Black Monday Math 101 Replaces Psychotic Faith In Central Banks

The psychotics in China started the week with a continuation of a classic crash and this despite aggressive PB0C monetary moves. The crazies like to invoke their divine right to stock market profits, something that has been reinforced by the criminals who function as their leaders. However, the parabolic blow off, during which millions of stock trading accounts were opened, has been erased.

Central bank “faith” is also being replaced with Math 101 in Puerto Rico where the Governor is calling for a default. $72 billion in bonds are involved. These issues are packed into many muni funds. Chicago is next.

There is a detail of note in the closure of Greek banks announced over the weekend. ATM withdrawals of 60 euros a day are still permitted. The ECB’s ELA fund is already in underwater, overshoot mode, and daily ATM withdrawals by hundreds of thousands of Greeks creates huge additional uncollateralized losses. Therefore a bail in announcement is days if not hours away.  The technical default on Greek debt is Tuesday the 30th. The Troika (including the ECB) will take a couple hundred billion in market losses there as well.

I previously commented on the quarter end mark to market situation for European banks. Now we see in full glory the trap that was sprung with the near zero interest scam in European sovereigns. Italian 10 years are trading Monday morning up 57 bps at 2.72%, and Spain at 2.54% up 43 bps. This could not have come at a worse time, as the price markings takes place June 30.

For those wondering what general margin calls may do to precious metals, I think the answer lies with the managed money slinger’s extreme offside short bets. As I have covered on these pages, slingers have no net longs at all in silver, and little on gold. It is the precious metals short selling patsies who will get the calls, far more so than the non-existent longs.  There is a precious metal short bubble that needs to be unwound. They will also have to contend with a flight to unencumbered assets scenario. To quote Dana Carvey, “Wasn’t that special.”