Sunday, July 5, 2015

Second Piece of the Puzzle - the Texas Bullion Depository

(a) The Texas Bullion Depository is established as an agency of this state in the office of the comptroller.
(b) The depository is established to serve as the custodian, guardian, and administrator of certain bullion and specie that may be transferred to or otherwise acquired by this state or an agency, a political subdivision, or another instrumentality of this state.

(a) The depository may receive a deposit of bullion or specie from or on behalf of a person acting in the person's own right, as trustee, or in another fiduciary capacity, in accordance with rules adopted by the comptroller as appropriate to:
(1)  ensure compliance with law; and
(2)  protect the interests of:
(A)  the depository;
(B)  depository account holders;
(C)  this state and the agencies, political subdivisions, and instrumentalities of this state; and
(D)  the public at large.

(a) The following persons may invest the person's money in a depository account by purchasing precious metals and depositing the precious metals with the depository or a depository agent:
(1)  a fiduciary, including an administrator, executor, custodian, guardian, or trustee;
(2)  a political subdivision of this state or an instrumentality of this state;
(3)  a business or nonprofit corporation;
(4)  a charitable or educational corporation or association; or
(5)  a financial institution, including a bank, savings and loan association, or credit union.
(b)  An investment by an insurance company in a depository account is eligible to be applied as a credit against taxes payable under Chapters 221 and 222, Insurance Code, in accordance with rules adopted by the comptroller after consultation with the commissioner of insurance.
(c)  An investment by a school district in a depository account may be made instead of an investment as provided by Section 45.102, Education Code, and the depository may be used by a district instead of a depository bank for the purposes of Subchapter G, Chapter 45, Education Code.

Sec. 2116.022.  CERTAIN ACTIONS PROHIBITED. The depository may not take any of the following actions, and any attempt by the depository to take any of the following actions is void ab initio and of no force or effect:
(1)  entering into a precious metals leasing, sale-leaseback, forward transaction, swap transaction, future transaction, index transaction, or option on or other derivative of any of those, whether in the nature of a cap transaction, floor transaction, collar transaction, repurchase transaction, reverse repurchase transaction, buy-and-sell-back transaction, securities lending transaction, or other financial instrument or interest intended to or having the effect of hedging or leveraging the depository's holdings of precious metals, including any option with respect to any of these transactions, or any combination of these transactions, except that the limitation provided by this
subdivision does not apply to a transaction entered into to limit the depository's exposure to post-signature price risks associated with executory agreements to purchase or sell precious metals in the ordinary course of depository operations and does not apply to policies of insurance purchased to insure against ordinary casualty risks such as theft, damage or destruction, loss during shipment, or similar risks;
(2)  crediting the depository account balances of a depository account holder, or disposing of any precious metals, if to do so would cause the aggregate depository account balances with respect to any precious metal represented by all depository accounts to exceed the aggregate quantities of such precious metal held by or for the benefit of the depository and the depository's depository agents;
(3)  entering into or maintaining a deposit, trust, or similar relationship for the custody of precious metals by a third party outside this state, directly or indirectly, for the account or benefit of the depository if the comptroller by rule establishes that:
(A)  the custody or intermediary arrangements in question do not meet the comptroller's standards of safety, security, and liquidity; or
(B)  except in those cases where such relationship may be incidental to the performance of or preparation for purchase and sale transactions with counterparties located outside of this state, suitable alternate arrangements for physical custody of the precious metals inside this state have been established and are available;
(4)  extending credit to a person, including credit secured by a depository account or other assets, except an extension of credit incidental to the performance of the functions and responsibilities otherwise provided by this chapter; or
(5)  engaging in a business or activity that, if conducted by a private person, would be subject to regulation in this state as a banking or savings and loan function.

Sec. 2116.023.  CONFISCATIONS, REQUISITIONS, SEIZURES, AND OTHER ACTIONS VOID. (a) A purported confiscation, requisition, seizure, or other attempt to control the ownership, disposition, or proceeds of a withdrawal, transfer, liquidation, or settlement of a depository account, including the precious metals represented by the balance of a depository account, if effected by a governmental or quasi-governmental authority other than an authority of this state or by a financial institution or other person acting on behalf of or pursuant to a directive or authorization issued by a governmental or quasi-governmental authority other than an authority of this state, in the course of a generalized declaration of illegality or emergency relating to the ownership, possession, or disposition of one or more precious metals, contracts, or other rights to the precious metals or contracts or derivatives of the ownership, possession, disposition, contracts, or other rights, is void ab initio and of no force or effect.

Saturday, July 4, 2015

Wednesday, July 1, 2015

"Walter Energy Debt Talks Said to Accelerate With Bankruptcy Plan" $WLT

"The senior lenders want Walter to file for bankruptcy by July 15, when the grace period on a $19 million interest payment due to junior bondholders ends, the people said."

"Alpha Natural Resources Creditors Ready for Possible Restructuring Talks" $ANR

In the WSJ:

"Creditors expect restructuring talks to heat up ahead of the Aug. 1 repayment deadline for some of Alpha’s convertible bonds, according to people familiar with the investors’ thinking. The company has been buying back the notes, but $109 million worth remained outstanding as of March 31, according to a regulatory filing."
Those bonds due Aug 1 were trading at 35 today! The market is saying that it's very likely the company defaults on August 1.

Monday, June 29, 2015

Reader Comments on Molycorp "Value Destruction" $MCP

"The extent of the value destruction is pretty breathtaking. They have consumed over $3.8B of capital between the paid in capital and debt outstanding. The 1L bonds are at 25, so that's about $160MM, Oaktree has about $250MM in so we have $400MM in round numbers of market EV (let's assume the equity is a goose egg), just a hair under 90% wealth destruction. That takes some doing - this will rival things like GSAT and IRDM in their first iteration...similar science project type of deals funded heavily with debt while in project development phase. Amazing bond holders sign up for this kind of nonsense."

Sunday, June 28, 2015

Comments From an Astute Eastern Europeon on Surreptitious Greek Moneyprinting

"What I think is more likely to happen (given how strong the support for the Euro is internally) is they are running the presses legitimately to cover the sharp increase in cash circulation due to the deposit run. The one thing they cannot afford now IMO is banking system collapse.

Stepping into the phantasmagorical now>

Next step would be, since the machines are running, they print (covertly this time, with western codes/serial numbers) a bunch of EUR 500 notes on behalf of the government (or government entities) which deposits them in the banks. Deposits appear and the banks are safe.

More phantasmagorical>

They like what they see, so they decide to cover more expenses with euro cash. Two venues that I see are retirees and military. Once or twice per year, there is actual cash disbursed without accounting recognition so the budget looks better or within the agreed upon "cuts". There are 2.1 mm ppl over 65, at avg pension 1000 euros, that's 4.2 mm EUR500 notes, or at 100x per stack, that's 42,000 stacks. That's a ~35x35x35 stack "cube", not difficult to produce or manage. Greece is also very concentrated: half the ppl live around Athens and Thessaloniki.

Then there are 108k military personnel. Easy to disburse cash too at say 2000/mo avg once or twice a year.

Also, guessing, there might be a few of the large oligarch suppliers (ie gasoline for all state/military vehicles) that will take cash in full or in part. Or do a three-way deal with a Bulgarian oligarch or two who will take euro cash. The Greek banks have extensive operations in Bulgaria so the money can get deposited there.

So Greece can print legit currency and make its budget look better and better.

The EU has a problem then: is that legit currency or not legit? It will be hard for them to declare vast parts of the currency in circulation (printed in Greece) to be not legit so the only thing they can do is ban printing and take over the machines (could happen). While this is happening, the Greeks start spending fast; typical pre-inflationary crack-up boom, because they don't know what will happen and chances are, most hold Greece-printed currency (no neighboring countries use the euro so guessing low intermix of cash)."