http://harveyorgan.blogspot.com/2012/05/spain-bombshell-friday-night-as-they.html
Gold closed higher today by $20.30 to finish the comex session at $1595.10. Silver finished the session at $29.14.
In the access market we are the weekend closing prices:
gold: $1592.10
silver: $28.74
the Dow fell badly for a loss of 72 points. Most of the loss occurred after the comex closed and this caused our gold and silver to fall in the access market. The big news occurred late Friday night as the Spanish government announced a revision in the 2011 budgetary deficit from 8.5% to 8.9%. This was preceded by announcements from the banking regulator that they are raising all margin requirements on LTRO seeking banks. Of course, both of these events will cause huge additional margin requirements even though the cupboards are bare. Monday is going to be a scary day. Also we learned that the swap spreads between the USA/Euro are widening indicating the USA is charging higher rates to support European banks who are having a huge problem funding USA dollars assets. Ireland is also in trouble this weekend as they seek another bailout for the ailing banking industry. We will go over all of these details
this morning, but first let us now head over to the comex and assess trading yesterday:
* * * *
Andy Borowitz on the phoniness of markets. His paper includes the Facebook IPO:
(courtesy GATA/Andy Borowitz)
and.....
Bank of America in this Ambrose Evans Pritchard release expects a massive rally as all central banks unleash liquidity that we have never seen before. And that point, be thankful you have plenty of gold and silver in your possession:
(courtesy Ambrose Evans Pritchard and the UKTelegraph)
Gold closed higher today by $20.30 to finish the comex session at $1595.10. Silver finished the session at $29.14.
In the access market we are the weekend closing prices:
gold: $1592.10
silver: $28.74
the Dow fell badly for a loss of 72 points. Most of the loss occurred after the comex closed and this caused our gold and silver to fall in the access market. The big news occurred late Friday night as the Spanish government announced a revision in the 2011 budgetary deficit from 8.5% to 8.9%. This was preceded by announcements from the banking regulator that they are raising all margin requirements on LTRO seeking banks. Of course, both of these events will cause huge additional margin requirements even though the cupboards are bare. Monday is going to be a scary day. Also we learned that the swap spreads between the USA/Euro are widening indicating the USA is charging higher rates to support European banks who are having a huge problem funding USA dollars assets. Ireland is also in trouble this weekend as they seek another bailout for the ailing banking industry. We will go over all of these details
this morning, but first let us now head over to the comex and assess trading yesterday:
* * * *
Andy Borowitz on the phoniness of markets. His paper includes the Facebook IPO:
(courtesy GATA/Andy Borowitz)
Andy Borowitz on the phoniness of the financial markets
Submitted by cpowell on Fri, 2012-05-18 21:06. Section: Daily Dispatches
and....
5:10p ET Friday, May 18, 2012
Dear Friend of GATA and Gold:
People wouldn't be investing in the monetary metals if they hadn't already concluded that the financial markets are now best described by the old song:
It's a Barnum & Bailey world,
Just as phony as it can be.
Just as phony as it can be.
But at least the satirist Andy Borowitz of the Borowitz Report nails these circumstances uproariously with commentaries arising from Facebook's initial public offering and the bankruptcy of Greece.
Borowitz's commentary on the Facebook IPO is headlined "A Letter from Mark Zuckerberg" and it's posted here:
Borowitz's commentary on Greece is headlined "Greece No Longer a Nation; Announces Plan to Become a Social Network," and it's posted here:
Also, a clarification: The commentary about gold and silver market manipulation by Brett Heath of KSIR Capital, "Paper Gold and Silver Ponzi Exposed," brought to your attention this morning after its posting at MineWeb --
-- originally appeared in a longer form at the firm's blog, the Kwan Box, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
JPMorgan unit has $100 billion in risky bonds
Submitted by cpowell on Fri, 2012-05-18 04:54. Section: Daily Dispatches
By Sam Jones, Tracy Alloway, and Tom Braithwaite
Financial Times, London
Friday, May 18, 2012
Financial Times, London
Friday, May 18, 2012
The unit at the centre of JPMorgan Chase's $2 billion trading loss has built up positions totalling more than $100 billion in asset-backed securities and structured products -- the complex, risky bonds at the centre of the financial crisis in 2008.
These holdings are in addition to those in credit derivatives that led to the losses and have mired the bank in regulatory investigations and criticism.
The unit, the chief investment office (CIO), has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralised loan obligations in all markets for three years, more than a dozen senior traders and credit experts have told the Financial Times.
The bank has said its derivative activities were intended primarily to help balance risks on its overall balance sheet, but the revelation that it has built up other large, risky positions is likely to raise further questions about the CIO's remit.
A spokesperson for JP Morgan declined to comment.
The CIO sprang into the spotlight with the revelation of more than $2 billion in losses on the complex derivative trades, a turn of events that has triggered a Department of Justice investigation and angered US lawmakers.
But the CIO has also dominated market activity and built up huge positions in other, equally esoteric markets, according to leading traders.
"I can't see how they could unwind these positions because no one can replace them in terms of size. It's a bit of the same problem they face with the derivatives trade," said a credit trader at a rival bank. "They pretty much are the market."
The unit made a deliberate move out of safer assets such as US Treasuries in 2009 in an effort to increase returns and diversify investments. The CIO's "non-vanilla" portfolio is now over $150 billion in size.
"Two years ago they kind of kicked off" renewed market activity in risky assets," said one banker who sells financial debt. "It was like they provided some kind of 'philanthropic' service to the market to encourage it to get going."
In November 2010, even the British Bankers' Association, a lobbying group, explicitly noted the scale of the CIO's activities in a warning on the fragility of the UK mortgage market.
The JPM CIO "has taken more than £13bn (or 45 per cent) of the total amount of UK RMBS" (residential mortgage backed securities) "that has been placed with investors since the market re-opened in October 2009," the BBA said.
The bank is planning to reduce its exposure to more complex products in the CIO and is likely to invest more of its $360bn in "excess deposits" in safer securities such as US Treasuries, according to people familiar with the matter -- a move that will be fraught with difficulties.
and.....
Look at what is happening to junk bond yields right after the news of a derivative bust at jPMorgan:
(courtesy Jim Sinclair and fellow supporter CIGA David)
Jim Sinclair’s Commentary
What about more Morgans, or is Morgan’s OTC derivative position totally out of control and still wide open?
Courtesy of CIGA David
I have been watching junk debt relative to nominal Treasuries (IEF/TLT) intraday. I began seeing some very wild intraday moves, with junk debt prices collapsing (yields spiking) while safer Treasuries were aggressively being bid up (yields dropping).The speed and magnitude of this credit spread widening on Wednesday was indeed meaningful. Thursday, that spread widened even further, in a way that suggests that a credit event may be underway in the U.S. and that contagion is here.Here we are, 48 hours after the major movement began on Wednesday, and a look at the daily chart of junk debt and sovereign debt EMB -0.09% shows that a "crash" may actually be here in credit markets. I say "crash" in quotes because while the price decline may not seem like much, a crash should be defined by how far back in time an investment sends you in its decline relative to a short time frame.Meanwhile, Treasuries have spiked, with 30-year Treasuries below the panic 3% level. To say that "credit leads the stock market" is too simplistic. It is widening credit spreads which lead risk-aversion, and vice versa. Credit spreads lead equities, not credit.In the past 48 hours, the magnitude of the decline of junk debt and sovereign debt relative to Treasuries increasing suggests meaningful credit stress is occurring. If junk/sovereign debt doesn’t stabilize and improve shortly, the odds of a follow-through sudden break in stocks in the U.S. increase substantially.Credit spread movement and improvement/deterioration is pretty much THE thing to focus on.The move in debt spreads over the last 48 hours has increased the odds of something major to come.Notice that this isn’t a prediction, but a statement about how such a scenario could occur if indeed junk debt deteriorates further beyond the last 48 hours, and under the assumption that the magnitude of a decline could lead equities lower.The most important question in the world may end up being answered soon after all. I remain defensively positioned in bonds and still short the US and European stock markets with an emphasis on short financials. All positions held since March 14.
and.....
Bank of America in this Ambrose Evans Pritchard release expects a massive rally as all central banks unleash liquidity that we have never seen before. And that point, be thankful you have plenty of gold and silver in your possession:
(courtesy Ambrose Evans Pritchard and the UKTelegraph)
Global banks see market rally on Greek exit
MAJOR GLOBAL BANKS ARE ADVISING CLIENTS TO PREPARE FOR A STOCK MARKET RALLY AND A RESURGENCE OF THE EURO IF GREECE IS FORCED OUT OF MONETARY UNION, BETTING THAT WORLD AUTHORITES WILL FLOOD THE INTERNATIONAL SYSTEM WITH LIQUIDITY.
7:40PM BST 17 May 2012
299 Comments
Bank of America said it expects a "powerful short squeeze" in risk assets as speculative funds unwind positions, led by a rebound in battered bank stocks and Club Med bonds. The euro would surge 10pc to $1.40 against the US dollar after dipping first to $1.20 in the immediate panic.
The benign outcome assumes that the European Central Bank steps in with massive support, backed by the US Federal Reserve, the Bank of Japan, and key central banks along the lines of concerted action in 2008-2009.
Bank of America said EU authorities will pull out the stops to keep Greece in the system as they weigh the full dangers of contagion. Should that fail, it expects a series of dramatic moves.
The ECB would cut interest rates, launch quantitative easing (QE), and back-stop Spain and Italy with mass bond purchases; the authorities would inject capital into the banks and create a pan-European system of deposit guarantees. The combined moves would be a major step towards EU fiscal union.
"We think the worst is over for the euro," said David Bloom, currency chief at HSBC. "The central banks will have to step in massively and that will be a soothing balm for the markets. The Fed is already leaving the door open for more QE. We could see quite a powerful rally."
Mr Bloom said the ECB is playing a game of chicken by waiting until it has secured maximum compliance from EMU's wayward states before coming to the rescue. "Once again it is holding everybody over the edge of the abyss until they scream for mercy," he said.
A currency union without the encumbrance of Greece would be viewed as a stronger bloc by investors, but much would depend on events in Greece itself.
If a return to the drachma proved to be a "ruinous experience" for the Greeks – as HSBC expects – if would mightily deter Portugal, Spain, and other from such temptation.
The worst outcome for euro and monetary union would be a double whammy where the authorities fail to control EMU-wide contagion, yet Greece somehow manages to claw its way out of crisis and make a success out of a devalued sovereign currency, as Argentina did after breaking the dollar-peg in 2002.
"That would be the disaster scenario. The euro would fall dramaticatlly. We think this scenario is very unlikely," said Mr Bloom.
Gary Jenkins from the bond advisers Swordfish said those betting on a market crash should be careful. "The global central banks are going to respond with the biggest flood of liquidity the world has ever seen. It will make the LTRO (the ECB's €1 trillion lending to banks) look like small change," he said.
"They have to act. We have reached the point where the peripheral bond markets are going to implode unless the ECB and EU politicians show they have deep pockets and start buying the debt on the secondary market. It is a quasi-fiscal union or bust at this stage," he said.
Mr Jenkins said it would be fatal if Greece were forced out in acrimony, without any stabilising support. That would lead to a hard default with losses of up to €150bn to €200bn for the European system. Any such debacle would destroy the political consent needed to forge EU fiscal union and hold the rest of the eurozone together. "Whatever they do, it has to be an orderly outcome for Greece".
Leaked reports from Berlin suggest that Germany's finance ministry has already drafted such a plan to shore up Greece with EU funds after a return to the drachma.
Bank of America said a chaotic withdrawal by Greece, followed by contagion, would cause a 4pc fall in eurozone GDP, roughly equal to the damage after the Lehman collapse in 2008. Recovery would be slower this time. Scope for fiscal stimulus is largely exhausted. China and the emerging powers are no longer able to pick up the slack.
Bob Janjuah from Nomura, `Bob the Bear' to global fans, said the EU will not dare to push Greece out. "The Europeans will blink and renegotiate the bail-out terms. Whatever happens we think the Fed and the ECB will respond over the next week or two and trigger a short sharp rally," he said.
He expects a 15pc jump in the S&P 500 index of stock to 1450 by July, and a 200 point rally on the iTraxx Crossover index for bonds. It will be a last gasp before the reality of sputtering global growth hits in the late summer. That is a long way off.
