Wednesday, March 20, 2013

More gold standing for March/More news from Cyprus

Good evening Ladies and Gentlemen:

Gold closed down  $3.80 to $1607.50 (comex closing time).  Silver fell by 3 cents to $28.78.

Here are the final access closing of gold and silver:

gold:  $1605.90
silver: $28.81

Today is the FOMC day and many of you know that gold and silver are always whacked prior to the announcement.  Today was no different.

In physical news at the comex, the CME reported a huge gold delivery notice filed equal to 181 notices or 18,100 oz , the number of gold ounces standing for delivery rose by  17,900 oz and thus 12.84 tonnes of gold is standing for March delivery.  No doubt this is a record for gold deliveries in the off delivery (non active) delivery month.

Eric Sprott has given a report showing 4,500 tonnes of official gold has left the USA shores for Europe.  It is a very important read.

The big news of the day is Cyprus again. This morning we were greeted with news of a potential deal with Moscow which proved not to be the case.
We now learn that the banks will be closed at least until Tuesday.
It looks like Putin has the upper hand in dealing with Cyprus. He is a very shrewd cookie.

We have two reports on this:

the first from Jim Sinclair
the second from Sherrie Questioning All

both are very important reads..

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

The total gold comex open interest fell by 3089 contracts falling from  443,801 down to 440,712.    The non active front month of March saw it's OI rise by 422 contracts from 641 down to 219.  We had a huge 601  notices filed yesterday so in essence we gained 179 contracts or 17,900 oz of additional gold will stand for March delivery.  The next big active delivery month is April which is  2 weeks away from first day notice.  Here the OI fell by 12,746 contracts from 176,921 down to 164,175.  The estimated volume today was mediocre at 130,883.  The confirmed volume yesterday was very strong at 207,924.

The total silver open interest rose b 1338 contracts from 150,192 up to 151,525.  The OI for the entire complex remains elevated. The active front month of March saw it's OI rise by 225 contracts from 342 up to 567. We had 3 delivery delivery notice filed on Tuesday so in essence we gained 228 contracts or 1,140,000 oz of additional silver oz will  stand for the March delivery. The non active April contract rose by 3 contracts up to 404.  The next big active delivery month contract for silver is May and here the OI rose by 916 contracts from  78,594 up to 80,510.  The estimated volume today was very weak at 20,539.   The confirmed volume on Thursday was stronger at 36,511 contracts. 

Comex gold/March contract month:
March 20.2013    

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
116,197.624 (HSBC, ScotiaManfra)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
 181   (18,100  oz)
No of oz to be served (notices)
38 (3,800) oz
Total monthly oz gold served (contracts) so far this month
4091  (409,100 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We had huge activity at the gold vaults.
The dealer had 0 deposits and 0   withdrawals.

We had no   customer deposits:

total deposit: nil   oz

We had 3  customer withdrawals :

Out of HSBC:  51,779.659 oz
 Out of Scotia:    64,385.815 oz
Out of Manfra:  32.15 oz

total customer withdrawal:  116,197.624  (another huge withdrawal)

We had 1  adjustment:

i) out of HSBC vault: 1,302.908 oz was adjusted out of the dealer account and into the customer account at HSBC.

Thus the dealer inventory rests tonight at 2.446 million oz (76.08) tonnes of gold.

The CME reported that we had 181 notices filed for 18,100 oz of gold today.   The total number of notices so far this month is thus 4091 contracts x 100 oz per contract or 409,100 oz of gold.  To determine how much will stand for March,  I take the OI standing for March (219) and subtract out today's notices (181) which leaves me with 38 notices or 3,800 oz left to be served upon our longs.

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

409,100 oz (served ) + 3,800 oz (to be served upon) = 412,900 oz or 12.84 Tonnes.

we gained another 179 contracts or 17,900 additional gold ounces will stand in March.  The amount standing is extremely large for a non active delivery month and I believe a record for a non delivery (non active) gold month.


March 20.2013:   The March silver contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 352,308.386  oz ,(CNT, HSBC)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory  386,907.41 (Brinks)
No of oz served (contracts)200  (1,000,000, oz)  
No of oz to be served (notices)367  (1,835,000  oz) 
Total monthly oz silver served (contracts) 1972  (9,860,000  oz) 
Total accumulative withdrawal of silver from the Dealers inventory this monthxxxxx
Total accumulative withdrawal of silver from the Customer inventory this monthxxxxx

Friday, we  had good activity  inside the silver vaults.

 we had 0 dealer deposits and 0 dealer withdrawal.

We had 1 customer deposits of silver:

i) Into Brinks: 300,318.04 oz

 total customer deposit: 300,318.04  oz

we had 4  customer withdrawals:

i) Out of CNT:  20,585.71 oz
ii) Out of Brinks:  602,024.76  oz
iii) Out of Delaware:  5004.50  oz
iv) out of HSBC 253,926.16   oz

total customer withdrawal:  881,541.13 oz

we had 0 adjustments:

Registered silver remains Friday at :  42.506 million oz
total of all silver:  162.863 million oz.

The CME reported that we had 200 notices filed for 1,000,000 oz of silver for the March active contract month. To obtain what is left to be served upon our longs, I take the OI standing for March (567) and subtract out today's notices (200) which leaves us with  367 notices or 1,835,000 oz left to be served upon our longs. 

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

9,860,000 oz (served)  +  1,835,000 oz (to be served upon)  =  11,695,000 oz

we gained a huge 1,140,000 oz of  silver standing.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Now let us check on gold inventories at the GLD first:

March 20/2013:



Value US$63.145  billion

March 19.2013:



Value US$63.273  billion

March 18.2013:



Value US$62.859  billion

March 15.2013:



Value US$63.232  billion

March 14.2013:



Value US$63.025   billion

March 13.2013:



Value US$63.155  billion

March 12.2013:



Value US$63.345 billion

we neither gained nor lost any gold at the GLD.

And now for silver:

March 20.2013:

Ounces of Silver in Trust340,262,979.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,583.36

 March 19.2013:

Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66

March 18.2013:

Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66

march 15.2013:

Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66

Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60

March 13.2013:

Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60

March 12.2013:

Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48

March 11.2013:
Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48

 Today the inventory at the SLV fell by a monstrous 4.83 million oz .


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 0.0 percent to NAV in usa funds and a positive 0.0%  to NAV for Cdn funds. ( March 20 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 2.14% NAV  March 19/2013
3. Sprott gold fund (PHYS): premium to NAV  rose to 1.68% positive to NAV March 19/ 2013.


And now for the major physical stories we faced today:

Note Argentinian citizens are now turning to gold as inflation in Argentina rises to 26%:

(courtesy Goldcore)

Argentina Turns To Gold As Inflation Tops 26%

-- Posted Wednesday, 20 March 2013 | Share this article | Source:
Today’s AM fix was USD 1,611.50, EUR 1,247.10 and GBP 1,064.12 per ounce.
Yesterday’s AM fix was USD 1,602.50, EUR 1,238.41 and GBP 1,059.78 per ounce.
Silver is trading at $28.95/oz, €22.52/oz and £19.23/oz. Platinum is trading at $1,558.50/oz, palladium at $737.00/oz and rhodium at $1,250/oz.
Gold rose $7.30 or 0.45% and closed yesterday at $1,612.60/oz. Silver rose to $29.10, and then finished down 0.03%.

Cross Currency Table – (Bloomberg)
Despite an increase in risk appetite in recent months, systemic risk remains. As Reuters' Pedro da Costa noted the "global impact of events in Cyprus casts doubt on the notion that the financial system has gotten a lot stronger since the crisis." The Cypriot deposit levy is creating jitters among some investors who are increasing their gold positions.
Argentines are buying more gold than ever to protect their savings from the Western Hemisphere’s fastest inflation reported Bloomberg.
Banco de la Ciudad de Buenos Aires, Argentina’s only bank offering gold bullion coins and bars to investors and savers is negotiating with mining companies to purchase gold direct as surging demand depletes the scrap supply.
The bank began marketing gold to clients after Argentina tightened currency controls in October 2011, selling 280 kilos in year one for 102.6 million pesos ($20 million).

Gold, 5 Years – (Bloomberg)
Argentines are utilizing gold to hedge their savings as economists forecast the peso will lose more value than any currency in the world, and President Cristina Fernandez de Kirchner forbids dollar purchases.
The nation’s inflation rate of 26% is also eroding Argentina’s peso- denominated bonds to fall 5.5% ytd.
“I’m buying gold every chance I get,” Guillermo Acosta, a 27-year-old security guard, said inside a branch of Banco Ciudad in downtown Buenos Aires. “With this inflation, I feel like my savings will evaporate if I keep them in pesos.”
Acosta’s initial investment of 10 grams of gold in February last year has returned 47% as the price per gram rose to 381.5 pesos from 260 pesos.

Gold in Argentine Pesos – 5 Years – (Bloomberg)
With Argentina printing pesos to finance itself, the growth of pesos in the economy has rose 38% in the past year, leading analysts to predict that the currency will depreciate 12.9% through year-end, the highest of currencies tracked by Bloomberg.
Banco Ciudad is the only bank left that trades in gold after Fernandez banned the purchase of certified 99.99% pure gold for savings in July. The bank sells it at 99.96% purity, according to Carlos Leiza, who oversees the lender’s gold trading.
There is a 35% gap in the prices to buy and sell physical gold at Banco Ciudad, while there’s no premium to sell the country’s benchmark 2017 dollar bond in the local market, according to the Buenos Aires-based Open Electronic Market, known as MAE.
Gold sold by Banco Ciudad also isn’t recognized internationally, making it more difficult to determine its value, he said.
The cost of 100 grams of gold in Argentina as of last week was 36,646 pesos. In New York, the same amount based on the benchmark troy ounce (31 grams) sold for about $5,126.
The bank multiplies that price by 0.95 to account for the lower quality of the gold to get a dollar price of $4,870.
“Historically, gold has been seen as a store of value, so as long as options for doing that in Argentina are limited, people are going to keep buying it,” Banco Ciudad’s Leiza told Bloomberg.
Bloomberg’s Alix Steel covered the story and a short video about record gold demand in Argentina can be watched here

Cyprus fears, FOMC hopes support gold prices – Market Watch

Gold holds near 3-week high on Cyprus crisis
 – Reuters
Video: COT for Gold Very Bullish – Got Gold Report


This is huge!!!

As I have been telling you:  gold is moving west to east:

(and leaving the vaults of Fort Knox)

(courtesy Eric Sprott/Kargutkar/GATA)

Sprott study of trade data suggests huge export of U.S. government gold

11:57a HKT Wednesday, March 20, 2013
Dear Friend of GATA and Gold:
Sprott Asset Management's Eric Sprott and Shree Kargutkar today report that their study of 22 years of international trade data suggests that the United States has exported almost 4,500 tonnes of gold beyond the country's supply capability.
Sprott and Kargutkar write: "The only U.S. seller that would be capable of supplying such an astonishing amount of gold is the U.S. Government, with a reported gold holding of 8,300 tonnes. The U.S. Government's gold holdings have not been audited or verified in more than four decades. The U.S. trade data defines the export of nonmonetary gold as a sale of gold from a private seller within the U.S. to an official agency. In September 2012 we espoused that the Western central banks have been surreptitiously selling or leasing their gold through private channels in an effort to increase the available supply and in turn suppress prices. This new analysis using official U.S. agency numbers seems to provide the strongest validation of our hypothesis to date. It is worth noting that our data covers only two decades and that the export gap could in fact be significantly larger if earlier numbers were included or the real private investor demand for gold was known."
The Sprott and Kargutkar commentary is headlined "Do Western Central Banks Have Any Gold Left? -- Part II" and it's posted at the Sprott Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Sprott: Do Western Central Banks Have Any Gold Left? Part II

Tyler Durden's picture

By: Eric Sprott & Shree Kargutkar of Sprott Asset Management
Do Western Central Banks Have Any Gold Left? Part II (part 1 here)
The past few months have been difficult for the gold investor as selling pressure in the gold futures market has set a decidedly negative direction for the price of the yellow metal. As fundamental investors, we always pay special attention to the supply and demand dynamics of gold and, recently, we have found it very difficult to reconcile lower prices with continued strong demand for physical gold.
While the supply of gold has remained largely static, we have seen a steady increase in demand for the yellow metal. India and China have emerged as strong buyers, consuming over half of the mine supply in recent years. Central banks have switched from being sellers of gold to being net buyers, with their gold purchases in 2012 increasing by 17% to almost 535 tonnes. Exchange traded products (ETPs) around the world have continued to add to their gold hoards, as have institutions and private investors. Furthermore, central banks, such as South Korea and Russia, have added to their bullion reserves early in 2013, which points to sustained strength in demand. These facts are important because, over the past decade, the annual supply of gold has stayed flat at approximately 4,000 tonnes.
Much ado has been made about the recent sell-off in the yellow metal forcing certain ETPs to liquidate, adding a supply of gold into the market in the process. Our work reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011, May 2012 and July 2012) have all coincided with gold finding strong price support and rallying higher.
In our September 2012 MAAG, titled, “Do Western Central Banks Have Any Gold Left???”, we reconciled the annual change in demand for gold between 2000 and 2012 to be almost 2,300 tonnes. We went on to hypothesize that given the massive change in demand, the only suppliers large enough to fill the gap between supply and demand were the Central Banks. Now, our long search for the “smoking gun” to prove our hypothesis appears to have finally materialized.
Every month, the US Census Bureau releases the FT900 document, which outlines US International Trade Data. Going through this document, we were intrigued to see that in December 2012 the US exported over $4B worth of gold and imported around $1.5B worth of gold, representing a net export of $2.5B or almost 50 tonnes1. This surprising number led us to look at the previous releases of US International Trade Data which go as far back as 1991 – what we found was truly shocking. Not only has the US been consistently exporting large quantities of gold on a net basis, the amount of gold the US has been exporting is above and beyond what the US should be capable of exporting.
The gold market is fairly simple to understand from a supply and demand perspective. Since you cannot fabricate gold out of thin air, supply comes from new mine production, scrap gold recycling and investor disposition of bullion. Demand comes from many sources including investment demand, electronics, dental and industrial uses to name a few. There can be short-term aberrations between supply and demand where the market can be oversupplied, or demand can outstrip supply, however, over a longer period, supply should equal demand with the price acting as the equalizer. Under this assumption, the amount of gold that the US is exporting should equate to the amount of gold that the US is not consuming over a long enough time frame.
Table 1 lays out our framework for analyzing the US gold supply and demand.
Table 1
For our analysis of supply and demand, we have very robust statistics as far as mine production, import-export data, coin sales and ETP demand from GFMS2, the US Census Bureau3, the US Mint4 and Bloomberg5, respectively. We have good data on gold recycling, jewelry sales and gold use in electronics and industrial applications from the CPM Group6.
Table 2 lays out our analysis for 2012 using the supply and demand framework.
Table 2
We used this framework to analyze supply and demand in the US going all the way back to 1991, which is as far back as the FT900 documents go. Over the span of 22 years, the total amount of gold that the US has exported – above and beyond its supply capability – is almost 4,500 tonnes! A truly stunning figure. (See Table 3).
Admittedly there is an unknown in our analysis, that being gold bullion acquisition and disposition by private investors. However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years. The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes. The US Government gold holdings have not been audited or verified in more than four decades. The US trade data defines the export of nonmonetary gold as a sale of gold from a private seller within the US to an official agency. In September 2012, we espoused that the Western Central Banks have been surreptitiously selling/ leasing their gold through private channels in an effort to increase the available supply and in turn suppress prices. This new analysis using official US agency numbers seems to provide the strongest validation of our hypothesis to date. It is worth noting that our data only covers two decades and that the export ‘gap’ could in fact be significantly larger if earlier numbers were included or the real private investor demand for gold was known.
We are currently in an environment where policy makers are intent on devaluing their currencies in an effort to create growth. Real rates continue to stay negative in most of the developed world. Every marginal dollar of debt that is created is producing lower and lower amounts of growth. In a world overwhelmed by mountains of debt and economic growth which is sub-par at best, precious metals and real assets can act as insurance against the stupidity of policy makers. The evidence pointing towards the suppression of the gold price is becoming increasingly apparent. Don’t be the last person to figure this out! The current sell-off in gold should be viewed not with extreme trepidation but as an unbelievable opportunity to buy the metal at an artificially low value.
1Import Export Stats – US Census Foreign trade:
3Import Export Stats – US Census Foreign trade:
4Coin sales from US Mint:
6Jewelry, recycling, dental, electronics and industrial from CPM Gold Yearbook


Sales of silver and gold eagles soar in Febrary:


Eagle sales soar even as metal prices fall

2:01p HKT Wednesday, March 20, 2013
Dear Friend of GATA and Gold:
Debbie Bradley of Numismatic News reports this week at Numismaster that sales of U.S. gold and silver eagle coins rose in February by 240 and 126 percent, respectively, over the previous February. Her report is headlined "Eagle Sales Soar Even as Metal Prices Fall" and it's posted at Numismaster here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Gene Arensberg gives a video presentation of positions of our major traders.  He shows that there is a huge imbalance and thus extemely bullish!

(courtesy Gene Arensberg/GATA)

Special video of Arensberg's Got Gold Report is extremely bullish

2p HKT Wednesday, March 20, 2013
Dear Friend of GATA and Gold:
In a special video presentation of his Got Gold Report, Gene Arensberg describes a historic imbalance in the positions of traders in the gold futures market, an imbalance he finds extremely bullish. The video is posted at the GGR Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

And now for our more important paper stories which will have an influence on gold and silver.

The following is your most important commentary of the day.  It is imperative that you read it

(courtesy Jim Sinclair/Kingworldnews)

Russia trounces IMF in Cyprus, Sinclair tells King World News

12:24p HKT Wednesday, March 20, 2013
Dear Friend of GATA and Gold:
The financial debacle in Cyprus has given Russia a huge victory over the International Monetary Fund, gold trader and mining entrepreneur Jim Sinclair tells King World News today. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

First  your early market sentiment which shaped the trading in NY:

The following story shaped trading from Europe and the USA as the Cyprus finance minister offered hope when that a deal will be struck with Cyprus with Moscow.

There was no actual news, but the boys hyped this and all bourses landed in the green.

Discussion from Bloomberg and Jim Reid of Deutsche Bank.

(your early market sentiment/zero hedge)

Hope Of Good News From Moscow Sees Return Of Overnight Futures Ramp

Tyler Durden's picture

The Cyprus finance minister Michael Sarris may or may not have submitted his resignation after the president formally declined to accept it, but now that he is back on the saddle he is back to spreading hope, cheer and goodwill. Those wondering why both the EURUSD, and its derivative, US stock futures have surged overnight and retraced all of yesterday's losses and then some, it is not due to any anachronistic events such as "good economic news" (especially since the Spanish PM said Spain will have to cut its economic outlook once again, or rather, as usual), but due to the following phrase uttered by Sarris a few hours ago: "We are hoping for a good outcome, but we cannot really predict" regarding his views on talks with Russia. That's right - the entire overnight ramp is based on the hope of one man, who thinks Russia can be blackmailed through deposit haircuts, into bailing out the tiny island which has now said neinto Europe and bet the ranch on a well-meaning Vladimir Putin. What can possibly go wrong: according to the GETCO algos all alone in levitating stocks, absolutely nothing. What is clear is that Cyprus is fully intent on seeing Europe "blink" whether due to Russia's involvement or just because it thinks (correctly) it has all the leverage as the alternative is a breakdown of the Eurozone.
Needless to say, there was no actual good news out of Russia. From Reuters:
Finance Minister Michael Sarris said he had reached no deal on financing with his Russian counterpart, Anton Siluanov, but talks were continuing.

Cypriot officials disclosed that the country's energy minister was also in Moscow, ostensibly for a tourism exhibition. Cyprus has found big gas reserves in its waters adjoining Israel but has yet to develop them.

"We had a very honest discussion, we've underscored how difficult the situation is," Sarris told reporters after talks with Siluanov. "We'll now continue our discussion to find the solution by which we hope we will be getting some support.

"There were no offers, nothing concrete," he said.
Elsewhere, Nicholas Papadopoulos, a member of Cyprus’s democratic party Diko discussed the parliament’s rejection of a levy on bank deposits with Bloomberg TV, saying Cyprus would propose a new package to the EU. That's great. The only problem is that the math is simple: either a massive haircut on Russians sparing everyone else, or nothing, and if the Russians get whacked, there will be no deal with Russia, while parliament has already made it clear any deposit haircut would not fly. So back to square one even as Frau Merkel reiterated the Shaeuble talking points, saying she regrets the decision by the Cypriot parliament.
However, reality is irrelevant - all that matters to the vacuum tubes is that there is some hope out of Europe, and with no POMO today, the algos are very hopeful that Bernanke will not hint at any more rate cuts today in today's 2 pm FOMC minutes, as he has in the past two times, as that would surely kill any no volume levitation party.
More overnight highlights from Bloomberg:
  • Treasuries fall for first time in four days as yen resumes decline vs U.S. dollar. Fed meeting concludes today; rate decision and eco projections at 2pm in Washington, Bernanke press conference at 2:30pm.
  • Troika officials are in Cyprus discussing further capital controls and the possible extension of a bank holiday through the end of the week, according to a European official who spoke on conditions on anonymity
  • Germany and its euro-area allies maintained pressure on the island’s politicians today to raise a planned EU5.8b via a levy on deposits; Austria finance minister Fekter raised the threat of a ECB funding cutoff while Germany’s Schaeuble said the nation’s “business model is no longer tenable”
  • Russia and Cyprus are continuing loan talks, with Cypriot finance minister Sarris pledging to continue discussions “as long as it takes”
  • BoE’s King was defeated for a second month in a vote to expand stimulus as the majority of policy makers said more bond purchases may erode their credibility and push the pound lower, minutes of the MPC’s March meeting showed
  • GBP/USD rises 0.3% to 1.5138; Chancellor of the Exchequer Osborne presents his 2013 budget at 1:30pm in London
  • U.K. jobless claims fell less than forecast in February while a wider measure of unemployment rose for the first time in a year
  • Japan closed for holiday. Shanghai Composite +2.7%. European equity markets, U.S. index futures higher. Peripheral yields fall, spreads to Germany  narrow  Energy, precious metals rise
The full overnight narrative from DB's Jim Reid:
Cyprus looks set to continue to dominate the headlines in the near term although we do have Bernanke on show later and also the UK budget. As I'm sure you all know by now, the Cypriot Parliament rejected a reworked levy on deposits last night. The revised levy, which included an exemption on deposits below EUR20k, was rejected by 36 votes with 19 abstentions including the President's centreright DISY party abstaining from the vote. So a pretty categoric rejection. The 'no' led to immediate focus on Cyprus’ banking sector as we approach the ECB’s Emergency Liquidity Assistance (ELA) expiry today although our economists believe in practice some leeway for a few days exists. The provision of ELA funding is normally conditional on the receiving banks remaining intrinsically solvent but our economists noted that this condition hardly holds with the prospect of a bank run starting immediately after the expiry of the bank holiday.
After the no vote, the ECB released a vague statement saying that it "reaffirms its commitment to provide liquidity as needed within the existing rules". This helped the S&P500 (-0.24%) and EURUSD (-0.58%) close off the day’s lows. Reports suggest that Cyprus' banks could remain closed until next Tuesday March 26th with capital controls and transaction limits in place when banks eventually open (WSJ, Telegraph). The FT noted that Cyprus’ finance minister arrived in Moscow last night in an 11th hour attempt to request assistance from the Kremlin.
In many ways we're back to square one as the fact that the revised version of the bank levy was rejected by the Cypriot parliament suggests that the "reprofiling" of the levy, which was open to negotiations with the troika, was not the main issue. More likely, it is the very principle of a bank levy - and the adverse consequences it would have on the country's standing as an off-shore centre - which is being overwhelmingly rejected by Cyprus' political circles. It is obviously a setback for the EU, but as our Economists note, reaching a deal on the adjustment program at the first attempt has always been tough since the beginning of the crisis. Rationally they think the Cypriot government and parliament will have to accept the deal, at least the principle of a deposit levy,  even if some sweeteners may have to be found (e.g. on the austerity measures).
But with the deposit levy facing political opposition what are the other fund raising options potentially available to Cyprus? Overnight the ekathimerini reported that Cyprus will attempt to sell the troubled Popular Bank of Cyprus, known as Laiki, and possibly other local lenders. The same article noted that it is likely the Russians will seek some form of compensation for such an investment. A naval port in Cyprus for the Russian fleet and access to the country’s natural gas reserves are among the rewards Moscow might seek. The option of tapping the social security funds’ reserves (amounting to EU5bn) is said to also being considered. The other option being reported is to offer depositors with more than EUR100k a voluntary haircut in return for natural gas-indexed bonds. The NYT also reported that Gazprom may enter the fray with a private bailout plan. Rather than tax deposits, Cyprus could raise money to right its economy by selling Gazprom exploration rights to offshore gas deposits in the Mediterranean Sea. Given that Gazprom is 50.02% owned by the Russian government and with former PM Putin being the current company chairman – such a deal certainly adds geopolitical dimension to the current situation. If raising the EU5.8bn in funds via the deposit levy is the pre-requisite for the EU bailout for Cyprus, then Gazprom seems financially quite capable of mustering a deal of some sort given its current market capitalisation of about EU84bn and a cash balance of c.EUR12bn at the end of September 2012.
So the question is whether the EU will revise its terms, whether the Cypriots find a way of raising the money in an acceptable manner or whether Russia rides to the rescue. The market is still assuming the money will be found somehow and hasn't yet considered the 'nuclear' alternative. A fascinating few days still lie ahead.
While the immediate focus is on the developments in Cyprus, we also have the FOMC statement (6.00pm London time) followed half an hour later by Bernanke’s press conference. For the record, DB’s US economists do not anticipate any major policy changes at today’s meeting - Chairman Bernanke and Vice Chair Yellen have been clear in recent commentary that the improvement in the labour market to date falls far short of what they will need to see before reducing monetary policy accommodation. In particular, Bernanke would like to see further rebound in the employment-population ratio, which has moved only slightly higher (58.6%) from its post-recession low (58.2%). For this reason, they anticipate a continuation of QE through at least mid-year, despite the improving tone in the economic data. In terms of the Fed’s latest economic projections, our economists expect that central tendency projections for 2013 real GDP growth (currently 2.3% to 3.0%) may be modestly upgraded while the year-end unemployment rate range of 7.4% to 7.7% may drift slightly lower.
Across the Atlantic, Chancellor George Osborne will be presenting the UK government budget for the next fiscal year today. News reports have suggested that government ministers have been ordered by the Chancellor to come up with GBP2.5bn of extra spending cuts. The extra cuts, equivalent to about 1%, over the next two years will apply to all departments apart from health, schools and hospitals, although police, defence and local government will also be granted some leniency. The savings are expected to be used to fund housing and other capital projects including a number of growth-oriented infrastructure items.
In addition to laying out the budget, some are expecting the Chancellor to use the opportunity to signal a change in the BoE’s mandate that would allow the central bank to loosen its 2% inflation target.
Turning to Asia, markets have been relatively quiet newsflow wise with Japanese markets closed for the Vernal Equinox public holiday. Chinese equities have posted strong gains overnight led by the Shanghai Composite (+2.5%) and Hang Seng (+0.8%) which is pulling other regional equity markets off the overnight lows. It is a similar story for the S&P500 futures (-0.05%) which has recovered from the overnight lows. In the currency space, the Australian dollar is marginally firmer against the USD. The CDS index roll has been the main focus for the Asian markets overnight and will likely be the main theme for  European and US markets ahead today.
Looking at the rest of the day ahead, we have the BoE minutes from its March meeting which will show how the nine members of the MPC voted with respect to further easing. The UK labour report is scheduled to be released at the same time. The above mentioned UK budget is expected at 12:30pm GMT today. In the Eurozone, Italian President Napolitano is expected to begin consultations with political leaders this morning London time in an effort to form a government. Datawise, the advance consumer confidence reading for March will be the main data point in the Eurozone. In the US the focus will be squarely on the FOMC and Chairman Bernanke’s press conference but expect markets to continue to gyrate around developments in Cyprus for now.


A discussion on currencies and on   the capital markets as they react calmly to the Cyprus rejection.

The following areas are discussed:

A.  the European Monetary areas

i) will the ECB continue to fund Cyprus as that was the big threat 
ii) the mistake by the EU was not to include Russia in the discussions
iii) it looks like a bank holiday will extend to the middle of next week.

B. The UK budget problems

i) will they QE or not?
ii) the majority of governors do not want QE as they claim it has no benefit

C the USA:

the Fed meeting today and discussion on whether they will lower expectations on GDP

D, Australia and New Zealand:

1. Iron ore prices are forecast lower which will hurt the Aussie
ii)  Softer steel production from China
iii) inflation rising in New Zealand with milk prices up 15% at last auction.

(courtesy Marc to Market)

What Next?

Marc To Market's picture

The global capital markets have reacted calmly to the Cyprus rejection of the terms of the 10 bln euro aid package. There is an ECB meeting today, which the Cyprus central bank governor is not attending. The immediate issue is that without an agreement should the ECB continue to allow Emergency Lending Credit be extended to Cyprus banks. It had previously threatened to cut it off as of tomorrow. This was the hard place on the other side of the rock of the conditionality which included a tax on all depositors that Cyprus found itself in over the past weekend.
When the post mortem of the Cyprus debacle is conducted, the failure to include Russia, an important stake holder in the talks was an important blunder.  Although Cyprus is making overtures now, European officials will not accept new loans from Russia to meet its 5.8 bln euro funds it needs to raise.  That would, after all be counter-productive putting the country back on a sustainable fiscal trajectory. 
While the ECB has a difficult and, one might add, a fundamentally a political not a technocratic, decision.  Cyprus needs to quickly propose an alternative.  Selling exploration to the gas fields on its continental shelf to Russia's Gazprom as some have suggested would seem to be tantamount to surrendering sovereignty in the other direction.  The bank holiday will be extended and reports now suggest they might not re-open until the middle of next week. 
In addition to the Cyprus developments, there are several other events vying for attention.  First, the UK budget is awaited and there is some thought that the BOE's remit may be modified, in order to give monetary officials greater leeway to offset the austerity that the Osborne is expected to maintain.  
Sterling had been under performing, but the MPC minutes showed that King and his two allies (Miles and Fisher) failed to carry a majority for the second consecutive month to resume gilt purchases.  The majority was concerned about the credibility of the BOE on new gilt purchases.  Gilts sold off  as many suspect that the window to resuming QE is closing as to avoid forcing Carney to inherit ongoing operations; better to begin with a clean slate, so to speak. 
Sterling rallied a cent against the dollar to new highs on the day, just above yesterday's peak near $1.5145.  Nearby resistance is seen in the $1.5160-80 area.  The UK's employment data failed to impress.  The jobless claims fell by 1.5k instead of the 5k the consensus expected.  The unemployment rate was steady steady.  Of note, the average weekly earnings slowed to 1.2% (Jan 3m year-over-year) compared with 1.5% expectation, which is well below levels that the BOE has indicated are consistent with price stability. 
The FOMC meets today.  It will provide updated macro-economic forecasts.  The statement will not go into details about the evaluative discussion QE and a review of the exit strategy.  We suspect that this is going to be more the focus of Bernanke's press conference.
The Fed is likely to recognize that the recent string of economic data has been encouraging in terms of the resilience to the fiscal headwinds, though in other regards, we don't expect substantial changes in the statement. 
On the other hand, it may revise it GDP forecasts lower.  Recall that the the mid-point of its range for 2013 is 2.7%, which as is its habit, on the optimistic side.  The Bloomberg consensus is 1.9%, which is the same as the Philly Fed's survey.  The National Association of Business Economists is 2.4%.  Forecasts of inflation (PCE deflator) and unemployment are unlikely to be altered much. 
Lastly there are two notable developments among the Antipodeans.  First is the forecasts for iron ore prices.  One major investment house cut their forecasts to $139 a tonne from $144 average for this year.  The main considerations were moderating demand in the face of softer steel production in China.  In contrast, the Australian government raised its forecast to $119 from  $106 a tonne forecast last December.  Separately, Australia reported a 1% decline in merchandise imports.  We suspect that poor weather and the Chinese New Year distortions have skewed the data.
Second, New Zealand reported another sharp jump in milk prices.  The 14.8% rise at the fortnightly auction follows a 10.4% rise at the previous auction.  The key whole milk powder jumped 21%.  However, the rising price is to distribute the drought-induced scarcity.  Volumes fell by 28%.   New Zealand reports Q4 12 GDP early in Wellington on Thursday.  After today's somewhat wider than expected Q4 current account deficit, the risk is slightly to the downside of the 0.9% consensus forecast.


Now the fun as the ECB tries to outbluff Cyprus.
The ECB states that they are "prepared to let Cyprus go"

(courtesy zero hedge)

ECB Re-Bluffs To Cyprus Bluff, Is "Prepared To Let Cyprus Go"

Tyler Durden's picture

When the market briefly surged yesterday, following the cryptic note from the ECB that it would "provide liquidity within existing rules" we urged to ignore the kneejerk algorithmic exuberance (although with only algos left trading that was obviously self-defeating) which interpreted this as an indication the ECB would provide unconditional liquidity now and forever, and that this was hardly a bullish sign because "the last thing the ECB wants is to appear weak, and fold letting every other broke deadbeat country to demand the same equitable treatment and diluting Germany's political might." Today, Reuters has picked up on this coming out with its own analysis that the "The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone."
It is unclear how much of the article is actual analysis, and how much interest-driven propaganda to put the ball back in Cyprus court with the imputed knowledge that the ECB will not fold and thus cave to Troika deposit haircut demands, but fundamentally the logic is there as, once more, the ECB will hardly want to appear weak and cave in to a "recalcitrant" and unyielding Cyprus. Of course, what happens if indeed Cyprus decides to pull the € plug, should Russia provide an unlimited backstop and in the process subjugate a part of European territory without firing a shot, and the precedent that Europe can and will let members go, nobody knows but one thing is certain: stocks will go, as always, up.
From Reuters:
Cyprus propelled the 17-nation bloc into uncharted waters on Tuesday by rejecting a proposed levy on bank deposits as a condition of a 10 billion euro ($12.9 billion) EU bailout.

Without the aid, much of it to recapitalize Cypriot banks, the ECB says they will be insolvent, and it requires banks to be solvent for them to receive central bank support.

Denied these funds, Cyprus would be left staring into a financial abyss.

For the rest of the euro zone, the ECB has a suite of policy tools at its disposal to prevent contagion - with bond purchases and unlimited liquidity offers to the fore.
"Tools" such as the unlimited, open-ended and very much non-existent OMT, which only "works" as long as it never has to work, because the Deus Ex qualities attributed to it by Draghi would actually have to be formalized, with the legal conditionality precedents put in writing should it truly start buying up bonds, something which would immediately destroy its image as the "end all, be all" bazooka that can fix any ailment. Which is why the second the OMT must be used, is when the entire European house of cards implodes. The catch is that a country must first agree to an aid plan of reforms and austerity measures. The Cyprus case has highlighted just how difficult agreeing such a program can be. "Even if the principle of OMT is still there and valid, all the drama about Cyprus may remind people that the bar to get OMT is actually higher than they probably think," Deutsche's Gilles Moec summarized.
As for the ECB's hard line:
By stressing that it stands ready to provide liquidity "within the existing rules", the ECB is standing firm.

The central bank is not ready to bend for Cyprus.

As its governing council gathered for a mid-month meeting on Wednesday, Asmussen pressed Cyprus to agree to an aid plan:

"We can provide emergency liquidity only to solvent banks and ... the solvency of Cypriot banks cannot be assumed if an aid program is not agreed on soon, which would allow for a quick recapitalization of the banking sector.

With Cyprus sovereign bonds ineligible for use as collateral for ECB refinancing operations due to their low credit ratings, the Cypriot central bank is providing banks with Emergency Liquidity Assistance (ELA).

These emergency loans are more easily available, but the ECB's Governing Council must approve provision of ELA. It reviews banks' eligibility every two weeks and needs a two thirds majority to stop these funds.

"If really need be, the euro zone would likely choose to let small Cyprus go and focus on containing the damage instead of softening the conditions to such an extent that much bigger countries than Cyprus could be encouraged to reject their own current bailout terms," said Berenberg Bank's Holger Schmieding.
And to think: so much pain and confusion over what CNBC can't stop repeating is nothing but a tiny, little country.
Tiny... maybe. But the precedent it will set may well be of Archduke Ferdinandian size.

Cyprus Banks To Reopen Next Tuesday At Earliest As Capital Controls Become Reality

Tyler Durden's picture

We can only hope that nobody will be shocked that the greatly overhyped Friday Cyprus bank reopen has been postponed.
And since March 25, Monday, is another Cyprus bank holiday, "Greek Independence Day" (from whom? Certainly not the Troika), it means Cypriot banks will now remain closed at leastuntil next Tuesday and likely far longer. In the meantime, since TV cameras can't show lines of people at their freindly neighborhood bank, which will have been closed for over a week, the propaganda machine will blast full bore how because the market is pushed higher by the Fed, any fears of bank runs can be forgotten. Actually instead of "can", replace with "must."
But since banks have to reopen at some time, at which point the inevitable bank runs will become reality, the already discussed Plan B is now taking shape:
It remains to be seen if a country can't have a bank run in theNew Centrally-Planned and Despotic Normal, if there is simply a law saying it is now illegal to pull or transfer more than €100 of cash per day.


I would like you to read the Sherrie Questioning All blog.
It gives a good review of events in Cyprus and then asks very pertinent questions at the end:
1. will Russia give the Cypriots the 5.6 billion euros in exchange for the port for its ships and also give gas/oil rights to the Russian firm Gazprom?
2.  Does Russia want Cyprus to remain in the EU? Is it to their advantage for Cyprus to remain in the EMU?
3. Would Russia take revenge on the EU for trying to gouge Russian deposit money?Russia could help Cyprus leave the EU  and then finance their gas and oil fields plus have a major port which they need in the Mediterranean.
4. Does Russia benefit if the EU collapses?
5. What does China think about this?
legitimate questions!!!

(courtesy Sherrie Questioning All)

Wednesday, March 20, 2013

Germany: Warns Cyprus Banks may never reopen without Euro bailout. Putin most Powerful Man in the World right now. Euro Zone will be decided by Russia.

Here is what we do know about Cyprus/Euro Zone/Russia.

The ECB, IMF and the Euro Zone Financial ministers had made the condition of the bail out for Cyprus with the bank deposit levy being enacted in Cyprus.   They knew full well the largest amount of money in the banks was Russian mafia/mob dirty money being laundered which they were attempting to grab.

The whole money stealing scheme went terribly wrong.  They did not expect it to back fire on them.  They have let the world see, they are willing to steal everyone's money in the banks for their own good.  They have revealed they are blood sucking people who will do anything to save their own asses and keep their little group together at the cost of all the people in the world.  The have shown that no one's money is safe in any bank no matter the country as they can make demands upon it.   The only reason the Cyprus people did not get their money stolen from them was due to the Russians.

No doubt due to many phone calls from the Russians (mob/mafia) that had money in the bank to the parliament members, letting them know what would happen to them and their families if they voted to steal billions from them in the banks.  The parliament members thought it best to go against the wishes of the Euro Zone and vote "No" on the levy of deposits.

But it appears the Russians were warned in the first place along with government and bank employees, as billions had fled the banks just days before the surprise announcement of the levy last Friday from those groups.   Even though there was inside information, they could not get all their money out before the levy announcement and the banks closed.

Russia is sending Naval ships for permanent deployment in the area now.  Putin has been very vocal, saying it was an unfair and dangerous for Cyprus to levy the bank deposits.   There are gas fields in Cyprus waters that Russia would like to get their hands on.

The Euro Zone caused Putin to become the most Powerful man in the world right now, in my opinion.  The Euro Zone's future lays completely in Putin's hands at this time.   I am sure they did not mean to do that and the whole money stealing scheme went so terribly wrong for them, they ended up giving the balance of power to Russia.   Remember, Russia and China are cozy with each other and they trade between themselves without using the dollar, as they swap currencies now.    China has stayed out of the bailing out of the Euro in the past, but how much skin do they have in the game?

The German Finance minister has warned the Cyprus banks may never reopen again if Cyprus does not get a bail out from the Euro Zone.

Germany's finance minister has warned Cyprus that its crisis-stricken banks may never be able to reopen if it rejects the terms of a bailout.
Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".

UPDATE 12:25 PM est - Cyprus banks will not reopen until next Tuesday at the earliest.  When they do reopen, 'Capital Controls' may be in place.
I wonder how the Russians feel about not being able to get their money and afterwards only being allowed to a small part of it each day?  The Cyprus banks and parliament is in quite a predicament. They have the Euro Zone on one side and the Russian mafia on the other.  I sure wouldn't want to be a politician in Cyprus right now.  I am sure many of the parliament members wish they were not at this time either.  

The Finance minister for Cyprus tried to resign and instead is up in Russia right now, having discussions about Cyprus and Russia's future together.

Russia at the moment has won the poker hand against the Euro Zone.  Their hand was called and Russia ended up having a Full House compared to EZ's straight.  The game is still being played so we don't know who will actually walk away winning and if Russia has a Royal Flush to win it all.  I would bet any Russian hands played against the Euro zone will have to have China's approval too.

Even the small country of Cyprus leaving the Euro would be a major blow, with the house of cards falling down.  At all cost the Euro Zone can not allow that to happen.

Nigel Farage told everyone to get their money out of the banks, yesterday and the Euro Zone would do anything to keep their currency going, including stealing everyone's money.

Here are my questions and what we don't know at this moment:

Will Russia completely bail out Cyprus and be their 'savior' by making agreements with them for their gas fields and a Naval port, thus giving them the money they need for their banks to reopen? 

Does Russia want Cyprus to stay in the Euro?  Is it to Russia's advantage to have Cyprus stay with the Euro Zone or would it be better for them to go back to their previous currency (pound)? 

Could Russia get their ultimate revenge upon the Euro Zone, who wanted to steal their money by the billions from their bank accounts and help Cyprus leave the Euro Zone and once that happens the Euro Zone collapses? 

Would Russia benefit from a Euro Zone collapse or do they benefit more from the Euro Zone staying together? 

What are China's thoughts on the Euro's future, how much do they have invested in that future?
One thing I have noticed: not one Chinese online news site has mentioned Cyprus this week, which I have found very odd. 

The status of the Euro has now just been handed to Russia and it will actually be Putin's and Russia's decision of what happens.   Putin can thank all the Euro Zone ministers, including Merkel and Bernanke for making him the most powerful man in the world, in my opinion.

Think about it.... Russia/Putin can literally take down the Western Banking world at this point.  Do they push Cyprus to leave the Euro Zone and finance them or help them stay in the Euro?  House of cards fall for the bankers if they leave.



Is Spain going to levy its own tax on deposits?

(courtesy zero hedge)

Is Spain Preparing For Its Own Deposit "Levy"?

Tyler Durden's picture

While Spain's economy minister Luis De Guindos proclaimed in the Senate today that bank deposits under EUR100,000 are "sacred"and that "Spanish savers should stay calm," Spain, it would appear, has changed constitutional rules to enable a so-called 'moderate' levy on deposits - as under previous Spanish law this was prohibited. For now, they claim the 'levy' will be "not much higher than 0%" and is mainly aimed at regions in Spain that have "made no effort to collect taxes" based on new revenue expectations. As El Pais reports, the minister of finance and public administration, Cristobal Montoro, defends the need for such a 'levy' in their constitution on the basis of standardizing taxes across regions (and is preparing a proposal on the amounts to be paid) and although it would appear that while the European Commission could previously argue that such a 'tax' would violate the free movement of capital in Europe, itnow leaves the door open to eventually effectively taxing the deposits. We can't help but remember the Tequila crisis and the constant reassurances from Zedillo up until even the night before Mexico devalued...
The Minister of Finance and Public Administration, Cristobal Montoro, has advanced on Tuesday that the government will impose a type "moderate" to bank deposits to compensate communities that saw their tax autonomy canceled after the Executive created a state tax 0% rate.  This tax on bank deposits, which has nothing to do with Cyprus, does not affect savers but requires credit institutions to pay for that capture deposits. 

"The autonomous communities receive timely and therefore financially compensation shall implement a moderate rate in the state tax on bank deposits," said the minister, adding that this kind "will not be much higher than 0%" . 

The Minister of Finance has clarified that such "moderate" will have no tax collection effort, "but that these regions serve to offset the revenue loss to see."  So, he assured that the amount will correspond to the amount "exact has been undermined by the cancellation of regional taxes". 

It will not be the case of Asturias, where the tax on deposits was approved by the regional budget law, while "Spanish law prohibits the adoption of this mode" stressed Montoro.  During the questioning of Senator Francisco Fuentes Socialist Group Gallardo, Montoro explained that communities of Extremadura, Andalusia and the Canary Islands, which were in force when the tax came into effect on state "receive timely compensation, which will resulting from the implementation a moderate to state tax rate. " 

Montoro has stressed that the Central Government is preparing a proposal on the amounts to be paid to travel to the affected communities "in the relevant joint committee" with the affected communities.  "That is the Government's intention and hope that through political dialogue can establish an agreement," said. 

Has advanced further the Government's intention to reduce delays for this compensation count as income to the budget. 

Meanwhile, Sen. Gallardo Fuentes Extremadura hasquantified what will stop collecting the three affected regions in 2013, once in force the 0% of the Government, amounting to 230 million euros in 2013.  Specifically, Extremadura lose 39 million euros, 96 million Canary Islands and Andalusia, 95.5 million.  Besides, you corresponerían Asturias 30 million. 

The Government announced in November 2012 the creation of a tax on bank deposits with type 0%, with implementation on 1 January 2013, to prevent the regions implement your own.  A week earlier, the Constitutional Court had endorsed the tax on deposits of Extremadura, which launched in 2001 and turned in the day the government of José María Aznar. 

Thus, this tax was in force before the imposition of the 0% and in the case of Andalusia, the Canary Islands in 2010 and established, who created it in June 2012.  Only after it established Asturias.  So this type Montoro 0% justified by the need to standardize the tax system and maintain the unity of the internal market, after the European Commission will send a letter to the Government on the grounds that these taxes in the regions could violate the free movement of capital.  While leaving the door open to eventually effectively taxing the deposits.


A terrific commentary on what we are witnessing in Cyprus:

(courtesy Malkoutziz/Ekathimerini (Greece)

Cyprus, It's Not About The Numbers

Tyler Durden's picture

Authored by Nick Malkoutzis, originally posted at ekathimerini,
The Eurogroup agreed on Monday night to allow Cyprus to change the make up of its controversial deposit tax.Instead of imposing a levy of 6.75 percent on savings under 100,000 and 9.9 percent on those above 100,000 – as agreed in Brussels in the early hours of Saturday – Nicosia can play around with the numbers, just as long as it raises the arranged amount of 5.8 billion euros.
Cyprus’s new but already beleaguered President Nicos Anastasiades is proposing that bank customers with deposits under 20,000 euros should not be taxed at all, while keeping the levy the same for the remaining depositors. Cypriot MPs have already shown a reluctance to approve the tax, mindful of the impact on depositors but also the long-term damage it could do to the island’s banking system and economy.
However, what’s happened over the past few days and what’s likely to happen in the days and weeks to come has little to do with numbers. It is much more about perceptions. Even if a financial meltdown is averted in Cyprus this week, the decision to tax depositors there in order to reduce the eurozone and International Monetary Fund contribution to the island’s bailout has sown the seeds for a future eruption.
The Eurogroup’s decision on Monday was a clear attempt to correct a mistake, while steadfastly refusing to admit one had been made. There are different interpretations about what happened in Brussels late Friday and early Saturday but ultimately they matter little compared to the end result, which was that Anastasiades flew home to implement the first depositor haircut in the euro’s history with the blessing of fellow eurozone finance ministers and the IMF’s Christine Lagarde.
There is nothing the Eurogroup had to say to the Cypriot government on Monday night that it could not have said in Brussels a few days earlier. The only difference was that by Monday the reaction in Cyprus and other parts of the eurozone to the idea of a deposit tax, including on guaranteed savings, had underlined what a perilous idea it was to start off with. From Sunday, eurozone governments and finance ministers who had been at the Eurogroup meeting, started to distance themselves from the idea of taxing small-time depositors with such frequency that it seemed hardly any of them participated in the Brussels talks and the few that did were strong-armed by Anastasiades into accepting a tax for deposits under 100,000 euros.
The back-pedalling and hand-wringing has been an embarrassing spectacle but it has also laid bare the unedifying eurozone decision-making process and the lack of stature amongst its decision makers. The only two plausible interpretations for the Eurogroup approving such a self-destructive decision as taxing all bank deposits is a complete disregard for the consequences (doubtful) or an utter underestimation for the effect it would have (more plausible).
The latter suggests that one part of the eurozone is now completely out of step with the other, unable to understand its challenges, its concerns and, ultimately, its reality. Only a core group of decision makers with no sense of the fragile state of societies in the periphery, which have been battered by deepening economic crisis and uncertainty for months on end, would favour a policy that creates a precedent for governments to grab people’s savings without second thought.
Even if capital flight from Cyprus as a result of this decision is less severe than many fear, even if Cypriot banks survive this real stress test, even if the island’s economy is not set back many years, even if savers in Greece, Spain, Portugal and Italy don’t panic, the idea of a deposit tax and the way it was adopted has released something poisonous in the air. It is difficult to see how these citizens will be able to trust the system - be it their governments, banks or eurozone partners - in the weeks to come. Belief in countries where the economy is contracting and unemployment growing is already vitreous and planting fears about a possible deposits grab in the future could shatter it completely.
Some will argue that the numbers involved in Cyprus are not that big, that small depositors will not lose a lot. This misses the point. Again, it’s not about the numbers, it’s about perceptions. Cypriot savers will not be so concerned about losing a few hundred euros here or there. After all, they know what’s going on in Greece and are aware that if they don’t pay a deposit levy, they’ll pay through higher taxes, lower wages and reduced spending. No, their worry will be about what’s going to come next. They have witnessed supposed partners back their country and its new president into a corner with almost underworld-style ruthlessness. The European Central Bank, essentially their central bank, threatened to cut off funding to Cypriot lenders, to cause their collapse, which would bring economic disaster. In these unprecedented circumstances, what basis is there for a relationship of trust between Cypriots and the eurozone? What’s to prevent them thinking that if they’ve been squeezed over this, they won’t be cornered over the island’s natural gas reserves or the terms for reunification with the Turkish-occupied north?
Others will argue that it is unfair to expect Germany or other eurozone taxpayers to keep footing the bill for bailing out member states. This also speaks of different perceptions of reality in the euro area. It ignores the fact that taxpayers in countries that have been bailed out are also paying a price. In fact, if one looks at the eurozone today and chooses any of its main economic indictors, it is abundantly clear who is footing the much higher cost for these rescue packages.
This emergence of parallel lives is the illness spreading to the heart of the single currency. How can the eurozone’s two parts understand each other when their realities are growing further apart? How can one side decide for the other when it’s not experiencing the depression, polarization and incertitude of its counterpart? In this two-tier construct, how can those on the upper deck assimilate the warnings from those below that the vessel is sinking, when their feet aren’t even wet?   
That’s why Cyprus is about so much more than just numbers.


This sent the Japanese yen tumbling this afternoon!!

(courtesy zero hedge)

Non-News That Japan Will Ease "Boldly" Has Bigger Impact Than Bernanke

Tyler Durden's picture

But wait - some regurgitated news from Japan of 'moar easing' and EURJPY ramps to pull S&P futures up to pre-Cyprus levels...
You have to wonder when no-news from the BoJ trumps no-news from the Fed in stirring S&P to move (but success as the S&P maaged to finally close the Cyprus gap). We can't help but wonder who decided that at 2:05am Japan time this non-news algo-pumping headline should be released?


our early Wednesday morning currency crosses;  (8 am)

Wednesday morning we  see minor euro strength  against the dollar   from the close on Tuesday, still trading below  the key 1.30 mark at 1.2921. The yen this the morning  is a touch weaker  against  the dollar,   at 95.38 yen to the dollar.  This will eventually cause problems as Japanese citizens bail out of their bond/yen holdings because of inflation.    The pound, this morning is a littler stronger against the USA dollar touching the 1.51 barrier at  1.5138. The Canadian dollar is stronger  against the dollar at 1.0237.   We have a  risk is on  situation  this morning with the major European bourses in the green.  Gold and silver are higher  in the early morning, with gold trading at $1611.50 (up $.20) and silver is at $29.00 up 19 cents in early morning European trading.

The USA index is down 25 cents at 82.78.

Euro/USA    1.2921  up .0059
USA/yen  95.38 up .327
GBP/USA     1.5138 up .0044
USA/Can      1.0237 down .0031


And now your closing Spanish 10 year bond yield:

a fall of .06 in yield:  (yields back over 5%)



4.980.07 1.29%
As of 12:59:57 ET on 03/20/2013.

yesterday's yield



5.040.08 1.57%
As of 12:59:59 ET on 03/19/2013.


And now our Italian 10 year bond yield:  (a drop of .09%)

Italy Govt Bonds 10 Year Gross Yield



4.640.09 1.88%
As of 12:59:59 ET on 03/20/2013.
yesterday's yield


  + Add to Watchlist


4.730.09 1.96%
As of 12:59:56 ET on 03/19/2013.


Your 5:00 pm closing Monday currency crosses:

The Euro rose again  this afternoon settling at 1.2950. The yen weakened terribly this afternoon  to finish at 96.02 . The pound weakened a bit this afternoon  finishing at 1.5108.  The Canadian dollar weakened a bit  against the dollar closing at 1.0243. 

The USA index remained constant from the morning session with the final index number down 23 cents to 82.79. 

Euro/USA    1.2880 down  .0063
USA/Yen  95.08 down .236
GBP/USA     1.5108  up 0014
USA/Can      1.0243  up  0044


Your closing figures from Europe and the USA:

red ink

i) England/FTSE down 8.62  or 0.13%

ii) Paris/CAC up 53.81 or 1.43% 

iii) German DAX:  up 54.18 or .68%

iv) Spanish ibex up 95.3 points  or  1.15%

v) Italian bourse (MIB) up  345.42  points or 2.20%

and the Dow up 3.76(.03%)


And now for some USA news:

No surprises from the Fed:

No Surprises From FOMC - Statement Redline Comparison

Tyler Durden's picture

As expected, Bernanke and his pals decided moar is betterer and keep the monetary policy foot to the floor even as they suggest things are getting better but not better enough.
So everything is moving forward; Politicians are still idiots but don't worry we won't stop...
Though the schizophrenia remains as they cut growth for 2013 ( 2.3%-2.8% vs 2.3%-3.0%) but lowered unemployment for 2013 (7.3%-7.5% vs 7.4%-7.7%).
Pre: 10Y 1.94%, ES 1550, Gold $1606, WTI $92.70, EUR 1.2950 


Fed Ex disappoints today:

(courtesy zero hedge)

Global Trade Bellwether FedEx Cuts Outlook, CapEx Forecast, Says May Ground Aircraft

Tyler Durden's picture

We are lucky that in the new normal earnings, cash flows, news, and broadly reality, are completely irrelevant, and all that matters is the central bank-sponsored S&P multiple expansion (due to monetary dilution), or else the news from moments ago that FedEx once more cut not only its EPS but CapEx (and thus growth spending) may have been negative for stocks, and even mentioned by assorted propaganda networks. And since none of the above will happen, here is the bottom line: FedEx - the bellwether for global trade and logistics - just cut its year EPS from $6.20-$6.60 to $6.00-$6.20, and slashed CapEx from $3.9 billion to $3.6 billion. But at least in keeping with the demands of ZIRP, the company instead of spending on growth, which is obviosuly not there, will instead buy back 10 million shares of stock. This tells you all you need to know about the "recovery."
From the release:
FedEx projects earnings to be an adjusted $1.90 to $2.10 per diluted share in the fourth quarter and an adjusted $6.00 to $6.20 per diluted share for fiscal 2013 before charges related to the company’s business realignment. Costs of the benefits provided under the voluntary buyout program will be recognized in the period that eligible employees accept their offers, predominantly in the fourth fiscal quarter. Including the third quarter costs, the company now expects the fiscal 2013 pretax cost of the voluntary buyout program to range from approximately $450 million to $550 million in cash expenditures, or $0.89 to $1.09 per diluted share, with some additional costs expected in fiscal 2014. Actual costs will depend on employee acceptance rates. Including the business realignment costs, earnings are expected to be $0.94 to $1.34 per diluted share in the fourth quarter and $4.91 to $5.31 per diluted share for fiscal 2013. This guidance assumes the current market outlook for fuel prices. The capital spending forecast for fiscal 2013 is now $3.6 billion, compared to $3.9 billion in the company’s previous forecast.

In last year’s fourth quarter, the company reported earnings of $1.99 per diluted share, excluding a $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Including this charge, earnings were $1.73 per diluted share.

Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “We expect these international revenue trends to continue. We have other actions under way beyond those already included in our profit improvement program. Some of these additional actions may involve temporarily or permanently grounding aircraft, which could result in asset impairment or other charges in future periods.”

“In early February, a number of officers and managing directors, primarily at FedEx Services and FedEx Express, accepted voluntary buyouts, and on February 15, thousands more team members were notified of their eligibility for the buyout program. This program is one of the first steps in a process that will help FedEx Express achieve necessary cost structure reductions and improved efficiency. In addition to continued profit improvements in the base businesses at FedEx Ground and FedEx Freight, our profit improvement programs are targeting annual profitability improvement at FedEx Express of $1.6 billion by the end of fiscal 2016, from the fiscal year 2013 base business. Collectively, these initiatives are expected to increase margins, improve cash flows and increase our competitiveness,” said Graf.
But what about 2022??


Generally,if Fed Ex falters so does the economy:

Here is trading on Fed Ex today:

FedEx Corporation
NYSE: FDX - 20 Mar 4:01pm ET
99.13-7.33‎ (-6.89%‎)


Fed Ex trading today

(courtesy zero hedge)


Meanwhile In Global Logistics...

Tyler Durden's picture

FedEx started the day down around 4% (on the disaster that we noted earlier) and has not looked back. Now at the lows of the day, down 7% (and 8.5% from its highs yesterday) this is the biggest drop and biggest volume (with 30 minutes left in the day) in 18 months.

So much for global trade volumes...

Our famous crooks reach a settlement in the MF Global scandal:

(courtesy Reuters/GATA)

JPMorgan, MF Global trustee reach $546 million settlement

By Sakthi Prasad
Wednesday, March 20, 2013
JPMorgan Chase & Co. has reached a $546 million settlement with the trustee liquidating the failed broker-dealer unit of MF Global Holdings, a court filing showed, an amount that will help repay the brokerage's customers.
As part of a settlement reached with James Giddens, the trustee who is tasked with liquidating MF Global Inc, JPMorgan will pay $100 million that will be made available for distribution to former MF Global customers.

JPMorgan will also return more than $29 million of the brokerage's funds held by the bank while releasing claims on $417 million that was previously returned to Giddens.
"The settlement agreement resolves claims by the trustee and customer representatives against JPMorgan that would otherwise result in years of costly litigation between the parties with an uncertain outcome," Giddens said in the filing.
JPMorgan was the lead on a $1.2 billion loan to MF Global, and was also one of its primary clearing banks before the broker-dealer went bankrupt. The bank had previously retained claims on some of the collateral posted by MF Global that led to the legal tussle.
Giddens will also request the bankruptcy court to authorize distribution of $250 million to former MF Global Inc customers who traded on U.S. exchanges and $50 million to customers who traded on foreign exchanges, according to the filing.
MF Global declared bankruptcy in 2011. Commodity traders with personal accounts lost millions of dollars when, according to Giddens, the firm improperly used client money to cover corporate transactions as the firm sank. MF Global customer accounts were frozen in the wake of the bankruptcy.
The case became a political firestorm when regulators discovered an estimated $1.6 billion hole in the trading accounts of the broker's trading customers.
The case is In re: MF Global Inc, case No. 11-2790, in U.S. Bankruptcy Court, Southern District of New York.


Well that about does it for tonight

I will report tomorrow but very late in the night

all the best


No comments:

Search This Blog