by Zero Hedge - July 1st, 2015 10:11 am
Submitted by GoldCore.
- Puerto Rico Governor says island cannot pay its $72 billion debt
- Puerto Rico debt 15 times per capita median debt of the 50 U.S. states
- Complicated arrangements misled bond investors to believe their funds were secure
- Share price of bond insurer exposed to Puerto Rican debt plummeting, possibly on inside information
With all eyes on Greece it would seem another crisis relating to unpayable debt is brewing in the Caribbean. The governor of Puerto Rico, Alejandro García Padilla, has warned that the island is unable to pay its debts of $72 billion.
Puerto Rico has managed to rack up an astounding level of debt relative to the size of its economy. Moody’s estimates the small U.S. territory to have bond debts fifteen times greater than the median bond debt of the 50 U.S. states.
Padilla has warned that by 2025 the island could have bond debt of up to $40,000 for every man, woman and child – in a territory with high unemployment and where the average annual wage is less than $20,000.
The debt was amassed by offering too-good-to-be-true terms to U.S. investors wishing to avoid paying high taxes at home. Interest paid on Puerto Rico’s bonds are tax exempt in the U.S.
A complicated set of arrangements lulled investors into a false sense of security with regards to Puerto Rican bonds. For a start, the constitution “contains an unusual clause that requires general-obligation bonds to be paid ahead of virtually any other government expense,” according to the New York Times.The government then promised specific revenue streams to different groups of bondholders.
The 2008 crisis hurt the economy badly and the government continued to promise more and more revenue streams in order to issue more and more bonds, the funds from which were used to finance current expenditure. Now there is simply not enough cash to finance debt and public services.
The governor did not specifically say that debts would be restructured. He did, however, say that he was “guaranteeing our citizens essential services and our pensioners a just income.”
“Strong Fundamentals” Meme Destroyed As US Manufacturing PMI Slows To Its Weakest Since October 2013
by Zero Hedge - July 1st, 2015 10:07 am
Submitted by Tyler Durden.
US Manufacturing PMI's final print for June at 53.6 (slightly above its preliminary 53.4 print) is its lowest since October 2013. The survey has fallen almost non-stop since the end of QE3. Under the covers, data was mixed, softer output growth was offset by a slight pick-up in the pace of new business gains and job creation, but Manufacturers indicated a slowdown in production growth for the third month running during June. As Markit's echief economist notes, “Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”
Worst since Oct 2013…
As Markit explains,
June data indicated a slower improvement in overall business conditions across the U.S. manufacturing sector, with softer output growth offsetting a slight pick-up in the pace of new business gains and job creation. The latest survey indicated that subdued export demand remained a key factor weighing down overall new order growth, as highlighted by a fall in new work from abroad for the third month running. Meanwhile, input cost inflation picked up in June, but output charge inflation moderated since the previous month.
The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.6 in June, down from 54.0 in May and the lowest reading since October 2013.
Manufacturers indicated a slowdown in production growth for the third month running during June. Reports from survey respondents suggested that subdued export sales and weaker investment spending patterns in the energy sector had weighed on output growth.
Things changed after the end of QE3…
Commenting on the final PMI data, Chris Williamson, Chief Economist at Markit said:
“Purchasing managers are reporting the slowest rate of manufacturing expansion for over a year and a half, suggesting that the economy is slowing again.
“The slowdown is largely linked to a third consecutive monthly fall in exports, in turn attributed by many companies to the strong dollar undermining international competitiveness.
“Investment spending also appears to be waning, with recent months seeing the slowest growth of new orders for business equipment and machinery for two years. The investment slowdown suggests companies are becoming more risk averse and cautious in their spending. The current impressive
by Zero Hedge - July 1st, 2015 9:54 am
Submitted by Tyler Durden.
1,000 Greek bank branches chanced a stampede in order to open their doors to the country’s retirees on Wednesday.
The scene was somewhat chaotic as pensioners formed long lines and the country’s elderly attempted to squeeze through the doors in order to access pension payments.
As Bloomberg reports, payouts were rationed and disbursals were limited according to last name. Here’s more:
It’s a day of fresh indignities for the people of Greece.
About a third of the nation’s depleted banks cracked open their doors after being closed for three days. But all they did was ration pension payments, hours after the country became the first advanced economy to miss a payment to the International Monetary Fund and its bailout program expired.
On the third day of capital controls, a few dozen pensioners lined up by 7 a.m. at a central Athens branch of the National Bank of Greece, an hour before opening time. They were to receive a maximum of 120 euros ($133), compared with the average monthly payment of about 600 euros. Many left with nothing after the manager said only those with last names starting with the letters A through K would get paid.
“Not only will I have to queue for hours at the bank in the hope of getting 120 euros, but I’ll have a two-hour round trip,” said Dimitris Danaos, 77, a retired local government worker who was making the bus journey from his home outside the Greek capital to the suburb of Glyfada.
AFP has more color:
In chaotic scenes, thousands of angry elderly Greeks on Wednesday besieged the nation’s crisis-hit banks, which have reopened to allow them to withdraw vital cash from their state pensions.
“Let them go to hell!” said one pensioner waiting to get his money, after failed talks between Athens and international creditors sparked a week-long banking shutdown.
The Greek government, which closed the banks and imposed strict capital controls after cash machines ran dry, has temporarily reopened almost 1,000 branches to allow pensioners without cards to withdraw 120 euros ($133) to last the rest of the week.
The move has again sparked lengthy queues at banks across Greece — and outrage from many retirees who are regarded as among the most vulnerable in society, exposed to a vicious and
by Zero Hedge - July 1st, 2015 8:35 am
Submitted by Tyler Durden.
As the shortened week continues ahead of tomorrow's payrolls print, and amid chaotic Greek headline-hockey, ADP and Challenger jobs data gives us a glimpse of what volatility lies ahead. After jumping a little last month, but remaining in weak territory, ADP printed 237k for June (beating expectations of +217.5k) in line with estimates for nonfarm payrolls. This is the best print since Dec 2014 but is dominated by small businesses with large companies lagging. Job gains were dominated by Services (+225k) with goods-producing fiorms gaining a mere 12k jobs. This comes after Challenger-Gray showed job cuts increasing 42.7% YoY in June and are at the highest level for June since 2009.
Mark Zandi, chief economist of Moody’s Analytics, said,
“The U.S. job machine remains in high gear. The current robust pace of job growth is double that needed to absorb the growth in the working age population. The only blemish in the job market is the loss of jobs in the energy sector. Most encouraging is the healthy rate of job growth among the nation’s smallest companies.”
Bounce back… good for the economy – bad for the market?
More visual details:
Change in Nonfarm Private Employment
Change in Total Nonfarm Private Employment
Change in Total Nonfarm Private Employment by Company Size
Change By Selected Industry
From the ADP report:
Payrolls for businesses with 49 or fewer employees increased by 120,000 jobs in June, the same as May. Employment among companies with 50-499 employees increased by 86,000 jobs, up from 63,000 the previous month. Employment gains at large companies – those with 500 or more employees – increased from May, adding 32,000 jobs in June, up from 19,000. Companies with 500-999 employees bounced back to 27,000 jobs added after shedding 1,000 jobs in May. Companies with over 1,000 employees added 5,000 jobs, down from 21,000 the previous month.
Goods-producing employment rose by12,000 jobs in June, after adding 11,000 in May. The construction industry had another solid month in June adding 19,000 jobs, down from 28,000 last month. Meanwhile, manufacturing added 7,000 jobs in June, after losing 2,000 in May.
Service-providing employment rose by 225,000 jobs in June, a strong rise from 192,000 in May. The ADP National Employment Report indicates that professional/business services contributed 61,000 jobs in June, almost
by kimblechartingsolutions - July 1st, 2015 8:24 am
Courtesy of Chris Kimble.
Much of the attention around the world seems to be revolving around a small country called Greece. What about the most populated country in the world (China), any key messages coming from there of late?
Well another Month, Quarter and Half a year are in the books. With this in mind I wanted to look at Monthly action of the hottest stock market in the world, the Shanghai Index. Above looks at the Shanghai index over the past 25-years. The 100%+ rally over the past year has pushed the Shanghai index up to its 23% Fibonacci ratio and a long-term resistance line, that has been in play for 25-years at (1) above.
As the Shanghai index was hitting this dual resistance last month it created a large reversal pattern. Could a reversal pattern after a large rally become important? Below looks at large reversals after at least 100% rallies in a year.
As you can see, seldom has the Shanghai index created a 10% reversal pattern after a 100% rally in 12-months. Until this past month, only one time in the past 25-years has the index created at least a 10% reversal pattern after a 100% rally in 12-months, which was 2007. A large decline followed this reversal pattern back in 2007. For sure we don’t have a large number of samples to compare what took place last month. One should not lose sight of how rare last months action was and what its long-term message/implications could be!
No doubt the world believes what happens in Greece is important for global stock markets. I am a fan of leadership, more so than being concerned about lagging stock markets or countries.
What the Shanghai index does going forward at (1) in the chart above (25-year resistance and Fib 23% level) should end up being very important for stock markets around the world in the next 6-months!
A break above dual resistance at (1) after this rare reversal pattern would be bullish for this global leader, lets see if it can accomplish it going forward!
To become a member of Kimble Charting Solutions, click here.
by phil - July 1st, 2015 8:13 am
Wheeeeeeee – what a ride!
It's 7:39:11 am and Greece is "fixed" at the moment and we have to time-stamp it to the second or it may change again. European markets are LOVING IT with 1.5-2.5% gains across the board but, on the whole, the DAX (the only one we really care about) isn't even close to our weak bounce line at 11,250 yet – so we don't care. We do care about CHINA!!! (see yesterday's post), who dropped over $200Bn in stimulus this week and they fell another 5% this morning anyway. That's not good, folks…
5% would be a 900-point drop in the Dow in one day. I think I need to put that in perspective because we say "China fell 5% today" and people go "well, isn't that a shame" and that's the end of it. It's not a shame, folks, it's a TRAGEDY! To sum things up, the Shanghai has fallend from 5,200 to 4,000, which is 23%, which would be over 4,000 Dow points and it bounced back to 4,300, which was a weak 25% retrace of the drop that was IMMEDIATELY reversed DESPITE massive stimulus measures.
Of course the 3,900 line is bouncy – it represents a 25% drop from 5,200 so SOMEONE is going to speculate and buy that dip but the dip buyers ran straight into a new round of sellers and now 3,900 MUST HOLD on the Shanghai or Greece will be the last thing you're worried about next week!
We are nowhere near unwinding the 2 TRILLION Yuan ($339Bn) of margin debt that has built up in China, much of it financed at the 22% capped interest rates. When your market is gaining 100% a year, taking a 22% loan out to buy stocks seems to make sense – especially when all of your state-controlled media (not to mention the Corporate Propaganda you pick up in the US) tells you how AWESOME everything is.
There are now more registered stock traders in China (90M) than there are registered Communist Party Members (87.8M) – interesting news on the 94th anniversary of the party's founding. It’s safe to assume this is not…
by ilene - July 1st, 2015 8:09 am
Courtesy of Mish.
Stock futures are up this morning on news that Alexis Tsipras Backs Down on Many Greece Bailout Demands.
A reader asked me about Tsipras’ cave in, but I responded it is nothing but a political ploy ahead of the July 5 referendum as to whether or not Greece should accept the creditor’s take-it-or-leave-it offer.
I am not the only one who sees it that way. In spite of numerous headlines that make it appear as if this was a significant breakthrough.
- Wolfgang Schäuble, Germany’s hardline finance minister, gave the latest Greek initiative short shrift, saying it was “no basis” for serious talks.
- Eurozone officials involved in the talks cautioned Mr Tsipras’s remaining demands in the letter were “not a handful of minor changes” and would have “significant fiscal impact” and may not be acceptable to creditors.
Gaming the Vote
There was no cave in, this is merely electioneering by Tsipras to counteract the nonstop meddling and electioneering by Germany, France, Spain, and European Commission president Jean-Claude Juncker.
No Vote Lead Narrowing
Another Greek bailout referendum opinion poll is out, conducted by prorata polling institute for efimerida ton synatkton newspaper, with responses before bank closure showing yes 30 pct, no 57 pct, don’t know 13 pct, while responses after bank closure have seen yes 37 pct, no 46 pct, don’t know 17 pct.
Rather than caving in, simply Tsipras’ proposal as a means to influence votes. As I noted yesterday, “As pertains to game-playing, Greek leaders have run circles around the eurozone nannycrats.”
Mike “Mish” Shedlock
by Zero Hedge - July 1st, 2015 7:53 am
Submitted by Tyler Durden.
The market may be scratching its head over the outcome of this Sunday’s Greek referendum, soaring on the faintest trace of good news such as the report of Tsirpas’ capitulation this morning then reluctantly selling off as the euphoria is rejected, but for the bookies the outcome is now clear: earlier today Ireland’s Paddy Power announced it has “paid out five figures” in winnings to gamblers who bet that Greece will back a July 5 austerity referendum that may seal the nation’s future as part of the euro region.
Cited by Kathimerini, Paddy Power – Ireland’s largest bookmaker – said in an e-mail in Dublin on Wednesday that “Despite some polls suggesting it’s neck and neck, over the last few days we’ve seen enough to be convinced. In a race with two potential outcomes we’ve seen over 85 percent of money go one way and that’s massive.”
It adds that gambling companies routinely pay out early on sporting events when they regard the result as a foregone conclusion, in part because it draws publicity and in part because gamblers often recycle winnings into other wagers.
Which is surprising because just a few hours earlier, a poll conducted between June 28-30 and published in the Efimerida ton Syntakton newspaper, showed 54 percent of those planning to vote in Sunday’s referendum would oppose the bailout against 33 percent in favor.
According to Reuters, “a majority of Greeks would vote ‘No’ to the terms of a proposed bailout deal by foreign lenders but the lead narrowed significantly after banks were closed this week, according to an opinion poll published on Wednesday. However, a breakdown of results between those polled before and after Sunday’s decision to close the banks and impose capital controls showed the gap narrowing.”
More details on the poll:
Of those polled before the announcement of the bank closures, 57 percent said they would vote No against 30 percent for who would vote Yes. Of those polled after, the No’s were at 46 percent against 37 percent for Yes.
The poll showed support for ‘No’ strongest among voters of the ruling leftist Syriza party (77 percent), the far-right Golden Dawn party (80 percent) and the Communist KKE (57 percent).
Support for ‘Yes’ was strongest among voters of the center-right
by Zero Hedge - July 1st, 2015 7:47 am
Submitted by williambanzai7.
by Zero Hedge - July 1st, 2015 7:47 am
Submitted by Tyler Durden.
All eyes are once again trained squarely on Greece this morning after a letter surfaced which shows Greek PM Alexis Tsipras is prepared to concede to most of Brussel’s demands in order to secure a deal for Greece which is laboring under capital controls and the threat of a banking collapse after becoming the first developed country to default to the IMF.
This morning, German Chancellor Angela Merkel addressed the German parliament. Here are the key talking points (via Bloomberg):
“The door for talks with Greece was always open and remain always open. We owe that to the people and we owe it to Europe.”
“There can be no negotiations for a new credit program before the referendum.”
“Greek people unquestionably confronting difficult days.” Greece unilaterally ended debate on second credit program, failed to make IMF payment, Merkel says
“Greece has legitimate right to hold referendum, euro states have right to respond.”
And some more of her speech highlights from MNI:
- GERMANY WON’T COMPROMISE AT ALL COSTS
- DON’T NEED TO FEAR EZ ECO CATASTROPHE FROM GREEK CRISIS
- MERKEL: EUROPE IS MUCH STRONGER THAN 5 YEARS AGO
- REFERENDUM IS LEGITIMATE RIGHT OF GREECE. GERMANY WILL AWAIT RESULTS OF REFERENDUM
- DOOR FOR TALK WITH GREECE OPEN
So is Germany bluffing the bluffer Tsipras, and effectively saying it won’t negotiation with the current Greek government but would rather wait until its replacement is sworn in after the referendum?
opposition leader in Germany accusing creditors of hoping for Greek govt to fall on Sunday-hence no talks b4.He probably has a point!#Greece
— Famke Krumbmüller (@FKrumbmuller) July 1, 2015
Of course, that assumes a Yes vote, which would be contrary to earlier reports that at least in early polling, the “No”s have it? Unless of course Germany does want a No vote, in which case all bets are off.