Dec 1.2014/No changes in GLD and SLV/ huge positive outside day reversal in gold and silver/looks like we will have a huge derivative mess in shale oil drillers/

 

 

 

My website is now ready but we still have to add a little  stuff to it.  You can find my site at the following url:

http://www.harveyorganblog.com or  www .harveyorgan.wordpress.com

I will continue to send the  comex data down to my good friends at the Doctorsilvers website on a continual basis.

They provide the comex data. I also provide other pertinent data that may interest you. So if you wish you can view that part on my website.

Gold: $1218. up $42.80
Silver: $16.65  up $1.49

In the access market 5:15 pm

Gold $1212.00
silver $16.47

The gold comex today had another poor delivery  day, registering only  109   notices served for 10,900 oz.  Silver comex registered 517 notices for 2,585,000 oz.

A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 246.59 tonnes for a loss of 57 tonnes over that period.

In silver, the open interest rose by 1232 contracts despite Friday’s huge loss in price of $1.06 . For the past year, we have been witnessing massive liquidation of contracts despite the fact that it cost nothing to roll.  This makes no sense and it smacks of cash settlements which are totally illegal. Since I have been following comex data, I have never witnessed such a massive liquidation in both gold and silver these past 4 days.  The total silver OI still  remains relatively high with today’s reading  at 155,108 contracts. The big December silver OI contract lowered by 2215 contracts down to 1735 contracts.

In gold we had a tame loss in OI despite the huge loss in price of gold on Friday to the tune of $21.60  The total comex gold  OI rests tonight  at 372,859  for a  loss  of 3,969 contracts. The December gold OI rests tonight at 4,536 contracts.  We witnessed a huge contraction of 6,971 contracts despite the fact that it costs nothing to roll..

TRADING OF GOLD AND SILVER TODAY

GOLD

 

Outside positive day reversal:

In trading of  gold and silver today, our two precious metals had a roller coaster time in the Asian,  European  and then USA trading  zone last night.  Early Sunday evening, as I was watching the screen, gold hit its low point at around 8 pm with a price of $1142.50.  From there it was one huge climb.  At the first fix, gold hit $1157.50 upon which the bankers threw a soft punch knocking a few dollars off gold where at 3 am gold was trading at $1155.00 . At about 6 am it reached $1180.00.

By 7 am the bankers threw a tantrum and knocked 8 dollars off gold to $1172.00.  Not to be undone,  gold hit its second plateau at the 2nd London fix at $1196.50.

Then gold straddled the 1200 dollar barrier until just before noon, it broke through, hitting its zenith at $1119. 50. In the access market it is trading around $1210.00

Silver:

Silver followed gold to a T. but much better. Silver hit its low point at about the same time as gold at around $14.63.  From there it was one steady climb:

First London fix:  $15.01 (2 am )

First plateau: $16.08 at (5 am)

Second trough  7 am  $15.53

then one stead climb to its zenith at $16.71

 

In the access market now it is trading at $16.45

 

 

Today, we had no change in tonnage of gold Inventory at the GLD / inventory rests tonight at  717.63 tonnes.

In silver, we no change in silver inventory:

SLV’s inventory  rests tonight at 347.954 million oz.

We have a few important stories to bring to your attention today…

Let’s head immediately to see the major data points for today.

OH NO!! THIS CANNOT BE SO!!!!!!

First:   GOFO rates:

all rates move again much deeper into the negative  and thus  we have severe backwardation!!

Now, all the months of GOFO rates( one, two, three  six month GOFO and one year) moved deeper into  the negative with the mostly used 1 to 6 month rates severely deep into the negative and thus  in backwardation Even the one year rate is within a hair- fraction of negativity. When the one year goes negative, we will have complete backwardation for one year out.   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 even though negative are still fully manipulated.

London good delivery bars are still quite scarce.

The backwardation in gold is incompatible with the raid on gold . It does not make any economic sense.

Even though the USA had a holiday yesterday, LBMA provided data from London and that is included in your report for today:

Dec 1 2014

1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate

-5825.%         – 46500  -%        –3150   -%   – 12333  .%          + 00667%

Nov 28 2014:

-.49333%           -.3633300%       -,25667 %         -10333%    +02667%

end

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 fell dramatically again  by 3,969 contracts from  376,828 down to 372,859 with gold down by $21.40 on Friday (at the comex close). We are now into the  big December contract month where the number of OI standing for the gold metal registers 4,536 contracts for a loss of 6971 contracts.  The non active January contract month fell by 273 contracts down to 331.  The next big delivery month is February and here the OI rose to 238,915 contracts for a gain of 2161 contracts. The  estimated volume today was fair at 187,859 .  The confirmed volume on Friday was excellent at 273,944 with the help of high frequency traders.   On this 2nd day of notice in the December contract, we  had only 109  notices filed for 10900 oz  which basically shows that the comex is probably having trouble locating any quantity of good delivery bars.

And now for the wild silver comex results.    Silver OI rose by 1,232   contracts from  153,876 up t0 155,108 as  silver down by $1.06 on Friday.      The big December active contract month saw it’s OI fall by 2215  contracts down to 1735 contracts. We had 1614 notices served upon for Friday’s delivery.  Thus we lost 601 contracts or  3,005,000 oz will not stand.  The  estimated volume today was excellent at 69,834.  The confirmed volume on Friday  was huge at 80,675. We also had 517 notices filed  today for 2,585,000 oz today.

December initial standings

 

Dec 1.2014

Gold

Ounces

Withdrawals from Dealers Inventory in oz nil
Withdrawals from Customer Inventory in oz 40,600.000 oz (Scotia) not kilobars
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz nil oz
No of oz served (contracts) today  109 contracts(10,900 oz)
No of oz to be served (notices) 4427 contracts (442,700 oz)
Total monthly oz gold served (contracts) so far this month  691 contracts  (69,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 69,932.310  oz

Today, we had 0 dealer transactions

total dealer withdrawal:  nil   oz

we had 0 dealer deposits:

 

total dealer deposit:  nil oz

we had 1 customer withdrawal and this one defies logic:

total withdrawal:  40,600.000 oz (not divisible by 32.15 oz and therefore not kilobars)  How on earth can this be????

we had 0 customer deposit:

 

total customer deposits : nil oz

We had 1 adjustments:

i) Out ofHSBC:

43.46 oz was adjusted out of the dealer and this gold just evaporated into thin air out of the comex vaults.

Total dealer inventory:  812,870.907 oz or 25.28 tonnes

Total gold inventory (dealer and customer) =  7.888 million oz. (244.35) tonnes)

Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 58 tonnes have been net transferred out. We will be watching this closely!

Today, 0 notices was issued from  JPMorgan dealer account and 22 notices were issued from their client or customer account. The total of all issuance by all participants equates to 109 contracts  of  which 46 notices were stopped (received) by JPMorgan dealer and 1  notices were stopped (received) by JPMorgan customer account.

To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (691) x 100 oz to which we add the difference between the OI for the front month of December (4536) – the number of gold notices filed today (109)  x 100 oz  =  the amount of gold oz standing for the December contract month.

Thus the  initial standings:

691  (notices filed for the month x 100 oz + 4536) OI for November – 109 (no of notices filed today equals 511,800 oz  standing for the December contract month or 15.919 tonnes)

 

we lost a massive 6,389 contracts or 638,900 oz standing.

This initiates the month of December for gold.

And now for silver

Dec 1/2014:

 December silver: initial standings

Silver

Ounces

Withdrawals from Dealers Inventory  nil  oz
Withdrawals from Customer Inventory nil oz
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 982,620.74 oz(CNT,Scotia)
No of oz served (contracts) 517 contracts  (2,585,000 oz)
No of oz to be served (notices)  1218 contracts (6,090,000 oz)
Total monthly oz silver served (contracts) 2131 contracts (10,655,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month

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 0 customer withdrawals:

total customer withdrawal  nil  oz

We had 2 customer deposits:

i) Into CNT: 361,585.300 oz (again just one decimal)

ii) Into Scotia:  621,035.44 oz

total customer deposits: 982,620.740   oz

we had 0 adjustments

 

Total dealer inventory:  65.197 million oz

Total of all silver inventory (dealer and customer)   177.990 million oz.

The total number of notices filed today is represented by 517 contracts or 8,070,000 oz.  To calculate the number of silver ounces that will stand for delivery in December, we take the total number of notices filed for the month (2131 ) x 5,000 oz to which we add the difference between the total OI for the front month of December (1735) minus  (the number of notices filed today (517) x 5,000 oz =   the total number of silver oz standing so far in November.

Thus:  2131 contracts x 5000 oz  +  (1735) OI for the November contract month – 517 (the number of notices filed today)  =6,745,000 oz of silver that will stand for delivery in December.

For those wishing to see data on the currencies and bourse closings you can see it on my site

athttp://www.harveyorgan.wordpress.com or http://www.harveyorganblog.com

end



The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

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:


i) demand from paper gold shareholders

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:

 

December 1.2014: no change in gold inventory at GLD

Nov 28.2014: a loss  in inventory of 1.19 tonnes/tonnage 717.63 tonnes

Nov 26.2014: we lost 2.09 tonnes of gold heading to India and or China/inventory at 718.82 tonnes

Nov 25.2014/no change in tonnage of gold inventory at the GLD/inventory at 720.91 tonnes

Nov 24.2015: no change in tonnage of gold inventory at the GLD/inventory at 720.91 tonnes

Nov 21.2014: no change in tonnage of gold inventory at the GLD/inventory 720.91 tonnes

Nov 20.2014; no changes in tonnage of gold at the GLD/tonnage 720.91 tonnes

Nov 19.2014: we lost 2.1 tonnes of gold/Inventory back to 720.91 tonnes.  No doubt physical gold is heading to China.

Nov 18.2014: no change in inventory/ Inventory level 723.01 tonnes

Nov 17.2014; we had a huge addition of 2.39 tonnes of gold added to the GLF inventory/inventory rests tonight at 723.01 tonnes. They may be running out of metal to give China!!!

Nov 14. we had no change in gold inventory at the GLD/inventory 720.62 tonnes

nov 13. we lost another 2.05 tonnes of gold at the GLD/Inventory at 720.62 tonnes

Nov 12.2014; we lost another 1.79 tonnes of gold at the GLD/Inventory at 722.67 tonnes

This gold left the shores of England and landed in Shanghai.

Today, December 1  no change of gold inventory at the GLD

inventory: 717.63 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 :  717.63 tonnes.

 

 

end

 

 

And now for silver:

 

December 1: no change in inventory/347.954 million oz

Nov 28.2014: no change in inventory/347.954 million oz

Nov 26.2014; no change in inventory/347.954 million oz

Nov 25.14 we had a loss of  1.342 million oz from the SLV/inventory 347.954 million oz

Nov 24.2014: no change in silver inventory at the SLV/Inventory 349.296 million oz

Nov 21.2014: no change in silver inventory at the SLV

Inventory:  349.296 million oz

Nov 20.2014; no change/inventory 349.296 million oz

Nov 19.2014: a huge addition of silver inventory to the tune of 2.396 million oz/inventory 349.296 million oz

Nov 18.2014; no change in silver inventory  346.90 million oz

Nov 17.2014 .SLV inventories remain constant tonight at 346.90 million oz

Nov 14.2014; wow!! we had an addition of 2.012 million oz into the SLV/inventory at 346.900 million oz

Nov 13. no change in silver inventory at the SLV/344.888 million oz.

Nov 12.2014: no change in silver inventory at the SLV/inventory rests tonight at 344.888 million oz.  And please note that gold leaves GLD/silver does not.  Why? there is no physical silver at the SLV..just paper obligations.

Nov 11.2014: no change in silver inventory at the SLV/inventory rests tonight at 344.888 million oz.

 

 

December 1.2014 no change in inventory/347.954 million oz.

 

 

end

And now for our premiums to NAV for the funds I follow:

 

 

Note:  Sprott silver fund now deeply into the positive to NAV

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded  at Negative 8.1% percent to NAV in usa funds and Negative   8.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold  62.2%

Percentage of fund in silver:37.20%

cash .6%


( December 1/2014)   

2. Sprott silver fund (PSLV): Premium to NAV rises to positive 3.65% NAV (Dec 1/2014)  

3. Sprott gold fund (PHYS): premium to NAV  falls to negative -0.36% to NAV(Dec 1/2014)Note: Sprott silver trust back hugely into positive territory at 3.65%.

Sprott physical gold trust is back in negative territory at  -0.36%

Central fund of Canada’s is still in jail.

 

 

end

 

 

And now for your most important physical stories on gold and silver today:

Early gold trading from Europe early Monday morning:

 

 

1.  Russian gold demand, despite the huge drop in the rouble  (52.00 to the dollar this morning) sees another 18.66 tonnes of gold land on its soil

 

2.  Chinese demand for the week:  52.4 tonnes of gold.

If we add China, Russia and India, they import 150% of annual global production.  If respect to China this does not include sovereign purchases as this does not enter into their calculations of demand.  They purchase their gold with unwanted dollars.  All other demand for gold is bought with yuan.

(courtesy Goldcore/Mark O’Byrne)

 

Swiss Gold No – Repatriation, Demand from Russia, India and China More Important

Published in Market Update  Precious Metals  on 1 December 2014

By

By Ronan Manly

 

Federal Reserve Confirms Biggest Foreign Gold Withdrawal In Over Ten Years

Introduction
Switzerland’s ‘Save our Swiss Gold’ referendum was convincingly rejected yesterday by the Swiss electorate following an aggressive anti-gold campaign in recent weeks that had been closely watched both in Switzerland and abroad.

Unusually, it involved the Swiss National Bank (SNB) very actively, and ultimately successfully, trying to convince the electorate along with the main political parties to return a ‘no’ vote.


The initiative had proposed a series of measures which would have obliged the SNB to hold a minimum of 20% of its reserves in gold, prevent the SNB from selling any gold, and force the SNB to repatriate that portion of its gold reserves that are currently stored abroad and to store gold in Switzerland.

The referendum campaign had evolved out of a popular initiative which had initially collected over 100,000 signatures between 2011 and 2013. Under Swiss law, this allowed the motion to go forward as an official referendum, even though the Swiss government, Swiss parliament and Swiss National Bank had all come out in opposition to the Gold Initiative.

In rejecting the referendum, the Swiss People voted 77.3% against, versus 22.7% for. Voters in all 23 of Switzerland’s cantons rejected the initiative in what was an unfortunate defeat for the initiative’s organisers. In most cantons, the results showed a three to one ratio in opposition to the initiative, and even a four to one ratio in a few cantons.

Opposition parties, and the SNB, are already pitching the referendum outcome as a ring of endorsement for the SNB’s current monetary policy strategy of pegging the Swiss Franc to the Euro at the 1.20 level. This is not necessarily the case and it needs to be remembered that the result also shows a substantial minority of the Swiss electorate who disapproved of the SNB’s gold reserve management strategy.

Anti-Gold Establishment?
The weak showing for the ‘yes’ vote continues a trend that was seen in the series of opinion polls that were conducted during the campaign in October and November. Two official polls had been produced by political pollster gfs.bern on behalf of state broadcaster SRF. In the October poll, the yes vote was 44% versus 39% no, with 17% undecided. The last poll published on 19 November had shown the yes vote slipping to 38%, with the no vote at 47%, and 15% undecided.


The weakening of the ‘yes’ vote in the final two weeks of the campaign was most likely influenced by more effective campaigning by the no side, as well as the continued intervention of the Swiss National Bank through various media appearances. The fact that none of the main political parties in Switzerland had backed the initiative also looks to have made an impact with the electorate.

Another ‘unofficial’ series of on-line polls, run by the ’20 Minuten’ media group, had always put the no side in front, and in a poll published on 18 November, had found the ‘yes’ vote at 28%, versus 65% for no, with 8% undecided.

Cantonal wipe-out
Every canton, except the Italian speaking Ticino canton, rejected the initiative by more than 70%. Turnout for the referendum was 48.7%, with about 581,000 of the electorate voting in favour of the motion, versus approximately 1,974,000 against.

The two cantons with the largest populations, namely Zurich and Bern, only returned yes votes of 20.6% and 21.6% respectively.

The cantons of French speaking Switzerland, aka Swiss Romande, recorded the highest no vote, with one canton, Vaud, rejecting the initiative by a huge 83% to 17% margin. Switzerland’s French speaking region comprises the western cantons of Geneva, Vaud, Neuchatel, Jura, and most of Fribourg, as well as parts of the Bern canton and the western areas of the Valais canton.

In Geneva, for example, the electorate returned a vote of 23.5% yes vs 76.5% no, while the Jura canton voted 19.4% yes vs 80.6% no, and the Neuchatel canton recorded an outcome of only 20.0% yes vs 80% no.

The Italian speaking canton of Ticino, which is in the south-east of the country, recorded the highest yes vote at 33.3% vs a no vote of 66.7%. In the opinion polls in the run-up to the referendum, Ticino had shown the highest yes vote, so the relatively stronger yes vote in Ticino compared to other cantons was expected, albeit, the yes vote still collapsed in Ticino relative to what the earlier polls had indicated.
Incidentally, Ticino is the canton where three of the four largest gold refineries in Switzerland are located, namely, Pamp, Valcambi and Argor-Heraeus.

Apart from Italian speaking Ticino, the strongest showing for the yes vote was seen in the cantons located in the north-east of the country, such as St. Gallen, Thurgau, and the two half cantons of Appenzell Ausserrhoden, and Appenzell Innerrhoden, and also the more centrally located canton of Schwyz. St. Gallen, for example, returned a 27.4% yes vote vs 72.6%, while Schwyz recorded 29.3% vs 70.7% no.

SNB Satisfaction
In a press release, the SNB said that it was “pleased to hear of the outcome of the gold initiative vote”, and that the gold initiative would have constrained its ability to maintain price stability. The SNB also reiterated that it will continue to impose its defence of the 1.20 CHF/EUR exchange rate with the ‘utmost determination’ and that it is prepared to buy ‘unlimited’ quantities of Euros for this purpose.


Luzi Stamm, National Councillor for the SVP, and one of the organisers of the gold initiative campaign, believed that the Swiss National Bank’s involvement helped the no campaign, saying that “the credibility of the SNB is obviously very high.”

Yves Nidegger of the SVP, another proponent of the yes campaign, said that the defeat was probably not a surprise given that none of the main parties officially supported the initiative.

Christophe Darbellay, national councillor and president of the Christian Democratic People’s Party (PDC), whose party was also against the initiative dramatically said that “the People have clearly said no to the SVP group (Swiss People’s Party) who wanted to put the SNB and Switzerland on morphine”.

The committee representing the large group of politicians who had opposed the gold initiative said in a statement following the vote that “the result confirms the confidence of the population towards the SNB and its recent monetary policy”, and that the Swiss people had “testified to the importance of a National Bank that is free and independent in its capacity to act.”

A similar point was made by Eveline Widmer Schlumpf at a press conference of the Swiss Federal Council (the Swiss Government) that was held following the results. Widmer Schlumpf is a member of the Federal Council and head of the Department of Finance, was also a committee member of the no-campaign.

Conclusion
Given that the gold initiative campaign was up against a well organised and well funded coalition of the main political parties and the SNB, the referendum outcome is probably not all that surprising.

The Swiss media and banking sector were also, on balance, more aligned with the SNB’s arguments, and the media failed to really ask any tough questions about the nation’s gold reserves and the SNB’s custodianship of said reserves.
Although the referendum has produced the desired outcome for the Swiss National Bank, the Bank now has to return to its main problem of dealing with the relative strength of the Swiss Franc versus the Euro.

With the CHF/EUR rate currently at the 1.20 mark, a line which the SNB has insisted it will defend, the immediate question for the financial markets is whether the Swiss Franc will now weaken slightly or whether the SNB will need to intervene in the short term by expanding its balance yet further via the purchase of large quantities of Euros.

The gold price has taken a short term hit, no doubt partially due to the Swiss referendum result. However, it is important to remember today’s context – with central banks in Russia and China and other creditor nation’s central banks continuing to diversify into gold and adding to their gold reserves, and with countries such as the Netherlands and Germany beginning to repatriate their existing gold reserves. Thus, there may come a point in the next few years when the Swiss will look back at this referendum and wonder whether it was a lost opportunity to reverse the debasement of the once venerable Swiss Franc.

Importantly, the Swiss gold referendum may be another contributing factor to the people of European countries demanding transparency regarding their gold reserves and to a demand for repatriation of  and audits of national gold reserves.

There is also the fact that there is a growing level of awareness regarding the importance of gold as a monetary asset and store of value to protect against systemic and monetary crisis.

Get Breaking News and Updates On Gold Markets Here

MARKET UPDATE
Today’s AM fix was USD 1,178.75, EUR 945.46 and GBP 750.56    per ounce.
Friday’s AM fix was USD 1,184.50, EUR 950.80 and GBP 753.98 per ounce.
On Friday, gold declined over 2% and silver lost nearly 7%. The scale of the losses, particularly for silver, surprised participants as there was no breaking news story and markets had largely priced in a no victory in the Swiss gold referendum.

Gold in USD – 5 Years (Thomson Reuters)

The Swiss public rejected the proposal to boost central bank gold reserves yesterday and the precious metals weakness continued at the open in Asia when gold fell 2.1% and silver slumped  6.7%, reaching the lowest in five years at $14.42/oz.

The precious metals then rebounded in the course of the Asian trading day, as there was an increase in physical demand and some traders closed out bearish bets leading to a “short squeeze.”

Spot gold rebounded to a high of $1,182.70 an ounce, and was up 1% at $1,179.00 an ounce in late morning trading in Europe. Silver was up 2.7%  at $15.83 an ounce, having earlier rallied as much as 6% to a high of $16.34.

Spot platinum was up 0.6% at $1,203.70 an ounce, while spot palladium was down 0.4% at $801.90 an ounce.

Moody’s cut Japan’s sovereign rating, plummeting the Japanese yen to a seven-year low against the euro, also created a demand for gold, traders told Reuters.

Premiums in China remained steady near $1-$2 and demand in China remains very robust with withdrawals on the Shanghai Gold Exchange (SGE) at 52 tonnes last week. This means that total Chinese demand for gold is headed for 2,000 tonnes in 2014.

SPDR Gold Shares, the world’s largest gold-backed exchange-traded fund, saw holding fall another 1.2 tonnes on Friday to 717.6 tonnes, to 6-year low as weak hands continue to liquidate ETF holdings.

On Friday, India the second largest importer and buyer of gold bullion, removed its import tax and other restrictions on gold imports which is a bullish development

The Perth Mint’s silver sales in November climbed to their highest since January as lower prices attracted retail investors, while gold sales fell to a three-month low. The Perth Mint runs the only gold refinery in Australia, the world’s second biggest gold producer after China. Silver coin sales jumped to 851,836 ounces in November from 655,881 ounces in October, data on the mint’s website showed

Sales of gold American Eagle coins from the U.S. Mint reached 60,000 oz in November down 11% month on month but up 25% on November 2013. Silver Eagles sales in November reached 3.426 million oz, down 41% month-on-month but up nearly 50% year-on-year.

 

 

end

 

 

 

 

On Friday we commented to you that 77 tonnes of gold has left the FRBNY this year (and 5 tonnes last year which was Germany’s lone repatriation.)   When I reported this to you, these figures were as of Sept 2014 withdrawals.  Saturday afternoon, the USA Federal Reserve Bank of NY announced a further 42 tonnes of gold removed.  If we do the math, that means 119.5 tonnes of gold has been removed this year and it seemingly belongs to the Netherlands.  A cargo boeing 747 can carry 123 tonnes of gold.  Why would the Netherlands need multiple flights and thus increase in costs to carry their gold from the USA to Holland?.  Why would they leave the last 3 tonnes for November.

There is no doubt that Holland got its 122.5 tonnes near the end of November and once they received their metal they made their announcement. We do not know the quantity of gold shipped in November and that will be a key discovery point. If the shipments are greater than 3 tonnes then Germany is also in the mood to repatriate.  If the November figure is 122.5 tonnes then the entire 119.5 tonnes belongs to Germany and then we will have central bankers not trusting one another as another country secretly wishes to repatriate its gold and does not trust the USA.

On the other hand if it is only 3 tonnes of gold coming in the November figures, then it would suggest that the gold is not earmarked and the USA is obtaining this gold from current purchases.  In other words the present gold at the FRBNY would now be suspect as it could not be earmarked  (original bars that cannot be touched).  In essence the USA would thus be stealing foreign gold and hypothecating and repothecating the stuff to the comex and other places keeping the gold fraud game alive.

 

 

(courtesy zero hedge)

 

 

 

 

 

A week ago, when we reported that in a stunning move, the “Dutch Central Bank Secretly Withdrew 122 Tons Of Gold From The New York Fed“, and when looking at the NY Fed’s monthly reports of gold deposits by foreign entities, we observed that “we can see that while the 5 tons outflow in 2013 was most likely Germany, the recent surge in gold repatriation from Liberty 33 was the Netherlands. That said, only 77.5 tons of NY deposits gold has been officially repatriated through September, which means the October update, when it comes out, will be a doozy.” Yesterday, the long anticipated October update of “earmarked gold” held on deposit at the NY Fed was released, and sure enough it did not disappoint. Declining in dollar value from $8.305 billion to $8.248 billion, this was the equivalent of 42 tonnes of gold being withdrawn, in the process reducing net gold located in the vault of JPMorgan the NY Fed to 6,076 tonnes. The 42 tonnes withdrawal was also the biggest single monthly redemption from the NY Fed since 2001.

So with the 119 tonnes of gold withdrawn so far in 2014, it is now abundantly clear that the “logistical complications” excuse used by Germany to halt its own gold repatriation program was nothing but a lie to cover up what, as Deutsche Bank explained earlier this month, was an escalation of “diplomatic difficulties” between the US and Germany, one in which Germany has folded, if only for now.

 

 

 

end

 

 

 

Chris Powell comments on the above story

(courtesy GATA)

Zero Hedge: Biggest monthly withdrawal of custodial gold from NY Fed since 2001

Section:

12:45p GMT Sunday, November 30, 2014

Dear Friend of GATA and Gold:

Zero Hedge says the Federal Reserve Bank of New York’s custodial gold report for October shows a reduction of 42 tonnes, the biggest monthly withdrawal in 13 years, apparently representing some of the gold repatriation recently announced by the Netherlands central bank. If the Netherlands can repatriate so much gold at once, Zero Hedge notes, the German Bundesbank’s gold repatriation operation can be so clunky only because the Bundesbank doesn’t really want its gold back that much, or else faces more political trouble in repatriating it. Zero Hedge’s report is posted here:

http://www.zerohedge.com/news/2014-11-29/federal-reserve-confirms-bigges…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

 

end

 

 

 

How stupid can the Swiss voters be:

(courtesy zero hedge/Bloomberg)

Swiss Gold Referendum Fails: 78% Vote Against “Protecting The Country’s Wealth”

Whether as a result of an unprecedented scare campaign by the Swiss National Bank (most recentlyreinforced by Citigroup), or due to confidence that Swiss gold is as safe abroad as it is at home, or simply due to good old-fashioned “hanging chads”, today’s most awaited event has come and gone and the result – according to early projections by Swiss television SRF –is that the Swiss population overwhelmingly rejected a referendum to force the Swiss National Bank to hold some 20% of its reserves in gold in a landslide vote, with about 78% voting against what AP politely termed “protecting the country’s wealth by investing in gold.”

As Bloomberg reports, the proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold was voted down by 78 percent to 22 percent, according to projections by Swiss television SRF as of 1:00 p.m. local time. The initiative “Save Our Swiss Gold” also would have prohibited the SNB from ever selling any of its bullion and required the 30 percent currently stored in Canada and the U.K. to be repatriated.

A ballot box is emptied at a voting center in Zurich today.

A map showing the breakdown of the Swiss vote by canton: none of the 23 Swiss regions had a majority vote for the gold initiative.

That said the decision will likley not come as a surprise because while early polls gave the yes camp a surprising lead, subsequently polling showed a marked shift in public opinion, and forecast the initiative’s rejection.

The biggest winner, of course, is the Swiss central bank: SNB policy makers warned repeatedly that the measure would have made it harder to keep prices stable and shield the central bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago, with the SNB pledging to buy foreign currency in unlimited amounts to defend it.

“The SNB can feel confirmed in its policy,” said Martin Gueth, economist at LBBW in Stuttgart. “By rejecting the gold measure, voters have come out in favor of its current stance.”

Referendums are a key feature of Switzerland’s system of direct democracy, and are held nationally and at a municipal level several times a year. The gold initiative was launched by a handful of members of the European Union-skeptic Swiss People’s Party. Uneasy about the more than 100 billion euros the SNB holds, they contend their initiative will strengthen — not weaken — the central bank’s credibility.

However, SNB President Jordan labeled the initiative “dangerous” and his fellow board member Fritz Zurbruegg said accepting the measure meant the room for maneuver “on currency reserves would be dramatically restricted, with negative consequences for the Swiss economy.”

The central bank, based in Bern and Zurich, would have faced a three-year deadline for repatriating its bullion from abroad and five to meet the 20 percent benchmark. With the European Central Bank poised to enact more stimulus to boost feeble growth and inflation, economists surveyed by Bloomberg News in a poll published on Nov. 19 had expected the SNB to maintain its ceiling on the franc into 2017.

The question now is what will happen to the Swiss France, which recently rose to a 26-month high against the euro. For many the concern that a successful gold referendum served as a catalyst to avoid going all in the CHF, as gold purchases would have weakened the currency. “If the euro crisis doesn’t get worse, then the minimum exchange rate will be defendable, said David Marmet, an economist at Zuercher Kantonalbank. Had the initiative been accepted, ‘‘instruments such as negative rates that don’t widen the balance sheet” would have been an option, he said.

With the referendum out of the way, the CHF may paradoxically find itself with a situation in which the inflows in the CHF force it to double down on defending the cap: economists have questioned whether the SNB will now find itself having to reinforce its cap with a negative interest rate on the cash-like deposits commercial banks keep with the central bank, making good on its threat to take further steps “immediately” if necessary.

And then there is the question of what happens to the tension in the gold swap market: as noted last week, the 1 Month GOFO rate had tumbled to the most negative in over a decade. It was not clear if this collateral gold squeeze was the result of Swiss referendum overhang or due to other reasons. The market’s reaction on Monday should answer those questions.

 

 

 

 

end

 

 

CNBC Europe interviews GATA secretary and Hinde Capital’s Davies

Section:

11:23a GMT Monday, December 1, 2014

Dear Friend of GATA and Gold:

In London this morning CNBC Europe interviewed your secretary/treasurer and Hinde Capital CEO Ben Davies about gold price suppression and the results of the Swiss Gold Initiative.

Video of an excerpt of your secretary/treasurer’s comments is posted at CNBC here:

http://video.cnbc.com/gallery/?video=3000335209&play=1

Video of an excerpt of Davies’ comments is posted here:

http://video.cnbc.com/gallery/?video=3000335168

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

 

end

 

Low prices of gold will attract huge attention from our friends from India:

 

(courtesy Avery Goodman/seeking alpha)

 

Avery Goodman: India is back and that’s more important to gold than Swiss vote

Section:

10:57a GMT Monday, December 1, 2014

Dear Friend of GATA and Gold:

Securities lawyer Avery Goodman writes today that the important development for gold is not the defeat of the Swiss Gold Initiative but rather than India has removed its restrictions on gold imports. Goodman adds: “Indian gold buying will be at record-breaking levels this year if oil prices stay low, and no amount of statist/bankster cartel intervention is likely to be sufficient to overcome the heavy physical demand that will inevitably come.” His commentary is headlined “Swiss Gold Referendum? No, the Big News Is That India Is Back” and it’s posted at Seeking Alpha here:

http://seekingalpha.com/instablog/337451-avery-goodman/3510225-swiss-gol…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

 

end

 

 

 

Ladies and Gentlemen:  a must read…

 

(courtesy  Bill Holter/Miles Franklin)

 

Low prices will cure low prices.

 

It looks as if another COMEX expiration has come and gone without any “fireworks”.  I must say, I in no way expected what has occurred, the longs evaporated unlike any time past and with the knowledge that physical supplies are very tight.  Were this any other market, a short squeeze for the ages would have been forced.  With less than one week to go, silver had almost 300 million ounces contracted for and gold 16 million.  These bled down to almost 20 million silver ounces and just over 1.1 million gold ounces.  Silver is in the clear so to speak because COMEX claims 65 million ounces in available inventory.  Gold on the hand have to see 10 new tons of gold enter the vault or be reclassified from “eligible” (customer) to the “registered” category.

  We have seen this happen many times before where the open interest bled down heavily going into first notice day, but never anything like this.  The open interest for both December contracts was staggering with just one week to go… but then just evaporated.  What happened was VERY odd because in past expirations, though total open would shrink slightly, much of it would be rolled into the next active contract.  This has not happened and makes very little sense because there is almost zero cost (premium) to move out to the next contract?  This expiration saw THE biggest build in open interest, followed by THE biggest evaporation ever.  With virtually no contango cost whatsoever, the lack of “roll” is astonishing.  Were these longs bullish going into the last week of trading… and collectively changed their minds?  While I thought I was “on to something” with the outsized OI, apparently I was on “to nothing”?
  I think the best question is “what” exactly were they trading?  Were they really trading gold and silver?  I think it is quite clear with gold for example, no, these trades were and are nothing but trading pieces of paper back and forth.  COMEX claimed to have 870,000 ounces of deliverable gold yet contracts outstanding for over 15 million ounces.  Who in their right mind would buy a contract which promises delivery of an asset where even the exchange itself admits to not have enough of what is contracted for to go around?  By the way, Friday saw another 40 ton sale which broke the “price” by $20.  Over the last month, we have seen three separate 40, 80, and another 40 ton operation performed all within 15 minute windows.  Who would ever sell in this fashion if they wanted to sell at the best price possible?  Why not sell all of this “gold” spread out through the day and not damage the price (and psychology)?  The answer of course is obvious for anyone willing to see, the sales had a purpose of “setting” a price, a LOWER price.
  Switching gears to the real world, gold and silver are both in very tight supply.  Gold forward rates in London went more negative on Friday than ever before with the exception of 1999 when the Washington agreement was announced http://www.zerohedge.com/news/2014-11-28/gold-shortage-worst-21st-century-sends-1y-gofo-lowest-ever-and-india-just-made-it-wo .  For GOFO to go this far negative suggests a very severe shortage on the institutional and central bank level.  It is very important to understand what this will most likely morph into… a short squeeze or some sort of buying panic for real and tangible metal.  Unlike the COMEX which can “instantly create supply”, this cannot be done in the real world.  For example, the 40 tons which was sold on a shortened and sparsely traded Friday will take one full week for the entire world to produce!  I view this disconnect of “price versus supply” as one that will, must, be rectified.  I will speak to this “rectification” shortly.  First, lets look further into the “real” world supply situation.
  As of this past week, Silver Eagle and Maple sales are on track to at least meet last year’s record sales http://silverseek.com/article/silver-eagle-maple-leaf-record-sales-five-times-larger-2007-13852

and are now running FIVE times higher than in 2007 (before the financial crisis began)!  We also know GOFO rates are the most negative with the exception of one time in history.  The silver inventory in Shanghai plunged again this past week and is now again under 100 tons.  For perspective, this inventory was over 1,100 tons just over a year ago and has been bled by over 90%.  In just 2 days last week, 21% of the inventory was withdrawn …and what’s left is now “worth” under $50 million (with a lower case “m”).  Silver contracts in Shanghai are also in backwardation, another perfect example of short supply.  Refiners in Switzerland are running flat out 24/7 due to Asian and Middle Eastern demand and to top things off, India just eased restrictions on gold imports.  When added together, China, Russia and India are taking nearly 150% of global gold production via physical purchases.  To put it in further perspective, China has the financial ability to purchase ALL central bank gold reserves at current “prices” THREE TIMES OVER!

  So, what is my point?  Something very drastic has to and will happen.  One market or the other is very wrong.  Either the paper price is wrong …or, the physical market is wrongly displaying all the signs of a supply shortage.  Can you figure out which one is wrong?  Is it the market where “gold” can be created at will or the one where it is dug up out the ground?  I will say this in my opinion, I cannot understand who in their right mind would trade a COMEX gold or silver contract?  Would you gamble in a casino where you knew the games were rigged …and not in your favor?  What is the purpose of trading pieces of paper that the exchange itself admits they don’t have enough metal for everyone?  Will these contracts save your bacon through a financial implosion?  During a dollar or currency crisis (which is exactly why gold is purchased to begin with), will capital fiercely try to enter COMEX contracts or the real metal.
  Further, assuming you do “win” on your gold contracts (a poor assumption) and the inventory is overwhelmed (a good assumption), COMEX has already told you they will “cash settle”.  So you “make” $1 billion dollars, you get the check, it clears, your bank stays open and does not bail in your “winnings”.  If physical gold has become hoarded and gone into hiding because of a currency crisis, you will be “given …more” of what the problem was in the first place.  What exactly did you win?  More currency of a bankrupt issuer?  In the extreme, ask any Zimbabwean if they would have given up even 1/2 roll of toilet paper for $1 billion Zimdollars?  The answer of course is “no”, being a “Zimbabwe billionaire” may not even entitle one to a dinner of beanie weenies!
  The disconnect between “price and supply” is exactly what an Austrian economist would predict.  If you price filet mignon below that of chicken, the supply of filet mignon will eventually disappear.  This is what we are seeing with gold and silver.  “Price” does not matter if you cannot get any product just as supply does not matter if the price is too high.  Low prices will cure low prices.  Low prices has and will create excess demand and also cause a shrinking supply since mines cannot make money producing at these levels.  While COMEX can and has created the price, they cannot create the supply necessary to satisfy the greater demand.
  We are at the point now where even central banks are displaying a lack of trust in each other when it comes to gold.  I plan to discuss this along with “deflation” and what the collapsed price of oil might mean.  The Saudis are creating a low price of oil by producing more supply than a weak global economy currently needs.  This current low price will cure itself by blowing up the U.S. shale industry…and thus lowering supply coming to market.
Bill Holter/Miles Franklin
addendum:
As an addendum to this morning’s writing, it looks like we had the hoped for “outside reversal day”.  This one will look funny on the charts because it actually encompasses 2 1/2 days trading. Wednesday was a weakish day and gave up the $1,200 level while Friday was a washout down $26.  Overnight Sunday, gold opened down and traded well below $1,150.  This action was blamed on the “no” Swiss vote and brought out all of the doomsayers.  The sentiment last night was “gold is over”!
  I wrote the short note at the bottom of my piece this morning as I saw gold quoted on Kitco down $6 (which was really up close to $20 from Friday’s close).  I believe the confusing quotation by Kitco was because of the shortened day in N.Y.on Friday.  In any case, we have now rallied another $35 from where I wrote the note this morning.  Silver has had a wilder ride up 17% off the early morning lows.
  Recall, we had two previous Fridays with outside reversal days, this makes a 3rd, though not a Friday.  I view today’s action as much more important for several reasons.  First, this actually encompassed 3 trading days where the previous two “engulfed” only the previous day.  This one is occurring with a close above what had been a very sticky area $1,200 and actually broke briefly above another line in the sand $1,220.  Any and all shorts placed in the last week are now under water with the momentum now higher.  The GOFO rates went further into negative territory with the 1 year rate at virtually zero, this should never be.  Logically there should be arbitrage to take this condition away but the “trust” (that you will get metal in the future) is apparently waning.
  Something behind the scenes has changed drastically to have seen these three outside days within such a tight timeframe.  This of course has been accompanied with record backwardation.  The danger now as I see it could be “supply” or the ability to procure metal.  I have postulated several times before, the danger is going to bed and something financial “breaking” while you sleep.  The result could be gold and silver going no offer and you being stuck in place with whatever your positions are.  Is this it?  Will it happen immediately?  I have no idea though I personally am not willing to bet against it.  For now I will only say, “something has drastically changed” behind the scenes and along with it, “sentiment”!  If you are still waiting to back up your truck, it may be that the “loading dock” is now moving away.
Bill Holter/Addendum Dec 1.2014

end

 

 

And now for the important paper stories for today:

Early Monday morning trading from Europe/Asia

1. Stocks a major mauling on major  Asian bourses     with a  higher yen  value rising to 118.440 (despite Moody’s lowering of its investment grade)

1b Chinese yuan vs USA dollar  (yuan slightly weakens) to 6.14860 (potential for another rate cut)

2 Nikkei up 130  points or 0.75%

3. Europe stocks all down  /Euro rises/ USA dollar index down to 88.12./European PMI also falters/

3b Japan 10 year yield at .43% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.70

3c  Nikkei now above 17,000

3e  The USA/Yen rate crosses back above the 118 barrier

3fOil:  WTI  65.78  Brent:   69.90 /all eyes are focusing on oil prices.  A drop to the mid 60′s would cause major defaults.

3g/ Gold up/yen up;  yen well above 118 to the dollar/

3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion

Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP

3i  Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)

3j China set to offer stimulus to its struggling economy/Chinese PMI falters

3k Moody’s lowers the boom on Japan, cutting its sovereign debt from Aa3 to A1

3l: USA 30 year bond rate drops below 3.00%/USA holiday sales drop 11%/setting mood for all bourses

3m Gold at $1174.00 dollars/ Silver: $15.64

3n  Bond yields plummet in European periphery/Spain’s 10 year bond yield at 1.966% , the lowest in 200 years.

4.  USA 10 yr treasury bond at 2.16% early this morning.
5. Details: Ransquawk, Bloomberg/Deutsceh bank Jim Reid

 

 

(courtesy zero hedge/your early morning trading from Asia and Europe)

 

 

 

The Macro Mauling Continues: Germany Contracts, Japan Downgraded, Copper Tumbles, WTI Lowest Since 2009, Gold Up

 

Another day full of global macroeconomic disappointments is certain to send the S&P500 to all time-higherest records as 100,000 or so E-mini contracts exchange hands between central banks and Citadel’s algos.

It started with the shocking NRF announcement that US holiday sales cratered 11% over the extended Thanksgiving weekend (which the NRF blamed on an “improving economy”, to which even Goebbels bows down his head), but also China’s latest manufacturing print miss expectations for the 2nd month in a row and drop to 8 month low, and moments thereafter, Eurozone releasing a downward revision to its October PMI data, with the all-important German PMI now openly in contraction, revised down from 50.0 to 49.5. And the punchline: the basket case that is Japan was finally downgraded by Moody’s to A1 from Aa3 by Moody’s which sent the USDJPY first to a new 7-year high at 119.14, only for USD/JPY to fall to new session low at 118.08 as everyone now realizes the Japanese endgame is just around the corner. Perhaps that is why after sliding 2% overnight, gold and silver have retraced all losses and are now higher from the Friday close, which however is more than can be said for copper down over 3% (thanks China) and of course crude, with both Brent and WTI declines continuing this morning as concerns of a sweeping global recession will sink future energy demand.

Looking at Europe’s PMI, the final number printed at 50.1 in November, 0.3pt below the Flash estimate (and the consensus) and 0.5pt below the October reading. The German final Manufacturing PMI for November was revised down 0.5pt to 49.5, contracting for the first time in years, while the French Manufacturing PMI recorded a 0.8pt upward revision to 48.4. The Italian Manufacturing PMI was unchanged from the level recorded in October (49.0), against expectations of a small increase (Cons: 49.4). By contrast, the Spanish Manufacturing PMI rose forcefully by 2.1pt to 54.7, against expectations of a slight contraction (Cons: 52.1).

The breakdown in November was weak. New orders receded by 1.7pt (to 48.7) and stocks fell by 0.9pt (to 49.0), leaving the forward-looking order-to-stock ratio stable in November; following gradual declines during 2014, this ratio now stands at the lowest level since April 2013. Both production and employment declined by 0.3pt in November, respectively. With today’s final print, the Euro area Manufacturing PMI is now estimated to have fallen in November (0.5pt), unwinding the small increase seen in October. The Euro area Manufacturing PMI is now at its lowest level in more than a year, having risen sharply from July 2012 to January 2014 reverting trend since then.

As a result, European shares fall with the basic resources and oil & gas sectors underperforming and utilities, travel & leisure outperforming. Crude oil continues decline. China November manufacturing PMI below estimates, Euro-zone PMI revised lower, German PMI revised to 49.5, U.K. PMI above estimates. U.S. post-Thanksgiving sales fall 11%. The Italian and U.K. markets are the worst-performing larger bourses, the German the best. The euro is little changed against the dollar. Greek 10yr bond yields fall; Japanese yields increase. Commodities decline, with natural gas, WTI crude underperforming and gold  outperforming. U.S. manufacturing PMI, ISM manufacturing due later.

Market Wrap

  • S&P 500 futures down 0.5% to 2057
  • Stoxx 600 down 0.6% to 345.2
  • US 10Yr yield up 1bps to 2.17%
  • German 10Yr yield down 0bps to 0.7%
  • MSCI Asia Pacific down 0.7% to 139.7
  • Gold spot up 0.1% to $1174.1/oz

Bulletin headline summary from Bloomberg:

  • Treasuries decline, with 30Y yield retreating from lowest closing levels this year; oil led commodities to a five-year low as energy producers declined the most in a global stock rout.
  • China’s official manufacturing PMI fell to 50.3 in Nov., an eight-month low, as factory shutdowns aggravated a pullback in the economy
  • Germany’s manufacturing PMI unexpectedly shrank last month, falling to 49.5 from 51.4, in a slump that dragged factories in the euro area to the brink of stagnation
  • U.S. retail sales tumbled an estimated 11% over the weekend, according to the National Retail Federation, as consumers were unmoved by aggressive discounts, longer hours; more than 6m shoppers who had been expected to hit stores never showed up
  • Oil’s decline is proving to be the worst since the collapse of the financial system in 2008 and threatening to have the same global impact of falling prices three decades ago that led to the Mexican debt crisis and the end of the Soviet Union
  • The “shock therapy” of a steep drop in crude prices, which have fallen to a five-year low, is no solution for OPEC’s loss of market share to U.S. shale  producers, Iran’s Oil Minister Bijan Namdar Zanganeh said
  • U.K. manufacturing growth unexpectedly accelerated in November, with Markit’s manufacturing PMI rising to 53.5 from 53.3, as domestic demand strengthened
  • Moody’s cut Japan’s credit rating, a setback to Prime Minister Shinzo Abe a day before he begins campaigning for an election that he wants to focus on the economy.
  • Sovereign yields mixed. Asian stocks mostly lower; European stocks, U.S. equity-index futures decline. Brent crude falls, WTI tumbles below $65/bbl to lowest since July 2009; gold higher, copper plunges 3.2%

 

DB’s Jim Reid as is customary concludes the weekend recap

 

 

Wrapping up Friday’s market moves, the further sell-off in Oil weighed on the broader market tone although overall equity and credit markets were relatively resilient. For Oil we saw WTI (-10.23%, playing catch up after Thanksgiving) and Brent (-3.35%) close at $66.15/bbl and $70.15/bbl, respectively. They have also moved lower overnight (more below). The S&P 500 (-0.27%) was dragged down by the Energy (-6.26%) component on the day but this was somewhat offset by gains in Consumer Staples (+1.22%), Consumer Discretionary (+1.17%) and Utilities (+1.07%). Airlines in particular were also a key beneficiary of this move lower in Oil as the sector sub-index rallied nearly 6% on Friday. Speaking of Consumers, the post Thanksgiving weekend also marks the unofficial start of the Holiday shopping season. Early estimates are in for retail sales in the US over the four day Cyber Monday weekend, with the National Retail Federation reporting an estimated 11% fall compared to 2013 to $50.9bn. It appears that sales at bricks and mortar stores have held in firmer however, with ShopperTrak reporting a 0.5% fall to $12.29bn on Thursday and Friday. The FT reports that the downward trend might not tell the entire picture however, with many stores commencing sales in mid-November in a bid to catch customers early and triggering an earlier shift in spending patterns – making it hard to determine overall consumer sentiment. Indeed it used to be just black Friday that was the focal for discounts. Now its spread across a longer period prior to this and after.

Turning to the fixed income markets the continued strength in Treasuries was one of the key highlights for US fixed income markets on what was otherwise another weak day for Oil & Gas credits. Starting with rates, the 5yr and 10yr benchmark Treasury reopened following Thanksgiving some 8bps lower in yield before closing at 1.48% and 2.16%, respectively. The 10yr in particular is just whiskers away from the October 15th closing lows of 2.136%. In the world of Credit, US IG spreads were broadly unchanged at the index level as opposed to a +7bp widening in US HY. The oil & gas sector extended their move wider with IG and HY energy spreads closing +4bp and +37bp wider at 157bp and 624bp on the day, respectively. As the stresses in US HY energy credits continue to build there seems to be increasing chatter of whether this current move in Oil will drive the next default cycle. Our US credit strategists have recently said that WTI at around $75 is already low enough to see first signs of stress materializing among the weakest names. At these levels our US strategists estimated pure energy sector contribution to US HY default rate at less than 1%, and pushing the headline rate to 3.5%, up from 1.7% currently. Given we’ve past the $75 mark at WTI, our colleagues noted that at $60 WTI, if sustained for a considerable time, could be sufficient to push the overall energy sector into distress. Clearly still a developing story that should keep everyone on their toes for now.

Closer to home, CPI and unemployment data for the Euro-area on Friday did little to excite the market after coming in line with consensus. However there were some interesting comments out of the ECB’s Lautenschlaeger ahead of the central bank meeting this week, commenting on the already depressed rates, specifically in Spain and Italy, and whether public QE would necessarily see a positive outcome. As mentioned part of the interest this Thursday may well be on whether we see a consensus for further action – it’ll be interesting to see if we hear any conflicting statements in the lead up this week. Just wrapping up the weekend news, the results from the Swiss referendum were released and showed the Swiss – as expected – comprehensively reject the proposal to force the Swiss National Bank to hold 20% of its balance sheet in Gold. The commodity is some 1.4% weaker this morning on the back of the result.

Turning to the Asian session overnight we are seeing further pressure in Oil with both WTI (-2.65%) and Brent (-2.67%) extending their declines to trade at $64.44 and $68.15 as we go to print. Bourses are trading mixed on the back of the moves with the Nikkei +0.64%, Hang Seng -1.97%, Kospi -0.79% and Shanghai Composite -0.05%. China appears to be the major source of headlines this morning, starting with the early data print for the week which shows a relatively subdued HSBC manufacturing PMI. The 50.0 reading in line with expectations but down from 50.4 in October. Looking at the breakdown, large companies (mainly SOEs) are still above 50. However, SMEs are trending below the 50 level which suggest that financial conditions for them remain poor. More on China, local news reported that the PBOC plans to officially launch the long-awaited deposit insurance scheme in January 2015. Whilst the timing of the implementation is in line with our DB Chinese banks analyst Tracy Yu’s expectation, the details of the scheme are still unknown. Overall whilst the implementation of the scheme may weigh slightly on banks’ earnings, Tracy believes it should help lower the system’s funding costs and reduce the systematic risks as interest rates become increasingly deregulated.

Quickly coming back to the aforementioned ECB meeting this week, our European economists are not expecting the central bank to announce any new material policies on Thursday. DB’s Mark Wall notes that although Draghi’s last speech was dovish, this was rather more of a justification for actions already taken rather than a prelude to imminent action. Looking ahead to Thursday, Mark notes two contingencies need to be met in order for the ECB to act again. The first being if the ECB concludes that current measures are insignificant to meet the €1tn goal. We note however that in his 21st November speech, Draghi expressed confidence in the capacity of TLTRO and ABS/covered bond purchases and this, combined with a ‘wait and see mode’ that council members typically adopt, makes us believe that it would be particularly hasty for Draghi to deem the current programme ineffective at this stage. The second contingency centers on the medium term outlook for inflation deteriorating, however our colleagues note that it’s unlikely that the expected upcoming downward revisions will be enough to force the ECB to act at this stage. The interest however this Thursday will be how Draghi’s rhetoric keeps the market confident moving into 2015 and provides some evidence of consensus for further action building in the camp.

In terms of the rest of the week ahead, we’ve got another busy calendar to look forward to, highlighted by the payrolls report in the US at the end of the week. Kicking off this morning in Europe, we’ve got November flash manufacturing PMI’s in Spain, Italy and Greece to look forward to as well as the final read on France, Germany, and Euro-area numbers today. In terms of the former, the market is expecting a slight improvement in both Spain and Italy, but generally unchanged prints through the latter regions. Looking ahead to this afternoon in the US, the market is expecting a slight drop in the November ISM to 58 (vs. 59 previously) – although noting that it will remain at the higher end of its post-recession range. There’s no shortage of central bank speak today, with ECB’s Costa and Mogherini speaking as well as the Fed’s Dudley and Fischer. Tuesday is a relatively quiet day data-wise in Europe, with just Euro-area PPI to look forward to, along with Spanish unemployment and the UK construction PMI. Across the pond, we are expecting vehicle sales data, construction spending as well as the NY ISM where the market is looking for a modest improvement. Perhaps of more interest, the Fed’s Yellen will be speaking in the evening so we will keep an eye out for anything of interest there. We start Wednesday off in Asia, with both non-manufacturing and services PMI prints due out of China as well as the services and composite PMI readings for Japan. Closer to home, we’ve got a host of further services and composite PMI prints to keep an eye out for in Europe – covering Italy, France, Germany, Spain, UK and the Euro-area, as well as October retail sales for the latter where the market expects the yoy print to jump to +1.6% from +0.6% previously. In the US in the afternoon, we will get the ADP employment print which as always will provide some hints into Friday’s payrolls. DB’s Joe Lavorgna is forecasting a slightly more bullish 240k reading (vs. 224k market consensus), up from 230k previously. As well as the ADP print, we also get revisions to Q3 productivity/unit labour costs and the November non-manufacturing ISM survey. Also of note for Wednesday will be the release of the Beige Book in the US. Thursday’s focus will be in Europe with just claims data in the US to look forward to. Away from the ECB meeting, we’ve got German and Euro-area retail PMI’s, as well as employment data in France. The end of the week brings the aforementioned payrolls report in the US. Before we get there however, we’ve got the leading index print in Japan expected first thing, followed by factory orders in Germany and industrial output in Spain. In terms of the payroll print, the market is looking for a +225k non-farm print whilst our US team has a +250k forecast. Our US colleagues noted that the employment component of the Richmond survey rose to a record high in November, boding well for both the non-manufacturing ISM and nonfarm payrolls print. In terms of unemployment, our colleagues expect the 5.8% unemployment rate to remain unchanged. Rounding out the week, the Fed’s Fischer and Mester will be speaking on Friday. So a very busy week.

 

 

end

 

 

 

Sunday night/Monday morning from Europe and Asia:

 

 

“Panic Selling” Saudi Stocks Crash Into Bear Market Following OPEC Decision

It’s not just Shale oil stocks in the US that are hurting. Following the OPEC decision to not cut production and squeeze US producers, Saudi Arabia’s major stock market index has tumbled into a bear market, giving up all the year’s gains. As one analyst noted,“investors are afraid if oil stays where it is, it will negatively impact the government revenues, thus creating potential headwinds on government spending.” Dubai stocks – our long-time favorite bubble index – has also been hammered, down over 7% intraday at its worst

As Bloomberg reports,

Saudi Arabian stocks plunged into a bear market after OPEC took no action to stem a slump in oil, triggering a rout in Middle Eastern equities.

The Tadawul All Share Index (SASEIDX) retreated as much as 6.3 percent, the most since March 2011, before settling 4.8 percent lower at the close in Riyadh.

“Investors don’t like the potential macro backdrop if oil continues to slide, which is being reflected in the markets,” Ali Khan, chief executive officer of London-based BGR Asset Management LLP, said by e-mail. “Investors are afraid if oil stays where it is, it will negatively impact the government revenues, thus creating potential headwinds on government spending.”

“It’s mostly panic selling today,” Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital PSC, said by phone. “Investors are worried about a possible slowdown in government spending, which would affect corporate earnings going forward.”

*  *  *

But apart from that, low oil prices are unequivocally good…right?

 

 

end

 

 

 

Chinese PMI drops to 8 month lows.  Very close to contraction:

 

(courtesy zero hedge)

 

 

China Manufacturing PMI Drops To 8-Month Lows, Teeters On Brink Of Contraction

From exuberant credit-fueled cycle highs in July, China’s official Manufacturing PMI has done nothing but drop as the hangover-effect from the credit-impulse weighs once again on the now commodity-collateral crushed nation. At 50.3 (missing expectations of 50.5 for the 2nd month in a row), this is the lowest print since March. All 5 components dropped led by notable weakness is outout and new orders (new export orders biggest MoM drop in 17 months) with medium- and small-enterprises heading deeper into contraction (at 48.4 and 47.6 respectively) as the Steel industry PMI craters to 43.3. Japan’s PMI dropped marginally to 52 and thenHSBC’s China Manufacturing confirmed the government data and flash reading with a 50 print – the lowest since May as New Export Orders growth slowed for the 2nd month.

And HSBC China Manufacturing at the lowest since May

Of course, this weak data is great news…

“The HSBC China Manufacturing PMI fell to a six-month low of 50.0 in the final reading for November, down from 50.4 in October and unchanged from the flash reading. Domestic demand expanded at a sluggish pace whilenew export order growth eased to a five-month low. Disinflationary pressures remain strong while the labour market weakened further. Today’s data suggest that the manufacturing sector lost momentum and point to weaker economic activity in November. The PBoC’s rate cuts, delivered on the 21st November, will help to stabilise property and manufacturing investment in the coming months. We continue to expect further monetary and fiscal easing measures to offset downside risks to growth.”

*  *  *

Then it was Japan’s turn as its PMI fell slightly, remaining oddly flat around 52 for the last 4 months– “However, the outlook for Japanese goods producers remains uncertain amid the weakening currency, the postponement of the planned sales tax increase and the upcoming election.”

But of course – it wouldn’t be Japan if the nations leaders were not spewing utter bullshit once again…

  • *HAMADA SAYS ABENOMICS HAS BEEN SUCCESSFUL
  • *HAMADA: ABENOMICS’S 1ST, 2ND ARROWS ARE WORKING FINE
  • *HAMADA:JAPAN ECONOMY EXPECTED BE BACK TO NORMAL IN 1-2 QUARTERS

Unbelievable!! The economy is imploding and still they are ‘allowed’ to utter this tripe in what appears a total lack of financial media attention to facts.

The low price of oil is weighing heavily on Russia. The sanctions are also not helping them.

(courtesy Bloomberg)

ETF Tumbles on Crude’s Plunge as Ukraine Crisis Weighs

The biggest exchange-traded fund for Russian equities plunged to a five-year low amid concern a deepening oil rout will push the world’s largest energy exporter, already beset by international sanctions, further toward a recession.

The Market Vectors Russia ETF (RSX) sank 5.5 percent on Nov. 28 to $19.56, the lowest since April 2009, extending November’s tumble to 11 percent. The ruble, the worst performing emerging-market currency in 2014, fell for the first time below 50 versus the dollar, completing a 13 percent slide for the month.

Crude sank last week after OPEC, the cartel that provides about 40 percent of the world’s oil, kept its output target unchanged despite calls to ease a global supply glut. Russia, which gets about half of its budget revenue from oil and gas taxes, now has a 75 percent probability of sinking into a recession, economists say. GermanChancellor Angela Merkel said sanctions against Russia will remain in place as long as the country fails to make progress to resolve the crisis in Ukraine.

“The colossal plunge in oil prices means for Russia a loss of about 30 percent of its usual oil revenue in its budget,” Oleg Popov, who helps oversee $1 billion at Allianz Investments in Moscow, said by phone on Nov. 28. “The ruble’s devaluation will compensate for this budget hole, but ordinary Russian consumers will be the ones to be hurt the most. OPEC’s decision created negative sentiment in the Russian market, and it’s possible that we’ll see a further decline in oil prices.”

Relationship ‘Remap’

Merkel last week used some of the strongest language yet against President Vladimir Putin’s alleged involvement in Ukraine.Germany’s relationship with Russia will have to be “remapped,” German Foreign Minister Frank-Walter Steinmeier said in a speech to parliament. The government in Moscow denies accusations of stoking the months-long unrest in the former Soviet republic.

With tension escalating, Ukrainian president Petro Poroshenko called for a national referendum on joining the North Atlantic Treaty Organization this decade, a prospect deemed unacceptable by a Russian government official. NATO Secretary General Jens Stoltenberg said the military alliance would stick by a 2008 decision to let Ukraine join if it eventually meets the criteria and decides to do so, even if membership isn’t being discussed now.

“Tensions between Moscow and Kiev are more likely to rise over the next few weeks,” Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory, said by e-mail on Nov. 26. “The new coalition government is expected to have a strong anti-Moscow bias and to take a strong line against the eastern separatists..”

Capital Flight

Putin has criticized the U.S. and European Union nations for encroaching into former communist Europe, including Ukraine, saying they pose a threat to Russia’s national security.

Russia stands to lose as much as $140 billion a year as a result of the sanctions and lower crude prices, Finance Minister Anton Siluanov said last week. He previously said capital flight may reach $130 billion in 2014, the most since the 2008 global crisis. Inflation at 8.3 percent in October was the fastest in more than three years.

The Bloomberg index of the most-traded Russian stocks in the U.S. decreased 11 percent last month to 66.80, widening the decline this year to 35 percent. Brent for January settlement fell 3.3 percent to $70.15 a barrel on the London-based ICE Futures Europe exchange, the lowest close since May 2010. It decreased 18 percent in November and is down 37 percent in 2014. WTI for January delivery sank 10 percent to $66.15 on the New York Mercantile Exchange on Nov. 28.

Further Declines

OPEC’s decision not to reduce production creates potential for further declines in oil prices, Goldman Sachs Group Inc. said in an e-mailed report. Citing its expectation of a “large market surplus” in the first half of next year, the bank maintained its 2015 Brent forecast at $80 to $85 a barrel and WTI at $70 to $75.

Futures contracts on the dollar-denominated RTS index expiring in December fell 2.1 percent to 94,890 in U.S. hours on Nov. 28. The RTS Volatility Index, which measures anticipated swings in the stock futures, increased 3.9 percent to 41.76.

The Standard & Poor’s GSCI Index of 24 raw materials fell for a fifth consecutive month, decreasing 11 percent in November and widening decline this year to 24 percent.

To contact the reporters on this story: Halia Pavliva in New York athpavliva@bloomberg.net; Elena Popina in New York atepopina@bloomberg.net

 

 

end

 

 

 

 

Moody’s last night downgraded Japan from AA3 down to A1 (down one notch)

 

 

 

(courtesy zero hedge)

 

The Three Reasons Why Moody’s Just Downgraded Japan From Aa3 To A1

 

Less than two weeks ago we were delighted to remind S&P that about a year ago, the laughable rating agency which is now terrified of being sued any time it tells the truth, promised it would downgrade Japan the moment things for the insolvent nation turn up to be, well, just as they are with the Bank of Japan now monetizing every yen of Japanese debt issuance. And yet, so far S&P has been very quiet on the downgrade front, most likely because it still has its hands full on the litigation front with the DOJ (and Tim Geithner) for downgrading the US back in 2011. So overnight we were not exactly surprised when that “other” rating agency, Moody’s, shocked the world and headline scanning algos when it downgraded Japan by 1 notch from Aa3 to A1.

Here are the reasons why Moody’s just did what it did, just two weeks ahead of the all-important for Abenomics snap election, in which should support for Abe tumble, then all bets on Abenomics, and the global stock market reflation game, are off.

The key drivers for the downgrade are the following:

  1. Heightened uncertainty over the achievability of fiscal deficit reduction goals;
  2. Uncertainty over the timing and effectiveness of growth enhancing policy measures, against a background of deflationary pressures; and
  3. In consequence, increased risk of rising JGB yields and reduced debt affordability over the medium term.

The full Moody’s report  below (link)

The A1 rating reflects the government’s significant credit strengths, including a large, diverse economy with a strong external position, very high institutional strength and a very strong domestic funding base.

The stable outlook reflects the broad balance between upside risks including significant fiscal consolidation and a resumption of economic growth, and downside risks including intensification of deflationary pressures and loss in economic momentum.

The rating action does not affect Japan’s Aaa foreign currency, local currency country and bank deposit ceilings. Those ceilings act as a cap on ratings that can be assigned to the obligations of other entities domiciled in the country.

RATIONALE FOR DOWNGRADE

DRIVER 1: HEIGHTENED UNCERTAINTY OVER REACHING FISCAL TARGETS AND CONTAINING DEBT

The first driver for the downgrade of the Japan government’s debt rating to A1 is the rising uncertainty over whether the government’s medium-term deficit reduction goal is achievable, and whether policy makers can overcome the tensions inherent in promoting growth while simultaneously stabilizing and reversing the rising debt trajectory.

The Bank of Japan remains committed to monetary expansion, with some positive impact on core CPI inflation. However, while monetary expansion has boosted domestic aggregate demand to some extent, the consumption tax increase on April 1 2014 has exerted even more powerful downward pressure. At least in the short term, deficit reduction is undermining the growth revitalization objective of Prime Minister Shinzo Abe’s economic policy strategy.

The government’s response, to announce a delay in the second step in the consumption tax increase, appears to represent a shift in policy towards stemming re-emerging deflationary pressures on economic growth and away from near-term fiscal deficit reduction. This strategy could have merits. In our view, the government’s target of halving the primary deficit balance, excluding budgetary interest payments, by fiscal 2015 from its fiscal 2010 level will be difficult to achieve without more robust nominal GDP growth and hence improved buoyancy in tax revenues. In their absence, reaching the long-term target of a primary balance surplus by 2020 will be even more challenging.

However, the strategy also poses risks to fiscal consolidation and, over the longer-term, to debt affordability and sustainability. Japan’s deficits and debt remain very high, and fiscal consolidation will become increasingly difficult to achieve as time passes given rising government spending, particularly for social programs associated with a rapidly ageing population.

The government acknowledges that additional but as yet unidentified economic and fiscal reforms will be needed for Japan to achieve its primary balance target in the second half of this decade. But the postponement of the second stage of the increase in the consumption tax has resulted in the delay of the 2015 budget, and a concrete plan to meet fiscal targets is not likely to emerge until the second half of 2015. The trajectory of government debt, projected at 245% of GDP in 2014 according to the IMF, will only start to decline under the most favorable combination of economic and fiscal reforms, including tax and social security system reforms and total factor productivity improvements, an end to deflation and achievement of annual nominal GDP growth of more than 3.5%. Given current domestic circumstances and lackluster external demand for Japan’s exports, achieving these conditions will be challenging.

DRIVER 2: ECONOMIC GROWTH POLICY UNCERTAINTIES AND CHALLENGES IN ENDING DEFLATION

The second driver for the downgrade is the rising uncertainty over the government’s ability to enhance medium term growth through structural economic reform — the third ‘arrow’ of Abenomics — success in which will be crucial to achieve fiscal consolidation. While some indicators suggest a pick-up in economic activity over the past year, potential economic growth remains low.

GDP growth sharply contracted in the second quarter of this year following the introduction on 1 April of the first step of the consumption tax increase, to 8% from 5%. Output was also affected by adverse weather in the summer to some extent. And both real and nominal GDP contracted again in the third quarter of the year, putting Japan’s economy in recession for the third time since global financial crisis.

Moreover the relapse of the GDP deflator, the broadest measure of price movements, into negative territory in the third quarter of this year highlights the difficult nature of ending more than a decade of deflation. Although the ratcheting up by the Bank of Japan of its quantitative easing policies in October may once again move the deflator back onto positive ground in the fourth quarter of 2014, the task ahead for economic revitalization and price reflation is looking more challenging than envisaged by Prime Minister Abe when he introduced his three-arrow economic policy package in March 2013.

Looking further ahead, the most notable structural reform measure to be implemented to date is a reduction in corporate taxation beginning in fiscal 2015. The details have yet to be announced, and the implications for business investment are therefore still unclear. It is not yet clear what further measures the government will choose, or be able, to take to address the deep-rooted structural problems of Japan’s economy, including broadening labor force participation, enhancing corporate governance and dealing with the challenges posed by demographic trends.

DRIVER 3: EROSION OF POLICY EFFECTIVENESS AND CREDIBILITY COULD UNDERMINE DEBT AFFORDABILITY

The third driver for the downgrade is the potential implications of the first two drivers for the affordability and sustainability of Japan’s huge debt load. Debt sustainability will rest on the continued willingness of domestic investors to provide funding at affordable rates for the government. This looks likely to remain the case as long as investor confidence is not undermined. The JGB market has been characterized by low and stable interest rates despite the exceptional rise in debt since the 1990s. And JGB interest rates have remained low and stable through a number of crisis episodes, including Japan’s 1997-1998 financial crisis, the 2008 global financial crisis and the 2011 tsunami and Fukushima nuclear power plant disaster.

Nonetheless, the Bank of Japan’s efforts to raise inflation to 2% may eventually put pressure on government bond yields and thereby raise government borrowing costs. Rising interest rates would increase expenditure and offset gains from revenue buoyancy. Rising uncertainty regarding the government’s capacity to deliver on its policy objectives could raise yields without any commensurate rise in revenues. Either outcome would further undermine the government’s ability to meet its fiscal deficit targets and reduce its debt burden over the medium term, and eventually start to undermine debt sustainability.

RATIONALE FOR A1 RATING AND STABLE OUTLOOK

JAPAN’S CREDIT STRENGTHS SUPPORTED BY A DEEP DOMESTIC BOND MARKET, STRONG INSTITUTIONS, LOW VULNERABILITY TO EXTERNAL SHOCKS

Whatever the challenges facing the government, Japan retains very significant credit strengths. Its A1 rating and stable outlook are supported by its large, diverse economy, which we characterize as having ‘High’ economic strength. And even with the very significant debt burden, we believe that Japan exhibits only ‘Low’ susceptibility to event risk. A marked home bias on the part of resident investors provides a strong funding base —domestic investors retain a marked preference for government bonds, which has allowed fiscal deficits to be funded at the lowest nominal rates globally over the past two decades. Private sector fiscal surpluses remain more than adequate to fund government deficits, without the government resorting to external funding. We believe that very high institutional and structural strengths, including a decisive and powerful central bank, currently sustain this funding advantage and are very unlikely to diminish over the rating horizon.

Although Japan’s government gross financing requirements are far larger than other advanced country governments’, contingent risks which could elevate further such financing needs are low and remote. Japan’s banking and corporate sectors have restored their health in recent years in terms of capitalization and deleveraging. Household debt is at a moderate level and has remained stable over the past decade. And despite low economic growth, Japan’s labor market is relatively sound in regard to key features, such as low unemployment level, the recent pick-up in employment and nominal wages and a labor force participation rate broadly comparable with other advanced economies.

Related to Japan’s home bias is its strong external payments position, which reflects the accumulated system-wide savings. At more than 60% of GDP in 2013, Japan’s net international investment position is much larger than any advanced industrial G-20 economy, insulating its economy and capital market from global shocks. Income earned from Japan’s sizable external assets has helped to sustain the current account surpluses, although this has diminished owing to a shift into a trade deficit which is in large part driven by the demand for energy imports following the shutdown in the nuclear power industry after the 2011 tsunami and Fukushima nuclear power plant disaster.

WHAT COULD MOVE THE RATING DOWN / UP

While the stable outlook indicates that we believe the rating is well positioned for the next twelve to eighteen months, factors that could prompt a negative rating action include significant divergence from the path toward achieving fiscal targets; an intensification of deflationary pressures; a severe loss in economic momentum; or a shift in the external current account surplus into persistent deficit.

Moody’s would consider a positive rating action if Japan were to implement policies that we concluded were likely to restore economic momentum and improve prospects for significant fiscal consolidation and debt reduction.

 

end

 

 

 

 

The hedge fund based on crude, Brevan Howard, becomes a casualty of the low price of crude by liquidating:

 

(courtesy zero hedge)

 

 

 

 

 

 

Crude Carnage Goes Contagious As Brevan Howard Liquidates Underperforming Commodity Fund

The entire commodity complex is seeing major contagion-like price declines in early trading. WTI Crude is back below $65 for the first time since May 2010 – now down 16% since the initial leaks of OPEC’s decision last Wednesday. Gold and Silver are getting whacked and copper has plunged below 300 – back at its lowest since June 2010. The news over the weekend that Brevan Howard is liquidating its $630 million commodity hedge fund following recent poor performance is also likely not helping as what looked like late-Friday margin call liquidations are extending notably this evening.

As The Wall Street Journal reports,

Brevan Howard Asset Management LLP plans to close its commodity hedge fund following recent poor performance, according to two people familiar with the matter.

The fund, managed by Stephane Nicolas, has$630 million in assets. It lost 4.2% last year and is down 4.3% this year to the end of October, according to performance data reviewed by The Wall Street Journal.

It is not clear what Mr. Nicolas’s role might be following the commodity fund’s closure, a person familiar with the matter said. Attempts to reach Mr. Nicolas were unsuccessful.

Brevan Howard is among Europe’s largest hedge fund managers with about $37 billion in assets.

*  *  *

 

 

end

 

 

 

 

 

Last night the ruble collapses to around 50.4 to the dollar:

 

(courtesy Bloomberg)

 

Ruble Rally Turns to Rout as Fortunes Tied to Sinking Oil

By Ksenia Galouchko Dec 1, 2014 4:40 AM ET

Bloomberg

 

For the Russian ruble, free float means going from emerging markets second best- to worst-performing currency in a week, with plunging oil pricessignaling more losses.

The ruble’s 9.3 percent slump last week to 50.4085 per dollar, the worst drop among 24 emerging markets tracked by Bloomberg, followed its biggest weekly gain in more than two years. Options trading show greater than 50 percent odds the currency will weaken another 10 percent by March 1. Russian bonds fell for a fourth month in five in November.

Central bank Governor Elvira Nabiullina’s decision last month to create a free-floating ruble rattled short-sellers, sparking a week-long surge. The change tied the currency’s fortunes to the price of oil, Russia’s main source of export revenue, which plunged last week after OPEC kept its output ceiling unchanged. The drop in crude is adding to headwinds for an economy on the brink of a recession because of sanctions.

“The outlook for ruble assets is pretty bleak because everything is against them,” Richard Segal, head of international credit strategy at Jefferies International Ltd., said by e-mail from London Nov. 28. Nabiullina’s “resolve to let the currency float will be tested and because this is a new policy, it will keep a lot of investors on edge,” he said.

Stability Risk

The ruble has weakened 37 percent against the dollar this year, the worst performer among 24 emerging-market currencies tracked by Bloomberg. It dropped 13 percent in November.

Nabiullina set the ruble free months ahead of target after spending $90 billion of the central bank’s gold and foreign-currency reserves this year to manage the currency’s slide. The Bank of Russia may still conduct “large-scale” interventions if it sees risks to financial stability, she told lawmakers in Moscow last week.

“A significant part” of the ruble speculators have abandoned the market and the current sell-off is “purely” a result of weaker oil, according to Vladimir Osakovskiy, chief economist for Russia and the Commonwealth of Independent States at Bank of America Corp. in Moscow, said by e-mail on Nov. 28. With crude at $70 a barrel, the currency would reach “equilibrium” at about 50-52 rubles per dollar, he said.

Slashing Reserves

The ruble fell to a record for a third day, slumping 4.2 percent to 52.5225 versus the dollar as of 12:34 p.m. in Moscow. Brent crude retreated 1.8 percent to $68.90 per barrel in London. Russian government bonds handed investors a 15 percent loss last month in dollar terms, the worst performance among 31 emerging markets tracked in the Bloomberg Emerging Market Local Sovereign Index.

Moving to the free float “was the right thing to do,” according to Ivan Tchakarov, Citigroup Inc.’s Moscow-based economist. “One can’t go against the fundamentals — if oil collapses from $115 in June to $70 in November, there isn’t too much that you can do,” Tchakarov said by e-mail the same day.

Six years ago, Russian policy makers sold $200 billion in seven months, slashing reserves by almost 40 percent, to prop up the ruble as commodity prices tumbled after the bankruptcy of Lehman Brothers Holdings Inc. According to the median estimate of 23 economists polled by Bloomberg, the central bank will resume its discretionary currency interventions to prop up the currency if the ruble weakens to 50 per dollar.

Balancing Out

A weaker ruble benefits the budget because it boosts export revenue in local-currency terms, helping offset the slide in Brent.Russia relies on oil and gas for 50 percent of budget revenue.

Bank of Russia probably won’t intervene as the “ruble’s devaluation balances out the falling oil price,” Evgeny Shilenkov, the head of trading at Veles Capital LLC in Moscow, said by phone Nov. 28. “The currency market is more realistic after the free-float and reflects the actual oil price.”

Nabiullina is weighing policy options as she seeks to keep lending flowing in an economy on the brink of recession, while avoiding a deeper currency slump that could spark a rush among citizens to switch their ruble savings into dollars.

Russia faces a 70 percent chance of recession, a survey of economists from Oct. 30 showed. The economy of the world’s biggest energy exporter has been weakened by U.S. and European sanctions over President Vladimir Putin’s role in Ukraine, where pro-Russian rebels battle government troops.

“The pressure on the ruble is less about the conduct of Russian monetary policy and more about plunging oil prices,” Nicholas Spiro, head of Spiro Sovereign Strategy in London, said by e-mail Nov. 28.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

 

 

 

end

 

 

 

 

 

This morning, the central bank of Russia intervenes as the ruble almost breaks into the 54 to the dollar column as oil producing nations see carnage continuing with the drop of oil:

 

(courtesy  zero hedge)

 

 Oil-Producing Nations Currency Carnage Continues, Russia Intervening

 

The Nigerian Naira and Russian Ruble have been the hardest hit in the last few days as oil-producing nations across the world see their currencies come under increasing pressure. With both hitting new record lows against the USDollar (with the Naira at 184.5,  already exceeding the recently devalued currencies upper peg band at around 176 per USD), chatter this morning is that the Russian central bank is actively intervening in the Ruble market after it hit 53.9 in early US trading.

 

The currency carnage since oil prices peaked

 

and desk chatter is the Russian Central Bank is intervening as RUB neared 54 to the USD

 

As Bloomberg reports, it’s not all terrible news for Russia,

A weaker ruble benefits the budget because it boosts export revenue in local-currency terms, helping offset the slide in Brent. Russia relies on oil and gas for 50 percent of budget revenue.

 

Bank of Russia probably won’t intervene as the “ruble’s devaluation balances out the falling oil price,” Evgeny Shilenkov, the head of trading at Veles Capital LLC in Moscow, said by phone Nov. 28. “The currency market is more realistic after the free-float and reflects the actual oil price.”

 

Nabiullina is weighing policy options as she seeks to keep lending flowing in an economy on the brink of recession, while avoiding a deeper currency slump that could spark a rush among citizens to switch their ruble savings into dollars.

 

Russia faces a 70 percent chance of recession, a survey of economists from Oct. 30 showed. The economy of the world’s biggest energy exporter has been weakened by U.S. and European sanctions over President Vladimir Putin’s role in Ukraine, where pro-Russian rebels battle government troops.

 

“The pressure on the ruble is less about the conduct of Russian monetary policy and more about plunging oil prices,” Nicholas Spiro, head of Spiro Sovereign Strategy in London, said by e-mail Nov. 28.

 

 

end

 

Now it is Venezuela’s turn to crash. Remember the authorities could’nt care less about the citizens of Venezuela.  What they do care about is the huge amount of credit default swaps written upon the health of Venezuela.  If their bonds default, then the credit default swaps will be called upon and the 5 major USA underwriting banks have to cough up huge amounts of money:

 

(courtesy zero hedge)

 

Crude Crash Slams Venezuelan Bonds To Close At 5-Year Lows: 21% Yield

 

It is no wonder Venezuela is suffering… Venezuelan bond prices have collapsed around 51 – the lowest close in at least 5 years as yields surge to around 21% yield. The market is pricing in extremely high probability of default (around 63% over 2Y, and 80% based on 5Y CDS) which, as Bloomberg reports, is surging as “every $1 drop in oil is around $770 million of lost revenue, so their ability to pay has taken a big hit.”

 

 

As Bloomberg reports,

Venezuelan bonds fell to a five-year lowas traders projected higher chances of default after OPEC’s decision to maintain oil output pushed crude lower.

 

 

“Every $1 drop in oil is around $770 million of lost revenue, so their ability to pay has taken a big hit,” Kevin Daly, a money manager at Aberdeen Asset Management, said in an e-mailed response to questions. “The market is already pricing in a high probability of default next year.”

 

Bank of America Corp. lowered its recommendation on Venezuelan bonds today to marketweight from overweight, citing the OPEC decision. At current oil prices, Venezuela will need an additional $25.6 billion to finance imports, the bank said.

 

 

“The Venezuelan government has not been very responsive, not acting fast enough to adjust, and not calming the markets with executable plans to respond to these external pressures.”

 

Venezuela can overcome any situation arising from lower oil prices and is taking measures to protect itself amid the drop, Rafael Ramirez, the nation’s foreign minister, said in an interview published in the newspaper Panorama.

 

Venezuela needs a break-even price near $85 a barrel with adjustments to pay for its dollar liabilities, Jefferies Group LLC analyst Siobhan Morden said in a research note.

*  *  * 

As long as Maduro can keep paying the military, buying their apartments and cars, all will be well… if not – coup time and social unrest.

 

end

 

 

A must read…the real problem with a lower price of oil?

The huge derivative bets underwritten by our criminal banks on these entities. The total “subprime”debt of the shale boys is about 200 billion and you can bet the farm that that the credit default or other exotic derivatives will be multiples of it.  That is the major problem today facing our illustrious bankers

(courtesy Dave Kranzler IRD)

 

 

More On The Oil Black Swan: Enron x 10?

Charles Hugh Smith via Zerohedge

 

The dude could at least give me a reference citation for the idea.  Or if Zerohedge wanted to be really cutting-edge, they would have posted my commentary on Friday.

The carnage in all of the debt issued on the shale/fracking industry in the last couple of years will be on par with the carnage we saw in home equity paper in 2008-2010.  Much of the sub-debt – i.e. junk bonds – are trading at substantial discounts to par. That is, when it’s actually trading. A lot of the paper is just quoted. Even bank debt is trading/quoted at a discount to par.   A colleague quoted the price of the bonds for a shale-related company that issued debt just 4 months ago.  The “street quote” was 58 x 59.  That is, it’s quoted at 58 cents bid.  In other words, its quoted down 42% in price from its issue price 4 months ago.  A real bid for size would probably be in the 30′s.   No one will sell there and the first real trade will occur in the 20′s or below.  I saw that happen many times in the 1990′s.  Just ask Donald Trump.

And let’s not forget about the the credit default swaps and “oil-index” derivatives that have been issued against all the oil shale debt.  If the amount of shale/fracking-related high yield debt is around $200 billion (rough estimate) there’s likely multiples of that in “notional” amount of derivatives.

We won’t see the fallout from this until the cash runs dry at all the crap companies who require $100 oil just to service the debt.   But we’re not too far away from that.   When Enron filed it had about $30 billion in identifiable debt and debt-related obligations.   Enron was a huge fraud.  While oil shale/fracking is not an outright fraud, we know that the reserve estimates upon which a lot of the junk debt was issued are complete fiction.  While many of these companies could theoretically service their debt at $100 oil, we’ll never get a chance to find out the real truth because most of them will blow up well before oil sniffs $80 again.

The  Central Bank printed money and debt-fueled mirage is hitting the wall now.  I believe the oil shale debt explosion will set off a much bigger derivatives-laced credit collapse. Think about all of the subprime quality debt that has been issued since 2008:   auto debt, FHA mortgage debt, student loan debt, etc.  And there’s OTC credit default swap debt connected to all of that.  Hell, the Treasury debt outstanding is now over $18 trillion.  It was $10 trillion in 2009 when Obama took over the Oval Office.  The U.S. Government debt is surely de facto junk bond quality.

While it’s not obvious yet, manifestations of the coming financial collapse are very obvious. Perhaps the most obvious is the severity and intensity with which the western Central Banks have attacked the price of gold.

Many of you reading this were not involved in the precious metals back in 2008.   Gold and silver were aggressively and methodically taken down in price that year starting in late March.  Gold had hit $1030 and silver had hit $21.   Right before Bear Stearns collapsed, both metals were smashed about 20%.   After a brief bounce, both metals were smashed even harder just ahead of the Lehman collapse and the AIG/Goldman de facto collapse which should have taken down Wall Street altogether.

All of this occurred over a 7 month time period and the orchestrated take-down of gold/silver was in advance of the the Great Financial Collapse, which was then saved with over $5 trillion in liquidity – $4 trillion in QE and over $1 trillion in direct taxpayer transfers to the big banks.  Gold hit a new all-time high of $1900 about two years after it was taken down well below $1,000 and silver ran from $8 to $49.

The current orchestrated takedown of gold and silver is 3x worse than what occurred back in 2008.   I opined to some colleagues over the weekend that what is coming at us from behind “the curtain” will certainly be 3x worse than what hit our system in 2008.   The only issue left in my mind is what the price of gold will be when the system is “reset.”   And will it be priced in dollars?

 

end

 

A terrific article from Ambrose Evans Pritchard on the risk of low prices and how that is effecting many Arab nations as well as the USA shale production:
(courtesy Ambrose Evans Pritchard/UKTelegraph and special thanks to Robert H for sending this to us)

 

 

 

Saudi Arabia and the core Opec states are taking an immense political gamble by letting crude oil prices crash to $66 a barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.

Caliphate leader Abu Bakr al-Baghdadi has already opened a “second front” in North Africa, targeting Algeria and Libya – two states that live off energy exports – as well as Egypt and the Sahel as far as northern Nigeria. “The resilience of US shale may prove greater than the resilience of Opec,” said Alistair Newton, head of political risk at Nomura.

Chris Skrebowski, former editor of Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance. “They want to unnerve the shale oil model and undermine financial confidence, but they won’t stop the growth altogether,” he said.

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.

The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history.

“When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.”

Opec has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85.

This is bravado. US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015.

Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production. “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.”

Efficiency is improving and drillers are switching to lower-cost spots, confronting Opec with a moving target. “The (price) floor is falling and may not be nearly as firm as the Saudi view assumes,” said Citigroup.

Mr Morse says the “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure. “The remaining capex required to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said.

Critics of US shale may have misunderstood its economics. There is a fast decline in output from new wells but this is offset by a “long-tail phase” for a growing number of legacy wells. The Bakken field has already reached 1.1m bpd, and this is expected to double again over the next five years.

Other oil projects around the world may be more vulnerable to a price squeeze, including the North Sea, the ultra-deepwater ventures in the Atlantic off Brazil and Angola, Canadian oil sands, or Russia’s contentious plans for the Arctic in the “High North”. But the damage will be gradual.

In the meantime, oil below $70 is already playing havoc with budgets across the global petro-nexus. The fiscal break-even cost is $161 for Venezuela, $160 for Yemen, $132 for Algeria, $131 for Iran, $126 for Nigeria, and $125 for Bahrain, $111 for Iraq, and $105 for Russia, and even $98 for Saudi Arabia itself, according to Citigroup.

Opec may not be worried about countries such as Nigeria, but even there a full-blown economic and political crisis could turn the north into a Jihadi stronghold under Boko Haram.

The growing Jihadi movements in the Maghreb – combining with events in Syria and Iraq – clearly pose a first-order security threat to the Saudi regime itself.

The Libyan city of Derna is already in the hands of the Salafist group Ansar al-Shariah and has pledged allegiance to Islamic State. Terrorist movements in the Egyptian Sinai have also rallied to the black and white flag of IS, prompting Egypt’s leader Abdel al-Sisi to call last week for a “general mobilisation” of all leading Arab and Western powers to defeat the spreading movement.

The new worry is Algeria as the Bouteflika regime goes into its final agonies. “They have an entrenched terrorist problem as we saw in the seizure of the Amenas gas refinery last year. These people are aligning themselves with Islamic State as part of the franchise,” said Mr Newton.

Algeria exports 1.5m bpd of petroleum products. Its gas exports matter more but the price of liquefied natural gas shipped to Europe is indirectly linked to oil over time.

It is an open question what will happen to Algeria, Iraq, and Libya if oil prices hover at half the budget break-even costs for a year or two, given the extreme fragility of the region and political risk of cutting subsidies.

The Sunni Salafist tornado sweeping across the Middle East – so strangely like the lightning expansion of Islam in the mid-7th century – is moving to its own inner rhythms. It is not a simple function of economic welfare, let alone oil prices.

Yet Saudi Arabia’s ruling dynasty tests fate if it is betting that the Middle East’s fraying political order can withstand a regional economic shock for another two years.

 

 

end

 

 

 

 

 

Now Wolf Richter weighs on as to why Saudi Arabia is not cutting its production:  it wants to keep its market share but in doing so we are witnessing much collateral damage:

 

(courtesy Wolf Richter/Wolf on Wall Street)

 

Saudi Arabia Declares Oil War on US Fracking, hits Railroads, Tank-Car Makers, Canada, Russia; Sinks Venezuela  

by  • December 1, 2014

 

When OPEC announced on Thanksgiving Day that it would maintain oil production at 30 million barrels per day, chaos broke out in the oil market, and the price of oil around the globe spiraled into a terrific plunge. The unity of OPEC, if there ever was such a thing, was in tatters with Saudi oil minister smiling victoriously, and with a steaming Venezuelan oil minister thinking of the turmoil his country is facing [OPEC Refuses to Cut Production, Oil Plunges off the Chart].

The bloodletting in the oil markets on Thursday led to some wobbly stability on Friday, and for a while it seemed oil had found a bottom, but then the US stock market closed early while crude continued trading, and suddenly all heck re-broke loose, and the US benchmark WTI plunged again and broke the $66-a-barrel mark before coming to a rest at $66.06. After a near 10% dive in two days, WTI is now down 37% since June!

This chart shows the Thanksgiving plunge following OPEC’s decision, the deceptive stability Friday, and the afterhours plunge:

US-WTI-2014-11-28

Now more information has emerged, confirming prior “rumors” and “conspiracy theories.”

During the closed-door meetings in Vienna, Saudi oil minister Ali al-Naimi told OPEC members that OPEC had to combat the US fracking boom. If OPEC cut output to raise the price of oil, it would lose market share, he argued. The way to win would be to allow overproduction to depress prices to the point where they would destroy the profitability of North American producers. And they’d have to cut production, rather than OPEC.

With Saudi Arabia’s overwhelming power within OPEC, his argument won against objections from desperate members, such as Venezuela, Iran, and Algeria, which wanted a production cut to push prices back up.

“Naimi spoke about market share rivalry with the United States, and those who wanted a cut understood that there was no option to achieve it because the Saudis want a market share battle,” a source told Reuters to make sure the message got out.

Asked if this was a response to rising US production, OPEC Secretary General Abdullah al-Badri essentially confirmed OPEC had entered the oil war against the American shale revolution: “We answered,” he said. “We keep the same production. There is an answer here.”

The bloodletting is spreading.

While the US fracking boom is the official target, Canada’s tar-sands producers are getting hit the hardest. The process is expensive. Their production is largely land-locked and often has to be transported to distant refiners in Canada and the US by costly oil trains. Yet these high-cost producers are getting the least for their oil: The heavy-oil benchmark Western Canada Select (WCS) traded for $48.40 per barrel on Friday, down over 40% from June, the cheapest oil in the world.

Their shares got knocked down in sync: For example, Suncor Energy dropped 9% on Friday, down 27% since June; and Canadian Natural Resources dropped nearly 10% for the day, down 28% since June.

The US shale oil revolution is bleeding as well. Shares across the board are getting hit, many of them outright eviscerated. If the word “plunge” occurs a lot, it’s because that’s what these stocks did on Friday.

  • Goodrich Petroleum plunged 34% on Friday; down 80% from June.
  • Sanchez Energy plunged 29.5% on Friday, down 71% from June.
  • Clayton Williams Energy plunged 25.6% on Friday, down 61% from May.
  • Callon Petroleum plunged 18.6% on Friday, down 60% from June.
  • Laredo Petroleum plunged 33.5% on Friday, down 66.5% from June.
  • Oasis Petroleum plunged 27.2% on Friday, down 68% from July.
  • Stone Energy plunged 24.1% on Friday, down 68% from April.
  • Triangle Petroleum plunged 25.6% on Friday, down 62% from June.
  • EP Energy plunged 25.3% on Friday, down 54% from June.

The list goes on. Even large oil companies got clobbered:

  • Exxon Mobil down 4.2% for the day and 13% from July.
  • ConocoPhillips down 6.7% for the day and 24% from July.
  • Marathon Oil down 11% for the day and 31% from early September.
  • Occidental Petroleum down 7.4% for the day and 24% from June.
  • Anadarko Petroleum down 10.5% for the day and 30% since late August.

Then there is the Oil Service sector.

The Market Vectors Oil Services ETF dropped 8.9% for the day and has plummeted 34% from June. The current standout is its 10th-most heavily weighted component, Norway-based SeaDrill which had announced that it would cut its dividend to zero to deal with its mountain of debt, given the current environment. Its shares swooned on Thursday and Friday a total of 28% and are now down 70% from a year ago. The whole sector followed. This is what debt can do when the going gets tough.

Those are among the official targets of OPEC’s scorched-earth oil war. They’ve been hit, and they’re taking on water.

There is collateral damage.

With increasing amounts of oil being carried by oil trains, the railroads, which had been trading near their exuberant 52-week highs in large part due to the lucrative oil-train business, suddenly took a dive on Friday:

  • Union Pacific -4.9%
  • CSX -3.8%
  • Canadian Pacific -8.0%
  • Norfolk Southern -4.7%
  • Kansas City Southern -5.1%
  • Canadian National Railway -4.6%
  • Burlington Northern Santa Fe, which is owned by Warren Buffett’s Berkshire Hathaway, isn’t publicly traded. But if the oil-train business gets hit, so will Buffett’s “steal.”

But this pales compared to the carnage in tank-car builders. On Friday, they plunged:

  • Greenbrier -15% for the day, -28% from its September high.
  • American Railcar Industries -12.9% for the day, -28.3% since August.
  • FreightCar America -7.5% for the day, -21% since September.
  • Trinity Industries -11.3% for the day, -36% since September.

The oil price move is already cascading through American industry. Bondholders are next. The US fracking boom was built with debt, much of it junk rated. And this pile of debt is now at the confluence of the collapsing price of oil, high costs of production, and sharp decline rates of fracked wells that force drillers to continue drilling just to maintain their revenues. It’s a toxic mix.

And there are victims of friendly fire, so to speak.

Particularly OPEC member Venezuela, dogged by the world’s highest inflation and worst budget deficit, is running out of options. On November 18, President Nicolas Maduro ordered $4 billion in loan proceeds from China to be transferred from an off-budget fund to one counted in the international reserves. The sudden appearance of $4 billion in international reserves pumped up bondholder confidence: the next day in intraday trading, Venezuelan bonds jumped the most in six years.

But it didn’t last long. Within a week, its international reserves dropped by $1.3 billion to $22.2 billion, Bloomberg reported. Venezuela had burned through one third of the Chinese money in one week. Venezuela must have much higher oil prices. Unless a miracles happens, or unless China bails it out altogether – at a steep price – the country is headed for default.

Russia, third-largest oil producer in the world, after Saudi Arabia and the US, also got hit, as did Norway, and their currencies have been brutalized [Ruble Freefall: And the Ugliest Currencies Are?]

But this time it’s different.

This time, OPEC is trying to depress oil prices. In prior years, OPEC tried to push prices as high as possible, but without killing the global economy and demand for oil. The balancing act led to high oil prices that consumers struggled to pay but that allowed the US shale revolution to bloom. If oil had remained at $40 or $50 a barrel, fracking wouldn’t have taken off. OPEC was, ironically, one of the enablers of fracking (yield-desperate investors, driven to near insanity by the Fed’s zero-interest-rate policy, were the other one). And now fracking is threatening to make OPEC irrelevant.

Saudi Arabia, formerly the dominant oil producer in the world, the country whose mere words could shake up markets and manipulate US policies in the Middle East, and the master of an all-powerful OPEC, is reduced to struggling for simple market share, the hard way.

A lot of people believe that the plunge in the price of oil will be brief, and that it has gone pretty much as far as it can go, given production costs in the US and Canada. But the bloodletting in the US fracking revolution will go on until the money finally dries up. Read…   How Low Can the Price of Oil Plunge?

 

end

 

 

Your more important currency crosses early Monday morning:

Eur/USA 1.2466 up .0017

USA/JAPAN YEN  118.44  down  .160

GBP/USA  1.5701 up .0051

USA/CAN  1.1398   down .0016

This morning in  Europe, the euro is up, trading now well above the  1.24 level at 1.2466 as Europe reacts to deflation and announcements of massive stimulation but crumbling bourses. In Japan  Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. And now he wishes to give gift cards to poor people in order to spend. The yen continues to reverse like a yoyo.   It finally settled  in Japan up 16  basis points and settling still above the 118 barrier to  118.44 yen to the dollar (heading towards 120).  The pound is slightly up  this morning as it now trades just above  the 1.57 level at 1.5701.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation).  The Canadian dollar is well up again today trading at 1.1398 to the dollar.

 Early Monday morning USA 10 year bond yield:  2.16% !!!  down 1  in  basis points from Friday night/

USA dollar index early Monday morning:  88.12 down 23 cents from Friday’s close

The NIKKEI: Monday morning up 130 points or 0.75% (Abe’s helicopter route to provide free cash)

Trading from Europe and Asia:
1. Europe  all in the red

2/    Asian bourses mostly in the red except Japan      Chinese bourses: Hang Sang  in the red, Shanghai in the red,  Australia in the red:  /Nikkei (Japan) green/India’s Sensex in the red/

Gold early morning trading:  $1174.00 (after spending the night below $1150)

silver:$ 15.64 (after spending the night below $15.00)

Closing Portuguese 10 year bond yield:  2.82% down 2  in basis points from Friday

 Closing Japanese 10 year bond yield:  .43% !!! up 1 in basis points from Friday

Your closing Spanish 10 year government bond Monday/ down 6   in basis points in yield from Friday night.

Spanish 10 year bond yield:  1.84% !!!!!!

Your Monday closing Italian 10 year bond yield:  2.02% down 1 in basis points from Friday:

trading 18 basis points higher than Spain:

 IMPORTANT CLOSES FOR TODAY

Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond:

Euro/USA:  1.2476  up  .0026

USA/Japan:  118.24 down .310

Great Britain/USA:  1.5740  up .00922

USA/Canada:  1.1337 down .0078

The euro rose in value during this afternoon’s  session,  and it is up by closing time , finishing just below the 1.25 level to 1.2476.  The yen was up  during the afternoon session, and it was up 31 in basis points on the day closing above the 118 cross at 118.24.   The British pound gained huge  ground   during the afternoon session and it was up on the day closing  at 1.5740.  The Canadian dollar was well up  in the afternoon and was up on the day at 1.1337 to the dollar.

Currency wars at their finest today.

Your closing USA dollar index:   87.93  down 43 cents  from Friday.

your 10 year USA bond yield , up 4   in basis points on the day: 2.21%!!!!

European and Dow Jones stock index closes:

England FTSE down 66.25 or 0.99%

Paris CAC  down  12.85  or 0.29%

German Dax down 17.34 or 0.17%

Spain’s Ibex down  97.90 or  0.91%

Italian FTSE-MIB down  328.37    or 1.64%

The Dow: down 51.44 or .29%

Nasdaq; down 64.28   or 1.34%

OIL:  WTI 69.22  !!!!!!!

Brent: 72.88!!!!

end

 

 

 

And now for your big USA stories

Today’s NY trading:

 

 

(courtesy zero hedge)

 

Trannies Trounced Most In 10 Months As Commodities & Bond Yields Bounce

 

Some very significant volatility intraday today. The Dow Transports lost around 2.7% today – the most since early January – as Airlines slipped (though held half of Friday’s panic-buying gains). The Dow outperformed – but closed red – thanks to strength in Chevron and Exxon (adding 35 Dow points alone). All major US equity indices are red from pre-Thanksgiving’s meltup exuberant close with Trannies and Small Caps worst. Momo names were hit, as was AAPL. All of this was driven, it appears, by a somewhat staggering (dead cat or not) bounce in commodity markets off overnight flush lows. Gold and silver screamed higher and oil gained 7% off its lows to close up 4.8% from Friday. Treasury yields also turned around notably intraday from down 1-2bps to closing up around 6bps at the long-end (after ISM beat). VIX briefly tested below 14 but the 330RAMP went the wrong way with VIX rising and stocks closing not off the lows.

 

Off last night’s flush lows… commodities have exploded higher…

 

From Friday’s close…

 

and from the initial OPEC ‘no cut’ leaks from the Venezuelans

 

The longest-streak in stock market history is over…

 

From Friday’s early close, the equity tumble escalated…

 

and From pre-Thanksgiving’s panic buying confidence-inspiring ramp close…

 

Of course AAPL’s collapse was stunning but described by some clever chaps on CNBC as “perfectly normal” and “a great buying opportunity”

 

and Momo names suffered

 

Treasury yields bounced off Bullard low levels today and popped 5-6bps on the day in light trading after ISM beat

 

Credit markets are notably decoupling from stocks..

 

Is someone starting to trade the TSY vs Equity divergence?

 

The USD lost around 0.25% today, also helping commodities – having basically traded flat for th elast month

 

 

Charts: Bloomberg

 

 

end

 

Holiday sales are a disaster/down 11%

 

(courtesy zero hedge)

Retail Disaster: Holiday Sales Crater by 11%, Online Spend Declines: NRF Blames Shopping Fiasco On “Stronger Economy”

Last year was bad. This year is an outright disaster.

As we reported earlier using ShopperTrak data, the first two days of the holiday shopping season were already showing a -0.5% decline across bricks-and-mortar stores, following a “cash for clunkers”-like jump in early promotions which pulled demand forward with little follow through in the remaining shopping days. However, not even we predicted the shocker just released from the National Retail Federation, the traditionally cheery industry organization, which just reported absolutely abysmal numbers: sales during the four-day Thanksgiving holiday period crashed by a whopping 11% from $57.4 billion to $50.9 billion, confirming what everyone but the Fed knows by now: the US middle class is being obliterated, and that key driver of 70% of US economic growth is in the worst shape it has been since the Lehman collapse, courtesy of 6 years of Fed’s ruinous central planning.

Demonstrating the sad state of America’s “economic dynamo”, shoppers spent an average only $380.95, down 6.4% from $407.02 a year earlier. In fact, as the NRF charts below demonstrate, there was a decline across virtually every tracked spending category (source):

As the WSJ reports, NRF’s CEO Matt Shay attributed the drop to a combination of factors, including the fact that retailers moved promotions earlier this year in attempt to get people out sooner and avoid what happened last year when people didn’t finish their shopping because of bad weather.

Also did we mention the NRF is perpetually cheery and always desperate to put a metric ton of lipstick on a pig? Well, hold on to your hats folks:

He also attributed the declines to better online offerings and an improving economy where “people don’t feel the same psychological need to rush out and get the great deal that weekend, particularly if they expected to be more deals,” he said.

And of course the sprint vs marathon comparisons, such as this one: “The holiday season and the weekend are a marathon not a sprint,” NRF Chief Executive Officer Matthew Shay said on a conference call. Odd how that metaphor is never used when the (seasonally-adjusted) sprint beats the marathoners.

So there you have it: a 11% collapse in retail spending has just been spun as super bullish for the US economy, whereby US consumers aren’t spending because the economy is simply too strong, and the only reason they don’t spend is because they will spend much more later. Or something.

Apparently the plunge in Americans who even care about bargains is also an indication of an economic resurgence:

The retail trade group said the number of people who went shopping over the four-day weekend declined by 5.2% to 134 million, from 141 million last year.

Finally, what we said earlier about a surge in online sales, well forget it – it was a lie based on the now traditional skewed perspectives from a few self-servcing industry organizations:

Despite many retailers offering the same discounts on the Web as they offered in stores, the Internet didn’t attract more shoppers or more spending than last year. Online sales accounted for 42% of sales racked up over the four-day period, the same percentage as last year, though up from 26% in 2006, the trade group said.

In fact, it was worse: “Shoppers spent an average $159.55 online, down 10.2% from $177.67 last year.”

But the propaganda piece de resistance is without doubt the following:

“A highly competitive environment, early promotions and the ability to shop 24/7 online all contributed to the shift witnessed this weekend,” Mr. Shay said.

So to summarize: holiday sales plunged, and Americans refused to shop because the economy is “stronger than ever” and because Americans have the option of shopping whenever, which is why they didn’t shop in the first place. That, and of course plunging gasoline prices leading to… plunging retail sales, just as all the economists “correctly” predicted.

Goebbels approves.

 

end

 

OH OH!! Shale well permits tumble at 15% as the price of crude tumbles:

 

(courtesy zero hedge)

 

The Shale Bust Arrives: November Permits For New Shale Wells Tumble 15%

 

With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the US oil-producers is critical as they have been gung-ho “unequivocally good” expanders even as oil prices fell. However, as Reuters reports, new data suggests that the much-anticipated slowdown in shale country may have finally arrived – permits for new wells dropped 15% across 12 major shale formations last month, as one analysts warns, “the first domino is the price, which causes other dominos to fall.”

 

As Reuters reports,

Permits for new wells dropped 15 percent across 12 major shale formations last month, according to exclusive information provided to Reuters by DrillingInfo, an industry data firm, offering the first sign of a slowdown in a drilling frenzy that has seen permits double since last November.

 

 

“Currently, the market is focused on U.S. shale as the place where spending and production must be curtailed,” Roger Read, a Wells Fargo analyst, said in a note Friday. “There is little doubt, in our view, that lower oil and gas prices will result in lower spending and lower shale production in 2015 to 2017.”

 

A cutback of U.S. production could play into the hands of Saudi Arabia, which has suggested over the past few months that it is comfortable with much lower oil prices.

 

 

“The first domino is the price, which causes other dominos to fall,” said Karr Ingham, an economist who compiles the Texas PetroIndex, an annual analysis of the state’s energy economy. One of the first tiles to drop: the number of permits issued, Ingham said.

 

 

The permitting slowdown was particularly pronounced in two Texas formations, the Permian Basin and Eagle Ford shale, which saw new permits decline by 13 and 22 percent respectively.

*  *  *

Interesting that Eagle Ford – despite its lower costs – is seeing the largest decline in permitting

*  *  *

Of course, this should all be ignored because – like the NRF’s reporting of a double-digit decline in Black Friday sales – it would break the narrative for the US economic recovery…

 

end

 

The US PMI plunges to 10 month lows on huge export drops:

 

(courtesy  zero hedge)

 

 

 

US PMI Plunges To 10-Month Lows (Export Order Drop), ISM Beats (Export Orders Soar)

 

 

 

For the 3rd month in a row, US Manufacturing PMI dropped from 4-year highs to 10-month lows. At 54.8, missing expectations of 55.0 (and down from 55.9) for the 5th month of the last 6 as extrapolated hopes fade into the usual cyclical un-decoupled collapse into year-end (but ignore NRF data). Sadly for the bullish decoupling meme, Markit notes, “the principal cause of the slowdown is a renewed downturn in export orders, which fell for the first time since January.” So, amid all of this doom, ISM then beat expectations, printing 58.7 vs 58.0 expectations (down slightly from October’s 59.0 print) led by – rather ironically – new export orders surging… US data has gone full China.

 

US Manufacturing PMI tumbled to 10-month lows

As Markit notes, this is not a pretty picture:

“What’s more, with inflows of new orders slowing sharply, there’s a good chance that production growth will deteriorate further in December.

 

The principal cause of the order book slowdown is a renewed downturn in export orders, which fell for the first time since January. Demand from many emerging markets remains well down on pre-crisis levels, and a deteriorating situation in the Eurozone has hit trade flows to Europe.

 

“Unless order book growth picks up, factories will inevitably soon turn to cutting jobs in order to bring capacity down in line with weaker demand.”

And then ISM beat.. led by export orders!!!!

 

Business activity fell to 58.7 vs 59.0 last month

* New orders rose to 66 vs 65.8 last month
* Employment fell to 54.9 vs 55.5 last month
* Supplier deliveries rose to 56.8 vs 56.2 last month
* Inventories fell to 51.5 vs 52.5 last month
* Customer inventories rose to 50.0 vs 48.0 last month
* Prices paid fell to 44.5 vs 53.5 last month
* Backlog of orders rose to 55.0 vs 53.0 last month
* New export orders rose to 55.0 vs 51.5 last month
* Imports rose to 56.0 vs 54.5 last month

Note that for the first time since July 2013, prices paid dropped below 50.

 

Of course – the new orders resurgence is entirely seasonally-adjusted idiocy…

 

WHAT RESPONDENTS ARE SAYING…

“The Holiday Season continues to exceed expectations. Customers are generally optimistic for future sales growth.” (Food, Beverage & Tobacco Products)

 

“Continued strong demand. Deliveries through the West Coast are delayed due to a number of factors.” (Fabricated Metal Products)

 

“We have seen continued growth in transportation equipment. Slowdowns and threats of strike of West Coast longshoreman weigh heavily on U.S. operations.” (Transportation Equipment)

 

“Business continues to be stronger than last year.” (Furniture & Related Products)

 

“Improvement in defense spending and manufacturing.” (Computer & Electronic Products)

 

“West Coast port longshoreman slowdown is affecting business with longer lead times.” (Chemical Products)

 

“We continue to hire people. People are also leaving to take other jobs indicating the job market is starting to improve for manufacturing.” (Electrical Equipment, Appliances & Components)

 

“Market has remained strong going into year-end.” (Wood Products)

 

“Order intake has been substantial, resulting in a very healthy backlog. The packaging automation requirements in the food and beverage market are robust.” (Machinery)

 

“Demand remains strong for new orders.” (Miscellaneous Manufacturing)

Simply put, absolutely every single respondent was bullish…

*  *  *

 

end

 

 

This is a must see from the guy who knows:

 

(courtesy Rob Kirby/USAWatchdog/Greg Hunter

 

 

Gold Selling for at least 50% over Spot in Asia-Rob Kirby

 

By Greg Hunter’s USAWatchdog.com   (Early Sunday Release)

A few months ago, financial analyst Rob Kirby said the gold price was ready to go up. In the international market, where it is sold by the ton–it has. Kirby explains, “For large amounts of bullion in the Asian market, the pricing mechanism has completely and utterly divorced itself from the fraudulent paper prices that are being reflected in the exchanges in the Western world.

In the Asian market, if you could find . . . physical bullion . . . as cheap as spot plus 50%, you’d be doing really, really, really well . . . and you’d be hard pressed to find serious tonnage at that price in Asia.” 

Kirby, who specializes in acquiring large amounts of physical gold for clients, sees physical gold bullion selling for at least “50%” over spot, which would put the price of gold in Asia at least $1,800 per ounce.   Kirby also says, “Prices being paid right now in Asia make a mockery of the prices being shown in COMEX and the LBMA (London Bullion Market Association).  These paper markets have divorced themselves from the laws of economics.  The paper gold price and the paper silver price has utterly stood economics on its ear because rudimentary economics tells you as demand increases, prices are supposed to increase.  Simple supply and demand dictate this.  The precious metals market in the Western world is the only market in the world where increased demand means a lower price, if you want to believe that.”

Kirby contends fraud is the only way to explain skyrocketing demand and plunging prices and says,“So, we’re all being treated to a colossal fraud, and the people perpetrating this fraud are the controllers of the western financial system and the people behind U.S. dollar hegemony.They are pulling a massive, massive fraud on humanity, and it’s not sustainable.  It will ultimately break down.”

What does the extreme precious metals demand say about the global financial system? Kirby thinks, “What the western world is trying to hide from the rest of the world is the U.S. dollar centric money system is failing, and it’s failing in spades. The only reason it hasn’t failed yet is extraordinary levels of corruption and fraud have been used and employed to keep kicking the can down the road.  They are also trying to keep officiating and hiding from the general public how broken the system really is.  That’s been done basically by payoffs, bribes and ownership of the media; payoffs, bribes and ownership of the political apparatus; and payoffs, bribes and ownership of the biggest financial institutions.  It gives things the appearance of being under control, but beneath the surface, things really aren’t under control.  Beneath the surface, we are seeing increasing amounts of the world negotiating bilateral currency arrangements.   If the world really felt as ill about gold as the western financial system would like us to believe, then why are so many nations abandoning the dollar in trade?  This is contrary to what you’d expect if people really believed what was going on in the paper gold market.  They don’t compute.”

So, are we seeing the overt signs of a panic into the gold market? Kirby says, “I believe we are.    I also believe that if we see some justice out of this, there is going to be a gaggle of central bankers put on trial in the world court in The Hague.  This is ultimately where this should go, whether it’s allowed to go there or not, or whether they decide to flip the tables over and say ‘screw humanity’ and take us to a nuclear war, these people are that sociopathic that they might do that.  I put nothing past them.”

As far as all the recent talk of countries repatriating their gold, Kirby says, “They are all screaming at us that gold is money. They are all screaming at us that they don’t trust the dollar.”

Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.

(There is much more in the video interview.)

 

Video Link

http://usawatchdog.com/gold-selling-for-at-least-50-over-spot-in-asia-rob-kirby/

-END-

 

That is all for today

 

I will see you Tuesday night

bye for now

Harvey,

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One comment

  1. SLV gained 2.204 million ozs today. They update around 8 PM EST. One would expect more when trading was 3X normal volume with a gain of 6.41%. GLD traded 2.5X normal volume and gained 3.99%, but not a single new share was created….. that takes real gold.

    Like

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