Aug 27


Russia Refuses To Participate In Ukraine Debt Restructuring (ZeroHedge, Aug 27, 2015):

War-torn Ukraine has reportedly reached a restructuring deal with a group of creditors headed by Franklin Templeton, according to the country’s finance minister Natalie Jaresko. The terms of the agreement call for a 20% writedown and a reprofiling that includes a maturity extension of four years and an across-the-board 7.75% coupon. Vladimir Putin isn’t interested.

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Aug 25

Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks (ZeroHedge, Aug 25, 2015):

On August 11, China devalued its currency, and in the subsequent 3 days the onshore Yuan, the CNY, tumbled by some 4% against the dollar. Then, as if by magic, the CNY stabilized when China started intervening massively, only this time not through the fixing, but in the actual FX market.

This means that while China has previously been dumping reserves as a matter of FX policy, after August 11 it was intervening directly in the FX market, with the intervention said to really pick up after the FOMC Minutes on August 19, the same day the market finally topped out, and has tumbled into a correction since then. The result was the same: massive FX reserve liquidations to defend the currency one way or the other.

And yet something curious emerges when comparing the traditionally tight, and inverse, relationship between the S&P and the Treausry long-end: the tumble in stocks has not been anywhere near as profound as the jump in yields. In fact, the 30 Year is wider now than where it was the day China announced the Yuan devaluation.


Why is that?

We hinted at the answer on two occasions earlier (here and here) and yet the point is so critical, and was missed by virtually all readers, that it deserves to be repeated once again: as part of China’s devaluation and subsequent attempts to contain said devaluation, it has been purging foreign reserves at an epic pace. Said otherwise, China has sold an epic amount of Treasurys in the past two weeks.

How epic? We turn it over to SocGen once again: Continue reading »

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Aug 21


You can’t make this stuff up!

–  Paul Krugman “What Ails The World Right Now Is That Governments Aren’t Deep Enough In Debt” (ZeroHedge, Aug 21, 2015):

This was written by a Nobel prize winning economist without a trace or sarcasm, irony or humor. It is excerpted, and presented without commentary.

From the NYT:

Debt Is Good

… the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt. Continue reading »

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Aug 19

More Trouble In Turkey As Lira Plunges To New Lows, Bond Yields Soar (ZeroHedge, Aug 18, 2015):

On Monday, Turkey’s lira plunged to new lows against the dollar as coalition talks between prime minister and AK Party leader Ahmet Davutoglu and nationalist MHP leader Devlet Bahceli broke down. The result, AKP won’t be able to form a coalition government after elections in June saw the party lose its parliamentary majority for the first time in 12 years.

In the absence of a coalition, the country will go back to the polls – likely in November – where President Recep Tayyip Erdogan hopes heightened violence between Ankara and the PKK will translate into a stronger showing for AKP.

The political turmoil, rising violence, and general EM malaise have hit the country’s currency hard and on Tuesday, Turkey’s central bank left rates unchanged prompting further weakness in the lira which had already fallen earlier in the session after Emine Nur Gunay, Davutoglu’s chief adviser, hinted that a rate hike was not in the cards.


Meanwhile, 10-year yields have spiked to their highest levels in nearly a year and a half. Continue reading »

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Aug 16

Yuan Devaluation Sparks Biggest Crash In US Corporate Bonds Since Lehman (ZeroHedge, Aug 16, 2015):

Just two days ago we warned of the dramatic disconnect between equity insurance and credit insurance markets – at levels last seen before Bear Stearns collapse. As the Yuan devaluation shuddered EURCNH carry traders and battered European assets, US equity markets stumbled onwards and upwards, impregnable in their fortitude with The Fed at their back no matter what. However, US corporate bond markets were a bloodbath…

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Aug 15

Dominos countries

“China, Australia, Brazil, Canada, Sweden – it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money. But first, you have to recognize what is happening.”

The Crisis Is Spreading: China, Australia, Brazil, Canada, Sweden… (ZeroHedge, Aug 15, 2015):

Earlier today, we posted an excerpt from IceCap Asset Management’s latest letter to investors focusing on the farce that is the Greek bailout #3, which can be summarized simply by the following table…

greece next steps

… and Keith Dicker’s assessment which was that “for Greece, it’s mathematically impossible to repay its debt” and that the Greek “economy continues to plummet to deeper depths and is now -33% less than where it was in 2008.”

But the truth is that for all the endless drama, Dicker continues, “the Greek debt crisis isn’t THE crisis. Rather it is simply a symptom of a much larger global debt crisis.” Continue reading »

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Aug 15


Study: Germany made €100bn profit on Greek crisis (Keep Talking Greece, Aug 10, 2015):

What? I don’t believe it! Rea-lly? Germany made a 100 billion euro profit on Greek crisis? No, kidding? HA! And yes, so it is! A study conducted by a German Economic Institute has shown that every time investors got bad news about Greece, they rushed to Germany’s ‘safe haven’ with the effect that the interest rates on German government bonds were falling!

“Greece’s biggest creditor Germany has made a huge profit on the country’s debt crisis over the last 5 years as it saved through lower interest payments on funds borrowed amid investor “flights to safety.”

Each time investors got bad news about Greece, they rushed to the ‘safe haven’ of Germany, with the interest rates on German government bonds falling, according to the study from the private, non-profit Leibniz Institute of Economic Research, Agence France-Presse reported Monday. Continue reading »

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Aug 08

It’s a controlled demolition.



When A Train Wreck Is No Accident (International Man):

“In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet.” – Ron Paul

Never in history have the economic and political structures been so manipulated by those who are responsible for their safekeeping; never has so much been at stake, in so many countries, and facing collapse, all at the same time.

The great majority of people in the First World recognise that the world is passing through an economic crisis. However, most are under the impression that there are some pretty smart fellows running the show and all they need to do is tweak the system a bit more and we’ll return to happy days.

Not so. The “smart fellows” who are in charge of fixing the problem are in fact the very same people who created it. Continue reading »

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Aug 07


Here Comes The Next Crisis “Nobody Saw Coming” (ZeroHedge, Aug 7, 2015):

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures.

Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that “nobody saw coming.” No doubt the crisis visible in these three charts will also fall into the “nobody saw it coming” category.

Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition of an unsustainable trend.


As noted earlier in the week, state and local taxes have soared 75%. While this would be no big deal if wages and salaries had risen by 75% in the same time frame, but earnings have barely kept pace with inflation (38% since 2000). Continue reading »

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Aug 06

Emerging Market Mayhem: Gross Warns Of “Debacle” As Currencies, Bonds Collapse (ZeroHedge, Aug 6, 2015)

Things are getting downright scary in emerging markets as a “triple unwind” in credit, Chinese leverage, and loose US monetary policy wreaks havoc across the space. Between a prolonged slump in commodity prices and a structural shift towards weaker global trade, the situation could worsen materially going forward.

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Aug 06

Is This Country Latin America’s Next “Argentina” (ZeroHedge, Aug 6, 2015):

Today, following another spike in negative news, it appears that the credit markets have finally woken up, and a quick look at Brazil’s CDS shows that following today’s spike to 314bps, the country’s implied default risk is back to levels last seen in April of 2009! We expect more credit market participants to notice the depressionary developments in brazil, and as the country’s CDS continue to blow out, many will start asking themselves: is Brazil the next Argentina?

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Aug 03

Puerto Rico broke

First Default By U.S. Commonwealth In History: Puerto Rico Fails To Make Required Debt Payment (ZeroHedge, Aug 3, 2015):

Over the weekend Puerto Rico was supposed to make a modest principal and interest payment of some $58 million due on Public Finance Corp. bonds, which however few expected would be satisfied. As a reminder, on Friday, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, said during a press conference in San Juan that the government simply does not have the money.

Moments ago Melba Acosta, president of the Government Development Bank, confirmed as much, when he announced that only $628,000 of the $58 million payment, or just about 1%, had been paid.

Below is the full statement from Acosta on the service of PFC Bonds: Continue reading »

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Aug 03

30Y Treasury Yield Plunges To 3-Month Lows As S&P Breaks Key Technical Support (ZeroHedge, Aug 3, 2015):

The carnage is contagious. The S&P 500 just broke down below its 50- and 100-day moving averages unable to hold the ubiquitous pre-EU-close ramp highs. Treasury yields have plunged since the weak spending and ISM data with the 5Y breaking below its 200-day moving average and 30Y yields testing 3-month lows


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Aug 02

“The punchline: Sheng warned about the risks of local government debt, saying that 2 trillion yuan ($322.08 billion) in bond swaps may not be able to fully cover maturing debt, according to the report.

What he really said, as paraphrased by Bloomberg, is that “local governments tended to not report all their debts when audited in June 2013, thus the 2 trillion yuan debt swap plan arranged this year may not cover all debts due, Sheng cited as saying.”




As China Admits It Lied About Its Local Debt Levels, Local Billionaires Are Quietly Liquidating Their Assets (ZeroHedge, Aug 2, 2015):

It was almost exactly two years ago, when during China’s long-forgotten attempt to actively deleverage its economy (remember that? good times…) we commented on the country’s s first attempt to estimate what its local government debt is since June 2011.

This is what we said in July 2013: Continue reading »

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Jul 28


The Disappearing Retirement Fund (International Man):

As a general principle, I’ve always tended to avoid entrusting others with my money. I’ve avoided funds, as they are often based upon investments that are peaking or close to peaking. I’ve avoided pension funds, as they’re often structured in a similar manner.

And whenever by law I’ve been required to be invested in such funds, they’ve rarely been successful over the long term. In the end, I would invariably have made more money by pursuing those investments that had great promise but at the time were unpopular (and therefore underpriced).

As dubious as I tend to be of conventional investment schemes (and those who broker them), I am doubly dubious of any government-run scheme. Governments, historically, have proved to be poor money managers, and politicians tend to place more value on big promises that garner votes than on delivering on those promises. Continue reading »

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Jul 24

In Latest Market Rigging Scandal, Wall Street Now Sued For Treasury Market Manipulation (ZeroHedge, July 24, 2015):

“Defendants used electronic chatrooms, instant messaging, and other electronic and telephonic methods to exchange confidential customer information, coordinate trading strategies.”

“Traders at some of these primary dealers talked with counterparts at other banks via online chatrooms and swapped gossip.”

Sound familiar?

Those quotes are from a 61-page complaint filed in the Southern District of New York wherein Boston’s public sector pension fund accuses all US primary dealers (the cabal of usual suspect dealer banks that transact directly with Treasury and “have a special obligation to ensure the efficient function” of what was formerly the deepest, most liquid market on the planet) of colluding to manipulate the $12.5 trillion US Treasury market.  Continue reading »

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Jul 22

It’s Not Just Greece: Total European Debt Hits New All Time High (ZeroHedge, July 22, 2015)

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Jul 22

And so it begins …

China’s Record Dumping Of US Treasuries Leaves Goldman Speechless (ZeroHedge, July 22, 2015):

On Friday, alongside China’s announcement that it had bought over 600 tons of gold in “one month”, the PBOC released another very important data point: its total foreign exchange reserves, which declined by $17.3 billion to $3,694 billion.

China gold reserves revised_0

We then put China’s change in FX reserves alongside the total Treasury holdings of China and its “anonymous” offshore Treasury dealer Euroclear (aka “Belgium”) as released by TIC, and found that the dramatic relationship which we first discovered back in May, has persisted – namely virtually the entire delta in Chinese FX reserves come via China’s US Treasury holdings. As in they are being aggressively sold, to the tune of $107 billion in Treasury sales so far in 2015.

China vs Reserves

We explained all of his on Friday in China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium, and frankly we have been surprised that this extremely important topic has not gotten broader attention.

Then, to our relief, first JPM noticed. This is what Nikolaos Panigirtzoglou, author of Flows and Liquidity had to say on the topic of China’s dramatic reserve liquidation

Looking at China more specifically, it appears that, after adjusting for currency changes, Chinese FX reserves were depleted for a fourth straight quarter by around $50bn in Q2. The cumulative reserve depletion between Q3 2014 and Q2 2015 is $160bn after adjusting for currency changes. At the same time, a current account surplus in Q2 combined with a drawdown in reserves suggests that capital outflows from China continued for the fifth straight quarter. Assuming a current account surplus in Q2 of around $92bn, i.e. $16bn higher than in Q1 due to higher merchandise trade surplus, we estimate that around $142bn of capital left China in Q2, similar to the previous quarter.

JPM conclusion is actually quite stunning:

This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2). Continue reading »

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Jul 22

Define Irony: Greek Banks Refuse To Buy ESM Bonds To Fund Greek Bailout (ZeroHedge, July 21, 2015):

In the latest example of what happens when circular funding schemes begin to trip over each other, National Bank of Greece has refused to participate in an auction for paper issued by the bailout fund which is set to recapitalize the Greek banking sector.

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Jul 21

– Greece Needs A €130 Billion Debt Haircut: Citi (ZeroHedge, July 21, 2015):

“The size of the required ‘upfront’ (i.e. to be introduced in 2016) principal haircut to be €110bn (60% of annual Greek nominal GDP in 2014). Note that we do not see much difference in an alternative scenario based on a ‘tranched’ principal haircut framework (of around €15bn per year), also starting in 2016. However, a ‘backloaded’ (i.e. to be introduced in 2022) approach relying on a single haircut would be more expensive, amounting to €130bn (72% of annual Greek nominal GDP in 2014).”


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Jul 15


Jul 14, 2015

Description: Continue reading »

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Jul 14

“Several days ago when we first calculated that the new Greek debt/GDP post bailout #3 will promptly hit 200%, something the IMF agreed with earlier today. But it won’t stop here, and as the  following analysis from Michael Lebowitz at 720 Global shows, just based on the country’s negative growth rate and positive interest rate, Greek debt/GDP will keep rising indefinitely and will likely hit 336% in about one decade, at which point Greece will, for all intents and purposes, cease to exist.”

Greek Debt/GDP: 336% By 2025 (ZeroHedge, July 14, 2015):

Back in 2012, when the IMF forecast that by 2022 Greek debt would become sustainable (under 120%) we laughed, and laughed, then laughed some more (see: The Farcical Tragicomedy Of The “Sustainable” Greek Debt/GDP “Denominator from November, 2012)

Three years later the IMF itself not only admitted its original Greek debt “sustainability” predictions were total garbage (hence our quarterly humor series presenting the latest and greatest IMF projections about world growth), of which the most humorous was its forecast of Greek 2016 GDP growth as the highest in the entire Eurozone…

IMF Greece growth

… but the IMF itself, under pressure from Washington, has become the biggest advocate of debt forgiveness, just not its own debt: that of the ECB will do nicely. Continue reading »

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Jul 09

Japanese Investors Lose Faith In Draghi – Dump The Most Foreign Bonds In History (ZeroHedge, July 8, 2015):

Did the narrative just change? With the world’s investors having entirely lost faith in China’s ability to control its markets, it appears the omnipotence of global central banks is under scrutiny. First the so-called “contained” risks from Greek contagion are non-existent as despite the best efforts of The SNB (and ECB), European stocks and peripheral bonds have tumbled; and now Japanese investors have dumped over JPY 4 trillion foreign bonds in June – the most ever.

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Jul 07


Greece — The One Biggest Lie You Are Being Told By The Media (Global Research, July 5, 2015):

By Truth and Satire 3 July 2015

Every single mainstream media has the following narrative for the economic crisis in Greece: the government spent too much money and went broke; the generous banks gave them money, but Greece still can’t pay the bills because it mismanaged the money that was given. It sounds quite reasonable, right?

Except that it is a big fat lie … not only about Greece, but about other European countries such as Spain, Portugal, Italy and Ireland who are all experiencing various degrees of austerity. It was also the same big, fat lie that was used by banks and corporations to exploit many Latin American, Asian and African countries for many decades.

Greece did not fail on its own. It was made to fail. Continue reading »

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Jul 05

Jul 4, 2015

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Jul 04

Jul 4, 2015


In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the Greek referendum, the 50 ways to not pay their creditors and the future for the “demerging” economy in which debts are repaid “parametrically.” In the second half, Max interviews Simon Dixon about what Bitcoin could do for Greece and whether or not, as Citi’s global chief economist says, it is the stupidest idea since Caligula made his horse a consul.

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Jul 04

Greek dominos

The Greek Bluff In All Its Glory: Presenting The Grexit “Falling Dominoes” (ZeroHedge, July 4, 2015):

Earlier today, Yanis Varoufakis reiterated his core thesis driving the entire Greek approach from day 1 of its negotiations with the Eurogroup: “Europe [stands] to lose as much as Athens if the country is forced from the euro after a referendum on Sunday on bailout terms.”

This is merely a recap of what we said 4 years ago when in July of 2011 we explained “How Euro Bailout #2 Could Cost Up To 56% Of German GDP“, recall: Continue reading »

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Jul 03

The Troika Turns Europe Into A Warzone (The Automatic Earth, July 3, 2015):

So now they do it. Now the IMF comes out with a report that says Greece needs hefty debt restructuring.

Mind you, their numbers are still way off the mark, in the end it’s going to be easily double what they claim. Not even a Yanis Varoufakis haircut will do the trick.

But at least they now have preliminary numbers out. The reason why they have is inevitably linked to the press leak I wrote about earlier this week in Troika Documents Say Greece Needs Huge Debt Relief. If that hadn’t come out, I’m betting they would still not have said a thing.

It’s even been clear for many years to the IMF that debt restructuring for Greece is badly needed, but Lagarde and her troops have come to the Athens talks with an agenda, and stonewalled their own researchers. Continue reading »

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Jul 02


Goldman “Conspiracy Theory” Validated As ECB Expands QE Program (ZeroHedge, July 2, 2015):

The ECB has expanded the list of SSA securities eligible for purchase under PSPP. The updated list includes:  Continue reading »

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Jul 02

Varoufakis Will Resign If Referendum Passes, Says Would Rather “Cut Off Arm” Than Sign (ZeroHedge, July 2, 2015):

“With banks shuttered and Greece’s economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt.”

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