Saturday, November 24, 2012

Silver OI rises again/Silver and Gold advance/Austria has 80% of its gold reserves in England and learns that it has been leased out/Brazil also notifies reporters that it owns gold obligations from bullion banks/

Good morning Ladies and Gentlemen:

Gold closed up $23.40 to $1751.30.  Silver also enjoyed a stellar day rising by 76 cents to $34.11
Today we learned that Austria has 80% of it's gold in London and then we find out that this gold has been all leased out.  The Austrian reporters are having a field day on this one. Then Brazil notifies us that the official gold purchased by them  (51 tonnes in two months) is really gold obligations owing to them by the bullion banks.  I wish these two nations all the luck in the world in getting real physical gold onto their shores.

In paper stories, the Euro/USA cross rose sharply these past few days signalling a risk is one situation and thus all bourses rose nicely into the green.

China reported its' HSBC flash PMI numbers and they were stronger than last month rising above 50 for the first time in 13 months.  They also had a positive service sector PMI.
Europe reported mixed results.  France had good manufacturing and service PMI but Germany had fair manufacturing PMI and weaker service sector PMI.

We still have no word on the Greek debt situation.
Also interesting developments on the Argentinian/Elliott Capital court battle to report on.
Finally Europe disappoints again with a failure to come up with a budget plan for the years 2014 through 2020.  We will cover all of these stories but first...........................................................

The total gold comex closed this weekend up a rather large 5010 contracts at 479,139 up from Wednesday's close of 474,129.  The non active November contract saw it's OI fall by 13 contracts from 45 down to 32.  However we had 33 notices filed on Wednesday so in essence we gained another  20 contracts or 2000 oz of additional gold will stand in November. We are now exactly 1 week away from first day notice next Friday.  The December contract saw it's OI fall from 216,610 down to 200,898.  All of these paper players moved to February and April as they still like to play with the bankers. The estimated volume at the gold comex on Friday was a very timid 127,970 contracts but I think we should chalk that up to the shortened Thanksgiving holiday week. The confirmed volume on Wednesday was much better at 170,665.

The total silver comex OI again rose to multi year levels finishing the comex session at 150,954 up 619 contracts from Wednesday's close to 150,335. The non active November contract month saw it's OI fall by one contract from 9 down to 8.  We had one delivery notice filed on Wednesday so we neither gained nor lost any silver ounces standing. The big December contract for silver has many eyes focusing on details as again we are just one week away from first day notice.  Here the OI fell by a very tiny 2875 contracts from 46,884 down to 44,009.  Our paper players wishing to remain in the game, did not pitch their longs but rolled to March.  However the high level of OI for December plus the high level for the entire complex will no doubt cause another of those weekend retreat meetings for the bankers as they discuss how to force many of the silver leaves to fall from the silver tree. The estimated volume at the silver complex on Friday was a very weak 26,020 but no doubt that too was due to the shortened holiday week. The confirmed volume on Wednesday was very good at 55,950.

Let us now head over to the comex and assess trading today.

Comex gold figures 

Nov 23-.2012

(first day notice for the December contract will be Nov 30.2012)   



--  |

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
 64.3 (HSBC)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
40,926.62 (HSBC,Scotia)
No of oz served (contracts) today
  21 (2100 oz)
No of oz to be served (notices)
11  (1100 oz)
Total monthly oz gold served (contracts) so far this month
376  (37,600 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

Today, we  had quite a bit of activity  inside the gold vaults. 

The dealer had no deposits  and no   withdrawals.
The customer had two deposits:

i) Into HSBC:  34,850.27
ii) Into Scotia: 6,076.35

total customer deposit:  40,926.62 oz

we had 1  customer withdrawal:

i) out of HSBC  64.3 oz

Adjustments: none

Thus the dealer inventory rests tonight at 2.524 million oz (78.50) tonnes of gold.

The CME reported that we had   21 notices  filed  for 2100 oz of gold. The total number of notices filed so far this month is thus 370 notices or 37,000 oz of gold.
To determine what is left to be served upon, I take the OI standing for November (32) and subtract out today's notices (21) which leaves us with 11 notices or 1100 oz left to be served upon our longs.

Thus the total number of gold ounces standing for delivery in November is as follows:

37,600 oz (served)  +  1100 oz (to be served upon)  =  38,700 oz (1.203 tonnes of gold).  We  gained 2,000  gold ounces standing at the gold comex Friday and everyday we gained additional gold ounces standing for November.


Nov 23.2012:

first day notice for the December contract will be Nov 30.2012:

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 90,143.600 ,Scotia)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventorynil
No of oz served (contracts)0  (nil)
No of oz to be served (notices) 8 (40,000 oz)
Total monthly oz silver served (contracts)64  (320,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month1,342,073.5
Total accumulative withdrawal of silver from the Customer inventory this month5,846,090.5

Today, we had tiny activity inside the silver vaults.
 we had no dealer deposit and no  dealer withdrawals

We had no customer deposits of silver but did have one withdrawals:

i) out of Scotia:  90,143.6

total customer withdrawal:  90,143.6 oz

we had 1 adjustments:

At the CNT vault, we have the following silver leave the customer and enter the dealer account:  52,566.000 oz

(again we have an exact round number transacted.  The comex vaults are physical and rarely should we see exact numbers like the above)

Registered silver remains tonight  at a very low :  35.054 million oz
total of all silver:  141.404 million oz.

The CME reported that we had 0 notices filed for nil oz . The total number of silver notices filed  this month remains at 64 contracts or 320,000 oz of silver.  

To determine the number of silver ounces standing for November, I take the OI standing for November (8) and subtract out today's notices (0) which leaves us with 8 notices or 40,000 oz ready to be served upon.

Thus the total number of silver ounces standing in this non active month of November is as follows:

320,000 oz (served) +  40,000 oz ( to be served upon)  =  360,000 oz
we neither gained nor lost any silver ounces at the silver comex.  


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.

Total Gold in Trust   Nov 23.2012

Total Gold in Trust



Value US$:74,827,992,666.94

Nov 21.2012:




Value US$:74,376,524,720.40

Nov 20.2012:




Value US$:74,733,351,973.30

Nov 19.2012:




Value US$:74,658,653,247.28

NOV 16.2012:




Value US$:73,927,254,789.60

Nov 15.2012:




Value US$:73,611,301,419.07


we neither gained nor lost any gold today at the GLD

and now for silver:

Nov 23.2012:

Ounces of Silver in Trust315,658,356.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,818.07

Nov 21:2012:

Ounces of Silver in Trust317,642,788.800
Tonnes of Silver in Trust Tonnes of Silver in Trust9,879.80

Nov 20.2012:

Ounces of Silver in Trust318,126,801.800
Tonnes of Silver in Trust Tonnes of Silver in Trust9,894.85

Nov 19.2012:

Ounces of Silver in Trust318,126,801.800
Tonnes of Silver in Trust Tonnes of Silver in Trust9,894.85

Ounces of Silver in Trust319,578,894.800
Tonnes of Silver in Trust Tonnes of Silver in Trust9,940.01

Nov 15.2012:

Ounces of Silver in Trust322,483,146.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,030.35

nov 14.2012

Ounces of Silver in Trust322,483,146.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,030.35

we  lost 1.984 million  oz of silver at the SLV today.
In one week we have lost over 7.648 million oz  and yet silver rose  $1.62  
from $32.50 to $34.11

So much for the comex being a price discovery mechanism in silver and in gold!!


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 6.9 percent to NAV in usa funds and a positive 7.2%  to NAV for Cdn funds. ( Nov 23.2012)   

2. Sprott silver fund (PSLV): Premium to NAV fell  to 0.77% NAV  Nov 23/2012
3. Sprott gold fund (PHYS): premium to NAV  fell to 1.17% positive to NAV Nov 23/2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 6.9% in usa and 7.2% in Canadian.This fund is back in premiums to it's former self with respect to premiums per NAV. 

The silver Sprott fund announced a big silver purchase and this reduces the premium to NAV temporarily.  It seems that the bankers are picking on Sprott to short their funds trying to cause an avalanche in selling in the precious metals.  They are foolhardy in their attempt.

It looks like England may have trouble in finding gold and silver for its clients.
It is worth watching the premium for gold at the Sprott funds which is a good indicator of shortage as investors bid up the premiums.



Here are you major physical stories:

First, lets get a little review of what happened in Europe during Thursday when the USA was celebrating Thanksgiving:

Gold trading overnight early Thursday morning:

1. Austria learns that 80% of it's 280 tonnes is stored in England.

2. Then it states that the country has "earned" 300 million euros for lending that gold.
Thus most or all of Austria's gold in London was leased out for an income. 

3.  I wish Austria all the luck in the world trying to retrieve their gold back.

4. commentaries on gold trading from various financial analysts.  For fun you should view the

commentary "the day the world ended". It might give you a wake up call as to what may happen


(courtesy Goldcore/Thursday report)

Austrian Parliament Hears 80% Of Austrian Gold Bullion Reserves In London

Tyler Durden's picture

Austrian Parliament Hears 80% Of Austrian Gold Bullion Reserves In London
Today’s AM fix was USD 1,729.75, EUR 1,344.23, and GBP 1,084.35 per ounce.
Yesterday’s AM fix was USD 1,726.75, EUR 1,350.71, and GBP 1,085.05 per ounce.
Silver is trading at $33.38/oz, €26.00/oz and £21.00/oz. Platinum is trading at $1,588.25/oz, palladium at $650.60/oz and rhodium at $1,060/oz.
Gold inched up $1.50 or 0.09% in New York yesterday and closed at $1,729.20. Silver surged to a high of $33.378 and finished with a gain of 0.51%. Gold is now some 1% higher for the week and silver nearly 3% higher for the week and higher weekly closes will be bullish from a technical perspective.
Gold priced in Japanese yen rose to a nine-month high this morning at 143,262 yen/oz and is on track for its biggest weekly rise since February, up 2.8% according to Reuters.
The yen came under heavy pressure from growing speculation that the Bank of Japan would aggressively ease monetary policy in the coming months.
Gold trading is quiet with the US markets closed for the Thanksgiving holiday today and the early close tomorrow.
Given the degree of uncertainty in the world - from the Middle East to Greece and the Eurozone debt crisis to the US fiscal cliff – most traders will be reluctant to take sizeable positions long or short and lacklustre, directionless trading may continue.
However, any of these risks could lead to a sudden spurt of safe haven buying that leads to gold eking out gains this shortened week.
The Austrian central bank keeps most of its 280 metric tons of gold reserves in the United Kingdom, Vice Governor Wolfgang Duchatczek was quoted as saying in the finance committee of the country’s parliament today, according to Bloomberg.
Answering lawmakers’ questions, Duchatczek said 80%, or 224.4 metric tons of the metal was stored in the U.K., 17% or 48.7 metric tons in Austria and 3% in Switzerland, according to a summary of a closed-door committee meeting provided by the parliament.
The reserve has been unchanged since 2007, Duchatczek was quoted as saying. The central bank has earned 300 million euros ($385 million) over the last ten years by lending the gold, he said.
Goldman Sachs is bullish on silver in 2013 and believe it will rise in price.
Silver is seeing strong investment demand due to high inflationary pressures, monetary easing and low interest rates, Goldman Sachs said in a note on silver stocks.
High silver prices in recent years have led to increased supply from mine production and old silver scrap.
Goldman noted that world silver supply grew by just 2.2% in 2012, driven by a 3% gain in mined production and a 1% increase in scrap supply.
Gold is poised to rise above $2,000/oz next year according to Merrill Lynch Wealth Management.
They are wary of industrial metals and say that the lack of clarity on demand outlook and policies in China dim prospects for industrial metals.
(Bloomberg) -- German Household Heating Oil Stockpiles Rise to 59.5% in October
German household heating oil tanks were 59.5 percent full last month, compared with 58.4 percent in September, according to data from Ipsos Loyalty GmbH.
Commercial inventories were at 41.6 percent in October, down from 43.8 the previous month, the data showed. Germany is Europe’s largest market for heating oil.
(Bloomberg) -- Gold Futures in Shanghai Rise; Silver Futures Reach 6-Week HighJune contract gains as much as 0.5% to 353.26 yuan/gram on the Shanghai Futures Exchange. Contract trades at 353.05 yuan at 9:02 a.m. Singapore time, climbing for the third time in four days. Jan-delivery silver advances as much as 1.4% to 6,938 yuan/kg, most expensive since Oct. 12. Cash bullion of 99.99% purity increases 0.4% to 347 yuan/gram on the Shanghai Gold Exchange; vols. were 3,541 kg yesterday vs. 4,227 kg on Nov. 20
(PTI) -- Reliance Money targets Rs 2 trillion gold market with new planTargeting an estimated Rs two lakh crore unorganised (rpt) unorganised gold market in the country, Reliance Money today launched a new daily gold accumulation plan under which customers can invest as low as Rs 1,000 per month. Under the plan, named Reliance My Gold Plan, the customer can invest a minimum of Rs 1,000 per month and the company would use the money for purchase of gold on a daily basis and the total accumulate funds can be redeemed for gold coins or jewellery at the end of the investment tenure.
The plan was launched here today in association with the World Gold Council as its marketing partner.
(Bloomberg) -- Reliance Money, World Gold Council Start Gold Investment Plan The plan allows for a minimum investment of 1,000 rupees, says Vikrant Gugnani, chief executive of broking and distribution business at Reliance Capital Ltd.
Investors can opt for investment period of 1 to 15 yrs, Compulsory delivery of physical gold, no transaction tax.
For breaking news and commentary on financial markets and gold, follow us on Twitter.        



Gold trading from Europe/Asia early Friday morning.

On Wednesday, we reported that Brazil added 17.1 tonnes of gold to its official reserves. In two months they have added 51 tonnes of gold.

And now on Friday:

The big news of course is that Brazil did not obtain real physical gold but only they have a claim against the bullion banks.  Thus the noose around the necks of the  LBMA is getting tighter and tighter as real physical gold leaves London for Eastern shores.  Brazil, we guess, is happy to accept these obligations as a "fee" to enter the Western banking fraternity.  Eastern nations (and Venezuela) were certainly not fooled by these jokers 

(courtesy Goldcore/Early Friday morning report)

Brazil Gold Reserves In Fixed Term Gold Deposits With Bullion Banks

Tyler Durden's picture

Brazil Gold Reserves In Fixed Term Gold Deposits With Bullion Banks
Today’s AM fix was USD 1,734.75, EUR 1,345.39, and GBP 1,088.37 per ounce.
Yesterday’s AM fix was USD 1,729.75, EUR 1,344.23, and GBP 1,084.35 per ounce.
Silver is trading at $33.43/oz, €26.02/oz and £21.07/oz. Platinum is trading at $1,583.00/oz, palladium at $654.70/oz and rhodium at $1,040/oz.

Cross Currency Table - (Bloomberg)
Yesterday New York was closed for the American holiday of Thanksgiving.  Today trading finishes at noon. With very little data today, trading is expected to be relatively quiet ahead of the weekend after yesterday's Thanksgiving holiday.
Gold inched up on Friday, set for its 2nd week of gains, as the euro strengthened on news of advancement in Greece’s bailout talks while the looming US fiscal cliff continues to support bullion.
Stock markets are down a touch and oil prices are edging lower due to the ceasefire in the Gaza strip and demand destruction concerns.
Greece's lenders have finalized new means to trim its debt burden but still need to fill a $12.9 billion gap to receive the approval of the IMF said a senior Greek official.
Central bank buying, the US fiscal cliff and continuous loose money policies from nations around the globe all cement the yellow metal’s appeal as a hedge against inflation. 
Gold is nearing some key chart levels and these were commented upon by UBS this morning and noted by Reuters.
“Gold is just a few dollars shy of its 50-day moving average sitting at $1741, and more importantly, a key technical level lurking at $1739.10," it said.
"Our technical strategist notes that a break above this level, which is the month’s high, would be a crucial bullish development that would open up $1748.95, the 62% retracement of the October/November sell-off ahead of $1794.80, the October high." 
"The yellow metal seems on the verge of a break higher," the bullion bank added. "But with trading for what’s left of the week expected to extend yesterday’s quiet $5-range, market participants may have to wait until after the weekend to see some action. The advantage of this is that investors still have the day ahead to position for what may be an exciting week in store for them."
The IMF reported Wednesday that the Banco Central do Brasil has increased its gold holdings for the second straight month, to the highest level in 11 years, as Latin America’s biggest economy looks to diversify its vast international reserves.
Brazil’s aggressive efforts to weaken its currency by buying dollars – about $132 billion since the beginning of 2008 – have left the country with the sixth biggest international reserves in the world, about 80% of which is denominated in the US currency.
However, recent turmoil in currency markets and concerns over the global financial crisis and fiat currencies in general has given Brazil’s authorities even more reason to diversify their holdings. 
It has frequently stated its intention to diversify assets and reduce its exposure to currency risk.
Recent sharp weakness in Brazil’s real (see table) and systemic risks are leading central banks, including the BCB to diversify into gold.
Brazil raised its gold holdings by 17.2 tonnes in October to 52.5 tonnes, the highest level since January 2001. The move comes on the back of Brazil’s 1.7 tonne increase in September, the country’s first significant gold purchase in a decade.
In December last year, 83.5% cent of the central bank’s $352 billion reserves was held in increasingly risky government bonds, 15.6% was in other bonds and bank deposits while only 0.8% of reserves was held in other asset classes such as gold.
In its international reserves report in June, the central bank said the recent surge in reserves had allowed the country to hedge its external liabilities, allowing it to now “seek a greater diversification of international reserves.”
However, there are concerns that the increase in the Brazilian central bank gold holdings' and tonnage are not all that they seem.  It appears that the central bank in Brazil has not actually bought London Good Delivery bullion bars but rather fixed term gold deposits with bullion banks.
Recently, the Brazilian central bank was asked about their gold reserves and about a section on gold on their website under 'Official Reserve Assets' lists gold as "gold (including gold deposit and, if appropriate, gold swapped)" with a footnote of "Includes available stock of financial gold plus time deposits."
Although Brazil’s central bank declined to comment on the reason behind its recent return to gold purchases,  the Banco Central do Brasil confirmed that the gold included in Reserve Assets comprises fixed term gold deposits at commercial banks only.
Therefore, rather than being outright owners of their national patrimony either in their own vaults in Brazil or in the vaults of other central banks, some of the Brazilian gold reserves may be a claim on gold deposits held with bullion banks .
This would be unusual and poses increased counter party risk for the Banco Central do Brasil and the Brazilian currency reserves. 
(Bloomberg) -- Iran Buys Gold in Turkey With Gas Payments, Babacan Says
Turkey pays for gas purchases in liras via bank in Turkey, Iran converts it to gold for transfer because of international sanctions against the Persian Gulf country, Turkish Deputy Prime Minister Ali Babacan says late yesterday.
Iran main reason behind increase in Turkey’s gold exports.
Babacan speaks at parliament committee in Ankara during debate on 2013 draft budget.
For breaking news and commentary on financial markets and gold, follow us on Twitter.       



Many were wondering how Brazil could obtain a rather large supply of physical gold this fast.
Now we know the truth:  it is not real physical but claims against bullion banks.

Is Brazil this stupid?  Or is it the price to belong to the brotherhood of Western central banking?

(courtesy GATA/Chris Powell/ and the above Goldcore commentary)

Brazil has no gold reserves, just claims against bullion banks, Goldcore discloses

8:27a ET Friday, November 23, 2012
Dear Friend of GATA and Gold:
Gorecore reports today that Brazil's gold reserves really aren't gold reserves at all but just "deposits" with -- claims against -- bullion banks. Can the Banco Central do Brasil really be unaware of the Western central bank gold price suppression scheme? Or is this insult to Brazil's sovereignty the price of admission to the scheme and to the fraternity of Western central banking? These are compelling questions for financial journalism in Brazil. Goldcore's disclosure is contained in its daily commentary here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


On Friday, the press in Austria is getting wise to their nation's gold in peril as they ask many pertinent questions on the leasing of their gold and why it has not been returned:

(courtesy GATA)

Clamor about gold reserves prompts leasing disclosure by Austrian central bank

11:05a ET Friday, November 23, 2012
Dear Friend of GATA and Gold:
Germany's clamor and agitation about the integrity of national gold reserves are spreading into Austria, where two national newspapers headquartered in Vienna, Die Presse and Der Standard, this week raised questions about Austria's national gold and even prompted a response from the country's central bank, the Oesterreichische Nationalbank (OeNB).
Die Presse's report, in German, is here:
Der Standard's, also in German, is here:
Der Standard also has published what appears to be a report on the issue by the Austria Press Agency, the country's independent press association, which GATA consultant Dimitri Speck has translated into English and is appended. The APA report is notable for its inducing the OeNB to disclose details about its gold leasing, supposedly now down to 16 percent of the Austrian gold reserve, and for recognizing that a fractional-reserve gold banking system may jeopardize the return of leased gold.
Thus there seems to be increasing understanding internationally of GATA's complaint about the Western central bank gold price suppression scheme.


Adrian Ash of Bullion Vault on Friday discusses gold trading and other important items from Europe:

Of note:

1. The USA needs to go to the bond market for 99 billion usa as funding needs increase.

2.  Spain's wealthiest province Catalonia goes to the polls on Sunday where their leader, Athur Mas has called for a referendum on independence for this rich province. Catalonia houses Barcelona.

3.Negotiations continue on the 31 billion Euro loan to Greece which may be increased to 44 billion.

 (courtesy Adrian Ash/Bullionvault)

"Exciting Week" Ahead for Gold as Silver Hits 6-Week High, US Prepares $99Bn Bond Sale

By: Adrian Ash

-- Posted Friday, 23 November 2012 | Share this article | Source:

London Gold Market Report

The DOLLAR PRICE of physical gold rose back to $1734 per ounce in London on Friday morning, nearing the top of the last 5 weeks' trading range as so-called "risk assets" also crept higher.

Asian and European stock markets were slightly stronger, while the single Euro currency pushed back above $1.29.

Commodity prices added 0.5% on the broad GSCI index. Silver touched its best Dollar-price in 6 weeks above $33.50 per ounce.

"Activity is muted," said one London dealer, with US markets due to re-open but many traders extending the Thanksgiving holiday.

"[The gold price] is stuck between $1715 and $1740 area for now," Reuters quotes Ronald Leung at Lee Cheong Gold Dealers in Hong Kong.

"But speculators are still bullish on gold, as uncertainties about the 'fiscal cliff' hang around and they believe that central banks around the world will stay loose on monetary policy."

On a technical analysis, the gold price "is just a few dollars shy of its 50-day moving average sitting at $1741," says a note from Swiss investment and bullion bank, UBS.

"More importantly, a key technical level [is] lurking at $1739.10...A break above this level, which is the month’s high, would be a crucial bullish development.

Again citing the US holiday, "Market participants may have to wait until after the weekend to see some action," UBS adds. "[European] investors still have the day ahead to position for what may be an exciting week."

Next week the US Treasury will seek to raise $99 billion in new debt, according to Bloomberg data.

Treasury bond prices rose Friday, pushing interest rates down to just 1.67% on 10-year debt.

"Pimco is avoiding, or trying to keep a low weighting, on maturities beyond 10 years," said Tony Crescenzi, a portfolio manager at the giant bond-fund group, in an interview. "Because we know the Fed’s intent is to reflate a deflated economy."

Nearer-term, he believes, "Treasuries provide good insurance against macro risk."

British Gilts and German Bunds also rose Friday morning, reducing 10-year German yields to just 1.42% – despite stronger-than-expected Ifo business confidence data – after the S&P ratings agency cut the status of 3 more Spanish banks.

Spain's sovereign debt prices fell, nudging 10-year interest rates up to 5.68%.

Spain's wealthiest region, Catalonia, goes to the polls on Sunday for elections which local president Artur Mas has called a referendum on independence from Madrid.

Over in Athens meantime, negotiations continued over €31.2 billion in bail-out funds which Greece has been waiting for since June from the International Monetary Fund.

The IMF said this morning that Greek debt would be "viable" if cut to 124% of GDP by 2020. It is currently on track to hit 190% by 2014.

"It's natural [we] look out for other types of assets," today's Financial Times quotes a Brazilian economist after new data showed the central bank adding more than 17 tonnes of gold bullion to its national reserves in October.

That took Brazil's total reserves to 53 tonnes, an 11-year high.

The latest gold reserves data from the IMF also show Turkey, Kazakhstan and Russia again raising their national holdings as well.

Adrian Ash

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and – starting this Sunday – just 0.5% dealing fees.

(c) BullionVault 2012


It has been confirmed that Turkey is paying for Iranian gas with gold.
Iran provides 18% of Turkey's needs in natural gas and 51% of its oil.  All of Turkey's purchases are paid for with gold.

Turkey confirms that gold exports are linked to purchase of Iranian gas

By Emre Peker and Joe Parkinson
The Wall Street Journal
Friday, November 23, 2012
ISTANBUL -- Turkey on Friday acknowledged that a surge in its gold exports this year is related to payments for imports of Iranian natural gas, shedding light on Ankara's role in breaching U.S.-led sanctions against Tehran.
The continuing trade deal offers the most striking example of how Iran is using creative ways to sidestep Western sanctions over its disputed nuclear program, which have largely frozen it out of the global banking system.
The disclosure was made by Turkey's deputy prime minister and top economic policy maker, Ali Babacan, in answers to questions from the parliamentary budget committee.
Iran provides 18% of Turkey's natural gas and 51% of its oil. But since U.S. and European Union sanctions ban Tehran from receiving payments in dollars or euros, Ankara pays Iran for the gas in Turkish liras. The lira is of limited value for buying goods on international markets but ideal for purchasing Turkish gold. The government hasn't specified how it pays for Iranian oil.

"In essence, gold exports" to Iran "end up like payments for our natural gas purchases," Mr. Babacan said. "Turkey is depositing the payment for the gas we purchase from Iran to Iran's account in Turkey. ... I don't know exactly how they then transfer it," he said.
The identity of the final destination of the gold in Iran isn't known, but the scale of the operation and its dramatic expansion suggest that the Iranian government plays a key role, analysts say.
In Turkey, state-run lender Turkiye Halk Bankasi has been responsible for processing the payments, since the U.S. adopted a measure in January to stop dealing with financial institutions working with Iran's central bank, freezing out private Turkish banks from facilitating payments. Halkbank raised 4.5 billion liras ($2.5 billion) Monday in Turkey's biggest offering in a secondary share sale -- a 20.8% stake, according to a statement to the Istanbul Stock Exchange.
Mr. Babacan's remarks Friday helped clarify an aspect of Turkish trade policy that has been a source of speculation since unusually high exports to Iran first appeared in March, the month Iran was cut off from the Swift global payments network, effectively blocking the country from performing international financial transactions.
Tehran has sought alternative means of payment for energy exports -- its main foreign currency earner and economic lifeblood -- including renminbi and rupees, as well as gold, in an attempt to skirt international sanctions and pay for its soaring food costs.
Analysts cautioned that although the trade with Iran wasn't illegal, Ankara wanted to keep details out of the public eye for fear of raising the ire of Washington, which is leading the international campaign against Tehran for its alleged push to develop nuclear weapons. Iran says its program is for peaceful purposes including medical treatments.
Turkey sold $6.4 billion of gold to Iran in the first nine months of this year, up from just $54 million in 2011, according to official data, tripling Ankara's exports to its eastern neighbor and almost evening the trade balance that historically has been dramatically in Tehran's favor. Iran accounts for 60% of Turkey's gold exports this year, followed by the United Arab Emirates with 30% of the total.
Those transactions also helped cut a gaping Turkish current-account deficit to 7% of gross domestic product in September from an unsustainable 10% at the end of last year and improved Turkey's short-term external financing needs -- a key development that this month that enabled Ankara to secure its first investment-grade credit rating in almost two decades.
The glittering bilateral gold trade has supplemented a strong trading relationship. Despite tightening sanctions, Turkey's total trade with Iran rose 50% to a record $16 billion in 2011. The countries have already surpassed that peak with $18.8 billion in almost evenly split exports and imports in the first nine months of this year.
Although Turkish gold sales to Iran spiked parallel to U.S. and European Union sanctions, August and September saw bullion exports shrink amid a jump in sales to the United Arab Emirates, leading to speculation that the gold is now traveling to Iran through the UAE.
"Historically, Turkey is a gold importer due to demand from the jewelry industry, albeit it seems that current gold exports are related to demand from the UAE and on to Iran. There has been concern that these sales somewhat reflect illicit trade with Iran," said Tim Ash, head of emerging markets research at Standard Bank PLC in London.
Traders in Istanbul's famed Grand Bazaar, which still plays host to a significant percentage of Turkey's gold trade, have speculated for months that Iran's government had been behind the bullion buying spree, since there was no discernible increase in the amount being purchased by traditional Iranian customers or tourists.
The government has denied direct links between the role of rising gold sales in buying energy, with Energy Minister Taner Yildiz saying in July that Turkish importers were paying for gas and oil in dollars and liras as per their purchasing agreements.
"This is a statement of what until now has seemed obvious, but was officially kept under wraps," said Robert O'Daly, a Turkey analyst at Economist Intelligence Unit in London. "As long as Turkey is importing gas from Iran, the gold exports will continue to be substantial."
While ties between Tehran and Ankara have become increasingly complicated in the past two years, as the Arab uprisings have polarized foreign policy aims, the neighbors have enough mutual interest to maintain a healthy trading relationship. The countries split most recently over the Syrian conflict, where Iran supports President Bashar al-Assad while Turkey backs rebels seeking to oust the regime in Damascus.

* * *


And now your major paper stories which influences the price of gold and silver:

OVERNIGHT MARKET SENTIMENT for early Thursday morning:

 Overnight Thursday we saw a big lift in the Euro/USA cross rising by a big 40 basis points as no news whatsoever.  The Euro/USA cross is the key driver as it pushes risk across the entire market.

China reported it's HSBC Flash Manufacturing PMI index and it rose above 50 for the first time in 13 months, to 50.4 from last month's 49.5.

The European PMI was very confusing.

First France reported manufacturing PMI at 44.7 a rise from last month's 43.7.  The service sector PMI also rose from 44.6 up to 46.1.  This set a light under the European and Asian bourses.

However:  Germany reported mixed results with it's Manufacturing PMI coming in at 46.2 a slight gain from last month's 45.5.  However it's service sector retreated from 48.4 down to 48.

It is the German dynamo which lights up Europe.  The higher Euro/USA is not helping this big exporting nation.

Comments from SocGen:

(courtesy zero hedge/SocGen)


With The US Closed, This Is What Happened Overnight Elsewhere

Tyler Durden's picture

With America shut for Thanksgiving today, what was going to be an abysmal volume day, coupled with the usual any news is good news levitation following the lowest volume day of the year, will be even worse. Sure enough, the overnight session started off with a bang, when in the vacuum of night, a lift everything algo sent the EURUSD soaring by 40 pips higher on no news. With the entire risk complex firmly anchored to the EURUSD pair as the key driver, it pushed risk across the entire market well higher to set the early session mood with the very first trade.
Followed light trading and a gradual drift lower which could not be offset even with a China HSBC Flash PMI print of 50.4, up from 49.5 in October, and the first 50+ print in 13 month (to accompany the new political regime: after all, the US is not the only nation where economic data mysteriously levitate with key political events).
This continued until about Europe open, when the monthly release of European PMIs came out, which once again were confusing to say the least with France posting the biggest and most surprising pick up, after its Manufacturing PMI rose from 43.7 to 44.7, on expectations of 44.0, while the Services PMI increased from 44.6 to 46.1, well above the expected 45.0 print. Germany was less exuberant with manufacturing rising from 45.5 to 46.2, although the Services PMI dropped from 48.4 to 48.0, missing expectations of 48.3, sending the series to its lowest in 41 months.
This is how Markit described the ongoing recessionary contraction for Germany:
November data indicated that the combined output of the German private sector dropped at a broadly similar pace to that seen in the previous month. However, this masked divergent trends in the performance of the manufacturing and service sectors, with the former posting a slower drop in output compared with October while the latter registered its fastest contraction since June 2009.

The seasonally adjusted Markit Flash Germany Composite Output Index registered 47.9 in November, only fractionally higher than October’s 47.7 and below the neutral 50.0 value for the seventh successive month. While the latest reading for services activity (48.0) pointed to a moderate pace of contraction, this was the weakest outturn for almost three-and-a-half years. At 47.7 during November, the equivalent index reading for manufacturing output was up since October and well above July’s 39-month low (42.2).

Another overall reduction in German private sector output reflected an ongoing contraction in new business volumes. Lower levels of new work have now been recorded in 15 of the past 16 months. Manufacturers and service providers indicated broadly similar rates of decline but, as with output, there was a divergence in momentum compared with that seen in October. Service providers posted the steepest decline in new business for three months, while the drop at manufacturers was the slowest since March. The latest drop in new export orders received by manufacturers was the least marked for six months, which some firms linked to support from stronger demand in China.

Shrinking new business volumes in the service sector contributed to a steep drop in expectations for activity over the next 12 months. The index measuring service providers’ business expectations was the lowest since March 2009.

German private sector employment dropped at the sharpest pace since January 2010. A softer fall in manufacturing staffing levels was offset by the most marked decrease in services jobs for three-and-a-half years.

Meanwhile, backlogs of work in the German private sector dipped for the seventeenth successive month in November, suggesting an ongoing lack of pressure on operating capacity.While the rate of decline in outstanding work eased in the manufacturing sector, the latest reduction at service providers was the steepest for a year.
In other words, the German growth dynamo which is the only thing keeping the Eurozone alive, continues to grow dimmer with each passing day. And what does the market do? It punishes Germany, by sending the EURUSD even higher, touching an overnight high of 1.2880, and making German exports outside the European Union (where German exports are funded by German TARGET2 claims anyway so it is a net wash), even more difficult. At this rate we expect the official onset of the German depression send the EURUSD north of 1.50, courtesy of centrally planned markets.
In other news Spain sold some sovereign bonds with maturities ranging from 2015 to 2021, to its banks which were then promptly repoed to the ECB with no haircut, or perhaps with a haircut: nobody really knows anymore what the ECB "mistake" is on Spanish collateral and if it has been fixed.
Europe will hold a summit today to discuss its hopeless budget, where Greece will likely be the true subject behind closed doors.
And that wil be all, once the European trading session closes in a few hours with America not there to step in and pick up the low volume levitation baton.
SocGen's FX team explains what else to look for today:
The JPY continues to animate G10 currency markets, but the reasons given for the follow-through selling that we are observing this week are becoming more spurious each day. The pro-stimulus rhetoric by LDP frontrunner Abe first hit markets last week, but it has been well and truly digested with no guarantee that the BoJ will actually adjust its policy principles and raise its 1% inflation target to fall in line with the politics of a PM elect. The moves of the last 24 hours can in all likelihood be traced back to investors' trading momentum, whilst USD/JPY purchases for hedging purposes related to the Softbank/Sprint deal are getting some credit as well. In any case, technically, the move looks like it has further to run until we reach the resistance zone around 83.19. The last time US/JA 2y rate spreads decoupled from spot to the extent we are seeing today was in Q109 when USD/JPY shot up from 94.50 to 100.72 and the 2y spread drifted in a 30-50bp range.

The Thanksgiving holiday in the US means reduced trading volumes across most asset classes today and tomorrow with the possibility of a squeeze in EUR/G10 if headlines break on Greece. The EU flash PMIs and bono auctions will draw attention where markets are open. A small rise in the PMIs is expected, but it is Germany where data has worsened most lately, so that's where the focus will be.
And sure enough, the deterioration continues, and will continue as long as a high EURUSD makes cheap German exports prohibitive, something which may have to be explained to theEURUSD traders at the BIS.
Finally, the big picture recap comes as usual from DB's Jim Reid:
Happy Thanksgiving to all our US readers, although you should be on holiday or at the early Black Friday sales rather than reading this. For the rest of us it’s a pretty interesting day ahead with October's flash PMI numbers being released in Europe and having already come out in China. Every month just as these numbers are about to be published, I can't help myself and internally sing "FLASH, saviour of the universe...." very loudly in my head. Glossing over the point that some things you should never publically admit to, the point is that the flash PMIs are a very important early indicator as to which way growth is moving across the globe.
Growth in Europe remains disappointing, especially (but not exclusively) at the core ironically, and markets have arguably run ahead of the hard data on the expectations that eventually the recent sovereign stability will translate into growth improvements next year. We still think Europe will get the benefit of the doubt for a few more months but risk markets are highly unlikely to be at these levels in 3-6 months time if the PMIs in Europe remain at current levels. We think they'll need to be low 50s at least not in the mid 40s region they are currently stuck at. So every month without a notable recovery in the PMIs is a worry even if the shortterm impact might be negligible.
While Euroland PMIs are still expected to be firmly in contractionary mode the Chinese readings seem to be heading towards the right direction. Indeed overnight we saw China’s HSBC Flash Manufacturing PMI rise 0.9pts to 50.4 in November which also happens to be the first >50 print for the series in 13 months. The underlying details of the report were also encouraging with the output subindex (51.3) reaching its highest reading since October 2011. Today’s release comes several weeks after the first >50 print in the official PMI in three months, adding further evidence that the economy is on the path to a near term recovery.
Buoyed by the positive Chinese data most Asian bourses are trading higher overnight. The Hang Seng and KOSPI up +0.5% and +0.9% respectively although
interestingly the Shanghai Composite (-0.5%) is the key laggard as we type. The Dollar index is a touch lower probably not helped by some dovish comments from Fed’s Williams. He expressed his preference on maintaining purchases of both MBS and Treasuries at the present pace even after the expiry of Operation Twist at year-end. Williams believes “a decision not to continue buying long-term Treasuries when Twist expires would be a surprise to markets and that would be counterproductive…and would push long-term rates up and cause financial conditions to be a little less supportive of growth”.
So despite the lingering fiscal cliff uncertainties investors are seemingly happy to add risk at these levels which helped the S&P 500 extend its consecutive up days to four. The index edged +0.23% higher yesterday but on very thin volumes ahead of Thanksgiving. Yesterday’s market was supported by reports that Israel-Hamas have agreed to an Egyptian-brokered ceasefire although how long will this last remains to be seen given reports that five missiles were fired from Gaza overnight after the truce was declared. Brent rallied +0.94% yesterday is holding steady at $110.9/bbl overnight after adding 0.94% yesterday.
Yesterday’s data flow was mixed. The better-than-expected US Markit PMI (52.4 v 51.0) came in at a six-month high. That lifted equities at the open although on a less positive note the final UofM confidence reading (82.7 vs 84.5) fell short of market expectations. Jobless claims are still feeling the effects of Hurricane Sandy with the latest reading still elevated at 410k but exactly in line with expectations.
A quick update on the ‘fiscal cliff’ debate it is interesting to see the growing number of worrying headlines around the state of negotiations. Politico noted that negotiations between the Democrats and the Republicans are off to a “rough start”, despite the cordial public statements made by both camps last Friday. The article suggests that the Republican’s opening proposal to “freeze the Bush-era tax rates, change the inflation calculator for entitlement programs, keep the estate tax at 2012 levels and authorize a major overhaul of the tax code” wasn’t something the White House could accept. At the same time, reports noted that Democrats are unwilling to make significant concessions to entitlements as demanded by Republicans. Indeed, in an op-ed piece in the Cincinnati Enquirer, Boehner wrote that “Obamacare has to go” suggesting a fairly hardline stance on entitlements. The slow pace of talks was also confirmed by the WSJ which described the negotiations as “inching forward” ahead of a likely meeting between Obama and congressional leaders when they return from Thanksgiving holidays next week. Fiscal cliff issues will remain a key driver for markets in the near term.
As mentioned at the start, flash November PMIs will be the key data flow in Europe today. We’ll kick off with France at 8am London where the market expects the manufacturing and services print to post a modest improvement to 44.0 (from 43.7) and 45.0 (from 44.6) respectively. We will get German numbers half an hour later with the market expecting the manufacturing and services sector readings to remain largely similar to October’s levels of 46.0 and 48.3 respectively. The Eurozone composite, manufacturing and services report will be out at 9am London and again expected to be broadly unchanged from October’s levels.
We also have the Eurozone Consumer Confidence reading for November. Elsewhere, the EU Summit convenes today to discuss the EU budget – although given the differences in opinion markets are probably not holding out high hopes of an agreement today. Away from Brussels we have a Spanish bond auction (2015, 2017 and 2021 maturities). Otherwise we should have a relatively quiet two days into the weekend with the US market closed today and an abbreviated session tomorrow.

Elliott Management Vs Argentina Round 3: The Showdown

Tyler Durden's picture

Most recently, in "Elliott Management Vs Argentina Round 2: Now It's Personal" we laid out the story of how in the ongoing legal fight between Argentina's prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country's vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, "or else" the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.
In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina's request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt.

The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp's NML Capital Ltd and Aurelius Capital Management.

If Griesa's ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina's terms at the time.

This would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges.
Griesa essentially circumvented the traditional appeals process and said no more delays.
Griesa wrote that he would ordinarily leave his order in place pending a ruling from the 2nd Circuit. However, he concluded this was not possible given comments from Argentine officials, including President Cristina Kirchner, that Argentina would not pay anything to the holdout bondholders.

"It is the view of the District Court that these threats of defiance cannot go unheeded, and that action is called for," Griesa wrote, saying the payments should be made as soon as possible.

The 2nd Circuit already upheld Griesa's Feb. 23, 2012 decision that Argentina violated equal-treatment provisions for all creditors when it chose to pay exchange bondholders and not holdout bondholders.

Given that Griesa's latest decision still needs the final blessing of the 2nd Circuit, he ordered that rather than Argentina paying the plaintiffs directly, it should deposit the money in an escrow account by Dec. 15.
In his ruling, Griesa said the less time Argentina was given "to devise means for evasion, the more assurance there is against such evasion."

"There is no question about what is 'currently due' to plaintiffs," Griesa wrote. "The amount that is currently due is the amount of the unpaid principal, the due date of which has been accelerated, and accrued interest."
The ball is now in Argentina's court. As a reminder, Argentina made it quite clear it would not pay "one dollar to the vulture funds." The vulture funds in question, are Elliott Management and Aurelius, who are owed upward of $1.3 billion. "Argentina owes this and owes it now," Griesa said. "It should be emphasized that these are debts currently owed, not debts spaced out over future periods of time." Griesa said NML and Aurelius should be paid concurrently or ahead of exchange bondholders.
And with the coupon payment due in one month, when Argentina has to pay $3.14 billion in accrued interest, we will know in a matter of weeks whether a district court's harsh language in New York is enough to make a Treasurer in Buenos Aires shiver in fear. Somehow we doubt it. Which also means Naval Commodore of His Own Majesty's Navy Paul Singer Second Rank will soon be upgraded to First Rank once he privateers a few Argentinian subs and perhaps an aircraft carrier... if any were still in service of course.
Without going into details (read Subordination 101 for the full primer), Griesa basically crushed any hopes the exchanging bondholders had that they had received priority status by being fooled into the exchange offer and accepting a price of 30 cents on the dollar:
Griesa rejected arguments from exchange bondholders that full payment to NML and Aurelius would infringe on their rights.

"In accepting the exchange offers of thirty cents on the dollar, the exchange bondholders bargained for certainty and the avoidance of the burden and risk of litigating," he wrote.

"Moreover, it is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes. After ten years of litigation this is a just result," the judge said.
What is most interesting is that Griesa for the first time threatened not only Argentina but its "accomplices" i.e., funds transferring "third party" banks, with enforcement should they selectively wire funds to one group of bondholders, but not another - the hold outs.
The 2nd Circuit has also directed Griesa to spell out precisely how his injunctions would apply to third-party banks.

Among the banks is BNY Mellon, which transfers funds from Argentina to the country's bondholders. It argues that the injunction would interfere with its duties to the exchange bondholders and could cause a wider disruption to the largely automated international bank payment systems.

Griesa said BNY Mellon's arguments "miss the point" and if Argentina followed the appeals court ruling there would be "no problem" about the money ending up in the right accounts.

He said that if Argentina attempted to make payments to the exchange bondholders in violation of the court's rulings, third party institutions should be "held responsible" for ensuring they are not taking steps to violate the law.
Of course, BNY has the choice to just pull out and do no more business with Argentina and its creditors. There is always the option that creditors can come in on location in Buenos Aires and collect their interest in bags with dollars signs printed on them. Or just pull an Iran, and demand payment in gold via unsupervised gold transfer pathways, such as Turkey.... or China. If and when such a circumventing route is discovered, it will be one more chip away in the dollar's reserve status.
Finally, should Argentina not make the payment in December as loudly cautioned by Griesa, wait and see just why Elliott happens to be on the ISDA determinations committee. We anticipate that ISDA will find an Argentinia event of default will have occurred within seconds of the December coupon non-payment as the country follows Hostess into Chapter 22, only this time it is really personal between Argentina and some of the wealthiest hedge funds in the world.

Kubler-Ross Goes To Buenos Aires

Tyler Durden's picture

Argentina's bonds suffered one of their largest single-day price drops on record today as it appears ever more obvious that a re-default will occur. With Elliott still battling over holdouts from a prior life, it seems the smart-money is long-gone this time leaving the momentum-chasing yield-grabbing flow suddenly fully cognizant that the bonds are in fact dead.'Acceptance' is upon us as we wrote a month ago"As for the Argentina vs Elliott bare-knuckled match, enjoy it while you can: very soon the Latin American country will likely proceed with yet another round of creeping selective defaults, exchange offers, consent solicitations, and other debt reorganizations, which will make the current free-for-all into a total and epic labyrinth of creditors, interests, bondholder classes, general unsecured claims, and other total confusion."

We continued:
After all why bother with Argentina: there are far higher IRRs to be generated by shorting local-law Spanish bonds while buying their international-law cousins. In fact, courtesy of the current government's arrogance and naivete, the position can be put on in a cost, and carry, neutral basis. Then sit back and just wait for the spread to blow out.
Because what is happening with Argentina today, is coming very soon to every banana republic near you.

Reuters, weighs in on the possible Argentinian bond default

(courtesy Reuters)

Argentina's options shrink after U.S. debt ruling

BUENOS AIRES | Fri Nov 23, 2012 1:24pm EST

(Reuters) - A decade after staging the biggest sovereign default in history, Argentina faces another possible debt crisis after a U.S. court ordered it to pay $1.3 billion to holders of defaulted bonds.
About 93 percent of Argentine bondholders agreed in 2005 and 2010 to swap defaulted debt from the 2002 default for new paper at a steep discount. So-called "holdout" creditors who rejected the swaps continue to battle for full repayment in international courts.
In a ruling late on Wednesday, U.S. District Judge Thomas Griesa toldArgentina to deposit funds to pay the holdouts by December 15, lifting a previous order stalling payments to the bondholders and raising fears of a technical default on the restructured bonds if Argentina does not pay.
Griesa's ruling is a sharp blow for Argentina's combative president, Cristina Fernandez, who has refused to pay the holdouts such as Elliot Management Corp's NML Capital Ltd and Aurelius Capital Management.
Her government's strategy of isolating the holdouts has come under intense pressure since late last month when a U.S. appeals court upheld Griesa's decision that Argentina violated equal-treatment provisions for all creditors when it chose to pay exchange bondholders and not holdouts.
An eventual technical default - with U.S. courts seizing payments to holders of restructured bonds to compensate the holdouts - would further dent investor confidence in Latin America's third-biggest economy.
That could exacerbate a sharp economic slowdown, but the impact would be less serious than in 2002 due to the country's relative isolation from global financial markets.
Argentina has stayed out of international credit markets since the 2002 debacle, partly due to fears the holdouts could block a new issue. It relies instead on the central bank's foreign reserves to pay debt and borrows from state agencies.
Here are possible scenarios in the decade-long legal battle:
Griesa's latest decision must still pass to the 2nd Circuit Court of Appeals, so he ordered that Argentina should deposit the money in an escrow account by December 15 rather than pay the plaintiffs directly.
Argentina swiftly pledged to appeal. If Griesa's ruling holds -- which legal specialists think likely -- and Argentina still refuses to pay, U.S. courts could block debt payments to creditors who took part in the debt swaps out of consideration for those holdout investors who rejected Argentina's terms at the time.
That would trigger a technical default on approximately $24 billion worth of restructured debt. Argentine bond prices were battered on Friday by fears about $3 billion in debt payments due next month could be subject to court.
The decision by Griesa came in response to a request from the appeals court for him to detail how the holdout creditors should be paid and clarify the role of third parties.
Late last month, the appeals court backed a February ruling by Griesa that Argentina had discriminated against the holdouts and Argentina has already requested a rehearing before the tribunal's full panel of 13 judges.
However, legal analysts think the so-called en banc rehearing is unlikely to yield a different result and say the 2nd Circuit will probably refer Monday's planned appeal aimed at getting the payment stay reinstated back to Griesa.
Economy Minister Hernan Lorenzino said Argentina will exhaust all judicial channels and could take the holdouts case to the U.S. Supreme Court.
The government could contest the appeals court's equal treatment ruling by arguing it did not discriminate against the holdouts because they could have tendered their defaulted bonds in the two restructurings.
The U.S. Supreme Court gets about 10,000 appeals requests a year but only agrees to hear 75 or 80 cases.
Some legal experts think the country's highest court could choose to weigh in on this case, however, since it has wider implications for debt restructurings.
U.S. government lawyers backed Argentina's position on pari passu, or with equal treatment. They argued in April that Griesa's orders "could enable a single creditor to thwart the implementation of an internationally supported restructuring plan, and thereby undermine the decades of effort the United States has expended to encourage a system of cooperative resolution of sovereign debt crises".
If the Supreme Court agreed to take on the case, it would have to consider whether to freeze current proceedings. That might end up buying Argentina more time.
The government lawyers said a similar ruling in a Belgian court that disrupted Peru's debt restructuring in 2000 "was viewed with almost universal consternation by international financial markets".
The 2nd Circuit downplayed any impact on other countries, noting that many newer bonds, including the ones issued by Argentina in its 2005 and 2010 debt swaps, have collective action clauses that force potential holdouts to accept a restructuring if the vast majority of other creditors do so.
Argentina will probably need to garner more support from Washington and U.S.-based banks to get the Supreme Court to intervene. If the court did agree to hear the case, a ruling might not be issued until 2014.
If Argentina won the appeal, its troubles could be over. But the uncertainty leading up to the ruling would likely weigh on Argentine bond prices and hurt liquidity regardless.
Alternatively, the Supreme Court could either refuse to hear the case, letting the appeals court ruling stand, or it could hear the case and affirm that ruling. This would force Argentina to comply with - or openly violate - the order to pay holdouts every time it services its restructured debt.
If Argentina loses its court battle at any point, the country could flout Griesa's payment orders to deposit funds for the holdouts.
This is seen as a real possibility since Argentina has systematically fought every court decision in favor of the holdouts and has refused to pay them court-awarded damages.
Argentine officials, including the economy minister and the president herself, have said the country will not negotiate with the "vulture funds" and will never pay them.
They say their responsibility to restructured bondholders ends when payment funds are deposited in a Buenos Aires account of the country's payment agency, Bank of New York Mellon. Argentina will make that transfer at all costs to avoid an outright default and reduce the political cost.
The government argues that when those funds are transferred to New York, they are already the property of creditors and therefore cannot be embargoed by U.S. courts.
Griesa, however, said all third parties involved in the payment of the bonds are responsible for ensuring his orders are fulfilled.
Although it seems unlikely, Argentina could end up paying the holdouts, either by making separate, proportional payments to them to comply with the court order or by agreeing to some kind of settlement. This could potentially prompt lawsuits by the creditors who accepted the swaps, however.
To pay the holdouts, it would first have to suspend or scrap the so-called "lock law", which requires prior congressional authorization for any kind of settlement with creditors who rejected the restructuring. The law also bars the government from reopening the debt swaps without legislative approval.
The government might want to change that law regardless since the appeals court cited it as key evidence that Argentina discriminates against the holdouts.
So far, officials have rejected that option, however.
Besides, the terms of the restructured bonds prevent Argentina from making better offers to creditors before December 31, 2014.
Even if the lock law were overhauled, this would not put an end to Argentina's legal woes since the holdouts would almost certainly refuse to agree to the swap terms and continue to sue for full repayment on their defaulted bonds.
Lawyers advising the holdouts say Argentina may be approaching a point of no return like the onePeru faced in 2000, when it ended up settling with the holdouts for $58 million to move forward with its debt restructuring.
The price tag for Argentina would be much higher, though, with holdout creditors owning a total of roughly $11 billion in defaulted debt, according to private estimates. That is equivalent to about a quarter of Argentina's foreign reserves.
(Additional reporting by Alejandro Lifschitz in Buenos Aires and Daniel Bases in New York; writing by Helen Popper and Hilary Burke, editing by Kieran Murray and Andrew Hay)


The Greek rescue plan hinges on lowering the interest rate that Greece must pay for bonds issued.
One plan has loans being issued which in turn will buy back Greek bonds at 25 cents on the dollar.  This will not help Greece much but will get Greece to below the 130/100 Debt to GDP level..The problem with the Greek buy back on bonds is that since the announcement, Greek bonds have risen in price making the deal now almost non existent.  

The IMF will not participate in the Greek bailout unless Greece gets to the 120/100 Debt to GDP.  The  IMF is seeking haircuts at the official level. This however would create a  massive hardship to the ECB which will need to orchestrate a cash call on all 17 nations in the monetary EU 

(courtesy Bloomberg)

Greek Rescue Deal Falters on Loan Rate Cut: Official

The main obstacle to unlocking international loans for Greece is a plan to reduce the interest rates charged by euro-area creditors as the sides agreed to ease debt-reduction targets, a Greek official said.

A cut in interest rates would put them below the cost of funding for some euro-area countries, the official told reporters late yesterday in Brussels on the condition of anonymity. Policy makers will continue work on an updated aid package for Greece into this weekend in preparation for a Nov. 26 meeting of euro finance ministers, said the official.

A selection of t-shirts printed with 'I love Greece' hang displayed for sale at a store in Athens, Greece. Photographer: Simon Dawson/Bloomberg
An agreement, which would unlock an aid payout of at least 31 billion euros ($40 billion), may raise Greece’s debt target to 124 percent of gross domestic product in 2020 from a previous goal of 120 percent, said the official. The cost of reaching the new target from a currently projected trajectory of 129 percent of GDP that year is about 10 billion euros, according to the official.
The option of a Greek debt buyback funded by loans from the euro area’s temporary rescue fund -- the European Financial Stability Facility -- is part of the talks, according to the official.
Greek bonds have rallied for 10 days on speculation aid will keep flowing even after finance ministers failed twice this month to seal the deal. Yields on 10-year notes fell to 16.36 percent yesterday, the lowest since the nation’s debt was restructured in March.

Greek Recession

Greece, facing a sixth year of recession in 2013, has been negotiating with the euro area andInternational Monetary Fund over the steps needed to qualify for the release of loan installments frozen since June. At stake is whether the Greek government of Prime Minister Antonis Samaras can pay its bills, recapitalize domestic banks and stay in the 17-nation euro.
Earlier this month, the Greek parliament approved extra austerity measures demanded by the country’s international creditors. The measures include a 2013 budget to shrink the spending gap further.
The IMF has insisted that the government cut its debt to 120 percent of GDP, a level it considers sustainable.
“We have done our part,” Samaras told reporters as he arrived for the Brussels meeting of European Union leaders on the future EU budget. “Now it is our European partners and the IMF’s turn to deliver as well.”
Greece narrowed its budget deficit from more than 15 percent of GDP in 2009 -- five times the EU limit -- to 9.4 percent in 2011. The spending gap is due to shrink to below 7 percent of GDP this year and to almost 5 percent in 2013.
Greece received a 110 billion-euro rescue in 2010 and a further aid package of 130 billion euros earlier this year. The second bailout also included the biggest writedown of privately held debt.
To contact the reporter on this story: Jonathan Stearns in Brussels at
To contact the editor responsible for this story: James Hertling at


Friday night saw Europe fail again, this time they could not agree on a budget framework for years 2014 to 2020:  the next two stories

(courtesy zero hedge)

Europe Fails Again, This Time To Get Budget Deal Done

Tyler Durden's picture

In what should be the least unexpected news of the day, Europe has failed for the second time in one week, after disappointing with no Greek resolution on Monday (and forcing the BIS into a EUR liftathon scramble to indicate that all is still well), this time announcing that an attempt to come to a deal on the EU budget has failed, with another budget summit scheduled now for January. This follows yesterday's misreported news that Cyprus, too, was fixed and the country had achieved a "hard-won" (as some sad Eurohack called it) bailout: turns out it wasn't in the end. And just how does one "hard-win" a bailout - crash their economy better than the rest? And speaking of Greece, nothing is fixed there either, but Germany, whose position was the reason for the first stalemate, demands optimism.
And so, once again, all is well. At least until the next failure to "fix" Greece, at which point Germany will demand even moreoptimism.


A Disappointed Van Rompuy Releases Statement Following EU Budget Talks Collapse

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The borderline incomprehensible gibberish is highlighted by us.
Remarks by President Herman Van Rompuy following the European Council (pdf)
The European Council gives its President the mandate together with the President of the European Commission to continue the work and pursue consultations in the coming weeks to find a consensus among the 27 over the Union's Multiannual Financial Framework for the period 2014-2020.
The bilateral talks yesterday and the constructive discussion within the European Council show a sufficient degree of potential convergence to make an agreement possible in the beginning of next year.
We should be able to bridge existing divergences of views. A European budget is important for the cohesion of the Union and for jobs and growth in all our countries.
We discussed as I said the Multiannual Financial Framework. We must work on a moderation budget. The times call for it. Every euro must be carefully spent. That's why we foresee more scrutiny and reporting. There is a certain number of things we want the Union to do for our countries and citizens and it must be able to do them.
Everybody also agrees on another point: this must be a budget for growth. A budget that focuses on jobs, on innovation, on research. That's why in my proposal the spending on competitiveness and jobs is more than 50% higher than in the period 2007-2013Here especially this budget is not a zero sum game. Growth in one country benefits all.
Last week I circulated my first draft proposal. Yesterday I carefully listened to all the colleagues, and I put a new proposal on the table.
Compared to the previous version, it keeps the budget's overall total at a stable level. It's 80 billion euro below the Commission proposal and a real cut compared to the 2007-2013 period. This is a first in EU budget talks.
My proposal, compared again to the previous version, includes increases in agriculture and cohesion funds, with total figures for these headings still lower than in the Commission proposal. It compensates these shifts with cuts in other areas.
We will need some more time to finalise this solution. This is the budget for the rest of the decade. And the next 7 years will be crucial, to put Europe back on the path of recovery and growth. So we must get it right.
There's no need to dramatise: these budget negotiations are so complex they generally take two goes.


As I have illustrated to you throughout these past several weeks:

the PIIGS nations  bond yields have languished (yields still very high) 
and yet the European bourses rise big time.

However the markets are not seeing the big storm clouds coming at them:

1. Greece
2. Spain

as for Greece it looks doubtful that a deal can be struck to get their Debt to GDP down to 120.
The deal to buy for 10 billion euros, the 40 billion euros at 25 cents on the dollar is now off the rails.  Why, the Greek bonds have risen in price in anticipation of the offer.

as for Spain, when will they officially ask for a bailout?

(courtesy zero hedge)

On Europe's Apparent Utopia

Tyler Durden's picture

With EURUSD hitting one-month highs and Greek and Spanish government bonds pushing higher day after day, one could be forgiven for thinking all is well across the pond. Tail-risks removed, firewalls in place, and everything ticking along nicely. The reality, of course, is a rather different picture. This week alone, 36bps compression in Spanish sovereign bond spreads, 100bps in Portugal...

European stocks are up over 5%!!!

and yet - under the surface - a harsher reality is coming into view...
Via Credit Suisse:
As we head into year-end, European storm clouds are building. In a week of considerable European news, the most significant in our view is the mass of headlines coming out on Greece. The inability, yet again, of the Eurogroup to reach an agreement in the absence of market stress we don’t think bodes well for the ECB-backed positive market environment to be sustained into 2013.

Greek headlines are negative – for Greece and Europe

It is hard to construe the newsflow out of Greece as anything other than negative. As we outlined last week, in our view the hard stance being taken by the IMF looked likely to lead to a better near-term outcome for Greece’s financial situation than if the IMF wasn’t involved. This is no longer clear.

Greece’s debt load is patently unsustainable, in our view, and it is necessary to cut it again. Which requires the euro area to put its money where its mouth is, and act to show their commitment to keeping Greece in the euro area by cutting Greece’s official sector debt.

It’s not a sufficient condition to put Greece on a sustainable economic path by any means, but it helps – not least because of the commitment it shows. And at the broader level, the fact that it would show that the euro area can take a decisive, pre-emptive action is positive when looking across to the situation in Spain. But instead, we believe the euro area again looks likely just to fudge the issue. We continue to expect funding for Greece to be forthcoming – although an agreement on Monday is far from certain – but a meaningful reduction in the country’s debtload is looking increasingly unlikely despite the IMF’s wishes.

With so many conflicting headlines emanating from this week’s Eurogroup meeting on Greece, the clearest conclusion is that there is complete disagreement not only on what needs to be done to support Greece, and when, but also how to go about it. The potential for anything meaningful therefore looks remote. Particularly since at Wednesday’s German Bundestag meeting on the 2013 budget, Merkel only discussed a cut in interest rates on the bilateral loans and a €10 billion EFSF-financed bond buyback programme. While not impossible, it is hard to see how she can agree to something greater than this next week given it wasn’t discussed in parliament.

So anything but the softest form of OSI still seems to be ruled out by Germany, and if, as reported by the FT, the Bundesbank isn’t willing to disburse its profits, it’s hard to see why other central banks would be willing to do so.

As for the debt buyback plan – on paper it may sound great: Greek bonds have been trading at around 25% of face value so spend €10 billion and buy back €40 billion face value, reducing the nominal debtload by €30 billion or 14% of GDP. Which would be a good start (although not decisive given debt levels in our opinion), but skips over a few minor details – one of which being the fact that bonds no longer trade at 25. Oddly enough, they’ve staged a rather decent rally since the buyback plan was announced… and what’s the incentive to sell? Or are we now talking aboutcoerced bond purchases for 25% of notional, in EFSF bonds again maybe? It seems a small step from current rhetoric to a second private sector debt restructuring – at which point, maybe the 25% also comes into debate. Greece may well be the “exception” a second time sooner rather than later on current trends…

Indecision costs the whole of the euro area

The apparent inability of the euro area to reach any sort of decision on how best to address Greece’s debtload is far more negative in our view than just its impact on Greece. It speaks, once again, in our view, of the inability for progress at the euro area level in the absence of market pressure. The ECB’s (unactivated) OMT backstop has worked extremely well until now, but the ability of it to continue to do so without progress on the political side is limited in our opinion.

As we head into year-end, European storm clouds are building. We still expect Greece to get its funding, but Europe looks increasingly unlikely to grasp the opportunity to take Greek funding issues decisively off the European agenda for 2013. A decision on banking union looks more bogged-down by the day, with the EU budget at risk of going in the same direction, and then there’s Spain...

This week’s election in Catalonia is likely to create further political noise rather than a real risk of secession as outlined by our economists: Catalonia’s choice, 19 Nov 2012.

Our view (hope?) that Spain might ask for support in November, in advance of year-end, looks destined to be incorrect. Since we believe that a Spanish request for support is inevitable, we see little market-positive reason for Rajoy to not to be pre-emptive in asking.

If it really is Spain’s decision when to ask, then market pressure does look increasingly necessary – which based on developments of the last few months could take some time.

This week Spain did another private placement, this time €3.27 billion bought by its social security reserve fund (the last few we believe were primarily bought by the banks). Sovereigns as we’ve often said, are sovereign, and have many means at their disposal to ensure buyers for their debt. The cost, however, is to further increase the correlation in the Spanish system, and hence systemic risk. If, on the other hand, and as we suspect is at least partially the case, the timing of a Spanish bailout request is a decision for the Eurogroup more generally, this begs the question of the advantage to the Eurogroup of a delay. If all countries are on board, there seems to be little to gain from waiting – particularly given the risks to a deterioration in the situation in Greece. And if not all countries are in agreement on the best approach for Spain (which given the situation with Greece, is a depressing possibility), this is clearly market-negative in our view. There is only so much the ECB can do without political support – as Draghi has frequently made clear.

Meanwhile, as illustrated in Exhibits 6 and 7, the private sector is voting with its feet:

German exposure to the periphery continues to fall (down 56% from the peak to the end of September), with exposures to Italy and Spain in particular lower this year. As we highlighted in our publication on the negative sovereign-bank feedback loop, buying time, particularly when done through indecision, comes at a substantial cost. Without certainty or confidence in the likely path ahead, business has to act in accordance with the risks, and cross-border exposures to the periphery will continue to decline, with the resultant negative implications for growth and lending-market fragmentation. As Santander’s CEO said this week: while the Treasury may not need the Spanish bailout, the Spanish economy and firms do.


 The ECB, the EU, and the IMF are playing the game of  "work around".  Everything is fine as long as they do not have to pay.

Your Friday sermon from Dr Grant on European affairs:

(courtesy Dr Grant/out of the Box and Onto Wall Street)

The Five Little PIGS

Tyler Durden's picture

Via Mark J. Grant, author of Out of the Box,

"Oh, sure. Of course, you're entitled. Who doesn't want this, that, and the other?"

                      -Jerry & Elaine, Seinfeld

So we have the Greek debt crisis, the European Union budget problem and the European bank oversight issue and twenty-seven countries all wanting “this, that and the other”except “the other” is not that much fun unless Ms. Merkel surprises everyone by saying she is a little tired and pulling a Mae West and telling all twenty-seven nations that one will have to leave.

“Boys, tell that fellow from Athens that tonight is just not his night.”

The scenario is unlikely of course but then everyone involved is now playing the grand old game of “Work Around” where someone must pay and it is going to be anybody but them. “Not this little piggy,” says the IMF and “not this little piggy” says the ECB and “not this little piggy” says the European Union. This is all because no one wants the political winds to “blow their house down” but there is the grinning big bad old wolf sitting on the mountain of debt and all of the hairs on their “chinny, chin, chins” aren’t going to change that fact. In the classic tale there were three houses with the least stable being the one made of straw and let me tell you; Greece is the straw house. Now you may have thought that the IMF’s contribution was kind of like the Fed or the ECB and that they just created money from some pork barrel but this is not the case. As a matter of fact the United States, as a 16.75% contributor to the International Monetary Fund, is on the hook for $13.4 billion of the money lent to Greece, Ireland and Portugal. Soon, in my estimation, we will have two more pigs in the pen which will be Cyprus and Spain. Change the bed sheets; its “PIGS in a blanket” for everyone!

Why did the PIGS cross the road?

“Whether the PIGS crossed the road or the road crossed the PIGS depends upon your frame of reference.”

                 -Attributed to Albert Einstein

It used to be, in the good old days, that the amounts of money were trivial and the European stockpile was large so that more money could be shoveled into the trough and no one really cared. Every problem was handled by “Mo’ money.” Then one day the wolf trotted back to the Piggly Wiggly and the straw house had grown cavernous and Parthenon Pig had grown from piglet to porker and the credit card bill for the food and the entertainment is sitting on the table of Francois and Angela while they stare at it, try to ignore it as Austria, Finland and the Netherlands declare the offing “Not Kosher” and refuse to partake.

Three PIGS become five PIGS. “Deal or no Deal” results in three no deals. Howie Mandel is nowhere in sight. The wolf bangs at the door and begins to “huff and puff.” Truffles are being replaced with pork and beans. The Euro goes up. The ECB will save the world.

“Thaaat’s All Folks.”

                             -Porky PIG


Although the Egyptian leader gained valuable points in the world for his efforts in gaining a ceasefire between Israel and Hamas, back home he faces trouble as citizens turn against him.  Citizens torch buildings accusing Morsi as being a temporary dictator:

(courtesy zero hedge)

Brotherhood Offices Torched As Egypt Turns Against US Muppet President Turned "Temporary Dictator"

Tyler Durden's picture

Shoe-throwing has escalated to building burning as demonstrators clash in Egpyt over Muslim Brotherhood-backed Mursi's 'coup-like' decision to make his decisions above judicial review. The self-annointed omnipotence comes after the judiciary were about to undo the Islamist-dominated panel drawing up the country's new constitution. This so-called "coup against legitimacy" has brought back painful memories as opposition leaders (ElBaradei) calls the 'temporary dictator' a "new pharaoh" - the same term of derision used against Mubarak when he was in power.
As Reuters notes, the protests and accusations are worryingly reminiscent of the 2011 anti-Mubarak uprising as the infamous Tahrir Square is dominated by calls of "the people want to bring down the regime." The Muslim Brotherhood offices have been set ablaze as a consequence of this 'decree' and the US (a generous benefactor to Egypt's military) is "very concerned about the possible huge ramifications of this declaration on human rights and the rule of law in Egypt." But it is leading protesters that perhaps summarize the situation best: "The decree is basically a coup on state institutions and the rule of law that is likely to undermine the revolution and the transition to democracy, I worry Mursi will be another dictator like the one before him."

Via Reuters:
Egyptian President Mohamed Mursi's decree exempting all his decisions from legal challenge until a new parliament was elected caused fury amongst his opponents on Friday who accused him of being the new Hosni Mubarak and hijacking the revolution.

Thousands of chanting protesters packed Tahrir Square, the heart of the 2011 anti-Mubarak uprising, demanding Mursi quit and accusing him of launching a "coup". There were violent protests in Alexandria, Port Said and Suez.

Mursi's aides said the presidential decree was to speed up a protracted transition that has been hindered by legal obstacles but Mursi's rivals were quick to condemn him as a new autocratic pharaoh who wanted to impose his Islamist vision on Egypt.


"Mursi a 'temporary' dictator," was the headline in the independent daily Al-Masry Al-Youm.

Mursi, an Islamist whose roots are in the Muslim Brotherhood, also gave himself sweeping powers that allowed him to sack the unpopular general prosecutor and opened the door for a retrial for Mubarak and his aides.

The president's decree aimed to end the logjam and push Egypt, the Arab world's most populous nation, more quickly on its democratic path, the presidential spokesman said.


The president's decree said any decrees he issued while no parliament sat could not be challenged, moves that consolidated his powers but look set to polarize Egypt further, threatening more turbulence in a nation at the heart of the Arab Spring.


"The people want to bring down the regime," shouted protesters in Tahrir, echoing one of the chants that was used in the uprising that forced Mubarak to step down.

In Alexandria, north of Cairo, protesters ransacked an office of the Brotherhood's political party, burning books and chairs in the streets. Supporters of Mursi and opponents clashed elsewhere in the city, leaving 12 injured.

A party building was also attacked by stone-throwing protesters in Port Said, and demonstrators in Suez threw petrol bombs that burned banners outside the party building.


The decree is bound to worry Western allies, particularly the United States, a generous benefactor to Egypt's army, which effusively praised Egypt for its part in bringing Israelis and Palestinians to a ceasefire on Wednesday.

The West may become concerned about measures that, for example, undermine judicial independence. But one Western diplomat said it was too early to judge and his nation would watch how the decree was exercised in the coming days.

"We are very concerned about the possible huge ramifications of this declaration on human rights and the rule of law in Egypt," Rupert Colville, spokesman for the U.N. Human Rights Commissioner Navi Pillay, said at the United Nations in Geneva.


"The decree is basically a coup on state institutions and the rule of law that is likely to undermine the revolution and the transition to democracy," Mervat Ahmed, an independent activist in Tahrir protesting against the decree, said. "I worry Mursi will be another dictator like the one before him."

Leading liberal politician Mohamed ElBaradei, who joined other politicians on Thursday night to demand the decree was withdrawn, wrote on his Twitter account that Mursi had "usurped all state powers and appointed himself Egypt's new pharaoh".



An assembly drawing up the constitution has yet to complete its work. Many liberals, Christians and others have walked out accusing the Islamists who dominate it of ignoring their voices over the extent that Islam should be enshrined in the new state.

Opponents call for the assembly to be scrapped and remade. Mursi's decree protects the existing one and extends the deadline for drafting a document by two months, pushing it back to February, further delaying a new parliamentary poll.

Explaining the rationale behind the moves, the presidential spokesman said: "This means ending the period of constitutional instability to arrive at a state with a written constitution, an elected president and parliament."


"There was a disease but this is not the remedy," said Hassan Nafaa, a liberal-minded political science professor and activist at Cairo University.

"I can see from the reaction of the political forces that we are going towards more polarization between the Islamist front on one hand and all the others on the other. This is a dangerous situation," he said, adding it could spark more street trouble.

The streets have been relatively quiet since Mursi took office, ...

The new army leaders are now appointees of Mursi and have stepped back from politics. The military still wields hefty influence through its huge business interests and security role. But one analyst said the generals had been "neutralized."


The real reason that Netanyahu agreed to a ceasefire;  USA troops in the Sinai next week?

(courtesy RT/Debka file/special thanks to Robert H for sending)

Netanyahu agreed to ceasefire after Obama promised US troops in Sinai next week?

Israel and Palestine are momentarily at a ceasefire, but the potential reasoning behind the recess could have some real international implications. Israel’s Debka reports that the pause in fighting comes after the US promised to send troops to Sinai.
According to Debka, US troops will soon be en route to the Sinai peninsula, Egyptian territory in North Africa that’s framed by the Suez Canal on the West and Israel on the East. In its northeast most point, Sinai is but a stone’s throw from Palestinian-controlled Gaza, and according to Debka, Hamas fighters there have been relying on Iranian arms smugglers to supply them with weaponry by way of Egypt.
Debka reports this week that Sinai will soon be occupied by US troops, who were promised by President Barack Obama to Israel’s leaders as a condition that a ceasefire be called. Once deployed, the Americans will intervene with the rumored arms trade orchestrated by Iranians, ideally cutting off supplies for Hamas while at the same time serving as a thorn in the side of Iran.
“Once the missile and arms consignments depart Iranian ports or Libyan arms bazaars, Tehran has no direct control of their transit from point to point through Egypt until they reach Sinai and their Gaza destination,” Debka reports. “All the same, a US special forces operation against the Sinai segment of the Iranian smuggling route would count as the first overt American military strike against an Iranian military interest.”
The decision to send US troops to Sinai in exchange for a ceasefire was reportedly arranged early Wednesday morning after Pres. Obama made a deal over the phone with Israeli Prime Minister Benjamin Netanyahu. In the days prior, Israel was relentless in targeting Gaza, killing more than 100 persons — including civilians — during a renewed assault on Hamas. A ceasefire has since been called after a week of fight, but more military action could soon occur, claims Israel, if the flow of weapons to Gaza is not stopped. Netanyahu has been adamant with his pleas for the United States to strike Iran in an effort to disrupt its nuclear enrichment facilities, a demand which up until now has been brushed aside by Pres. Obama. The White House has up until now insisted on diplomatic measures in order to make an impact on any Iranian output, but Debka’s sources suggest that US troops may now have to intervene in Sinai if any smugglers should attempt to move weapons into Gaza.
“By opening the Sinai door to an American troop deployment for Israel’s defense, recognizes that the US force also insures Israel against Cairo revoking or failing to honor the peace treaty Egypt signed with Israel in 1979,” adds Debka.
According to their sources, US troops are expected in Egypt early next week. Meanwhile, American forces have all but surrounded Iran and are stationed in countless bases across the Middle East.

Your opening Spanish 10 year bond yield: (  still close to 6% ) at around 8 am Friday morning.



5.672000.00700 0.12%
As of 08:01:01 ET on 11/23/2012



Your opening Italian 10 year yield:  

Italy Govt Bonds 10 Year Gross Yield


4.759000.03400 0.71%
As of 08:06:04 ET on 11/23/2012.


Your 8:00 am early currency crosses: showing general USA dollar weakness . The Euro/usa cross gained during the night which substantially indicating the algos the risk on scenario and go for the green with respect to equities:

Euro/USA    1.2922  up .0044
Japan/USA  82.18    down .176
GBP/USA     1.5940  up .0004
USA/Can       .9961  down  0016


Your early results for bourses for Europe 8:30 am Friday morning prior to NYSE :

i. England/FTSE up 12.55 points or 0.22%

ii) Paris/CAC up 7.11 points or 0.20%

iii) German DAX: up 8.17 points or 0.11%

iv) Spanish ibex: down 20.90   points or 0.%


We do not see much austerity for Portugal.  This nation saw spending rise by .7% for the months January through October,  yet...

i) indirect taxes drop by 4.5%
ii) direct taxes drop by 3.7%

so they increase spending yet revenues fall.  Sounds like we will need another bailout for Portugal:

(courtesy zero hedge)

European 'Austerity' Update

Tyler Durden's picture

As we highlighted a few months back for Spain, the word 'austerity' appears to mean something different than we thought. Portugal just announced:
  • *PORTUGAL SAYS JAN.-OCT. SPENDING RISES 0.7%           :1174Z PL
and to help cover that anti-austerity 'rise' in spending:

Hhhhmm, well at least the deficit reduced modestly thanks to some chicanery transferring pension benefits. We are sure this 'diligent austerity' is why the bonds have rallied 100bps this week and everyone is patting the Portuguese on their back for 'following the Troika program'!


Your closing Spanish 10 year yield: (reacting positively to the higher Euro/usa cross)



5.619000.03900 0.69%
As of 11:59:56 ET on 11/23/2012.


Your closing Italian 10 year bond yield:  (now safely below 5%)

Italy Govt Bonds 10 Year Gross Yield


4.751000.03300 0.69%
As of 11:59:51 ET on 11/23/2012.


Your 3:30 pm currency crosses: ( still showing considerable  USA weakness against all currencies.
The Cdn dollar got a boost as the IMF wishes the C$ and the Aussie dollar to be included in countries reserve currencies. 

Euro/USA    1.2972 up  .0099
Japan/USA  82.40  up .039
GBP/USA     1.6032 up .0096
USA/Can      .9927 down 0049


Your closing figures from Europe and the USA:

all in the green

i) England/FTSE up 28.11 points or  0.49%

ii) Paris/CAC up  30.58 points or 0.87%

iii) German DAX: up 64.14 points or 0.89%

iv) Spanish ibex: up  34.0 points or 0.43% 

and the Dow: up 172.79   points 


And now for some big USA stories:

Boehner describes how the USA just cannot afford Obamacare.  His comments are certainly not helping the big divide between the Republicans and Democrats on the fiscal cliff

(courtesy Reuters)

Boehner comments show tough road ahead for "fiscal cliff" talks

ThurNov 22, 2012 5:09pm EST

* Boehner: U.S. can't afford "Obamacare" law, given debt

* Says law "has to stay on the table" as parties discuss debt

* Analysts say "Obamacare" a non-starter in fiscal cliff talks

* Boehner comments could be "bargaining chip" in negotiations

By Roberta Rampton

WASHINGTON, Nov 22 (Reuters) - New comments from top Republican lawmaker John Boehner slamming health care reforms illustrate how hard it will be for Washington to reach a deficit reduction deal when talks resume next week, analysts said on Thursday.

President Barack Obama and the U.S. Congress will begin negotiating next week on a plan that could avert tax hikes and spending cuts set to begin in January that economists worry could push the U.S. economy over the "fiscal cliff" and into recession.

Boehner did not explicitly mention the "fiscal cliff" talks in an opinion piece published in the Cincinnati Enquirer on Wednesday. But he argued the nation cannot afford the costs of Obama's 2010 health care reform law, given the United State's sluggish economy and massive $16 trillion debt.

"That's why I've been clear that the law has to stay on the table as both parties discuss ways to solve our nation's massive debt challenge," said Boehner, who is a key player in the talks.

Boehner's comments show it won't be easy to reach a deal on the thorny tax and spending issues, said Greg Valliere, chief political strategist at Potomac Research Group in Washington.

"There's an enormous gulf between the two parties on the details," he said, noting it is still possible that Obama and Congress may agree by January to broad spending and tax measures, and then take months afterwards to iron out details.

"Plunging off the cliff, then passing a tax cut in January that excludes the rich -- is still a very live option," Valliere said.


Analysts said Boehner's renewed critique of the health care law is designed to appeal to Republicans in the House of Representatives who have voted more than 30 times to repeal it.

The law aims to extend health coverage to more than 30 million uninsured Americans starting in 2014. It also contains measures designed to contain the costs of America's $2.6 trillion healthcare system, the most expensive in the world.

Republicans had promised to repeal the law, which they call "Obamacare", if they won the November presidential elections.

But Obama won, and Democrats kept their majority in the Senate. Last June, the U.S. Supreme Court upheld the reforms.

Boehner's comments were "not constructive" for the fiscal talks ahead because there is little chance negotiations will lead to changes in the health care law, said Jim Kessler, senior vice president for policy at centrist think-tank Third Way.

"This is a complete non-starter and a clumsy starting point for negotiations," Kessler said.

Larry Sabato, political scientist at the University of Virginia, said he thought Boehner's comments seemed like a "bargaining chip" for the talks ahead.

"Just as President Obama is insisting that taxes must go up for everyone making $250,000 or more, the Republicans are saying that Obamacare is on the table," he said, noting he expects the income trigger for tax increases will end up being much higher and that the healthcare law will stay untouched.

After the election, Boehner acknowledged in an ABC News interview that "Obamacare is the law of the land", although he also said the law had to be "on the table" as legislators work toward balancing the nation's budget.

Julie Barnes, director of healthcare policy at the Bipartisan Policy Center, said the costs associated with getting the new health reforms in place pale in comparison to the much-larger costs of tax and spending issues before lawmakers.

"Small businesses and large businesses are not going to view Obamacare as what's really causing the problem for their competitiveness. The problem is health care costs," Barnes said.


In December,the Fed will engage in "forever" or "unlimited" bond purchases as they mop up 85 billion dollars of mortgaged back securities. Ben Bernanke states that this is temporary and he can reverse course at any time.  He is lying.  The USA will engage in evergreen (or forever) bond purchasing.  Hyperinflation will be upon us shortly.

(courtesy Bruce Krasting)


Bruce Krasting's picture

I live not too far from a 100 year-old dam that’s part of NYC’s water supply. There’s a roadway that runs over the top. For years, the locals used the dam as the quick-way to town.

That ended a few days after 911 when some SWAT guys showed up. The thinking was that maybe the terrorists would hit the water supply next. That lasted a few months; then the SWAT guys left, and were replaced with NYS prison guards (a nasty lot). The guard guys hung out in a hut, smoked cigarettes and talked on cell phones.

Two years of guard duty (and a ton of OT) went by with no attack, so the Home Land Security folks brought in a few big rocks, and a heavy cable to keep things safe, sort of.

Things stayed like that for another five years, all the time people complaining that they had to drive miles out of the way, and the kids were stuck on buses for hours and it wasn’t safe as fire, police and ambulance had to go up the side road.

So finally push came to shove, and there was a big meeting, and the folks at the DHLS worked out a deal with the County. The dam roadway would be reopened; but only after the national threat alert went to green.


American won’t see a “Green” alert level for another fifty years. What kind of answer is that? It’s a lie.

I thought of this story after reading the comments from the Swiss National Bank’s Vice-Chair, Danthine. He set a time frame for how long the SNB would maintain the 1.2000 peg against the Euro. His words:

SNB can keep 1.20 cap as long as needed

As long as needed? That's about as open-ended as it can get. This language could be interpreted as meaning 1-2 years, it could just as easily mean ten-years (forever). Danthine is describing an inflexible policy that has no defined ending. I think of this as "Evergreen" monetary policy.

Evergreen policies are evident at all of the big CBs today. The ECB's, Mario Draghi, has used the word "Unlimited" when describing the scope of his willingness to intervene in the capital markets. He has also used the word "Forever" when describing the duration of the fixed exchange rate regime in the EU.

Forever + Unlimited = Evergreen

Japan has been Evergreen for years. Is it ten rounds of QE that the BOJ has done so far? And today, in what I find to be an extraordinary development, there is a promise that Evergreen will be taken to the next level. In less than a month, Japan will have an election, the outcome will mark the end of the concept of an "Independent Central Bank". The leading candidate, Abe, has promised that if elected, he will force the BOJ to conduct money printing monetary policies that would have no bounds.
I think of this as if the government was handing out cyanide pills. The markets disagree. The Nikkei has been on a tear ever since the national elections were called:

Why is it that the promise of more printing always brings with it a ramp up in equity prices? After ten failed attempts, one would think that investors finally "get it". QE does not work, it just distorts.

The Mother of all Central Banks is, of course, the Federal Reserve. Ben Bernanke, his cohorts at the Fed and the usual suspects in the press have been preparing the markets for the coming QE4.
Janet Yellen spoke a week ago, she talked Evergreen:

The three elements of forward guidance that were adopted by the FOMC in September 2012 would have been unthinkable in 1992 and greatly surprising in 2002, but they have, in my view, become a centerpiece of appropriate monetary policy.

Right. What was, not so long ago, "unthinkable", is now the "centerpiece". These people are actually proud of this "accomplishment".

Then Bernanke spoke, Evergreen was his message too:

we expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.

In other words, there is no scenario for an end to printing.

And finally, today, the WSJ's ace reporter, Jon Hilsenrath, has an interview with Federal Reserve President John Williams. The message? More Evergreen talk.

Conceptually you could imagine some upper limit to this but I don't think we're getting anywhere near it.

On whether the Fed could stop monetizing any time soon?

Stopping or scaling back would be "counterproductive" for the economy.

The US is at a tipping point on monetary policy. Operation Twist ends in December. The mind numbing reality is that if the Fed were to allow Twist to just end, it would be contractionary.
Traditionally, monetary policy could be either Restrictive, Accommodative, or Neutral. In 2012, Neutral is equal to Contraction. There is no longer a middle ground. Either the Fed adds more to the system every month for eternity, or else.
And that is exactly what will happen in December. The Fed will do QE#4, it will result in an additional $40+B per month of Fed buys. Along with QE#3, that means the Fed will be monetizing debt to the tune of $85B a month ($2mm a minute, 24/7). When QE#3 and #4 is ending, we will have QE#s 5 and 6.
Bernanke has said many times that all of his efforts are just temporary. That the big balance sheet of the Fed can be reduced with no problems at all when ever it might be needed. Ben's lying. He's fibbing in the same way as suggesting my roadway might reopen someday soon. America is never going to have a Green Terror Alert status again. The answer to the question, "When's the shortcut gonna open again?" is, "Never". The Fed is no different. They are committed to an Evergreen approach. They have no other alternative.
The major economies of the world are faced with Print or Die. So print it will be. I do wish the monetary overlords would acknowledge that what is being done is irreversible, and that the consequences will be felt for years. What was once unthinkable, is now permanent.


The death of a company and one simple look as to how it happened:

(courtesy Market Shadows/Dr Paul Price)

Harder to Digest than Twinkies

Myth: Twinkies have a shelf-life of forever. They don’t; they stay fresh for about 25 days.

Hostess: Union Rules were Harder to Digest than Twinkies

Courtesy of Dr. Paul Price
Did union workers simply get their ‘Just Desserts’ for backing Hostess into a corner with too many unreasonable demands? Consider the evidence.
Union workers have now completed their mission. 18,500 jobs are gone forever.
The national labor bosses stood firm. Labor leaders are proud they stood up to those nasty ‘suits’ [see Entourage for definition] who refused to run a money-losing business simply to continue paying salaries and benefits.
Hostess posted a $341 million loss in 2011 on revenues of about $2.5 billion. Contributing to those 2011 losses:
  • $52 million in Workers’ Comp Claims
  • Dealing with 372 Distinct Collective-Bargaining Contracts
  • Administration of 80 Separate Health and Benefits Plans
  • Funding and Tending to 40 Discrete Pension Plans
  • $31 million in year-over-year increases in wages and health care benefits for 2012 v. 2011
Uncounted in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:
  • No truck could carry both bread and snacks even when going to the same location
  • Drivers were not permitted to load their own trucks
  • Workers who loaded bread were not allowed to also load snacks
  • Bringing products from back rooms to shelves required another set of  union employees
  • Multi-Employer pension obligations made Hostess liable for other, previously bankrupted,  retirement plan contributions from employees that never worked for Hostess at all
America has come to this. The only defense against insane union demands is the willingness to walk away and close shop.
With General Motors and Chrysler we found that even that remedy wouldn’t work.

Market Shadows (


Well I guess that does it for the week.
I will see you Monday night.


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