Saturday, May 26, 2012

Spanish Banking needs more funding/Spain's Catalonia province also badly in need of money/

Good morning Ladies and Gentlemen:

Gold closed at its highest point on Friday $1568.80 for a gain of $11.50.  Silver also did pretty good
rising by 20 cents to $28.37. Friday was truly remarkable for our precious metals because they rose despite a 75 point drop in the Dow and a fall in the euro/usa dollar cross.

(The final dow figures: 12454 for a drop of 74.92 points.
The Euro/dollar cross closing:  1.25152)

Here is the closing gold and silver prices in the access market:

Gold;  $1573.50
silver:  $28.54

The big story of the day is Spain where we find the nationalized bank of Bankia asking for more money to fill the cracks due to its huge losses.  On May 9th, the day the bank was nationalized, the government stated that they were solvent.  In the following week, the needed 9 billion euros which was followed by 15 billion euros.  Yesterday Spain announced that Bankia will need 19 billion euros.  No doubt that all Spanish banks are in the same trouble as they have underestimated the losses in their real estate mess. Most Spanish banks have seen massive bank runs which thus increase target 2 imbalances.  If Spain were to leave the EU, then the rest of the EU will have to share in those losses in which in turn will bring on more contagion like destruction as nations will have to deal with bonds purchased by the ECB of Spanish derivation.

Yesterday the wealthiest regional state of Catalonia which houses Barcelona also stated that it was in serious trouble and in need of much funding.  I will spend most of time on those paper stories with respect to Spain and its major creditor Germany.

Let us head over to the comex and assess trading but inventory levels as well as changes in positions by our major players.

The total gold comex OI fell by 3198 contracts from 441,681 to 438,483 basis Thursday. Please remember that all OI numbers are 24 hrs back in trading unlike the Toyko market which gives OI accurately immediately at days end.  The CME refuses to give us that data so as to give the criminal bankers an edge.  The non official delivery month of May saw its OI mysteriously rise from 7 to 14 and on top of this we had 1 delivery notice on Thursday.  Thus we gained 8 contracts or 800 oz of additional gold standing.  Generally this means that someone or some entity was badly in need of physical to service elsewhere. The first day notice for the June contract is now less than a week away.  Actually we have only 3 more trading days until delivery notices will be filed.  I will be on top of this very important delivery week. The OI for June lowered by 18,928 as many of the paper players rolled into August, Oct and December. The OI rests this weekend at 118,677 compared to 137,605 on Thursday.  The estimated volume yesterday was extremely light especially when you consider the rollovers and HFT (high frequency traders).  The estimated volume on Friday was 220,441 compared to the confirmed volume on Thursday of 247,908.  Volumes at the comex are coming down probably due to the crooked games the banks and the CME are doing to investors.

The total silver comex OI continues to baffle the Comex folks.  Gold and silver had good days yesterday but the OI on gold fell by 3109 contracts and the silver OI fell by a marginal 25 contracts.  We have been witnessing slow movements in silver OI up and down despite wild swings in the actual price.  The new OI for the silver complex rests this weekend at 114,080.  On Thursday the reading was 114,105.  The front delivery month of May saw its OI fall from 54 to 36 for a loss of 18 contracts.  We had 27 notices filed on Thursday so in essence we gained 9 contracts or an additional 45,000 oz of silver are standing. The next big delivery month for silver is July.  Here the OI lowered slightly by 237 contracts from 59,123 to 58,886.
The CME is keeping a close watch on the silver OI as they fear another high delivery month.
The estimated volume at the silver comex on Friday was abysmal at 32,953 compared to the compared volume of 52,239 on Thursday.

May 26.2012


Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in
No of oz served (contracts) today
(4)  400 oz
No of oz to be served (notices)
  10  (1000)
Total monthly oz gold served (contracts) so far this month
(573) 57,300
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

 My goodness, the vaults were as quiet as could be.
We had zero activity whatsoever whether dealer deposit/withdrawal or customer deposit/withdrawal.
We only had a tiny 512.95 oz lease from Manfra customer back to the dealer.

Thus the registered gold inventory rests this weekend at 2.427 million oz or 75.49 tonnes of gold.

The CME notified us on Friday that we had only 4 delivery notices filed for 400 oz of gold.
The total number of notices filed so far this month total 573 for 57,300 oz.  To obtain what is left to be
served upon, I take the OI standing for May (14) and subtract out Friday's delivery notices (4) which leaves us with 10 notices or 1000 oz left to be served upon.

Thus the total number of gold ounces standing in this non official delivery month of May is as follows;

57,300 (oz served)  +  1000 oz (to be served upon)  =  58,300 oz or 1.813 tonnes.
we gained 800 additional oz standing and we are coming close to 2 tonnes of metal delivered upon in a generally weak delivery month.
June ought to be a huge delivery month so stayed tuned for excitement next week.


May 26.2012:

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory157,793.38 ( Brinks,Scotia)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory631,626.35 oz (Brinks,Scotia)
No of oz served (contracts)11 (55,000)
No of oz to be served (notices) 25  (125,000)
Total monthly oz silver served (contracts)2420 (12,100,000)
Total accumulative withdrawal of silver from the Dealers inventory this month583,065.04 oz
Total accumulative withdrawal of silver from the Customer inventory this month 5,833,566.00
We witnessed a little more activity than on Thursday.
We had no dealer activity.

The customer had the following deposit:

1. Into Brinks;  15,791.15 oz
2. Into Scotia:  615,835.20 oz

total deposit:  631,626.35 oz

we had the following customer withdrawal:

1. Out of Brinks;  137,713.21 oz
2. Out of Scotia:  20,0890.17 oz

total:  157,793.38. oz

we had no adjustments.
The total registered or dealer inventory rests this weekend at 35.71 million oz
The total of all silver rests at 141.918 million oz.

With all of this massive silver inventory why are they having so much trouble settling upon our longs.
If it is better financially to deliver at the end of the month, why are they slowly delivering notices throughout the month.!!

The CME notified us that we had only 11 delivery notices filed on Friday for a total of
55,000 oz.  The total number of notices filed so far this month total 2420 for 12,100,000 oz
To obtain what is left to be served upon our longs, I take the OI standing for May (36)
and subtract out Friday's delivery notices (11) which leaves us with 25 notices or 125,000 oz left
to be served upon our longs.

Thus the total number of silver ounces standing in this official delivery month of May is as follows:

12,100,100 oz (served)  +  125,000 oz (to be served upon)  =  12,225,000 oz.

we gained an additional 45,000 oz standing and the month of May has certainly been a stellar
delivery month.  July ought to be a dilly so take front row seats for its delivery come June 29.2012.


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

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.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

May 26. 2012:

Total Gold in Trust



Value US$:64,078,804,951.95




Value US$:64,038,665,122.22

MAY 23.2012:




Value US$:63,137,727,037.44

we neither gained nor lost any gold at the GLD.


And now for silver May 26/2012:

Ounces of Silver in Trust310,714,438.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,664.30

May 24.2012:

Ounces of Silver in Trust310,229,256.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,649.21

we gained 485,000 oz of silver which was updated late Thursday night.

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

1. Central Fund of Canada: traded to a negative 0.4 percent to NAV in usa funds and a negative  0.3%  to NAV for Cdn funds. ( May 26.2012)

2. Sprott silver fund (PSLV): Premium to NAV  lowered to  5.32% to NAV  May 26..2012 :
3. Sprott gold fund (PHYS): premium to NAV lowered to  1.28% positive to NAV May 26 2012). end 


And now let's visit positions held by our major players:  first the Gold COT:

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, May 22, 2012


Our large speculators:

Those large speculators that have been long continued to add huge amounts to their longs to the tune of 5500 contracts.

Those large speculators that have been short in gold added a huge 4491 contracts to their short side and thus they were the dominant suppliers of the paper to our longs.

Our commercials;

those commercials that have been long in gold and are close to the physical scene added a smallish 2134 contracts to their long side.

those commercials that have been short in gold from the beginning of time covered a small 1185 contracts from their short side.

Our small specs.

Those small specs that have been long in gold added a tiny 556 contracts to their long side.
Those small specs that have been short in gold made a terrible mistake and added a gigantic 4884 contracts to their short side and they are now crying the blues.

Conclusion:  even more bullish than last week as the commercials added to their long side and covered from their short side. Another big plus is that the small specs generally get it wrong and the huge increase in short positions in gold would no doubt cause them to be annihilated which seems the case these past few days.
Remember that the COT is from Tues May 15 to May 22.2012

and now let us head over to see the silver COT:

Silver COT Report: Futures
Large Speculators
Small Speculators
Open Interest
non reportable positions
Positions as of:

Tuesday, May 22, 2012
  © SilverSeek.c

You can visualize the difference between the gold and silver COT.

Our large speculators:

Those large speculators that have been long in silver added a smallish 767 positions to their long side.
Those large speculators that have been short in silver are not happy campers this weekend as they added another 1444 contracts to their short side and these guys supplied the necessary paper.

Our commercials:

Those commercials that have been long in silver and are close to the physical scene pitched 750 contracts from their long side. (this is the same as a banker going more short)

Those commercials that have been short in silver from the beginning of time and subject to the silver probe by the CFTC enforcement (yes I know this is a big joke)  covered a small 1018 contracts from their short side.

Our small specs:

those small specs that have been long in silver added another 440 contracts to their long side.
those small specs that have been short in silver added another 449 contracts to their short side

conclusion:  slightly more bullish than last week. Also the small specs generally get it wrong so this must also be a plus for silver.


In physical news this broke after I published by Thursday commentary.
The CME will lower margins on crude and gold.

I do not think it will matter that much.  I question:  why not silver as well!
It is certainly not that volatile as of late.

(courtesy zero hedge)

CME Cuts Crude, Gold Margins

Tyler Durden's picture

There was a time when the CME was rushing to hike crude, gold and silver margins. That seems like an eternity ago. So was the appointment of Obama to the role of margin hiker-in-chief, and his most recent witch hunt to rid the world of all evil speculators (oddly, the speculators are only evil when driving the price of oil higher, never that of stocks). Anyway, as of minutes ago, the CME just cut margins for Crude (CL) and Gold (GC) by 13% and 10% respectively. At this point we doubt it will do much if anything. Those who care, know that the only real assets are those that one has possession of, not held by proxy of an exchange which just can't wait to spring the trap and hike margins the second Bernanke announces the NEW QE. Sorry: the people just aren't going to fall for that one again.

Little noticed is that on Tuesday, Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading -- not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.
Specifically, the law authorizes the Federal Reserve to provide "discount and borrowing privileges" to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed's discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to "be or become a bank or bank holding company." To get help, they only needed to be deemed "systemically important" by the new Financial Stability Oversight Council chaired by the Treasury Secretary.


I guess Obama is at it again and they are now stating that the Comex is too big to fail.
Obama took initial steps putting taxpayers behind the derivative mess and not the banks.
The following story should clearly irk you:

(courtesy Wall Street Journal/GATA/Chris Powell)

Wall Street Journal says Comex has been classified as 'too big to fail'

A Mess the 45th President Will Inherit
Taxpayers Now Stand Behind Derivatives Clearinghouses
From the Wall Street Journal
Thursday, May 24, 2012
President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.
J.P. Morgan's recent trading loss and the resulting Washington blather about tighter regulation have grabbed headlines.
Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading -- not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.
As we noted in May 2010, the authority for this regulatory achievement was inserted into Congress's pending financial reform bill by then-Senator Chris Dodd. Two months later, the legislation was re-named Dodd-Frank and signed into law by Mr. Obama. One part of the law forces much of the derivatives market into clearinghouses that stand behind every trade. Mr. Dodd's pet provision creates a mechanism for bailing out these clearinghouses when they run into trouble.
Specifically, the law authorizes the Federal Reserve to provide "discount and borrowing privileges" to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed's discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to "be or become a bank or bank holding company." To get help, they only needed to be deemed "systemically important" by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
Last year regulators finalized rules for how they would use this new power. On Tuesday, they began using it. The Financial Stability Oversight Council secretly voted to proceed toward inducting several derivatives clearinghouses into the too-big-to-fail club. After further review, regulators will make final designations, probably later this year, and will announce publicly the names of institutions deemed systemically important.
We're told that the clearinghouses of Chicago's CME Group and Atlanta-based Intercontinental Exchange were voted systemic this week, and rumor has it that the council may even designate London-based LCH.Clearnet as critical to the U.S. financial system.
U.S. taxpayers thinking that they couldn't possibly be forced to stand behind overseas derivatives trading will not be comforted by remarks from Commodity Futures Trading Commission Chairman Gary Gensler. On Monday he emphasized his determination to extend Dodd-Frank derivatives regulation to overseas markets when subsidiaries of U.S. firms are involved.
Readers know Mr. Gensler as the chief regulator of MF Global, which was run into bankruptcy by his old Beltway and Goldman Sachs pal Jon Corzine. An estimated $1.6 billion is still missing from MF Global customer accounts. What an amazing feat Mr. Gensler will have performed if, through his agency's oversight, he can manage to have U.S. customers eat the cost of Mr. Corzine's bets on foreign debt and have U.S. taxpayers underwrite bets in foreign derivatives trading.
If there's one truth we've learned about government financial backstops, it's that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess. And if the 45th president spends his first term whining about his predecessor's mistakes, he'll have a point.  end


Here the Author Seth is counting on huge Indian demand for gold.  Even though the rupee has lost considerable value, gold has also fallen and this should be a catalyst for huge gold imports.

Monsoon and marriages to see Indian gold demand, and prices, soar

Author: Shivom Seth
Posted: Friday , 25 May 2012
Gold prices are set to rise in India during the June to August period, given the pent up demand by jewellery manufacturers who are bracing for the marriage season ahead. According to Assocham, an apex trade association, the price of the yellow metal is set to cross $627.60 (Rs 35,000) per ten gram (around $1950 an ounce) by the end of the year. Currently gold is trading around $521.88 (Rs 29,000) per ten grams.
In a survey conducted in India, Assocham has noted that respondents continue to believe in gold's intrinsic value and that gold's traditional appeal remains intact around the country as compared to all other investment instruments.
This, despite the fact that in volume terms, gold demand in the first quarter of 2012 fell 29% in India, with the sharpest fall coming in the investment demand segment, which slipped 46%.
Though demand for the precious metal in Mumbai, the commercial capital of India and a nerve centre for precious metals, appears to have plummeted to around 300 kilograms a day as compared to the 1.5 metric tonnes a day usage last year around the same time, the onset of monsoon at the end of May in South India could well turn the tide.
The rains hit South India first and then proceed across the country early June. A good monsoon period also means many ceremonies and festive occasions, when rural folk tend to buy gold to herald the onset of good times.
A new report by the weather department has forecast a normal monsoon period this year. More than 60% of farmland in India is rain fed. Good rainfall ensures healthy crops in India, which in turn ensures a healthy environment for investment in gold.
``There are just too many reasons supporting a rise in the price of gold in India,' said D S Rawat, a senior official at Assocham. Spelling out some, he said a slowdown in inflows by foreign institutional investors (FIIs) into India, rising inflation in the country and the rupee depreciation were the main reasons why the price of gold could be headed northward soon.
``There are growing signs of fatigue in the realty sector. Investors continue to refrain from real estate and the stock markets, which have been on a downward spiral for the past few weeks. With nowhere else to invest, gold seems like an attractive option for many,' he said.
Referring to the pent up demand by jewellery manufacturers and traders in the wake of India's annual wedding and festive season which commences next month, Rawat was of the opinion that jewellers are keen to stock ahead, which would ensure a positive run on the price of gold.
Gold is one of the biggest purchases during the marriages season and this is not going to change overnight, even though many middle class families find it hard to manage given the ruling high price, said Rawat, adding that it was a social habit and not something that could be done away with completely.
The rupee plays an important role in determining the landed cost of the dollar quoted gold. It hit a record low against the dollar for the seventh straight session on Thursday.
Rural households who have received huge compensation from sale of land are also said to be investing heavily in gold, Assocham said.
The chambers recently interacted with about 200 goldsmiths, jewellery manufacturers and retail jewellers in Ahmedabad, Chennai, Chandni Chowk area in Delhi and Zaveri Bazaar area in Mumbai to ascertain the gold trading sentiment given the current scenario.
Almost 55% of respondents in these cities said gold imports were expected to swell during the quarter of June to August due to the marriage season. Another 60% respondents said they were closely watching the situation in the global markets for any changes.
``The weak recovery in the US economy and persistent troubles in the Euro-zone will also ensure that gold prices rise further. Many of the respondents said it may even reach Rs 35,000 per 10 gram by the end of the year,' said Rawat.


Ted is very angry and has given up on the CFTC.  I do not blame him one bit.


May 25, 2012 - 4:22pm
The Commodity Futures Trading Commission (CFTC) has been negligent in failing to terminate the obvious manipulation ongoing in silver. Furthermore, the agency may be complicit in this manipulation. Worse, it has lied to the public and elected officials. This all goes back to the time when Bear Stearns was taken over by JPMorgan in March of 2008. It is well known that Bear Stearns went under as a result of a sudden loss of liquidity amidst a run by creditors and customers. What is not well known is that those problems were greatly exacerbated by a $2 billion margin call on silver and gold short positions from the end of December 2007 to March 2008. I believe the silver and gold margin calls were at the heart of Bear Stearns’ failure.
We know now (from CFTC correspondence to lawmakers in 2008) that JPMorgan took over Bear Stearns’ giant silver and gold short positions on the COMEX. Up until that time, we did not know that Bear Stearns was the concentrated silver and gold short. Using Commitment of Traders Report (COT) data, Bear Stearns had a COMEX silver short position of no less than 35,000 net contracts and a COMEX gold short position of no less than 60,000 net contracts from the end of December 2007 to their takeover by JPMorgan two and a half months later. From December 31, 2007 to mid-March 2008, the price of silver rose by $6 (from $15 to $21) and the price of gold rose from $850 to over $1000. Based upon the number of contracts held short by Bear Stearns and the price movement at that time, that resulted in margin calls of $2 billion. I would contend that was the real reason for Bear Stearns’ demise.
So where do I get off claiming that the CFTC is complicit in the silver manipulation and lied about it to the public and to lawmakers? This is easy to prove. On May 13, 2008, the CFTC published a 16 page public response to my allegations of an ongoing manipulation in silver by means of a concentrated short position. The response was based upon silver market activity through the end of 2007, thereby conveniently sidestepping the drama that occurred through March 2008 when the biggest silver short in the market, Bear Stearns, failed and needed to be rescued with taxpayer assistance (Federal guarantees given to JPMorgan). The May 13, 2008 report from the CFTC went into great lengths in explaining there was nothing amiss on the short side of silver, even though the Commission knew that two months before the report was issued, the biggest concentrated short had failed and needed to be rescued by taxpayers. A lie by omission is no less of a lie.
Why am I bringing this up now? Because I’ve had enough of the CFTC’s lies and its refusal to do its job. As a result of the transfer of Bear Stearns’ concentrated short position becoming visible in the August 2008 Bank Participation Report the Commission initiated another formal investigation of the silver market, this time by the Enforcement Division. This investigation is now 3 years and 9 months old, the longest-running investigation in U.S. Government history. It has lasted longer than most wars. Just as with the two prior investigations by the Division of Market Oversight, the current investigation is a phony investigation. I say this because there has been no attempt by the Enforcement Division to contact me or anyone claiming that silver has been manipulated. It’s clear that the agency does not want to get to the truth. The agency keeps initiating investigations which involve time and taxpayer money, but they never check with the person who has caused them to investigate in the first place.
Only two of the five commissioners currently serving at the agency were at the Commission when JPMorgan took over Bear Stearns or when the Enforcement Division began its current investigation. But all have received vastly more public complaints about silver than for any other commodity. None of them can claim ignorance of the issue. Chairman Gensler preaches about the need for transparency in our markets. How about some transparency for the Commission? The Commission lied in its May 13, 2008 report (by omission) and is lying now when it claims to be conscientiously investigating silver. See my article from 2009.
The stalled investigation has only served as cover for the crooks at JPMorgan and the CME to manipulate the price of silver more egregiously than ever before. I think it’s time to press for the removal of all current commissioners, including Gensler and Commissioner Chilton. Who wants to hear platitudes when a serious crime is in progress? Clearly, the Division of Market Oversight lied in its 2008 letter and the Enforcement Division is lying now. Who needs public servants like these?   
Please send this article to your Congressman or Senator and ask them to investigate. Also please e-mail the Commodity Futures Trading Commission with your comments. Chairman Gensler Commissioner Chilton Commissioner Sommers Commissioner O’Malia Commissioner Wetjen Director Meister


And finally this great piece of gold demand from a story I delivered to you on Thursday. Jeff
Nichols comments on the latest IMF gold purchases by Mexico, Kazakhstan, Ukraine, Russia and the Philippines:

(courtesy Jeff Nichols)

 "The lastest IMF data on central bank gold reserves was just released earlier today -- showing gold purchases by Mexico, Kazakhstan, Ukraine, Russia, and the Philippines. Undoubtedly, China and perhaps a few other countries bought gold but did not report their purchases to the IMF." This reiterates the widespread belief that some countries - of which China is thought to be the major entity - for political reasons do not report their total holdings to the IMF, but hold new gold purchases in accounts that are not reported until it is considered politically expedient to do so. Last time China reported an increase in reserves was in 2009.
Since then there has been much speculation that China could be building up its reserves at a rate of four or five hundred tonnes a year or more given the level of domestic gold production and the big surge in imports seen. Although China is the world's sixth largest holder of gold, the metal only represents a tiny 1.8% of its reserves and there have been a number of presumably government approved (is there anything else in China?) statements by officials that do suggest the nation is carefully buying on dips in the gold price so as not to create disruption in a relatively orderly global gold market.
Overall reported Central Bank gold purchases last year amounted to over 450 tonnes - the highest for nearly 50 years and The World Gold Council and GFMS have suggested that this year will see another 400 tonnes or more flowing into Central Bank coffers - and the purchases to date suggest that this target may well be achieved. Gold may have fallen out of Central Bank favour for a few decades but the realisation now is increasingly that it should be a significant part of a country's foreign reserve base as fiat currencies the world over lose their intrinsic value.


And now let us explore the major paper stories which will certainly have an effect on the physical price of gold and silver:

The first major story is the ongoing saga on the big Spanish bank Bankia.  You will recall that this bank was nationalized on the 9th of May and the government stated that the bank was solvent and that no additional costs would be necessary.  They converted 4.5 billion euros worth of preferred shares to purchase common shares and thus nationalize the bank. The conversion took place on May 21.2012.  Two days later, on May 23, the government announced that Bankia was in the hole to the tune of 9 billion euros. On Thursday, May 24.2012,  Bankia SA asked the government for more aid.  It stated that it was in the hole for more than 15 billion euros. The bank along with all of the other major Spanish banks are having massive bank runs.

It seems that Bankia has collateralized its major asset, the soccer star Ronaldo.
You will truly love this post:

(courtesy zero hedge as of May 24/2010)

As Bankia Bailout Costs Grow Exponentially, Is A Stealth Bank Run Taking Place... And What Happens To Ronaldo?

Tyler Durden's picture

Note the following sequence of events, bolded numbers, and dates:
  • Bank Of Spain Formally Nationalizes Bankia, Says Insolvent Bank Is "Solvent", Adds There Is No Cause For Concern,Zero Hedge, May 9
  • Spain is taking over Bankia by converting its 4.5 billion euros of preferred shares in the group’s parent company into ordinary shares, BusinessWeek, May 21
  • Spain said on Wednesday its rescue of problem lender Bankia would cost at least 9 billion euros ($11 billion), as the government tries to clean up a banking system that threatens  to drag the country deeper into the euro zone crisis, Reuters, May 23   
  • Bankia SA will have to ask the Spanish government for more than 15 billion euros as part of its effort to restore its financial health, state-owned news agency EFE reported Thursday, citing financial sources, Dow Jones, May 24
Hopefully we aren't the only ones to notice how the bailout cost has oddly doubled almost on a daily basis.
Which is to be expected: After all, recall that The Bankia group, was formed in late 2010 following a merger of seven insolvent savings banks led by Caja Madrid, which has the most exposure to Spanish real estate among the nation’s banks. The pro forma company then, under the guise of newfound solvency, turned to the stock market to raise capital after parking its worst real estate assets in the parent company. This worked for just over a year. Then Bankia itself blew up.
Essentially, Spain tried to do what the US did - consolidate a bunch of insolvent companies with some deposits, into a larger one - a desperate attempt to create a TBTF - diluting the bad assets among the constituent subsidiaries.
The problem, however, is that the impaired liabilities continued growing as the Spanish housing sector has not stopped deteriorating and in fact has become increasingly more distressed. At the same time, occasional deposit runs have exhausted the liability side of the bank, causing company cash to fly out of the door, and subsequently impairing equity forcing the sovereign to pump ever more money into this lost cause.
This, to anyone who has even rudimentary understanding of finance, is a Vicious Cash Outflow Cycle 101, where capital outflows beget more capital outflows, unless a credible backstop steps in and restores confidence. Otherwise bank runs not only accelerate but they spread to all even solvent entities.
Sadly, what the Spanish government and the Bank of Spain have demonstrated, is that despite all the rhetoric, capital flight has not only stopped, it is accelerating.
Yes: the bank run is on, and is getting worse, despite what the press may be promising. Proof - just look at the bullets above. It is a virtual certainty that in the next few days we will see total Bankia "bailout costs" rise more and more, until the truth becomes self-evident to even the most financially unsophisticated soon to be ex-depositor. Sadly, we are also fairly confident this is not limited to Bankia as more of the harebrained Cajas consolidation schemes from 2010 blow up one by one.
Yet we don't want to leave off on a pessimistic note. Instead, we go back to our post from July 28, in which we reported on something rather amusing. To wit:
We were pretty much speechless when we read this - it sure puts guarantees by Noyer, Trichet and all the other bureaumonkeys that the ECB does not accept just any collateral in perspective. From "The most expensive footballer in history may now be used to guarantee the solvency of a Spanish bank. “Ronaldo in the bailout fund,” headlines Süddeutsche Zeitung. The daily reports that the Bankia group of savings banks, which financed Real Madrid’s acquisition of the Portuguese player, is now seeking to borrow funds from the European Central Bank. In response to the ECB’s demand for guarantees, Bankia are putting up… Ronaldo and the Brazilian Kaka, who also plays for the Madrid football club. In 2009, Real borrowed 76.5 million euros to pay transfer fees of 100 millions euros to Manchester United, and 60 million to Milan AC."
“Could we see a situation in which the ECB seizes one of the players?“ wonders the Munich daily. “In theory, it is possible. Bankia would first have to become insolvent. Thereafter, Real would have to default on its loans, which are secured by advertising and television revenues. It goes without saying that Real Madrid is in debt to the tune of several million euros. However, in Spain football clubs have a history of obtaining publicly funded bailouts — just like the country’s banks.”
This is beyond even The Onion's (and even Zero Hedge's) level of sarcasm.

There is nothing that can be added to this insanity. Furthermore, the fact that the "collateral" most likely has a virulent case of Paris Hiltonitis which will infect all the other worthless collateral, likely leading to the latest and greatest reality TV show, only adds to the complete farce that the global ponzi scheme has now become.
So... Is it time for Bankia to claim its "collateral" (even if as we morbidly predicted, and were right again, it infected all of Bankia's other collateral with "Hiltonitis")? Or has Cristiano Ronaldo also been rehypothecated on several other occasions, and not a single bank has any idea who has actual claim to the "Ronaldo" title?


Yesterday, May 25.2012 a new day and again Bankia has stated that their costs have risen and they now need 19 billion euros.

(courtesy zero hedge)

Bankia Bailout Costs Rise Again, Now At €19 Billion, €4 Billion Increase Overnight

Tyler Durden's picture

Well under 24 hours ago we wrote, "As Bankia Bailout Costs Grow Exponentially, Is A Stealth Bank Run Taking Place" in which among other things, we listed the chronology of the Bankia bailout. To wit: "Note the following sequence of events, bolded numbers, and dates:
  • Bank Of Spain Formally Nationalizes Bankia, Says Insolvent Bank Is "Solvent", Adds There Is No Cause For Concern,Zero Hedge, May 9
  • Spain is taking over Bankia by converting its 4.5 billion euros of preferred shares in the group’s parent company into ordinary shares, BusinessWeek, May 21
  • Spain said on Wednesday its rescue of problem lender Bankia would cost at least 9 billion euros ($11 billion), as the government tries to clean up a banking system that threatens  to drag the country deeper into the euro zone crisis, Reuters, May 23   
  • Bankia SA will have to ask the Spanish government for more than 15 billion euros as part of its effort to restore its financial health, state-owned news agency EFE reported Thursday, citing financial sources, Dow Jones, May 24
Hopefully we aren't the only ones to notice how the bailout cost has oddly doubled almost on a daily basis."  We concluded: "It is a virtual certainty that in the next few days we will see total Bankia "bailout costs" rise more and more, until the truth becomes self-evident to even the most financially unsophisticated soon to be ex-depositor. Sadly, we are also fairly confident this is not limited to Bankia as more of the harebrained Cajas consolidation schemes from 2010 blow up one by one."
Sure enough, courtesy of Spanish daily Europa Press:
Or translated:
What does this mean? Again, from yesterday: "Sadly, what the Spanish government and the Bank of Spain have demonstrated, is that despite all the rhetoric, capital flight has not only stopped, it is accelerating."
In other words, since the bailout total yesterday, which was €15 billion, through today, another €4 billion in cash has left the bank.
Yes: you won't hear the words "Bank Run" uttered in the media, as that would imply panic. Unfortunately, that is the only explanation for a €4 billion capital (i.e. cash) deficiency overnight.
Things in Spain are getting worse by the minute, which sadly is becoming more predictable by the day


  The preceding stories were only appetizers.  The wealthier and gorgeous region of Catalonia
which includes the magnificent city Barcelona has now run out of money and demanded a bailout. Catalonia represents 20% of all revenues for Spain has 13 billion euros to refinance this year alone.  All 17 regions have 36 billion euros of refinancing.  Thus Catalonia has 36% of all regional financing due this year.  The regions deficit is 15 billion euros and its interest owing has doubled to over 2 billion euros per year.

In absolute humour, if Bankia can rehypothecate Ronaldo maybe  Barcelona can demand delivery of another soccer star, the Argentinian Messi and then pledge him to the ECB as collateral.
Then I guess, we can look forward to another of those crazy LTRO's. Or maybe Spain can nationalize the Argentinian Messi, in response to Argentina whacking Repsol.

You gotta love the Spanish and the Argentinians:

(courtesy zero hedge)

It Begins: Spanish Region Of Catalonia Demands A Bailout

Tyler Durden's picture

Yesterday we mocked the fact that the Bankia's bailout costs are doubling with each passing day. Today, things just got "Messi-er":
So... if broke Bankia can rehypothecate Ronaldo, can Barcelona demand delivery of Messi and pledge him as ECB collateral too? Or was he nationalized by the government in retaliation for that whole "Argentina" thing?
From Reuters:
Spain's wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said on Friday.

"We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills," Mas told a group of reporters from foreign media.

The debt burden of Spain's 17 highly devolved regions, and rising bad loans at the country's banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc's fourth biggest economy, will need an international bailout.

Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.

All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.

Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers.

This year the central government provided them with a special credit facility from the Official Credit Institute, or ICO, to pay providers, of which Catalonia has taken 2 billion euros.

The provider credit lines from the ICO run out in June and the central government has pledged to come up with a new mechanism for backing debt from the regions, which have been mostly priced out of international debt markets since the Greek rescue in 2010.

Catalonia's Mas, from the centre-right Convergence and Union Party, said he is running out of options. In the past two years Catalonia has placed patriot bonds, at 4.5 percent to 5.0 percent, but he says the capacity for the people of the region to buy such bonds is at its limit.

Aquarter of all Catalan savings are already in patriot bonds, he said.

The other option would be short-term financing from banks, but Catalonia's neighbour, the region of Valencia, recently paid 7 percent for a six-month loan, a level seen as unsustainable.

Catalonia's annual interest payments have already doubled in the last two years, to 2 billion euros this year.
And just because the "perfectly efficient" market completely ignored this news from two days ago:
Back in late March, we pointed out - much to the chagrin of the LTRO-funded Spanish-sovereign-debt-stuffing banks of the tapas-nation - that, in a similarly misleading manner to Greece's 'leverage' the debt-to-GDP data for Spain was significantly higher than official estimates. Once sovereign guarantees, contingent liabilities and their responsibilities to the EU and the ECB were included things got a whole lot uglier. Now, slowly but surely, as reported by Reuters this evening, some of these bilateral guarantees/loans are coming to light.Instead of the expected EUR8 billion of 'regional refinancing' expected for 2012, it turns out there is EUR36 billion and as Reuters notes "the difference is due to bilateral loans from Spanish banks to the regions worth 28 billion euros that were not made public previously" adding that "It could unnerve further investors concerned by the capacity of Spain to curb its public finances and reform its banking sector." Critically this stunning 'discovery' should be worrisome since the plan, given the regions are virtually blocked from public market financing - due to the high cost of funds, was/is for the sovereign to guarantee (there's that word again) their issuance explicitly. Ironically, as de Guindos and Hollande are chummy borrow-and-spendaholic growth-seekers versus Merkel's safe-and-austere determination, so now the Spanish authorities must lend exuberantly to their regions while at the same time demanding deficit targets are met (or else?) - or as one Reuters' source objects: "You can't tell them on one side that they have to be austere and on the other side give them unlimited liquidity". Irony indeed.


As a result of all of the above, Spanish bonds slumped to a 17 year lows. Credit default swaps widened as there was perceived risk of default.  On top of that, the country saw huge outflows of cash due to the massive bank runs:

(courtesy zero hedge)

Spanish Bonds Slump To 17 Year Lows Amid Choppy Week

Tyler Durden's picture

Aside from Spain (-0.3%) and Greece (-11.8%), European equity markets are ending the week green - albeit marginally - as we can only assume the hopes and prayers of every banker are being discounted into the price of corporate liabilities (an 'event' will happen but don't worry as the ECB/Germany will cave). Corporate and financial credit markets also ended the week tighter - with financials the high beta players on the week, hugely outperforming on Tuesday but fading into today's close. Today was not a pretty end to the week in creditthough as both sovereigns, corporates, financials, all peaked early in the day and pushed to near their lows by the close. Senior financial bond spreads actually closed wider on the day - at their wides - and Spanish sovereign bond spreads exploded over 35bps wider from earlier tights to end at theu widest since April 1995. Italian bond spreads also jumped 32bps wider from their morning tights but end the week -9bps and France gave back almost half its sovereign bond gains of the week today. EURUSD remains the story, breaking below 1.2500 for the first time since early July 2010 as it seems the FX markets remain much less sanguine of the endgame here than do equity markets (with sovereign credit getting closer to FX's world view and corporate credit closer to equities but fading today). Europe's VIX remains above 30% (though our VIX-V2X compression trade is performing well as US VIX elevates).
Athens Stock Exchange Index this week...-11.78%
Credit markets - particularly financials (red below) - were weak today, giving back over half of the week's gains. Equities rallied into the close (blue) against the performance of every other asset class...
but today was dismal for European sovereign spreads...
leaving Spanish bond spreads at 17 year wides...
and while we hear plenty of chatter on VIX, Europe's VIX equivalent remains above 30% - even after having a great week - though we note - the VIX-V2X compression trade we recommended is performing very well...


The first reading of the Spanish 10 yr bond was at 8 am Friday morning est.  The yield was 6.20%. With news of the Catalonia disaster plus more funding that was needed for Bankia, the bonds rose in yield to 6.31% and thus lowered in price. 

Spanish 10 yr bond early Friday morning:


Add to Portfolio


6.204000.04000 0.65%
As of 07:53:00 ET on 05/25/2012.


Add to Portfolio


6.311000.14700 2.39%
As of 12:04:00 ET on 05/25/2012.


Overnight sentiment courtesy of Bloomberg:

During the European session overnight the Euro temporarily strengthened on news of a 
potential joint bond (Eurobond). The European bond yields rose (prices fell) on the news.
Chinese banks will again miss their loan targets.

The chances that Germany will allow Eurobonds is zero at best.

(courtesy Bloomberg)

Euro Strengthens On Joint Bond Bets As Stocks Pare Gains

The euro strengthened after Italian Prime Minister Mario Monti said most of the region’s leaders support sales of joint bonds. French 10-year yields fell to an all-time low, while European stocks trimmed their biggest weekly rally in a month.
The euro appreciated 0.4 percent to $1.2577 at 7 a.m. in New YorkThe Stoxx Europe 600 Index (SXXP) fell 0.3 percent, paring this week’s advance to 0.9 percent. Standard & Poor’s 500 Index futures swung between gains and losses. The MSCI Asia Pacific Index (MXAP) retreated 0.2 percent, heading for a fourth week of losses, on concern Chinese banks will miss loan targets. The French 10-year bond yield fell to a record 2.422 percent. Oil gained 0.3 percent and copper climbed 0.4 percent.

The majority of EU leaders at a Brussels meeting this week backed joint euro-area government bonds, Monti told Italy’s La7 television station yesterday, even as Germany remains opposed to such sales. The MSCI All-Country World Index has advanced 0.9 percent this week, snapping three weeks of losses that drove equities to their cheapest valuations relative to earnings this year.
“There’s an air of inevitability that we’ll get euro bonds,” Donald Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which manages about $1 billion, said in an interview with Susan Li on Bloomberg Television’s “First Up.” “Germany is going to have to compromise more than it was willing to a few months ago. Ultimately there will be some resolution there and the markets will start to head higher again.”

Cheapest This Year

More than $4 trillion was erased from the value of global equities in the first three weeks of the month as concern deepened Greece will abandon the euro, driving valuations of shares in the MSCI World gauge down to 12.9 times reported earnings, the lowest since Dec. 30. European leaders failed to come up with a plan to resolve the debt crisis at a summit this week.
The Stoxx 600 has advanced 1.2 percent this week, the biggest gain since April 20. Banks and mining companies led declines. Logica Plc, an Anglo-Dutch computer services provider, andNexans SA (NEX), a maker of cable and wire, rallied more than 2 percent today as analysts upgraded the shares.
U.S. index futures were little changed after four days of gains for S&P 500. The Thomson Reuters/University of Michigan final index of consumer sentimentfor May is due for release today. The gauge climbed to 77.8, the highest since January 2008, from 76.4 the prior month, according to the median forecast of 60 economists surveyed by Bloomberg.

Paring Declines

The euro’s gain versus the dollar pared its fourth straight weekly decline, the longest run since January. The 17-nation currency rose 0.3 percent versus the yen, trimming five weeks of losses, the most since October. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, fell for the first time in four days, dropping 0.2 percent.
The French 30-year yield declined six basis points, extending a weekly slide to 41 basis points. The Spanish 10-year yield dropped 10 basis points, with the similar-maturity Italian yield nine basis points lower. The German bund yield rose two basis points after falling to a record 1.351 percent yesterday.
The yield on the 10-year Treasury note was little changed at 1.78 percent, set to snap nineweeks of declines, the longest run since 1998.
Oil in New York jumped to $90.95 a barrel. Iran and world powers agreed to hold a new round of talks about the Persian Gulf nation’s nuclear program next month after failing to bridge differences during two days of negotiations in Baghdad that ended yesterday. European Union sanctions banning purchases of Iran’s oil takes full effect on July 1.

Emerging Markets

Copper advanced for a second day. The S&P GSCI gauge of commodities rose 0.4 percent, led by gains in corn, wheat and cotton.
The MSCI Emerging Markets Index (MXEF) slipped 0.2 percent. The gauge has fallen 0.6 percent this week, poised for a 10th weekly decline, the longest string of losses since 1994. The Shanghai Composite Index lost 0.7 percent today. China’s largest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said. Indonesia’s Jakarta Composite Index (JCI) sank 2 percent, the sharpest loss since Nov. 1 and the most in Asia.  
To contact the reporters on this story: Stephen Kirkland in London at;
To contact the editor responsible for this story: Justin Carrigan at

Overnight Sentiment: Off The Lows

Tyler Durden's picture

With US markets already checked out ahead of the holiday day weekend, and Europe acting abnormally stupid (PIIGS bond spreads plunging, then soaring right back), there is little newsflow to report overnight, except for a key report that China loan growth is plunging in what is a major risk flag proudly ignored by all algos (but not the SHCOMP which dropped 0.7%). Futures have followed the now traditional inverse pattern of selling off early in the Asian session, then ramping following the European opening on nothing but vapors of hope. All that needs to happen today is a drop early in regular trading, following by a major squeeze on the third consecutive baseless rumor for the week to be complete, and for stocks to actually post an increase even as the EUR crashes and burns. Unless of course we get a rumor that Europe will be open on Monday even as the US is not there to bail out risk assets.
Full overnight summary via BofA:
Market action
The Asian bourses ended the week on a mixed note. Japan's Nikkei finished up 0.2%, the Hang Seng closed up 0.3% and the Korean Kospi rallied 0.5%. On the flip side, the Shanghai Composite dropped 0.7%, on concern that some of the biggest banks of China might not meet their loan targets amid an economic slowdown, dampening investor's sentiment. 
European equities are marginally higher, up 0.1% in the aggregate. If that holds for the rest of the day, the index will have advanced 1.3% over the past week. That would be the first weekly gain in May. At home, futures are pointing to a 0.3% higher opening, after closing 0.1% higher yesterday. 
In bondland, Treasuries are lower in the five- and ten-year maturities, while the long bond is unchanged, at 2.87%. Both the five- and ten-year yields are down 1bp, to 0.77% and 1.77%, respectively. In Europe, the UK gilt is bid 1bp, to 1.76%, while the German bund is 1bp higher, at 1.40%. Yields on the Italian and Spanish bonds are lower, but Spain's 10-year still remains above 6%, at 6.11%. 
The dollar is losing steam against other major currencies. The DXY index is down 0.4%. The weaker dollar is helping boost commodity prices. WTI crude oil is up 48 cents, to $91.14 a barrel, while gold is up $4.30 an ounce, to $1,563.55 an ounce. 
Overseas data wrap-up
Japan remains locked in deflation. The country's consumer price index excluding food and energy dropped 1.3% yoy in May, down from the prior month's 1.0% yoy drop. Japan suffers from deflation for several reasons, including a central bank that is reluctant to take the drastic measures necessary to break the country's cycle of deflation, a stronger yen that pushes the price of imported goods down and a relatively weak economy. All three conditions mentioned above are likely to continue for some time, meaning deflation will continue in Japan. 


Over in Greece, the Police are urging citizens to stop stuffing mattresses with Euros as they are now an easy target for a robbery:

(courtesy zero hedge)

Police Urging Greeks To Stop Stuffing Mattresses

Tyler Durden's picture

We have spent a considerable amount of time in the last week or two explaining just why depositor withdrawals (or bank runs) are the death knell for the Euro experiment. We first described the 'run on banks and governments' on the basis of the potential for overnight loss of 'fungibility' back in December but the escalation last week in Greece (and the contagion to Spain's Bankia) signals things are shifting to 11 on the amplifier of Euro-Fail. This evening brings new information from The Guardian that 'Police are urging Greeks to keep their money in bank accounts rather than putting it at risk of theft, amid further uncertainty about whether the austerity-struck country will remain in the eurozone.'
Greece's national police spokesman, Thanassis Kokkalakis, told Reuters:
"Many people have withdrawn their money from the banks fearing a financial crash, and they either carry it on them, find a hideout at home or in storage rooms. We urge people to trust the banking system, leave their money there, or at least in a safe place, not hide it at home."  
Uhm, does anyone remember Cramer and his 'Bear Stearns' call? Or are we just "being silly?"
Speculation of a Euro-wide deposit guarantee scheme was quashed somewhat by yesterday's  dismally predictable non-event summit - especially given the only three-week span to the next elections. That leaves Greek citizens juggling the possibility of having their home robbed against the probability that the government, via GEURO-isation, will do it for them in the bank.

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