Wednesday, August 31, 2016

Deutsche Bank Refuses Delivery Of Physical Gold Upon Demand

While the trading world was focused on the latest news involving Deutsche Bank, namely that the troubled German bank had beencontemplating a merger with Germany's other mega-bank, Commerzbank as part of a strategy to sell all or part of a key business to speed up its flagging overhaul, a more troubling report emerged in a German gold analysis website, according to which Deutsche Bank was unable to satisfy a gold delivery request when asked to do so by a client of Germany's Xetra-Gold service.
But first, what is Xetra-Gold?
According to its website, the publicly traded company "provides investors with an efficient instrument to participate in the performance of the gold market. Xetra-Gold’s combination of features – cost-efficient trading and the right for physical delivery of gold - makes it an attractive product."
Among its highlights, Xetra-Gold lists the following:
Cost-efficient trading: No mark-up fee, no transportation or insurance costs such as those incurred when purchasing physical gold. Only the standard transaction fees that are charged for on-exchange securities trading are payable at the time of acquisition. The spreads that apply to purchase and sale correspond to the standard conditions on the global market and are considerably lower than those for traditional gold-based financial products. Furthermore, management or administration fees relating to Xetra-Gold are not incurred. The investor pays the amount of custody fees which he/she has agreed upon with the depository bank.

Physically backed: The issuer uses the proceeds from the issue of Xetra-Gold to purchase gold. The physical gold is held in custody for the issuer in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse AGIn order to facilitate the delivery of physical gold, the issuer holds a further limited amount of gold on an unallocated weight account with Umicore AG & Co. KG.

Transparent:  Xetra-Gold tracks the price of gold on a virtually 1:1 basis, and is always up to date.

Tradeable in euros per gram: While in the past, gold was mainly denominated in US dollars per troy ounce, you trade Xetra-Gold in euros per gram.

Stable/Constant holdings: The investor’s right to receive delivery of the certificated amount of gold is not reduced by management costs or other fees, unlike other investments in gold. 1,000 units of Xetra-Gold will still represent a kilogram of gold in 30 years' time.
The company makes the following promise:
Redemption for gold: Investors always have the possibility of demanding delivery of the securitised amount of gold per bearer note against the issuer. If the investor is not able to exercise this right due to legal restrictions effective for him/her, he/she can demand the cashing of Xetra-Gold from the issuer. In this case, a settlement fee of EUR 0.02 per Xetra-Gold bond will be charged.

Delivery of gold: If an investor asserts his/her right to the delivery of the certificated volume of gold from the issuer, the gold will be transported to the respective point of delivery by Umicore AG & Co. KG, which is responsible for all physical delivery processes. The issuer will also have delivery rights of gold from Umicore AG & Co. KG, as the gold leaf debtor. Investors can find information on delivery and the alternative payment claims that are relevant for investment and insurance companies in the PDF document entitled 'Information on the process for exercising Xetra-Gold'.
And yes, Deutsche Bank is involved, as the fund's Designated Sponsor.
In other words, Xetra-Gold is an Exchange-Traded Commodity which differentiates itself by "representing that every gram of gold purchase electronically is backed by the same amount of physical gold" and its principal bank is none other than Deutsche Bank.
And with Germans recently rushing to buy safes or find sound money alternatives in a country where the interest rate is negative, the ETC, it is not surprising that the population has flocked to its offering.
According to recent report by LeapRate, the gold held in custody by Deutsche Borse Commodities for the purpose of physically backing the Xetra-Gold bond has risen to a new record high of 90.67 tons, an increase of more than 50% since the beginning of the year. "For each Xetra-Gold bond, exactly one gram of gold is deposited in the central vaults for German securities in Frankfurt" the report parrots the company's website.
Among all exchange-traded commodities (ETCs) tradable on Xetra, Xetra-Gold is by far the most successful in terms of turnover. During the first seven months of the year, order book turnover on Xetra stood at approximately €1.5 billion. The assets managed by Xetra-Gold currently amount to €3.5 billion.

In September 2015, the German Federal Fiscal Court (Bundesfinanzhof) had ruled that after a minimum holding period, any profits from the sale or redemption of Xetra-Gold are not subject to the capital gains tax. From a fiscal point of view, the purchase, redemption or sale are thus to be treated equal to a direct purchase or sale of physical gold, such as in bullions or coins.
But what is most notable, is that, as noted above, Xetra-Gold investors are entitled to the delivery of the certified amount of physical gold at any time, and adds that "since the introduction of Xetra-Gold in 2007, investors have exercised this right 900 times, with a total of 4.5 tons of gold delivered."
However, something appears to have changed.
As Oliver Baron reports, those who ask for gold delivery at this moment, "could encounter difficulties." The reason is that according to Baron, a reader of GodmodeTrader "sought physical delivery of his holdings of Xetra-Gold. For this he approached, as instructed by the German Borse document, his principal bank, Deutsche Bank."
At that point then he encountered a big surprise: the Deutsche Bank account executive informed the investor that "the service", is no longer offered, namely exercising physical delivery at Xetra-Gold, for "reasons of business policy" and therefore the order form provided by Clearstream Banking AG for exercising Xetra-gold is no longer available.
Baron writes that since Deutsche Bank is no longer serving the physical exercising of delivery request of Xetra-Gold is remarkable, as Deutsche Bank is the "designated sponsor" as well as fiscal, principal and redemption agent of Xetra-Goldaccording to its prospectus, and as the explainer of how to exercise physical delivery also reveals. Even if one is a customer of another bank, Xetra-Gold should - at least on paper- guarantee delivery by way of Deutsche Bank, as the Deutsche Borse Commodities GmbH explains in its "process description for exercising units"
Step-by-step description of exercise

Together with a representative of his principal bank, the investor creates the transaction and sends it to the principal bank's custodian with the relevant process data described above. The custodian in turn instructs its custodian, stipulating all process-relevant data, until a bank which is a customer of Clearstream Banking is authorised.

The customer may use the attached exercise form to instruct the designated sponsor (here Deutsche Bank AG, Frankfurt) to deliver a specified number of gold bars to the point of delivery. The process is similar to that for the delivery of physical certificates.

The customer should send the original exercise form to the following address:

Deutsche Bank AG
"Ausübung Xetra-Gold" CIB-Global Banking
Trust & Securities Services 
Grosse Gallusstrasse 10 – 14 
60311 Frankfurt am Main 

To transfer the required amount of Xetra-Gold units to the blocked account of Deutsche Börse Commodities, the customer should also place an FoP instruction via CASCADE or File Transfer/SWIFT.

Delivery will be initiated if Deutsche Bank receives the securities and the application form by 10:00 CET. As a rule it takes one to two weeks to deliver retail gold bars and four days for London Good Delivery gold bars from date of ordering. As soon as the delivered gold arrives at the point of delivery, the Xetra-Gold® units are removed and recovered from the "Ausübungskonto DBCo" (DBCo exercise account).

Due to the provisions of the Money Laundering Act (Geldwäschegesetz) only the branch of a bank may be used as point of delivery. Investors expecting a large delivery of gold should contact their principal bank to discuss the transfer of the gold to the point of delivery.
The article goes on to note that it was not clear whether the exercise and physical delivery at other banks is actually still possible. Baron said that Deutsche Borse Commodities advised to transfer the Xetra-Gold shares in a cooperative/Raiffeisenbank since physical delivery is allegedly still possible here. The Deutsche Borse also announced that it is currently working on the "possibility of delivery regardless of bank branch." However, since this process was not described in the prospectus of Xetra-Gold, it would have to be legally tested, which could take considerable time.
The article's conclusion: anyone who wants to easily convert their Xetra-Gold holdings into physical gold - at least for clients of Deutsche Bank - can do so only by selling their shares, and then buying gold coins or bars directly elsewhere. Which leads the author to the logical question: what is the worth of the Xetra-Gold service, which certifies the right to redeem physical gold, if said delivery is no longer possible?
In other words, what was supposedly an ETC which promised physical delivery upon demand, is nothing more than yet another "paper only" play.
We, on the other hand, have a more focused question: is the inability to deliver physical gold an incipient issue with Xetra-Gold, or with the company's "designated sponor" Deutsche Bank, and if the latter is suddenly unable to satisfy even the smallest of delivery requests by retail clients, just how unprecedented is the global physical gold shortage?

$55 Million in Cocaine Was Just Discovered at a Coca-Cola Plant

(ANTIMEDIAHundreds of kilos of cocaine were found in a Coca-Cola plant in France last Friday, making the seizure of the drug one of the largest ever on French soil.
French officials say the cocaine was discovered in backpacks among a shipment of orange juice concentrate that originated in Costa Rica. The 370 kg of literal coke uncovered at the factory is reported to have a street value of €50 million Euros ($55m) and was referred to as a “very bad surprise” by a local prosecutor.
Authorities are currently unaware of who was behind the cocaine, but an investigation is now underway in Signes, a village in the south of France. Employees of the plant have already been ruled out as suspects.
“The first elements of the investigation have shown that employees are in no way involved,” according to Jean-Denis Malgras, the regional president of Coca-Cola.
Coca-Cola was originally called Pemberton’s French Wine Coca and contained a mixture of Peruvian coca leaves, kola nut, damiana, and cocaethylene (cocaine mixed with alcohol). Druggist John Stith Pemberton invented his French Wine Coca in Atlanta, Georgia, and it became very popular across the southeastern United States.
The Coca-Cola recipe was a closely guarded secret, but in 1891, an Atlanta newspaper reported what many had already suspected: Coca-Cola contained cocaine. Coke was forced to change its marketing strategy and began referring to their product as “refreshing,” rather than promoting any medicinal benefits. Coca-Cola began taking cocaine out of its soft drink in 1903 because of racially-promoted fears among white society.
According to the New York Times:
“Anyone with a nickel, black or white, could now drink the cocaine-infused beverage. Middle-class whites worried that soft drinks were contributing to what they saw as exploding cocaine use among African-Americans. Southern newspapers reported that ‘negro cocaine fiends’ were raping white women, the police powerless to stop them.”
Cocaine was eventually made illegal in the United States in 1914, but it wasn’t until 1929 that Coca-Cola perfected its formula. Before that year, the psychoactive components of the coca leaf could still be found in the soda in small amounts.
The Coca-Cola soft drink became completely cocaine-free in 1929, but coca leaf extract is still used to this day as an active ingredient in the internationally popular soda. The ecgonine alkaloid, which gives cocaine its accelerating effect on the brain, is extracted from the coca leaf before processing.
The Stepan Corporation, a New Jersey-based chemical processing company, performs the extraction on the coca leaves for Coca-Cola. Stepan has an arrangement with the DEA and is the only group allowed to import the coca leaf into the United States. One hundred and seventy-five thousand kilograms of coca leaves are imported into the United States each year by Stepan. That is a street value equivalent to roughly $21 billion of cocaine,according to the United Nations.
So what happens to the actual cocaine processed by Stepan? It is hauled away from the facility in armored trucks and then sold to Mallinckrodt, a pharmaceutical company whose United States headquarters are based in St. Louis, Missouri.
The coca leaf extract is referred to as Merchandise No. 5.

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Global Supply Chains Paralyzed After World's 7th Largest Container Shipper Files Bankruptcy, Assets Frozen

After years of relentless decline in the Baltic Dry index...

... today the largest casualty finally emerged on Wednesday when South Korea's Hanjin Shipping, the country's largest shipping firm and the world's seventh-biggest container carrier, filed for court receivership after losing the support of its banksleaving its assets frozen as ports from China to Spain denied access to its vessels.
For those unfamiliar with the company, here is a brief overview from its website:
Hanjin Shipping is Korea's largest and one of the world’s top ten container carriers that operates some 70 liner and tramper services around the globe transporting over 100 million tons of cargo annuallyIts fleet consists of some 150 containerships and bulk carriers.

With 4 regional headquarters in the U.S., Europe, Asia and South East & West Asia, approximately 5,000 global staffs as well as container terminals in world’s major ports contribute to Hanjin Shipping’s world-class logistics network around the world.
As Reuters reports, banks led by state-run Korea Development Bank withdrew backing for the world's seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle debt that stood at 5.6 trillion won ($5 billion) at the end of 2015.
Suk Tai-soo, president and chief executive officer of Hanjin Shipping Co, arrives
at a court in Seoul, South Korea, August 31, 2016.
South Korea's biggest shipping firm, announced the filing for receivership and a request to the court to freeze its assets, which the Seoul Central District Court planned to grant, a judge told Reuters.
As part of the company's insolvency process, the court will now decide whether Hanjin Shipping should remain as a going concern or be dissolved, a process that usually takes one or two months but is expected to be accelerated in Hanjin's case, the judge said.A bankruptcy for Hanjin Shipping would be the largest ever for a container shipper in terms of capacity, according to consultancy Alphaliner, exceeding the 1986 collapse of United States Lines.
Coming as no surprise to anyone who has followed the persistent decline in worldside trade, global shipping firms have been swamped by overcapacity and sluggish demand, with Hanjin booking a net loss of 473 billion won in the first half of the year. 
South Korea's ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring. According to Reuters, KDB's decision to stop backing Hanjin Shipping shows the government is taking a tougher stance with troubled corporate groups.
The fallout from the country's unprecedented bankruptcy invoked a statement from South Korea's Finance Minister Yoo Il-ho, who said that "the government will swiftly push forth corporate restructuring following the rule that companies must figure out how to survive and find competitiveness on their own while taking responsibility."
To be sure, this decision is a fresh breath of air in a world in which mega-corprations across the globe have become "too big to fail" by default, and in many cases anticipate a government bail-out.
According to South Korea's Financial Services Commission, Hyundai Merchant Marine, the country's second-largest shipping line, will look to acquire its rival's healthy assets, including profit-making vessels, overseas business networks and key personnel,  A Hyundai Merchant Marine spokesman told Reuters nothing had been decided about the potential acquisition of Hanjin assets and that the firm will hold talks with KDB. Hyundai Merchant Marine is also in the process of a voluntary debt restructuring.
The question now is whether as a result of the bankruptcy process there will be an unexpected failure in the global supply-chain:South Korea's oceans ministry estimates a two- to three-month delay in the shipping of some Korean goods that were to be transported by Hanjin Shipping, and plans to announce in September cargo-handling measures which could include Hyundai Merchant Marine taking over some routes, a ministry spokesman said on Wednesday.
Making matters worse, Reuters adds that KDB's move to pull the plug was already having an impact on Hanjin's operations, with the company's various shipping assets already frozenPorts including those in Shanghai and Xiamen in China, Valencia, Spain, and Savannah in the U.S. state of Georgia had blocked access to Hanjin ships on concerns they would not be able to pay fees, a company spokeswoman told Reuters.
Another vessel, the Hanjin Rome, was seized in Singapore late on Monday by a creditor, according to court information. "Now Hanjin must do everything it can to protect its clients' cargoes and make sure they are not delayed to their destination, by filing injunctions to block seizures in all the countries where its ships are located," said Bongiee Joh, managing director of the Korea Shipowners' Association.
Finally, while jarring Hanjin's bankrtupcy was inevitable: shipping industry economics have deteriorated. Charter rates for medium-sized container ships have dropped from around $26,000 a day in 2010 to $13,000 per day now.  Container rates from Shanghai to the U.S west coast have more than halved since then, from around $2,000 per 40-foot container in January 2010 to $596 per 40-foot box last week, data from the Shanghai Shipping Exchange shows.
Shares in Hanjin Shipping have been suspended after plunging 24% on Tuesday.
The global implications from the bankruptcy are unknown: if, as expected, the company's ships remain "frozen" and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos. The good news is that both economists and corporations around the globe, both those impacted and others, will now have yet another excuse on which to blame the "unexpected" slowdown in both profits and economic growth in the third quarter.

Sunday, August 28, 2016

The Deep State (And The Rise Of The Unspeakable)

"The state within a state is hiding mostly in plain sight.

The pressure to conform to an authority figure or peer group can cause people to behave in shocking ways.

It is not too much to say that Wall Street may be the ultimate owner of the Deep State and its strategies, if for no other reason than that it has the money to reward government operatives with a second career that is lucrative beyond the dreams of avarice - certainly beyond the dreams of a salaried government employee.

The corridor between Manhattan and Washington is a well-trodden highway for the personalities we have all gotten to know in the period since the massive deregulation of Wall Street."

-Mike Lofgren

As we noted previouslythe deep state seems to have grown, strengthened and tightened its grip.  Can a lack of real money restrain or starve it?  I once thought so, and maybe I still do.  But it doesn’t use real money, but rather debt and creative financing to get that next new car, er, war and intervention and domestic spending program.  Ultimately it’s not sustainable, and just as unaffordable cars are junked, stripped, repossessed, and crunched up, so will go the way of the physical assets of the warfare–welfare state.
Because inflated salariesinflated stock prices and inflated ruling-class personalities are month to month, these should evaporate more quickly, over a debris field once known as some of richest counties in the United States.  Can I imagine the shabbiest of trailer parks in the dismal swamp, where high rises and government basilicas and abbeys once stood?  I’d certainly like to.  But I’ll settle for well-kept, privately owned house trailers, filled with people actually producing some small value for society, and minding their own business.
Can a lack of public support reduce the deep state, or impact it?  Well, it would seem that this is a non-factor, except for the strange history we have had and are witnessing again today, with the odd successful popular and populist-leaning politician and their related movements.  In my lifetime, only popular figures and their movements get assassinated mysteriously, with odd polka dot dresses, MKULTRA suggestions, threats against their family by their competitors (I’m thinking Perot, but one mustn’t be limited to that case), and always with concordant pressures on the sociopolitical seams in the country, i.e riots and police/military activations.  The bad dealings toward, and genuine fear of, Bernie Sanders within the Democratic Party’s wing of the deep state is matched or exceeded only by the genuine terror of Trump among the Republican deep state wing.   This reaction to something or some person that so many in the country find engaging and appealing — an outsider who speaks to the growing political and economic dissatisfaction of a poorer, more indebted, and more regulated population – is heart-warming, to be sure.  It is a sign that whether or not we do, the deep state thinks things might change.  Thank you, Bernie and especially Donald, for revealing this much!  And the “republicanization” of the Libertarian Party is also a bright indicator blinking out the potential of deep state movement and compromise in the pursuit of “stability.”
Finally, what of those pinpricks of light, the honest assessments of the real death trail and consumption pit that the deep state has delivered?  Well, it is growing and broadening.  Wikileaks and Snowden are considered assets now to any and all competitors to the US deep state, from within and from abroad – the Pandora’s box, assisted by technology, can’t be closed now. The independent media has matured to the point of criticizing and debating itself/each other, as well as focusing harsh light on the establishment media.  Instead of left and right mainstream media, we increasingly recognize state media, and delightedly observe its own struggle to survive in the face of a growing nervousness of the deep state it assists on command.
Maybe we will one day soon be able to debate how deep the deep state really is, or whether it was all just a dressed up, meth’ed up, and eff’ed up a sector of society that deserves a bit of jail time, some counseling, and a new start.  Maybe some job training that goes beyond the printing of license plates.  But given the destruction and mass murder committed daily in the name of this state, and the environmental disasters it has created around the world for the future generations, perhaps we will be no more merciful to these proprietors of the American empire as they have been to their victims. The ruling class deeply fears our judgment, and in this dynamic lies the cure.
To learn more about the financial system as a whole, checkout Splitting Pennies - your pocket guide to becoming a financial wizard!