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The Morning After

All eyes should remain focused on Cyprus today, especially since there is no data being reported elsewhere. Financial markets closed Friday on a positive note, as an agreement on Cyprus appeared to be taking shape and a minor relief rally across most asset classes overnight vindicated hopes of a positive outcome as details of the detail were announced overnight. More clarity is still required on some aspects of the agreement (deposit and bondholders) but the fact that the national parliament does not need to vote again should stop the deal from unravelling as it did last week. Whether this is enough to restore confidence and prevent a possible cautionary deposit flight from Cyprus remains to be seen.

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RANsquawk EU Market Re-Cap - 25th March 2013

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What A Difference A Week Makes For Cyprus' Schrodinger Deposits

Following the Eurogroup press conference, the Cypriot Finance Minister Michael Sarris is currently explaining how:


Having avoided the "disastrous exit" from the Euro. Should we believe him? Earlier in the week he exclaimed:


And tonight we are told Bank of Cyprus uninsured 'savers' will face 40% haircuts and Laiki uninsured 'savers' as much as 100% (or total wipeout). It seems the lessons of Juncker are well studied in all the European Nations.

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Eurogroup Press Conference - Live Webcast (And Full Eurogroup Statement)

It's 2:30am, do you know where your deposits are? Tune in to see the Eurogroup explain how this is in the best interest of the Cypriot people, how the 'deal' illustrates the solidarity of the European people, and how the worst of the crisis is now behind us.


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"In The Best Interests Of The People..."

The European Union finance ministers have just agreed to the terms of the Cyprus-Troika deal (which we fear could mean 100% haircts for the uninsured Laiki depositors as unsecured claims in a Chapter-7-style liquidation). With democracy now a complete farce since not even Parliament will be allowed to vote on deposit confiscation as part of a financial sector bankruptcy deal, here is the island nation's president explaining what just happened:


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"Cyprus Is The Homage Europe Pays For The Denial Of A Systemic Crisis"

Three months ago, Yanis Varoufakis explained Europe's bogus growth pact and the papering over the cracks that was being done by the IMF and ECB, "The idea here is that, yet again, the Eurogroup-ECB-IMF alliance is not ready, politically, to reveal the truth to its various constituencies." He was, obviously, correct. This weekend, in a brief BBC Radio interview (below), as Cyprus erupts and brings the European circus back into town, Varoufakis exclaims, "every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one." In three minutes, the Greek economist illustrates how the leaders are laying waste to the supposed pillars upon which the European Union was founded.

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Meanwhile, Cash Exodus From Cyprus Surges Despite Bank Closures, Capital Controls

When Cyprus put its banks into lockdown last weekend until... well indefinitely, now that capital controls are established, the main reason was to halt all capital outflows from the henceforth liquidity starved island whose banks will only exist as long as the ECB provides an ever greater dose of liquidity to account for the collapse in deposit funding. Which is why it is surprising, make that shocking, that as Germany FAZ reports, in the past week there has been a surge in cash outflows from Cyprus, even as its financial system has been supposedly ringfenced from the world, which by the way is the only thing preventing the EUR17 billion bailout from soaring by orders of magnitude because should a liquidity leak be discovered, it is all over for the country's financial system.

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It's Going To Be A Long Night (With Updates)

As liquidity started to come back into FX markets this evening, it is very clear that humans and algos are reacting to every headline, rumor, and bloviation from Europe. In the last two hours, as this chart of EURUSD shows, while the range is small, the reactions are telling. It does appear from the EUR ramps that no-news-is-good-news for now - though evidently, the facts behind that 'no news' paint a different picture. As S&P 500 futures just opened, so EURJPY was ramped 70 pips to hold the only policy tool the Fed has left at unch (for now).

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Another Gold Shortage? Dutch ABN To Halt Physical Gold Delivery

Based on a letter to clients over the weekend, it appears ABN Amro is changing its precious metals custodian rules and "will no longer allow physical delivery." Have no fear, they reassuringly add, your account will be settled at the bid or offer price in the 'market' and "you need to do nothing" as "we have your investments in precious metals."

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Guest Post: Stocks Priced in Real GDP

Since the 1990s, priced in Real GDP the Dow Jones Industrial Average (as well as the S&P500) has been far above their 20th-century norm. There is an unsurprising coincidence - as stock prices (and corporate profits) have soared above their historical norm, wage growth has been very stagnant. The economy has come to be tilted toward bankers, financiers, insurance brokers and away from wage-earners, manufacturers and artisans. Does that mean that as Hassett and Glassman projected in Dow 36,000, stock prices have climbed to a new plateau? Well, while it is impossible to say exactly what prices will do in future (nominal, or otherwise) the “new plateau” has been very much supported by the Federal Reserve, first by lowering rates and keeping them low. Some might take that as a sign that stocks aren’t going to get much cheaper, because the Fed won’t let them get much cheaper; but gravity is against the Fed. Will it be third-time unlucky for the Fed, hell-bent on wealth-effecting and financialising the US economy to prosperity?

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Four Feckless Features Of A Post-Cyprus Europe

The calmness of the financial markets in the face of the deteriorating Cyprus crisis in the past week has been remarkable. Although Cyprus is tiny enough to be completely overlooked in most circumstances, its economy and banking system have characteristics similar to other, much larger, eurozone countries. Cyprus is certainly at the extreme end, but an over-leveraged banking system, with insufficient capital and reliance on foreign funding, is familiar territory in the eurozone. But while Cyprus is at an extreme, four of the features of the reported deal are setting unfortunate precedents for the future. If the reported deal is done to keep Cyprus inside the euro by Monday, we can expect to hear, very loudly, that this is a unique case, and that the unfortunate features of this settlement cannot be extrapolated to any other future circumstances. Let us hope not. If nothing else, it would certainly demonstrate that the eurozone still has much work to do before the crisis is fully under control.

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Switzerland Next: Swiss Banks Set To Foward Confidential Bank Client Data To U.S. Officials

The Cyprus deposit scramble contagion spreads as Reuters reports that "Swiss banks would be required to "motivate" remaining U.S. clients to come clean to U.S. tax officials. If they failed to do so, confidential bank data would be forwarded to U.S. officials. The initial shipment of data from those banks would not include client names but, based on the data, U.S. officials would be able to submit a judicial aid requests to get the names of alleged tax evaders."

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With Russia "Demanding Cyprus Out Of The Eurozone" Here Is A List Of Possible Russian Punitive Reprisals

As has been made abundantly clear on these pages since the breakout of the latest Cyprus crisis, the Russian policy vis-a-vis its now former Mediterranean offshore deposit haven-cum-soon to be naval base, has been a simple one: let the country implode on the heels of the Eurozone's latest humiliating policy faux pas, so that Putin can swoop in, pick up assets (including those of a gaseous nature, much to Turkey's chagrin) for free, while being welcome like the victorious Russian red army saving Cyprus from its slavedriving European overlords (a strategy whose culmination Merkel has very generously assisted with). Curiously there had been some confusion about Russia's "noble" motives in Cyprus (seemingly forgetting that in Realpolitik, as in love and war, all is fair). We hope all such confusion can now be put to rest following the clarification by Jorgo Hatzimarkakis, the German Euro deputy of Greek origin, who told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.

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Is This Europe's Biggest Nightmare?

Just one Spiderman towel left in stock in Europe... how will they ever attract depositors back now...


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Guest Post: Frugality Or Fragility?

The hallmark of human nature is adaptability.  Faced with a changing environment, the human spirit and its social manifestations change in response.  But once the human endeavor itself creates the environment, how can such adaptation be a simple exercise in instinct?  Simply put, it cannot. Throughout all of this crisis, the global elites have displayed consistently worsening signs of decadence, psychopathic tendencies, and overall detachment from reality.  And who can blame them?  There has been no tap on the shoulder, no knock on the door, no raid on the office to indicate that anything is seriously wrong. Such is the contemporary reality we live in.  People try to live their lives, to avert their eyes, to hide their children from the sight and effect of the monstrous cavorting of the elites. Perhaps a crazed fad for frugality will break out and suppress the urges of the elites.  In the meantime, hide your valuables as well as you can, and treat your children with the sympathy they deserve.  They are among the chief victims of our era’s unholy orgies of risk and corruption.  Frugality or fragility?  The choice is yours, as well as theirs.

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