Gold closed down by $16.20 to $1366.00 (comex closing time). Silver fell by 8 cents to $21.67 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1367.10
silver: $21.67
At the Comex, the open interest in silver rose by a rather large 2408 contracts to 150,968 contracts despite silver's fall in price yesterday. The silver OI is still holding firm at these highly elevated levels. As I mentioned to you yesterday, the bankers will try and do everything possible to remove as many longs from the silver arena as possible. They must know something is up!!
The open interest on the entire gold comex contracts fell by 4081 contracts to 372,950 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month is 940,500 or 29.2 tonnes.The number of silver ounces standing in this non active month of June remained constant at 705,000 oz
Tonight, the Comex registered or dealer inventory of gold remained the same at 1.434 million oz or 44.60 tonnes. This is still dangerously low. The total of all gold at the comex also remained the same at 7.706 million oz or 239.68 tonnes of gold.
JPMorgan's customer inventory shows no change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The total of the 3 major bullion dealers, Scotia , HSBC and JPMorgan have in the Comex dealer account only 30.02 tonnes of gold
The GLD reported a loss in inventory of 1.51 tonnes of gold inventory. The SLV inventory of silver remained firm with no losses or gains in inventory.
In physical stories we have reports from, Bill Holter and Chris Powell of GATA on the departure of Gary Gensler and maybe others at the CFTC.
On the paper side of things,we have Ron Paul tackling USA involvement inside Syria, Reuters, Matt Scuffham on the bail-in of the UK's Co Op Bank, Ambrose Pritchard Evans on what will happen to the world if Bernanke "tapers" and finally Michael Snyder of Economic Collapse Blog as he discusses the plight of Detroit and the USA in general.
We will go over these and many other stories but first.....................
Here are the details:
First Richard Russell, on gold trading last night :
*Richard Russell last night…
"It looks like the great gold rip-off is completed and over. A few of the banks (JPM) spread the rumor that gold was heading for $1,000 and that the bull market in gold was toast. This set off a panic in gold and silver, which served the perpetrators well.
As the metals swooned, the crooks, who had sold the metals short, made a tidy fortune as the metals collapsed. At the same time, they loaded up on cheap gold and silver. In all, quite a play, during which a good many duped investors dumped their silver and gold.
I understand that there is now a huge speculative short position in gold on the Comex. This position will have to be covered. This means driving the shorts out of the market. Thus, the manipulators will have cleaned up -- first by selling the metals short, and then by loading up on the metals at the bottom of the panic in preparation for (hopefully) the ride up.
My guess is that China and Russia soaked up a good deal of the bargain-priced gold near the bottom of the panic. China waits patiently while the US spends its way into bankruptcy. Which reminds me, there's still lots of talk about the true amount of gold owned by the US. Then why the hell doesn't the government or the Fed finally audit our gold holdings and put an end to the rumors? From what I understand, neither the Fed nor the US government want an audit. If the gold is really there, then why don't they put an end to all the rumors? For heaven's sake, let's have an audit -- or is there really something to hide?
I feel we are besieged with rumors, secrets, lies and manipulations. I've felt this way before, but I've never felt this strongly that we (Americans) are being lied to and manipulated. What's to hide? Jesus told us that we must know the truth, and the truth will make us free. Then for God's sake, start telling us the truth! My intuition tells me that if it's a secret, it's probably evil. Ultimately, good or bad, everything comes to light-- although it may take time." - Richard Russell.
The total gold comex open interest fell by 4081 contracts from 377,031 down to to 372,950 with gold falling by $4.20 yesterday. The front active month of June saw it's OI fall by 437 contracts from 1382 down to 945. We had 414 deliveries served upon our longs on Monday. We thus lost 23 contracts or 2300 oz that will not stand in this delivery month of June. The next delivery month is the non active July contract and here the OI fell by 68 contracts down to 651. The next active delivery month for gold is August and here the OI fell by 4083 contracts from 212,754 down to 208,671. The estimated volume today was bad at 123,017 contracts. The confirmed volume yesterday was atrocious at 82,551. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.
The total silver Comex OI surprisingly rose despite as silver's fall in price by 20 cents yesterday. It's total OI is up by 2408 contracts to 150,968. The longs in silver remain resolute, willing to take on the criminal bankers who today threw a tantrum with their raid, as their object of the exercise was to remove some of those stubborn longs from the silver open interest. I doubt very much if today's raid would have any effect on the total OI. The front non active June silver contract month shows a loss in OI of 4 contracts resting tonight at 25. We had 4 notices filed yesterday so in essence we neither gained nor lost any silver contracts. The next big delivery month is July and here the OI fell by only 437 contracts down to 57,686. We are less than two weeks away from first day notice (June 28.2013) and judging from the relatively high OI in July, we may see some fireworks in silver. The estimated volume today was good coming in at 57,686 contracts. The confirmed volume on Friday was good at 43,115.
Comex gold/May contract month:
June 18/2013
the June contract month:
the June contract month:
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
202.48 oz (Scotia)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| 12,178.435 (Scotia) oz |
No of oz served (contracts) today
|
11 (1,100 oz)
|
No of oz to be served (notices)
|
934 (93,400 oz
|
Total monthly oz gold served (contracts) so far this month
|
8471 (847,100 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
78,856.579 oz
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 259,153.01 oz |
We again had no activity at the gold vaults
The dealer again had 0 deposits and no withdrawals.
We again had 0 customer deposits today
total customer deposit: nil oz
It is very strange that in a big delivery month, we are witnessing no gold enter the dealer or even the customer.
we had no customer withdrawals:
i) total customer withdrawals: nil
thus, zero ounces were withdrawn from JPMorgan today as well as no notices were issued by them as well.
As we reported to you two weeks we reported to you that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
The last Tuesday in May, we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of last night 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
Last Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan
Today we had no issuance from any of the major bullion banks, JPMorgan, HSBC and Scotia.
In summary on the customer side of things for JPMorgan:
From the beginning of June we have had 1527 notices served from the customer side of JPMorgan for 152,700 oz. If we add the 71,611.00 oz owing from May issuance, we get 224,311 oz. We can subtract the actual withdrawal of gold form JPMorgan of 217,844.96. This still leaves 6466.04 oz that needs to be settled upon from the vaults of JPMorgan customer side.
Today we had no adjustments.
The total dealer comex gold thus remains at 1.434 million oz or 44.60 tonnes of gold.
The total of all comex gold, dealer and customer rests tonight at 7.706 million oz or 239.68 tonnes..
Thus tonight we have the following closing inventory figures for JPMorgan:
i) dealer account: 413,526.284 oz
ii) customer account remains at 136,380.611 oz. (or only 4.2 tonnes of gold)
Now for JPMorgan's dealer side and what the inventory should be:
Last Tuesday night we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall a week ago on Saturday and again last Monday night, I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side at 413,526.284 oz where it sits tonight.
On the dealer side a week ago Thursday, we had 10 notices issued on JPMorgan's dealer account.
Last Friday: zero
On Monday: 1
On Tuesday: 0
On Wednesday : 0
On Wednesday : 0
on Thursday: 0
on Friday: 0
on Monday: 0 .
Today: 0 again.
Thus, 4946 notices have been issued by JPMorgan so far for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
on Friday: 0
on Monday: 0 .
Today: 0 again.
Thus, 4946 notices have been issued by JPMorgan so far for 494,600 oz and these ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz.
Somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.
How will JPMorgan satisfy this shortfall??
Another disturbing piece of news is the low dealer gold inventory for our 3 major bullion banks: Scotia, HSBC and JPMorgan equal to 30.08 tonnes
i) Scotia: 285,596.23 oz or 8.88 tonnes (a slight increase from Friday)
ii) HSBC: 270,197.277 oz or 8.4 tonnes
iii) JPMorgan: 413,526 oz or 12.8 tonnes
Brinks dealer account has the lions share of the dealer gold at 445,398.58 oz 13.89 tonnes.
There were no changes in inventory from all sides today.
Today we had 11 notices served upon our longs for 1,100 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (945) and subtract out today's notices (11) which leaves us with 934 contracts or 93,400 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal in June:
8471 contracts x 100 oz per contract or 847,100 oz served upon + 945 contracts or 94,500 oz (left to be served upon) = 940,500 oz or 29.20 tonnes of gold.
We lost 23 contracts or 2300 oz and this gold will not stand in the June contract month.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 152.4% of that total production.
Ladies and Gentlemen: we have a three-fold problem:
i) the total dealer inventory of gold is at a very dangerously low level of only 44.32 tonnes and none of the 9.5 tonnes delivery notices from May and the 30 tonnes from June have been removed from inventory as of yet.
ii) a) JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz
iii) the 3 major bullion banks have collectively only 30.08 tonnes of gold left!!
end
now let us head over and see what is new with silver:
now let us head over and see what is new with silver:
Silver:
June 18.2013: June silver contract month:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | 5136.60 (Scotia) |
| Withdrawals from Customer Inventory | 228,922.79 oz (,Scotia) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 651,006.965 oz (CNT) |
| No of oz served (contracts) | 0 (nil oz) |
| No of oz to be served (notices) | 25 (125,000 oz) |
| Total monthly oz silver served (contracts) | 116 (580,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 988,092.07 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 3,718,881.9 oz |
Today, we had fair activity inside the silver vaults.
we had 0 dealer deposits and 1 dealer withdrawals.
i) Out of Scotia dealer: 5136.60 oz
We had 1 customer deposit:
i) Into CNT: 651,006.965 oz
total customer deposits 651,006.965 oz
We had 1 customer withdrawals:
i) Out of Scotia dealer: 5136.60 oz
We had 1 customer deposit:
i) Into CNT: 651,006.965 oz
total customer deposits 651,006.965 oz
We had 1 customer withdrawals:
i) Out of Scotia: 228,922.79 oz
total customer withdrawal : 228,922.79 oz
total customer withdrawal : 228,922.79 oz
we had 1 adjustment today
i) Out of JPM:
5,247.40 oz was adjusted out of the dealer and this landed in the customer.
i) Out of JPM:
5,247.40 oz was adjusted out of the dealer and this landed in the customer.
Registered silver at : 41.763 million oz
total of all silver: 164.996 million oz.
The CME reported that we had 0 notices filed for nil oz today. In order to calculate what we believe will stand in the month of June, I take the Oi standing for June (25) and subtract out today's notices (0) which leaves us with 25 notices or 125,000 oz.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
116 contracts x 5000 oz per contract (served) = 580,000 oz + 25 contracts x 5000 oz or 125,000 oz left to be served upon = 705,000 oz
we neither gained nor lost any silver ounces standing today.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
116 contracts x 5000 oz per contract (served) = 580,000 oz + 25 contracts x 5000 oz or 125,000 oz left to be served upon = 705,000 oz
we neither gained nor lost any silver ounces standing today.
end
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
Now let us check on gold inventories at the GLD first:
June 18.2013:
Tonnes1,001.66
Ounces32,204,529.04
Value US$44.002 billion
June 17/ 2013:
Tonnes1,003.17
Ounces32,252,855.33
Value US$44.649 billion
June 14.2013:
Tonnes1,003.53
Ounces32,264,597.16
Value US$44.860 billion
Tonnes1,003.53
Ounces32,264,597.16
Value US$44.659 billion
June 12/ 2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.8682 billion
June 11.2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.592 billion
June 10.2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.885 billion
June 7.2013:
Tonnes1,007.14
Ounces32,380,584.27
Value US$44.855 billion
June 6.2013:
Tonnes1,007.74
Ounces32,399,917.19
Value US$45.334 billion
June 5.2013:
Tonnes1,010.45
Ounces32,486,916.77
Value US$45.588 billion.
June 4.2013:
Tonnes1,010.45
Ounces32,486,916.77
Value US$45.443 billion
June 3.2013:
Tonnes1,013.15
Ounces32,573,918.24
Value US$45.662 billion
Today, the bleeding resumes again. We lost 1.51 tonnes of gold today.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks)
As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today it fell again and now stands at 7.706 million oz (239.68 tonnes)
GLD gold: 1001 tonnes.
GLD gold: 1001 tonnes.
end
And now for the ETF silver SLV
June 18.2013:
June 14.2013:
june 13.2013;
June 12.2013:
June 11.2013:
June 10.2013
June 7.2013:
June 6.2013:
June 5 2013:
June 4.2013:
June 3.2013:
And now for the ETF silver SLV
June 18.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,473,111.500 |
| Tonnes of Silver in Trust | 9,998.93 |
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,473,111.500 |
| Tonnes of Silver in Trust | 9,998.93 |
June 14.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,473,111.500 |
| Tonnes of Silver in Trust | 9,998.93 |
june 13.2013;
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,473,111.500 |
| Tonnes of Silver in Trust | 9,998.93 |
June 12.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,473,111.500 |
| Tonnes of Silver in Trust | 9,998.93 |
June 11.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,135,274.700 |
| Tonnes of Silver in Trust | 9,988.42 |
June 10.2013
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,135,274.700 |
| Tonnes of Silver in Trust | 9,988.42 |
June 7.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,135,274.700 |
| Tonnes of Silver in Trust | 9,988.42 |
June 6.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,135,274.700 |
| Tonnes of Silver in Trust | 9,988.42 |
June 5 2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,135,274.700 |
| Tonnes of Silver in Trust | 9,988.42 |
June 4.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,279,945.800 |
| Tonnes of Silver in Trust | 9,992.92 |
June 3.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 321,279,945.800 |
| Tonnes of Silver in Trust | 9,992.92 |
THE SILVER INVENTORY REMAINED CONSTANT TODAY.
end
THE SILVER INVENTORY REMAINED CONSTANT TODAY.
end
end
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at negative 3.6% percent to NAV in usa funds and a negative 3.9% to NAV for Cdn funds. ( June 18/13) .
1. Central Fund of Canada: traded at negative 3.6% percent to NAV in usa funds and a negative 3.9% to NAV for Cdn funds. ( June 18/13) .
2. Sprott silver fund (PSLV): Premium to NAV fell to positive .14% NAV June 18/2013
3. Sprott gold fund (PHYS): premium to NAV rose to negative-.42% to NAV June 18/ 2013
end
2. Sprott silver fund (PSLV): Premium to NAV fell to positive .14% NAV June 18/2013
3. Sprott gold fund (PHYS): premium to NAV rose to negative-.42% to NAV June 18/ 2013
3. Sprott gold fund (PHYS): premium to NAV rose to negative-.42% to NAV June 18/ 2013
end
And now for the major physical stories we faced today:
Gold trading from Europe this morning:
Gold trading from Europe this morning:
Platinum 'Supply Squeeze' Likely To Lead to Record Prices
Submitted by GoldCore on 06/18/2013 13:25 -0400
Today’s AM fix was USD 1,378.50, EUR 1,030.35 and GBP 880.32 per ounce.
Yesterday’s AM fix was USD 1,386.00, EUR 1,038.59 and GBP 881.79 per ounce.
Gold was little changed on Tuesday as investors awaited guidance from a Federal Reserve meeting on the outlook for the bank's still incredibly ultra loose stimulus programme, amid mixed U.S. economic data.
Uncertainty about the tenure of Federal Reserve Chairman Bernanke and the possibility of his early retirement may lead to increased risk aversion which will support gold.
Platinum’s fundamentals look increasingly strong and platinum is an attractive diversification for bullion owners looking to further diversify the precious metals component of their investment and savings portfolio.
A record deficit in platinum supplies is set to push prices higher, as unrest sweeps the South African mining industry and demand is boosted by the auto sector and a new exchange traded fund (ETF), according to HSBC, as covered on CNBC (see Commentary).
Platinum in USD – 10 Year
Platinum, which has been influenced by swings in the price of gold since April this year, hit a six-week high of $1,531 earlier this month following the "highly successful" launch of a new physically backed ETF. According to respected James Steel, chief precious metals analyst at HSBC, prices will rise further over the next two years, as the risk of South African mining strikes weigh on output.
But Steel also cut his price target on the metal in the short term because platinum had been influenced more than he had anticipated by the sharp swings in the price of gold.
Platinum Holdings All Known ETFs
Platinum prices have fallen around 17% from the highs in February, as investors sold their gold positions. While both commodities are considered precious metals, platinum has far greater industrial uses.
"A rotational shift out of commodities and into equities also took its toll on the platinum market," Steel said.
He predicts the metal will peak at $1,875 by 2015 or a 30% return in 3 years, before falling back to a more steady level of $1,825 thereafter.
"The launch of the South African ETF in mid-May has already attracted a whopping 371,000oz of platinum demand to date. This is more double the growth in the rest of the platinum ETFs combined this year," he added.
Jewelry demand remains strong, and if industrial or auto demand pushes above forecasts, Steel said platinum prices would rise. At the same time, limited output is likely as further strike action in South Africa, the hub for global platinum production, could hit supplies.
Platinum Supply Mine Production South Africa
"Widespread strike action and other stoppages in South Africa greatly reduced domestic platinum production in 2012. According to Johnson Matthey, production fell almost 16 percent in 2012," said Steel.
"The possibility exists for further disruptions to production in South Africa. Additionally, the long-term challenges of low platinum prices make a sizable amount of current production uneconomical. This leads us to believe that higher prices are necessary to sustain production longer term."
GoldCore believe that the supply demand fundamentals are very strong and should lead to new record nominal prices above $2,000/oz in the coming years.
Steel's new average price forecasts for 2013 is $1,580 down from $1,710 forecast previously and for 2014 it's $1,725 down from $1,800 previously.
Based on platinum's price of $1431/oz today, that's a forecasted 9% gain this year with zero default risk and a guarantee of return of capital as platinum bullion cannot be ‘bailed-in’ or become worthless like stocks and bonds.
NEWS
Gold holds steady ahead of Fed meeting - Reuters
COMMENTARY
Gold Is Poised to Rally Mid-Summer - Huffington Post
(courtesy Goldcore)
end
Gensler is out, but there may be more:
(courtesy GATA/Chris Powell)
Today’s AM fix was USD 1,378.50, EUR 1,030.35 and GBP 880.32 per ounce.
Yesterday’s AM fix was USD 1,386.00, EUR 1,038.59 and GBP 881.79 per ounce.
Yesterday’s AM fix was USD 1,386.00, EUR 1,038.59 and GBP 881.79 per ounce.
Gold was little changed on Tuesday as investors awaited guidance from a Federal Reserve meeting on the outlook for the bank's still incredibly ultra loose stimulus programme, amid mixed U.S. economic data.
Uncertainty about the tenure of Federal Reserve Chairman Bernanke and the possibility of his early retirement may lead to increased risk aversion which will support gold.
Platinum’s fundamentals look increasingly strong and platinum is an attractive diversification for bullion owners looking to further diversify the precious metals component of their investment and savings portfolio.
A record deficit in platinum supplies is set to push prices higher, as unrest sweeps the South African mining industry and demand is boosted by the auto sector and a new exchange traded fund (ETF), according to HSBC, as covered on CNBC (see Commentary).
Platinum in USD – 10 Year
Platinum, which has been influenced by swings in the price of gold since April this year, hit a six-week high of $1,531 earlier this month following the "highly successful" launch of a new physically backed ETF. According to respected James Steel, chief precious metals analyst at HSBC, prices will rise further over the next two years, as the risk of South African mining strikes weigh on output.
But Steel also cut his price target on the metal in the short term because platinum had been influenced more than he had anticipated by the sharp swings in the price of gold.
Platinum Holdings All Known ETFs
Platinum prices have fallen around 17% from the highs in February, as investors sold their gold positions. While both commodities are considered precious metals, platinum has far greater industrial uses.
"A rotational shift out of commodities and into equities also took its toll on the platinum market," Steel said.
He predicts the metal will peak at $1,875 by 2015 or a 30% return in 3 years, before falling back to a more steady level of $1,825 thereafter.
"The launch of the South African ETF in mid-May has already attracted a whopping 371,000oz of platinum demand to date. This is more double the growth in the rest of the platinum ETFs combined this year," he added.
Jewelry demand remains strong, and if industrial or auto demand pushes above forecasts, Steel said platinum prices would rise. At the same time, limited output is likely as further strike action in South Africa, the hub for global platinum production, could hit supplies.
Platinum Supply Mine Production South Africa
"Widespread strike action and other stoppages in South Africa greatly reduced domestic platinum production in 2012. According to Johnson Matthey, production fell almost 16 percent in 2012," said Steel.
"The possibility exists for further disruptions to production in South Africa. Additionally, the long-term challenges of low platinum prices make a sizable amount of current production uneconomical. This leads us to believe that higher prices are necessary to sustain production longer term."
GoldCore believe that the supply demand fundamentals are very strong and should lead to new record nominal prices above $2,000/oz in the coming years.
Steel's new average price forecasts for 2013 is $1,580 down from $1,710 forecast previously and for 2014 it's $1,725 down from $1,800 previously.
Based on platinum's price of $1431/oz today, that's a forecasted 9% gain this year with zero default risk and a guarantee of return of capital as platinum bullion cannot be ‘bailed-in’ or become worthless like stocks and bonds.
NEWS
Gold holds steady ahead of Fed meeting - Reuters
COMMENTARY
Gold Is Poised to Rally Mid-Summer - Huffington Post
(courtesy Goldcore)
end
Gensler is out, but there may be more:
(courtesy GATA/Chris Powell)
Gensler is out, but there may be more:
(courtesy GATA/Chris Powell)
At the CFTC even Gensler is too much for the big banks
Submitted by cpowell on Tue, 2013-06-18 19:19. Section: Daily Dispatches
Commodity Futures Trading Commission Faces Top-Level Shake-Up
By Gregory Meyer
Financial Times, London
Tuesday, June 18, 2013
In the past month bankers and lawyers from Citigroup, Goldman Sachs, and JPMorgan Chase have streamed into a dark brick Washington office building where the future of finance is being shaped.
The high-powered visitors to the home of the Commodity Futures Trading Commission testify to its rise from an obscure US government agency to a global watchdog of financial derivatives, the scandal-hit Libor lending benchmark, and physical commodities from oil to silver.
The agency's tack is now more in question than at any time since Gary Gensler became chairman four years ago. He and one or two others on the five-member commission may be replaced as soon as July, lobbyists and commission officials say. This could slow or reverse Mr Gensler's clampdown on Wall Street banks
"If there is 60 per cent turnover at the commission, that means there could be a 60 per cent change in direction of the commission," says Michael Dunn, a former CFTC commissioner at lobbyist Patton Boggs.
The banks, their opponents at liberal pressure groups and others have filed through the commission's glass doors to try to influence new rules transforming the $633 trillion derivatives market. Under Mr Gensler, the CFTC has shaved dealer banks' information advantage, set business conduct standards, and forced more swap contracts to be backed by clearing houses.
Mr Gensler's term expired in April 2012 but by law he can stay through to the end of the year if no successor is confirmed. As the sun sets on his tenure, one big reform plank remains incomplete: guidelines for foreign derivatives dealers, whose blow-ups could endanger the US economy.
If this does not pass, Mr Gensler has warned that the CFTC's painstakingly constructed regulatory framework could become a hollow shell as derivatives operations move offshore but retain Washington's implicit backing.
"If the offshore operations of financial institutions are allowed a free pass from reform," he said in a recent speech, "we will not fulfil Congress' intent to end 'too big to fail.'"
The term of commissioner Bart Chilton, a Democrat like Mr Gensler, expired in April but he can serve through 2014 unless he is reappointed or another commissioner is confirmed. He says: "There's work to be done and I'd like to continue to do it."
Lobbyists say one candidate to replace either man is Amanda Renteria, former chief of staff to Debbie Stabenow, the Senate Agriculture Committee chairman. The committee oversees the CFTC.
Ms Renteria holds a Harvard MBA and helped on the Dodd-Frank financial reform law that laid the groundwork for the CFTC's derivatives rules, associates say. Still, "you can tell looking at her resume she's not a derivatives market expert," says a former senior CFTC official, now an industry lobbyist.
Commissioner Jill Sommers, a Republican, has announced plans to resign. Names in circulation as possible replacements include Chris Giancarlo, executive vice-president at interdealer broker GFI Group, and Martha Scott Poindexter, Republican staff director on the Senate Select Intelligence Committee.
Mr Giancarlo has roots in off-exchange markets. In congressional testimony last December he was critical of what he called the "anti-competitive, single-silo, monopolistic structure of the futures market."
The prospect of a personnel shuffle hangs over the CFTC's pending business. Already three commissioners -- Ms Sommers; Mark Wetjen, a Democrat; and Scott O'Malia, a Republican -- have questioned whether the foreign guidelines should be completed before a July 12 exemption expires for offshore branches of dealers such as Goldman and JPMorgan.
The CFTC has other contentious tasks to complete. A customer protection rule proposed in response to the MF Global collapse and Peregrine Financial Group fraud has agitated brokers, who claim it will require $100 billion in extra margin collateral, making futures markets too costly to trade.
The agency is also trying to impose new constraints on commodity speculators after banking groups successfully sued to overturn initial limits.
"Gary is not the kind of person who comes up and slugs you in the nose, but he's persistent," Philip McBride Johnson, a derivatives lawyer and former CFTC chairman, says of Mr Gensler. "I don't know for sure if a new composition of the commission would be inclined to either slow down or back off."
end
James Turk believes that many do not believe the doubletalk at the Fed as they are losing control
(courtesy Kingworldnews/James Turk)
Submitted by cpowell on Tue, 2013-06-18 19:19. Section: Daily Dispatches
Commodity Futures Trading Commission Faces Top-Level Shake-Up
By Gregory Meyer
Financial Times, London
Tuesday, June 18, 2013
Financial Times, London
Tuesday, June 18, 2013
In the past month bankers and lawyers from Citigroup, Goldman Sachs, and JPMorgan Chase have streamed into a dark brick Washington office building where the future of finance is being shaped.
The high-powered visitors to the home of the Commodity Futures Trading Commission testify to its rise from an obscure US government agency to a global watchdog of financial derivatives, the scandal-hit Libor lending benchmark, and physical commodities from oil to silver.
The agency's tack is now more in question than at any time since Gary Gensler became chairman four years ago. He and one or two others on the five-member commission may be replaced as soon as July, lobbyists and commission officials say. This could slow or reverse Mr Gensler's clampdown on Wall Street banks
"If there is 60 per cent turnover at the commission, that means there could be a 60 per cent change in direction of the commission," says Michael Dunn, a former CFTC commissioner at lobbyist Patton Boggs.
The banks, their opponents at liberal pressure groups and others have filed through the commission's glass doors to try to influence new rules transforming the $633 trillion derivatives market. Under Mr Gensler, the CFTC has shaved dealer banks' information advantage, set business conduct standards, and forced more swap contracts to be backed by clearing houses.
Mr Gensler's term expired in April 2012 but by law he can stay through to the end of the year if no successor is confirmed. As the sun sets on his tenure, one big reform plank remains incomplete: guidelines for foreign derivatives dealers, whose blow-ups could endanger the US economy.
If this does not pass, Mr Gensler has warned that the CFTC's painstakingly constructed regulatory framework could become a hollow shell as derivatives operations move offshore but retain Washington's implicit backing.
"If the offshore operations of financial institutions are allowed a free pass from reform," he said in a recent speech, "we will not fulfil Congress' intent to end 'too big to fail.'"
The term of commissioner Bart Chilton, a Democrat like Mr Gensler, expired in April but he can serve through 2014 unless he is reappointed or another commissioner is confirmed. He says: "There's work to be done and I'd like to continue to do it."
Lobbyists say one candidate to replace either man is Amanda Renteria, former chief of staff to Debbie Stabenow, the Senate Agriculture Committee chairman. The committee oversees the CFTC.
Ms Renteria holds a Harvard MBA and helped on the Dodd-Frank financial reform law that laid the groundwork for the CFTC's derivatives rules, associates say. Still, "you can tell looking at her resume she's not a derivatives market expert," says a former senior CFTC official, now an industry lobbyist.
Commissioner Jill Sommers, a Republican, has announced plans to resign. Names in circulation as possible replacements include Chris Giancarlo, executive vice-president at interdealer broker GFI Group, and Martha Scott Poindexter, Republican staff director on the Senate Select Intelligence Committee.
Mr Giancarlo has roots in off-exchange markets. In congressional testimony last December he was critical of what he called the "anti-competitive, single-silo, monopolistic structure of the futures market."
The prospect of a personnel shuffle hangs over the CFTC's pending business. Already three commissioners -- Ms Sommers; Mark Wetjen, a Democrat; and Scott O'Malia, a Republican -- have questioned whether the foreign guidelines should be completed before a July 12 exemption expires for offshore branches of dealers such as Goldman and JPMorgan.
The CFTC has other contentious tasks to complete. A customer protection rule proposed in response to the MF Global collapse and Peregrine Financial Group fraud has agitated brokers, who claim it will require $100 billion in extra margin collateral, making futures markets too costly to trade.
The agency is also trying to impose new constraints on commodity speculators after banking groups successfully sued to overturn initial limits.
"Gary is not the kind of person who comes up and slugs you in the nose, but he's persistent," Philip McBride Johnson, a derivatives lawyer and former CFTC chairman, says of Mr Gensler. "I don't know for sure if a new composition of the commission would be inclined to either slow down or back off."
end
James Turk believes that many do not believe the doubletalk at the Fed as they are losing control
(courtesy Kingworldnews/James Turk)
Fed's doubletalk losing effectiveness, Turk tells King World News
Submitted by cpowell on Tue, 2013-06-18 19:08. Section: Daily Dispatches
3p ET Tuesday, June 18, 2013
Dear Friend of GATA and Gold:
The Federal Reserve thinks it can control markets by talking out of both sides of its mouth but its denial of inflation isn't convincing people anymore and markets are starting to spin out of the central bank's control, GoldMoney founder and GATA consultant tells King World News today. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
from Seeking Alpha, Santa Cruz province in Argentina is slapping a 1% annual tax on mining profits.
(courtesy seeking alpha)
Argentina's Santa Cruz province slaps a 1% annual tax on mine resources, a move mining companies...
- Tuesday, June 18, 12:52 PM ETArgentina's Santa Cruz province slaps a 1% annual tax on mine resources, a move mining companies say they will challenge in court. While the percentage seems small, miners say it will cost them $100M in new taxes next year, as the tax amounts to ~8% of the total resources of a mine with a 15-year life. Among miners with operations in Santa Cruz: AU -3.5%, MUX -2.3%, GG -2.5%, PAAS -1.4%.
end
And now your more important paper stories which will influence the price of gold and silver:
Your overnight sentiment which shapes the price of gold and silver:
Major Points:
1. Merkel, (at G8) critical of the Japanese Abenomics (weakening of the Yen against all currencies)
2. In China, the liquidity shortage continues and thus cripples the banking system over there.
3. China's Agricultural bank cuts back on bond issue by 31% due to lack of demand intensifying the lack of cash in the system.
4. the USA/Yen caught a bid driving it above the 95 mark (yen down) as Japanese Minister makes statement that seemingly Japan is pandering to markets.
5. Nikkei down 26 points and the 10 year bond yield finishes down 2 basis points at .82%
6. European car sales hit 20 year low for May
7. Draghi jawboning as he states that he will be accomodative. The euro/USA pushed lower on that statement.
8. Then German ZEW confidence index rose to 38.5 from 36.4 pushing the euro to its highs. (3 month high)
9. However the big news was this development on bad loan ratios inside Spain:
And while all this posturing was going on, Spain's economy cratered once again with the bad loan ratio rising from 10.47% in March to a record 10.87% in April, and since this is a coincident unemployment reading of unemployment look for the real, not manipulated and misreported, Spanish economy to continue deteriorating as rapidly as it has been to date.
10. Details from Bloomberg, Jim Reid of Deutsche
from Reuters today:
"Bad loan ratio rises in April: Reuters, citing data from the Bank of Spain, reported that Spanish banks' bad loans as a percentage of total credit rose to 10.9% in April from 10.5% in March. The article noted that the increase came after declines in late 2012 and early 2013 as banks transferred distressed property assets to Spain's bad bank."
(courtesy zero hedge/Bloomberg/Jim Reid/Deutsche bank)
And now your more important paper stories which will influence the price of gold and silver:
Your overnight sentiment which shapes the price of gold and silver:
Major Points:
1. Merkel, (at G8) critical of the Japanese Abenomics (weakening of the Yen against all currencies)
2. In China, the liquidity shortage continues and thus cripples the banking system over there.
3. China's Agricultural bank cuts back on bond issue by 31% due to lack of demand intensifying the lack of cash in the system.
4. the USA/Yen caught a bid driving it above the 95 mark (yen down) as Japanese Minister makes statement that seemingly Japan is pandering to markets.
5. Nikkei down 26 points and the 10 year bond yield finishes down 2 basis points at .82%
6. European car sales hit 20 year low for May
7. Draghi jawboning as he states that he will be accomodative. The euro/USA pushed lower on that statement.
8. Then German ZEW confidence index rose to 38.5 from 36.4 pushing the euro to its highs. (3 month high)
9. However the big news was this development on bad loan ratios inside Spain:
And while all this posturing was going on, Spain's economy cratered once again with the bad loan ratio rising from 10.47% in March to a record 10.87% in April, and since this is a coincident unemployment reading of unemployment look for the real, not manipulated and misreported, Spanish economy to continue deteriorating as rapidly as it has been to date.
10. Details from Bloomberg, Jim Reid of Deutsche
from Reuters today:
"Bad loan ratio rises in April: Reuters, citing data from the Bank of Spain, reported that Spanish banks' bad loans as a percentage of total credit rose to 10.9% in April from 10.5% in March. The article noted that the increase came after declines in late 2012 and early 2013 as banks transferred distressed property assets to Spain's bad bank."
(courtesy zero hedge/Bloomberg/Jim Reid/Deutsche bank)
Schizomarket On Edge As FOMC Meeting Begins
Submitted by Tyler Durden on 06/18/2013 07:03 -0400
- Bank of England
- Barclays
- Ben Bernanke
- Ben Bernanke
- Bloomberg News
- BOE
- Bond
- British Pound
- CDS
- China
- CPI
- Crude
- Deutsche Bank
- Economic Calendar
- Equity Markets
- European Central Bank
- fixed
- General Motors
- Germany
- Gross Domestic Product
- headlines
- Housing Starts
- Ireland
- Japan
- Jim Reid
- Krugman
- Market Sentiment
- Monetary Policy
- NAHB
- Nikkei
- President Obama
- Price Action
- Recession
- Unemployment
- United Kingdom
- Volatility
- Yuan
There was non-Fed news in the overnight market.
Such as Nikkei reporting that Germany's Angela Merkel was the first G-8 member to be openly critical of Japan's credit-easing policy "that has led to the yen's weakening against major currencies" in what was the first shot across the bow between the two export-heavy countries. Not helping risk in Asia was also news that China May new home prices rose in 69 cities over the past year, compared to 68 the prior month, thus keeping the PBOC's hands tied even as the liquidity shortage in traditional liquidity conduits continues to cripple the banking system and forcing the Agricultural Development Bank of China to scale back the size of two bond offerings today by 31% "as the worst cash crunch in at least seven years curbs demand for the securities."
Rounding up Asia were the latest RBA meeting minutes which noted the possibility of further weakness in AUD over time, adding downside pressure on the currency and pressuring all AUD linked equity pairs lower. Still, the USDJPY caught a late bid pushing it above 95 on some comments by the economy minister Amari who said that the government would not be swayed by day-to-day market moves and the BOJ "should continue making efforts to convey its thinking to markets" adding the government was not making policy to pander to markets, confirming that Japan is making policy solely to pander to markets.
Then we moved to Europe where we found that European car sales hit a fresh 20 year low for May, which followed the return of Draghi jawboning after he said that Europe was ready to do "whatever it takes" to preserve the Euro, which is an odd statement to make considering all the promises by Van Rompuy saying the EUR existential crisis is well past. Draghi also said that he has an open mind on non-standard policies and that the ECB can stay accommodative as long as necessary. This quickly pushed the EUR to session lows, however, this move was rapidly reversed when the German ZEW Economic Sentiment survey printed at 38.5, up from 36.4 and beating expectations of 38.1, sending the EURUSD to a fresh three month high.
And while all this posturing was going on, Spain's economy cratered once again with the bad loan ratio rising from 10.47% in March to a record 10.87% in April, and since this is a coincident unemployment reading of unemployment look for the real, not manipulated and misreported, Spanish economy to continue deteriorating as rapidly as it has been to date.
But all of the above is meaningless with the market continuing to act like a teenage primadonna with the June FOMC meeting starting today. We can't help but wonder how much the market would plunge, or soar, if Amanda Bynes has a tweet commenting on what Bernanke may (or may not) do. Remember: it is a centrally planned world and we are all merely collateral whose every communication is intercepted and recorded by the authorities. And speaking of, it is quite likely that the next Fed Chairman is coming, following the release of Obama's Charlie Rose interview contents in which the president said that "he's already stayed a lot longer than he wanted or he was supposed to." Bring on the Geithner, Summers, Yellen, Krugman rumors.
All the news headlines in bulletin format courtesy of Bloomberg:
- Treasuries steady as Fed’s two-day meeting begins, with rate decision and Bernanke press conference tomorrow; investors weighing whether economy strong enough for Fed to begin tapering asset purchases.
- ECB’s Draghi said the central bank is considering further non- standard monetary policy tools and will deploy them if circumstances warrant
- German investor confidence rose in June, with the ZEW index of investor and analyst expectations increasinf to 38.5 from 36.4 in May, est. 38.1
- U.K. inflation accelerated 2.7% in May, more than economists forecast, as a record jump in air fares for the month helped extend its persistence above the Bank of England’s 2% target
- European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region reduced demand at PSA Peugeot Citroen, Renault SA and General Motors Co.
- Obama said Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the Fed chief will leave when his current term expires next year
- Currency strategists from Barclays Plc to Deutsche Bank AG are advising investors to sell the yuan, this year’s best-performing emerging-market currency, as growth slows in the world’s second-largest economy and inflows wane
- Sovereign yields mostly higher. Nikkei falls 0.2%, most Asian equity markets gain. European stocks mixed, U.S. equity index futures mixed. WTI crude and metals lower
SocGen recaps the main macro events of the day
The economic calendar is pretty busy today but whether that will matter for FX and bonds 24 hours before the Fed FOMC is debateable as markets continue to mulll over the Fed's tactics in the light of the recent back up in UST yields and mortgages. Price action was quiet in Asia with the USD a touch firmer following the FT article discussing Fed policy (see link above) where Robin Harding played up the likelihood of a signal on tapering.
Investors will probably be paying close attention in particular to the German ZEW index. Expected up for the second month in a row, it might indicate that the trough has been reached in terms of business in Germany. This would also confirm the lack of urgency signalled by the ECB at its June meeting. But will the EUR necessarily benefit? Theoretically, the answer would tend to be in the affirmative. The fact that the FOMC meeting takes place tomorrow makes us more cautious however.
In the UK, the slight increase forecast in CPI inflation should help fend off expectations of additional QE. This is marginally positive for the GBP, although the BoE minutes, to be published tomorrow, will probably be a more decisive factor. SG's call is for a rise in annual CPI from 2.4% to 2.7% vs consensus of 2.6%. A stronger number should help to underpin GBP's broad-based gains so far this month as markets assess the diminished policy leeway for incoming governor Carney.
A few US indicators should also be reported, but they are not expected to have a major impact on the outcome of the FOMC, the day before it occurs. They are also not expected to further prompt investors to take new directional positions: all of the players are now holding their breath until the major meeting is over. Will Ben Bernanke repeat that tapering is possible in a couple of meeting? The Fed's new forecasts and the press conference held by the chairman after the meeting might provide greater visibility. An up-tick in May CPI from 1.1% to 1.4% will leave it well below the 2.5% Fed reference.
* * *
DB's Jim Reid with the complete overnight summary for those who missed the news yesterday
There has been no shortage of Fed-related headlines in the lead up to Wednesday’s FOMC. Yesterday, the FT published a commentary saying that Bernanke will likely use Wednesday’s post-FOMC press conference to signal that the Fed is close to tapering asset purchases. The article also wrote that Bernanke will balance his message by saying subsequent tapering moves will depend on the path of the economy and in no way brings forward the timing of a rate rise. The S&P500 fell almost 1%, and the USD index hit an intraday high of 80.9 (or +0.26%), in the hour after the article hit the newswires. But in an interesting turn of events, the FT reporter who wrote the article (US economy reporter Robin Harding) subsequently tweeted that “The Fed does not leak anything to any journalist to steer markets – especially during blackout” and that he has “been in the September taper camp for a while and I’d stick with that”. The S&P500 then went on to recover most of its losses to close with a 0.76% gain, while EURUSD bounced to a session high of 1.338. As we wrote yesterday, we suspect that this week Bernanke will continue to say tapering could happen this year but will be data dependant and that we are still a long way off from removing the very easy policy stance the Fed has in place.
In terms of other Fed headlines, the odds of having a new Fed Chairperson come February 2014 have seemingly shortened overnight after President Obama said that Bernanke has remained in his post “longer than (Bernanke) wanted”. Obama’s comment came in an interview with Charlie Rose, and was in response to whether he will renominate Bernanke for another term. Recall that in March’s post-FOMC press conference, Bernanke hinted that his current tenure as the Fed Chairman would be his last - and it’s likely he will be pressed again on this topic on Wednesday.
Moving on to the overnight session there’s plenty of focus on China. The Shanghai Composite (-0.05%) is slightly lower again for the second consecutive day this week. Chinese banks’ share prices aren’t much stronger overnight in Asia despite news that China’s state investment agency Huijin’s has raised it’s A-share stakes in China’s Big Four banks. There seems to be an increased focus on the sector not helped by the recent tightness in liquidity and spike in interbank funding rate.
Indeed Bloomberg news also reported that Agricultural Development Bank of China has scaled back the size of its two bond offerings today by nearly 31% due to “the recent large fluctuations in bond market liquidity”. DB’s Jun Ma thinks the latest data points on new loans and interbank rates suggest that monetary condition is a bit too tight and some relaxation will be needed. Staying in China, property prices remained buoyant in May with 69 out of 70 Chinese cities’ new home prices rising in May versus a year ago. Specifically, prices of new homes in Beijing and Shanghai rose 11.8% and 10.2% from a year ago. Data showing that China’s FDI grew at its slowest pace in four months in May is also not helping market sentiment.
Away from China, key Asia-Pacific bourses are mostly lower. The Hang Seng, Nikkei, and ASX 200 are down -0.7%, -0.3% and -1.0%, respectively as we type. Asian credit markets are mixed although we continue to see decent demand for cash credit ahead of the FOMC. The latest RBA meeting minutes noted that the possibility of further weakness in AUD over time, adding some downside pressure on the currency. The UST 10-year yield is steady at 2.176%.
Returning to yesterday, in the fixed income space DM credit held fairly firm with the CDX IG index closing 1bp tighter on the day tracking a similar move in the European iTraxx (-2bp). The resilience in credit was somewhat surprising coming off the back of rising UST yields (10yr USTs added 5bp to close at 2.18%). There were reports of fund managers taking advantage of the higher all-in yields offered by the recent sell off in rates and credit spreads. The stability in credit also allowed US primary markets activity to return following a fairly quiet week for new issuance last week. Indeed, Chevron managed to print a $6bn jumbo deal yesterday on the back on an order book in excess of $34bn, according to the IFR.
In the EM credit space, volatility continued to be high. Mexican and Brazilian 10yr government yields added around 18bp and 20bp respectively. Venezuelan 5yr CDS gapped out by 75bp to more than 1000bp after S&P cut the country’s rating to B from B+ citing the “political polarization and internal challenges within the government”.
Yesterday’s US dataflow was fairly mixed with stronger housing sentiment offset by deteriorating factory data. Our US economists expect this to be a template for the near-term economic outlook. Starting with housing, the NAHB homebuilder sentiment index printed at its highest level since March 2006 (52 vs 44 previous and 45 consensus). In the details, present sales (56 vs. 48), future sales (61 vs. 52) and buyer traffic (40 vs. 33) all touched a cyclical high. DB’s economists highlight that the current level of sentiment is consistent with housing starts of well over one million units. They forecast a starts rate closer to 1.3 million units by yearend. As a result, the direct contribution to real GDP growth from home construction is likely to be 50-100 bps in 2013 compared to 30 bps in 2012. On a less positive note, while the headline component of the NY Empire survey was markedly stronger than expectations (+7.8 vs. 0.0 expected), the details were roundly disappointing - new orders (-6.7 vs. -1.2 previous), shipments (-11.8 vs. unch.), employment (unch. vs. +5.7) and the average workweek (-11.3 vs. -1.1) all showed deterioration. The silver lining was that the six month outlook in nearly every category was above the current conditions reading.
Turning to the day ahead, the G8 summit will be wrapping up in Northern Ireland, while the first day of the two-day FOMC gets underway today. Germany’s ZEW survey is the main data release in the euroarea and consensus is looking for a small improvement in the economic sentiment index to 38.1 (vs 36.4 previous). In the UK, the focus will be on CPI and producer prices. Building permits, housing starts and CPI for May are the major data releases in the US.
end
We warned you this was going to happen. The huge bank run on the Cypriot banks have now taken their toll. They need a new transfusion of cash;
(courtesy zero hedge)
- Bank of England
- Barclays
- Ben Bernanke
- Ben Bernanke
- Bloomberg News
- BOE
- Bond
- British Pound
- CDS
- China
- CPI
- Crude
- Deutsche Bank
- Economic Calendar
- Equity Markets
- European Central Bank
- fixed
- General Motors
- Germany
- Gross Domestic Product
- headlines
- Housing Starts
- Ireland
- Japan
- Jim Reid
- Krugman
- Market Sentiment
- Monetary Policy
- NAHB
- Nikkei
- President Obama
- Price Action
- Recession
- Unemployment
- United Kingdom
- Volatility
- Yuan
There was non-Fed news in the overnight market.
Such as Nikkei reporting that Germany's Angela Merkel was the first G-8 member to be openly critical of Japan's credit-easing policy "that has led to the yen's weakening against major currencies" in what was the first shot across the bow between the two export-heavy countries. Not helping risk in Asia was also news that China May new home prices rose in 69 cities over the past year, compared to 68 the prior month, thus keeping the PBOC's hands tied even as the liquidity shortage in traditional liquidity conduits continues to cripple the banking system and forcing the Agricultural Development Bank of China to scale back the size of two bond offerings today by 31% "as the worst cash crunch in at least seven years curbs demand for the securities."
Rounding up Asia were the latest RBA meeting minutes which noted the possibility of further weakness in AUD over time, adding downside pressure on the currency and pressuring all AUD linked equity pairs lower. Still, the USDJPY caught a late bid pushing it above 95 on some comments by the economy minister Amari who said that the government would not be swayed by day-to-day market moves and the BOJ "should continue making efforts to convey its thinking to markets" adding the government was not making policy to pander to markets, confirming that Japan is making policy solely to pander to markets.
Then we moved to Europe where we found that European car sales hit a fresh 20 year low for May, which followed the return of Draghi jawboning after he said that Europe was ready to do "whatever it takes" to preserve the Euro, which is an odd statement to make considering all the promises by Van Rompuy saying the EUR existential crisis is well past. Draghi also said that he has an open mind on non-standard policies and that the ECB can stay accommodative as long as necessary. This quickly pushed the EUR to session lows, however, this move was rapidly reversed when the German ZEW Economic Sentiment survey printed at 38.5, up from 36.4 and beating expectations of 38.1, sending the EURUSD to a fresh three month high.
And while all this posturing was going on, Spain's economy cratered once again with the bad loan ratio rising from 10.47% in March to a record 10.87% in April, and since this is a coincident unemployment reading of unemployment look for the real, not manipulated and misreported, Spanish economy to continue deteriorating as rapidly as it has been to date.
But all of the above is meaningless with the market continuing to act like a teenage primadonna with the June FOMC meeting starting today. We can't help but wonder how much the market would plunge, or soar, if Amanda Bynes has a tweet commenting on what Bernanke may (or may not) do. Remember: it is a centrally planned world and we are all merely collateral whose every communication is intercepted and recorded by the authorities. And speaking of, it is quite likely that the next Fed Chairman is coming, following the release of Obama's Charlie Rose interview contents in which the president said that "he's already stayed a lot longer than he wanted or he was supposed to." Bring on the Geithner, Summers, Yellen, Krugman rumors.
All the news headlines in bulletin format courtesy of Bloomberg:
- Treasuries steady as Fed’s two-day meeting begins, with rate decision and Bernanke press conference tomorrow; investors weighing whether economy strong enough for Fed to begin tapering asset purchases.
- ECB’s Draghi said the central bank is considering further non- standard monetary policy tools and will deploy them if circumstances warrant
- German investor confidence rose in June, with the ZEW index of investor and analyst expectations increasinf to 38.5 from 36.4 in May, est. 38.1
- U.K. inflation accelerated 2.7% in May, more than economists forecast, as a record jump in air fares for the month helped extend its persistence above the Bank of England’s 2% target
- European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region reduced demand at PSA Peugeot Citroen, Renault SA and General Motors Co.
- Obama said Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the Fed chief will leave when his current term expires next year
- Currency strategists from Barclays Plc to Deutsche Bank AG are advising investors to sell the yuan, this year’s best-performing emerging-market currency, as growth slows in the world’s second-largest economy and inflows wane
- Sovereign yields mostly higher. Nikkei falls 0.2%, most Asian equity markets gain. European stocks mixed, U.S. equity index futures mixed. WTI crude and metals lower
SocGen recaps the main macro events of the day
The economic calendar is pretty busy today but whether that will matter for FX and bonds 24 hours before the Fed FOMC is debateable as markets continue to mulll over the Fed's tactics in the light of the recent back up in UST yields and mortgages. Price action was quiet in Asia with the USD a touch firmer following the FT article discussing Fed policy (see link above) where Robin Harding played up the likelihood of a signal on tapering.
Investors will probably be paying close attention in particular to the German ZEW index. Expected up for the second month in a row, it might indicate that the trough has been reached in terms of business in Germany. This would also confirm the lack of urgency signalled by the ECB at its June meeting. But will the EUR necessarily benefit? Theoretically, the answer would tend to be in the affirmative. The fact that the FOMC meeting takes place tomorrow makes us more cautious however.
In the UK, the slight increase forecast in CPI inflation should help fend off expectations of additional QE. This is marginally positive for the GBP, although the BoE minutes, to be published tomorrow, will probably be a more decisive factor. SG's call is for a rise in annual CPI from 2.4% to 2.7% vs consensus of 2.6%. A stronger number should help to underpin GBP's broad-based gains so far this month as markets assess the diminished policy leeway for incoming governor Carney.
A few US indicators should also be reported, but they are not expected to have a major impact on the outcome of the FOMC, the day before it occurs. They are also not expected to further prompt investors to take new directional positions: all of the players are now holding their breath until the major meeting is over. Will Ben Bernanke repeat that tapering is possible in a couple of meeting? The Fed's new forecasts and the press conference held by the chairman after the meeting might provide greater visibility. An up-tick in May CPI from 1.1% to 1.4% will leave it well below the 2.5% Fed reference.
* * *
DB's Jim Reid with the complete overnight summary for those who missed the news yesterday
There has been no shortage of Fed-related headlines in the lead up to Wednesday’s FOMC. Yesterday, the FT published a commentary saying that Bernanke will likely use Wednesday’s post-FOMC press conference to signal that the Fed is close to tapering asset purchases. The article also wrote that Bernanke will balance his message by saying subsequent tapering moves will depend on the path of the economy and in no way brings forward the timing of a rate rise. The S&P500 fell almost 1%, and the USD index hit an intraday high of 80.9 (or +0.26%), in the hour after the article hit the newswires. But in an interesting turn of events, the FT reporter who wrote the article (US economy reporter Robin Harding) subsequently tweeted that “The Fed does not leak anything to any journalist to steer markets – especially during blackout” and that he has “been in the September taper camp for a while and I’d stick with that”. The S&P500 then went on to recover most of its losses to close with a 0.76% gain, while EURUSD bounced to a session high of 1.338. As we wrote yesterday, we suspect that this week Bernanke will continue to say tapering could happen this year but will be data dependant and that we are still a long way off from removing the very easy policy stance the Fed has in place.
In terms of other Fed headlines, the odds of having a new Fed Chairperson come February 2014 have seemingly shortened overnight after President Obama said that Bernanke has remained in his post “longer than (Bernanke) wanted”. Obama’s comment came in an interview with Charlie Rose, and was in response to whether he will renominate Bernanke for another term. Recall that in March’s post-FOMC press conference, Bernanke hinted that his current tenure as the Fed Chairman would be his last - and it’s likely he will be pressed again on this topic on Wednesday.
Moving on to the overnight session there’s plenty of focus on China. The Shanghai Composite (-0.05%) is slightly lower again for the second consecutive day this week. Chinese banks’ share prices aren’t much stronger overnight in Asia despite news that China’s state investment agency Huijin’s has raised it’s A-share stakes in China’s Big Four banks. There seems to be an increased focus on the sector not helped by the recent tightness in liquidity and spike in interbank funding rate.
Indeed Bloomberg news also reported that Agricultural Development Bank of China has scaled back the size of its two bond offerings today by nearly 31% due to “the recent large fluctuations in bond market liquidity”. DB’s Jun Ma thinks the latest data points on new loans and interbank rates suggest that monetary condition is a bit too tight and some relaxation will be needed. Staying in China, property prices remained buoyant in May with 69 out of 70 Chinese cities’ new home prices rising in May versus a year ago. Specifically, prices of new homes in Beijing and Shanghai rose 11.8% and 10.2% from a year ago. Data showing that China’s FDI grew at its slowest pace in four months in May is also not helping market sentiment.
Away from China, key Asia-Pacific bourses are mostly lower. The Hang Seng, Nikkei, and ASX 200 are down -0.7%, -0.3% and -1.0%, respectively as we type. Asian credit markets are mixed although we continue to see decent demand for cash credit ahead of the FOMC. The latest RBA meeting minutes noted that the possibility of further weakness in AUD over time, adding some downside pressure on the currency. The UST 10-year yield is steady at 2.176%.
Returning to yesterday, in the fixed income space DM credit held fairly firm with the CDX IG index closing 1bp tighter on the day tracking a similar move in the European iTraxx (-2bp). The resilience in credit was somewhat surprising coming off the back of rising UST yields (10yr USTs added 5bp to close at 2.18%). There were reports of fund managers taking advantage of the higher all-in yields offered by the recent sell off in rates and credit spreads. The stability in credit also allowed US primary markets activity to return following a fairly quiet week for new issuance last week. Indeed, Chevron managed to print a $6bn jumbo deal yesterday on the back on an order book in excess of $34bn, according to the IFR.
In the EM credit space, volatility continued to be high. Mexican and Brazilian 10yr government yields added around 18bp and 20bp respectively. Venezuelan 5yr CDS gapped out by 75bp to more than 1000bp after S&P cut the country’s rating to B from B+ citing the “political polarization and internal challenges within the government”.
Yesterday’s US dataflow was fairly mixed with stronger housing sentiment offset by deteriorating factory data. Our US economists expect this to be a template for the near-term economic outlook. Starting with housing, the NAHB homebuilder sentiment index printed at its highest level since March 2006 (52 vs 44 previous and 45 consensus). In the details, present sales (56 vs. 48), future sales (61 vs. 52) and buyer traffic (40 vs. 33) all touched a cyclical high. DB’s economists highlight that the current level of sentiment is consistent with housing starts of well over one million units. They forecast a starts rate closer to 1.3 million units by yearend. As a result, the direct contribution to real GDP growth from home construction is likely to be 50-100 bps in 2013 compared to 30 bps in 2012. On a less positive note, while the headline component of the NY Empire survey was markedly stronger than expectations (+7.8 vs. 0.0 expected), the details were roundly disappointing - new orders (-6.7 vs. -1.2 previous), shipments (-11.8 vs. unch.), employment (unch. vs. +5.7) and the average workweek (-11.3 vs. -1.1) all showed deterioration. The silver lining was that the six month outlook in nearly every category was above the current conditions reading.
Turning to the day ahead, the G8 summit will be wrapping up in Northern Ireland, while the first day of the two-day FOMC gets underway today. Germany’s ZEW survey is the main data release in the euroarea and consensus is looking for a small improvement in the economic sentiment index to 38.1 (vs 36.4 previous). In the UK, the focus will be on CPI and producer prices. Building permits, housing starts and CPI for May are the major data releases in the US.
end
(courtesy zero hedge)
The Cyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter)
Submitted by Tyler Durden on 06/18/2013 12:18 -0400
- Bank Run
- European Central Bank
- Eurozone
- Greece
- Gross Domestic Product
- International Monetary Fund
- non-performing loans
- Recession
- Unemployment
Cyprus' President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA's terms are "too onerous."Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials "puzzled", according to a letter the FT has uncovered, as "essentially, he is asking for a complete reversal of the program." The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.
The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume - or just token gestures to recover some populist support as the enemy of my enemy is my friend.
As we noted here (and on the chart below), it seemed pretty obvious where this was going to end - obvious that is to everyone except Europe's victory-claiming politicians.
It seems the ongoing flood of capital (despite controls) and collapse of the economy that we discussed here is occurring at ever increasing pace - and demanding even more gold be sucked out of their vaults...
"Unless Cyprus implements some controls that truly work, at this pace its entire banking system will be completely deposit-free in under one year. And it will need to sell much more than all its gold to continue keeping the Troika happy and in compliance with all the future (because there will be many more) bailouts."
In other words, anyone who has been paying attention to the facts on the ground, in this case represented by the record April collapse in deposits (during a capital-controlled month!), would be well aware of the inevitability of this happening; and that in a continent in which the link between the banking sector and the sovereign is stronger than an umbilical, it was only a matter of weeks or most months before Cyprus pulled an Oilver Twist once again.
Via The FT,
Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected.
...
“[T]he economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund.
“I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”
...
A senior eurozone official directly involved in the Cypriot talks said EU officials were “puzzled” by the letter
...
“Essentially, he is asking for a complete reversal of the programme,” the official said, adding that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government
...
Although the letter does not request it explicitly, MrAnastasiades is in effect asking for further eurozone loans on top of the existing €10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time.
No explicit M.A.D. "we'll leave the Euro" threats aside from the implicit view that this is not a viable path for his people.
Finally, when bailing out ungrateful European insolvent nations (who voted on the terms of the onerous bailout through their own government precisely two months ago), can Europe next time makre sure they get the memo to not make a ruckus before the critical reelection of Europe's de facto viceroy, Angie Merkel?
Full Letter below (via Open Europe):
I am writing to update you on the economic and banking system developments in Cyprus following the Eurogroup decisions of last March and to request your support regarding a number of very pressing issues which need to be addressed the soonest.
1. The Cypriot economy is adapting to major shocks
The Cypriot economy is adapting to major shocks. Substantial private wealth has been lost and a significant number of Cypriot firms have lost their working capital at the two systemically important financial institutions which were subject to the bail - in. Restrictive measures, including capital controls, are seriously hampering the conduct of business and confidence in the banking system has been shaken. As a result the economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult.
2. Application of bail-in was implemented without careful preparation
It is my humble submission that the bail-in was implemented without careful preparation. Its form was changed drastically within a week. Originally designed as a general bail-in across the banking system, it eventually became focused on the two distressed banks, the Laiki Bank and the Bank of Cyprus (BOC). There was no clear understanding of how a bail-in was to be implemented, legal issues are being raised and major delays in completing the process are being observed. Moreover, no distinction was made between long-term deposits earning high returns and money flowing through current accounts, such as firms' working capital. This amounted to a significant loss of working capital for businesses. An alternative, Ionger-term, downsizing of the banking system away from publicity and without bank-runs was a credible alternative that would not have produced such a deep recession and loss of confidence in the banking system.
3. Cyprus was forced to pay the cost to ring-fence Greece but no reciprocity has been granted
Another feature of the current solution was that deposits at the branches of Laiki and Bank of Cyprus in Greece were spared from a haircut to prevent contagion. These deposits amounted to €15 billion. The wish to avoid contagion to Greece was also evident in the Eurogroup's insistence that Cypriot banks sell their Greek branches. In addition and as a result of the sale, the Cypriot banks have lost their Greek deferred tax assets. As understandable as ring-fencing may be, this was absent at the time of deciding the Greek PSI in relation to the Greek Government Bonds which cost Cyprus 25% of its GDP (€4.5 billion). The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus' turn to seek help.
4. Imposition of Laiki's ELA liability to Bank of Cyprus
The implementation of the sale of the Greek branches of the Cypriot banks, as urged by the Eurogroup, resulted in Laiki selling assets that were pledged against its ELA liability to Piraeus Bank, without Piraeus assuming the corresponding ELA liability. As such, Laiki was left with the related ELA liability but without the aforementioned assets. The ELA liability which was left "unsecured" as a result of the sale amounts to around €3.8 billion and was imposed on Bank of Cyprus as a result of the Eurogroup decision. It is worth reminding that a substantial part (in excess of €4 billion) of Laiki's ELA liability was required in the first place in order to cover deposit outflows experienced by Laiki's Greek branches.
Bank of Cyprus itself has a total ELA liability of around €2 billion.By taking an additional €9 billion from Laiki, which was accumulated over the course of the last year under very questionable circumstances, BOC has substantially increased the vulnerability of its own funding structure, with its cumulative ELA liability reaching a very high €11 billion. BOC was called to pledge its own assets to cover for the collateral shortfall for the €3.8 billion liability carried over by Laiki. Such a high amount of ELA liability hinders BOC's funding sources as the room for obtaining additional ELA is limited. The imposition of Laiki's ELA liability on Bank of Cyprus is the main contributor to the liquidity strain Bank of Cyprus faces.
5. Urgent need for Troika to provide a long-term sustainable and viable solution to the liquidity issues Bank of Cyprus is facing as a result of the Eurogroup decisions
Instead of addressing the issue of severe liquidity strain on Cyprus' mega-systemic bank through a long-term sustainable and viable solution, the Troika partners seem to have chosen the path of maintaining strict capital restrictions. Artificial measures such as capital restrictions may seem to prevent a bank run in the short term but will only aggravate the depositors the longer they persist. Rather than creating confidence in the banking system they are eroding it by the day. Maintaining capital restrictions for a long period will inevitably have devastating effects on the local economy, will also affect the country's international business and will have an adverse impact on GDP. Under such scenarios spill over effects will no doubt register on other local banks through higher non-performing loans as a result of dampened economic activity. In addition, increased deposit withdrawals from other local banks, as fear of lack of liquidity of the only systemic bank will have a domino effect on the entire banking system.
I stress the systemic importance of BOC, not only in terms of the banking system but also for the entire economy. The success of the programme approved by the Eurogroup and the Troika depends upon the emergence of a strong and viable BOC.It is for this reason that I urge you to support a long-term solution to Bank of Cyprus' thin liquidity position. Such a solution will re-instate depositor confidence in the banking system and will allow the full functioning of the economy away from restrictive measures and capital controls. It will also facilitate the attraction of foreign direct investment in Cyprus.
My Finance Minister has alerted the Troika Mission Chiefs in writing on 19 May 2013, in relation to the need to implement a long-term viable solution to Bank of Cyprus' liquidity position. No response has been received yet.
A possible long-term solution could be the conversion of part of Laiki's ELA liability into long term bonds and the transfer of these bonds and corresponding assets into a separate vehicle. Another solution could be the reversal of the Eurogroup decision in relation to the merger of Good Laiki (carrying the €9 billion ELA liability) into Bank of Cyprus. In any case the BOC should exit resolution status without any further delays and should be granted eligible counter-party status by the ECB. Of course more options need to be examined. I should mention that an interim Board and an interim CEO is already in place at BOC and the final asset valuation is progressing according to schedule.
I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people. The new government of Cyprus, despite its expressed disagreements, has abided by the Eurozone decisions and remains determined to implement the programme fully and effectively. I am personally determined to lead Cyprus out of this dire situation and towards a path of sustainable growth and development. We are also fully committed to re-establishing Cyprus's stance as a credible EU partner. However, at this crucial juncture, we are calling upon you for active and tangible support.
end
The following is very important as Shibor or the Shanghair Interbank lending rate is much higher indicating much stress in the Chinese banking sector as we outlined to you yesterday:
(courtesy Mathew Phillips/Jessie American cafe)
- Bank Run
- European Central Bank
- Eurozone
- Greece
- Gross Domestic Product
- International Monetary Fund
- non-performing loans
- Recession
- Unemployment
Cyprus' President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA's terms are "too onerous."Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials "puzzled", according to a letter the FT has uncovered, as "essentially, he is asking for a complete reversal of the program." The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.
The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume - or just token gestures to recover some populist support as the enemy of my enemy is my friend.
As we noted here (and on the chart below), it seemed pretty obvious where this was going to end - obvious that is to everyone except Europe's victory-claiming politicians.
It seems the ongoing flood of capital (despite controls) and collapse of the economy that we discussed here is occurring at ever increasing pace - and demanding even more gold be sucked out of their vaults...
"Unless Cyprus implements some controls that truly work, at this pace its entire banking system will be completely deposit-free in under one year. And it will need to sell much more than all its gold to continue keeping the Troika happy and in compliance with all the future (because there will be many more) bailouts."
In other words, anyone who has been paying attention to the facts on the ground, in this case represented by the record April collapse in deposits (during a capital-controlled month!), would be well aware of the inevitability of this happening; and that in a continent in which the link between the banking sector and the sovereign is stronger than an umbilical, it was only a matter of weeks or most months before Cyprus pulled an Oilver Twist once again.
Via The FT,
Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected....“[T]he economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund.“I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”...A senior eurozone official directly involved in the Cypriot talks said EU officials were “puzzled” by the letter...“Essentially, he is asking for a complete reversal of the programme,” the official said, adding that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government...Although the letter does not request it explicitly, MrAnastasiades is in effect asking for further eurozone loans on top of the existing €10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time.
No explicit M.A.D. "we'll leave the Euro" threats aside from the implicit view that this is not a viable path for his people.
Finally, when bailing out ungrateful European insolvent nations (who voted on the terms of the onerous bailout through their own government precisely two months ago), can Europe next time makre sure they get the memo to not make a ruckus before the critical reelection of Europe's de facto viceroy, Angie Merkel?
Full Letter below (via Open Europe):
I am writing to update you on the economic and banking system developments in Cyprus following the Eurogroup decisions of last March and to request your support regarding a number of very pressing issues which need to be addressed the soonest.
1. The Cypriot economy is adapting to major shocks
The Cypriot economy is adapting to major shocks. Substantial private wealth has been lost and a significant number of Cypriot firms have lost their working capital at the two systemically important financial institutions which were subject to the bail - in. Restrictive measures, including capital controls, are seriously hampering the conduct of business and confidence in the banking system has been shaken. As a result the economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult.
2. Application of bail-in was implemented without careful preparation
It is my humble submission that the bail-in was implemented without careful preparation. Its form was changed drastically within a week. Originally designed as a general bail-in across the banking system, it eventually became focused on the two distressed banks, the Laiki Bank and the Bank of Cyprus (BOC). There was no clear understanding of how a bail-in was to be implemented, legal issues are being raised and major delays in completing the process are being observed. Moreover, no distinction was made between long-term deposits earning high returns and money flowing through current accounts, such as firms' working capital. This amounted to a significant loss of working capital for businesses. An alternative, Ionger-term, downsizing of the banking system away from publicity and without bank-runs was a credible alternative that would not have produced such a deep recession and loss of confidence in the banking system.
3. Cyprus was forced to pay the cost to ring-fence Greece but no reciprocity has been granted
Another feature of the current solution was that deposits at the branches of Laiki and Bank of Cyprus in Greece were spared from a haircut to prevent contagion. These deposits amounted to €15 billion. The wish to avoid contagion to Greece was also evident in the Eurogroup's insistence that Cypriot banks sell their Greek branches. In addition and as a result of the sale, the Cypriot banks have lost their Greek deferred tax assets. As understandable as ring-fencing may be, this was absent at the time of deciding the Greek PSI in relation to the Greek Government Bonds which cost Cyprus 25% of its GDP (€4.5 billion). The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus' turn to seek help.
4. Imposition of Laiki's ELA liability to Bank of Cyprus
4. Imposition of Laiki's ELA liability to Bank of Cyprus
The implementation of the sale of the Greek branches of the Cypriot banks, as urged by the Eurogroup, resulted in Laiki selling assets that were pledged against its ELA liability to Piraeus Bank, without Piraeus assuming the corresponding ELA liability. As such, Laiki was left with the related ELA liability but without the aforementioned assets. The ELA liability which was left "unsecured" as a result of the sale amounts to around €3.8 billion and was imposed on Bank of Cyprus as a result of the Eurogroup decision. It is worth reminding that a substantial part (in excess of €4 billion) of Laiki's ELA liability was required in the first place in order to cover deposit outflows experienced by Laiki's Greek branches.
Bank of Cyprus itself has a total ELA liability of around €2 billion.By taking an additional €9 billion from Laiki, which was accumulated over the course of the last year under very questionable circumstances, BOC has substantially increased the vulnerability of its own funding structure, with its cumulative ELA liability reaching a very high €11 billion. BOC was called to pledge its own assets to cover for the collateral shortfall for the €3.8 billion liability carried over by Laiki. Such a high amount of ELA liability hinders BOC's funding sources as the room for obtaining additional ELA is limited. The imposition of Laiki's ELA liability on Bank of Cyprus is the main contributor to the liquidity strain Bank of Cyprus faces.
5. Urgent need for Troika to provide a long-term sustainable and viable solution to the liquidity issues Bank of Cyprus is facing as a result of the Eurogroup decisions
Instead of addressing the issue of severe liquidity strain on Cyprus' mega-systemic bank through a long-term sustainable and viable solution, the Troika partners seem to have chosen the path of maintaining strict capital restrictions. Artificial measures such as capital restrictions may seem to prevent a bank run in the short term but will only aggravate the depositors the longer they persist. Rather than creating confidence in the banking system they are eroding it by the day. Maintaining capital restrictions for a long period will inevitably have devastating effects on the local economy, will also affect the country's international business and will have an adverse impact on GDP. Under such scenarios spill over effects will no doubt register on other local banks through higher non-performing loans as a result of dampened economic activity. In addition, increased deposit withdrawals from other local banks, as fear of lack of liquidity of the only systemic bank will have a domino effect on the entire banking system.
I stress the systemic importance of BOC, not only in terms of the banking system but also for the entire economy. The success of the programme approved by the Eurogroup and the Troika depends upon the emergence of a strong and viable BOC.It is for this reason that I urge you to support a long-term solution to Bank of Cyprus' thin liquidity position. Such a solution will re-instate depositor confidence in the banking system and will allow the full functioning of the economy away from restrictive measures and capital controls. It will also facilitate the attraction of foreign direct investment in Cyprus.
My Finance Minister has alerted the Troika Mission Chiefs in writing on 19 May 2013, in relation to the need to implement a long-term viable solution to Bank of Cyprus' liquidity position. No response has been received yet.
A possible long-term solution could be the conversion of part of Laiki's ELA liability into long term bonds and the transfer of these bonds and corresponding assets into a separate vehicle. Another solution could be the reversal of the Eurogroup decision in relation to the merger of Good Laiki (carrying the €9 billion ELA liability) into Bank of Cyprus. In any case the BOC should exit resolution status without any further delays and should be granted eligible counter-party status by the ECB. Of course more options need to be examined. I should mention that an interim Board and an interim CEO is already in place at BOC and the final asset valuation is progressing according to schedule.
I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people. The new government of Cyprus, despite its expressed disagreements, has abided by the Eurozone decisions and remains determined to implement the programme fully and effectively. I am personally determined to lead Cyprus out of this dire situation and towards a path of sustainable growth and development. We are also fully committed to re-establishing Cyprus's stance as a credible EU partner. However, at this crucial juncture, we are calling upon you for active and tangible support.
end
The following is very important as Shibor or the Shanghair Interbank lending rate is much higher indicating much stress in the Chinese banking sector as we outlined to you yesterday:
(courtesy Mathew Phillips/Jessie American cafe)
Here’s what’s behind the Chinese cash crunch
Remember Libor? When that once obscure measure of short-term interest ratesshot higher in 2007 and 2008, it was one of the earliest warnings signs of what would eventually become the financial crisis. Now, its Chinese cousin—known as Shibor—is telegraphing the rising stress in the opaque financial system of the world’s second largest economy. Behold:
What does the spike in rates mean? Large banks are increasingly leery of tapping into their pools of cash to lend to each other. Recent reports that China Everbright Bank failed to repay a short-term loan to Industrial Bank Co. aren’t helping. Industrial Bank says that report is “untrue and exaggerated.” But short-term lending markets suggest other bankers are skeptical.
So what’s the solution? Chinese authorities tamed short-term interest rate spikes before. They could create new cash to lubricate lending, or lower reserve requirements for banks, which would boost liquidity. According to the Wall Street Journal, that’s what bankers are hoping for.
But remember, those reserves are supposed to protect Chinese banks against losses from bad loans. (And there are plenty of bad loans floating around in the Chinese banking system.) So both of those solutions would actually just be a bandaid to reduce short-term rates; they would do little to reduce the underlying systemic risks. Stay tuned.
Now we see, UK's Co OP Bank agree to a 1.5 billion pound bail-in. This will be the template:
(courtesy Reuters)
Remember Libor? When that once obscure measure of short-term interest ratesshot higher in 2007 and 2008, it was one of the earliest warnings signs of what would eventually become the financial crisis. Now, its Chinese cousin—known as Shibor—is telegraphing the rising stress in the opaque financial system of the world’s second largest economy. Behold:
What does the spike in rates mean? Large banks are increasingly leery of tapping into their pools of cash to lend to each other. Recent reports that China Everbright Bank failed to repay a short-term loan to Industrial Bank Co. aren’t helping. Industrial Bank says that report is “untrue and exaggerated.” But short-term lending markets suggest other bankers are skeptical.
So what’s the solution? Chinese authorities tamed short-term interest rate spikes before. They could create new cash to lubricate lending, or lower reserve requirements for banks, which would boost liquidity. According to the Wall Street Journal, that’s what bankers are hoping for.
But remember, those reserves are supposed to protect Chinese banks against losses from bad loans. (And there are plenty of bad loans floating around in the Chinese banking system.) So both of those solutions would actually just be a bandaid to reduce short-term rates; they would do little to reduce the underlying systemic risks. Stay tuned.
Now we see, UK's Co OP Bank agree to a 1.5 billion pound bail-in. This will be the template:
(courtesy Reuters)
UK's Co-op Bank agrees to £1.5 billion 'bail-in' rescue plan
LONDON |
(Reuters) - Britain's Co-operative Group CWSGR.UL will force bondholders to help plug a 1.5 billion pound ($2.4 billion) capital hole, avoiding a repeat of unpopular taxpayer-funded bailouts made during the financial crisis.
Using a "bail-in" rescue model, bondholders will have to swap their debt for new bonds and equity in the bank, which will be listed on the London Stock Exchange.
The Co-op Group, Britain's biggest customer-owned business, will also provide financial support for its banking unit (CPBB_p.L), the Co-op said on Monday.
Europe is pushing ahead with plans to implement a "bail-in" regime that would force bondholders and depositors, rather than taxpayers, to bear the cost of failed banks and the Co-op's approach could become a blueprint for future rescues.
"We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the bank. In doing so we have agreed a plan to ensure its future," said Co-op Group Chief Executive Euan Sutherland.
Co-op Group, which runs supermarkets, pharmacies and funeral services, will retain a majority stake in the Co-op Bank, which has 4.7 million customers. Sources said bondholders are likely to end up with at least a quarter of the bank's shares.
Sutherland said he was confident a "good proportion" of bondholders would support the move, given that coupons on their debt will be canceled making them effectively worthless. If they refused, the bank would face the threat of nationalization.
The bank's future has been in question since ratings agency Moody's cut its credit rating to junk status and warned it might need taxpayer support - something the bank denied.
Its capital position had come under scrutiny since it pulled out of a deal to buy hundreds of bank branches from Lloyds Banking Group (LLOY.L) in April.
Analysts have blamed Co-op Bank's problems on its takeover of the Britannia Building Society in 2009.
Industry sources say Britannia, which had lent aggressively on commercial property, was likely to have required a taxpayer-bailout had it not been bought by the Co-op.
Co-op said it would hive off toxic assets worth about 14.5 billion pounds into a 'bad bank,' most of which are from Britannia, as part of a restructuring.
Sutherland has overhauled Co-op's management since joining from retailer Kingfisher in May.
He declined to comment on whether former chief executive Peter Marks, who led the Britannia acquisition, or other former executives should have past pay rewards clawed back. Marks received a 103,000 pound long-term performance bonus in 2012 and a 490,000 bonus for 2011.
Co-op said the bail-in plan will generate 1 billion pounds of new capital this year and 500 million pounds in 2014.
This includes a debt-for-equity exchange with the bank's subordinated bondholders.
Co-op's debt holders all have 'subordinated', or 'junior' bonds that pay higher interest than 'senior' debt, but carry a higher risk. These kinds of bonds suffered heavy losses in bank rescues inIreland and Spain.
The bank's subordinated bonds took another hit on Monday following significant declines in recent weeks.
The plan applies to about 1.3 billion pound of outstanding Co-op Bank bonds. Co-op said about 7,000 private retail investors will be affected, the majority of whom have invested around 1,000 pounds.
Britain's financial regulator said it would "hold the Co-operative to the delivery of its plans" which incorporate the previously announced sales of its life insurance business for 220 million pounds and a planned sale of its general insurance business. One banking source said there were around 10 to 15 parties interested in the general insurance business.
The Prudential Regulation Authority has said banks must raise 25 billion pounds of extra capital by the end of the year to absorb any future losses on loans.
Taxpayer-funded rescues during the 2008-09 crisis, particularly of RBS (RBS.L) and Lloyds (RBS.L), were highly unpopular with Britons and authorities have been trying to avoid any more.
Co-op said its core tier 1 ratio, a measure of the bank's financial strength, was expected to be above 9 percent by the end of 2013 and to increase in the following years. The PRA wants banks to hold at least 7 percent.
Co-op will provide details of the plans via a prospectus after its results in August and before the planned stock market listing of shares in October.
($1 = 0.6379 British pounds)
(Additional reporting by Laura Noonan; Editing by David Stamp and Erica Billingham)
end
As luck may have it, Bill Holter comments on the new template that will be before us, that is bail-ins. Bill wrote this late night, and lo and behold we have Cyprus needing to rewrite their bail in agreement due to a massive bank runs as many citizens removed their cash leaving no doubt their number one bank, the Bank of Cyprus totally bust. The other story is the bail in of UK's Co-Op bank.
a must read.....
(courtesy Bill Holter/Miles Franklin)
The most well advertised bank run in history.
I was going to write a piece today about the current Fed meeting which we will hear a statement tomorrow. It used to be that the term used was "exit plan" from QE (monetization), now the politically correct term is "tapering". "Exit plan" I guess just sounded too scary, too final to be used. Is sounded like throwing a 5 year old into the water with no life preserver and walking away my Dad did this but didn't walk away...yes, I learned how to swim). The markets nor economies can deal with this because of the lead weight tied to their necks...debt, too much of it.
"Tapering"? Nope, it cannot happen. They might talk about it and maybe even try it for a week...until both the stock and bond markets lock up like a crack addict going cold turkey. It is either pedal to the metal or the markets will implode within 72 hours and the economy which is merely treading water will slip below the surface and drown. I have written several times "what can they say" when referring to these Fed meetings, unfortunately the answer is not much unless they want to upset and turn over the apple cart. I would not expect anything Earth shattering as the Fed understands the fine line that they've confined themselves to.
Rather than harp on the Fed's lack of options, I'd like to mention that we stand before THE greatest and most pre advertised bank run in history, let me explain. If you have kept your ear to the ground then you know that Europe, Canada, New Zealand and most importantly the U.S. have all legislated "bail ins" for future bank failures. The BIS (the central bank's central bank) even publicly put forth their own "simple" (as they call it) plan to handle bank failures. The new "plan" is that there will be no more taxpayer bailouts, no more central bank bailouts...no, let Mother Nature rule! Stockholders, bondholders AND depositors will now be on the hook and "fund" any bank reorg's. In other words, Cyprus is the future and can be used as a pretty close roadmap to what's coming!
I used the term "well advertised" which has actually happened. With any due diligence at all you can see exactly what's coming and you can bet your bottom Dollar that you will hear after the fact "we tried to tell you". Well yes they have, they did, but few have listened and fewer have acted so far. As with any bank run, it starts slowly with just a trickle (the smartest money), then it will gain pace. My only question is of the "chicken or the egg" type. Does a bank run force the banks to close? ...or does a bank closure get blamed for a systemic bank run? It's really a stupid question because the "result" is exactly the same, banks close and people lose money so who cares "why"?
The "noise" about bail ins is getting louder and louder every day which as I've said will actually cause bank runs on its own, but, there is another "run" which is getting very little to no press at all. This is the "run" on vaults. If you just look at the Shanghai metals exchange, they have delivered nearly as much Gold so far year to date as all of the world's mines have produced. If you look at the NY Fed and even though there are numbers to look at showing "tons upon tons" of Gold, they told Germany that they'd have to wait 7 years to get their's back...good luck with this! GLD has seen its inventory drop about 25% since the beginning of the year and even JP Morgan shows a nearly 70% drop. Can you imagine that JP Morgan holds only a "whopping" 136,000 Gold ounces for their customers? The echoes inside of this vault must be deafening!
In any case, it's pretty easy to see and the "warnings" (if you're listening) have been quite straightforward and loud. They are telling you in no uncertain terms to "get your money out of the banks" because when push comes to shove no more bail "outs" will exist...only bail "ins" which unfortunately will include YOUR money that you thought you "had". Regards, Bill H.
end
Ron Paul describes the Syrian policy identical to Bush Jr's policy on Iraq: totally nuts!!
(courtesy Ron Paul/zero hedge)
Ron Paul: "Obama’s Syria Policy Looks A Lot Like Bush’s Iraq Policy"
Submitted by Dr. Ron Paul via The Free Foundation,
President Obama announced late last week that the US intelligence community had just determined that the Syrian government had used poison gas on a small scale, killing some 100 people in a civil conflict that has claimed an estimated 100,000 lives. Because of this use of gas, the president claimed, Syria had crossed his “red line” and the US must begin to arm the rebels fighting to overthrow the Syrian government.
Setting aside the question of why 100 killed by gas is somehow more important than 99,900 killed by other means, the fact is his above explanation is full of holes. The Washington Postreported this week that the decision to overtly arm the Syrian rebels was made “weeks ago” – in other words, it was made at a time when the intelligence community did not believe “with high confidence” that the Syrian government had used chemical weapons.
Further, this plan to transfer weapons to the Syrian rebels had become policy much earlier than that, as the Washington Post reported that the CIA had expanded over the past year its secret bases in Jordan to prepare for the transfer of weapons to the rebels in Syria.
The process was identical to the massive deception campaign that led us into the Iraq war. Remember the famous quote from the leaked “Downing Street Memo,” where representatives of British Prime Minister Tony Blair’s administration discussed Washington’s push for war on Iraq?
Here the head of British intelligence was reporting back to his government after a trip to Washington in the summer of 2002:
“Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy.”
That is exactly what the Obama Administration is doing with Syria: fixing the intelligence and facts around the already determined policy. And Congress just goes along, just as they did the last time.
We found out shortly after the Iraq war started that the facts and intelligence being fixed around the policy were nothing but lies put forth by the neo-con warmongers and the paid informants, like the infamous and admitted liar known as “Curveball.” But we seem to have learned nothing from being fooled before.
So Obama now plans to send even more weapons to the Syrian rebels even though his administration is aware that the main rebel factions have pledged their loyalty to al-Qaeda. Does anyone else see the irony? After 12 years of the “war on terror” and the struggle against al-Qaeda, the US decided to provide weapons to the allies of al-Qaeda. Does anyone really think this is a good idea?
The Obama administration promises us that this is to be a very limited operation, providing small arms only, with no plans for a no-fly zone or American boots on the ground. That sounds an awful lot like how Vietnam started. Just a few advisors. When these few small arms do not achieve the pre-determined US policy of regime change in Syria what is the administration going to do? Admit failure and pull the troops out, or escalate? History suggests the answer and it now appears to be repeating itself once again.
The president has opened a can of worms that will destroy his presidency and possibly destroy this country. Another multi-billion dollar war has begun.
end
Ambrose Evans Pritchard comments in the UK Telegraph today that if Bernanke tapers, then half the world will sink:
(courtesy Ambrose Evans Pritchard/UKTelegraph)
Now we see rioting on the streets of Brazil:
(courtesy zero hedge)
Ambrose Evans Pritchard comments in the UK Telegraph today that if Bernanke tapers, then half the world will sink:
(courtesy Ambrose Evans Pritchard/UKTelegraph)
Ambrose Evans-Pritchard: If Bernanke really shakes tree, half the world may fall out
Submitted by cpowell on Tue, 2013-06-18 15:54. Section: Daily Dispatches
We will find out tomorrow whether Ben Bernanke is ready to blink after the market ructions of the last three weeks, sobered by the cascading upsets across the BRICs and mini-BRICs; or whether he will stay the course with Fed tapering sooner rather than later.
By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, June 18, 2013
The Telegraph, London
Tuesday, June 18, 2013
We no longer have a free market. The world's financial asset prices have become a plaything of central banks and the sovereign wealth funds of a few emerging powers.
Julian Callow from Barclays says they are buying $1.8 trillion worth of AAA or safe-haven bonds each year from an available pool of $2 trillion. Nothing like this has been seen before in modern times, if ever.
The Fed, the ECB, the Bank of England, the Bank of Japan, et al., own $10 trillion in bonds. China, the petro-powers, et al., own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 25 percent of global GDP. They are the market. That is why Fed taper talk has become so neuralgic and why we all watch Chinese regulators for every clue on policy.
Investors seem to think he will indeed blink, or at least blink enough to put off the day of reckoning for another three-month investment cycle, which is what hedge funds care about, and that if he doesn't blink it will be because the economy is picking up speed. They cling to the Bernanke Put, when the new reality may instead be the Bernanke Call.
Perhaps Bernanke will oblige one more time, knowing that the US economy has yet to absorb the full shock of fiscal tightening, the biggest squeeze for half a century. Besides, core PCE inflation is down to 1.1 percent. Jim Leaviss from M&G says the Fed would normally be cutting rates by 1.5 percent under the Taylor Rule in these circumstances, not tightening.
Yet what causes me to hesitate is the drip of reports and comments from key figures in -- or near -- the Fed seeming to suggest a loss of nerve, or who fear that QE has turned counterproductive.
First we had a paper co-written by Frederic Mishkin -- Bernanke's close friend and a former board member -- warning that is becoming ever-harder for the Fed to extricate itself safely from QE, and the door may shut altogether from 2014.
"Crunch Time: Fiscal Crises and the Role of Monetary Policy" said the Fed's own capital base could be wiped out "several times" once borrowing costs spike. It said trouble could compound at an alarming pace, with yields spiking up to double-digit rates by the late 2020s. By then Fed will be forced to finance spending to avert the greater evil of default.
Then we had the minutes of the Federal Advisor Council arguing that it is "not clear" whether QE is really boosting the economy, while the toxic side-effects are all too clear. It warned of "unsustainable bubbles" in asset prices. It said zero rates are pushing pension funds under water on their liabilities, and even claimed that QE may be causing firms to defer investment.
Since then the Bank for International Settlements has issued a full frontal attack on the credibility of QE, saying it "doesn't work" and is doing more harm than good. Even the Boston Fed's ultra-dove Eric Rosengren has talked of early tapering, a clear sign that the Fed's centre of gravity has shifted.
So don't be surprised if Bernanke talks tough tomorrow, and don't underestimate the implications if he does. The point was put nicely by Jan Loeys from JP Morgan in a note last week:
"In Fed hiking cycles over the past half century, 10-year US Treasury yields on average bottomed some six months before the first rate hike. In the current cycle, where rate cuts have been complemented by large-scale asset purchases, the end of the easy-money period is harder to define. It is surely well before the first rate hike.
"The end of the current easy-money regime is set to have a bigger impact than previous ones as the current one will have lasted much longer and was much more extreme.
"We have learned from past regime changes that the longer they last, the more the market will have got used to them, and could even be said to become leveraged and addicted to the old regime.
"In addition, after major regime changes, we find that the leverage to the old one was each time much larger and in different places than most of us had assumed. A regime change is like shaking a tree and having no idea who or what will fall out."
Brazil, South Africa, and Turkey, are already falling out. Any other candidates?
end
(courtesy zero hedge)
200,000 Take To Brazil's Streets In Largest Protest In Two Decades
It started off a simple protest in Sao Paulo as a demonstration by students against an increase in bus fares from R$3 to R$3.20, and then quickly morphed into general demonstration of discontent with the nation’s political classes on both sides of the spectrum involving over 200,000 across the country, with those marching on Monday holding placards decrying everything from the enormous sums spent on the World Cup to the treatment by police of protesters last week. It got to the point where protesters invaded and occupied, peacefully, the roof of the national Congress complex in Brasilia. Then things turned less peaceful when a breakaway group from the main rally in Rio de Janeiro attacked the state legislative assembly building and attempted to set it on fire.
From Reuters:
As many as 200,000 demonstrators marched through the streets of Brazil's biggest cities on Monday in a swelling wave of protest tapping into widespread anger at poor public services, police violence and government corruption.The marches, organized mostly through snowballing social media campaigns, blocked streets and halted traffic in more than a half-dozen cities, including Sao Paulo, Rio de Janeiro, Belo Horizonte and Brasilia, where demonstrators climbed onto the roof of Brazil's Congress building and then stormed it.Monday's demonstrations were the latest in a flurry of protests in the past two weeks that have added to growing unease over Brazil's sluggish economy, high inflation and a spurt in violent crime.While most of the protests unfolded as a festive display of dissent, some demonstrators in Rio threw rocks at police, set fire to a parked car and vandalized the state assembly building. Vandals also destroyed property in the southern city of Porto Alegre.Around the country, protesters waved Brazilian flags, dancing and chanting slogans such as "The people have awakened" and "Pardon the inconvenience, Brazil is changing."The epicenter of Monday's march shifted from Sao Paulo, where some 65,000 people took to the streets late in the afternoon, to Rio. There, as protesters gathered throughout the evening, crowds ballooned to 100,000 people, local police said. At least 20,000 more gathered in Belo Horizonte.The demonstrations are the first time that Brazilians, since a recent decade of steady economic growth, are collectively questioning the status quo.
Bloomberg added a geopolitical and economic twist to events:
Francisco Soares, a 32-year-old Brasilia electrician, felt good about life two years ago when he started commuting in his first car, blasting the music and passing packed buses. Since then, bills started piling up, the cost of living jumped and last week he had to sell his wheels.After a decade that saw 40 million people rise from poverty, Brazil’s middle class finds itself squeezed by faster inflation, rising debt and a weaker currency. Consumers are spending less at supermarkets and hairdressers as the classic weekend event, a prime cut barbecue, becomes a stretch for some. Continuing a wave of protests sparked by an increase in bus fares, demonstrators surrounded Congress in Brasilia yesterday and set a car on fire in Rio de Janeiro as tens of thousands marched in major cities.The emerging middle class was the engine of economic growth and made the developing nation one of the world’s top five markets for cars and mobile phones. It also helped the Workers’ Party win its third straight presidential election in 2010. Now, as the dream of a new car and a trip to Disney World fades for some, so does support for President Dilma Rousseff, who was jeered at a packed soccer stadium on June 15. Asked whether he would vote for her again, as he did in 2010, Soares said: “No way.”“The golden days are over, the feel-good factor is lost,” said Renato Fragelli, economics professor at the Fundacao Getulio Vargas, a business think tank in Rio de Janeiro. “It’s not that the middle class is disappearing but there’s been a setback, people feel they’re getting less for their money.”
Is Brazil be returning to a time of political instability driven by a relapse in the wealth effect:
After Latin America’s biggest economy expanded less than economists forecast for the past five quarters and inflation accelerated, the approval rating of Rousseff’s government fell eight percentage points in June from March, the first drop since she took office in January 2011, according to a Datafolha opinion survey published June 9. The poll interviewed 3,758 people June 6-7 and had a margin of error of plus or minus two percentage points.Still, at 57 percent, Rousseff’s government support is 10 percentage points higher than in March 2011, according to Datafolha. The 65-year-old Rousseff remains the favorite to win the October 2014 presidential race, commanding 49 percent of voter intention, according to Datafolha. Marina Silva, a former environment minister who finished third in the 2010 presidential race, ranked second with 14 percent, while Aecio Neves, the candidate of the main opposition party, ranked third with 12 percent of voter intention.
And without the marginal pull from China, whose growth trajectory is now aggressively tapering, which in turn is wreaking havoc on emerging markets (one look at their stock market performance YTD should explain it), are photos such as the ones below from Brazil overnight set to become a daily staple, and to be added to the roster of civilian disobedience from such developed world countries as Greece and Turkey.
Photos: Reuters, AFP
end
Your closing Japanese 10 year bond yield very early this morning:
Your closing Japanese 10 year bond yield very early this morning:
Japan Govt Bond Year to maturity 10 Year Simple Yield
GJGB10:IND
0.820.02 1.79%
As of 01:33:00 ET on 06/18/2013.
end
Your opening 10 year USA 10 year bond: (still relatively high) early Tuesday morning;
0.820.02 1.79%
As of 01:33:00 ET on 06/18/2013.
end
Your opening 10 year USA 10 year bond: (still relatively high) early Tuesday morning;
US Generic Govt 10 Year Yield
USGG10YR:IND
2.200.01 0.66%
As of 07:08:00 ET on 06/18/2013.
2.200.01 0.66%
As of 07:08:00 ET on 06/18/2013.
Early Tuesday Morning morning currency crosses (7 am)
Tuesday morning we see some euro strength against the dollar from the close on Monday with this time trading well above the 1.33 mark at 1.3372. The yen this morning,is weaker trading down 638 basis points to 95.33 yen to the dollar (dollar up). The yen carry traders are still in mourning with their trades devastated. They need the yen at 100 per dollar. The pound, this morning is a lot weaker against the USA dollar, with this time still trading well above the 1.56 column at 1.5614. The Canadian dollar currency is a little weaker against the dollar trading above the 1.02 column at 1.0205. We have the sentiment this morning with a slight risk on situation with some of our European bourses in the green. The Nikkei exchange was on a roller coaster ride this morning finishing down by 26 points or 0.2% The Japanese 10 year bond yield finished down in yield by 2 basis points to .82%. Gold and silver are mixed in the early morning, with gold trading at $1375.00 (down $8.20) and silver is at $21.77 up 2 cents in early morning European trading.
Early Tuesday Morning morning currency crosses (7 am)
Tuesday morning we see some euro strength against the dollar from the close on Monday with this time trading well above the 1.33 mark at 1.3372. The yen this morning,is weaker trading down 638 basis points to 95.33 yen to the dollar (dollar up). The yen carry traders are still in mourning with their trades devastated. They need the yen at 100 per dollar. The pound, this morning is a lot weaker against the USA dollar, with this time still trading well above the 1.56 column at 1.5614. The Canadian dollar currency is a little weaker against the dollar trading above the 1.02 column at 1.0205. We have the sentiment this morning with a slight risk on situation with some of our European bourses in the green. The Nikkei exchange was on a roller coaster ride this morning finishing down by 26 points or 0.2% The Japanese 10 year bond yield finished down in yield by 2 basis points to .82%. Gold and silver are mixed in the early morning, with gold trading at $1375.00 (down $8.20) and silver is at $21.77 up 2 cents in early morning European trading.
The USA index is up early this morning by 13 cents at 80.77
Euro/USA 1.3372 up .0011
USA/yen 95.33 up 0.638
GBP/USA 1.5614 down .0102
USA/Can 1.0205 up .0017
The USA index is up early this morning by 13 cents at 80.77
Euro/USA 1.3372 up .0011
USA/yen 95.33 up 0.638
GBP/USA 1.5614 down .0102
USA/Can 1.0205 up .0017
end
And now your closing Spanish 10 year bond yield: down 3 basis points..
SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE
GSPG10YR:IND
4.550.03 0.68%
As of 11:59:00 ET on 06/18/2013.
and now Italy:
and now Italy:
Your Italian 10 year bond yield close Tuesday night (gain of 2 basis points)
Italy Govt Bonds 10 Year Gross Yield
GBTPGR10:IND
4.290.02 0.52%
As of 11:59:00 ET on 06/18/2013.
Your closing figures from Europe today. Key crosses late Tuesday afternoon 5 pm:
The Euro strengthened again this afternoon closing this time just above the 1.34 mark at 1.3402. The yen proceeded northbound again in the afternoon in value finishing just above the 95 barrier to 95.22. The yen carry traders will not sleep well tonight, as their losses continue to mount. The pound strengthened a bit more from early this morning , closing just above the 1.56 barrier at 1.5650. The Canadian dollar slightly strengthened this afternoon against the dollar finishing the day at 1.0202.
The Euro strengthened again this afternoon closing this time just above the 1.34 mark at 1.3402. The yen proceeded northbound again in the afternoon in value finishing just above the 95 barrier to 95.22. The yen carry traders will not sleep well tonight, as their losses continue to mount. The pound strengthened a bit more from early this morning , closing just above the 1.56 barrier at 1.5650. The Canadian dollar slightly strengthened this afternoon against the dollar finishing the day at 1.0202.
The USA index is down slightly on the day at 80.62, down 2 cents on the day.
Euro/USA 1.3402 up .0041
USA/Yen 95.22 up .53
GBP/USA 1.5650 down .0068
USA/Can 1.0202 up .0015
closing 10 year USA bond yield; (flat on the day)
Euro/USA 1.3402 up .0041
USA/Yen 95.22 up .53
GBP/USA 1.5650 down .0068
USA/Can 1.0202 up .0015
closing 10 year USA bond yield; (flat on the day)
closing 10 year USA bond yield; (flat on the day)
US Generic Govt 10 Year Yield
USGG10YR:IND
2.190.000.17%
As of 15:40:00 ET on 06/18/2013.
2.190.000.17%
As of 15:40:00 ET on 06/18/2013.
end.
i) England/FTSE up 43.72 points or 0.69%
ii) Paris/CAC down 3.11 points or 0.08%
iii) German DAX: up 13.78 points (or 0.17%)
iv) Spanish ibex up 43.90 points or 0.54%
v) Italian bourse (MIB) up: 3.80 (0.02%)
and the Dow up 138.38 points (0.92% )....
v) Italian bourse (MIB) up: 3.80 (0.02%)
end
And now for USA news:
Today news from Detroit is not good as some unsecured creditors will only get 10 cents on the dollar. Many of Detroit's pensions are massively underfunded.
Here is why:
And now for USA news:
Today news from Detroit is not good as some unsecured creditors will only get 10 cents on the dollar. Many of Detroit's pensions are massively underfunded.
Here is why:
Today news from Detroit is not good as some unsecured creditors will only get 10 cents on the dollar. Many of Detroit's pensions are massively underfunded.
Here is why:
Derivative Losses, Bad Bets, And Aggressive Assumptions Leave Detroit's Pensions Massively Underfunded
Submitted by Tyler Durden on 06/18/2013 09:52 -0400
Late last week, Detroit's emergency manager Kevyn Orr, outlined his plan to stop a disaster becoming a catastrophe in the slumping city. The initial suspension of payment on pension obligation bonds is just the start as Orr warns unsecured creditors may only receive up to 10 cents on the dollar as about $2.5 billion in general unsecured debt won't be recovered. Rather incredibly, the city's General and Police and Fire retirement systems have a combined underfunding of $3.5 billion made worse by "aggressive actuarial assumptions," and "investing in risky development projects around the city and loans that will never be repaid." Under more realistic assumptions the funding status of the two pensions drops from 83% and 100% to 65% and 78% and he notes that "if these pension funds' assets had just been invested in a conservative way," as opposed to the political and reach-for-yield driven extravagance, "they probably would be fully funded now." The bottom line is not just creditor haircuts but,"significant cuts in accrued, vested pension amounts for both active and currently retired persons."
...
Unsecured creditors may only receive up to 10 cents on the dollar under Mr. Orr's plan; his team said about $2.5 billion in general unsecured debt won't be recovered.
Detroit's liabilities total $17 billion, including $1.4 billion related to COPs and an additional $344 million in marked-to-market swaps related to the COPs, according to Mr. Orr's creditor plan.
...
Mr. Orr's pension fund analysis found that previous “aggressive actuarial assumptions” resulted in “substantially understated” funded status for each city pension plan. The funded status of the General Retirement System was 83%, while that of the police and fire fund was 100%, according to June 30, 2011, independent valuations.
Recalculations based on “more reasonable assumptions” substantially lowered the funded status of the General Retirement System to 65%, and the police and fire system to 78%, according to Mr. Orr's creditor plan.
...
“Because the amounts realized on the underfunding claims (the COPs and swaps unsecured debt) will be substantially less than the underfunding amount,there must be significant cuts in accrued, vested pension amounts for both active and currently retired persons,” the creditor proposal said.
...
“As discussed in the creditors' meeting today, if these pension funds' assets had just been invested in a conservative way, instead of investing in risky development projects around the city and loans that will never be repaid, they probably would be fully funded now,”
end
More misses from the USA as housing starts, housing permits and the CPI all miss expectations:
(courtesy zero hedge)
Late last week, Detroit's emergency manager Kevyn Orr, outlined his plan to stop a disaster becoming a catastrophe in the slumping city. The initial suspension of payment on pension obligation bonds is just the start as Orr warns unsecured creditors may only receive up to 10 cents on the dollar as about $2.5 billion in general unsecured debt won't be recovered. Rather incredibly, the city's General and Police and Fire retirement systems have a combined underfunding of $3.5 billion made worse by "aggressive actuarial assumptions," and "investing in risky development projects around the city and loans that will never be repaid." Under more realistic assumptions the funding status of the two pensions drops from 83% and 100% to 65% and 78% and he notes that "if these pension funds' assets had just been invested in a conservative way," as opposed to the political and reach-for-yield driven extravagance, "they probably would be fully funded now." The bottom line is not just creditor haircuts but,"significant cuts in accrued, vested pension amounts for both active and currently retired persons."
...Unsecured creditors may only receive up to 10 cents on the dollar under Mr. Orr's plan; his team said about $2.5 billion in general unsecured debt won't be recovered.Detroit's liabilities total $17 billion, including $1.4 billion related to COPs and an additional $344 million in marked-to-market swaps related to the COPs, according to Mr. Orr's creditor plan....Mr. Orr's pension fund analysis found that previous “aggressive actuarial assumptions” resulted in “substantially understated” funded status for each city pension plan. The funded status of the General Retirement System was 83%, while that of the police and fire fund was 100%, according to June 30, 2011, independent valuations.Recalculations based on “more reasonable assumptions” substantially lowered the funded status of the General Retirement System to 65%, and the police and fire system to 78%, according to Mr. Orr's creditor plan....“Because the amounts realized on the underfunding claims (the COPs and swaps unsecured debt) will be substantially less than the underfunding amount,there must be significant cuts in accrued, vested pension amounts for both active and currently retired persons,” the creditor proposal said....“As discussed in the creditors' meeting today, if these pension funds' assets had just been invested in a conservative way, instead of investing in risky development projects around the city and loans that will never be repaid, they probably would be fully funded now,”
More misses from the USA as housing starts, housing permits and the CPI all miss expectations:
(courtesy zero hedge)
Housing Starts, Permits, CPI All Miss
Submitted by Tyler Durden on 06/18/2013 08:52 -0400
Following last week's jump in headline PPI some expected a reversal in the recent trend of BLS-measured disinflation. No such luck: moments ago the BLS reported that according to its hedonic adjustments, May headline consumer price inflation rose by 0.1%, below expectations of a 0.2% increase, and up 1.4% from the prior year. Alternatively, core CPI, excluding food and energy rose by 0.2% in line with expectations, and up 1.7% from past year. According to the BLS, "The shelter index rose 0.3 percent and accounted for more than half of the seasonally adjusted all items increase in May. The energy index rose modestly, with the gasoline index flat but increases in the electricity and natural gas indexes accounting for the rise. The food index, however, turned down in May, with the food at home index falling 0.3 percent." Should the recent surge in WTI continue, look for this "disinflation" to not persist, and certainly look for it to end as soon as the PBOC decides the time to get involved in markets returns.
Breaking down the CPI by component, fuel saw a -2.9% drop, while food supposedly declined -0.1% in May. This was offset by utility gas service rising 2.4% (and Energy services posting a broad 1.2% price increase), even though the Industrial Production data released previously by the Fed showed an underperformance in utility businesses. Go figure.
Elsewhere, the housing market, despite some so-called recovery, continues to be moribund, with both housing starts (914K, below expectations of 950K), and permits (974K, Exp. 975K) missing expectations. And the miss would have been much worse if one were to exclude the multi-familiy (rental) housing units, which after plunging by the most since 2006 last month, which once again spiked from 245K to 306K even as single-family housing unites stayed essentially flat in May at 599K vs 597K the last month. More notably, the single-family housing market was only boosted thanks to a jump of building in the south, where units jumped from 295K to 331K, while unit starts dropped in the Northeast, Midwest, and the West.
Seasonally-adjusted Starts data showing that the single-family housing market remains virtually unchanged for the past 5 years.
The divergence is even more pronounced on a non-seasonally adjusted basis.
Source: Census
end
A great commentary on the plight of Detroit and on the USA in general
(courtesy Michael Snyder/Economic Collapse Blog)
Following last week's jump in headline PPI some expected a reversal in the recent trend of BLS-measured disinflation. No such luck: moments ago the BLS reported that according to its hedonic adjustments, May headline consumer price inflation rose by 0.1%, below expectations of a 0.2% increase, and up 1.4% from the prior year. Alternatively, core CPI, excluding food and energy rose by 0.2% in line with expectations, and up 1.7% from past year. According to the BLS, "The shelter index rose 0.3 percent and accounted for more than half of the seasonally adjusted all items increase in May. The energy index rose modestly, with the gasoline index flat but increases in the electricity and natural gas indexes accounting for the rise. The food index, however, turned down in May, with the food at home index falling 0.3 percent." Should the recent surge in WTI continue, look for this "disinflation" to not persist, and certainly look for it to end as soon as the PBOC decides the time to get involved in markets returns.
Breaking down the CPI by component, fuel saw a -2.9% drop, while food supposedly declined -0.1% in May. This was offset by utility gas service rising 2.4% (and Energy services posting a broad 1.2% price increase), even though the Industrial Production data released previously by the Fed showed an underperformance in utility businesses. Go figure.
Elsewhere, the housing market, despite some so-called recovery, continues to be moribund, with both housing starts (914K, below expectations of 950K), and permits (974K, Exp. 975K) missing expectations. And the miss would have been much worse if one were to exclude the multi-familiy (rental) housing units, which after plunging by the most since 2006 last month, which once again spiked from 245K to 306K even as single-family housing unites stayed essentially flat in May at 599K vs 597K the last month. More notably, the single-family housing market was only boosted thanks to a jump of building in the south, where units jumped from 295K to 331K, while unit starts dropped in the Northeast, Midwest, and the West.
Seasonally-adjusted Starts data showing that the single-family housing market remains virtually unchanged for the past 5 years.
The divergence is even more pronounced on a non-seasonally adjusted basis.
Source: Census
end
A great commentary on the plight of Detroit and on the USA in general
(courtesy Michael Snyder/Economic Collapse Blog)
Rotting, Decaying And Bankrupt – If You Want To See The Future Of America Just Look At Detroit
Submitted by Tyler Durden on 06/17/2013 22:41 -0400
- Barack Obama
- Bill Gates
- Budget Deficit
- China
- Creditors
- Detroit
- Federal Reserve
- GAAP
- Greece
- Gross Domestic Product
- India
- International Monetary Fund
- Ireland
- Italy
- Japan
- Medicare
- Michigan
- National Debt
- New York City
- New York Times
- Obama Administration
- Obamacare
- Portugal
- recovery
- White House
Submitted by Michael Snyder of The Economic Collapse blog,
Eventually the money runs out. Much of America was shocked when the city of Detroit defaulted on a $39.7 million debt payment and announced that it was suspending payments on$2.5 billion of unsecured debt, but those who visit my site on a regular basis were probably not too surprised. Anyone with half a brain and a calculator could see this coming from a mile away. But people kept foolishly lending money to the city of Detroit, and now many of them are going to get hit really hard.
Detroit Emergency Manager Kevyn Orr has submitted a proposal that would pay unsecured creditors about 10 cents on the dollar. Similar haircuts would be made to underfunded pension and health benefits for retirees. Orr is hoping that the creditors and the unions that he will be negotiating with will accept this package, but he concedes that there is still a "50-50 chance" that the city of Detroit will be forced to formally file for bankruptcy.
But what Detroit is facing is not really that unique. In fact, Detroit is a perfect example of what the future of America is going to look like. We live in a nation that is rotting, decaying, drowning in debt and racing toward insolvency. Already there are dozens of other cities across the nation that are poverty-ridden, crime-infested hellholes just like Detroit is, and hundreds of other communities are rapidly heading in that direction. So don't look down on Detroit. They just got there before the rest of us.
The following are some facts about Detroit that are absolutely mind-blowing...
1 - Detroit was once the fourth-largest city in the United States, and in 1960 Detroit had the highest per-capita income in the entire nation.
2 - Over the past 60 years, the population of Detroit has fallen by 63 percent.
3 - At this point, approximately 40 percent of all the streetlights in the city don't work.
4 - Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.
5 - 210 of the 317 public parks in the city of Detroit have beenpermanently closed down.
6 - According to the New York Times, there are nowapproximately 70,000 abandoned buildings in Detroit.
7 - Approximately one-third of Detroit's 140 square miles is either vacant or derelict.
8 - Less than half of the residents of Detroit over the age of 16 are working at this point.
9 - If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
10 - According to one very shocking report, 47 percent of the residents of Detroit are functionally illiterate.
11 - Today, police solve less than 10 percent of the crimes that are committed in Detroit.
12 - Ten years ago, there were approximately 5,000 police officers in the city of Detroit. Today, there are only about 2,500 and another 100 are scheduled to be eliminated from the force soon.
13 - Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.
14 - The murder rate in Detroit is 11 times higher than it is in New York City.
15 - Crime has gotten so bad in Detroit that even the police are telling people to "enter Detroit at your own risk".
16 - Right now, the city of Detroit is facing $20 billion in debt and unfunded liabilities. That breaks down to more than $25,000 per resident.
As Detroit Emergency Manager Kevyn Orr noted last week, it took a very long time for Detroit to get into this condition...
“What the average Detroiter needs to understand is that where we are right now is a culmination of years and years and years of kicking the can down the road,” said Orr, adding that his proposal should not be seen as a “hostile act” but as a step in the right direction.
Does that sound familiar?
It should.
U.S. politicians have also been kicking the can down the road for "years and years and years".
But eventually you can't kick the can down the road anymore.
Sometimes it is helpful to step back and look at what we have done to ourselves over the past several decades.
For example, back in 1980 the U.S. national debt was less than one trillion dollars. Today, it is rapidly approaching 17 trillion dollars.
And our debt binge has greatly accelerated under Barack Obama.
During Barack Obama's first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
Isn't that insane?
In fact, if you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
The following are a lot more facts about our exploding national debt from one of my previous articles entitled "55 Facts About The Debt And U.S. Government Finances That Every American Voter Should Know"...
#1 While Barack Obama has been president, the U.S. government has spent about 11 dollars for every 7 dollars of revenue that it has actually brought in.
#2 During the fiscal year that just ended, the U.S. government took in 2.449 trillion dollars but it spent 3.538 trillion dollars.
#3 During fiscal year 2011, over a trillion dollars of government money was spent on 83 different welfare programs, and those numbers do not even include Social Security or Medicare.
#4 Over the past four years, welfare spending has increased by 32 percent. In inflation-adjusted dollars, spending on those programs has risen by 378 percent over the past 30 years. At this point, more than 100 million Americans are enrolled in at least one welfare program run by the federal government. Once again, these figures do not even include Social Security or Medicare.
#5 Over the past year, the number of Americans getting a free cell phone from the federal government has grown by 43 percent. Now more than 16 million Americans are enjoying what has come to be known as an "Obamaphone".
#6 When Barack Obama first entered the White House, about 32 million Americans were on food stamps. Now, 47 million Americans are on food stamps. And this has happened during what Obama refers to as "an economic recovery".
#7 The U.S. government recently spent 27 million dollars on pottery classes in Morocco.
#8 The U.S. Department of Agriculture recently spent $300,000 to encourage Americans to eat caviar at a time when more families than ever are having a really hard time just trying to put any food on the table at all.
#9 During 2012, the National Science Foundation spent $516,000 to support the creation of a video game called "Prom Week", which apparently simulates "all the social interactions of the event."
#10 The U.S. Department of Agriculture gave the largest snack food maker in the world (PepsiCo Inc.) a total of 1.3 million dollars in corporate welfare that was used to help build "a Greek yogurt factory in New York."
#11 The National Science Foundation recently gave researchers at Purdue University $350,000. They used part of that money to help fund a study that discovered that if golfers imagine that a hole is bigger it will help them with their putting.
#12 If you can believe it, $10,000 from the federal government was actually used to purchase talking urinal cakes up in Michigan.
#13 The National Science Foundation recently gave a whopping $697,177 to a New York City-based theater company to produce a musical about climate change.
#14 The National Institutes of Health recently gave $666,905 to a group of researchers that is studying the benefits of watching reruns on television.
#15 The National Science Foundation has given 1.2 million dollars to a team of "scientists" that is spending part of that money on a study that is seeking to determine whether elderly Americans would benefit from playing World of Warcraft or not.
#16 The National Institutes of Health recently gave $548,731to a team of researchers that concluded that those that drink heavily in their thirties also tend to feel more immature.
#17 The National Science Foundation recently spent $30,000 on a study to determine if "gaydar" actually exists. This is the conclusion that the researchers reached at the end of the study...
"Gaydar is indeed real and… its accuracy is driven by sensitivity to individual facial features"
#18 Back in 2011, the National Institutes of Health spent$592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.
#19 The U.S. government spends more on the military than China, Russia, Japan, India, and the rest of NATO combined. In fact, the United States accounts for 41.0% of all military spending on the planet. China is next with only 8.2%.
#20 In a previous article, I noted that close to 500,000 federal employees now make at least $100,000 a year.
#21 In 2006, only 12 percent of all federal workers made $100,000 or more per year. Now, approximately 22 percent of all federal workers do.
#22 If you can believe it, there are 77,000 federal workers that make more than the governors of their own states do.
#23 During 2010, the average federal employee in the Washington D.C. area received total compensation worth more than $126,000.
#24 The U.S. Department of Defense had just nine civilians earning $170,000 or more back in 2005. When Barack Obama became president, the U.S. Department of Defense had 214 civilians earning $170,000 or more. By June 2010, the U.S. Department of Defense had 994 civilians earning $170,000 or more.
#25 During 2010, compensation for federal employees came to a grand total of approximately 447 billion dollars.
#26 If you can believe it, close to 15,000 retired federal employees are currently collecting federal pensions for life worth at least $100,000 annually. That list includes such names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
#29 During 2010, an average of $4,005,900 of U.S. taxpayer money was spent on "personal" and "office" expenses per Senator.
#30 In 2013, 3.7 million dollars will be spent to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.
#31 During 2011, the federal government spent a total of 1.4 BILLION dollars just on the Obamas.
#32 When you combine all federal government spending, all state government spending and all local government spending, it comes to approximately 41 percent of U.S. GDP. But don't worry, all of our politicians insist that this is not socialism.
#33 As I have written about previously, less than 30 percent of all Americans lived in a home where at least one person received financial assistance from the federal government back in 1983. Today, that number is sitting at an all-time high of 49 percent.
#34 Back in 1990, the federal government accounted for just32 percent of all health care spending in America. This year, it is being projected that the federal government will account for more than 50 percent of all health care spending in the United States.
#35 The number of Americans on Medicaid soared from 34 million in 2000 to 54 million in 2011, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
#36 In one of my previous articles, I discussed how it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
#37 If you can believe it, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
#38 In the United States today, more than 61 million Americansreceive some form of Social Security benefits. By 2035, that number is projected to soar to a whopping 91 million.
#39 Overall, the Social Security system is facing a 134 trilliondollar shortfall over the next 75 years.
#40 When Barack Obama first took office, the U.S. national debt was about 10.6 trillion dollars. Now it is about 16.7 trillion dollars. That is an increase of 6.1 trillion dollars in a little more than 4 years.
#41 The federal government has now run a budget deficit of more than a trillion dollars for four years in a row.
#42 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
#43 If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.
#44 Some suggest that "taxing the rich" is the answer. Well, if Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
#45 If the federal government used GAAP accounting standards like publicly traded corporations do, the real federal budget deficit for 2011 would have been 5 trillion dollars instead of 1.3 trillion dollars.
#46 The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.
#47 At this point, the United States government is responsiblefor more than a third of all the government debt in the entire world.
#48 The amount of U.S. government debt held by foreigners isabout 5 times larger than it was just a decade ago.
#49 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.
#50 The U.S. national debt is now more than 37 times largerthan it was when Richard Nixon took us off the gold standard.
#51 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.
#52 The U.S. national debt jumped more on the very first dayof fiscal year 2013 than it did from 1776 to 1941 combined.
#53 Historically, the interest rate on 10 year U.S. Treasuries has averaged 6.68 percent. If the average interest rate on U.S. government debt rose to that level today, the U.S. government would find itself spending more than a trillion dollars per year just on interest on the national debt.
#54 A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.
#55 Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay. Kotlikoff speaks of a "fiscal gap" which he defines as "the present value difference between projected future spending and revenue". His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead.
Please share this article with as many people as you can. We are in the process of committing national financial suicide and time is rapidly running out to do anything about it.
Just like Detroit, a day is rapidly approaching when America will not be able to kick the can down the road anymore.
Sadly, our politicians don't seem inclined to do anything about it and most of the population seems to think that our exploding national debt is not a significant problem.
By the time it becomes clear how wrong they were, it will be far too late to do anything about it.
end
Well that about does it for tonight
I will see you tomorrow night
harvey
- Barack Obama
- Bill Gates
- Budget Deficit
- China
- Creditors
- Detroit
- Federal Reserve
- GAAP
- Greece
- Gross Domestic Product
- India
- International Monetary Fund
- Ireland
- Italy
- Japan
- Medicare
- Michigan
- National Debt
- New York City
- New York Times
- Obama Administration
- Obamacare
- Portugal
- recovery
- White House
Submitted by Michael Snyder of The Economic Collapse blog,
Eventually the money runs out. Much of America was shocked when the city of Detroit defaulted on a $39.7 million debt payment and announced that it was suspending payments on$2.5 billion of unsecured debt, but those who visit my site on a regular basis were probably not too surprised. Anyone with half a brain and a calculator could see this coming from a mile away. But people kept foolishly lending money to the city of Detroit, and now many of them are going to get hit really hard.
Detroit Emergency Manager Kevyn Orr has submitted a proposal that would pay unsecured creditors about 10 cents on the dollar. Similar haircuts would be made to underfunded pension and health benefits for retirees. Orr is hoping that the creditors and the unions that he will be negotiating with will accept this package, but he concedes that there is still a "50-50 chance" that the city of Detroit will be forced to formally file for bankruptcy.
But what Detroit is facing is not really that unique. In fact, Detroit is a perfect example of what the future of America is going to look like. We live in a nation that is rotting, decaying, drowning in debt and racing toward insolvency. Already there are dozens of other cities across the nation that are poverty-ridden, crime-infested hellholes just like Detroit is, and hundreds of other communities are rapidly heading in that direction. So don't look down on Detroit. They just got there before the rest of us.
The following are some facts about Detroit that are absolutely mind-blowing...
1 - Detroit was once the fourth-largest city in the United States, and in 1960 Detroit had the highest per-capita income in the entire nation.
2 - Over the past 60 years, the population of Detroit has fallen by 63 percent.
3 - At this point, approximately 40 percent of all the streetlights in the city don't work.
4 - Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.
5 - 210 of the 317 public parks in the city of Detroit have beenpermanently closed down.
6 - According to the New York Times, there are nowapproximately 70,000 abandoned buildings in Detroit.
7 - Approximately one-third of Detroit's 140 square miles is either vacant or derelict.
8 - Less than half of the residents of Detroit over the age of 16 are working at this point.
9 - If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
10 - According to one very shocking report, 47 percent of the residents of Detroit are functionally illiterate.
11 - Today, police solve less than 10 percent of the crimes that are committed in Detroit.
12 - Ten years ago, there were approximately 5,000 police officers in the city of Detroit. Today, there are only about 2,500 and another 100 are scheduled to be eliminated from the force soon.
13 - Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.
14 - The murder rate in Detroit is 11 times higher than it is in New York City.
15 - Crime has gotten so bad in Detroit that even the police are telling people to "enter Detroit at your own risk".
16 - Right now, the city of Detroit is facing $20 billion in debt and unfunded liabilities. That breaks down to more than $25,000 per resident.
As Detroit Emergency Manager Kevyn Orr noted last week, it took a very long time for Detroit to get into this condition...
“What the average Detroiter needs to understand is that where we are right now is a culmination of years and years and years of kicking the can down the road,” said Orr, adding that his proposal should not be seen as a “hostile act” but as a step in the right direction.
Does that sound familiar?
It should.
U.S. politicians have also been kicking the can down the road for "years and years and years".
But eventually you can't kick the can down the road anymore.
Sometimes it is helpful to step back and look at what we have done to ourselves over the past several decades.
For example, back in 1980 the U.S. national debt was less than one trillion dollars. Today, it is rapidly approaching 17 trillion dollars.
And our debt binge has greatly accelerated under Barack Obama.
During Barack Obama's first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
Isn't that insane?
In fact, if you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
The following are a lot more facts about our exploding national debt from one of my previous articles entitled "55 Facts About The Debt And U.S. Government Finances That Every American Voter Should Know"...
#1 While Barack Obama has been president, the U.S. government has spent about 11 dollars for every 7 dollars of revenue that it has actually brought in.
#2 During the fiscal year that just ended, the U.S. government took in 2.449 trillion dollars but it spent 3.538 trillion dollars.
#3 During fiscal year 2011, over a trillion dollars of government money was spent on 83 different welfare programs, and those numbers do not even include Social Security or Medicare.
#4 Over the past four years, welfare spending has increased by 32 percent. In inflation-adjusted dollars, spending on those programs has risen by 378 percent over the past 30 years. At this point, more than 100 million Americans are enrolled in at least one welfare program run by the federal government. Once again, these figures do not even include Social Security or Medicare.
#5 Over the past year, the number of Americans getting a free cell phone from the federal government has grown by 43 percent. Now more than 16 million Americans are enjoying what has come to be known as an "Obamaphone".
#6 When Barack Obama first entered the White House, about 32 million Americans were on food stamps. Now, 47 million Americans are on food stamps. And this has happened during what Obama refers to as "an economic recovery".
#7 The U.S. government recently spent 27 million dollars on pottery classes in Morocco.
#8 The U.S. Department of Agriculture recently spent $300,000 to encourage Americans to eat caviar at a time when more families than ever are having a really hard time just trying to put any food on the table at all.
#9 During 2012, the National Science Foundation spent $516,000 to support the creation of a video game called "Prom Week", which apparently simulates "all the social interactions of the event."
#10 The U.S. Department of Agriculture gave the largest snack food maker in the world (PepsiCo Inc.) a total of 1.3 million dollars in corporate welfare that was used to help build "a Greek yogurt factory in New York."
#11 The National Science Foundation recently gave researchers at Purdue University $350,000. They used part of that money to help fund a study that discovered that if golfers imagine that a hole is bigger it will help them with their putting.
#12 If you can believe it, $10,000 from the federal government was actually used to purchase talking urinal cakes up in Michigan.
#13 The National Science Foundation recently gave a whopping $697,177 to a New York City-based theater company to produce a musical about climate change.
#14 The National Institutes of Health recently gave $666,905 to a group of researchers that is studying the benefits of watching reruns on television.
#15 The National Science Foundation has given 1.2 million dollars to a team of "scientists" that is spending part of that money on a study that is seeking to determine whether elderly Americans would benefit from playing World of Warcraft or not.
#16 The National Institutes of Health recently gave $548,731to a team of researchers that concluded that those that drink heavily in their thirties also tend to feel more immature.
#17 The National Science Foundation recently spent $30,000 on a study to determine if "gaydar" actually exists. This is the conclusion that the researchers reached at the end of the study...
"Gaydar is indeed real and… its accuracy is driven by sensitivity to individual facial features"
#18 Back in 2011, the National Institutes of Health spent$592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.
#19 The U.S. government spends more on the military than China, Russia, Japan, India, and the rest of NATO combined. In fact, the United States accounts for 41.0% of all military spending on the planet. China is next with only 8.2%.
#20 In a previous article, I noted that close to 500,000 federal employees now make at least $100,000 a year.
#21 In 2006, only 12 percent of all federal workers made $100,000 or more per year. Now, approximately 22 percent of all federal workers do.
#22 If you can believe it, there are 77,000 federal workers that make more than the governors of their own states do.
#23 During 2010, the average federal employee in the Washington D.C. area received total compensation worth more than $126,000.
#24 The U.S. Department of Defense had just nine civilians earning $170,000 or more back in 2005. When Barack Obama became president, the U.S. Department of Defense had 214 civilians earning $170,000 or more. By June 2010, the U.S. Department of Defense had 994 civilians earning $170,000 or more.
#25 During 2010, compensation for federal employees came to a grand total of approximately 447 billion dollars.
#26 If you can believe it, close to 15,000 retired federal employees are currently collecting federal pensions for life worth at least $100,000 annually. That list includes such names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.
#29 During 2010, an average of $4,005,900 of U.S. taxpayer money was spent on "personal" and "office" expenses per Senator.
#30 In 2013, 3.7 million dollars will be spent to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.
#31 During 2011, the federal government spent a total of 1.4 BILLION dollars just on the Obamas.
#32 When you combine all federal government spending, all state government spending and all local government spending, it comes to approximately 41 percent of U.S. GDP. But don't worry, all of our politicians insist that this is not socialism.
#33 As I have written about previously, less than 30 percent of all Americans lived in a home where at least one person received financial assistance from the federal government back in 1983. Today, that number is sitting at an all-time high of 49 percent.
#34 Back in 1990, the federal government accounted for just32 percent of all health care spending in America. This year, it is being projected that the federal government will account for more than 50 percent of all health care spending in the United States.
#35 The number of Americans on Medicaid soared from 34 million in 2000 to 54 million in 2011, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
#36 In one of my previous articles, I discussed how it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
#37 If you can believe it, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
#38 In the United States today, more than 61 million Americansreceive some form of Social Security benefits. By 2035, that number is projected to soar to a whopping 91 million.
#39 Overall, the Social Security system is facing a 134 trilliondollar shortfall over the next 75 years.
#40 When Barack Obama first took office, the U.S. national debt was about 10.6 trillion dollars. Now it is about 16.7 trillion dollars. That is an increase of 6.1 trillion dollars in a little more than 4 years.
#41 The federal government has now run a budget deficit of more than a trillion dollars for four years in a row.
#42 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
#43 If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.
#44 Some suggest that "taxing the rich" is the answer. Well, if Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
#45 If the federal government used GAAP accounting standards like publicly traded corporations do, the real federal budget deficit for 2011 would have been 5 trillion dollars instead of 1.3 trillion dollars.
#46 The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.
#47 At this point, the United States government is responsiblefor more than a third of all the government debt in the entire world.
#48 The amount of U.S. government debt held by foreigners isabout 5 times larger than it was just a decade ago.
#49 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.
#50 The U.S. national debt is now more than 37 times largerthan it was when Richard Nixon took us off the gold standard.
#51 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.
#52 The U.S. national debt jumped more on the very first dayof fiscal year 2013 than it did from 1776 to 1941 combined.
#53 Historically, the interest rate on 10 year U.S. Treasuries has averaged 6.68 percent. If the average interest rate on U.S. government debt rose to that level today, the U.S. government would find itself spending more than a trillion dollars per year just on interest on the national debt.
#54 A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.
#55 Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay. Kotlikoff speaks of a "fiscal gap" which he defines as "the present value difference between projected future spending and revenue". His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead.
Please share this article with as many people as you can. We are in the process of committing national financial suicide and time is rapidly running out to do anything about it.
Just like Detroit, a day is rapidly approaching when America will not be able to kick the can down the road anymore.
Sadly, our politicians don't seem inclined to do anything about it and most of the population seems to think that our exploding national debt is not a significant problem.
By the time it becomes clear how wrong they were, it will be far too late to do anything about it.
end
Well that about does it for tonight
I will see you tomorrow night
harvey
Well that about does it for tonight
I will see you tomorrow night
harvey
