Thursday, July 31, 2014

Russia And India Begin Negotations To Use National Currencies In Settlements, Bypassing Dollar

Over the past 6 months, there has been much talk about the strategic proximity between Russia and China, made even more proximal following the "holy grail" gas deal announced in May which would not have happened on such an accelerated time frame had it not been for US escalation in Ukraine.
And yet little has been said about that other just as crucial for the "new BRIC-centric world order" relationship, that between Russia and India. That is about to change when yesterday the Russian central bank announced that having been increasingly shunned by the west, Russia discussed cooperation with Reserve Bank of India Executive Director Shrikant Padmanabhan. The punchline: India agreed to create a task group to work out a mechanism for using national currencies in settlements. And so another major bilateral arrangement is set up that completely bypasses the dollar.
First Deputy Chairman of the Central Bank of the Russian Federation KV Yudaeva and Executive Director of the Reserve Bank of India G. Padmanabhan at the twentieth meeting of the Subgroup on banking and financial issues of the Russian-Indian intergovernmental commission on trade-economic, scientific-technical and cultural cooperation discussed the current state and prospects of cooperation between banks.

The meeting was attended by representatives of central banks, ministries and agencies, credit organizations in Russia and India.

During the meeting dealt with the problems faced by the branches and subsidiaries of banks in the two countries and ways of addressing these problems.

As a priority area discussed the use of national currencies in mutual settlements. Given the urgency of the issue and the interest of commercial structures of the two countries, the meeting decided to establish a working group to develop a mechanism for the use of national currencies in mutual settlements. It will consist of representatives of banks and, if necessary, the ministries and departments of the two countries to coordinate its activities will be central banks of Russia and India.
What is curious is that now that China has sided firmly with Russia when it comes to geopolitical strategy (not least when it comes to recent development surrounding the downing of flight MH-17, recall "China Blasts "One-Sided Western Rush To Judge Russia" Over MH17"), and thus Russia behind China when it comes to claims by the world's most populous nation in its territorial dispute with Japan, Japan too is scrambling to secure a major ally in Asia, and it too is trying desperately to get on India's good side.
Bloomberg reports that "Japan’s Sasebo naval base this month saw unusual variety in vessel traffic that’s typically dominated by Japanese and U.S. warships. An Indian frigate and destroyer docked en route to joint exercises in the western Pacific."
The INS Shivalik and INS Ranvijay’s appearance at the port near Nagasaki showed Japan’s interest in developing ties with the South Asian nation as Prime Minister Shinzo Abe’s government faces deepening tensions with China. Japan for the third time joined the U.S. and India in the annual “Malabar” drills that usually are held in the Bay of Bengal.

With Abe loosening limits on his nation’s military, the exercises that conclude today showcase Japan’s expanding naval profile as China pushes maritime claims in disputed areas of the East and South China Seas. For newly installed Indian Prime Minister Narendra Modi, Japan’s attention adds to that of China itself, in an opportunity to expand his own country’s sway.

Japan’s involvement in Malabar underscores its interest in helping secure its trade routes to Europe and the Middle East. The Indian Ocean is “arguably the world’s most important trading crossroads,” according to the Henry L. Stimson Center, a foreign policy research group in Washington. It carries about 80 percent of the world’s seaborne oil, mostly headed to China and Japan.


“The Japanese are facing huge political problems in China,” said Kondapalli in a phone interview. “So Japanese companies are now looking to shift to other countries. They’re looking at India.”
So on one hand Japan is rushing to extend a much needed olive branch by the "insolvent western alliance + Japan" to India; on the other Russia is preparing to transact bilterally with India in a way that bypasses the dollar.
Which means that just as Germany has become the fulcrum and most strategic veriable in Europe (more on this shortly) whose future allegiance to Russia or the US may determine the fate of Europe, so suddenly India is now the great Asian wildcard.
Perhaps a very important hint of which way India is headed came moments ago from Reuters, which said that India has raised the issue of U.S. surveillance activities in the South Asian nation with Secretary of State John Kerry, the foreign minister said on Thursday. "Yes, I raised this issue (U.S. snooping) with Secretary John Kerry ... I have also conveyed to him that this act on the part of U.S. authorities is completely unacceptable to us," Sushma Swaraj said at a joint news conference in New Delhi. In response, Kerry said: "We (the United States) fully respect and understand the feelings expressed by the minister."
Thank you Snowden for helping move the geopolitical tectonic plates that much faster.
Now let the real courting begin.

Wednesday, July 30, 2014

Argentina Defaults on 29 Billion

It's all over but the crying: having explained Argentina's position (i.e. not giving to so-called vulture funds), Economy Minister Kicilloff explains:
As Bloomberg notes, by defaulting today, Argentina may trigger bondholder claims of as much as $29 billion -- equal to all its foreign-currency reserves. Just remember that the last 2 days have seen 'smart money' buy Argentine bonds and stocks to all-time record highs.

If the overdue interest on Argentina’s dollar-denominated securities due 2033 isn’t paid by July 30, provisions in bond indentures known as cross-default clauses would allow the nation’s other debt holders to also demand their money back immediately. The amount corresponds to Argentina’s debt issued in foreign currencies and governed by international laws.

In a default, even a temporary one, Argentina’s economy will contract and the odds of a crisis are high, according to Marcos Buscaglia, an economist at Bank of America Corp. Money demand will become unstable as Argentines scramble for dollars, causing the peso to slump, he wrote in a report today.
“Argentina’s current weak fiscal, monetary and external conditions make the probability of the situation spinning out of control quite high,” he wrote. “Argentina’s payment capacity should not be taken for granted if it defaults.”
*  *  *
All those equity and bond gains - which hit an all time high - today, gone.

Finally, we aren't the only ones who are let down by today's anticlimatic development. Compare and contrast with this 2001 announcement when Argentina announced is last default: a far more exuberant affair.

EES announces Forex vendor package

Elite E Services (EES) announces the launch of a package for Forex vendors, ideally for those who sell their custom indicator or Expert Advisor.  The package includes a membership area, SEO compliant website, an affiliate system, and an API bridge linking the membership area to MQLLock, the world's best MQL locking system.  The package was developed in conjunction with Vector Informatics for the client site  It is ideal for Forex vendors that want to focus on their content and building their business, and not the nuances of managing a members site.  Marketing tools such as organic SEO combined with an affiliate system provide vendors the best use of their content and member area, and the tools to grow their business.  The package includes all elements needed, but for vendors who already have some of the components, items may be purchased individually.

Click here to learn more about the package or Contact EES today.

Thursday, July 24, 2014

America's Dumbest Move Yet: Seizing A Foreign Bank

Ten dark suited men entered the premises of FBME bank in Cyprus on Friday afternoon and took it hostage.
It must have looked like a scene from the Matrix. And given the surrealism of how this conflict is escalating, maybe it was.
The men were from the Central Bank of Cyprus (CBC). And they commandeered FBME because an obscure agency within the US government recently issued a report accusing the bank of laundering money.
It just so happens that FBME… and Cyprus in general… is where a lot of wealthy Russians hold their vast fortunes.
Bear in mind, there has been no proof that any crime was committed. There was no court hearing. No charges were read. It wasn’t even the government of Cyprus who accused them of anything.
There was just a generic report penned by some bureaucrat 10,000 miles away.
Funny thing—when HSBC got caught red-handed laundering funds for a Mexican drug cartel last year, the US government gave them a slap on the wrist. HSBC got off with a fine.
Yet when the US government merely hints that FBME could be laundering money, the bank gets taken over at gunpoint.
Welcome to warfare in the 21st century. It’s not about battleships and ground troops anymore.
This time the adversaries are battling each other using what ultimately affects everyone: money.
And on this battlefield the US doesn’t really have many options.
  • US banks still form the nucleus of the global financial system, but this is quickly being replaced.
  • Just last week the BRICS nations met in Fortaleza, Brazil to launch the origins of a brand new, non-US financial system.
  • The US is still the largest economy in the world, but will likely lose this status to China by the end of the year.
  • The US dollar is still the most widely used currency in global trade, but even America’s closest allies (Canada, Western Europe) recognize that the time has come to move beyond the dollar.
So while the US is still running around and barking at others, it is quickly losing its capacity to bite.
Their only tactic is to haphazardly attack Russian interests wherever they can.
They’re sanctioning Russian companies. They’re trying to torpedo international support for Russia. And now they’ve resorted to plundering Russian assets held in other sovereign nations.
Imagine you’re Qatar. Or China. Or Kuwait. Or Singapore. Or anyone else who holds substantial amounts of US debt.
All of these countries understand the lesson loud and clear: when the US doesn’t like you, they will do everything they can to make your life difficult.
Does this inspire confidence? If you’re holding hundreds of billions of dollars of US Treasuries, does this really improve your level of trust in the US?
Probably not.
By terrorizing Russian interests, the Obama administration is begging the rest of the world to reconsider their misplaced trust in the United States.
All these foreign countries really have to do if they want to retaliate is start dumping their US Treasuries. Or simply stop rolling over when the notes mature.
That will cause catastrophic consequences in the United States. Interest rates will soar, inflation will kick in, and the government will be even closer to default than it already is.
Inexplicably, Mr. Obama is practically begging the world to do this. It’s tremendously arrogant.
It’s like the economic warfare equivalent of Napoleon pompously leading his overstretched, exhausted army into Russia.
And neither Napoleon nor Obama gave the slightest consideration to the big picture consequences.
At $17.6 trillion in debt, the US is trying to wage economic war without any ammunition. It’s not something that is going to work out well for them.

Europe – Here is What the Wealthy are Doing

By: Chris Tell at:
There are essentially three main reasons for using Banks:
  1. Storing cash for ease of transacting;
  2. Keeping cash safe from theft;
  3. Earning interest on your capital.
As a teenager I remember opening my first bank account, diligently saving my money and watching it slowly grow. Receiving "official" mail was cool. I felt important by simply receiving my monthly bank statements with my name on the envelope.
I was confident that by banking my cash I was protecting my capital. After all, it seemed a better idea than sticking it in my sock drawer, and I soon found that I was earning interest on my money, something else my sock drawer couldn't provide.
Little did I know or understand how modern banking actually worked back then, though it's only gotten worse since I opened that first bank account many years ago. Much worse, in fact.
In Europe, Banks reserve ratios have literally collapsed, despite what the "stress tests" conducted by Eurocrats want us to believe. Passing a European Banking stress test these days is a little like farting - easy to do, mostly hot air, and yet it typically warns of something else coming down that isn't going to be pretty. And for those who see the writing on the wall, they know it stinks.
As Reuters recently reported:
European banks have a combined capital shortfall of about 84 billion euros ($115 billion), German weekly WirtschaftsWoche reported, citing a new study by the Organisation for Economic Cooperation and Development (OECD).
French bank Credit Agricole has the deepest capital shortfall at 31.5 billion euros, while Deutsche Bank and Commerzbank have gaps of 19 billion and 7.7 billion respectively, the magazine reported in a pre-release of its Monday publication.
If you'd like your eyes to bleed, you're welcome to read the entire report here.
It is no surprise that cash withdrawal limits are being implemented across Europe, and cash transactions of more than a fleeting amount are actually being banned. Yep, it is actually illegal to purchase anything over 1,000 Euro using cash.
Want to have a big party night in Berlin? No problem. Go to the ATM and withdraw a couple hundred Euro in cash. If you're a central banker out for a taxpayer-funded soiree, (un)fortunately you'll have a problem, as you'll likely need to withdraw a few thousand Euro (hookers and blow aren't cheap). I wonder how they're going to pay for services rendered now? With a Visa card?
It was only a few months back that HSBC were publicly humiliated for restricting cash withdrawals by its customers. Now this is becoming commonplace across Europe.
Why are they doing this?
Two reasons:
  1. Bank runs are a real risk if the populace actually wakes up;
  2. Controlling the flow of money allows the controlling of people. Ensuring that transactions are all digital guarantees that financial privacy is vaporised.
None of the above information is particularly enlightening for those paying attention. However, what is going on to combat this might raise a few eyebrows. I thought I'd relay a little story which came out of a conversation I had last week with a friend.
Switzerland, once known for its robust banking privacy and healthy capital ratios, despite all of Europe's troubles, is still home to large pools of wealth. My friend maintains a relationship with an old banking colleague, who is currently working with fiduciaries in Switzerland to get client money out of their own bank accounts and into physical cash. These clients are no longer allowed to withdraw large amounts of cash, THEIR cash, directly from the banks any longer. However, they are free to wire funds anywhere they please.
What is therefore happening is that the fiduciaries are wiring the money to Hong Kong, where it is picked up by a "messenger" and placed in an envelope to be couriered BACK to Switzerland, in cash. There are currently no restrictions on remitting cash into Switzerland. Right now a loophole exists, and these wealthy clients are moving many millions of dollars each week - wiring it out of the country only to have it sent back in cash. No doubt they're looking to put it in the sock drawer! What do they see that the man on the street doesn't?
Remember the 3 reasons for using a bank account mentioned at the beginning of this article?
  1. Storing cash for ease of transacting - This is still valid so long as you use the system.
  2. Keeping cash safe from theft - The words "safe" and "bank", at least with most European banks that is, should not be used in the same sentence. Aside from the theft occurring on a daily basis by our central bankers, the risk to waking up one day to a nationalization of your European bank is a real and present risk.
  3. Earning interest on your capital
Central bankers have single-handedly destroyed any incentive to place capital into the traditional banking system for yield. Anyone buying CDs thinking they're safe and that they provide a satisfactory return is simply delusional.
- Chris

"The Eurozone was never designed to cope with millions of Spaniards moving their money out of the country, behaving like middle-class Venezuelans with offshore accounts in Miami. And it also was never designed to cope with capital controls. But increasingly, it looks like we’re going to end up with one or the other. Or both." - Felix Salmon

Wednesday, July 23, 2014

NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk"

First it was French BNP that was punished with a $9 billion legal fee after France refused to cancel the Mistral warship shipment to Russia (which promptly led to French National Bank head Christian Noyer to warn that the days of the USD as a reserve currency are numbered), and now moments ago, none other than the 150x-levered NY Fed tapped Angela Merkel on the shoulder with a polite reminder to vote "Yes" on the next, "Level-3" round of Russia sanctions when it revealed, via the WSJ, that "Deutsche Bank's giant U.S. operations suffer from a litany of serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems."
What could possibly go wrong? Well... this. Recall that as we have shown for two years in a row, Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That's a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of... the world.

In a letter to Deutsche Bank executives last December, a senior official with the New York Fed wrote that financial reports produced by some of the bank's U.S. arms "are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm's entire U.S. regulatory reporting structure requires wide-ranging remedial action."

The criticism from the New York Fed represents a sharp rebuke to one of the world's biggest banks, and it comes at a time when federal regulators say they are increasingly focused on the health of overseas lenders with substantial U.S. operations.

The Dec. 11 letter, excerpts of which were reviewed by the Journal, said Deutsche Bank had made "no progress" at fixing previously identified problems. It said examiners found "material errors and poor data integrity" in its U.S. entities' public filings, which are used by regulators, economists and investors to evaluate its operations.

The shortcomings amount to a "systemic breakdown" and "expose the firm to significant operational risk and misstated regulatory reports," said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank.


Deutsche Bank's external auditor, KPMG LLP, also identified "deficiencies" in the way the bank's U.S. entities were reporting financial data in 2013, according to a Deutsche Bank email reviewed by the Journal.
Oh wait, so those €55 trillion in derivatives are actually completely fabricated? Well if that doesn't send the S&P 500 limit up nothing will.
DB's response is the generic one already attempted by that other permacriminal bank, Barclays, which hired a few hundred compliance people after it was revealed that the British firm was manipulating and rigging pretty much every product and market it was involved in.
"We have been working diligently to further strengthen our systems and controls and are committed to being best in class," a Deutsche Bank spokesman said Tuesday. As part of this, he said, the bank is spending €1 billion globally and appointing 1,300 people, including about 500 compliance, risk and technology employees in the U.S. Mr. Muccia declined to comment.
Sadly for now what this latest Pandora's box means is that confidence in Europe's insolvent banks just crashed with a bang once again, not that it would be reflected in the stock's rigged price of course: rigged most likely by Deutsche Bank among other of course.
The New York Fed's concerns also pose a challenge for Deutsche Bank's longtime finance chief, Stefan Krause, who is ultimately responsible for the company's financial figures and has been spearheading efforts to improve the quality of the bank's reporting.

The concerns from regulators strike at the heart of an issue plaguing many of the world's big banks: Some investors lack confidence in the integrity of their numbers. Such fears have been especially prevalent in Europe.
Then again, none of DB's numbers actually matter: if the banks needs a bailout the Fed will promptly step in, and today's advisory has one simple end point, which happens to be the same as the recent BNP $9 billion fine - don't even dare to side with Putin over the US. Because you sure have big bank over there Germany... It would be a pity if the NY Fed i) revealed just how insolvent it truly was and ii) decided not to bail it out subsequently.
* * *
As for Deutsche Bank's response perhaps the simplest and most effective one would be for the Frankfurt megabank to tell the NY Fed that perhaps its own 150x leverage is just a little more worthy of attention.

Tuesday, July 22, 2014

Swiss, Chinese Central Banks Enter Currency Swap Agreement

ZURICH--The Swiss National Bank and the People's Bank of China reached a currency swap agreement on Monday, allowing the two central banks to buy and sell their currencies up to a limit of 150 billion renminbi, or 21 billion Swiss francs ($23.4 billion).
The deal will also allow the Swiss central bank to invest some of its huge accumulation of foreign exchange reserves in the Chinese bond market, the SNB said in a statement Monday.
The Zurich-based SNB said the agreement will further strengthen collaboration between it and its Chinese counterpart and is a "key requisite for the development of a renminbi market in Switzerland." It could also facilitate trade and investment between the two countries, the PBOC said.
Switzerland is the latest of a series of countries to set up swap lines with China, which is keen to promote the international use of the yuan.
Last year China signed swap agreements with the European Central Bank and a clutch of others, including the U.K., Brazil and Indonesia.
The agreement between China and Switzerland has a term of three years and can be renewed thereafter, the PBOC said.
Write to Neil MacLucas at and Richard Silk at

Read more:

Saturday, July 19, 2014

Listed At "Only" HK$1.94 Million, This Is What Hong Kong's Cheapest "Home" Looks Like

First the good news: one can now buy an apartment in Hong Kong for the low, low price of under HK$2 million, or HK$1.94 million to be precise which amounts to a measly USD $250,000.
Hong Kong's leading property developer and conglomerate, Cheung Kong Holdings (whose position in the Hong Kong financial pyramid is best described by its stock ticker: 0001) is selling a studio at Mont Vert in Tai Powhich is also the cheapest new home available for sale in Hong Kong, at HK$1.94 million, according to the price list Cheung Kong released on Thursday for the first batch of units at the development.
"New flats selling for less than HK$2 million are almost impossible to find in Hong Kong," said Louis Chan Wing-kit, managing director of Centaline Property Agency's residential department.
Now the bad news: the studio has an area of a whopping 194 square feet, which works out to HK$10,031 per sq ft or about USD$1,300 per square foot. And just in case this may seem like a cavernous McMansion to some, Cheung Kong is also selling an even smaller pad, one sized a tiny 177 sq ft. This particular unit did not have a sale price listed in the first batch.
The unit is about double the size of a prison cell.
It looks as follows:

But ignore the fact that the apartment is just double the size of a prison cell, according to SCMP [6]: Justin Chiu Kwok-hung, an executive director at Cheung Kong, said he was told by property agents that prices at the project were about 30 per cent below transaction prices for other new flats in the area.
"The stunning low price is because of low land cost," he said. "The site was converted from farmland for residential use. We also secured lower construction cost as the contract was awarded several years ago."
For those who demand more "princely" estates, there are options: the first batch of the 1,071-unit project going on sale includes two-bedroom or three-bedroom flats, as well as 43 studio flats. Sellable area for the flats ranges from 194 to 945 square feet. Flats cost between HK$1.65 million and HK$8.70 million with maximum discounts of 15 percent.
Of the 260 units on offer, 43 are studio flats, 20 are two-bedroom units and 197 are three-bedroom units. They are priced at HK$8,961 to HK$11,162 per square foot, while the going rates for second-hand flats in the area are HK$8,310 to HK$10,334.
Don't expect anything new however, most of those flats are more than 20 years old.
So act now to buy your own prison cell at the low, low price of a quarter million dollars. In fact, you have to buy it "sight unseen [7]."
Meanwhile, the Sales of First-hand Residential Properties Authority reminded potential buyers to look at the flat before signing the provisional purchase deal.

It came after the authority noticed that Cheung Kong was requiring potential buyers to sign a no-visit agreement, baring them from seeing the flat they want to buy before signing the provisional contract.
Best of all, all of this is coming to a housing bubble near you.

Thursday, July 17, 2014

EES: USD spikes against RUB on plane crash

A 777 was shot down in Ukraine by a surface to air missile, as reported by Sky and other news agencies.  See USD/RUB hourly chart below:

What implications this will have on other USD crosses?  USD is down against the JPY - flat on the rest of the majors.

Stocks And Bond Yields Are Plunging On Shot-Down Passenger Jet

Remember when Ukraine was fixed and you could BTFATH as no geopolitical concerns could ever harm US equity markets... well that just changed... News that a Malaysian Airlines passeneger jet carrying 280 passengers was shot down in Ukraine has sparked major derisking across stocks and slammed bonds to the low yields of the day. Gold and Silver are jumping and the USD is fading.

Gold surge as stocks, JPY, and bond yuields tumble...

Stocks are near post-Yellen lows on this news... 

Tuesday, July 15, 2014

BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks

As we suggested last night, the anti-dollar alliance among the BRICS has successfully created a so-called "mini-IMF" since the BRICS are clearly furious with the IMF as it stands currently: this is what the world's developing nations just said on this topic "We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness."
As Putin explains, this is part of "a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies." Initial capital for the BRICS Bank will be $50 Billion - paid in equal share among the 5 members (with a contingent reserve up to $100 Billion) and will see India as the first President. The BRICS Bank will be based in Shanghai and chaired by Russia. Simply put, as Sovereign Man's Simon Black warns, "when you see this happen, you’ll know it’s game over for the dollar.... I give it 2-3 years."
A quick take on existing monetary policy.
The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other "developed world" central-bank dominated world and will provide their own funding.
We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 
Incidentally, the role of the dollar in such a world is, well, nil.
For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.
Key excerpts from the Full statement:
We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund's resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015.

BRICS, as well as other EMDCs, continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. We appreciate the work undertaken by our Finance Ministers. Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth.

The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 

"Boring", "Absolutely Dead" Market Leaves World's Largest Trading Floor "Virtually Empty"

The UBS trading floor in Stamford, CT was dubbed (by Guinness World Records) the largest in the world. But now... as the WSJ reports, there arevirtually no traders shouting into their phones or staring at terminals. UBS's cavernous floor is taken up mostly by back-office, legal and technology staffers, according to people familiar with the bank. Simply put, a deep slump in trading activity in everything from stocks and bonds to currencies is changing the face of Wall Street. Today's markets are "boring," rants a senior credit trader; "It's been absolutely dead," warns another adding, "When you go a day or two and don't have a trade on the tape, it's frustrating," as stock trading in the second quarter fell 43.6% from second-quarter 2009 levels to their lowest level since 2007.

"You go through lulls," he said. "If you're going through this for the first time, you have no context."
UBS's trading floor in Stamford, Conn., once teemed with traders occupying a space equal to two football fields. The Guinness World Records recognized it as the biggest such facility on the planet. And the Swiss bank used it to showcase its Wall Street credentials.

Today, there are virtually no traders shouting into their phones or staring at terminals. UBS's cavernous floor is taken up mostly by back-office, legal and technology staffers, according to people familiar with the bank.
The reason...
A deep slump in trading activity in everything from stocks and bonds to currencies is changing the face of Wall Street. Businesses that once contributed disproportionately to the revenues of the world's largest banks are now bleeding jobs and sparking fears of a permanent decline.
Today's markets are "boring,"
"This is affecting the opportunity to make money, and ultimately the earnings these [trading] businesses can provide."

Global revenue from trading in fixed income, currencies and commodities, or FICC, dropped to $112 billion last year, down 16% from a year earlier and 23% from 2010, according to Boston Consulting Group.

"It's been absolutely dead," said Jarrod Dean, a municipal-bond trader at Sierra Pacific Securities in Las Vegas. Municipal-bond trading volumes are down about 30% since last August, he said, while profits are down more than 70%.

Equities trading volumes also have taken a beating of late. Stock trading in the second quarter fell 43.6% from second-quarter 2009 levels to their lowest level since 2007, according to Credit Suisse Group data.

Bill Nichols, head of U.S. equity trading at Cantor Fitzgerald LP, said low volumes have taken a toll on traders' psyches.

"When you go a day or two and don't have a trade on the tape, it's frustrating," he said.
*  *  *
Sounds eerily familiar to the total and utter collapse of Japanese bond markets - described as "dead" by traders with days going by with no trading... stunning!!

Monday, July 14, 2014

U.S. seeks 11-year sentence, $4.4M for Hopkinton man accused of fraud

U.S. prosecutors want a Hopkinton man who defrauded investors out of more than $30 million to serve 11 years in prison and pay back $4.4 million, court records show.
But the attorney for Craig Karlis is seeking a "radical downward" departure from the typical sentencing guidelines for his client's crimes, citing Karlis's deteriorated health.
Karlis pleaded guilty in March to nine counts of wire fraud and two counts of filing false tax documents. Authorities said he and his business partner misled customers of their foreign currency trading company and siphoned those investments for their own personal use.
In a sentencing memorandum filed in U.S. District Court in Boston, Assistant U.S. Attorney Sarah Walters from U.S. Attorney Carmen Ortiz's office wrote that the government's recommendation that Karlis serve 135 months in prison for those crimes is lighter than such a case would usually demand. She also said prosecutors would not seek to fine Karlis, given his "extraordinary restitution obligations."
"The recommended sentence, however, is reasonable and is sufficient, but not greater than necessary, to reflect the seriousness of the crime while taking into account the defendant’s culpability and significant health issues," Walters wrote.
In his own heavily redacted sentencing memorandum filed this week, Karlis's attorney, Michael Natola, said those "grave medical problems" warranted a much more lenient punishment, pointing to a precedent established in past cases. While the document, which censors every reference to Karlis's ailment, doesn't suggest a sentence, it asks for one that reflects "the most undeniably relevant statutory factor in the unique circumstances of this case: providing him with needed medical care in the most effective manner available."
"Mr. Karlis’s experience of prison has been and will continue to be far more difficult than the normal hardship associated with prison, and will certainly continue to subject him to more than usual inconvenience or danger of deterioration of his health, or even death," Natola wrote.
Documents filed earlier in the case said Karlis has been battling cancer since his arrest in 2010.
Walters said Karlis's health was the primary factor in the government's decision not to seek the typical 14- to 17-1/2-year prison sentence his case would typically warrant. But the government doesn't believe he deserves any additional mercy beyond that.
"This scheme caused massive and devastating financial losses to many individual victims, who thought they were dealing with a legitimate investment company," Walters wrote in her memorandum, which puts the total number of victims at more than 250. "This was a calculated, long-term scheme, rather than a one-time occurrence, and Karlis was one of the two architects of the fraud."
Prosecutors argue Karlis also greatly benefited financially from his crimes, taking at least $1.7 million that he spent on a home in Florida, jewelry, and other personal items.
The sentencing hearing is scheduled June 24 in Boston.
Scott O'Connell can be reached at 508-626-4449 or Follow him on Twitter: @ScottOConnellMW