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Gold: $1229.20 up $0.10
In the access market 5:15 pm:
The gold comex today had a good notice day registering 55 notices served for 5500 oz
In silver, the open interest continues to remain extremely high and we are still at multi year highs at 174,641 contracts.
Today, we had another withdrawal in gold inventory of 2.000 tonnes at the GLD . Inventory rests tonight at 743.39 tonnes.
SLV’s inventory remains unchanged and rests at 343.415 million oz.
Today is options expiry on the comex and on Friday we have options on the OTC contracts for both silver and gold.
Tomorrow is also announcement day from the Fed. ( remember that they have supposedly stopped QE. )
Expect gold and silver to be under the weather for the remainder of the week.
We have a few important stories to bring to your attention today…
Let’s head immediately to see the major data points for today.
First: GOFO rates/We are now in backwardation!!
All months basically moved slightly toward the positive with the first two GOFO months in the negative. On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates.
It looks to me like these rates are now fully manipulated.
London good delivery bars are still quite scarce.
Oct 28 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
-.08% -.04% + .0025% + .07% + .16%
Oct 27 .2014:
1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate
-.09% + -.05% +-0025% +.075 + .16%
Let us now head over to the comex and assess trading over there today,
Here are today’s comex results:
The total gold comex open interest rose by a large margin of 3406 contracts from 410,909 up to 414315 with gold down $2.70 yesterday. Not too many longs left the arena. We are now in the active delivery month of October and generally this is a very poor month for deliveries. The October contract month surprisingly fell by 157 contracts down to 129. We had 50 notices filed yesterday, so we lost 107 gold contracts or an additional 10,700 oz will not stand for the October contract month. The November contract month saw its OI fall by 77 contracts down to 248. The December contract fell by 1165 contracts down to 275,379. The estimated volume today was poor at119,697 contracts. The confirmed volume yesterday was also poor at 96,735 and still loaded with Bart Chilton’s high frequency traders.
The total silver Comex OI surprisingly rose by 942 contracts despite the fact that silver was down yesterday to the tune of 2 cents. The shorts are now in a state of shock as OI rises despite the constant raids on silver . Tonight the silver OI complex rests at 174,641 contracts. In ounces, this represents 873 million oz or 124.7% of silver annual production (annual production of 700 million oz ex China). In commodity law generally the OI is represented by 3 to 5% of annual production. These silver contracts are in very strong hands and as I have indicated to you on countless occasions, this will continue to bring nightmares to our bankers. Probably this is as good a reason as ever for the bankers to raid on a continual basis trying to force those longs to puke their interests, and again they failed today.
We are in the non active silver contract of October and here the OI remained constant at 2 contracts. We had 2 notices served upon yesterday so we neither gained nor lost any silver contracts standing for the October contract month. November is also a non active delivery month and here the OI remained constant at 130 contracts.
The December silver contract is a biggy contract month and tonight it surprisingly fell by a tiny 171 contracts down to 119,269 contracts. No doubt the December contract month may provide all the fireworks if our major entity tries to take delivery of much of the comex silver. So far nobody wishes to leave the silver arena. In ounces, the December contract equates to 596.3 million oz or 85.1% of annual global production (ex China). The estimated volume today was poor at 28,825. The confirmed volume yesterday was also poor at 24,812 contracts. Bill Holter and I strongly believe that only one entity could possibly behind the majority of these longs and that entity is the sovereign Chinese government.
Data for the October delivery month.
Data for the October delivery month.
Today, we had zero dealer transactions
total dealer withdrawal: nil oz
total dealer deposit: nil oz
we had 0 customer withdrawals:
total customer withdrawals :nil oz
we had 0 customer deposit:
total customer deposit: nil oz
We had 2 adjustments:
i) Out of Manfra: 96.975 oz was adjusted out of the customer and this landed into the dealer at manfra.
ii) Out of Scotia: 29,810.151 oz was adjusted out of the customer and this landed into the dealer at Scotia
Total Dealer inventory: 904,076.903oz or 28.12 tonnes
Total gold inventory (dealer and customer) = 8.514 million oz. (264.82) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 38 tonnes have been transferred out. We will be watching this closely!
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 55 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices stopped by JPMorgan customer account.
We had 55 notices served upon our longs for 5500 oz of gold. In order to calculate what will be standing for delivery in September, I take the number of contracts served so far this month at 1224 x 100 oz = 122,400 oz,to which I add the difference between the open interest for the front month of October(129) minus the number of notices served upon today (55) x 100 oz = 129,800 oz or 4.037 tonnes.
We lost a rather large 10,700 gold ounces standing for the October contract month.
Thus: October standings:
1224 contracts x 100 oz = 122,400 oz + (129 ) – (55)x 100 = 129,800 oz or 4.037 tonnes
October silver: Initial standings
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 3 customer withdrawals:
i) Out of Scotia: 300,300.72 oz
ii) Out of CNT: 56,180.42 oz
iii) Out of Delaware: 2,987.400 oz
total customer withdrawal 359,468.54 oz
We had 1 customer deposits:
i) IntoBrinks: 533,326.10 oz
total customer deposits: 533,326.10 oz
we had 0 adjustments:
Total dealer inventory: 66.737 million oz
Total of all silver inventory (dealer and customer) 180.340 million oz.
The CME reported that we had 2 notices filed for 10,000 oz today. To calculate what will stand for this active delivery month of October, I take the number of contracts served for the entire month at 774 x 5,000 oz per contract or 3,870,000 ounces upon which I add the difference between the open interest for the front month of October (2) – the number of notices served upon today (2) x 5000 oz per contract
Thus Oct. standings for silver: 774 notices x 5,000 oz per notice or 3,870,000 oz + (2) – (2) x 5,000 oz = 3,870,000 oz,
we thus have the same silver standing in the October contract month as Monday.
This should complete the October silver month and a rather large 3.87 million oz stood for delivery.
It looks like China is still in a holding pattern ready to pounce when needed.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
Oct 28.2014: we had another withdrawal of exactly 2 tonnes of gold heading to Shanghai; Inventory 743.39 tonnes
Oct 27.2014: no change in gold inventory at the GLD/inventory 745.39 tonnes.
Oct 24.2014: a huge withdrawal of 4.48 tonnes of gold at the GLD/Inventory 745.39 tonnes. This gold is heading to friendly territory: namely Shanghai.
Oct 23.2014: no change in gold inventory at the GLD/Inventory at 749.87 tonnes.
Oct 22.2014: we lost another 2.1 tonnes of gold at the GLD. Inventory rests at 749.87 tonnes. This tonnage no doubt is off to Shanghai.
Oct 21.2014: no change in inventory/GLD inventory rests tonight at 751.96 tonnes.
Oct 20.2014: wow!! a massive 8.97 tonnes of gold leaves the GLD heading to the friendly shores of Shanghai./Inventory 751.96
Oct 17.2014: No change in gold inventory at the GLD/Inventory 760.93 tonnes
Oct 16.2015: GLD gained back 1.79 tonnes of gold/inventory 760.93 tonnes
Oct 15.2014 GLD lost back the gold it gained yesterday to the tune of 2.09 tonnes/Inventory back to 759.14 tonnes
Oct 14. GLD inventory/stays the same at 761.23 tonnes
Today, Oct 28 we lost 2 tonnes gold inventory at the GLD
inventory: 743.37 tonnes.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD gold: 743.37 tonnes.
And now for silver:
October 28.2014: no change in silver inventory at the SLV/Inventory at 343.415 million oz
Oct 27.2014: no change in silver inventory at the SLV
Oct 24.2014: as of 6 pm, there is no change in silver inventory at the SLV. Note the difference between gold and silver. Gold leaves the vault of GLD as little silver leaves the SLV. (I guess it means that there is no silver to give to the banker participants)/Inventory: 343.415 million oz
Oct 23.2014: no change in silver inventory at the SLV (as of 6 pm est
Inventory: 343.415 million oz
Oct 22.2014: no change in silver inventory at the SLV ( as of 6 pm est)
Oct 21.2014; no change in silver inventory at the SLV (as of 6 pm est)
Oct 20.2014: we lost 1.15 million oz of silver inventory at the SLV/inventory 343.415 million oz
Oct 17.2014: no change in silver inventory/344.565 million oz
Oct 16.2014: no change in silver inventory/344.565 million oz
Oct 15.2014 no change in silver inventory/344.565 million oz
Oct 14.2014 today we had a loss of 1.201 million oz/SLV inventory rests at 344.565 million oz
Oct 13.2014: no change in silver inventory so far:
345.766 million oz
oct 10.2014: we lost a massive 3.25 million oz of silver leaving the SLV. Inventory 345.766 million oz
Oct.8/2014 no change in silver inventory 349.071 million oz
Oct 7.2014: a reduction of silver inventory to the tune of 863,000 oz/new inventory at SLV 349.071 million oz
Oct 3.2014/ we had a minor loss of 152,000 oz and this is usually to pay for fees./Inventory 349.934
Oct 1 late last night at 11 pm I was notified by Fred that they added a remarkably high 4.075 million oz of silver inventory at the SLV.
new inventory: 350.086 million oz.
sept 30.2104: no change in inventory/inventory 346.011 million oz
Today, Oct 28.2014: no change/inventory at 343.415 million oz
And now for our premiums to NAV for the funds I follow:
NOT PROVIDING TONIGHT
Note: Sprott silver fund now deeply into the positive to NAV
Sprott and Central Fund of Canada.
1. Central Fund of Canada: traded at Negative 8.5% percent to NAV in usa funds and Negative 8.5% to NAV for Cdn funds
Percentage of fund in gold 60.8%
Percentage of fund in silver:38.50%
2. Sprott silver fund (PSLV): Premium to NAV falls to positive 4.25% NAV (Oct 27/2014) (will pick up later tonight
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.44% to NAV(Oct 27/2014)
Note: Sprott silver trust back hugely into positive territory at 4.25%.
Sprott physical gold trust is back in negative territory at -0.44%
Central fund of Canada’s is still in jail.
Now your more important physical stories today:
(courtesy Mark O’Byrne)
John Embry with Eric King, of Kingworldnews
(courtesy Eric King/John Embry/GATA)
Recovery impossible within the current monetary system, Embry tells KWN
Submitted by cpowell on Mon, 2014-10-27 22:11. Section: Daily Dispatches
6:10p ET Monday, October 27, 2014
Dear Friend of GATA and Gold:
Incomprehensible debt, derivatives, and algorithmic trading in financial instruments have made a worldwide economic recovery impossible within the current monetary system, Sprott Asset Management’s John Embry tells King World News today:
CHRIS POWELL, Secretary/Treasurer
Grant Williams talks about the Swiss gold initiative plus other goodies:
(courtesy Grant Williams/Hmmmm/Mauldin Economics)
Grant Williams: This little piggy bent the market
Submitted by cpowell on Tue, 2014-10-28 17:01. Section: Daily Dispatches
1p ET Tuesday, October 28, 2014
Dear Friend of GATA and Gold:
In his latest “Things That Make You Go Hmmm. …” letter Singapore-based fund manager Grant Williams examines the history, objectives, and prospects of Switzerland’s gold initiative referendum proposal, along with the duplicity and hypocrisy of the Swiss National Bank. Williams’ letter is headlined “This Little Piggy Bent the Market” and it’s posted at the Mauldin Economics Internet site here:
CHRIS POWELL, Secretary/Treasurer
Bill, covers major events last week and interprets their meaning.
a must read….
(courtesy Bill Holter)
The Bear Growls Publicly
I plan to report more about the New Orleans investment conference and in particular what Alan Greenspan had to say later in the week. Today I want to speak about several pieces of news from late last week which I believe were important. Though these are seemingly not “connected”, I believe there is a very strong connection for most of it but to this point only behind the scenes.
First, Russia reported the import of 1.2 million ounces of gold last month. This is a big jump from what they had been previously importing. Earlier in the year if I recall they were running some 300,000 ounces per month and they have now begun to increase this rate. Why is this significant you ask? Because Russia has been under U.S. sanctions for the last 3+ months. If the sanctions were truly biting and crippling Russia, they would not have the financial ability to import any gold at all, much less increase the amount dramatically. Maybe the Chinese are lending them a hand or Russia is acting as a proxy for Chinese buying? I have no idea but Russia increasing her imports of gold certainly was not what Washington envisioned as a result of sanctions I am sure. As a side note, we also got the weekly gold import numbers out of Shanghai. Another 50+ tons after 68 tons the week before, how much longer can China buy nearly ALL global production? The answer of course is until the Western vaults are empty.
Speaking of “empty vaults”, JP Morgan reported 321,500 ounces of eligible gold withdrawn from their vault last Thursday. This is interesting because it is now the 3rd time in the last two months JPM has had this exact 10 ton withdrawal. We do know that this is “kilo” gold and not “ounce” gold because of the reporting. Were it N.Y. or London style bars we would see a report of “._ _ _” because the 100 ounce and 400 ounce bars are never exact round number weights, they are “point, something something something”. In just the last 2 months, JP Morgan has seen over 75% of their eligible gold withdrawn and now stands under 500,000 ounces. Because the East buys and trades in kilos rather than ounces, this may be an Eastern withdrawal or is actually being shipped East, no way to tell.
Getting back to Russia, Mr. Putin has finally spoken out in aggressive fashion. Late last week he made several statements including http://www.zerohedge.com/news/2014-10-24/putin-warns-risk-major-conflict-says-dollar-losing-reserve-currency-status “there is risk of major conflict, the U.S. dollar is losing trust as a reserve currency and the U.S. cannot humiliate its partners forever”. Why has he chosen “now” to become boisterous? There can be several reasons individually but most probably all have come together at one time. First, surely none of what he said would be done without the knowledge and approval of China. Secondly, he has just finished many rounds of talks with Middle East nations where I am sure trade, finance, energy and “protection” were all discussed. You can also add to this, November 1st is now only a week away and with it comes the calendar beginning of cold weather. Russian gas supply to Europe is a trump card that no amount of “dollars” can beat, not even if you burn them all for warmth. You see, Mr. Putin has the ability right here and now to blackmail much of Europe into fracturing away from the U.S..
Did he speak during his talks to Arab oil producers regarding “his markets” and his expectations that the Arabs not fill any void he creates? Probably, I certainly would. Please keep in mind that Russia has been militarily “probing” NATO everywhere on the planet. They in my opinion are testing our response times and also showing us they are no longer a broken state. Russia also last week sent military equipment and personnel to the hotly disputed Arctic circle. http://www.theguardian.com/world/2014/oct/21/russia-arctic-military-oil-gas-putin Does he plan to plant a Russian flag and thumb his nose at the U.S., Canada, Norway and Sweden? Again, probably.
As to the Mr. Putin’s “timing”, it is not just the cold weather coming. It just so happens the U.S. Fed is now about done with the current round of QE. Our markets are beginning to convulse and the calls for renewed QE can be heard even from within the Fed itself. This, at the same time Europe reported a banking stress test with 25 failures and 100’s of billion euros in new capital needed. Please remember, Mr. Putin is a brilliant guy and can do logic as well or better than anyone. He sees the West’s economies and financial systems weakening and knows the Achilles Heel to the system is physical gold. While we have tried to isolate Russia, they have firmed up allegiances with China, the rest of the BRICS and now even Middle East oil producers.
NONE of what Mr. Putin says or does is by mistake or coincidence, everything is planned and done so well ahead of time. Do you really believe earlier in the year he would have pushed Russia’s position when it would be stronger in 6 month’s time? Russia now has more alliances, trade deals signed, gold and Chinese backing than ever before, …while the West has accumulated more debt, printed more currency, cut military numbers and EXPORTED gold not to mention “weakened relationships” internally. This is not rocket science, the West has been declining for years and is now 6 months weaker while Russia/China et al are rising and are 6 months stronger and wealthier …
The fact that ‘the Bear’ is now growling publicly should not be overlooked as Mr. Putin would not do so, so loudly unless he was already in position. Regards, Bill Holter
Early Monday morning trading from Europe/Asia
1. Stocks mostly up on Asian bourses with the lower yen values to 108.08
2 Nikkei down 59 points or 0.38%
3. Europe stocks up/Euro up USA dollar index up at 85.59. Chinese bourse Shanghai down as the yuan slightly strengthens in value to 6.11389 per usa dollar/yuan.
3b Japan 10 year yield at .47%/Japanese yen vs usa cross now at 107.90/
3c Nikkei now below 15,000
3d FOMC two day meeting
3e the higher USA/Yen ramp pushes bourses around the world.
3fOil: WTI 81.49 Brent: 86.19
3g/ Gold down/yen down; yen above 108 to the dollar/
3h/ Sweden enters the ZIRP club pushing its interest rate to zero
3i Gold at $1227.00 dollars/ Silver: $17.22
4. USA 10 yr treasury bond at 2.28% early this morning.
(courtesy zero hedge)
Futures Levitate On Back Of Yen Carry As Fed Two-Day Meeting Begins
Submitted by Tyler Durden on 10/28/2014 06:59 -0400
If yesterday’s markets closed broadly unchanged following all the excitement from the latest “buy the rumor, sell the news” European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today’s overnight trading session has been far more muted with no major reports, and if the highlight wasKuroda’s broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to “tone down or abandon its outlook for inflation.” This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don’t, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe’s rating dangerously low.
Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.
And speaking of central bank meetings, the Fed’s own two-day October FOMC meeting begins today in the first ex-POMO day after many years of direct central bank intervention in the market, with the announcement due at the usual time tomorrow. Most commentators expect QE to end this month but for the Fed to keep the ‘considerable time’ language. Some mentioned that it would be interesting to see if the recent market volatility gets a mention. In short, nothing major is expected from the Fed although central banks still can surprise as Sweden’s Riksbanks showed today, when it sent the Krona tumbling to a four-year low against the dollar after the central bank entered the ZIRP club, cutting its main rate to 0.00%, below the 0.1%-0.25% expected.
Looking at markets, JGBs trade up 11 ticks at 146.55 underpinned by weakness in Japanese stocks, with some mild curve flattening observed, as 10s/20s fell to their flattest level since July 2013. Chinese bourses rescinded yesterday’s losses amid the H.K-Shanghai connect delay. The Hang Seng (+1.6%) and Shanghai Comp (+2.07%) were further supported by a jump in September Chinese Industrial Profits (+0.4% vs. Prev. -0.6%). Nikkei 225 traded down 0.4% weighed on by energy stocks, after yesterday where WTI crude futures briefly fell below USD 80/bbl to trade at the lowest level since June 2012. FIXED INCOME & EQUITIES Price action throughout the European session has largely been dictated by this morning’s plethora of large cap earnings reports, with a distinct lack of further macro European news to guide prices. More specifically, the DAX (+1.4%) leads the way for European equities after breaking above the 9,000 level with support provided by Deutsche Telekom (2.9%) following earnings from T-Mobile US and K+S (+2.2%) after a positive broker move at Goldman Sachs. Elsewhere in Europe gains for both the CAC (+0.4%) and FTSE 100 (+0.4%) have been capped by heavy losses for Sanofi (-7.9%) and Standard Chartered (-8.4%) respectively.
Today will see the release of the Conference Board Consumer Confidence for October, the Richmond Fed Manufacturing Survey for October, Case-Shiller Home Prices for August and more importantly Durable Goods Orders for September. It is a highly volatile series but could play a key part in influencing the advance Q3 real GDP report on Thursday. Closer to home, Italy’s economic sentiment and business confidence are perhaps the notable ones to watch. We also have 49 S&P 500 companies and 16 Stoxx600 firms reporting today. Pfizer, Facebook (after market), UBS and Lloyds Banking Group are just some of them.
Bulletin Headline Summary from Bloomberg and RanSquawk
JGBs trade up 11 ticks at 146.55 underpinned by weakness in Japanese stocks, with some mild curve flattening observed, as 10s/20s fell to their flattest level since July 2013. Chinese bourses rescinded yesterday’s losses amid the H.K-Shanghai connect delay. The Hang Seng (+1.6%) and Shanghai Comp (+2.07%) were further supported by a jump in September Chinese Industrial Profits (+0.4% vs. Prev. -0.6%). Nikkei 225 traded down 0.4% weighed on by energy stocks, after yesterday where WTI crude futures briefly fell below USD 80/bbl to trade at the lowest level since June 2012. FIXED INCOME & EQUITIES Price action throughout the European session has largely been dictated by this morning’s plethora of large cap earnings reports, with a distinct lack of further macro European news to guide prices. More specifically, the DAX (+1.4%) leads the way for European equities after breaking above the 9,000 level with support provided by Deutsche Telekom (2.9%) following earnings from T-Mobile US and K+S (+2.2%) after a positive broker move at Goldman Sachs. Elsewhere in Europe gains for both the CAC (+0.4%) and FTSE 100 (+0.4%) have been capped by heavy losses for Sanofi (-7.9%) and Standard Chartered (-8.4%) respectively.
Fixed income markets remain relatively subdued, although underperformance has been seen in the long-end of the UK curve after books closed on the syndication of UK 2068 Gilt with orders exceeding GBP 13bln and price guidance set at 2.5 bps over the 2060 Gilt. French and Belgium bonds are trading well in early trade with IFR noting demand into month-end and redemption flow supporting prices; a redemption payment of EUR 21bln of a maturing 10y OAT was paid yesterday.
FX markets remain relatively tentative ahead of tomorrow’s widely anticipated FOMC releases, however, SEK has seen substantial weakness after the Riksbank cut their key repo rate by 25bps to 0.00% against expectations of a 15bps cut. This subsequently saw SEK weaken to a 4-month low vs. EUR and 4-year low vs. USD. Heading into the North American crossover, USD is regaining some ground as the USD index returns to positive territory and as such pushing USD/JPY back above 108.00, with offers touted above at 108.20-25 and 108.40-50 with stops above.
WTI and Brent crude futures have been provided some reprieve in a pull-back of yesterday’s heavy losses, although Barclays have added to the recent slew of tier 1 investment banks by cutting their 2015 Brent and WTI crude forecasts. More specifically, they cut their 2015 Brent crude forecast to USD 93/bbl from USD 96/bbl and 2015 WTI crude forecast to USD 85/bbl from USD 89/bbl. Elsewhere, gold trades with modest gains albeit off its best levels, as markets look ahead to tomorrow’s seminal FOMC meeting while spot gold (+0.1%) bounced back after triggering stops below last week’s low on strong Asian demand. Furthermore, Barclays remains bullish on the near-term fundamentals for gold, keeping its Q4 average forecast at USD 1,220/oz.
* * *
DB’s Jim Reid complete the overnight summary
It was a bit of a ‚buy the rumour, sell the fact? day for European financials after Sunday’s relatively benign stress test results. Although to be fair there hadn’t been an awful lot of buying beforehand. The Stoxx 600 bank index peaked at 8.03am (London time) having climbed +2.1% in a matter of minutes, only to close -2.3% lower with the wider Stoxx 600 -xxx%. The turn also coincided with a weak IFO number (more later) but financials traded poorly led by Italian and Greek banks. Banca Monte dei Paschi di Siena and National Bank of Greece were the main decliners having closed -21.5% and -7.8% on the day, respectively. Credit fared better with Crossover, Main and Fin Snr index closing around +3bp, +1bp and +1bp on the day although they were still around 18bp, 4bp and 4bp off their respective intraday tights.
I spoke to a few clients and internal people yesterday about the tests and there was a broad consensus that although banks are now probably safer entities with ample liquidity and a decent amount of capital, nothing has really changed vis-a-vis growth. There was some disagreement on whether the responsibility was now on banks to lend more or whether the test results actually hint that the banks aren’t holding back the recovery. The latter view tended to think that it was now for the authorities to provide a growth impetus. With politicians unable or unwilling to use fiscal policy then all the heavy lifting is down to a divided ECB. We think they’ll eventually expand their balance sheet considerably but there’s unlikely to be an imminent surge. So we’re perhaps in no man’s land for a while in Europe.
Yesterday marked the weekly ECB balance sheet numbers where we learnt they bought €1.704bn of Covered bonds in the first week of their new regime. The result was broadly in line with what was expected but it’s a long way to go to reach a Trillion Euros. We still think they’ll have to do Government QE to get there, a view shared by our Economists. They simply don’t think there’s enough private securities to be able to realistically buy enough bonds to meet their target. My team contributed to a section in this week’s Focus Europe where the conclusion is that buying corporate bonds is a decent possibility but that they will still eventually need to do full QE to get the desired volumes. The piece has plenty of stats around the potential size of ABS, Covered and Corporate bonds they could purchase.
Staying in Europe, the German IFO survey and sub components were all softer than expected. Business Climate (103.2 v 104.5 expected) fell for the sixth consecutive month which brings the series to a 22 month low. Current Assessment (108.4 v 110.0 expected) fell to the lowest since April 2013 whilst Expectations (98.3 v 99.2 expected) also fell to December 2012 lows. Money and credit aggregates data in Europe offered some encouraging news (M3 +2.5% yoy in September v +2.1% yoy August) but the market was very much fixated on conditions in Germany.
Over on the other side of the Atlantic, data was also on the softer side. Pending home sales (0.3% mom in September v 1.0% mom expected), Markit services PMI (57.3 v 57.8) and Dallas Fed Manufacturing (10.5 v 11.0) all fell short of market consensus. This offered little support to US equities (S&P 500 -0.15%) but in reality the market was perhaps due for a little breather after the biggest weekly gain (+4.1%) for the index since January 2013. All eyes now turn to the Fed’s decision tomorrow. Elsewhere in US credit the CDX IG and HY indices were little changed at around 65bp and $106.8 even though it was a fairly active day for the primary markets. The USD corporate bond market (including EM) absorbed US$5.4bn from five issuers across 9 different tranches with Financials being the main issuer of the day. The stability in Treasuries probably helped with the UST 10yr yield only a smidgen lower on the day at 2.26%. Away from core DM markets, price action in Brazil following the election results was largely as expected although they did recover from their intraday lows. After sharp fall in Brazilian stock ETF’s of as much as 7% in European trading, the Ibovespa closed down 2.8% after having fallen as much as 6.2% in early trading. The BRL fell by 1.9% to 2.521 against the USD. Our EM colleagues had expected the Real to trade closer to 2.60/USD and noted that the relatively tame reaction in the currency reduced the probability of another tightening cycle. They also expect the finance minister appointment to be crucial as to whether Rousseff will adjust current polices, however early indications from the Portuguese President Falcao is that this might not happen until 2015.
This morning we’ve already had the September Retail Sales print in Japan with the 2.7% mom reading well ahead of expectations of 0.9%. The data has failed to spark positive sentiment however with the Nikkei currently trading 0.8% lower following a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to “tone down or abandon its outlook for inflation.” This comes before the Bank of Japan meeting on Friday where our Japanese colleagues mentioned yesterday that the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015. The rest of Asia is trading generally mixed with bourses in Hong Kong, China, Korea and Australia +0.6%, +1.1%, -0.3% and -0.2% respectively.
Before we wrap it up, there was some focus on Greece yesterday as the market absorbed the news that Syriza had edged further ahead in the latest weekend polls, extending their supposed lead to 8.5% from 6.5% in previous polls earlier in the month. As we’ve discussed before, although parliamentary elections are not due until June 2016, the presidential vote early next year could trigger snap elections sooner than expected if the current coalition government fails to secure the 180 votes needed to elect its presidential candidate. These polls will certainly be important to keep an eye on as we move through the remainder of the year. Greece’s key equity benchmark closed -3.3% yesterday although this is still about 10% off its recent lows.
Today will see the start of the two-day FOMC meeting although we won’t hear anything from the Fed until tomorrow’s post meeting statement. As a brief recap DB does expect QE to end this month but for the Fed to keep the ‘considerable time’ language for now. What’s would be interesting though is to see if the recent market volatility gets a mention. Fed aside, today will see the release of the Conference Board Consumer Confidence for October, the Richmond Fed Manufacturing Survey for October, Case-Shiller Home Prices for August and more importantly Durable Goods Orders for September. It is a highly volatile series but could play a key part in influencing the advance Q3 real GDP report on Thursday. Closer to home, Italy’s economic sentiment and business confidence are perhaps the notable ones to watch. We also have 49 S&P 500 companies and 16 Stoxx600 firms reporting today. Pfizer, Facebook (after market), UBS and Lloyds Banking Group are just some of them.
Japan is basically hopeless and they will be one of the first major countries to crash!!
(courtesy zero hedge)
Kuroda Comedy Hour (Or Has The World Gone Mad… Again?)
Submitted by Tyler Durden on 10/27/2014 21:35 -0400
The head of Japan’s Central Bank kept a straight face while unleashing a torrent of comedic genius this evening with regard the Japanese economy and its monetary and fiscal policy success… Enjoy…
*KURODA: EXPECT JAPAN TO CONTINUE MODERATE RECOVERY (let’s hope not….)
*KURODA: INFLATION EXPECTATIONS RISING ON THE WHOLE (nope…!)
*KURODA: BOJ EASING HAVING INTENDED IMPACT(Misery Index at all-time record highs)
Followed by this….
*KURODA: WEAK YEN HAS BEEN PLUS FOR JAPAN’S ECONOMY (oh you mean apart from the now record chronic trade deficit?)
And then – to conclude…
Now we wonder why no one trusts the constant flow of lies and spin spewing from Japanese leaders mouths night after night…
And now for your major data points today:
Portuguese 10 yr bond yield: 3.40 up 1 in basis points from Monday night.
Your closing Portuguese 10 year bond yield Tuesday night: down 4 in basis points on the day
Portuguese 10 year bond yield: 3.35%
Your closing Japanese yield Tuesday par in basis points from Monday night
yield .47% !!!
Japanese 10 year bond yield: .47%
And now for your closing Japanese 10 year bond yield down 1 in basis points from the morning: ( Japanese markets imploding)
Japanese 10 year bond yield: .46%
Your opening currency crosses for Tuesday morning:
EUR/USA: 1.2703 up .0003
USA/JAPAN YEN 108.08 up .260
GBP/USA 1.6162 up .0001
USA/CAN 1.1223 down .0026
This morning the Europ is slightly up, trading now just below the 1.27 level at
1.2670 as Europe reacts to deflation. The yen is down a little and it closed in Japan falling by 26 basis points at
108.08 yen to the dollar. The pound is up from Monday as it now trades just above the 1.61 level to 1.6162.
The Canadian dollar is slightly down trading at 1.2223 to the dollar.
Early Tuesday morning USA 10 year bond yield: 2.28% !!! up 2 in basis points from Monday night/ (USA economy not doing so well with this low yield)
USA dollar Index early Tuesday morning: 85.59 up 10 cents from Monday’s close
The NIKKEI: Tuesday morning down 59 points or 0.38%
Trading from Europe and Asia:
2/ Asian bourses mostly in the green / Chinese bourses: Hang Sang in the green, Shanghai in the green, Australia in the gr: red/Nikkei (Japan) red/India’s Sensex in the green
Gold early morning trading: $1227.00
Your closing Spanish 10 year government bond Tuesday/ par in basis points in yield from Monday night.
Spanish 10 year bond yield: 2.14% !!!!!!
Your Tuesday closing Italian 10 year bond yield: down 2 in basis points:
trading 39 basis points higher than Spain:
Italian 10 year bond yield; 2.53%!!!!!
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: Europe falling apart this afternoon
Euro/USA: 1.2743 up .0041
USA/Japan: 108.04 up .200
Great Britain/USA: 1.6138 up 0.0015
USA/Canada: 1.1193 down .0056
The euro rose quite a bit in value during this afternoon’s session, and it was up by closing time , closing well above the 1.27 level to 1.2743. The yen was marginally up during the afternoon session,but it lost 20 basis points on the day closing just above the 108 cross at 108.04. The British pound lost some ground during the afternoon session but it was up for the day as it closed at 1.6138
The Canadian dollar was up during the afternoon session, and it was up on the day closing at 1.1193.
Your closing USA dollar index:
85.36 down 13 cents on the day
your 10 year USA bond yield ,up 1 in basis points on the day: 2.27%
European and Dow Jones stock index closes:
England FTSE up 38.71 or 0.40%
Paris CAC up 15.93 or 0.39%
German Dax up 165.58 or 1.86%
Spain’s Ibex up 199.60 or 1.96%
Italian FTSE-MIB up 447.95 or 2.35%
The Dow: up 187.81 or 1.12%
Nasdaq; up 78.36 or 1.75%
OIL: WTI 81.40
And now for your big USA stories
Today’s NY trading:
(courtesy zero hedge)
Historic Short Squeeze, Biggest In 3 Years, Sends Small-Caps Soaring; Dow Tops 17,000
Submitted by Tyler Durden on 10/28/2014 16:02 -0400
In a strangely familiar case of deja vu all over again, stocks surged (alone in the cross-asset class world of economic reality) on the day before an FOMC statement. The Russell 2000 has had its best 10-day run in 3 years, best day of the year, and managed to scramble back to its 100- & 200-day moving-average. Dow 17,000 was another key technical level that was achieved. S&P 500 was levitated on volume around 40% below average into the green for October. VIX was banged under 15 and tracked stocks. Away from the equity-vol complex, asset-classes were unimpressed – HY credit, bonds, JPY, and the USD all diverged from stocks. USD weakened slightly, and commodities all gained on the day. TSY yields were up 2-3bps and HY closed practically unchanged. “Most shorted” stocks rose almost 3% – the biggest squeeze since Dec 2011 – smashing the Russell 2000 higher.
“Most Shorted” stocks (BBG Ticker GSCBNSAL Index) had their best day (biggest short squeeze) since Dec 2011…
Don’t think it was a squeeze? spot the difference…
Don’t forget the last time we were here, Bullard pissed in the punchbowl… Dow tops 17000 into close last minute!
Gentle reminder of the pre- and post- exuberance at the last FOMC in stocks… but not bonds… (just like we saw today)
On the day – volume was a disaster – so that means stocks soared…
The October miracle…
Off The Bullard lows…
Russell back up to its 100/200DMA…
HY credit diverged early then played some catch up but underperformed…
and JPY carry and Bonds decoupled from stocks too
Treasury yields rose modestly on the day, up 2-3bps on the week – bonds basically gacve back their 4ET-12ET gains from yesterday in the same period today…
The USD slipped lower (down 0.35% on the week) led by EUR strength (big SEK move on rate cut)
The weaker USD helped commodities…
Bonus Chart: Divergences (almost) everywhere…
Bonus Bonus Chart: Where to next Janet?
Charles Biderman blasts the correct future obligations of the USA as 98 trillion dollars and not 16 trillion according to Obama:
(courtesy zero hedge)
Biderman Blasts “Either Obama Is Ignorant, Or He Is Hiding The Truth”
Submitted by Tyler Durden on 10/28/2014 13:44 -0400
According to the official government data, the United States asserts its future obligations, as of Q2 2014, are $16.5 trillion. However, TrimTabs founder Charles Biderman says that is wrong, the actual figure of the country’s future obligations, which is $98 trillion. “This does not bode well for future generations,” Biderman warns, adding “either Obama is ignorant of future US government obligations or he is hiding the truth.”
Charles Biderman, founder of TrimTabs Investment Management Float Shrink (TTFS) says the U.S. gives its future obligations, as of Q2 2014, as $16.5 trillion. But, in fact, Biderman says, the actual number is $98 trillion.
“Either Obama is ignorant of future US government obligations or he is hiding the truth,” slammed Biderman.
“If the United States were a public company and was hiding the truth that the present value of future obligations was $98 trillion – not just $16.5 trillion– the president of that company would be guilty of criminal fraud.”
Biderman said the actual figure of the country’s future obligations, which is $98 trillion, is in the 2013 OASDI (Old Age, Survivor’s and Disability Insurance) Trust Funds, a combination of Social Security and Medicare Trustee Reports.
As Biderman concludes:
“This does not bode well for future generations when the U.S. can’t afford to fund benefits including Medicare.”
Case Shiller: California leads housing slowdown!
(courtesy Case Shiller/zero hedge)
California Leads Housing Slowdown As Case-Shiller Home Prices Decline For 4 Months In A Row
Submitted by Tyler Durden on 10/28/2014 09:19 -0400
Following misses in yesterday’s Markit Service PMI, Existing Home Sales and the Dallas Fed report, and today’s Durable Goods numbers, we just made it apentafecta for misses in US econ data, when the just released August Case-Shiller data for August confirmed once again that US housing is rapidly slowing down, when the Top 20 Composite Index (Seasonally Adjusted) posted another decline in August, its fourth in a row, declining by -0.15% and missing expectations of a modest 0.2% rebound (following last month’s -0.5%) decline. The best summary of the situation came from S&P’s David Blitzer: “The deceleration in home prices continues… The Sun Belt region reported its worst annual returns since 2012, led by weakness in all three California cities — Los Angeles, San Francisco and San Diego.”But who cares what the birth (and death) place of every housing bubble is doing, right?
This is what Case-Shiller Month over Month data looked like:
More from the report:
“The large extent of slower increases is seen in the annual figures with all 20 cities; the two composites and the national index all revealing lower numbers than last month. The 10- and 20-City Composites gained 5.5% and 5.6% annually with prices nationally rising at a slower pace of 5.1%. Las Vegas continues to see a sharp deceleration in their annual home prices with a 10.1% annual return, down just below three percent from last month. Miami is now leading the cities with a 10.5% year-over-year return. San Francisco, which has shown double-digit annual gains since November 2012, posted an annual return of 9.0% in August.
“Despite softer price data, other housing data perked up. September figures for housing starts, permits and sales of existing homes were all up. New home sales and builders’ confidence were weaker. Continued labor market gains, low interest rates and slower increases in home prices should support further improvements in housing.
And this is how the 20 major MSA’s did in August:
In short: absent another major housing stimulus, one can stick a fork in even this latest fake housing, economic, and finally, market “recovery.”
This does not bode well for the USA as capital expenditures decline.
(courtesy zero hedge)
Core Capex Drops Most Since January; Durable Goods Orders Slide, Miss By Most In 2014
Submitted by Tyler Durden on 10/28/2014 08:42 -0400
It was just 2 months ago when the one-off Boeing order-related idiocy distorted the entire time series and was thus extrapolated into escape velocity dreams by prognosticators everywhere. Excused by the cognoscenti as a “volatile time series,” Durable Goods new orders dropped 1.3% MoM, missing expectations by the most since Dec 2013 and negative for the 2nd month in a row. Last month’s drop was revised lower also. Even more concerning is the 1.7% drop MoM in Core Capex, the biggest miss in over a year and biggest drop since January. Did it snow in September?
The headline summary via BBG:
- Durable goods new orders fell 18.3% in Aug., the Census Bureau said
- New orders ex-trans. fell 0.2% in Sept. after 0.7% rise
- New orders ex-defense fell 1.5% in Sept. after 19.1% fall
- Non-defense capital goods orders ex-aircraft fell 1.7% in Sept.
- Non-defense capital goods ex-air 3 mo. avg. annualized rose 10.4%
- Non-defense capital goods shipments ex-aircraft fell 0.2% in Sept. after 0.1% rise
Snark aside, it was time to find scapegoats why for another month, the 5 year delayed CapEx renaissance is still missing. Bloomberg promptly came up with a convenient one: Europe.
Companies are looking for more signs of sustained consumer demand before making high-dollar investments, even as households benefit from strong job gains and pared-down debt. As markets in Europe and emerging nations slow, fewer exports will probably also damp orders in coming months, indicating American manufacturing will cool.
“Exports aren’t doing anything great because Europe’s in a really bad funk,” Michael Montgomery, U.S. economist at IHS Global Insights in Lexington, Massachusetts. “Prospects for sales one or two years down the line are decent, but they’re not booming.”
Well, “Europe” is at least better than the weather. But just wait until Ebola is blamed in 2-3 months.
And now, time to start cutting those Q4 GDP forecasts.
Durable Goods prints 2nd miss and 2nd drop in a row
And Core Capex – Capital goods new orders ex defense ex-aircraft – dropped most since January
The Y/Y change in headline durables, noe the Boeing distortion.
And core CapEx: there is still much more room to fall.
So how long until Obama issues an executive order banning stock buybacks and demanding all excess cash be spent on “growth”?
That is all for today
I will see you tomorrow night
Do not forget that they will put continuous pressure on gold and silver
for the remainder of this week due to options expiry
bye for now