adversaries in a public court case.

Such a legal battle between the government and a central bank would be a first in German history. It could lead to a constitutional crisis of unprecedented severity or to currency turbulence — which is why it is extremely improbable that the two sides would allow the conflict to escalate to such a degree.

Just a few hours later Schauble went on the record to deny that the Geran finmin would consider taking legal action if the European Central Bank resorts to “helicopter money” but the damage was already done.

As Reuters follows up today, “almost a month after stoking a divisive debate about how far it should go in pumping money into the flagging euro zone economy, the European Central Bank is trying to soothe relations with Germany after unusually strong criticism from Berlin.

Late last week, German Finance Minister Wolfgang Schaeuble was reported as blaming the ECB’s cheap-money policy in part for the rise of the country’s right-wing anti-immigration Alternative for Germany (AfD).

The discussion is likely to continue when ECB President Mario Draghi meets Schaeuble this week in Washington at the International Monetary Fund’s spring gathering of central bankers and ministers from around the world.

A storm of protest erupted in thrifty Germany after Draghi last month described the idea of “helicopter money” – sending money directly to citizens – as a “very interesting” – if unexamined – concept.

Late last week, top ECB officials, including the ECB’s chief economist and its vice president, backpedalled, saying the idea was not on the table. But the damage had already been done.

Analysts at German banks, those most impacted by Europe’s trillions in negative yieldings loans, were furious. “The ECB’s policy was already unpopular in Germany and the idea of helicopter money was the straw that broke the camel’s back,” said Joerg Kraemer, an economist with Commerzbank in Frankfurt. “People feel that ideas like this are dangerous.”

Others were likewise livid: “We’ve seen most of the impact of QE (Quantitative Easing) last year and there is little more to come,” said Lars Feld, one of the ‘wise men’ that advise the German government on economic policy.

Instead of lower rates, the German government, which is becoming increasingly concerned with the hostility of its savers and insurance companies, is now calling for higher rates: “Higher interest rates would now be good for the profits of banks and insurers and would stop the emergence of property bubbles, such as the one we might see in Germany.”

On Sunday, a number of German politicians criticized the ECB’s stance, with one minister blaming low interest rates for putting a “gaping hole” in pensions, as rumors of possible legal action over helicopter money swirled.

While one can debate how much of Germany’s public stance is posturing, the tide is clearing turning against Draghi in Europe’s most prosperous and powerful nation. And as Reuters adds, this weekend’s scandal marked a new low in the often fraught relations between the euro zone’s biggest country and the central bank’s Italian chief, who has recently bemoaned what he described as the “nein zu allem” (“no to everything”) approach – a swipe at Germany.

It’s not just Germany who is angry though: the discussion about ever wider boundaries of possible ECB action, distracting from the ECB’s 1.7-trillion-euro-plus money printing scheme, also irritated some euro zone central bank governors, a person familiar with the matter said.

The ECB, which for years has struggled to improve its image with a skeptical German public, declined to comment. But many at the ECB resent what they see as unrelenting criticism from German politicians, journalists and economists, who reject the ever more generous measures the ECB is taking to fire up the slow economy.

“I think this shooting at the institution, especially in this country, is sometimes difficult to swallow,” Peter Praet, the ECB’s chief economist, told a conference of economists last week in Frankfurt.

There seems little prospect, however, of the debate abating ahead of a meeting of the 19 euro zone central bank governors on April 20-21. A spokesman for Schaeuble’s finance ministry described it as a “legitimate discussion”.

Others forecast that the idea of sending money directly to Europeans could shadow such gatherings. “It will be hard to get the idea of helicopter money out of people’s heads,” said a euro zone official.

Finally, for all those skeptics who correctly see this as nothing but a made for primetime TV spectacle meant to show how Germany is willing to oppose the former Goldmanite money printer, here is the punchline: “The criticism in Germany is justified but a little dishonest,” said Commerzbank’s Kraemer.“There is no way Schaeuble would be balancing his books were it not for the ECB’s policy.

And this is why, after all the sound and fury dies down, the ECB will proceed with the monetary paradops just as expected. Because, after all, that is what Goldman wants.

RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

The Ukraine is also a basket case  (along with Venezuela see below). Yesterday, the UKraine Prime Minister resigns and states that destabilization is inevitable and what is needed is a new government:

(courtesy zero hedge).

As the Americans deploy B 52 bombers in Syria, they will surely come in contact with Russia.  The USA will come from the Mosul side and Russia will come from the Aleppo side. This is an accident waiting to happen!
(courtesy zero hedge)

Let The Carpet Bombing Begin: U.S. Deploys B-52s In Fight Against ISIS

Several months ago, the US press and military had a field day with Donald Trump’s suggestion to send the heavy equipment to Syria and Iraq and “carpet bomb” the Islamic State. In February, Army Lt. Gen. Sean MacFarland, who directs the coalition fighting ISIS in Iraq and Syria, butchered the idea and detailed why it’s militarily unacceptable. “Indiscriminate bombing where we don’t care if we are killing innocents or combatants is just inconsistent with our values,” he said in response to a question from CNN on the possibility of using carpet bombing.

“We are the United States of America, and you know we have a set of guiding principles and those affect the way we, as professional soldiers, airmen, sailors marines conduct ourselves on the battlefield,”

Fast forward just two months later, and it appears Trump may have been on to something.

According to Reuters, for the first time in 25 years, the U.S. Air Force deployed B-52 bombers to Qatar on Saturday to join the fight against Islamic State in Iraq and Syria. This is the first time the B-52 has been based in the Middle East since the end of the Gulf War in 1991.

U.S. Air Forces Central Command said it last flew the long-range bombers operationally in the region in May 2006 as part of the war in Afghanistan, and during a U.S.-led military exercise in Jordan in May 2015.

“The B-52 demonstrates our continued resolve to apply persistent pressure on Daesh and defend the region in any future contingency,” said Air Force Lieutenant General Charles Brown, commander of U.S. Air Forces Central Command.

And, since the B-52’s core competency is bombing, usually with the “carpet” adverb before it, one may wonder if it wasn’t Trump’s suggestion to unleash hell on ISIS that prompted the US military to make this move.

Lieutenant Colonel Chris Karns, spokesman for the Central Command, said he could not provide the exact number of B-52 bombers to be based at Al Udeid Air Basein Qatar due to “operational security reasons.”

Washington’s decision to deploy its powerful B-52 bombers to Al Udeid Air Base in Qatar came as the U.S. military stepped up the fight against Islamic State in Iraq and Syria.

Brown said the bombers would be able to deliver precision weapons and carry out a range of missions, including strategic attack, close-air support, air interdiction, and maritime operations.

To be sure, it was important to make it seems that Trump is not who prompted the ideas, which is why Karns said the bombers would enable U.S. forces to drop one or two munitions in an area, rather than use carpet bombing.

And then the following disclaimer: “Accuracy is critically important in this war,” he said. “Carpet-bombing would not be effective for the operation we’re in because Daesh doesn’t mass as large groups. Often, they blend into population centers. We always look to minimize civilian casualties.”

Which probably does not explain why 90% of the people killed in recent US drone strikes were not the target.

As for the B-52s about to unleash carpet precision bombing in Syria, for the sake of any Doctors without Borders locations on the ground, our advice: run and hide.

END
Iran releases video showing the arrival of long range S 300 missile systems:
(courtesy zero hedge)

Iran Releases Video Showing Arrival Of First Russian S-300 Missile System

Over the past year, the US State Department had repeatedly objected to the proposed Russian delivery of S-300 missile defense systems to Iran. One year ago, the issue first came up when as CNN reported then John Kerry raised objections with Moscow over a plan to sell advanced missile defense systems to Iran. The White House said Kerry made the US opposition clear in a phone call to Russian Foreign Minister Sergey Lavrov.

It wasn’t just Kerry: the Pentagon also expressed concern about the move, saying it was “unhelpful.” At the time, Pentagon spokesman Colonel Steve Warren told reporters that “our opposition to these sales is long and public. We believe it’s unhelpful. We are raising that through the appropriate diplomatic channels.”

Israel also chimed in and “expressed alarm” over Putin’s announcement that he was lifting the block on the transfer of the controversial weapons system to Tehran, against which both the US and Israel have lobbied hard. “There is concern that the S-300 would seriously complicate any attempt at military intervention against Iranian nuclear facilities” CNN reported.

A senior Israeli official told Haaretz on Monday night that the Kremlin briefed Israel on its decision a short while before announcing the move. The official said Israel is also worried components of the air-defense system will be transferred to Syria and Hezbollah, seriously hamstringing the air force’s ability to dominate the skies over Lebanon or Syria.

And yet, none of these formal diplomatic complaints resulted in anything. As Iranian media reported overnight, Russia has delivered the first part of an advanced missile defense system to Iran, starting to equip Tehran with technology that was blocked before it signed a deal with world powers on its nuclear program.

The S-300 surface-to-air system was first deployed at the height of the Cold War in 1979. In its updated form it is one of the most advanced systems of its kind and, according to British security think tank RUSI, can engage multiple aircraft and ballistic missiles around 150 km (90 miles) away.

In a recorded transmission, state television showed Foreign Ministry spokesman Hossein Jaber Ansari telling a news conference on Monday: “I announce today that the first phase of this (delayed) contract has been implemented.”

Ansari was replying to reporters’ questions about videos on social media showing what appeared to be parts of an S-300 missile system on trucks in northern Iran.

More from Tasnim News:

Iranian Foreign Ministry Spokesman Hossein Jaberi Ansari announced on Monday that the first phase of a contract with Russia on the sale of S-300 air defense missile system to Iran has been completed.

The first phase of the contract has run its course, Jaberi Ansari said at his weekly press briefing in Tehran on Monday, expressing the hope that all the phases of the deal will be implemented according to schedule.

The head of Russia’s industrial conglomerate Rostec had said last month that Iran would take delivery of the first shipment of S-300 missile defense system in August or September this year.

“I think we will deliver the S-300 by the end of the year,” Sergei Chemezov said on March 11. “The first delivery will be in September or August.” Chemezov also said that Iran has stressed it is only interested in purchasing S-300 PMU-1.

They (Iranians) gave the conditions, and said they need only an S-300 PMU-1. We suggested an Antey-2500, but they said no, give us the S-300,” he said

On February 17, Russian media reported that the first consignment of S-300 surface-to-air missile defense systems was to be delivered to Iran on February 18. However, one day later, Russia’s Defense Ministry dismissed the reports and said there were still some issues that needed to be resolved.

Under the previous contract signed in 2007, Russia was required to provide Iran with at least five S-300 defense system batteries. But the contract, worth more than $800 million, was revoked after then-President Dmitry Medvedev banned the supply of those systems to Tehran in 2010.

Later, Iran lodged a $4 billion lawsuit at an international court in Geneva against Russia’s arms export agency. However, Russian President Vladimir Putin decided in April 2015 to lift the self-imposed ban on the S-300 missile system delivery to Iran.

While the U.S. military has said it has accounted for the possible delivery of the S-300 to Iran in its contingency planning, Israel is sweating now that any attack on Iran’s nuclear centers, or elsewhere, can result in an immediate counterattack.

Finally, to confirm receipt of the first S-300 system, Iran released the following video clip.

Inline image 1

end

GLOBAL ISSUES

Over the years, i have been harping that in order to have a vibrant economy, you must have savers and these savings are then given to investors to provide your vibrant economy.  Once you remove savers, the bedrock of capitalism has been destroyed.Negative interest rates destroys savers!!

Now Larry Fink joins Bill Gross describing just that:

 

(courtesy Bill Gross/Larry Fink/Blackrock/zero hedge)

Bill Gross : “Negative Rates Destroy Savers, The Bedrock Of Capitalism”, Larry Fink Agrees

Over the weekend there was a flurry of commentary around the increasing use of NIRP by central banks, and the program’s declining effectiveness. Predictably the IMF – whose Christine Lagarde recently said “When The World Goes Downhill, We Thrive“, came out in support, while investors Larry Fink and Bill Gross came out hammering the program.

On one side of the argument, and to the surprise of no one, the IMF was quick to defend negative rates. In a blog post on Sunday, the organization listed the reasons they favor NIRP. Despite the fact that they admit individuals may just increase their cash position, they base their argument on the fact that lending will increase and portfolios will rebalance from fixed income into riskier assets such as equities, corporate bonds, or property.

The portfolio balance channel appears to have operated normally at negative rates. Wholesale interest rates have fallen with central bank deposit rates. Money market trading activities appeared to have declined, but it is not clear whether these effects reflect negative rates per se, or the substantial surplus liquidity associated with quantitative easing that reduces the demand for trading. Lower risk-free wholesale rates have tended to encourage investors to switch from low yield government securities to riskier assets such as equities, corporate bonds, or property. In addition, lower wholesale interest rates have reduced the cost of funds for those borrowers such as large corporates who can directly finance in commercial paper and corporate bond markets.

On the other side are Blackrock’s Larry Fink and Bill Gross, both of whom  came out hammering NIRP, pointing out that it would decrease spending, lead to disastrous consequences for insurance companies and pension funds, and generally crush the middle class.

Larry Fink’s take, as the Financial Times reports, is that savers aren’t going to be able to get the returns they need to prepare for retirement, so as fixed income rates go negative they would divert those funds into savings instead.

This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending…A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending.

Bill Gross agrees with that sentiment. In an interview with Barrons, Gross touches on the fact that savers would be going to cash, but also brings up the fact that insurance and pension models would blow up, and along with it, the ability of states to fund their liabilities, or insurance companies to honor their commitments.

So where does that leave our economy?

In the developed financial economies, as a bloc, lowering interest rates to near zero has produced negative consequences. The best examples of this include the business models of insurance companies and pension funds. Insurers have long-term liabilities and base their death benefits, and even health benefits, on earning a certain rate of interest on their premium dollars. When that rate is zero or close to it, their model is destroyed.

 
To use another example, California bases its current and future pension payments to civil workers on an estimated future return of 8% or so from bonds and stocks. But when bonds return 1% or 2%, or nothing in Germany’s case, what happens? We’ve seen the difficulties that Puerto Rico, Detroit, and Illinois have faced paying their debts.

 
Now consider mom and pop and other people who read Barron’s. They are saving for retirement and to put their kids through college. They might have depended on a historic 8%-like return from stocks and bonds. Well, sorry. When interest rates get to zero—and that isn’t the endpoint; they could go negative—savers are destroyedAnd savers are the bedrock of capitalism. Savers allow investment, and investment produces growth.

Of course central banks will do what they please, as they know best of course. Many countries have already enacted NIRP, and some speculate that the US will follow in short order, although that remains to be seen.

end

EMERGING MARKETS

 

Venezuela is now shear chaos. They need a revolution fast

(courtesy zero hedge)

“It’s Pure Chaos Now; There Is No Way Back” – Venezuela Morgues Are Overflowing

When we previewed Venezuela’s upcoming hyperinflation, which in January was predicted to be 720% and as of this moment is likely far higher…

 

… we said “This Is What The Death Of A Nation Looks Like” and said “there is no good news in any of the above for the long-suffering citizens of this “socialist paradise” which any minute now will be downgraded to its fair value of “socialist hell.

Subsequent news that Venezuela was now openly liquidating its gold reserves while its president, in an amusing twist, announced last week, that henceforth every Friday will be a holiday, (the term there was a slightly different meaning) to cut down on electricity usage (while blaming El Nino for its electricity rationing) merely confirmed that the end if nigh for this once flourishing Latin American nation.

Sadly, while we have been warning for years about Venezuela’s inevitable, economic devastation, we said it was only a matter of time before the chaos spreads to broader society and leads to total collapse.

That may have arrived because as even the FT now admits, after visiting the main Caracas morgue, Venezuela risks a descent into chaos.

But back to the morgue of central Caracas, where FT correspondent Andres Schipani writes that the stench forces everyone to cover their nostrils. “Now things are worse than ever,” says Yuli Sánchez. “They kill people and no one is punished while families have to keep their pain to themselves.

Ms Sánchez’s 14-year-old nephew, Oliver, was shot five times by malandros, or thugs, while riding on the back of a friend’s motorcycle. His uncle, Luis Mejía, remarked that in a fortnight three members of their family had been shot, including two youths who were shot by police.

Sounds a little like Chicago on a Friday… only in Venezuela things are even worse: “an economic, social and political crisis facing Nicolás Maduro, Venezuela’s unpopular president,is being aggravated by a rise in violence which is prompting fears that this oil-rich country risks becoming a failed state.”

Even the morgue employees are asking if they should give up.

“What can we do?” Mr Mejía asks. “Give up.” The morgue employee in charge of handling the corpses notes that a decade ago he received seven or eight bodies every weekend. These days, he says, that number has risen to between 40 and 50: “This is now wilder than the wild west.

Critics say that the Venezuelan government is increasingly unable to provide citizens with water, electricity, health or a functioning economy which can supply basic food staples or indispensable medicines, let alone personal safety.

In other words, total socioeconomic collapse. This is what it looks like:

Last month alone, Venezuelans learned of the summary execution of at least 17 gold miners supposedly by a mining Mafia, the killing of two police officers allegedly by a group of students who drove a bus into a barricade, and a hostage drama inside a prison at the hands of a grenade-wielding criminal gang. On Wednesday, three policemen were killed when an armed gang busted a member out of a lock-up in the capital.

 

At least 10 were killed in a Caracas shanty town after a confrontation between local thugs armed with assault rifles, while a local mayor was gunned down outside his home in Trujillo state last month. There are widespread reports of lynchings.

 

All this is creating a broad unease that Mr Maduro is unable to maintain order…There is a lack of basic goods. Analysts warn that the economic crisis risks turning in to a humanitarian one.

Some refuse to acknowledge that a state erected on so much oil wealth can be a failed state:

“Failed state is a nebulous concept often used too lightly. That’s not the case with today’s Venezuela,” says Moisés Naím a Venezuelan distinguished fellow at the Carnegie Endowment for International Peace. “The evidence of state failure is very concrete in the country that sits on top of the world’s largest oil reserves.”

Alas, a failed state is precisely what Venezuela has become: Venezuela is already one of the world’s deadliest countries. The Venezuelan Observatory of Violence, a local think-tank, says the murder rate rose last year to 92 killings per 100,000 residents. The attorney-general cites a lower figure of 58 homicides per 100,000. This is up from 19 per 100,000 in 1998, before Maduro’s predecessor Hugo Chavez took power.

It gets worse, because in addition to a soaring murder rate, the government itself is implicated.

“Venezuelans are facing one of the highest murder rates in the hemisphere and urgently need effective protection from violent crime,” said José Miguel Vivanco HRW’s Americas director. “But in multiple raids throughout the country, the security forces themselves have allegedly committed serious abuses.”

Their findings show that police and military raids in low-income and immigrant communities in Venezuela have led to widespread allegations of abuse, including extrajudicial killings, mass arbitrary detentions, maltreatment of detainees, forced evictions, the destruction of homes, and arbitrary deportations.

And like all other failed governments, Maduro’s administration is quick to deflect blame, instead accusing violence within its borders on Colombian rightwing paramilitaries “engaged in a war against its revolution.” But as David Smilde and Hugo Pérez Hernáiz of the Washington Office on Latin America, a think-tank, recently wrote: “Attributing violence in Venezuela to paramilitary activity has been a common rhetorical move used by the government over the past year, effectively making a citizen security problem into a national security problem.”

For many Venezuelans it no longer matters who is to blame. “It is a state policy of letting anarchy sink in,” says a former policeman outside the gates of a compound in Caracas.

The FT adds that the former police station now houses the Frente 5 de Marzo, one of the political groups that consider themselves the keepers of socialism’s sacred flame. The gates bear the colours of the Venezuelan flag and are marked with bullet holes. The man believes there is something akin to a civil war going on.

Venezuela is pure chaos now. It seems to me there is no way back,” the former policeman says.  He is right.

* * *

And since words can not fully do a failed state justice, here is a video clip from Jeff Berwick showing the reality on the ground in the country where “socialism’s sacred flame” is about to go out for good.

 end

OIL MARKETS

Do not expect much from the DOHA meeting states Goldman Sachs. We agree

(courtesy zero hedge)

Even Goldman Says OPEC Doha Meeting Will Be A Dud: “Don’t Expect A Bullish Surprise”

Two months after speculation and recurring headlines of an “imminent” OPEC meeting to first cut, then merely freeze (at record output levels) oil production, a meeting in which Iran is certain to not comply with any production curbs and the all important Saudis following suit, not even Goldman believes there is any upside from the meeting scheduled for this upcoming Sunday.

This is what Goldman commodity strategist Damien Courvalin said in a note released overnight.

OPEC and non-OPEC producers will meet next Sunday (April 17) in Doha to discuss a potential production freeze. We do not expect the meeting to deliver a bullish surprise as we believe production cuts make little sense given it has taken 18 months for the rebalancing to finally start. In addition, any resolute agreement that would support prices from current levels would prove self-defeating, in our view, as we believe that sustained low prices are required for the nascent non-OPEC supply adjustments to deliver a deficit in 2H16. Finally, a production freeze at recent production levels would not accelerate the rebalancing of the oil market as OPEC (ex. Iran) and Russia production levels have this year remained close to our 2016 average annual forecast of 40.5 mb/d. Importantly, the stable level of production achieved during the first three months of the year is due to transient disruptions whose reversal could add 500 kb/d to OPEC production, with Iran, the Neutral Zone and Libya potentially providing additional production growth in coming months. As a result, we see risks that even a production agreement could be followed by sequentially rising OPEC production given the multitude of potential sources of production growth.

 

Ultimately, while the market seems to have taken comfort in some form of OPEC help, press reports over the past weeks suggest that a production agreement is far from guaranteed. Net, we see greater odds that the Doha meeting delivers a bearish catalyst for oil prices. Interestingly, the oil options market is associating no risk premia to this meeting with Jun-16 Brent ATM implied volatility below Jul-16 ATM implied vol, the first time this has occurred heading into an OPEC meeting since June 2014. While it is difficult to assess consensus expectations ahead of the meeting, we believe that this upward sloping volatility curve is mispricing the potential moves on Monday, April 18, with our bias for lower prices. Finally, while we forecast that the balancing of the oil market will bring crude oil prices sustainably back into backwardation later this year, we believe that the recent flattening of the Brent forward curve is only transitory, reflecting the combination of production maintenance, especially in the North Sea, in the face of seasonally rising Atlantic basin refinery runs. As a result, we continue to believe that the balancing of the oil market requires sustained low prices with our 2Q16 forecast of $35/bbl.

Furthermore, this comes on the heels of news that Iraq just hit a fresh record monthly output, while Bloomberg reported that instead of freezing, Gulf nations are actually about to unleash even more production:

Kuwait plans to raise production capacity by 5 percent from 3 million barrels a day by the third quarter, and to reach 4 million barrels by 2020. Abu Dhabi means to lift production capacity to 3.5 million barrels a day by 2017 from about 3 million.

For now the algos refuse to listen and instead are pushing onward with last week’s oil momentum higher.

 END

Oil slides after Algeria Oil Minister admits that Russian refuses to cut output

(courtesy zero hedge)

Oil Slides After Algeria Oil Minister Admits Russia Refused To Cut Output

First it was the Saudis who said they would not cap oil output unless Iran joins the production freeze, which it won’t. And now, Bloomberg reports citing APS, that Russia was in on the plot to make the Doha meeting a total and complete farce.

  • ALGERIA SAYS DOHA TALKS AIM TO CAP OUTPUT AT JAN. LEVELS: APS
  • ALGERIA’S KHEBRI SAYS SOME OIL PRODUCERS REFUSE OUTPUT CUT: APS
  • ALGERIA OIL MINISTER SAYS RUSSIA REFUSED TO CUT OUTPUT: APS

More details:

Planned April 17 meeting of OPEC, other major producers in Doha, Qatar, aims to reach agreement to freeze oil production at Jan. levels, Algeria’s state-run news agency APS reports, citing Energy Minister Salah Khebri.

Meeting “crucial” because if all countries agree to cap production, this will allow oil market to recover gradually

“Oil producers don’t want to cut their output. We have already asked for the decrease of production, but some countries have  refused, including non-OPEC members, especially Russia,” Khebri says, according to APS

Which to regular readers should not come as a surprise: recall that as we wrote three weeks ago, What Oil Production Freeze: Russia Just Revealed The Laughable Loophole In The OPEC “Agreement”

Oil algos finally pay attention. And as goes Crude, so goes stocks…

END

Chesapeake is forced to pledge the entire company as collateral to the banks in order to preserve existing credit. The bondholders are going to be screwed:
(courtesy zero hedge)

Chesapeake Forced To Pledge Entire Company As Collateral To The Banks To Preserve Existing Credit Facility

As we enter the critical spring borrowing base redetermination season, which as we previewed previouslyis the biggest threat to near-insolvent energy companies whose banks may, and in many cases will, decide their assets are worth far less and as a result dramtically cut their revolver availability, one of the biggest question marks was how generous would the banks of troubled gas giant Chesapeake be, whose $4 billion credit facility is one of the few things keeping the company still afloat.

We got the answer earlier today when the company announced it had succeeded in maintaining its entire $4 billion borrowing base and as a result would not suffer an imminent liquidity crunch. From the release:

Chesapeake Energy Corporation today announced it has amended its $4.0 billion secured revolving credit facility agreement maturing in 2019 with its bank syndicate group. Key attributes include:

  • Borrowing base reaffirmed at $4.0 billion, consistent with current availability
  • Next scheduled redetermination of borrowing base postponed until June 2017
  • Senior secured leverage ratio covenant relief granted until September 2017
  • Interest coverage ratio covenant reduced to 0.65x through March 2017

Following the recent redetermination review by its bank syndicate group, Chesapeake’s senior secured revolving credit facility borrowing base was reaffirmed at $4.0 billion, consistent with current availability.

The stock promptly took off and was some 13% higher at last check.

At the same time, Chesapeake’s $1.1 billion of 5.75 percent notes maturing in March 2023 jumped 3.25 cents to 36.25 cents on the dollar.

However, this bank “generosity” came at a cost, because this is what else CHK announced:

In connection with the redetermination, Chesapeake agreed to pledge additional assets as collateral under the Credit Agreement.

What additional assets? Pretty much all of them.

As Bloomberg reports, to preserve its full availability, Chesapeake was forced to pledge almost all of its natural gas fields, real estate and derivatives contracts to maintain access to its existing credit as the shale gas producer grapples with falling energy prices.

Chesapeake amended a secured revolving credit agreement that matures in 2019 with lenders, who agreed to postpone the next evaluation until June 2017, the Oklahoma City-based company said in a statement Monday. Such reassessments normally occur twice a year. In exchange, Chesapeake pledged “substantially all of the company’s assets, including mortgages encumbering 90 percent of all the company’s proved oil and gas properties” as collateral, according to a regulatory filing on Monday.

As described by Citi anlysts, the amendment provides Chesapeake with “time to ride out a low commodity price environment.” The company probably will issue a secured, first-lien term loan to retire its remaining 2017 and 2018 bonds, the analysts said.

In addition to most of its gas and oil reserves, Chesapeake pledged as collateral all hedge contracts, property, deposit accounts and securities, subject to certain undisclosed carve-outs, according to the regulatory filing.

The amendment includes a collateral value coverage test, which Chesapeake said may limit its ability to tap the credit line. The revision also provides temporary covenant relief, with a key measure of indebtedness suspended until September 2017. During the grace period, Chesapeake promised to maintain minimum liquidity of $500 million. Chesapeake also maintains the right to incur as much as $2.5 billion of first lien indebtedness.

But while the stock may be delighted at this latest “can kicking”, the unpleasant reality remains, namely that unless something dramatically changes in the company’s income statement, Chesapeake has merely bought itself a few quarters of time while in the process stripping unsecured bondholders of any potential recoveries if and when it files for bankruptcy.

Chief Executive Officer Doug Lawler has employed a combination of debt exchanges, asset sales and open-market purchases of Chesapeake’s cut-rate bonds to reduce leverage and cope with falling gas prices. Chesapeake’s main focus is 2017 and 2018 “maturity management,” Lawler said in a presentation to analysts last month. In other words, without a dramatic rebound in commodity prices, CHK has about a year before it hits a refi wall at which point it will have to replace its current cheap debt with far more expensive funding, which will likely hand over major equity stakes to the existing bondholders, unless of course the company does not file Chapter 11 (or 7) long before.

And here is the punchline: the company lost about $40 million a day in 2015 and is expected to end this year in the red as well, based on the average estimate of 14 analysts in a Bloomberg survey.

The daily cash burn will only increase as Chesapeake is layered with even more debt and has to fund even more interest expense, which for the time being is manageable due to the existing low blended cost of its debt, but which will spike over the coming two years.

The banks however, don’t care: they now are assured full control of all the company’s assets when the hammer hits. As for the bondholders, there is always prayer and hope that soon the same “production freeze” headlines that push oil higher on a daily basis will finally shift over to natural gas.

Someone else who won’t care if the company he built from scratch is handed over to the lenders: Aubrey McClendon who may have a sense all of this was coming long ago.

end

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/MONDAY morning 7:00 am

Euro/USA 1.1396 UP .0001 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 108.15 up 0.150 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4232 UP  .01108 (STILL THREAT OF BREXIT)

USA/CAN 1.2980 DOWN.0001

Early THIS MONDAY morning in Europe, the Euro ROSE by 1 basis point, trading now WELL above the important 1.08 level FALLING to 1.1396; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRPand NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite was UP 48.99 POINTS OR 1.64%/ Hang Sang UP 20.41 OR  0.35 %   / AUSTRALIA IS LOWER BY 0.12% / ALL EUROPEAN BOURSES ARE BARELY IN THE GREEN, as they start their morning/.

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 and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

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 MONDAY morning: closed DOWN 70.39 OR 0.44%

Trading from Europe and Asia:
1. Europe stocks ALL IN THE GREEN AS WE START THE DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED IN THE GREEN  . ,Shanghai CLOSED IN THE GREEN / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED/IN THE RED/India’s Sensex in the GREEN /

Gold very early morning trading: $1250.00

silver:$15.57

Early MONDAY morning USA 10 year bond yield: 1.74% !!! UP 2 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.57 UP 1 in basis points from FRIDAY night.

USA dollar index early MONDAY morning: 94.18 UP 1 cents from FRIDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers MONDAY MORNING

 

end

 

And now your closing MONDAY NUMBERS

 

 

Portuguese 10 year bond yield:  3.41% UP 6 in basis points from FRIDAY

JAPANESE BOND YIELD: -.086% DOWN 1 in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD:1.51% DOWN 1 IN basis points from FRIDAY

ITALIAN 10 YR BOND YIELD: 1.34  UP 3 IN basis points from FRIDAY

the Italian 10 yr bond yield is trading 17 points lower than Spain.

GERMAN 10 YR BOND YIELD: .011% (UP 1 IN BASIS POINT ON THE DAY)

 

end

 

IMPORTANT CURRENCY CLOSES FOR MONDAY

Closing currency crosses for MONDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:30 PM

 

Euro/USA 1.1410 UP .0016 (Euro UP 16 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 107.55 DOWN 0.064 (Yen UP 6 basis points) and A MAJOR BOMB BLOWING UP our yen carry traders and Kuroda’s NIRP.

Great Britain/USA 1.4239  UP .01195 Pound UP 112 basis points/

USA/Canad 1.2887 DOWN 0.0093 (Canadian dollar UP 93 basis poInts with OIL (WTI AT $40.44

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 16 basis points to trade at 1.1410 as the markets REACTED TO THE WEAKER DOLLAR

 

The Yen ROSE to 107.95 for a GAIN of 6 basis pints as NIRP is a big failure for the Japanese central bank/also all our yen carry traders are being fried!!.

The pound was UP 112 basis points, trading at 1.4239 TRADING IN SYMPATHY WITH THE FALLING USA DOLLAR

The Canadian dollar ROSE by 93 basis points to 1.2887, WITH THE HUGE ADVANCE IN WTI TODAY:  $40.45

The USA/Yuan closed at 6.4580

the 10 yr Japanese bond yield closed at -.086% DOWN 1 BASIS  points in yield

Your closing 10 yr USA bond yield: UP 1 basis point from MONDAY at 1.725% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.56 PAR in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 94.28 DOWN 23 in  cents on the day at 2:30 pm

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED  DOWN 4.29 POINTS OR 0.07%
German Dax :CLOSED UP 60.73 OR 0.63%
Paris Cac  CLOSED UP 9.51  OR 0.22%
Spain IBEX CLOSED UP 70.00 OR 0.83%
Italian MIB: CLOSED UP 218.04 OR 1.25%

The Dow was DOWN 20.55 points or 0.120%

NASDAQ DOWN 17.29 points or 0.36%
WTI Oil price; 40.49 at 2:30 pm;

Brent Oil: 42.91

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.61 (ROUBLE UP 51/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT AND WTI ROSE.

 

END

 

 

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

 

WTI CRUDE OIL PRICE 5 PM:  $40.28

 

BRENT: 41.87

USA 10 YR BOND YIELD: 1.72%

USA DOLLAR INDEX:94.01 DOWN 17 cents on the day

 

END

And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form:

Silver Soars, Stocks Slump As Equity “Fear” Hits All-Time Record High

“smooth sailing”, right?

 

Something is going on beneath the covers…

Last week saw the biggest addition of shorts across the Treasury Bond Complex in over 3 years (with record ultra shorts)

 

And CSFB’s “Fear Barometer” just hit an all-time high…

As CS’ Mandy Xu notes, typically, an increase in the CSFB is caused by a combination of higher put demand and lower call demand. Interestingly, this time, the entire move was driven by the call-side. The derivatives market is assigning less than 1% probability the market will rise by 10% in the next three months vs. 17% probability it will fall by 10%.

*  *  *

And so while stocks tried (twice) to ramp in the face of faux-ness, they couldn’t… Despite a well placed Italian headline into the close…

  • *ITALY FIN. INSTITUTIONS, CDP AGREE TO SET UP FUND FOR BANKS

Just as we predicted…

 

Which totally failed.. as stocks dumped into the red!

 

Who could have seen that coming? An EU banking bailout rumor headline-driven rally and USDJPY ramp crushed by crude’s collapse on Russia “no freeze” headlines…

 

Post-Payrolls, stocks are red but crude is soaring with gold and bonds also bid…

 

But again all that mattered was 2043.94… (YTD unch) – VIX tagged 16.00 and was quickly dropped to get S&P back over 2043.94…

 

Goldman was bid on a $5.1bn settlement… (imagine if it had been $51 billion?)

 

Stocks are beginning to wake up to the credit and bond decoupling…

 

Treasury yields ended the day practically unchanged – swinging from bid to offered in the EU session and rallying (lower yields) during the US session…

 

The USD Index ended modestly lower on the day but rallied back during the US session (after the EU close) after some shenanigans around the Silver fix time…

 

And finally, Commodities all ended positively (even copper just) but it was silver that stood out…

 

As the precious metal inched back towards the $16 level…

 

Charts: Bloomberg

Bonus Chart: With Alcoa kicking off earning season, we suspect this won’t end well…

Average:

end

 

Early trading today:

(courtesy zero hedge)

Putting Today’s “European Banks Are Fixed” Bounce In Context

This morning’s 160 point spike in Dow Futures – out of nowhere – was predicated on hopes of an Italian bank bailout. While this may seem like an odd reason to “buy buy buy” US equities, in the new normal, it really is not.. and when put in context, the ‘bounce’ in EU banks should do more to scare than soften investors’ concerns

Remember the last time headlines hit that Italian banks were to be bailed out (by ECB buying that time)…

Oh and Deutsche Bank hardly blinked…

Still think this is sustainable…

end

A biggy story!!  United Health exits Obama’s ACA in Georgia and Arkansas.  No doubt other insurers will follow.  The reason for the exit is, of course, that they were losing money.

They will probably exit other states as well

 

(courtesy zero hedge)

The Beginning Of The End For Obamacare: Largest US Health Insurer Exits Georgia, Arkanasas

You can’t say UnitedHealth didn’t warn us.

* * *

Tracking the slow motion trainwreck of Obamacare has become one of our preferred hobbies: below is just a random sample of headlines covering just the most recent tribulations of the “we have to pass it to find out what’s in it” Unaffordable Care Act:

But the most surprising article we wrote was our explanation from last November explaining why “Your Health Insurance Premiums Are About To Go Through The Roof” showing that even insurance companies have been unable to earn a profit under Obamacare, as shown in the following chart:

 

This was a stunning revelation because, after all, the Affordable Care Act was largely drafted by the insurance industry itself, and if for whatever reason, it itself was unable to capitalize on Obamacare, then it has truly been a disaster.

It all came to a head in late November of last year when none other than the U.S.’s biggest health insurer, UnitedHealth, cut its 2015 earnings forecast with a warning that it was considering pulling out of Obamacare, just one month after saying it would expand its presence in the program. At the time UnitedHealth Group said it would scale back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the business entirely in 2017 because it has proven to be more costly than expected.

In a statement, UnitedHealth said that “the company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.”

Needless to say, the implications for Obamacare – which had seen a surge in problems over the past year – were dire: As Bloomberg reported at the time, “a pull-back would deal a significant blow to President Barack Obama’s signature domestic policy achievement. While UnitedHealth has been slower than some of its rivals to sell Obamacare policies since new government-run marketplaces for the plans opened in late 2013, the announcement may indicate that other insurers are struggling.”

“If one of the largest and presumably, by reputation and experience, the most sophisticated of the health plans out there can’t make money on the exchanges, then one has to question whether the exchange as an institution is a viable enterprise,” Sheryl Skolnick, an analyst at Mizuho Securities said at the time. UnitedHealth further said it suspended marketing its individual exchange plans and is cutting or eliminating commissions for brokers who sell the coverage.

Fast forward to today, this largest U.S. health insurer, announced it has decided to pull the plug on two state Obamacare markets.

Going forward, UnitedHealth said it will no longer sell plans for next year in Georgia and Arkansas, according to state insurance regulators. Tyler Mason, a UnitedHealth spokesman, confirmed the exits and declined to say whether the company would drop out of additional states, Bloomberg reported.

As per our extensive coverage of the topic, the reason for the pull out is simple: many, if not most, insurers have found it difficult to turn a profit in the new markets created by the Affordable Care Act, “where individuals turned out to be more costly to care for than the companies expected. UnitedHealth and Aetna Inc. both posted losses from the policies last year, as did big Blue Cross and Blue Shield plans in states like North Carolina.

According to Bloomberg, UnitedHealth’s decision to stop offering ACA plans next year means that people who are currently enrolled with the insurer will have to choose a new health insurance provider next year. And while UnitedHealth is the biggest carrier in the United States, with about 42 million medical customers, it has a smaller role in the ACA’s markets. The company had about 650,000 in individual exchange-compliant policies as of Dec. 31.  Kenneth Ryan James, a spokesman for the Arkansas Insurance Department, told Bloomberg tgat UnitedHealth had a “small footprint” in the state, where Blue Cross and Blue Shield plans are dominant.

However, now that the the precedent has been made, it will likely promptly spillover to other major insurers, including Blue Cross Blue Shield plans, which are dominant on many state exchanges, and have also complained about losses in the individual market, citing higher-than-expected medical claims.

In total, Georgia currently has nine – make it eight after the withdrawal of UnitedHealth – health insurers that currently offer ACA polices, according to Glenn Allen, a spokesman for the state’s insurance commissioner. Others include Aetna, Humana Inc. and Cigna Corp. No other company has yet told Georgia that it’s exiting, and companies have until May 11 to decide, he said.

We are certain that many if not all will promptly follow in UnitedHealth’s footsteps as the beginning of the end for Obamacare finally plays out as so many skeptics of the “Affordable” Care Act had predicted.

end
Our good friends over at Goldman Sachs has been fined 5.1 billion for their ‘serious misconduct” in the Mortgage scandal of 2004-2008.  We still have RBS and Deutsche bank who have been under investigation in this matter has still to be fined:
(courtesy zero hedge)

Goldman Slammed With $5.1 Billion Fine For “Serious Misconduct” In Mortgage Selling

Hot on the heels of Wells Fargo’s $1.2 billion settlement, Bloomberg reports that Goldman Sachs will pay $5.1 billion to settle a U.S. probe into its handling of mortgage-backed securities involving allegations that loans weren’t properly vetted before being sold to investors as high-quality bonds.

As AP reports,

The Justice Department announced a $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities leading up to the 2008 financial crisis.

The deal announced Monday resolves state and federal probes into the sale of shoddy mortgages before the housing bubble and economic meltdown.

It requires the bank to pay a $2.4 billion civil penalty and an additional $1.8 billion in relief to underwater homeowners and distressed borrowers, along with $875 million in other claims.

The agreement is the latest multi-billion-dollar civil settlement reached with a major bank.

Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co.

Goldman had previously disclosed the settlement in January, but federal officials laid out additional allegations in a statement of facts.

As NY AG Schneiderman notes,

  • Settlement Includes $670 Million For New Yorkers, Including $190 Million In Cash And $480 Million In Consumer Relief Committed To Mortgage Assistance, Principal Forgiveness, And Affordable Housing Programs
  • New York Has Now Received $5.3 Billion In Cash And Consumer Relief From National Mortgage Settlement And Residential Mortgage-Backed Securities Working Group Settlements Combined Since 2012
  • Schneiderman: Since 2012, My Number One Priority Has Been Getting New York Families The Resources They Need To Help Rebuild

NEW YORK – Attorney General Eric T. Schneiderman today joined members of the state and federal working group he co-chairs to announce a $5 billion settlement with Goldman Sachs over the bank’s deceptive practices leading up to the financial crisis.  The settlement includes $670 million – $480 million worth of creditable consumer relief and $190 million in cash – that will be allocated to New York State. The resolution requires Goldman Sachs to provide significant community-level relief to New Yorkers, including resources that will facilitate a significant expansion of the New York State Mortgage Assistance Program enabling distressed homeowners to restructure their debt, as well as first-lien principal forgiveness, and funds to spur the construction of more affordable housing.  Additional resources will be dedicated to helping communities transform their code enforcement systems, and invest in land banks and land trusts.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal working group formed in 2012 to share resources and continue investigating wrongdoing in the mortgage-backed securities market prior to the financial crisis.

New York has now received $5.33 billion in cash and consumer relief from the National Mortgage Settlement (NMS) and all five Residential Mortgage-Backed Securities Working Group settlements (RMBS). The combined $3.2 billion in cash and consumer relief from RMBS settlements is more than any other state.

“Since 2012, my number one priority has been getting New Yorkers the resources they need to rebuild,” Attorney General Schneiderman said. “These dollars will immediately go to work funding proven programs and services to help New Yorkers keep their homes and rebuild their communities. We’ve witnessed the incredible impact these programs and services can have in helping communities recover from the financial crisis. This settlement, like those before it, ensures that these critical programs—such as mortgage assistance, principal forgiveness, and code enforcement—will continue to get funded well into the future, and will be paid for by the institutions responsible for the financial crisis.”

The settlement includes an agreed-upon statement of facts that describes how Goldman Sachs made multiple representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors, its process for screening out questionable loans, and its process for qualifying loan originators.  Contrary to those representations, Goldman Sachs securitized and sold RMBS backed by large numbers of loans from originators whose mortgage loans contained material defects.

In the statement of facts, Goldman Sachs acknowledges that it securitized thousands of Alt-A, and subprime mortgage loans and sold the resulting residential mortgage-backed securities (“RMBS”) to investors for tens of billions of dollars.  During the course of its due diligence process, Goldman Sachs received pertinent information indicating that significant percentages of the loans reviewed did not conform to the representations it made to investors.  Goldman also received and failed to disclose negative information that it obtained regarding the originators’ business practices.  Indeed, Goldman’s due diligence vendors provided Goldman with reports reflecting that the vendors had graded significant numbers and percentages of sampled loans as EV3s, i.e., not in compliance with originator underwriting guidelines.  In certain circumstances, Goldman reevaluated loan grades and directed that such loans be waived into the pools to be purchased or securitized.

Even when the percentage of problematic loans in pools sampled by it vendors indicated that the unsampled portions of the pools likely contained additional such loans, Goldman typically did not increase the size of the sample or review the unsampled portions of the pools to identify and eliminate any additional such loans.   In many cases, 80 percent or more of the loans in the loan pools Goldman purchased and securitized were not sampled for credit and compliance due diligence.  Nevertheless, Goldman approved various offerings for securitization without requiring further due diligence to determine whether the remaining loans in the deal contained defects.  A Goldman employee overseeing due diligence for a particular loan pool noted that the pool included loans originated with “[e]xtremely aggressive underwriting” and “large program exceptions made without compensating factors.”  Despite this observation, Goldman did not review the remaining portion of the pool, and subsequently securitized thousands of loans from the pool.

Goldman made statements to investors in offering documents and in certain other marketing materials regarding its process for reviewing and approving originators, yet it failed to disclose  to investors negative information it obtained about mortgage loan originators and its practice of securitizing loans from suspended originators.

Beginning in mid-2006, Goldman recognized that Fremont, a “key originator, was experiencing an increasing level of early payment defaults (“EPDs”) (i.e., loans for which the borrowers had failed to make one or more of their first payments).  Goldman was aware that EPDs were a sign of originators’ bad credit decisions and could be indicators of potential borrower fraud.  However, Goldman did not put Fremont on its “no bid” list and continued to purchase loan pools from Fremont during the period Fremont’s EPD claims remained unpaid.  Moreover, Goldman “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.”    Likewise, Goldman identified issues with Countrywide’s origination practices.  Goldman’s head of due diligence, when presented with a “very bullish” equity report on Countrywide, another large originator, exclaimed “[i]f they only knew  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”

*  *  *

Monday’s resolution is the fifth multibillion-dollar settlement reached with U.S. banks resulting from the government’s push to hold Wall Street firms to account for creating and selling subprime mortgage bonds that helped spur the 2008 financial crisis.

As Bloomberg notes, however, other banks, including Royal Bank of Scotland Group Plc and Deutsche Bank AG remain under investigation, people familiar with the matter have said.

end

Another gem from David Stockman on the USA economy:
(courtesy David Stockman/ContraCorner)’

Simple Janet——Jabbering On The Edge Of A Live Volcano

You have to wonder whether there are any carbon units left in the casino. The robo traders and HFTs, of course, have an attention span of 10 milliseconds. So their utter lack of concern about context, fundamentals and history is readily explainable. They never get around to it.

But somebody besides the machines is getting paid the big bucks on Wall Street. Do they really think that dancing on a live volcano, as the estimable Ambrose Evans-Pritchard put it recently, is not semi-suicidal?

Yet for the last 18 months that is exactly what they have been doing. The S&P 500 closed today exactly where it first crossed in November 2014. In the interim, it’s been a roller-coaster of rips, dips, spills and thrills.
^SPX Chart

^SPX data by YCharts

The thing is, however, this extended period of sideways churning has not materialized under a constant economic backdrop; it does not reflect a mere steady-state of dare-doing at the gaming tables.

Actually, earnings have been falling sharply and macroeconomic headwinds have been intensifying dramatically. So the level of risk in the financial system has been rocketing higher even as the stock averages have labored around the flat-line.

Thus, GAAP earnings of the S&P 500 in November 2014 were $106 per share on an LTM basis compared to $86.44 today. So earnings are down by18.5%, meaning that the broad market PE multiple has escalated from an already sporty 19.3X back then to an outlandish 23.7X today.

And the latter is by no means reflective of an expected stick save turnaround in earnings. Analysts have been furiously marking down their estimates for Q1 for weeks now. At the latest reading profits are projected to fall by 10%, marking the fifth straight quarter of decline.

-1x-1 (8)

Always and everywhere, such persistent profit collapses have signaled recession just around the corner. And there are plenty of macro-economic data points signaling just that.

For instance, total US business sales have fallen by 5.1% since mid-2014—-even as inventories have soared. This means that while Wall Street speculators have been dancing on the edge of the volcano for 18 months, the US economy’s tepid rebound has been petering out.

Indeed, there has never been an inventory ratio surge of the magnitude shown in the chart below—-from 1.29X to 1.40X in 18 months—- that did not signal a recession dead ahead.

During the stock market’s most recent dead-cat bounce, the signals that the US economy is drifting into a downturn have only grown more frequent and intense. For instance, class 8 truck orders—-a classic leading indicator—–are now plunging.  At the same time, inventories haven’t been this high since early 2007.

20160405_class8trucks_0

Likewise, rail car loadings were down 13.7% year-to-date compared to 2015. As is evident in the chart below, the plunge in shipments is now approaching the depths of 2008-2009. Perhaps that is why some market technicians are fretting about the non-confirmation of the rally by the transports.

Then there is the latest reading on GDP by the unusually accurate running gauge published by the Atlanta Fed. As of this morning, there isn’t any. Q1 GDP is now forecast to come in at stall speed or just 0.1%. Not even the Chinese can measure things that finely!

Evolution of Atlanta Fed GDPNow real GDP forecast

In light of these fundamentally negative trends it might be wondered why in the world every attempt at correction in the casino gets short-circuited in another dead-cat bounce. Presumably, the remaining carbon units would recognize the danger at some point, thereby precipitating a sell-off that would eventually trigger a spasm of liquidation by the machines.

Needless to say, the latter will happen. It’s only a matter of time and the right catalyst.

But in the interim, there can be no doubt as to what explains the stock market’s treacherous dance on the crater’s edge. To wit, honest price discovery in the financial markets was destroyed by heavy-handed central bank intrusion long ago. So what remains is simply episodic spasms of stock buying in response to open mouth actions emanating from the Eccles Building.

In that context, Janet Yellen’s risible proclamations and recurrent bouts of incoherence play a major role. She let loose of a patented barrage of Keynesian jabberwocky at the Fed heads soirée yesterday.

In fact, her response to a question about whether the Fed is stimulating a dangerous bubble was so unattached from reality that it deserves to be quoted in full. If there were a modicum of honesty left in the casino they would be stampeding for the exists on the basis of this gem alone:

So I would say the US economy has made tremendous progress in recovering from the damage from the financial crisis. Uh, slowly but surely the labor market is healing. Um, for well over a year we’ve averaged about  225,000 jobs a month.The unemployment rate now stands at 5%. So, we’re coming close to our assigned congressional goal of maximum employment. Um, inflation which, um, my colleagues here Paul and Allen um, spent much of their time as chair um, bringing inflation down from unacceptably high levels. For a number of years now inflation has been running under our 2% goal and we’re focused on moving it up to 2%. Um, but we think that it’s partly transitory influences, namely declining oil prices, and uh, the strong dollar that are responsible for pulling inflation below the 2% level we think is most desirable. So, I think we’re making progress there as well, and this is an economy on a solid course, um, not a bubble economy. Um, we tried carefully to look at evidence of potential financial instability that might be brewing and some of the hallmarks of that, clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth. We certainly don’t see those imbalances. And so although interest rates are low,and that is something that could encourage reach for yield behavior, I wouldn’t describe this as a bubble economy.”

With 102 million adult Americans not employed and only 48 million of them retirees and spouses, it is amazing that Yellen still has the audacity to cite the U-3 unemployment rate as indicative of anything meaningful about the state of the economy; and let alone to say that it is indicative of “tremendous progress” and that the US economy is now “close to our assigned congressional goal of maximum employment”.

That’s just paint-by-the-numbers ritual incantation. If the Fed weren’t ensnared in a Keynesian time-warp the completely specious U-3 metric would never even be mentioned. What might be mentioned, instead, is that employment in the core sectors of productivity and wealth creation—–mining, energy, manufacturing and construction—-has been declining since the turn of the century.

Goods Producing Economy Jobs- Click to enlarge

Nor would they babble endlessly about inflation being possibly not what it seems and less than they want. It is self-evident that the price of goods is been repressed by massive excess capacity and cheap labor in the world market and that the Fed has no power or reason to fight it.

At the same time, the US economy has plenty of inflation—well more than 2% per annum—for items like shelter, health care, education and other services. These are the items which are eroding middle class living standards—-even as the ship of fools in the Eccles Building keeps gumming about undershooting their inflation target.

In fact, during the last 15 years, the CPI for durable goods has declined at a 1.0% annual rate. By contrast, the index for shelter rose by 2.6% annually, while medical costs increased by 3.8% per year and education prices by just under 6.0%. In today’s open world economy, the Fed’s capacity to guide the blended average consumer inflation rate precisely to 2.00% is somewhere between zero and none.

Or as Yellen said yesterday “for a number of years now inflation has been running under our 2% goaland we’re focused on moving it up to 2%.”

Please don’t!

But what takes the cake is her risible insistence that there are no signs of financial instability, over-valued assets or “high leverage, rising leverage and rapid credit growth”.
Let’s see. US corporate debt as a percent of GDP is at an all-time high, and nearly one-third above where it stood on the eve of the Great Financial Crisis. This is not “rising leverage”?

And on the matter of reaching for yield, just exactly who has been buying trillions of corporate debt that now reflects the highest leverage ratios ever?

Likewise, on the alleged absence of “high debt”, presumably total US credit outstanding at $62 trillion and counting isn’t it.

Why in the world is Yellen so complacent? The Great financial crisis was widely blamed on too much debt, but there has not been a wit of deleveraging in the US economy as a whole since then.

The aggregate US leverage ratio still stands at 3.4X or roughly two turns higher than its pre-1980 average of 1.5X. Stated differently, the US economy is now carrying an implied $35 trillion of extra debt compared to the historic norm that prevailed during the century prior to 1980. During that bygone era, the US economy grew on average at nearly twice the anemic 1.6% rate that has materialized since the turn of the century.

Yet Simple Janet sees no signs of excess or bubbles. For crying out loud, the $62 trillion of debt reported in the Fed’s own flow-of-funds data is the very embodiment of a debt bubble. And one that is as alien to the free market as are unicorns to the animal kingdom.

The evidence that Yellen is clueless or a blatant liar is endless. Junk bonds outstanding currently total $1.8 trillion and are nearly double where they stood on the eve of the 2008 meltdown. Is Yellen unaware that junk bonds are used almost entirely to fund speculations like LBOs, leveraged recaps, stock buybacks and ultra risky investments in cyclical industries like the oil and gas shale patch?

In short, the casino gamblers keep dancing on the edge of a live volcano in the belief that Yellen has their back. In fact, her statements yesterday prove once again that she is right there on the edge with them—–jabbering incoherently.

One of these days, even the silicon units in the casino will take notice. The dancing will then turn into diving for the doors.

 

end

 

David Stockman has been telling us for the past few years, that earnings are going down faster than a speeding bullet.  Now JPMorgan reaffirms Stockman:

(courtesy zero hedge/JPMorgan)

 

“This Is Where The Good News Ends” – JPM Says All Margin Subcomponents Are Rolling Over

From one of the biggest cheerleaders of the stock market, in recent months Jamie Dimon’s JPM has undergone a dramatic anti-Hugh Hendrian metamorphosis, turning increasingly more skeptical on further risk asset upside and as of one month ago, pulled the plug on its former cheerful nature when in early March it announced it had gone Underweight stocks “for the very first time this cycle.”

Today, JPM’s chief equity strategist, Misla Matejka is out with a new note, in which he tackles not the S&P500, where he has repeatedly said to take profits, but the weakest link of the economy, the one which Albert Edwards declared last week was “The “One Failsafe Indicator” Of An Inevitable Recession“, crashing profits. And not just profits of energy companies (which are expected to be down -104% in Q1), but in a total of 7 out of 10 S&P sectors (per Facset).

This is what Matejka has to say about the coming earnings season, and why he believes trouble is coming. First the good, if one may call them so, news:

Will upcoming Q1 results help market sentiment? It is the case that Q1 saw an inflection in some of the headwinds for US earnings – specifically, such as in dollar, oil, corporate pricing and a bounce in manufacturing activity.

 

Also, sharp downgrades to analysts’ estimates seen so far ytd have lowered the hurdle rate materially in the main regions. Consensus is forecasting S&P500 Q1 EPS to fall 6.9% y/y, the lowest run rate since the ’09 recession and down from +2.3% expectation at the start of the year. Seven of the ten US sectors are projected to deliver negative EPS growth. Expectations appear subdued for SX5E as well, at -4.7% ex-Energy, but are much higher for Topix, at +9.8%.

And now the not so good news.

This is where the good news ends. We worry that the top-line outlook, which is the key driver of operating leverage, remains subdued. Despite some improvement in US leading indicators due to temporary restocking, global activity was generally poor in Q1. The March PMIs failed to confirm the rebound in Eurozone and rolled over sharply in Japan, while consumer activity was especially sluggish.

 

USD weakening is a zero-sum game. It helps the US, but hurts Eurozone and Japanese earnings.

 

 

We reiterate our caution on Eurozone and Japanese equities, in part due to the increasing FX headwind. On the flipside, the rollover in USD, combined with improving activity momentum, should help EM, where earnings are still depressed in the historical context. Stay OW the space.

 

Overall, we believe that Q1 earnings will not provide much clarity, and we stick to our call from three weeks back that the Feb-March bounce in equities should be faded. Technicals are not supportive anymore and P/E multiples are at ytd highs.

 

 

Bond yields rolled over and the leadership of Defensives, which are beating Cyclicals by 100-150bp in the US and Europe ytd, and by considerably more since the ECB/Fed meetings, should continue. We note that MSCI Growth style is beating Value ytd in Europe by 210bp.

And then, JPM cuts right to the gist of its bearishness: profit margins.

Big picture, one of our key medium-term concerns for equities remains the outlook for US profit margins. We have argued since late ’14 that corporate profit margins appear to be peaking out for this cycle. The latest  NIPA data are confirming the deceleration, with our model pointing to much more downside.Weakness is broad-based, with margin compression seen in all subcategories of profits: domestic, foreign, financial and non-financial.

 

 

We think this deceleration will continue as productivity remains depressed and the top line is unlikely to accelerate. Profit margins are a particularly useful indicator to assess the stage of the business cycle. In the past 60 years, there has never been a recession starting before the peak in profit margins. However, once margins have peaked, the likelihood of a downturn increases materially.

 

We believe that the rollover in profit margins will be a constraint for equities, as profits have tended to drive most economic variables, capex and employment in particular. It will also likely have negative implications for corporate activity, especially as M&A, buybacks and dividends are at cycle highs, and US financing conditions are deteriorating.

 

The conclusion:

We believe that the rollover in profit margins will be a constraint for equities, as profits have tended to drive most economic variables, capex and employment in particular. It will also likely have negative implications for corporate activity, especially as M&A, buybacks and dividends are at cycle highs,and US financing conditions are deteriorating.

Which means one can have rising wages or rising profits (and thus stocks), but one can’t have both. Unless, of course, multiples grow to even more ridiculous levels, and at last check the S&P’s GAAP PE is just shy of 24x.

Which also means the central banks’ mandate is clear: expand multiples to even bubblier levels.

end

See you tomorrow night

Harvey

 

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