Saturday, August 18, 2012

Spanish bad loans increase dramatically/Spain to issue increasing levels of debt/

Good morning Ladies and Gentlemen:

Gold closed up today by 40 cents to $1616.50.  Silver fell by 21 cents to $28.00  in the rather lacklustre day. The only big news of the day came from Spain where it announced an increase in bad banks loans.  It also said it will probably increase it's offerings through sovereign auctions.We will see these and other stories but first....

Let us now proceed to the comex and assess trading.  The total gold comex rose slightly by 353 contracts to rest this weekend at 386,408.  The Thursday night close came in at 386,055.  Gold has a great day on Thursday, so it is surprising to see such a shallow gain in OI.  The August gold delivery month saw its OI fall by 92 contracts.  On Thursday we had 88 delivery notices on Thursday so we only lost 4 contracts to cash settlements or 400 oz of gold.   The Sept delivery month saw its OI fall by 35 contracts where this weekend's resting place is 1340 contracts.  The next delivery month is October and here the OI actually rose by 849 contracts from 29,426 to 30,275.  October is a very weak delivery month as most decide to play December. The estimated volume on Friday was the lowest I have seen in many years coming in at 78,976 compared to the confirmed volume on Thursday at 117,718.

The total silver comex OI continues to baffle our CME and bankers. It rose again on Friday by a rather large 1244 contracts from 125,645 to 126,889. Again we are back to 3 year highs in OI. The August delivery month strangely saw its OI rise by 31 contracts from 51 to 81 despite only 4 delivery notices on Thursday.
We thus gained 27 contracts or an additional 135,000 oz of silver standing. We are now less than 2 weeks away from first day notice in the silver September contract.  In the September month of silver we saw OI fall from 41,748 to 40,776.  All of these paper players moved into December.  The September OI still remains elevated. The estimated volume at the silver comex on Friday was anemic at 27,881 compared to the confirmed volume of 59,225 contracts on Thursday.

August 18-.2012   August/gold

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 oz
No of oz served (contracts) today
(131)  13,100 oz 
No of oz to be served (notices)
(248) 24,800
Total monthly oz gold served (contracts) so far this month
(9355) 935,500 oz
Total accumulative withdrawal of gold from the Dealers inventory this month
23,956.16 oz
Total accumulative withdrawal of gold from the Customer inventory this month


On Friday we had no activity as everybody seems to have taken off for the weekend.

The only transaction was an adjustments at JPM of 196.32 oz of gold repaid to a customer and leaving the dealer.

The total registered or dealer gold rests tonight at 2.955 million oz or 91.9 tonnes of gold.

The CME announced that we had 131 notices filed for 13100 oz of gold.  The total number of notices
filed so far this month total 9395 for 939,500 oz.  To obtain what is left to be filed upon, I take the OI standing for Aug (369) and subtract out Friday's notices (131) which leaves us with 248 notices or 24800 oz left to be served upon our longs.

Thus the total number of gold ounces standing in the month of August is as follows:

935,500 oz (served)  +  24,800 oz (to be served upon) =  960,300 oz or 29.8 tonnes of gold
we lost 400 oz from Thursday's level.

August 18.2012:  silver  

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 205,947.47  ( Delaware, Scotia  )
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory2,391,780.90  (Scotia,JPM)
No of oz served (contracts)26  (130,000)
No of oz to be served (notices)55 (275,000)
Total monthly oz silver served (contracts)184 (920,000)
Total accumulative withdrawal of silver from the Dealers inventory this month310,045.28
Total accumulative withdrawal of silver from the Customer inventory this month3,809,878.1

We had considerable activity in the gold vaults today.

We had no dealer deposit and no dealer withdrawal.
The customer had the following deposit:

i) Into JPM: 625,214.60 oz
ii) Into Scotia:  1,766,5676.300 oz.

total deposit;  2,391,780.90 oz

that was some deposit!!

We had the following silver withdrawal:

a) Out of Delaware:  15,131.30 oz
b) Out of Scotia: 190,816.17 oz

total withdrawal:  205,947.47 oz
we had no adjustments.

Thus the registered or dealer inventory rests this weekend at 35.479 million oz
The total of all silver rests at 140.676 million oz.

The CME informed us today that we had another good 26 notices filed for130,000 oz
The total number of notices filed so far this month total 184 for 920,000 oz. To obtain what is left to be
served upon , I take the OI standing for August (81) and subtract out today's notices (26) which leaves us with 55 notices or 275,000 oz left to be served upon our longs.

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

920,000 oz (served)  +  275,000 oz (to be served upon )  =  1,195,000 oz

we gained another 27 contracts or 135,000 additional silver oz standing.
I promised you that we would have above 1 million oz standing and it looks like this will be true.


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.

August 18.2012:

Total Gold in Trust



Value US$:66,164,105,540.61

august 16.2012:




Value US$:65,168,987,766.06

aug 15.2012:




Value US$:64,778,361,506.27

AUGUST 14.2012:




Value US$:64,617,266,568.49

aug 13.2012:




Value US$:65,619,128,255.27

The GLD folks  added a massive 5.43 tonnes of  gold into  the GLD on Thursday.
On Friday, something must be up as an amazing 11.16 tonnes were added into the  GLD gold vault.  In two days 16.59 tonnes of gold was added into the GLD
It takes Sprott weeks to add a small percentage of this quantity and these guys get this quantity in two days.  They are really good!!

And now for silver:  

August 18.2012: as of est

Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39

august 16.2012:

Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39

aug 15.2012:

Ounces of Silver in Trust311,578,672.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,691.18

aug 14.2012:

Ounces of Silver in Trust313,226,434.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,742.43

aug 13.2012:

Ounces of Silver in Trust313,226,434.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,742.43

aug 11.2012:

Ounces of Silver in Trust313,226,434.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,742.43

we had zero oz of silver added into the silver SLV vaults.


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

Sprott and Central Fund of Canada. 

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

1. Central Fund of Canada: traded to a positive 2.4percent to NAV in usa funds and a positive 2.4%  to NAV for Cdn funds. ( Aug18-.2012)

2. Sprott silver fund (PSLV): Premium to NAV  fell slightly to  3.40% to NAV  august 18 2012   :
3. Sprott gold fund (PHYS): premium to NAV fell marginally to 4.02% positive to NAV August 18 .2012). 

Note:  have you noticed that slowly Sprott's gold fund has been rising in positive to NAV. today it rests at its high point of 4.02%. Also Sprott's silver fund is gaining some traction.  And now the Central fund of Canada is gaining in its positive to NAV.

It looks like England may have trouble in finding gold for its clients.


At 3:30 pm the CME released its COT report which gives position levels of our major players.
Let us now proceed to 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, August 14, 2012

Our large speculators:

Those large specs that have been long in gold decided that they were not going to play anymore as they pitched 1647 contracts from their long side.

Those large specs that have been short in gold also decided to cover 451 contracts from their short side.

Our commercials:

Those commercials that have been long in gold and are close to the physical scene, pitched a considerable 1593 contracts from their long side.

Those commercials that have been short in gold from the beginning of time, covered a rather large 4071 contracts taking advantage of fleecing are large specs again.

Small specs:

Those small specs that have been long in gold followed in the footsteps of the large specs, in covering a rather large 1,115 contracts from their long side.

Those small specs that have been short in gold added a tiny 167 contracts to their short side;

Conclusions; more bullish as our bankers went net long for the week extracting some pain onto our specs.


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

Tuesday, August 14, 2012

And now for the Silver COT:
Our large speculators:

Those large speculators that are long in silver continued to pour it on and bought an additional 896 contracts to their long side;

Those large speculators that are short in silver, did not like the lay of the land and covered 1011 contracts from their short side

Our commercials;

Those commercials that are long in silver and close to the physical scene added a whopping 3202 contracts to their long side;

Those commercials who have been short from the time of Alexander the Great, decided in their great wisdom to continue to provide the non backed paper and added an additional 4752 contracts to their short side.  I guess nobody else would provide the paper.

Our small specs;

Those small specs that have been long in silver liked what they saw and added an additional 174 contracts to their long side and these guys are happy campers this weekend.

Those small specs that have been short in silver are crying the blues tonight as they added an additional 531 contracts to their short side.  Somehow these missed reading the tea leaves.

Conclusion:  slightly more bearish as the commercials continue to go net short.

And now for some physical stories which may interest you.  Gold is now starting to act as money
as CME Europe accepts gold as clearing collateral:

Gold Continues To Be Money: CME Europe Now Accepts Gold As Clearing Collateral

Tyler Durden's picture

Over two years ago, the US Clearing house of the CME, the world's largest derivatives marketplace, had no choice but to allow gold as collateral. Why: because as we showed some days ago, while in Europe bank deposits are expansive, in the US, financial system funding relies primarily on mythical assets as liabilities, i.e., those that exist primarily due to faith in the system, something which has been in short supply, as a result of which the $15 trillion (down from a peak of $23 trillion) shadow banking system long used to fund regular operations, has been imploding.
Couple that with a scarcity of other (re)pledgeable assets which in the US do not, unlike the UK, have an infinite rehypothecation chain, and one can see why back in October 2009 the CME had no choice but to accept gold as eligible collateral for clearing purposes.
As of minutes ago, the European arm of CME Clearing has folded too, and has released a press release stating that it to0 "has extended the range of eligible collateral types to include gold bullion." Of course, this is the same gold bullion that Germany will be seeking to "repo" in exchange for sovereign bail outs as Europe's periphery continues to run out of endogenous money and has to increasingly rely on the benevolence of the Bundesbank.
For now all we need to know is that another exchange just threw in the towel and admitted that contrary to Bernanke's stern position, gold is, indeed money. 
CME Clearing Europe, the London-based clearing house wholly-owned by CME Group, the world's leading and most diverse derivatives marketplace,today announced it has extended the range of eligible collateral types to include gold bullion.

The extension offers additional flexibility at a time when high quality collateral is at a premium and the clearing of over-the-counter (OTC) derivatives is increasing. CME Clearing Europe has followed the lead of CME Clearing, which has accepted gold to cover margin requirements since October 2009.

Launched in May 2011, CME Clearing Europe currently clears OTC commodity derivatives andplans, subject to regulatory approval, to introduce OTC Interest Rate Swap clearing later this year.

CME Clearing Europe

CME Clearing Europe is an FSA regulated, multi-asset class clearing house based in London that offers more than 200 OTC products for clearing. Its clearing model ensures stability and increases transparency in the OTC markets that it clears. CME Clearing Europe has its own dedicated staff, and its governance arrangements, capital and default resources are separate from those of CME Clearing in the US. As part of CME Group it nonetheless has full access to the to the clearing and risk management expertise, systems and financial strength of CME Clearing. More information can be found at


Gold and silver are just in their beginning stage in price as Chris Waltzek explains at GoldSeek radio:

(courtesy Chris Waltzek/goldseekradio.)

Chris Waltzek: Gold and silver have long way to go before reaching 'mania' stage

9:25p ET Thursday, August 16, 2012
Dear Friend of GATA and Gold:
GoldSeek Radio's Chris Waltzek today revisits the "Fear Index" concept of GoldMoney founder and GATA consultant James Turk and calculates that both gold and silver have a long way upward to go before entering the "mania" stage. Waltzek's commentary is headlined "Current Gold Fear Index" and it's posted at GoldSeek Radio here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

From Jim Willie and Bill Murphy of GATA:

From Jim Willie…
News come from a Hat Trick Letter subscriber who works at BNParibas in London. He wrote in early August,

"US authorities now going after RBS and Standard Chartered for money laundering. The crack between the Anglo-Saxon bankers is now apparent. Maybe bigger news will be coming out after Olympics are over. Just another observation. On my Bloomberg terminal, the bid/offer for Gold being quoted used to be dominated by Deutsche Bank and UBS. The waterfall declines were usually the handiwork of DBank. Over the last week or so, a new ticker has popped up making quotes which has started to set the price. It is ICBC (Industrial & Commercial Bank of China)."

Bill Murphy on the above:

Wow! The Chinese banks are entering the room to counter the corrupt London protectors of the free world whose stock & trade consists of naked short contracts from corrupted accounts and illicit leveraged strategies emanating from putrid office buildings bearing monikers from the gold cartel.


And early this morning from Bloomberg, the above Willie announcement seems to be true:

(courtesy Bloomberg)

Deutsche Bank Among Four Said To Be In U.S. Laundering Probe


Ann Barnhardt is interviewed over at our friends Silver Doctor website site.
You must hear this:

(courtesy, Ann Barnhardt and the boys over at Silver Doctors:)

Ann Barnhardt: 'If You're Still in These Markets You're Either Stupid or On Drugs!'



James Turk advises everyone to own gold and silver as the world faces financial headwinds:

(James Turk/GATA)

James Turk on metals' prospects, govt. intervention, and need for diversification

2:21p ET Friday, August 17, 2012
Dear Friend of GATA and Gold:
Interviewed by GoldMoney's followers on Facebook and LinkedIn, GoldMoney founder and GATA consultant James Turk covers his outlook for the monetary metals markets, manipulation of those markets, and government intervention against gold and silver investors. He advises investors to diversify their gold and silver holdings in form and location. He also cites GATA's work. The interview is posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Ben Davies talks to Eric King and thinks that gold will start rising immediately maybe Monday:

(courtesy Kingworld news/Ben Davies)

Hinde Capital's Ben Davies thinks Monday may be monetary metals' day

2p ET Friday, August 17, 2012
Dear Friend of GATA and Gold:
Hinde Capital CEO Ben Davies today tells King World News why developments could start pushing the gold price up -- and silver more so -- as early as Monday. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Gold trading as we started Friday:

(courtesy of Goldcore)

“Gold Ponzi Schemes” Revealed - Physical Gold Favored Over Derivatives

Tyler Durden's picture

From GoldCore
Gold Ponzi Schemes” Revealed - Physical Gold Favored Over Derivatives
Today's AM fix was USD 1,616.50, EUR 1,306.05, and GBP 1,028.57 per ounce.
Yesterday’s AM fix was USD 1,603.50, EUR 1,306.74 and GBP 1,021.34 per ounce.
Silver is trading at $28.19/oz, €22.94/oz and £18.03/oz. Platinum is trading at $1,460.50/oz, palladium at $587.30/oz and rhodium at $1,025/oz.
Gold rose $9.90 or 0.62% in New York yesterday and closed at $1,614.00/oz. Silver surged to a high of $28.275 and finished with a gain of 1.37%.
Gold continued gains on Friday receiving a boost from Angela Merkel’s comments saying she supported ‘Super’ Mario Draghi’s pledge “to do whatever it takes” to save the euro.  
While this sentiment lifted markets and some investors hope ECB action is sooner rather than later - it is also creates the risk ofcurrency debasement and could lead to further falls in the euro.
At the beginning of August, the European Central Bank said that it might buy Spanish bonds if the government first applied for the European Financial Stability Facility (EFSF) support. The ECB has said that specific committees within the bank would design the appropriate mechanisms for the bond purchases in the coming weeks, suggesting a possible green light within a few weeks. 
EFSF bond purchases require the vote of all member states, including ratification by the German Parliament.  Many investors are waiting on the sidelines until more concrete news from the ECB and US Fed is conveyed. 
Certainly any more monetary stimulus is positive for gold as policy makers’ favourite choice for bolstering sagging economies risks devaluing currencies.
Barrick Gold Corp, the world's top gold miner, is currently in negotiations with China Gold Corp, China’s top gold producer, about selling part or all of its holdings in its African business. This shows how China is eager to secure a greater source of global supply in order to be able to supply the voracious Chinese market.
Mark O'Byrne, executive director of GoldCore, talked about the outlook for gold prices and the merits of purchasing the physical metal over derivative products with Linzie Janis on Bloomberg Television's "Countdown" today.
He warned regarding the various “gold ponzi schemes” that have come to light recently and advocated owning physical gold and if storing to own gold in an allocated or segregated manner.
Cross Currency Table – (Bloomberg)
For breaking news and commentary on financial markets and gold, follow us on Twitter.
(Bloomberg) -- Standard & Poor’s Warns Re South Africa Violence Spreading 
Standard & Poor’s is “concerned” about violent clashes between labor union members and police at South African platinum mines, which added to negative perceptions of the country, Business Day reported, citing Konrad Reuss, managing director of S&P South Africa.
S&P has no plans to revise its negative outlook for the country in the near term, Reuss told the Johannesburg-based newspaper. S&P reduced the outlook on South Africa’s BBB+credit rating to negative from stable in March, following similar actions by Fitch Ratings in January and Moody’s Investors Service in November.
(PTI) -- China set to overtake India in gold imports in 2012
China is likely to overtake India as the largest importer of gold this year on the back of huge demand for the precious metal for jewellery and investment in the world's second-largest economy, World Gold Council (WGC) said today.
"In the first half, China's demand for gold stood at 417 tonne surpassing India's 383.2 tonne in the same period," WGC Managing Director (India and Middle East) Ajay Mitra told reporters here.
Looking at the current trends, WGC expects China to overtake India as the largest importer of gold.
In the first quarter of 2012 (January-March), China's gold import stood at around 136 tonnes, lower than India that imported 209 tonne in the same quarter.
"China is a much bigger economy than us and their demand, especially for jewellery and investment, is growing. The country's own supply will not be able to meet this demand growth and the imports will rise," he said.
The fastest-growing major economy in the world consumed roughly 761 tonne gold in 2011.
In the April-June quarter this year, China's jewellery and investment demand declined 7 per cent to 144.9 tonne from 156.6 tonne in the corresponding quarter of 2011, due to lack of direction of gold prices and slowdown in domestic GDP growth. However, steady growth in Chinese gold jewellery demand is expected to resume in the third quarter as economic growth is expected to pick up following monetary easing implemented during the second quarter.
China is the world's largest gold producer and mines about 350 tonne of the precious metal annually.
Gold Prices/Rates/Fixes /Volumes – (Bloomberg)
(Bloomberg) -- Turkey Raises Foreign Exchange, Gold Banks Can Keep in Reserves
Turkey’s central bank increased the proportion of required lira reserves lenders can keep in foreign exchange to 60 percent from 55 percent and the part that can be kept in gold to 30 percent from 25 percent.
The change for the foreign currency portion of lira reserves will be effective from Aug. 31 and the gold portion from Sept. 14, the bank in Ankara said in a statement on its website today.
The changes may add as much as $7.3 billion to the central bank’s foreign exchange reserves and supply up to 5.6 billion liras of liquidity to the market, it said.

Gold Poised To Advance For Third Day On Stimulus Speculation - Bloomberg

Let us now see the major currency crosses and how the European bourses behaved prior to the opening on  Wall Street, Friday morning:

The all important Eur/USA cross: 1.2357 which basically is a measure of risk, the higher the euro the greater the risk is on trade.

The USA/Can cross:  .9874.  The higher the Canadian, generally the higher commodities go.

Your early morning bourse index:  (at 7 am est)

The London FTSE up 12.82 points or .22%
The German DAX up 21.47 points or .31%
The Spanish Ibex: up 128 points or 1.73%  (these guys believe that there will be a sovereign bailout)
The Paris CAC up 2.32 points or .07%


And now our major paper stories which will have some influence on the physical price of gold and silver.

The Finnish Finance Minister believes the end is near for the group of 17 who share the Euro. He states:  He adds

"Either the south or the north will break away because this currency strait-jacket is causing misery for millions and destroying Europe's future."

He adds:

 no-one wants to be first to get out of the Euro and take all the blame.

He is deeply troubled by the group of four: ( Draghi, Herman Van Rompuy, Juncker, Barraso,)

he "does not trust these people."

 (courtesy zero hedge)

Finns Prepare For Euro's End: "Deeply Suspicious" of EU's 'Gang of Four'

Tyler Durden's picture

While not advocating the break-up of the Euro-zone, Finland's foreign minister Erkki Tuomioja told the Daily Telegraph this evening that "it is only a matter of time". In a somewhat stunning show of truthiness, perhaps the first cracks in Europe's Nash Equilibrium are starting to show through following Monti's 'threats', Draghi's 'promises', and Merkel's 'well, nothings'. The Finn continues, via Reuters"Either the south or the north will break away because this currency strait-jacket is causing misery for millions and destroying Europe's future."
Finland, which has a veto that could be used to block any new bailout measures, has already stirred the pot unilaterally by demanding collateral from Greece and Spain, is quite clear in its view that Europe "is a total catastrophe" but adds that  no-one wants to be first to get out of the Euro and take all the blame.
Insisting that the break-up of the Euro does not mean the end of the European Union, Tuomioja believes "it could make the EU function better," but comments that he is deeply suspicious of the 'gang of four' - which includes Draghi - with regard his promises (especially ESM seniority) adding that he "does not trust these people."


And this was stated later by the Finnish Foreign Minister Tuomioja:

(courtesy UKTelegraph)

Finland's foreign minister says his country would block attempts to strip ESM of its seniority: The Telegraph cited comments from Finnish Foreign Minister Erkki Tuomioja, who said that Finland would block attempts to strip the ESM, the Eurozone's permanent bailout fund, of its senior creditor status. He argued that "The ESM loans have priority. That is a red line for us. We are very concerned that the rules of the ESM seem to be changing." Finland's opposition to dropping seniority on ESM loans has been widely discussed. However, in a 29-Jun summit statement addressing the bailout of the Spanish banking sector, Eurozone leaders noted that "We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status." In addition, in his recent comments regarding renewed intervention on the part of the bailout mechanism, ECB President Draghi said that the issue of seniority would be addressed.


In Holland, we have the socialists who are favoured to win the most seats in the upcoming Sept 12 election wants a referendum on the fiscal fact:

(courtesy Reuters)

Dutch Socialists want referendum on fiscal compact: Reuters reported that Emile Roemer, the leader of the Socialist Party who is seen as a candidate for prime minister, said in an interview that his party would demand a referendum on the new fiscal compact. Recall that the WSJ recently discussed the election dynamics in the Netherlands, which goes to the polls on 12-Sep. The paper pointed out that recent polls show that the anti-austerity Socialist Party would win the most seats (37) in the 150-member parliament. It added that a win by the Socialist Party could scupper an austerity plan agreed under the government in April, and could also derail the budget targets for 2013 set by the European Commission


In the following Bloomberg commentary we see the same rhetoric from Germany and it's chancellor, Merkel.
She states that she backs Draghi's views on Europe but only with conditionalities added to the mix something that Spain and Italy loathe to do.  Rajoy wants to keep his job and fears reprisals from his populace. Italy goes to the polls next year and Monti would also like to keep his job.

(courtesy Bloomberg)

Merkel Says Germany Backs Draghi’s ECB Aid Conditionality

Chancellor Angela Merkel backed the European Central Bank’s insistence on conditions for helping reduce borrowing costs in indebted countries, saying Germany is “in line” with the ECB’s approach to defending the euro.
“Obviously time is pressing” on stamping out the debt crisis, though “on many of these issues we feel we’re on the right track,” Merkel told reporters in Ottawa yesterday at a joint press conference with Canadian Prime Minister Stephen Harper. Euro-area policy makers “feel committed to do everything we can to maintain the common currency.”
Chancellor Angela Merkel said that time is running out to resolve the crisis that emerged in Greece in late 2009 even as European leaders make progress in overcome the turmoil. Photographer: John Macdougall/AFP via Getty Images
Aug. 17 (Bloomberg) -- Alastair Winter, chief economist at Daniel Stewart & Co., talks about the European Central Bank's approach to defending the euro. He speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
Aug. 17 (Bloomberg) -- Mujtaba "Mij" Rahman, an analyst at Eurasia Group, talks about the outlook for Europe's debt crisis. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)
Asked about ECB chief Mario Draghi’s announcement that the central bank may return to sovereign bond-buying, Merkel said recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the euro.”
Merkel, facing European pressure to ease bailout terms and allow shared debt as well as calls by global partners to stop contagion, returned to the crisis fight after her summer vacation, using the trip to Canada to make her first public comments on the turmoil in a month. She hailed Canada’s budget and debt discipline as a model for the 17-nation euro area.

Draghi’s Proposal

Draghi said on Aug. 2 that the ECB might buy government bonds to help lower borrowing costs in countries such as Spain and Italy, though only in return for strict conditions and if governments act first by buying debt through Europe’s bailout funds. Spain and Italy have yet to say whether they will request aid.
“It is becoming clear that the ECB purchases have to be conditional on the implementation of austerity and structural reform measures in that country,” Citigroup Global Markets analysts led by Juergen Michels said in a note to clients.
Merkel is returning to the global stage as the crisis enters a new phase. Germany’s supreme court will rule on the legality of Europe’s permanent rescue fund next month, when Greece’s international creditors are due to report on progress in meeting bailout targets. Draghi said the ECB will thrash out the details of its bond-buying proposals by then.

Hollande, Samaras

Merkel steps up her crisis-fighting diplomacy next week, when she is due to host French President Francois Hollande Aug. 23, Paris-based Agence France-Presse reported, one day before Greek Prime Minister Antonis Samaras visits Berlin for talks. Italian media reported that Prime Minister Mario Monti is due in the German capital on Aug. 29, while Spanish Prime Minister Mariano Rajoy has said that Merkel will visit Madrid on Sept. 6.
Finnish Foreign Minister Erkki Tuomioja said his country, one of four in the euro region with the top AAA credit rating, is preparing for the currency union’s breakup, the U.K.’s Telegraph newspaper reported today, citing an interview.
“We have to face openly the possibility of a euro breakup,” Tuomioja was quoted as saying. While that’s not advocated by the Finnish government, a breakup “could make the EU function better.” Tuomioja told Finnish media today that he had only been stating the obvious.
Merkel, as leader of Europe’s largest economy and the biggest single contributor to euro-region bailouts, is facing calls from Italy and Spain to pool debt to bring down bond yields, from Greece to back an easing of its austerity timetable and from the ECB for politicians to take the lead in fighting the crisis. She also faces domestic pressure from her coalition partners to refuse any more aid for Greece.

Spanish Yields

Italian 10-year bond yields opened little changed at 5.78 percent as of 9:07 a.m. while equivalent Spanish debt slid 1 basis point to 6.49 percent. Spanish yields reached a euro-era high of 7.62 percent on July 24, beyond the threshold that prompted Greece, Portugal and Ireland to seek bailouts. German 10-year bonds yielded 1.53 percent today. The euro bought $1.2361.
Harper, who offered Merkel a barbecue with elk meat upon her arrival, Canada’s CTV news channel reported on its website, said “there are additional things that have to be done” by European policy makers. “I have great confidence in the chancellor’s leadership,” he said.

‘European Friends’

“We have great confidence in our European friends,” Harper said. “My experience has been the vast number of them are seized with the scale of the challenge and with the range of options that have to be considered.”
Even so, Greece, on its second rescue program after triggering the crisis in late 2009, may run out of road at the end of the year. Samaras’s government probably can’t come up with enough austerity measures even if creditors extend the time line as his coalition wants, according to the Citigroup note. That means an end to international funding “looks very likely” after the next audit set for December, it said.
Europeans “need to do much more,” Canadian Finance Minister Jim Flaherty told reporters two days ago. “We have been clear for several years that not only should the European countries take overwhelming concerted action to take control of the situation, but also that the European countries have more than adequate resources to do so.”
Merkel, a physicist by training, visited an ocean research center in Halifax yesterday on her trip back to Berlin. German business leaders accompanying the chancellor included the chief executives of BASF SE (BAS), the world’s largest chemical maker, ThyssenKrupp Marine Systems and K+S Group, which is involved in mining potash in Saskatchewan, CTV reported.
To contact the reporters on this story: Patrick Donahue at; Tony Czuczka in Berlin at
To contact the editor responsible for this story: James Hertling at

Your early morning Spanish 10 yr bond yield:


Add to Portfolio


6.453000.07100 1.09%
As of 07:10:00 ET on 08/17/2012.


Your opening Italian 10 yr bond yield:

Italy Govt Bonds 10 Year Gross Yield

 Add to Portfolio


5.800000.00700 0.12%


This is the key story of the day.  Spanish bad loans at Spanish banks soar by the most in the last 3 years.
Just look at the graphs supplied by UBS which shows that the banks continue to bleed red in those real estate loans that put the Spanish banks in peril

Also note that Spain will need an additional 8 billion euros/month  to fund all of these losses.
Where will this money come from? The potential is there for 13 billion euros per month.  I cannot see anyone buying this junk.

(courtesy zero hedge)

Spanish Bad Loans Soar By Most In 3 Years As Bond Issuance Set To Surge

Tyler Durden's picture

The absence of any ket EMU events combined with a relatively muted news flow on the debt crisis amid the summer vacations/doldrums and a major lack of bond supply from the periphery until the end of August has created a favorable environment for peripheral debt. Draghi's August 2nd comments drove risk-on and as UBS notes, this amplified the usual thin liquidity and light volumes. However, all these fun and games are about to stop as September has myriad events slated that are likely to have significant impacts on investors' demand for peripheral paper. Spain, in particular, after seeing its stock and bond markets surging euphorically, is about to suffer a double-whammy. Gross issuance for the rest of the year is estimated at EUR8bn per month (and could rise to EUR13bn per month) implying EUR4-6bn per auction twice a month - keeping bonds back under pressure as supply approaches. As if that was not enough, Delinquencies on Spanish bank loansjust soared to new all-time highs, rising by the most in over three years and accelerating. So, after a calm summer vacation, Spain (optics aside) is bad and about to get much worse.

Spanish loan delinquencies bad and getting worse in a hurry...
and supply is set to rise significantly in September and October for Spain...

UBS: Spain’s funding outlook through year-end looks challenging
Even assuming that the Spanish Treasury sticks to its original funding plan of EUR 86bn, the Tesoro will need to continue to sell around EUR 6bn of bonds per month. Monthly net issuance should average nearly EUR 3bn. Moreover, gross issuance could potentially rise to around EUR 8bn per month and total net issuance could reach EUR 13bn if Spain adjusts for the increased net-borrowing requirement.

Considering that Spain usually carries out two auctions per month, this would imply an average issuance of around EUR 4bn per auction. The last time Spain was able to sell such an amount at a single auction session was in early March. Monthly supply has ranged between EUR 5-6bn since April (we exclude the first three months of 2012 when Spanish supply was largely supported by the two 3Y LTROs). Since that time, Spanish banks’ capacity to absorb new government paper has deteriorated.

In our view this should continue to keep Spanish bonds under pressure each time supply approaches, making Spain very vulnerable to a possible loss of market access should other adverse domestic economic factors or events cause demand to fall even further.

Spain’s situation is even more worrisome when looking at next year’s funding requirements.

In 2013, Spain will need to refinance around EUR 60bn of maturing Bonos and Obligaciones while issuing an additional EUR 45bn to cover its public deficit. In this analysis, we assume that the government’s targets for next year are reached. This amount needs to include the funding for the deficit of local administration since regional issuance is unlikely to resume next year. Similarly, the central government very likely will need to cover the EUR 15 billion of Spanish regional debt maturing in 2013, which as it stands now cannot be otherwise refinanced. Additional central government funding may also need to be provided for maturing Spanish international and agency debt such as FADE bonds for a further EUR 3-4bn.

All in all, the total amount of gross bond issuance from Spain in 2013 could be in excess of EUR 120bn. That is around 40% higher than this year, 10-20% higher than in 2009 and almost four times larger than the average amount of Spanish bond issuance recorded in the previous four years.
European event risk
Europe looms large. We expect next month to be filled with events that will shape the policy response to the debt crisis. We summarize the key points here:

On September 5, the Eurogroup will hold an informal meeting which most likely was set to discuss how to deal with a possible emergency request by Spain. The meeting is one day before scheduled issuance of Spanish government bonds. The ECB meeting on 6 September could bring more details on the new bond purchase capability announced in August, as well as heralding potential developments on the ECB’s collateral framework and liquidity provision. We perceive a clear risk that markets will be disappointed with the details, or lack thereof, forthcoming at this meeting, given the discord within the Governing Council on bond purchases. In our view, market pressure will ultimately be brought to bear before Spanish PM Rajoy requests an EFSF primary market bond buying programme.

Spain’s September 6 bond auction, after the August lull, will be a key focus for markets.

Next, on September 11 the EU Commission will unveil its proposals for a single banking supervisory authority while on the following day the German Constitutional Court is due to issue its ruling on the ESM. This will be another crucial policy event since only a favourable outcome would clear the completion of the ratification process of the ESM Treaty by Germany.

The Dutch general elections also are on September 12. Recent opinion polls suggest a rather fractured distribution of seats across the parliament, with the current five party caretaker coalition unlikely to return a majority. The Dutch Socialist Party looks likely to take the greatest number of seats, following a sharp increase in support. This party has already pledged to enact a referendum on the fiscal compact if it enters government for the first time after the elections.Other key decisions to be taken in September include the assessments by the EU and IMF on the first review by the Troika of the new Greek aid package and of the fifth and sixth reviews of the Portuguese and Irish programmes, respectively.

Also in September, Moody’s is expected to complete a review of its credit rating of Spain. If Spain is downgraded multiple notches, its bonds run the risk of being ejected from the major bond indices. The results of Spain’s bank stress tests are due to be released, too. Eurogroup and Ecofin meetings have already been scheduled for September 14-15. We expect these meetings to focus on the outcome of the ESM, EC proposals regarding bank supervision and possibly Spain bank stress tests.
Charts: UBS and Bloomberg

Your closing Spanish 10 yr bond yield:


Add to Portfolio


6.443000.08100 1.24%
As of 08/17/2012.


Your closing Italian 10 yr bond yield:

Italy Govt Bonds 10 Year Gross Yield

 Add to Portfolio


5.786000.00700 0.12%
As of 08/17/2012.


Here are your closing major currency crosses;

Eur/USA: 1.2335
USA/Can  .9890

Your major bourse closing index:

Dow:  up 25 points or .19%
FTSE: up 17.9 points or .31%
DAX: up 44.59 points or .64%
Paris CAC up 7.89 points or .23%
Spanish Ibex; up 143.7 points or 1.94%


Generally when you see short term ECB/Dollar swaps rise you know that there is trouble in the European banking sector.  Today we learn that the 7 day swaps have risen by 9 billion euros.  If Libor would function properly, it would signal trouble as a rise in libor means scarcity of dollars. Now we must rely on the swaps as an indicator of trouble:

(courtesy zero hedge).

Short-Term ECB Dollar FX Swaps With Fed Soar To Highest Since December 2009

Tyler Durden's picture

While Europe is once again experiencing one of its brief, manic episodes of inexplicable euphoria sending all risk assets in the continent higher while everyone is still on vacation (and ahead of a surge in Spanish bond issuance in September, which only spikes even more in 2013 - more shortly), its banks have quietly run out of dollars again. Certainly, looking at the now irrelevant metric known as Libor which indicates precisely nothing of significance, and merely allows banks to feel good about themselves, and which has been declining, one could imagine that banks have zero problems finding unsecured dollar funding. One would also be absolutely wrong because as the most recent ECB and Fed data confirm, 7-day dollar swaps between the ECB and New York Fed - the only real sign of dollar funding scarcity - has risen to $9.3 billion in the current week, the highest since December 9, 2009. And with 10 banks bidding at the last USD operation, one can be sure that at least 10 European banks are suddenly hoping that the bout of euphoria continues for at least 2 more weeks so that the executives of these 10 dollar impaired banks can continues their vacation in peace, until the eye of the European hurricane passes starting September 1.

Kocherlakota Says FOMC Goes Too Far With 2014 Rate Pledge

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said he believes theFederal Open Market Committee has gone too far by pledging to hold the main interest rate near zero at least through late 2014.
“I would not have chosen to put that date as far out as the committee has chosen,” Kocherlakota said in response to an audience question after a speech today in Williston, North Dakota.
The policy-setting FOMC repeated on Aug. 1 that it expects economic conditions to warrant unusually low interest rates, while saying it’s prepared if necessary to increase stimulus to reduce unemployment. Policy makers are next scheduled to meet Sept. 12-13.
To contact the reporter on this story: Aki Ito in San Francisco at
To contact the editor responsible for this story: Christopher Wellisz at

I will leave you with this weekend wrap up from Greg Hunter who covers topics about an imminent strike by Israel on Iran.   The story that Jon Corzine will not face any charges on the MFGlobal scandal. Other comments are on WikiLeaks founder Assange and Mitt Romney's tax returns:

Hope you enjoy the article and his video wrap up:

(courtesy Greg Hunter/USAWatchdog)

Weekly News Wrap-Up 8.17.12

By Greg Hunter’s 
The Middle East is in the spot light again this week, and it’s all because of continued talk of war.  Matan Vilnai, an Israeli defense minister, said Israel is “ready as never before.”  He’s talking about a strike on Iran’s nuclear facilities and predicts it “. . . will last 30 days on a number of fronts.” To that I say he must be dreaming.  There is no way on earth Israel is going to drop a daisy cutter on Iran’s head and it be over in 30 days.  You’d be lucky if it were over in 30 months.  Iran has repeatedly said its nuclear program is for the peaceful production of energy.  The civil war that has been going on in Syria the last year and a half is now spreading into Lebanon.  Foreign citizen are evacuating because of worries of kidnapping, and chaos is spreading.  Things are getting worse, not better in the Middle East, but you’d never know it if you watched and read much of the mainstream media.  The New York Times is reporting there will likely be no charges filed against former Governor Jon Corzine over the MF Global bankruptcy and $1.6 billion in “vaporized” client funds.  Investigators are saying there was “chaos” but no “fraud.”  Big surprise.  WikiLeaks’ founder Julian Assange has been granted political asylum by Ecuador.  Assange and his WikiLeaks have leaked hundreds of thousands of secret U.S. documents.   Mitt Romney says he’s paid about 13% of his income the past ten years in taxes.  He’s not releasing any more of his tax returns.  In light of possible war in the Middle East and a lawless and insolvent Western banking system, is this really a big issue?  Join Greg Hunter as he gives his analysis and more in the Weekly News Wrap-Up.   


I hope you all have a grand weekend and I will see you Monday night.

all the best


Search This Blog