Update: President Anastasiades rejects FinMin Sarris' resignation. Unclear what happens next.
Things just took a turn for the much worse following this news from Market News:
- CYPRUS FINANCE MINISTER SUBMITS RESIGNATION - SOURCES
- MARKET NEWS CITES SOURCES ON CYPRUS FINANCE MINISTER
Unclear if German FinMin Schauble will promptly step in to fill this latest sovereign vacancy.
US Deposits In Perspective: $25 Billion In Insurance, $9,283 Billion In Deposits; $297,514 Billion In DerivativesSubmitted by Tyler Durden on 03/19/2013 10:40 -0400
Earlier today, the American Banking Association reminded Americans that there is absolutely nothing to worry about when it comes to the sanctity of US deposits: after all there is a whopping $25 billion in the FDIC insurance fund which means "insured depositors are safe and their deposits are protected by a strong FDIC fund....The FDIC insurance fund has over $25 billion in reserves and the banking industry " Obviously supposedly "insured" depositors in Cyprus also though there was nothing to worry about, until they woke up on Saturday with a haircut between 6.75% and 9.9% on their money in the bank. Sadly, it may be the case that the ABA is being just modestly disingenuous in its statement. Why? Instead of explaining it in detail, here is a snapshot that does more than thousands of words ever could.
When you have a few good bureaucratic central planners preserving a broke monetary regime, what can possibly go wrong? Perhaps headlines such as these:
- Senior German Official - No Idea When Or If Cypriot Parliament Will Vote On Proposed Bailout Programme
- Senior German Official - Situation In Cyprus Is Bad, Reasons For This Lie In Cyprus
- Senior German Official - With No Programme, Liquidity To Cypriot Banks Is In Danger And They Cannot Open
And then Schrodinger Schauble himself:
- SCHAEUBLE SAID TO TELL LAWMAKERS FEELS SORRY FOR CYPRIOT PEOPLE
- SCHAEUBLE SAID TO SAY CYPRUS LONG HAD WRONG BUSINESS MODEL
Wait, being a participant in a monetary cul-de-sac, whose eventual end leads to a very painful and often times lethal, hyperinflationary outcome, is a wrong business model? Who could have known. Naturally, with well-wishers like these, who needs bond vigilantes?
The no-brainer trade of the year is hitting a wall of reality in the last few days. Greek government bonds (GGBs), levitated on a sea of central bank excess and a plethora of promises, are coming back to earth rapidly as the fears of their Mediterranean brethren spreads contagiously to other bond markets. Spain and Italy are suffering notably today also but it is the almost 7% drop in the price of GGBs instantly removing all 2013 gains that is the most worrisome... This is the largest price drop since the March 2012 bailout 'success'.
The average US worker remains concerned about their retirement even as the stock market reaches new all-time highs. The WSJ reports new data that shows the impact of stagnating wage growth and aging demographics is combining to squeeze individuals as a depressing 57% of Americans reported less than $25,000 in household savings and investments. On the bright side, the latest and greatest 'Cyprus' tax limit appears to be €20,000, or roughly the $25K threshold in the US, freeing those 'un'-wealthy citizens to keep their hard-earned private property.
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.
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.
- 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.
The relativity relationship that Grant Williams discusses in his latest 'Things That Make You Go Hmmm' newsletter is far simpler to understand than that proposed by Einstein (and far, far less likely to win him any prizes of a scientific nature, but we can live with that). Ladies and gentlemen, we are proud to unveil to you, for the first time: 'Williams's Theory of Disconnectivity' After long and painstaking research, I have distilled my theory down to the following equation: OS+ps2?R (where OS is 'official statistics', ps2 is 'political spin' (squared) and R is 'reality'. We must be missing something because, try as we might, we are having a hard time understanding the bull case right now. It seems to be predicated largely on the thesis that we should buy things 'because they are going up'. (Japan is the poster child for this curious strategy, as those terrible results from Sony demonstrated a few weeks ago. Despite them, Sony stock is back to where it was before the company laid out, in no uncertain terms, just how poorly it was doing. In every single division.) Yes, we understand that, in nominal terms, money printing is good for stocks 'just because'; but sooner or later, reality is going to reassert itself (painfully, we might add).
While the Cypriot Parliament may be dragging its feet on a proposed rescue plan for Cyprus' banks, the country ultimately faces a choice between Brussels' bitter pill... and bankruptcy. Cyprus' newly-elected President, Nicos Anastasiades, has quite accurately summed up the situation: "A disorderly bankruptcy would have forced us to leave the euro and forced a devaluation." Yes, Brussels and the IMF have finally decided to come to the aid of the tiny island, which accounts for just 0.2% of European output -- to the tune of roughly $13 Billion. But, this bailout is different. Still, the question lingers: Why now? The sorry state of Cyprus' banking system is certainly no secret. One reason can be found by taking a look at the composition of Cyprus' bank deposits...