Archive - Mar 19, 2013 - Story

While we explained exactly why there is a possibility of a Europe-style wealth tax in the US, it appears the American Banking Association has decided to put out fires early...

While the crisis in Cyprus is a real concern for depositors in Cypriot’s banks, it has no implication for depositors in U.S. institutions. Depositors in U.S. banks are insured up to $250,000 and no insured depositor has ever lost money in a bank failure...

So, it seems, the basis for not worrying about US deposits is the rule of law and the deposit insurance? Remind us again what Cypriots thought they had?

Today, we got more great news on the housing front as housing starts rose from an upward revised 910K (was 890K) to 917K, modestly beating expectations of a 915K print. This was a blistering number, and as the mainstream media will have you know, was the second highest since early 2008, lower only compared to the very amusing 982K starts recorded in the dead of winter in December of 2012. All of this would be great if it didn't have one rather profound two-word caveat: "seasonally-adjusted." What happens when one strips away the Arima-X-12 seasonal adjustments? We have the answer! As the chart below shows, when one maps the seasonal pattern in the winter, the November-February three month period, one gets the following chart. What one doesn't get, is how a 0.2K increase in not-seasonally adjusted housing starts (from 62.2K to 62.4) manifests itself in a 76K surge in seasonally adjusted house starts.

As we suggested, the ongoing wranglings in Cypriot political quarters has resulted in more changes. The President just proposed the 'levy' on deposits begin at EUR 20,000 just hours ahead of today's planned vote.

• CYPRUS REVISED BILL SEES NO LEVY ON DEPOSITS UP TO EU20,000

However, it is still theft of private property which appears to be the philosophical stumbling block for the parties involved and therefore today's vote appears to be delayed:

• ANASTASIADES TO MEET PARTY LEADERS 9 AM TOMORROW: SPOKESPERSON
• CYPRUS PARLIAMENT BANK-LEVY VOTE MAY HAPPEN TOMORROW, CYBC SAYS

We patiently await news that the stock exchange and banks will be closed the whole week...

JP Morgan Chase & Co won their case of a nationwide investors' lawsuit accusing them of conspiring to drive down silver prices. U.S. District Judge Robert Patterson in Manhattan said the investors, who bought and sold COMEX silver futures and options contracts, failed to show that JPMorgan manipulated prices, by creating long short positions that were not in synch with market events at the time period. The judge acknowledged that the firm could influence prices, but said that it was not proven that the bank "intended to cause artificial prices to exist" and acted accordingly.  The plaintiffs had nearly 43 complaints filed from 2010-2011, which accused banks of profiteering in over $100,000,000 by illegally manipulating silver prices. The lawsuits against major Wall Street firms were consolidated, naming JPMorgan and 20 unnamed individuals as defendants. The complaint had sought triple damages for what it saw as antitrust violations in jiggering silver prices from 2007-2010, including through alleged "fake" trades during low market volumes.

The Troika has run roughshod over the rule of law. By calling for a universal bail-in of depositors (the securest part of bank capital ladder) before extracting money from shareholders, junior and subordinated bondholders, the EU bureaucrats and IMF have unilaterally ripped up the legal framework for property rights. This is a truly worrying and frightening progression – actually regression – in economic freedom. Unfortunately bank depositors (savers) have long been under the misguided impression that they are potentially immune from a bank collapse, with the State providing a safety net in the form of deposit guarantees up to a declared sum.  I would argue that individuals, partly due to government propaganda in the good times, have long since forgotten – or indeed have never understood – that once you deposit your money into a bank, you give up your right to ownership, ie, It’s a LOAN! An asset which is lent out multiple times as is the agreed practice under fractional reserve banking, clearly has a risk of no return, albeit a seemingly a low risk when confidence and trust is high in the economic system... The bail-in announcement for the Cypriot banks late Friday night was one of those events when we all look back and think that was the beginning of the end of the real global financial crisis. This should leave any individual in Europe under no illusion that the political elite will enact whatever it deems fit to protect their positions in the name of the euro and their own positions of power.

• Cyprus parliament ready to veto deposit tax (Reuters)
• Power still out at damaged nuclear plant in Japan (AP)
• CS' Dougan Calls Bankers Out-Earning Investors Unsustainable (BBG)
• Citi in $730 Million Pact on Debt Suits (WSJ)
• Bernanke Tightens Hold on Fed Message Against Hawks (BBG)
• India Central Bank Cuts Lending Rate (WSJ)
• ECB role in bailout comes under scrutiny (FT)
• Putin Buddy Gets $7 Billion of Deals for Sochi Olympics (BBG)
• BlackRock to Cut About 300 Jobs in Fink’s Reorganization (BBG)
• Trade, economy top agenda as China's Xi meets U.S.'s Lew (Reuters)
• Late Winter Storm Threatens Heavy Snow for Northern New England (BBG)
• China Foreign Investment Rebounds as Confidence Returns (BBG)
• Republicans differ on flexibility on taxes with Obama (Reuters)

Not even the usual monthly futures panacea (which in fact manages to fool the entire centrally-planned market twice every month, all the time), the always rising German ZEW Economic Sentiment survey, which mysteriously did not come at an all time high, but still rose from February's 48.2 to 48.5, despite expectations of a decline to 48.1, has managed to push the EUR higher in overnight trading, as a result keeping a lid on any of the generic no-volume futures levitation we have all grown to love. The reason is not that concurrently with the German data we got abysmal Eurozone Construction Output data, which plunged -7.3% Y/Y, the most in four months, following a slump in French and Spanish activity offsetting the German "confidence-boosting economic miracle" but simply because there continues to be no clarity whatsoever on events in Cyprus, where as noted earlier, the parliament may vote as soon as 6 hours from now to veto the proposed deposit confiscation "bailout/in" plan, which could lead to the first Eurozone banking system collapse, and the first expulsion of a member Eurozone nation, setting the wheels in motion for the unthinkable.

So much for the credibility of Reuters' Greek FinMin "unnamed" source. After the newswire presented the latest Eurogroup statement as if it was one where all deposits under €100,000 will be tax exempt, which was not the case, CNA reported a little while ago that the government has submitted a revised bill according to which only deposits under €20,000 would be exempt, and everything between €20K and €100K would still see the previous 6.75% levy. The parliamentary economic committee would discuss the bill ahead of plenary a debate scheduled for 6 p.m. Cyprus time. However, now as MarketNews reports, that is likely moot.

• CYPRUS PRESIDENT: PARLIAMENT BELIEVES BAILOUT PLAN UNJUST, GOVERNMENT MAKING OTHER PLANS.
• CYPRUS PRESIDENT: PARLIAMENT WILL REJECT BAILOUT PLAN –MNI

Of course, as we said nearly a day ago, if there is no consensus on the term of the bail-in, it is assured that there will be no vote today either, and possibly none tomorrow, and so on, which means that with both banks and stock markets closed through Friday, Cyprus may end up in permanent stasis indefinitely.