Tuesday, 5 July 2016

Europe’s Banks On The Edge – Again.

Baltic Dry Index. 688 +11       Brent Crude 49.55

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

With US markets closed yesterday, celebrating Amexit from mad King George and Britain, gold and silver aside, which managed rallies of one percent and four percent yesterday, the black mood in Europe’s stocks was dominated by Europe’s banks, especially Italy’s ever shrinking banks, which seem to have compounded their balance sheet problems by betting wrongly on Brexit. Not that Brexit has very much to do with Europe’s banking crisis, but never let a good excuse go unused.

The EU’s banking crisis, which never really went away or got fixed, despite “Super Mario’s” whatever it takes bluff, he was the man at the Bank of Italy that sat around and watched as Italy’s banks got into this mess, is taking centre stage again. Germany is insisting that Italy follow the Eurozone rules and bail-in its bondholders and large depositors, before allowing any state bailout with taxpayer money. Although it’s not at all clear that Italy has any credible way left to bailout its banks.

The EU has offered Italy some sophistry to guarantee its solvent banks to the tune of 150 billion euros, provided it’s not actually used since there’s no actual money coming to back up the guarantee. But it’s not Italy’s few solvent banks that need even a phony guarantee. At this point, why anyone still has deposits in Italian banks is sheer folly.

 “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”

Joseph J. Cassano, a former A.I.G. executive, August 2007. Credit Default Swaps.

European stocks end lower as Italian banks, Volkswagen weigh

Published: July 4, 2016 12:03 p.m. ET

Banca Monte dei Paschi di Siena down more than 8%

Stocks in Europe slipped Monday, with losses among Italian banks helping to hand the pan-European benchmark its first loss in four sessions.

Stoxx Europe 600 SXXP, -0.74%  dropped 0.7% to end at 329.78.

Italy’s Banca Monte dei Paschi di Siena SpA BMPS, -13.99%  closed down 14%. The move came after a report that the European Central Bank is pushing the lender to draft a new plan aimed at reducing non-performing loans.

Other Italian bank shares were lower, with Banca Popolare dell’Emilia Romagna BPE, -6.73%  down 6.7%, Intesa Sanpaolo SpA ISP, -3.04%  off 3% and Banca Popolare di Milano SpA PMI, -1.40%  lower by 1.4%.

----Indexes: Germany’s DAX 30 DAX, -0.69%  fell 0.7% to 9,709.09, and the U.K’s FTSE 100 UKX, -0.84% was lower by 0.8% at 6,522.26.

France’s CAC 40 PX1, -0.91%  lost 0.9% at 4,234.86, while Italy’s FTSE MIB I945, -1.74%  fell 1.7% to 16,012.31.

Movers: Volkswagen AG VOW3, -1.87% VLKAY, +3.40%  was down 2% as the German auto maker rejected demands that it pay compensation to European car owners who bought tainted diesel vehicles.

Paschi Leads Italy Banks Lower Amid Fresh Capital Worries

July 4, 2016 — 9:42 AM BST Updated on July 4, 2016 — 1:44 PM BST
Banca Monte dei Paschi di Siena SpA led Italian banks to new record lows in Milan on Monday amid fresh concerns the country’s lenders are under pressure to raise capital.
The European Central Bank has asked Monte Paschi to cut more than 14 billion euros ($15.6 billion) of gross non-performing loans over three years, which would reduce the share to 20 percent of total loans, Italy’s third-biggest bank said in a statement Monday. Monte Paschi had 46.9 billion euros of soured debt at the end of 2015, the bank said.
Selling such a large stock of soured loans “could lead the bank to seek additional capital that investors are not available to provide,” said Vincenzo Longo, a strategist at IG markets in Milan. “The government’s moves to seek easier rules to support Italian banks underscores the difficulty of the weakest ones, adding pressure to the industry.”
The request is part of the central bank’s regular supervisory dialog, a euro-area official said by phone, asking to not be identified because the matter is private. The ECB hasn’t used early intervention powers against Monte Paschi, the official said.
Italian newspaper la Repubblica reported the ECB move earlier, describing it as a preemptive measure to avoid a resolution plan.
----The commission defends EU rules to prevent governments from giving companies an unfair advantage over their competitors. Renzi will respect the state-aid rules, an Italian official said earlier Monday.
Monte Paschi, which has dropped 70 percent this year, has sold 2 billion euros of bad loans since 2015, toward a goal of 5.5 billion euros in such disposals by 2018. Chief Executive Officer Fabrizio Viola said in May that he is considering accelerating the effort.

Seven of the 10 biggest decliners in the STOXX 600 Banks Index were Italian lenders, with Monte Paschi falling more than 10 percent by 2:37 p.m., while UniCredit SpA was down 3.5 percent. The benchmark index, which tracks 48 banks, dropped 1.4 percent.

Regulators are pressing Italian banks to clean up their balance sheets and build up their buffers against losses. Europe’s biggest banks are undergoing stress tests, the first since the region’s 2014 asset review, with results expected at the end of July.
In the ever more desperate EUSSR, the rules, apparently, are there to be broken. Below the EUSSR’s technocrat man, parachuted in to take over the Premiership and do Brussels bidding, has gone off-reservation, gone native, and called Chancellor Merkel a “school teacher.” The wealth and jobs destroying, dying EUSSR, needed to reform, but opted instead for more of what is killing the EUSSR. Will John Bull get the change to trigger Article 50 of the Lisbon Treaty, before the EUSSR self destructs?

Each success only buys an admission ticket to a more difficult problem.
Henry Kissinger.

Renzi ready to defy Brussels and bail out Italy’s troubled banks

Regulators fear intervention would dent credibility of union’s new rule book

July 3 2016

Italy is prepared to defy the EU and unilaterally pump billions of euros into its troubled banking system if it comes under severe systemic distress, a last-resort move that would smash through the bloc’s nascent regime for handling ailing banks.

Matteo Renzi, the Italian prime minister, is determined to intervene with public funds if necessary despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues, according to several officials and bankers familiar with their plans.

The threat has raised alarm among Europe’s regulators, who fear such a brazen intervention would devastate the credibility of the union’s newly implemented banking rule book during its first real test. In the race to find workable solutions, Margrethe Vestager, the EU’s competition chief, has laid out options for Rome to address its banking problems without breaking the bail-in principles of Europe’s banking union.

Italy is the eurozone’s biggest vulnerability following the shock outcome of the UK vote to leave the EU, with bank stocks plunging by a third. Concerns are building before the outcome of bank stress test results due this month and a constitutional referendum in Italy in early October, on which Mr Renzi has wagered his job. Citi has described the referendum as “probably the single biggest risk on the European political landscape this year outside the UK”.

After several of its ideas on intervention were rebuffed, Rome is considering whether to act alone. “We are willing to do whatever is necessary [to defend the banks], and do not rule out acting unilaterally, although that would only be as a last resort,” said one person familiar with the government’s thinking. European officials fear any Italian intervention would carry high risks, opening a battle over illegal state support that would put off private investors.

Angela Merkel, German chancellor , last week rebuffed Italy’s request for a suspension of state aid and bail-in rules in order to recapitalise its banks. Benoit Coeure, a senior European Central Bank official, has said any suspension of bail-in rules would spell the end of the banking union “as we know it”.
Mr Renzi has bristled at suggestions he is ignoring rules, saying he will not be “lectured by the school teacher”.

Rome is considering measures such as boosting the size of a state-sponsored privately backed fund called Atlante used to backstop capital increases at two failing banks, say senior bankers. Atlante will also launch a fund focused on non-performing loans within days aimed at buying bad loans built up during Italy’s three-year recession to avoid widespread writedowns.

It will first target bad loans at Monte dei Paschi di Siena, Italy’s biggest problem bank, according to senior bankers. Italy is also discussing the use of funds from Treasury-owned Cassa Depositi e Prestiti and state pension funds to recapitalise banks.

Brussels and Berlin have resisted any options that overpay banks for bad loans, or sidestep the need for creditors bail-in.

----Brussels last week signed off €150bn worth of precautionary measures allowing Italy to help banks with short-term liquidity problems. But of greater concern is pressure on capital, say analysts. Stress test results are due on July 31 and senior bankers consider Italy’s weaker banks — including its third largest Monte dei Paschi — may be found to be undercapitalised.
Italy’s business lobby, Confindustria, on Friday warned of “political chaos” should Mr Renzi lose October’s referendum. Under such a scenario, Italy would re-enter recession, spreads on Italian debt would widen and there would be capital flight from Italy, Confindustria argued. Italian gross domestic product would fall 0.7 per cent in 2017 and drop a further 1.2 per cent in 2018, it added. 

Brexit Is a Lehman Moment for European Banks

July 4, 2016 2:30 AM EDT
European banks are undergoing a real-life stress test in the wake of Britain's vote to leave the European Union. Their share prices were already down 20 percent this year; since the referendum result was announced, they've doubled that decline. If the rot isn't stopped soon, Europe will have found a novel solution to the too-big-to-fail problem -- by allowing its banks to shrink until they're too small to be fit for purpose. The answer is found in the adage never let a good crisis go to waste.

The current situation should be both a motivation and an excuse to do what Europe failed to do after the 2008 collapse of Lehman Brothers brought the financial world to its knees: fix its banking system. Here's a snapshot of this year's drop in value of some of the region's biggest institutions:

----Deutsche Bank, which once had pretensions to be Europe's contender on the global investment banking stage, is now worth just 17 billion euros ($18 billion). When the biggest bank in Europe's biggest economy, with annual revenue of about 37 billion euros, is worth about the same as Snapchat -- a messaging app that generated just $59 million of revenue last year -- you know something's wrong. No wonder the billionaire investor George Soros was betting against Deutsche Bank shares this month.

Greece has recapitalized its banks three times, to almost no effect. Piraeus Bank, for example, is worth less than 1.5 billion euros, down from 4 billion euros in December after the last cash injection, and as much as 11 billion euros just two years ago.

UniCredit, Italy's biggest bank, has suffered particularly badly this year. It has a market capitalization of just 12 billion euros, dwarfed by its non-performing loans worth 51 billion euros. Italian banks as a whole have non-performing debts worth 198 billion euros, a total that's been rising ever since the financial crisis and is illustrative of Europe's failure to tackle its banking problems:

We close this morning with yet more sign of rising trouble in China.

Wave of suicides by Chinese officials indicate impact of Xi’s anti-graft drive

Sutirtho Patranobis, Hindustan Times, Beijing Updated: Jul 03, 2016 23:33 IST
A wave of suicides committed by government officials in China has set off alarm bells in the quiet corridors of power here amid President Xi Jinping’s ongoing anti-corruption drive.
Over 150 officials from different levels of government have committed suicide since 2013, data scattered across Chinese media, including official ones, reveal. 
The broad break-up: 46 in 2013, 54 in 2014 and 30 in 2015. 
The tragic trend till mid-2016 indicates that this year could turn out to be the worst – till Sunday, 28 government officials had committed suicide. 
Most jumped to their deaths from their offices or homes. 
A Beijing-based senior academic said the suicides were being described as an “epidemic” in official circles but declined to comment further. 
An official commentary appearing in the South China Morning Post said “…between 2003 and 2012 – when Hu Jintao was President – at least 68 officials killed themselves. That number was surpassed in the first two years of President Xi Jinping’s administration, with at least 77 officials committing suicide.” 
Experts said it might not always be easy to link the suicides to the anti-graft campaign that has netted officials from all hierarchies. 
The official reason is usually “depression”. 
But many of those who committed suicides were or could have been under the scanner for graft. 
“There could be multiple reasons to commit suicide. Not one. But sometimes, people might kill themselves to save their families from being shamed,” Paul Yip, director of the Hong Kong-based Centre for Suicide Research and Prevention, told HT. 
Eminent psychiatrist Zhao Guoqiu told ThePaper.cn that the Chinese Criminal Procedure law says a defendant cannot be investigated for criminal responsibility after death. 
“If he was already under investigation, the case should be withdrawn. For that reason, some officials find ending their lives before a prosecution will save his or her whole family and related people, and the benefits it brings is much more attractive than that of spending the rest of their lives in jail,” Zhao said. 

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

At the Comex silver depositories Friday final figures were: Registered 24.66 Moz, Eligible 126.39 Moz, Total 151.05 Moz.  Comex was closed on Monday.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
In London, the duffers at Standard Life also seem to have bet wrongly on Brexit, making no contingency plan for if Leave won. In response, this morning there seems to be another coordinated media anti Brexit campaign once again. I bet on the wrong horse in the Derby, I demand a do-over.

Redemptions Trigger Halt of $3.9 Billion Property Fund on Brexit

July 4, 2016 — 5:25 PM BST Updated on July 4, 2016 — 6:09 PM BST
Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday after Britain’s vote to leave the European Union triggered a surge in redemptions.

The fund, which invests in a mix of prime commercial real estate assets, was halted at midday and the decision will be reviewed every 28 days, the Edinburgh, Scotland-based fund manager said in a statement. Standard Life adjusted the value of the underlying assets by 5 percent last week.

“The risk is that it’s the thin end of the wedge and we have more property funds doing this sort of thing in the weeks and months to come,” said Laith Khalaf, a senior analyst at investment firm Hargreaves Lansdown. “If Standard Life is experiencing outflows, other managers will be suffering the similar fate and may have to take similar action.”

Investors are pulling money as industry commentators warn that London office values could fall by as much as 20 percent within three years of the country leaving the European Union. Khalaf estimated that about 25 billion pounds is invested in property sector funds by U.K. investors, including those that invest in stocks.

 “The decision was taken following an increase in redemption requests as a result of uncertainty for the U.K. commercial real estate market,” Standard Life said in a statement Monday. “The suspension was requested to protect the interests of all investors in the fund and to avoid compromising investment returns.”

The company said the property fund still offered a stable and secure income return with a distribution yield of about 3.86 percent and that the selling process had to be controlled to protect investors. The fund held a cash position of more than 13 percent as of May 31.

Standard Life was among a number of asset managers, including Aberdeen Asset Management Plc and M&G Investments, that last week adjusted the vale of the underlying property assets in some of their funds in the wake of Brexit.

A spokesman for Aberdeen said the company had no plans to suspend trading in
its funds, saying that redemptions had started to slow and its U.K. property
fund held about 20 percent in cash.

"If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold."

Robert Ringer

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Solar power reaches record high, but cuts to subsidies are slowing demand

Use of solar power has reached a record high in the UK, but Government cuts to subsidies means fewer people are installing panels.

Last updated: 04 July 2016, 00:10 BST

Solar power has hit new record highs in the UK, providing almost a quarter of the country’s electricity at one point last month, analysis shows.
The solar industry estimates the country now has almost 12 gigawatts (GW) of solar panels – enough to power the equivalent of 3.8 million homes – in solar farms and on buildings such as homes, offices, warehouses and schools.
New analysis by MyGridGB for the Solar Trade Association (STA) shows that solar power hit a new peak on June 5 – in the early afternoon, to be precise – when it met just under 24% of demand.
The UK has a million “solar homes”, STA said, with an estimated 800,000 using solar panels to produce electricity from the sun, and 200,000 using solar thermal units to provide hot water.
But installation rates have slowed as the sector has been hit by major cuts to subsidies for solar panels.
So the industry is marking its third annual “solar independence day” by pushing to raise maintenance standards for the technology and highlighting how it can protect home owners and businesses from volatile energy prices by reducing bills.
Paul Barwell, STA chief executive, said: “This is what the country and the world needs to decarbonise the energy sector at the lowest price to the consumer” – adding that the Government’s decision to adopt the target of cutting carbon emissions by 57% by 2030 sent a good long term signal on clean energy.
A Department of Energy and Climate Change spokeswoman said: “The solar industry still receives subsidies. However, the cost of solar has steadily declined over the last 10 years, so it is only right that as these costs come down so should the subsidies paid for through energy bills.”


The monthly Coppock Indicators finished June

DJIA: 17930  -14 Up NASDAQ:  4843 -08 Down. SP500: 2099 -10 Up.

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