My website is now ready 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: $1222.10 down $3.10
Silver: $17.02 down $0.04
In the access market 5:15 pm
The gold comex today had a poor delivery day, registering 1 notice served for nil oz. Silver comex registered 0 notices for nil oz.
A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.83 tonnes for a loss of 57 tonnes over that period.
In silver, the open interest fell by a tiny 484 contracts with yesterday’s fall in price of $0.07. Looks like some of the shorts are vacating the arena as they are scared at what they are witnessing. 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. The total silver OI still remains relatively high with today’s reading at 147,536 contracts. The big December silver OI contract fell by 120 contracts down to 397 contracts.
In gold we had a fall in OI with the fall in price of gold yesterday to the tune of $3.80. The total comex gold OI rests tonight at 368,521 for a loss of 4,199 contracts. The December gold OI rests tonight at 1044 contracts losing 10 contracts.
TRADING OF GOLD AND SILVER TODAY
Gold was a little weaker during the Asian time zone, as at 12 midnight, it came in at $1221. By the first London fix it rebounded to only $1222.00
By 4 am however, it rose to $1226.00 it zenith for the day. It then drifts southbound:
By 9 am it hit its nadir at $1215.
By comex closing: $1222.10 and access closing: $1222.60
Silver followed gold in lock steps.
By midnight, silver was trading at around $17.05. By 2 am and the first London fix, silver traded at $17.01. However by 4 am silver rebounded to $17.20 it’s zenith for the day. It then retreated to $17.10 by the 2nd London fix and drifted for the rest of the day. Comex closing: $17.02
Access closing; $17.03
Today, we had no change in inventory with respect to gold inventory at the GLD /Inventory 725.75 tonnes
In silver, no change in silver inventory
SLV’s inventory rests tonight at 342.35 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.
First: GOFO rates:
some rates moved closer to the negative and one rate remained constant All GOFO rates are thus out of backwardation!!
Now, all the months of GOFO rates( one, two, three six and 12 month GOFO moved slightly to the negative . They must have found a few bars to lease but the quantity must be at extreme low levels . On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates. These rates are still fully manipulated. London good delivery bars are still quite scarce.
Dec 12 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
+.132.% + .142500 -% -+1450 -% +. 1600 .% +. 2000%
Dec 11 2014:
+.1375% +.142500% +.1475 % +.16250% +.2025%
Let us now head over to the comex and assess trading over there today,
Here are today’s comex results:
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 today by 4,199 contracts from 372,720 all the way down to 368,521 with gold down by $3.80 yesterday (at the comex close). We are now into the big December contract month where the number of OI standing for the gold metal registers 1044 contracts for a loss of 10 contracts. We had 0 delivery notice served yesterday so we lost 10 contracts or 1000 oz of gold will not stand for the December contract month. The non active January contract month fell by 82 contracts down to 421. The next big delivery month is February and here the OI fell t0 229,702 contracts for a loss of 4,024 contracts. The estimated volume today was poor at 62,834. The confirmed volume yesterday was fair at 150,982 even with the help of high frequency traders. The comex now has no credibility and many investors have vanished from this crooked casino. Today we had 1 notice filed for 100 oz .
December initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||32.15 oz (Manfra) 1 kilobar|
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||nil oz|
|No of oz served (contracts) today||1 contracts(100 oz)|
|No of oz to be served (notices)||1043 contracts (104,300 oz)|
|Total monthly oz gold served (contracts) so far this month||2606 contracts(260,6–00 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||153,424.154 oz|
Total accumulative withdrawal of gold from the Customer inventory this month
Today, we had 0 dealer transactions
total dealer withdrawal: nil oz
we had 0 dealer deposit:
total dealer deposit: nil oz
we had 1 customer withdrawals
i) out of Manfra: 32.15 oz
total customer withdrawal: 32.15 oz
we had 0 customer deposits:
We had 0 adjustments
Today, 1 notice was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 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 (2606) x 100 oz to which we add the difference between the OI for the front month of December (1044) minus the # gold notices filed today (1) x 100 oz = the amount of gold oz standing for the December contract month.
Thus the initial standings:
2606 (notices filed for the month x 100 oz) + (1044) the number of OI notices for the front month of December served upon – (1) notices served today equals 364,900 oz or 11.32 tonnes
we lost 10 contracts or 1,000 oz that will not stand.
Total dealer inventory: 737,166.946 oz or 22.93 tonnes
Total gold inventory (dealer and customer) = 7.905 million oz. (245.87) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 57 tonnes have been net transferred out. We will be watching this closely!
This initiates the month of December for gold.
And now for silver
December silver: initial standings
|Withdrawals from Dealers Inventory||431,404.15 oz (CNT)|
|Withdrawals from Customer Inventory||60,317.565 oz (Scotia )|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil|
|No of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||397 contracts (1,985,000 oz)|
|Total monthly oz silver served (contracts)||2678 contracts (13,390,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||1,594,966.8 oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||5,615,797.3 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 1 dealer withdrawal:
i) Out of CNT: 431,404.15 (two decimals out of three)
total dealer withdrawal: 431,404.15 oz
We had 1 customer withdrawal:
i)Scotia: 60,317.565 oz
total customer withdrawal 60,317.565 oz
We had 0 customer deposits:
total customer deposits: nil oz
we had 0 adjustments
Total dealer inventory: 64.595 million oz
Total of all silver inventory (dealer and customer) 176.447 million oz.
The total number of notices filed today is represented by 0 contracts or nil 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 (2678) x 5,000 oz to which we add the difference between the total OI for the front month of December (397) minus (the number of notices filed today (0) x 5,000 oz = the total number of silver oz standing so far in November.
Thus: 2678 contracts x 5000 oz + (397) OI for the November contract month – 0 (the number of notices filed today) =15,375,000 oz of silver that will stand for delivery in December.
we lost 25,000 oz that will not stand for the December silver contract.
for those wishing to see the rest of data today see:
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:
dec 12.2014: we had no change in gold inventory/GLD inventory 725.75 tonnes
Dec 11.2014: we had another addition of .95 tonnes of gold inventory at the GLD/Inventory 725.75 tonnes
dec 10.2014: we gained another 2.99 tonnes of gold at the GLD. If China cannot get its gold from London, then its only source will be the FRBNY.
Inventory: 724.80 tonnes
Dec 9.2014: we gained 2.69 tonnes of gold/inventory 721.81 tonnes
Dec 8.2014: we lost .900 tonnes of gold/inventory 719.12 tonnes
Dec 5.2014: no change in tonnage/720.02 tonnes
Dec 4 no change in tonnage/720.02 tonnes
Dec 3 no change in tonnage/720.02 tonnes/
December 2/2014; wow!! we had a huge addition of 2.39 tonnes of gold /Inventory 720.02 tonnes
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
Today, December 12 / no change in inventory / 725.75 tonnes
inventory: 725.75 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 : 725.75 tonnes.
And now for silver:
Dec 12.2014 no change in silver inventory at the SLV/Inventory at 342.35 million oz
Dec 11.2014: we lost 2.873 million oz of silver inventory at the SLV/Inventory 342.35 million oz
December 10.2014; no change in inventory/345.223 million oz
Dec 9.2014: no change in inventory/345.223 million oz
Dec 8.2014: no change in inventory/345.223 million oz
Dec 5/2014: no change in inventory/345.223 million oz
Dec 4/we lost another 2.204 million oz of silver/inventory 345.223 million oz
dec 3. we lost 2.73 million oz of silver/inventory 347.427 million oz and back where we were on Dec 1.2014.
dec 2 wow@!!@ a huge addition of 2.20 million oz of silver/inventory 350.158 million oz.
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
December 12/2014/ no change in silver inventory at the SLV/inventory registers: 342.35 million oz
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 9.7% percent to NAV in usa funds and Negative 9.5% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 60.8%
Percentage of fund in silver:37.7.%
( December 12/2014)
2. Sprott silver fund (PSLV): Premium to NAV rises to positive 0.26% NAV (Dec 12/2014)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.45% to NAV(Dec 11/2014)
Note: Sprott silver trust back hugely into positive territory at 0.26%.
Sprott physical gold trust is back in negative territory at -0.45%
Central fund of Canada’s is still in jail.
At 3:30 pm we received the COT report.
First let us head over and see the gold COT:
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, December 09, 2014|
Our large specs:
Those large specs that have been long in gold added a whopping 16,226 contracts to their long side
Those large specs that have been short in gold covered a rather large 9606 contracts from their short side
Those commercials that have been long in gold pitched 10,686 contracts from their long side
Those commercials that have been short in gold added another whopping 16,507 contracts to their short side and the regulators watch gleefully
Our small specs;
Those small specs that have been long in gold added 3911 contracts to their long side
Those small specs that have short in gold added 2250 contracts to their short side.
and now silver:
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||139||129|
|Tuesday, December 09, 2014||© SilverSeek.com|
Our large specs;
Those large specs that have been long in silver added 1443 contracts to their long side
Those large specs that have been short in silver covered a monstrous 5425 contracts.
Those commercials that have been long in silver pitched a huge 2575 contracts from their long side
Those commercials that have been short in silver added a monstrous 6196 contracts to their short side
Our small specs:
Those small specs that have been long in silver added 612 contracts to their long side
Those small specs that have been short in silver covered 1291 contracts from their short side
Conclusions: the bankers are defending their turf until their last breath.
And now for your most important physical stories on gold and silver today:
Early gold trading from Europe early Friday morning:
This week: 38 tonnes of gold demand came from China
(see below Shanghai gold withdrawals)
New York Times on Benefits of Gold in Currency Wars
The New York Times published an important article this week in which the benefits of gold to nation states during a period of currency wars was highlighted. The article was noteworthy as the New York Times has rarely covered gold in a positive manner.
The article, entitled ‘The Golden Age’ is about the growing use of gold in geopolitical affairs. They drew attention to the gold repatriation movements in Europe and to the accumulation of the precious metals in vast quantities by the central banks of the East – particularly Russia and China.
The Times attempts to get into the mind-set of the central banks who are buying gold or attempting to repatriate their current stocks of the metal. It presents two major rationales for the current trend.
“Some that’ve interpreted the metal’s mini-comeback as an indication that financial Armageddon, in the guise of runaway inflation, is approaching. Others have read the recent move as a symbolic way for central banks and governments to make a show of strength in nervously uncertain economic times.”
The first point is one which we have covered here consistently. The article quotes Jim Rickards who interprets the policies of China and Russia as “they understand who fragile things are and they are getting ready for the demise of the dollar.”
The Times refers to the unprecedented waves of money printing by central banks in recent years “which in theory can devalue sovereign currencies.” Despite the fact that massive money printing programs have always led to high inflation the Times seems to believe that this time it may be different – famous last words in economic terms.
The other side of the argument as put forward by the Times does not really hold water. It suggests that the accumulation of gold is a largely symbolic act . It is being used to induce a “culture of stability.”
It quotes a professor from the University of Southern California, “I doubt that the Russians or the Chinese actually believe that gold is such a great investment in terms of pure returns,” he says -“But if they are trying to suggest that they are unhappy with the dollar or that they want to become a global player, then gold is very powerful.”
He does not seem to realize that these two countries already are global players whose influence is growing as that of the U.S. declines. They may not view gold as an investment in the classic sense how they clearly view gold as an important monetary asset as seen in their declarations and in the enormous volumes they have been accumulating.
The New York Times is the paper of Paul Krugman and the Federal Reserve and central banks. It rarely has a critical word to say about central banks and the current fiat monetary system. Conversely, it rarely has a positive word to say about gold.
The article is thus noteworthy and suggests a realisation that currency wars are set to intensify with gold again becoming an important monetary and geo-political asset.
A new Golden Age cometh. The golden rule – those who have the gold will make the rules …
Today’s AM fix was USD 1,223.50, EUR 984.31 and GBP 779.15 per ounce.
Yesterday’s AM fix was USD 1,219.50, EUR 980.94 and GBP 778.24 per ounce.
Spot gold fell $2.30 or 0.19% to $1,225.10 per ounce yesterday and silver slipped $0.03 or 0.18% to $17.05 per ounce.
Gold is still on track for a 2.6% weekly gain so far, its strongest since mid-October, as safe haven demand and short covering have given support.
Gold in Singapore ticked marginally lower again overnight prior to seeing slight gains on the open in London as European shares saw falls. Asian shares were mixed but shares in Asia were lower for the week and shares in the U.S. and Europe are also heading for losses this week.
This is supporting gold and it remains just below its highest in more than six weeks. Gold rose this week as equities and the dollar tumbled on global growth concerns and political uncertainty in Greece.
Gold appears to be consolidating above the 1,200/oz level and is supported by robust global demand particularly from China and India and the still uncertain outlook for debt saturated western economies and the U.S.
The U.S. House of Representatives averted a government shutdown late last night, narrowly passing another massive $1.1 trillion spending bill. The vote followed a long day of drama and discord on Capitol Hill that highlighted fraying Democratic unity and featured an uneasy alliance between previous enemies President Barack Obama and House Speaker John Boehner.
The FTSE pulled back again Friday, in broad-based losses that pushed the FTSE 100 benchmark toward its worst weekly drop in more than two years.
The FTSE 100 is heading for a fifth consecutive decline, to round off a week when oil prices tumbled to five-year lows and investors begin to worry about the global economy. The London benchmark is set to be down 5.6% this week, which would be the largest weekly drop since March 2012, according to Reuters data (see chart).
Technically, the FTSE looks like it is topping out with a triple top and has all the hallmarks the beginning of a bear market.
Improvement sentiment this week is seen in the holdings of SPDR Gold Trust, the world’s largest gold exchange-traded fund. Holdings of New York’s SPDR Gold Shares <GLD>, rose 0.13 percent to 725.75 tonnes on Thursday – a third straight day of inflows. they are up by 4.8 tonnes so far this week, a second week of net inflows and their biggest weekly rise since early July.
Chinese demand for gold remains robust. Volumes on the Shanghai Gold Exchange (SGE) for the benchmark spot gold contract climbed yesterday to a three-week high.
Members of the century-old Chinese Gold & Silver Exchange Society in Hong Kong should be able to start trading the yellow metal in Shanghai from March, allowing them to tap into mounting demand in China, the world’s leading gold buyer.
The CGSE has been accepted by the Shanghai Gold Exchange as a strategic trading member, allowing CGSE members to do business on the main and international boards of the Chinese exchange, Haywood Cheung, president of the CGSE, told Reuters in an interview.
Cheung said the CGSE was building a system to link into Shanghai trading, which was expected to be ready in March next year. Its members would be able to trade for themselves and for clients.
The connection between the two exchanges will also benefit the CGSE’s plan to set up a trading floor and bonded warehouse for gold in a free-trade zone, Qianhai, in Shenzhen city in China’s southern province of Guangdong, home to thousands of jewellery makers.
The trading floor and and a bonded warehouse will be one of the largest in the world and able to hold a very large 1,500 tonnes of gold. It will be ready in the first half of 2017, Cheung said.
Spot platinum was flat at $1,243.50 an ounce and is heading for a second weekly increase, the longest such stretch since July. Palladium fell 0.3 percent to $818.75 an ounce, snapping three days of gains. The metal rose to $823 yesterday, the highest since Sept. 24.
Silver continues to consolidate above $17 per ounce and was 0.5% higher to $17.28/oz – a second weekly advance. The gold silver ratio at 71 ($1226/$17.27) is very favourable to silver and leading to continuing steady weekly demand for silver – in bar format but especially for silver eagles and maples.
Looks like Austria is concerned that the Bank of England does not or cannot retrieve the Austrian sovereign gold of 280 tonnes
(courtesy zero hedge)
Austria Considers Repatriating Its Gold
Submitted by Tyler Durden on 12/12/2014 13:11 -0500
And just like that, the list of countries who want to repatriate their gold just increased by one more, because after Venezuela, Germany, the Netherlands, sorry Switzerland, and rumors of Belgium, we now can add Austria to those nations for whom the “6000 year old barbarous relic bubble” is more than just “tradition.”
Austrian Central Bank Mulls Relocating London Gold: Standard
The Austrian state audit court says central bank should address concentration risk of storing 80% of its gold reserves with the Bank of England, Standard reports, citing draft audit report. Court advises central bank to diversify storage locations, contract partners.
Austrian central bank reviewing gold storage concept, doesn’t rule out relocating some of its gold from London to Austria: Standard cites unidentified central ank officials. Austria has 280 tons gold reserves, according to 2013 annual report. Austrian Audit Court Will Review Nation’s Gold Reserves in U.K.
And from derStandard.at (google translated):
The gold reserves of the Oesterreichische Nationalbank (OeNB) and their deposits in the UK and in Switzerland are a recurring theme in political discussions. Especially like the Freedom require relocation to Austria,the example of the Deutsche Bundesbank in mind, who want to move their gold by 2020 half of them to Germany.
In Austria, the Court has adopted in its recent OeNB examination of the issue of gold. In its draft report he gives the OeNB diverse recommendations on the way. One of the key points: Given the “high concentration risk in the Bank of England” advise the examiner to “rapid evaluation of all possibilities of a better dispersion of the storage locations”. Not only the parties to be diversified, but it should also come to the “actual spread of the storage locations”.
Gold relocation possible
In the central bank can not hold, such a transfer excluded. The existing gold bearing concept would be reviewed, at best you’ll bring parts of the stored gold in the UK to Austria, OeNB experts explain the standard. Any changes will be decided according to security and economic criteria, according to the OeNB.
A brief orientation in gold Milieu: Austria has 280 tons of gold, only a small part of them (17 percent) are kept in Vienna. 80 percent of the reserves are located in London, the main trading for gold, three percent in Switzerland. For comparison, the German Bundesbank has 3400 tons of gold; about half of them superimposed (as of 2013) in the United States. With the decision by the end of 2012, to resettle half of the gold to Germany, gave the Bundesbank political pressure.
Examiners want Strategy
Because you do not think in the OeNB; the central bank decide “autonomously”, as emphasized. But there was indeed a discussion of the gold storage, you will receive and evaluate the recommendations of the Court. But whose final report is not yet available, the OeNB has transmitted to the auditors on 28 November their comments on the draft report.
The examiners also recommend an analysis of the costs of the bearings and a “comprehensive strategy for the management of gold reserves” to. The OeNB said: “opportunities to develop a long-term approach bearings will be evaluated.” The criticism of the auditor, the OeNB have the gold that is not stored in the National Bank itself, not regular “physically checked” 2009-2013 or not, has the OeNB in ??its opinion violently back.
In October 2011, had central bankers, as mentioned in the report body, held in three deposits in Switzerland and one in London “Einschau”. 2012 were examined in the coin Austria gold holdings. Keyword Einschau: This should not be so easy. Anyway criticize the auditor that access opportunities are not agreed with all bearings contract.
Violent criticizes the Court of Auditors on the audit of the gold holdings abroad: Since lacked a concept of what constitutes a gap in the internal control system. The OeNB denies it, which was founded in 2013 department of “values ??Revision” fulfills that function already.
What, no rigged referendum? Or maybe this is the next logical step from the only country in Europe to push for the now-cancelled Russian “South Stream” pipeline.
So, who’s next? Because if you act now, you may still be able to recover some of the physical gold “located” in the gold vault located at the bottom of Libert 33 (which just happens to share a tunnel with the JPM gold vault located just across the street).
As for what this ever more aggressive scramble by official monetary authorities to repatirate their gold means, we hardly need to comment what that means for the future of “non-6000 year old, non-traditional” fiat currencies.
HSBC sees an 11 million ounce deficit in silver in 2005:
(courtesy Lynette Tan/Fastmarkets.com)
Silver to see 11 million ounce deficit in 2015 – HSBC
The bank predicts the deficit will come mainly from a reduction in mine production.
Author: Lynette Tan
Posted: Thursday , 11 Dec 2014
The demand and supply balance for silver is likely to swing from a three million ounce surplus in 2014 to an 11 million ounce deficit in 2015, said HSBC in a report focusing on the outlook of silver.
The deficit comes mainly from a reduction in mine production, lower scrap supplies as well as a cea halt to government sales. Consequently, the small but persistent deficit should limit further price declines.
Despite the deficit forecast, the bank is keeping its average price for silver outlook at $17.65 for 2015 and expects the precious metals to trade in the price range between $15 to $21 per ounce.
Current spot silver price stands at $17 per ounce
As indicated above, gold demand form China this week: 38 tonnes
WGC notes that total Chinese demand (ex Sovereign) should reach 1700 tonnes.
(courtesy Koos Jansen)
WGC Notes 2014 Chinese Gold Demand Could Reach 1,700t
On December 9, 2014, Albert Cheng, Managing Director Far East of the World Gold Council, was interviewed by the China Gold Network. The interview was published in Chinese only.
The Gold Demand Trends published each quarter by the World Gold Council (WGC), show aggregated Chinese consumer demand Q1 – Q3 2014 has been 638.4 tonnes. But, in the interview Cheng notes that the chairman of the Shanghai Gold Exchange (SGE), Xu Luode, stated the SGE has been supplied by 1,100 tonnes of gold import in the first eleven months of 2014 and this number may reach 1,250 tonnes by year end. Supplemented by 450 tonnes of domestic mine production this year “total demand should reach about 1700 tonnes”, said Cheng.
I have been long disputing Chinese gold demand numbers from the WGC, as total supply (Chinese net import, domestic mining and scrap) persistently has been transcending the WGC numbers. The WGC has never been able to elucidate the difference between massive supply and their demand numbers. The aggregated difference from 2007 until present is about 3,000 tonnes.
The total supply can be tracked on a weekly basis by SGE withdrawals, which have proven to be the best proxy. Though the import (and scrap) composition of SGE withdrawals can only be estimated until confirmed by the SGE or China Gold Association.
And so I was surprised Cheng openly (in Chinese) elaborates on the SGE model and instead of solely talking about how much gold was sold at retail level, also expands on how much gold is actually added to Chinese (non-government) gold reserves: import and domestic mine production, that are prohibited from being exported from the mainland.
Translated by LK, gold investor from Hong Kong (who we all should be very thankful for his work!):
The China Gold Network: The recently published Q3 Gold Demand Trends report says that China’s gold demand is down year-on-year. How do you interpret this?
Albert Cheng: This year, the Q3 gold demand figure that we publish is down because last year’s gold demand was a special case. Given that last year compared to 2012 same time was up 40%, there really is nothing strange. However, if we compare this year’s Q3 figure to the average of the last 5 years at this time, we still find positive growth, and still up slightly compared to 2012.
Using the numbers supplied by Xu Luode, they in fact show that China imported about 1100 tonnes of gold in the first 11 months this year through the SGE, and may reach 1200 to 1300 tonnes by year end. Adding together domestic production, total demand should reach about 1700 tonnes. So, the energy of the China gold market hasn’t diminished; compared to last year, the development is still healthy.
For clarity: the translator is a native Chinese speaker and a financial expert. The translation has been confirmed by a second native Chinese speaker and a financial expert, which severely limits the probability of the Chinese text being misinterpreted.
As my regular readers know I often make estimates of Chinese net import using SGE withdrawals as a proxy. Last week I estimated China in the first 11 months of 2014 imported 1,200 tonnes, we now know now I probably overestimated gold import by 9 % (1,200 tonnes vs 1,100 tonnes).
In hindsight it’s always more easy to analyze. I think what happened is that in mid 2014 (March and June) a part of the SGE withdrawals supply composition shifted from import to scrap. If scrap went up, import went down, as:
SGE withdrawals = import + mine + scarp (neglecting stock-carry over)
In the chart above we can see premiums going negative in March and June while withdrawals staying relatively strong. This means domestic supply (scrap) was increasing relative to import, hence the gold in China became cheaper than in London. The reason the discount isn’t immediately arbitraged is because gold in China is prohibited from being exported.
The dip in Chinese gold import was also reflected in export from Hong Kong to China mainland.
Because scrap apparently was more than I calculated in my model, I can now adjust the model. If from January until November import was 1,100 tonnes and mining was 413 tonnes, than scrap had to be 328 tonnes, as withdrawals were at least 1,841 tonnes in the mainland.
Additionally, elevated means scrap means quite some Chinese have been selling physical gold that found its way to the SGE. Perhaps some were expecting the price to rise sooner. I don’t think elevated scrap signals leases were unwound; if a lease expires the lessee is most likely to buy gold on the SGE, it would not make sense for him to buy gold in the domestic market to bring to the SGE in order the repay the loan.
SGE withdrawals in week 49 have dropped by a whopping 28 % w/w, to 38 tonnes. Year to date withdrawals stand at 1,905 tonnes.
However, when corrected for SGEI volume withdrawals in week 49 could have been as low as 27 tonnes, which was not expected for the seasonally strong December month. Year to date withdrawals corrected for SGEI volume is 1867 tonnes.
Let’s what next week will bring to see if China will reach the 1,700 tonnes.
Another commodities firm Gunvor exits the gold trading field. States that he cannot obtain physical gold.
Commodities Firm Gunvor Said to Exit Gold Trading After Year
Gunvor Group Ltd. is giving up trading physical precious metals less than a year after the commodity house started a business dedicated to buying and selling gold.
At least two traders are leaving the company in Geneva and Singapore, according to people with knowledge of the matter, declining to be identified as the decision isn’t public. Seth Pietras, the firm’s spokesman in the Swiss city, declined to comment by phone and e-mail today.
Gunvor, the world’s fifth-largest oil trader whose former major shareholder and co-founder was sanctioned by the U.S. this year because of ties to Vladimir Putin, is one of the few large commodity firms that handles precious metals. The move into gold was part of an expansion into non-oil businesses that now include iron ore, industrial metals and natural gas. Gold trading was done by a handful of people in Singapore and Geneva.
Among the departures are Francois Beuzelin, hired in 2012 as head of metals in Geneva, and Cedric Chanu, who started in Singapore in January as a precious-metals trader, the people said. Chanu declined to comment by phone and Beuzelin didn’t answer calls to his office nor an e-mail sent via his LinkedIn account.
Gunvor executives decided to abandon the precious metals trading business partly because of difficulties in finding steady supplies of gold, where the origin could be well documented, one of the people said. Gunvor’s announcement earlier this year that it would begin physically trading precious metals was unusual as neither Glencore Plc (GLEN), the biggest metals trader, nor Trafigura Beheer BV, the second-largest, trade physical gold.
Gunvor continues to trade base metals, including copper and aluminum, as well as bulk commodities such as coal and iron ore. It opened an office in Shanghai this year that now employs 20 people to trade industrial metals and other non-oil products.
Founded by Swedish national Torbjorn Tornqvist and Gennady Timchenko, sanctioned by the U.S. in March because of close ties to Putin, Gunvor has expanded into other commodities and in Asia to diversify beyond its roots trading Russian crude oil, which now accounts for less than 4 percent of the firm’s trading volume.
Timchenko sold his 44 percent interest in the company to Tornqvist the day before he was sanctioned. The U.S. Treasury Department said Putin has investments in Gunvor and may have access to the company’s funds. The trader has denied any connections to Putin and has provided U.S. officials with documentation regarding its shareholders and ownership structure.
Gunvor’s exit from physical precious metals trading follows that of Deutsche Bank AG, which announced its departure last month.
Gold prices have slumped 37 percent from a record in September 2011 as the U.S. economy improved, raising expectations that interest rates will increase, damping demand for non-yielding assets like bullion.
Bullion for immediate delivery fell 0.2 percent to $1,225.30 by 11:04 a.m. in London.
To contact the editors responsible for this story: Will Kennedy at firstname.lastname@example.org Dylan Griffiths, Alex Devine
Guest Post/courtesy of Koos Jansen/author It is a Mystery
The incessant commentary about the FED hiking rates is supported only by government data. Retail sales appear great as does the employment situation. Everyone is entitled to their opinion and mine is the data is fabricated.
The rationale is simple. The FED is out of bullets. They cannot be zero bound when the next downturn comes. They cannot be zero bound when the equity market goes into a bear market. There is however a very big problem with the rate hike camp. The yield curve is collapsing and the FED has never raised rates in any environment other than a rising yield curve. The other elephant in the room is obviously the dollar and the effect it has on “inflation mandates.” With the Western World desperately trying to create inflation by crushing their respective currencies, the FED is supposedly going in the other direction.
The gold market is tracking the Yen/$, although the correlation is definitely weakening, as absolute levels suggest gold should be much lower. So, where does this leave us heading into the FED meeting?
Going back six months we see a bullish broadening wedge. Refer to Bulkowski for the odds of a breakout and the measured move.
In a shorter time frame the view is a little less sanguine.
Gold is most likely going to fall out of this short term rising wedge. The FED meeting and the Japanese election will have great influence on what it does from there.
In the longer term the only thing that matters is gold de-coupling from the dollar trade. The spark that will make this happen is without a doubt one of two things. Either there is a military confrontation of extreme significance or we start to see massive stress in global sovereign debt.
Once either or both of these occur, the pair trades that everyone seems to have on, along with hedges that have worked for years will all go up in smoke. That period of time is coming and when it does I believe volatility in gold will reach unprecedented levels. Until that time, gold will continue to trade irrespective of supply and demand fundamentals and simply mirror FX.
Written by: It’s a Mystery
E-mail Koos Jansen on: email@example.com
a little history reason on what happened to the Dutch gold during and after World War ii
(courtesy Roel Janssen/Koos Jansen/In Gold we Trust)
Early Friday morning trading from Europe/Asia
1. Stocks down on major Asian bourses even with a higher yen value rising to 118.46
2 Nikkei up 114 points or 0.66% (Abe expects to win Sunday’s election)
3. Europe stocks all down /Euro up/ USA dollar index down to 88.34/
3b Japan 10 year yield at .40% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.46
3c Nikkei now below 18,000
3fOil: WTI 59.35 Brent: 63.25 /all eyes are focusing on oil prices. A drop to the mid 60′s would cause major defaults.
3g/ Gold down/yen up;
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 Oil collapsing this morning both WTI and Brent/Oil demand forecasts another drop.
3k Greece accelerates its bid for a new president/if they fail then a new election/Athens stock exchange down 10%
3l Chinese industrial production drops/sends oil lower
3m Gold at $1222 dollars/ Silver: $17.10
3n USA vs russian rouble: 57.42!!!!!! (much weaker against the dollar)/Russia raises rates for the fifth time and central bank rate yields 10.5%
4. USA 10 yr treasury bond at 2.13% early this morning. Thirty year rate well below 3% AND COLLAPSING (2.80%)
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Crude Drops, Yields Slump, Futures Tumble
“A global flight-to-safety continues to dominate the landscape as lower oil prices drives the bid for core fixed income markets”
– ED&F Man
Anyone who was hoping the market would rebound on last-minute news that the US government has gotten funding for another 9 months, will be disappointed this morning, when futures are finally starting to notice the relentless decline in crude, and with Brent down another 1% as of this writing following yet another cut in the forecast of Global oil demand by the IEA (the 4th in the last 5 months) and with Chinese industrial production also missing estimates (recall that the Chinese slow-motion hard landing has been said by many to be the primary catalyst for the crude collapse) which however pushed Chinese stocks higher on hopes of even more stimulus,the S&P is trading lower by some 13 points, the 10 Year is in the red zone at 2.12%, and the USDJPY is close to session lows. In short: Kevin Henry’s “ETF” desk at the NY Fed will have its work cut out to generate one of the now traditional pre-weekend feel good, boost confidence stock market ramps.
Some more details
European equities trade lower (Eurostoxx50 -1.4%) following the late sell-off in the S&P 500 as oil broke USD 60 to print its lowest level since July 2009 which pushed the VIX (+8.4%) to its biggest 4 day gain since 2011. In Europe the Eurostoxx50 Volatility Index is up 10%, following its US counterpart, with the FTSE (-1.7%) underperforming due to lower commodity prices with energy the worst performing sector in Europe. The DAX (-1.3% also trades heavy as index heavyweights BASF (-2.75%) was downgraded at Morgan Stanley and Commerzbank (-1.55%) is looking to settle USD 1bln fine with US regulators.
As fixed income traders focus on the weekly LTRO update (not released at time of writing) weak equities have helped push Bunds (+45 ticks) to contract highs and German 10 year yields to record lows at 0.64%.
Overnight the US House of Representatives narrowly passed a USD 1.1trl spending package that will fund nearly all of the US government through September 2015. The Senate now has until midnight Saturday to take up the bill, thanks to a short-term resolution passed by the House to give it time. Senator Harry Reid said the chamber could take up the bill as early as Friday. (BBG)
Nikkei 225 (+0.7%) retraced recent losses amid expectations for PM Abe’s party to win an overwhelming majority in the lower house, with results due this weekend. Shanghai (+0.4%) and Hang Seng (-0.3%) traded mixed following Chinese IP Y/Y 7.2% vs. Exp. 7.5% (Prev. 7.7%) and Retail Sales Y/Y 11.7% vs. Exp. 11.5% (Prev. 11.5%). Downside was capped amid heightened expectations of further easing after China’s 2015 GDP growth targets were lowered at the Central Economic Work conference. JGBs traded higher up 7 ticks at 147.32 amid notable curve steepening after the BoJ offered to buy JPY 1.3trl of JGBs, all in the 1yr–10yr maturity range.
10Y Treasury futures traded 220k contracts overnight as European equities sell off; bund yield making record lows at 0.639%, “which in turn is underpinning Treasuries,” Tom di Galoma, head of credit and rates trading at ED&F Man writes in note. “A global flight-to-safety continues to dominate the landscape as lower oil prices drives the bid for core fixed income markets”: ED&F
The US economic calendar is a little lighter this afternoon featuring just the PPI and the preliminary UofM Consumer Sentiment for December. It will be interesting to see if lower energy prices will have an impact on the latter, we add sarcastically.
European shares fall, though are off intraday lows, with the basic resources and oil & gas sectors underperforming and real estate, travel & leisure outperforming. European bond yields fall to all-time lows. IEA lowers forecast for global oil demand, WTI crude falls below $60 a barrel. Ruble falls to record, Norway’s krone falls to 11-year low. China November industrial production growth below estimates y/y. The U.K. and French markets are the worst-performing larger bourses, the Swedish the best. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with WTI crude, Brent crude underperforming and natural gas outperforming. U.S. Michigan confidence, PPI due later.
- S&P 500 futures down 0.5% to 2013.1
- Stoxx 600 down 1.3% to 335
- US 10Yr yield down 3bps to 2.13%
- German 10Yr yield down 3bps to 0.64%
- MSCI Asia Pacific up 0.4% to 137.3
- Gold spot down 0.3% to $1224/oz
Bulletin Headline Summary from RanSquawk and Bloomberg
- Bunds hits contract highs and German 10y hits record low yields as European equities trade lower and the Eurostoxx50 Volatility Index is up 10% with energy the worst performing sector in Europe.
- Looking ahead will see the release of US PPI, Michigan and updates from S&P and Fitch on UK and France.
- Treasuries rise, headed for weekly gain, as EGB yields fall to all-time lows amid ongoing decline in oil and European stocks head for worst week since 2012.
- Global oil demand next year will be weaker than previously estimated, with consumption expanding by 230k barrels less than estimated in November, and supply from non-OPEC producers will be bigger, the International Energy Agency said
- China’s economy slowed in November as factory shutdowns exacerbated weaker demand, raising pressure on the central bank to add further stimulus
- The ruble tumbled to a record for a second day, spurring speculation Russia’s central bank intervened to stem the rout, and bonds slid as weaker oil prices worsen the outlook for an economy verging on recession
- Euro-area industrial production barely grew in October, rising 0.1% vs 0.2% median estimate in a Bloomberg News survey
- ECB’s supervisory board is today seeking to sign off on capital-raising plans for the lenders that failed a stress test in October, two people familiar with the issue said
- ECB said banks plan to repay EU39.758b in 3-yr loans next week, the highest-ever payback, vs EU14.04b payback this week, according to data compiled by Bloomberg
- As investors brace for a Greek presidential succession that could sink the government, Italy faces its own dilemma over appointing a new head of state after Giorgio Napolitano indicated that he’ll consider stepping down in the new year
- The Senate begins debate on a $1.1t U.S. government spending bill today after turmoil in the House yielded narrow passage of the plan amid opposition from Democrats and Republicans alike
- Sovereign yields mostly lower. Asian stocks mixed. European stocks, U.S. equity-index futures fall. Brent crude declines, WTI trading below $60/bbl; gold lower, copper gains
FX markets have been relatively quiet as the USD (-0.19%) has traded in a small range following its recent bout of volatility. USD/JPY printed session lows after sources suggested the BoJ would reject added stimulus to ease the blow from to CPI from oil. The continued slide in oil prices pushed the RUB to all-time lows vs. USD once again, shrugging off the Russian rate cut yesterday. In the Asian session NZD fell for the first time in 4-days amid disappointing data including Manufacturing PMI (55.2 vs. Prev. 59.3) and as Fonterra in its global forecast said sees decreasing milk exports. AUD steadied despite yesterday’s attempts by RBA Governor Stevens to jaw bone the currency saying AUD/USD should be closer to 0.7500.
WTI and Brent crude futures continue their descent with the latest leg lower below USD 59 as the IEA cut their global oil demand forecast for the fourth time in five months. This comes in addition to earlier this week when OPEC cut their global demand forecasts. In terms of levels to the downside, USD 58.32bbl could be a key level, with this price being the low seen in July 2009. Precious metals have traded sideways.
* * *
DB’s Jim Reid Concludes the overnight recap
The ECB will likely start broad based asset purchases in Q1 (probably March) including corporate and government bonds. This will help European credit withstand some risks in the early months, not least from possible pivotal Greece elections. There will also likely be an early year drag from US credit due to the effects of the falling oil price on the US energy sector and periodic fears of a hawkish Fed. Although our spread forecasts are for tighter Euro/GBP spreads by the end of H1 and YE we think we could go wider in Q1 for a period of time. The days of blanket US QE and low volatility are over. Expect some challenging conditions en route to tighter spreads. As the year progresses we expect the Fed to be more dovish as still soft global growth and low inflation makes it harder for them to pull the trigger on rates in line with their own timing preferences. So credit (especially US) may have a better H2 than H1.
Within Europe we think 2014’s sell-off in HY, especially single-Bs, makes it attractive against IG as technicals from the likely ECB buying spread to more ‘yieldy’ assets. Our excess return forecast for European HY is around 5% in 2015 while for EUR and GBP IG, excess return expectations range from 1.4%-4.9% across non-fins and fins with GBP outperforming EUR. Our US credit strategists expect the US HY default rate to rise to 3.5% in 2015 from September’s cycle lows of 1.7%. This is led by the energy sector. For Europe all of our forward indicators currently point to a 1.5-2% default rate over the course of the year – still incredibly low. The risk is if US energy defaults start to lead to a wider mini credit crunch in global HY. Please see the link in your inboxes that arrived within the last 90 mins.
To celebrate finishing the report I had a glass of mulled wine and some roasted chestnuts at Vienna’s fabulous main Xmas market last night. With the big day now only two weeks away I’m surprised I haven’t yet heard my favourite Xmas song namely “Fairytale of New York”. This normally marks the point that I turn from bah humbug to embrace the whole seasonal mood. I’m turning late this year and it probably doesn’t help that markets are still busy and full of intrigue.
Next week sees the important Fed meeting where Mrs Yellen will either be seen as ‚Scrooge or Santa? and we’ll also know whether Abe receives a ringing endorsement for Abenomics with the Japanese election due on Sunday – we should get the official results late on Sunday night in our timezone. The Greek presidential elections will also commence and with Greek equities down over 20% this week and with a huge inversion of the yield curve there’s plenty to play for.
For now the ongoing weakness in Oil continues to dominate the headlines. Indeed yesterday saw WTI and Brent fall by 1.6% and 0.9% with the former closing below $60/bbl for the first time since July 2009. The S&P 500 got off to a pretty strong start to the day having risen as much as 1.4% helped by a decent retail sales report. The market took a turn in the afternoon as the selloff in Oil gathered momentum although the index (+0.45%) still managed to post its first up day this week. The energy sector was unsurprisingly the laggard although having closed the day unchanged it was probably one of the better outcomes that one could have hoped for. Elsewhere the 10yr benchmark Treasury yield was little changed at 2.16% but the curve flattened further led by strength by long bonds. The 30yr fell by 2.5bp to close at around 2.81% a level which is currently lower than the pre-Taper tantrum lows that we saw in May last year. Demand for the 30yr auction yesterday was strong with a bid/cover ratio (2.76x) higher than the previous sale. Credit underperformed on a relative basis with the CDX IG about half a basis point wider and the CDX HY index around four-tenths of a point lower.
Staying on Credit we have the latest US HY fund flow stats and unfortunately we don’t have much good news to share. US HY mutual funds saw outflows of over $2.6bn (0.9% AUM) in the latest week ended 10 December. This marks the fourth straight week of outflows but notably it is the biggest weekly redemption for the asset class since the peak of outflows during the summer. The latest outflow also brings the 4-week moving average flows for US HY to – $1.1bn from around -$280m in the prior week. Energy is clearly the driver here. There is some good news though for European HY investors as outflows seem to have stabilized for now. The latest week saw around $160m (0.3% AUM) of inflows into the asset class, the first in 6 weeks. This gives us a little more confidence that European HY can out-perform the US, especially given its lack of exposure to Energy. Indeed many of the companies should be benefiting from lower Oil. As usual we have updated the weekly HY fund flow charts in the PDF for those interested.
In Europe the ongoing weakness in Greece was again one of the key market features yesterday. There was further pressure on the front end of the Greek curve with the 3yr and 5yr bond yields jumping 128bp and 98bp to close at 10.7% and 9.6% yesterday. The ASE was also down sharply closing more than 7% lower yesterday to put Greek equities as the worst performing equity markets year to date behind Russia. Indeed the ASE is poised to suffer from its worst weekly performance since 1987 and has lost around 29% this year. Our in house Greek expert George Saravelos had just returned from Athens and noted that the local opinion is firming that we are heading for an early election. What also looks to be becoming increasingly clear is that the government seems to be going down a strategy of polarization/highlighting the risks of an election while the opposition is trying to allay fears hence we are likely to get more headlines similar to Samaras’ over the course of the next few weeks. So plenty to look out for ahead of the first presidential vote (next Wednesday at 5pm London time).
Away from Greece the second round of the ECB’s TLTRO was reasonably subdued with just €130bn of funds allocated to banks – coming in at the lower end of expectations. Given the €1tn balance sheet expansion aim proposed by the central bank, the cumulative €212bn of issuance over the first two rounds lends further support to our call more broad-based QE sometime in Q1 next year, especially as upcoming legacy LTRO repayments over the next 2 and a half months are likely to exceed this amount.
Rounding out the market news, there were some contrasting moves from central banks in Europe yesterday. Starting in Norway, the Norges Bank surprised the market with a 25bp cut in rates to 1.25% with the decline in oil prices weighing on the country’s economy. On the other hand the Bank of Russia hiked 100bp yesterday to 10.5% – the fifth hike this year- although this did little to halt a further slide for the Rouble which closed 1.6% weaker versus the Dollar, extending the record low to 55.7/Dollar. Quickly updating the Asian session overnight, equity markets are mostly in the green as we type. The Nikkei, HSCEI and KOSPI are +1.1%, +0.5% and +0.4%, respectively. Onshore Chinese equities are little changed though the latest Chinese data just hit the screens as we are about to head to print. A mixed bag overall with Fixed Asset Investments (+15.8%) and Retail Sales (+11.7%) coming in line with consensus. Industrial Production (+7.2% v 7.5%) fell short of expectations though which is broadly consistent with the trends of late. More on China the PBOC yesterday said that it will maintain a prudent monetary policy with balance between loosening and tightening.
In terms of the day ahead, we have the wholesale price index from Germany but focus will probably be on the inflation data out of Spain and Italy. The US economic calendar is a little lighter this afternoon featuring just the PPI and the preliminary UofM Consumer Sentiment for December. It will be interesting to see if lower energy prices will have an impact on the latter.
Otherwise Oil and Greece should still be on top of people’s watch list ahead of next week’s FOMC meeting.
Guess who is loading the boat with oil: you guessed correctly, China!!!!
(courtesy N. Christie/Bloomberg and special thanks to Robert H for sending this to us):
Record Oil Tankers Sailing to China Amid Stockpiling Signs
The number of supertankers sailing to China jumped to a record in ship-tracking data amid signs that the oil-price crash is spurring the Asian nation to stockpile.
There are 83 very large crude carriers bound for Chinese ports, according to shipping signals from IHS Maritime, compiled by Bloomberg at about 8:30 a.m. today in London. The ships would transport 166 million barrels, assuming standard cargoes, the largest number in data starting in October 2011. The cost of hiring the vessels surged to the highest in almost five years, according to Baltic Exchange data.
The International Energy Agency, a Paris-based adviser to 29 nations, said in a report today that China may have added to strategic crude stockpiles last month, after pausing the activity in October. Oil plunged into a bear market this year, with Saudi Arabia and other nations in the Organization of Petroleum Exporting Countries offering few signs they will tackle a global glut.
“We see cargoes being picked up to be put into storage in China predominantly,” Erik Folkeson, a shipping analyst at Stockholm-based Swedbank AB, said by phone today. “The steep reduction in crude prices and continued output of crude has, in my view, triggered stock building.”
Daily shipping rates on the tanker industry’s benchmark trade route from the Middle East to Asia jumped to $81,499 yesterday, the highest since January 2010, Baltic Exchange data show. Swaps on the route, used for hedging freight costs, indicate earnings this month will average $77,907.
Crude slumped in London and New York today after the IEA cut global demand estimates for 2015, citing weakening economies in Russia and other producer nations. Brent slid as much as 1.5 percent to $62.75 a barrel on the ICE Futures Europe Exchange. West Texas Intermediate slid as much as 1.9 percent on the New York Mercantile Exchange. Both are down about 40 percent this year.
“As the price declined it made sense to buy,” Court Smith, head of research at Stamford, Connecticut-based shipbroker MJLF, said by phone yesterday.
China has to buy at least another 50 million barrels of crude in 2015 for its strategic petroleum reserve, according to Amrita Sen, chief oil market analyst at Energy Aspects Ltd., a London-based consultant. Plans to expand commercial crude inventories could raise that total above 100 million barrels, depending how quickly the country can build new storage units, she said.
“China filling up big parts of its SPR essentially helps to absorb the oversupply” on international oil markets, Sen said by telephone today. “You’re not going to get China slowing down on filling before 2016.”
Part of the tanker freight-rate rally may be because of rising shipments from West Africa. Traders booked 33 cargoes of crude on VLCCs from the region this month, 43 percent more than a year earlier, according to data from Galbraith’s Ltd., a London-based shipbroker.
Angola and Nigeria, the region’s two biggest exporters, will ship 4 million barrels a day next month, the most since August 2012, loading programs obtained by Bloomberg show.
The cost of shipping crude to China from West Africa was $3.34 a barrel yesterday compared with an average of $2.52 this year, according to data compiled by Bloomberg.
An excess of VLCCs in the Persian Gulf shrank in the past several weeks, with 11 percent more of the ships available than cargoes, down from an average surplus this year of 17 percent, according to a Bloomberg survey of shipbrokers and owners.
“Fleet growth is slowing, meaning that every additional barrel of oil on the water will help to tighten the market,” said Swedbank’s Folkeson.
The crude tanker fleet grew 1.5 percent this year compared with trade growth of 1.8 percent, according to Folkeson. Seaborne oil trade will rise by 3.5 percent in 2015, against no change in the fleet, he said.
VLCC rates will rise to an average of $35,000 a day in 2015, compared with $25,851 this year, according to a median of six forecasts from shipping analysts compiled by Bloomberg.
“Primarily it’s a consequence of lower oil prices still being a driver for buyers of crude to stock up,” Erik Stavseth, an analyst at Arctic Securities ASA in Oslo, said of the rally in prices.
To contact the reporter on this story: Naomi Christie in London at firstname.lastname@example.org
West Texas Intermediate falls into the 57 handle. It puts 80% of shale production into being non economic and totally blows up derivatives:
(courtesy zero hedge)
WTI Crashes To $57 Handle; 80% Of Shale Production Non-Economic
WTI Crude just burst below $58 and is now over 46% below the peak in June. Since the initial leaks of no production cuts at OPEC, WTI is down 25% (gold and silver are up 2-4%). At these levels only 4 of the US 18 Shale Oil regions remain economic…
Down 25% from the initial OPEC leaks…
Which leaves only 20% of US Shale regions economic…
* * *
This is what the low price of oil will accomplish with respect to financial risk in the high yield junk bond space plus derivative fallout.
(courtesy zero hedge)
We Have Just Escaped The Earth’s Gravity And Are Now In Space Orbit
Houston, we have a serious problem… With only 20% of US Shale regions remaining economic at these oil price levels, it should not be surprising that the credit risk of the US
Energy sector is exploding to near 1000bps… and contagiously infecting
the broad HY market…
Credit risk in the energy sector is starting to infect the broad HY market – HYG at 2-year yield highs and HYCDX near 15-month wides…
Which signals considerable pain to come for US Energy stocks..
* * *
The denial is so loud it’s deafening
And Dave Kranzler shares our thoughts on the oil collapse:
“Something is collapsing behind the scenes
I think it’s related to oil derivatives. I’ve been reading that the big banks like Goldman are sitting on a lot of un-syndicated shale company bank debt. That stuff has almost no collateral value with oil at $60 when the breakeven price is $100. It has option value, which means the junk subordinated debt is worth ZERO.”
Guess what Goldman Sachs is afraid of: a Greek exit:
(courtesy zero hedge)
Goldman Warns Greeks Of “Cyprus-Style Prolonged Bank Holiday” If They “Vote Wrong”
Funny what a difference two months make. Back on October 4, we wrote “Here We Go Again: Greece Will Be In Default Within 15 Months, S&P Warns” and… nobody cared as the Greek stock market meltup continued. Now, after the biggest three-day rout in Greek stock market history (or about 30% lower), and with the overhyped, oversold, oversusbcribed recent Greek 5 Year bond issue available in the open market some 16 points lower, and suddenly everyone cares. Including Goldman Sachs.
Overnight the bank with the $58 trillion in derivative exposure issued a note “From GRecovery to GRelapse” which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: “In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point.”
Here is the full note.
Why Have Greek Assets Tumbled?
Over the last three months, Greek assets have come under intense selling pressure. The 10y Greek government bond trades at a yield of 9.1% compared to 5.5% in September and the Athens stock exchange is trading 32% lower over the same time-frame (and 40% below the post-crisis peak). As we have written extensively, this deterioration in market conditions has taken place despite an ongoing improvement in macroeconomic indicators. Markets have sold off on the back of election uncertainty ahead of a key year for Greece’s recovery process.
Greece needs official sector funding to pass the 2015 funding hump and ensure financial stability.
Indeed 2015 is a pivotal year for Greece. The most recent growth data prints suggest that the recovery may be gaining momentum. But financial risks still lurk, which could destabilize the Greek economy back into recession. More specifically, 2015 is the last year the government faces large financing needs, nearing €24bn (net of the established primary surplus). Part of those needs may be covered with domestic resources (see Box 1). However, additional funds will likely be required to ensure the government is able to meet its liabilities. As discussed in Box 1, the additional funds required may range between €6bn and €15bn depending on different economic assumptions.
It is important to note that from 2016 onwards, overall financing needs become a lot more manageable (compared to €24bn in 2015) – at or below €10bn until 2022 (lower primary surpluses or higher bond yields than the ones provisioned in the program could push these calculations up somewhat).
With government bond yields at prohibitively high levels, the Greek government will require official sector financing to provide the additional funds for 2015. €7.1bn of IMF funds are currently available as part of the Greek assistance program under relevant conditionality. In addition, the Eurogroup decided on Monday to grant Greece a precautionary credit line (ECCL) provided Greece completes the ongoing review by end of February. There are three main items to be agreed on for the current review to reach a conclusion: a) further reform in labor markets and in union legislation, b) further pension system reform, and c) further budget cuts. Greece is also likely stay under close economic supervision thereafter.
Political complications arise with the presidential vote.
According to the Greek constitution, the parliament needs to elect a President of the Hellenic Republic every five years. The presidential vote requires an extended majority. The term of the incumbent, President Karolos Papoulias, ends in early March 2015. The parliament would need to start the process of electing a new president at least one month in advance – by early February the latest. Should the parliament fail to elect a president, general elections would need to be held.
Due to a tight timeframe between the new deadline for completion of the program review and the deadline for the presidential election, the government decided to speed up the voting process. Three votes will take place – first two on the 17th and the 23rd of December respectively. The first two votes require a majority of 200 votes, which is unlikely to be achieved given the current parliamentary balances. The one that essentially matters is the third and final one on the 29th of December, where the Greek government would need to find 180 votes in the current parliament (of 300 members) to back their presidential candidate. As things stand, the government majority does not suffice to elect a president and avoid elections. 25 independent MPs and MPs from small parties would need to consent to meet the tally.
In the event that the parliament elects a president, the government and the troika will likely resume negotiations and an agreement is likely to be found. Financial risks would decline and Greek assets would likely rally.
In the event that the parliament fails to elect a president, general elections would be held and market uncertainty/pressures would extend. At this stage it is important to understand that market pressures are not linked to the democratic process of elections nor to a potential government change, whatever the ensuing government formation may be. They are linked to the risk of policy discontinuity and a severe clash between Greece and international lenders. More specifically, we think the room for Greece to meaningfully backtrack from the reforms that have already been implemented is very limited. Any such attempt would lead to an interruption of official financing to Greece.
Examining the downside scenario.
To be sure, even in the event of a government change, there is room for a cooperative solution between Greece and Europe. Greece has made significant reform progress between 2012 and the gap between what has already been implemented and what remains to be done is not insurmountable.
Also, the incentives for a clash are not there. For instance any Greek government would likely want to capitalize on the momentum that the economy is building on the activity front, rather than trigger a disruptive capital flight that would lead Greece to a double–dip recession. In addition, given that more than 80% of Greek debt is held by the official sector and given that any OSI would be feasible only as part of an agreement with the Euro-area, there is an incentive for a Greek government to pursue cooperative solutions.
However, the history of the Euro-area crisis has shown that the probability of an “accident” can never be dismissed, when it comes to intra-EMU politics. And it is important for markets to be able to understand and quantify the aspects of a potential downside scenario, where official financing to Greece is interrupted.
The Biggest Risk is an Interruption of the Funding of Greek Banks by The ECB.
Pressing as the government refinancing schedule may look on the surface, it is unlikely to become a real issue as long as the ECB stands behind the Greek banking system. In fact, refinancing became a lot more pressing between 2011 and 2012. But financing needs were met despite the impasse in negotiations between Greece and international lenders – partly via the issuance of T-bills repoable at the ECB by Greek banks. Such methods can always be revisited at times of extreme need.
But herein lies the main risk for Greece. The economy needs the only lender of last resort to the banking system to maintain ample provision of liquidity. And this is not just because banks may require resources to help reduce future refinancing risks for the sovereign. But also because banks are already reliant on government issued or government guaranteed securities to maintain the current levels of liquidity constant.
And this risk can become more pressing from a timing perspective. At the heat of the Greek crisis, there was evident deposit and broader capital flight, which Greek banks helped accommodate with ECB’s help via the ELA facility. In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point.
Will European assets be affected?
Outside the spectrum of Greek assets, the main question becomes whether Euro-area assets (such as peripheral bonds, the EUR etc) as well as global assets (equities) are likely to be affected by the Greek crisis. We think this is unlikely. Should financial pressures from a Greece related shock hit the peripheral countries formerly in a program (Ireland & Portugal), there may be special arrangements to avert the transmission of the shock locally. Moreover, in our view, the ECB is likely to engage in outright market purchases of sovereign debt securities as part of their monetary policy operations in H12015. We do not think that the volatility from Greece is likely to derail the QE decision.
There is of course the risk of broader contagion, should the participation of Greece in EMU once again be put in doubt. But we think this is a low probability event as the majority of the Greek population is still in favor of EMU participation and as all major political parties in Greece currently deem Euro-exit as undesirable.
And with all that good news tonight, at 5 pm we get another dandy:
(courtesy Fitch/zero hedge)
Fitch rating agency downgrades France to AA from AA+
Fitch Downgrades France To AA: Full Text
And the final punch in the gut on this bloodbathy Friday some from French Fitch which just downgraded France from AA+ to AA.
Fitch Downgrades France to ‘AA’; Outlook Stable
Fitch Ratings has downgraded France’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA’ from ‘AA+’. This resolves the Rating Watch Negative (RWN) placed on France’s ratings on 14 October 2014. The Outlooks on France’s Long-term ratings are now Stable. The issue ratings on France’s unsecured foreign and local currency bonds have also been downgraded to ‘AA’ from ‘AA+’ and removed from RWN. At the same time, Fitch has affirmed the Short-term foreign currency IDR at ‘F1+’ and the Country Ceiling at ‘AAA’.
KEY RATING DRIVERS
The downgrade reflects the following factors and their relative weights:
When it placed the ratings on RWN in October, Fitch commented that it would likely downgrade the ratings by one notch in the absence of a material improvement in the trajectory of public debt dynamics following the European Commission’s (EC) opinion on France’s 2015 budget. Since that review, the government has announced additional budget saving measures of EUR3.6bn (0.17% of GDP) for 2015, which will push down next year’s official headline fiscal deficit target to 4.1% of GDP from the previous forecast of 4.3%. On its own, this will not be sufficient to significantly change Fitch’s projections of France’s government debt dynamics.
The 2015 budget involves a significant slippage against prior budget deficit targets. The government now projects the general government budget deficit at 4.4% in 2014 (up from 3.8% in the April Stability Programme with the slippage led by weaker than expected growth and inflation) and 4.1% in 2015 (previously 3.0%), representing no improvement from the 4.1% of GDP achieved in 2013. It has postponed its commitment to meet the headline EU fiscal deficit threshold of at most 3% of GDP from 2015 until 2017.
In the draft 2015 budget, the authorities projected the gross general government debt (GGGD) to GDP ratio to peak higher at 98% and later in 2016 (previously in the Stability programme at 95.6% in 2014 and 2015) and fall more slowly to 97.3% in 2017 (previously 91.9%) and 92.9% in 2019. The projections compare with the ‘AA’ category median for GGGD of 37%. The only ‘AA’ range country with a higher debt ratio is Belgium (AA/Negative). Even under the official forecast, the capacity of the public finances to absorb shocks has been significantly reduced. Fitch expects the debt to GDP ratio to peak higher at close to 100% of GDP, with a slower decline to 94.9% of GDP by the end of the decade.
Risks to Fitch’s fiscal projections remain on the downside owing to the uncertain outlook for GDP growth and inflation in the near term and the increased uncertainty over the government’s ability to deliver on a fiscal consolidation path. Reflecting these concerns, Fitch’s medium-term growth forecasts are somewhat weaker and budget deficits wider than official projections.
The weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilising the public debt ratio. The French economy underperformed Fitch’s and the government’s expectations in 1H14 as it struggled to find any growth momentum, in common with a number of other eurozone countries. Underlying trends remained weak despite the economy growing more strongly than expected in 3Q, when inventories and public spending provided an uplift. Euro depreciation and lower oil prices will provide some boost to growth in 2015. Fitch’s near-term GDP growth projections are unchanged from the October review of 0.4% in 2014 and 0.8% in 2015, down from 0.7% and 1.2% previously. Continued high unemployment at 10.5% is also weighing on economic and fiscal prospects.
The on-going period of weak economic performance, which started from 2012, increases the uncertainty over medium-term growth prospects. The French economy is expected to grow less than the eurozone average this year for the first time in four years. The French government is implementing a programme of structural reforms. However, the quantitative impact of recent structural reforms is uncertain, and in Fitch’s view does not appear sufficient to reverse the adverse trends in long-term growth and competitiveness.
The OECD estimates that the impact of economic reforms could take longer to materialise than expected by the authorities. Its October 2014 report on French structural reforms suggests that measures already undertaken could raise GDP by a cumulative 1.2ppt in five years and 3.0pp in ten years. This is equivalent to an annualised impact on growth of 0.2ppt and 0.3pp, respectively. Adding announced measures yet to be implemented, the impact on GDP rises to 1.6ppt over five years and 0.3ppt annually. However, these estimates are highly sensitive to assumptions and there are risks to policy design and implementation of some of the measures. We continue to believe estimates of long-term growth potential around 1.5% are plausible, down from over 2% in the 1980s. This would be consistent with applying the OECD’s estimates for the impact of structural reforms on growth to the EC’s current estimate of trend growth at 1.2%.
In Fitch’s view, the latest deviations from budget targets and EU excessive deficit procedure commitments weaken fiscal credibility. This is the second time the French government has postponed meeting the EU 3% headline deficit threshold since end-2012. This is despite the introduction of a High Council of Public Finances and new fiscal framework in France and the reinforced EU policy framework.
Despite the additional measures, the EC November opinion on 2015 was that France is at risk of non-compliance with the provisions of the Stability and Growth Pact. Furthermore, it states that “the information available so far indicates that France has not taken effective action for 2014”. If that is its final view and agreed by the EU Council, and France then fails to take effective action it could potentially incur a fine in the form of a deposit of 0.2% of GDP. The EC will reassess France’s position in March 2015 after official data on 2014 budget performance is made available by Eurostat and consider the next steps.
The French High Council of Public Finance’s (HCPF) opinion on the government’s latest economic forecast was that the lower GDP growth rates projected for 2016-2017 were more realistic than previous forecasts but still reflect an optimistic view of the external environment and domestic investment potential. The HCPF’s opinion on the government’s fiscal projections in the draft 2015 budget was that there is a risk of deviation from the medium-term objective of lowering the structural deficit from 2.5% of potential GDP in 2013 to 0.4% by 2019.
France’s ‘AA’ IDRs and Stable Outlooks also reflect the following main factors:
Fitch judges financing risk to be low, reflecting an average debt maturity of seven years, low borrowing costs and strong financing flexibility. Government debt is entirely euro-denominated rather than in foreign currency.
The government has stated its intention to continue with structural reforms in 2015, including territorial reform and a law on growth. As stated above, these have the potential to raise trend growth.
France has a wealthy and diversified economy. It has a track record of relative macro-financial stability including low and stable inflation. It also benefits from moderate levels of household debt and a high household savings rate. Political stability and governance is entrenched by strong and effective civil and social institutions.
While the current account balance has generally been on a deteriorating trend for the past 10 years due to France’s loss of export market share, at 1.3% of GDP in 2013 the deficit is not excessive. Fitch projects the deficit to stabilise around current levels. However, France’s net external debt is significantly higher than most rating peers.
There is low risk from contingent liabilities. In recent years, the financial sector has been cleaning up its balance sheets, strengthening funding, liquidity, capital and leverage. The risks from the eurozone crisis management mechanism including the EFSF and ESM have also eased owing to the actions of the ECB and the on-going gradual economic recovery of the single currency area.
The main factors that could lead to negative rating action, individually or collectively, are:
– Weaker public finances reducing confidence that public debt will peak in 2017 and be placed on a downward trajectory.
– Deterioration in competitiveness and weaker medium-term growth prospects.
Future developments that could individually or collectively, result in positive rating action include:
– Sustained lower budget deficits, leading to a track record of a decline in the public debt to GDP ratio from its peak.
– A stronger economic recovery of the French economy and greater confidence in medium-term growth prospects particularly if supported by the implementation of effective structural reforms.
In its debt sensitivity analysis, Fitch assumes a primary surplus averaging 0.5% of GDP over the next 10 years, trend real GDP growth averaging 1.5%, an average effective interest rate of 2.7% and GDP deflator of 1.5%. On the basis of these assumptions, the debt-to-GDP ratio would peak at 99.4% in 2017, before declining to 87.6% by 2023.
Fitch assumes the eurozone will avoid long-lasting deflation, such as that experienced by Japan from the 1990s. Fitch also assumes the gradual progress in deepening fiscal and financial integration at the eurozone level will continue; key macroeconomic imbalances within the currency union will be slowly unwound; and eurozone governments will tighten fiscal policy over the medium term.
What on earth is Mary Jo worried about?
(courtesy Dave Kranzler)
Why Is The Head Of The SEC Calling For Mutual Fund “Stress Tests?”
Is she worried about the large body of mutual funds that bloated up with derivatives? Is she worried about the lack of liquidity in the bond market? Did Mary Jo White see a burning bush that spoke to her about the system derivatives risk embedded in every crevice of the financial markets?
I warned everyone less than a year ago to get out of your bond mutual funds. Get out NOW. A good friend of mine who is a hedge fund consultant told me yesterday that he spoke to a big bond fund manager who is terrified about the lack of liquidity in the corporate bond market. This guy couldn’t get a bid on some paper he wanted to sell this week. A year ago he could have moved it in one phone call.
The system is collapsing. We have seen several clear indications of that just this week…
To all our Japanese friends out there: we wish you all the luck in the world!!
(courtesy zero hedge)
The GPIF Has A Warning For Japan’s Citizens: Abenomics Better Work, Or Your Pensions Are Toast
Once upon a time, the world’s biggest government pension fund, Japan’s $1.1 trillion Government Pension Investment Fund, or GPIF, was apolitical, and merely focused on preserving the people’s wealth.
Then everything changed, and with the reckless abandon of a junkie on a crack cocaine binge, aka Abenomics, the GPIF management was kicked out, and its entire mandate was flipped from preserving wealth, to gambling on #Ref!P/E stocks, in hopes of recreating the wealth effect of the super-rich (the only problem: Japan has reached its breaking point and the higher the USDJPY, and thus the Nikkei rises, the more the BOJ directly destroys its economy with an already record number of bankruptcies due to the plunging Yen getting recorder).
Worst of all, the GPIF became nothing short of the latest political pawn in what is now the the first failed Keynesian state, Japan.
Here is why this is bad. As the WSJ reports, “Japan’s $1.1 trillion government pension fund is betting that a long-term recovery and rising corporate profits will push Tokyo stock prices higher, helping the fund increase returns for the nation’s retirees.”
Mr. Abe has pushed for the fund to become a more aggressive and sophisticated investor. The fund decided in October to shift its portfolio to seek higher returns, slashing its target allocation to domestic bonds almost in half while nearly doubling that of domestic and foreign equities.
Mr. Mitani said the fund is still in the process of carrying out the changes and has a long way to go. Just under 50% of its total portfolio was in domestic bonds at the end of September, compared with its new target of 35%.
Expectations that Mr. Abe’s policies will succeed have already helped double Japan’s benchmark stock index since late 2012. Further gains would no doubt benefit GPIF’s ¥23.9 trillion ($202 billion) domestic stock portfolio.
What has doubled Japan’s stock index is the collapse in the Yen. In Dollar terms the Nikkei is down for the year. Which means the only beneficiaries are those uber-rich ten or so percent who were long the Nikkei and hedged for a collapse in the Yen. For everyone else, such as the 90% of Japanese (including record number of retirement-age population) who do not participate in the market, Abenomics has so far been an absoutely epic and undisputed debacle, as confirmed not only by the soaring inflation of most products and services coupled withcollapsing real wages now down for a record 16 consecutive months, but also by a misery index that is at generational highs.
Sadly, it has gotten so bad that with the BOJ at least on paper limited as to what it can buy sizewise (because the recent expansion to its QE has already been factored in by the market), means that the GPIF is now being used as a patsy that may or may not be buying more stocks in the market, just to keep the algo frontrunners at bay:
Mr. Mitani said the fund is still in the process of carrying out the changes and has a long way to go. Just under 50% of its total portfolio was in domestic bonds at the end of September, compared with its new target of 35%.
He declined to say whether it had already bought more stocks and foreign bonds. “I leave it up to you to imagine that,” he said.
Of course he will: after all the GPIF has more than filled its legal quotes of stock purchases by now. However, what he won’t leave to your imagination is what happens when this latest experiment in central planning fails:
“I have no doubt that the economy is in a recovery trend if you look at the long run,” GPIF President Takahiro Mitani said in an interview Friday.
Actually, no, it isn’t, unless you call a quadruple-dip recession a “recovery”.
Unfortunately, for Japan, and its tens of millions of pensioners, the only news here is simple: the entire country is now held hostage by Japan’s last-gasp attempt to prove Monetarist and Keynesian policies work. Because, said otherwise, “Abenomics better work, or else all your pensions are toast.”
What happens when Abenomics inevitably fails, we leave to the civil war historians of the latter part of the 21st century.
Eur/USA 1.2460 up .0052
USA/JAPAN YEN 118.46 down .535
GBP/USA 1.5716 down .0002
USA/CAN 1.1568 up .0040
This morning in Europe, the euro is up , trading now well above the 1.24 level at 1.2460 as Europe reacts to deflation and announcements of massive stimulation and 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 trade in yoyo fashion as this is causing havoc to our yen carry traders. This morning it settled up in Japan by 54 basis points and settling just below the 119 barrier to 118.46 yen to the dollar ( still heading towards 123). The pound is up this morning as it now trades just above the 1.57 level at 1.5716.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation). The Canadian dollar is down today trading at 1.1568 to the dollar.
Early Friday morning USA 10 year bond yield: 2.13% !!! down 6 in basis points from Thursday night/
USA dollar index early Friday morning: 88.34 down 32 cents from Thursday’s close
The NIKKEI: Friday morning down 114 points or 0.66% (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 … Chinese bourses: Hang Sang in the red ,Shanghai in the green, Australia in the red: /Nikkei (Japan) green/India’s Sensex in the red/
Gold early morning trading: $1222.00
Closing Portuguese 10 year bond yield: 2.97% par in basis points from Thursday
Closing Japanese 10 year bond yield: .40% !!! down 1 in basis points from Thursday
Your closing Spanish 10 year government bond Friday par in basis points in yield from Thursday night.
Your Thursday closing Italian 10 year bond yield: 2.06% par in basis points from Thursday:
trading 18 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Friday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2452 up .0059
USA/Japan: 118.72 up .270 ( the yen carry traders are whacked again)
Great Britain/USA: 1.5708 down .0010
USA/Canada: 1.1567 up .0039 (oil countries are getting killed in their currencies)
The euro rose in value during the afternoon , and it is up by closing time , finishing well above the 1.24 level to 1.2452. The yen fell a bit in the afternoon, but it was still well up by closing to the tune of 27 basis points closing well below the 119 cross at 118.72. The British pound lost some ground during the afternoon session and it was down on the day closing at 1.5708. The Canadian dollar was well down in the afternoon and was down on the day at 1.1567 to the dollar.
Currency wars at their finest today.
Your closing USA dollar index: 88.34 down 32 cents from yesterday.
your 10 year USA bond yield , down 9 in basis points on the day: 2.10%!!!! wow!!
European and Dow Jones stock index closes:
England FTSE down 161.07 or 2.49%
Paris CAC down 116.93 or 2.77%
German Dax down 267.80 or 2.72%
Spain’s Ibex down 286.80 or 2.75%
Italian FTSE-MIB down 600.24 or 3.13%
The Dow: down 315.51 or 1.10%
Nasdaq; down 51.80 or 0.52%
OIL: WTI 57.63 !!!!!!!
And now your final gold prices in the various currencies
And now for your big USA stories
Today’s NY trading:
Crude Carnage Contagion: Biggest Stock Bloodbath In 3 Years, Credit Crashes
Submitted by Tyler Durden on 12/12/2014 16:04
Quite a week!!
- WTI’s 2nd worst week in over 3 years (down 10 of last 11 weeks)
- Dow’s worst worst week in 3 years
- Financials worst week in 2 months
- Materials worst week since Sept 2011
- VIX’s Biggest week since Sept 2011
- Gold’s best week in 6 months
- Silver’s last 2 weeks are best in 6 months
- HY Credit’s worst 2 weeks since May 2012
- IG Credit’s worst week in 2 months
- 10Y Yield’s best week since June 2012
- US Oil Rig Count worst week in 2 years
- The USDollar’s worst week since July 2013
- USDJPY’s worst week since June 2013
- Portugal Bonds worst week since July 2011
- Greek stocks worst week since 1987
Some serious intraday volatility this week as hope kept shining through but in the end, reality won. Despite spiking euphoria among US Consumers, concerns over Greek elections, Japanese elections, the GDP-plunge-driven collapse in oil prices (with neither OPEC nor non-OPEC willing to blink yet on cutting production), and contagion to high-yield finallly caught up with stocks after they blindly followed the mainstream media narrative that low oil prices are unequivocally good for every muppet.
First things first… 2014 so far… “why would you buy a Treasury bond when you can buy stocks with dividends?”
Here’s why crude matters…
No Hindenburg Omen today but it appears the Dow & S&P are pressing down to test their 50DMAs…
On the week, The Dow was the laggard… NOT OFF THE LOWS
And Energy sector the worst…
The Russell 2000 closed the week negative year-to-date…
VIX surged this week (ignore the excitement over percentage moves)…
Treasury yields collapsed…
Leaving the decoupling at epic levels… between bonds and stocks..
and between credit and stocks…
The Dollar slipped a little today to end the week down over 1%
Gold and Silver had great weeks – very stable as the rest of the markets turmoiled – while oil prices
Crude is now down 25% from the initial OPEC leaks…back below $58!!
Makes you wonder eh? The decoupling began when QE3 was hinted at…
and energy credit is near 1000bps now… and isstarting to spread to rest of the HY markets…
notably worse than stocks (for now)…
* * *
But it’s all about the fundamentals!! Great Jobs Data, Great Retail Sales Data, and Great Consumer Confidence Data – unless that’s all totally manipulated bullshit?
Bonus Chart: How much longer can this go on?
Now USA citizens are on the hook for 303 trillion in derivatives.
Actually when this blows up, it is so big, it would not matter.
(courtesy zero hedge)
Presenting The $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For
Courtesy of the Cronybus(sic) last minute passage, government was provided a quid-pro-quo $1.1 trillion spending allowance with Wall Street’s blessing in exchange for assuring banks that taxpayers would be on the hook for yet another bailout, as a result of the swaps push-out provision, after incorporating explicit Citigroup language that allows financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp,explicitly putting taxpayers on the hook for losses caused by these contracts. Recall:
Five years after the Wall Street coup of 2008, it appears the U.S. House of Representatives is as bought and paid for as ever. We heard about the Citigroup crafted legislation currently being pushed through Congress back in May when Mother Jones reported on it. Fortunately, they included the following image in their article:
Unsurprisingly, the main backer of the bill is notorious Wall Street lackey Jim Himes (D-Conn.), a former Goldman Sachs employee who has discovered lobbyist payoffs can be just as lucrative as a career in financial services.
We say explicitly, of course, because taxpayers havealways been on the hook implicitly for the next Wall Street meltdown.
Exhibit A: US banks are the proud owners of $303 trillion in derivatives (and spare us the whole “but.. but… net exposure” cluelessness – read here why that is absolutely irrelevant when even one counterpaty fails):
Exhibit B: Here are the four banks that are in complete control of the US “republic.”
At least we now know with certainty that to a clear majority in Congress – one consisting of republicans and democrats – the future viability of Wall Street is far more important than the well-being of their constituents. Which also, implicitly, was made clear when Hank Paulson was waving a three-page “blank check” term sheet, and when Congress voted through the biggest bailout of banks in US history back in 2008.
The only question is when the next multi-trillion (or perhaps quadrillion now that all global central banks are all in?) bailout takes place.
The taxpayers in America lost again.
Furor Over Move to Aid Big Banks in Funding Bill
WASHINGTON — In a 1,600-page, $1.1 trillion spending bill, a provision to roll back an obscure financial regulation became a focal point of uproar as Congress struggled to keep the government funded.
The “push-out” regulation — a measure to ensure that banks trade their riskiest financial instruments without the protection of the Federal Deposit Insurance Corporation or the Federal Reserve’s backup — was controversial from the start. Hundreds of billions of taxpayer dollars were shoveled into Wall Street banks after instruments like credit default swaps became worthless in the financial crisis, but even some crucial Democrats were unsure if Congress went too far when it voted to include push-out in the landmark Dodd-Frank law to regulate Wall Street in 2010.
But with regulators pressing to put rules into effect to carry out the law, a provision in the enormous spending bill to remove the push-out regulation drew bipartisan outrage. Representative Nancy Pelosi of California, the House minority leader, said she was “heartbroken” by the “taint” visited upon the spending bill, which would finance virtually all of the government through September.
Senators David Vitter, left, and Sherrod Brown oppose a provision in the federal spending bill. Credit Win Mcnamee/Getty ImagesSenator David Vitter, Republican of Louisiana, one of the Senate’s most conservative lawmakers, teamed with Senator Sherrod Brown, Democrat of Ohio, one of its most liberal ones, to demand the provision’s removal.
“If Wall Street banks want to gamble, Congress should force them to pay for their losses and not put the taxpayers on the hook for another bailout,” the two wrote on Thursday to House and Senate leaders.
With a midnight deadline, Republican leaders postponed a scheduled vote on the spending bill on Thursday afternoon, trying to round up votes. Late Thursday night, the spending bill passed the House, 219 to 206. The bill now goes to the Senate.
Before the vote, the White House lamented the inclusion of a Wall Street measure that would “weaken a critical component of financial system reform aimed at reducing taxpayer risk,” but not enough to oppose the overall bill.
The fierce Democratic opposition over the Dodd-Frank rollback provision created the odd spectacle of President Obama and Vice President Joseph R. Biden Jr. calling Democrats to muster support for the spending bill over the opposition of Ms. Pelosi.
“I love the American political system, I really do, but the ability to sneak in substantive policy measures and make it take it or leave it, I think it’s appalling,” said Simon Johnson of the Massachusetts Institute of Technology’s Sloan School of Management and a former chief economist at the International Monetary Fund, who is a prominent critic of the nation’s big banks.
The push-out legislation assumed outsize importance, not only because of what it does but because the biggest Wall Street companies have fought it since it was proposed.
The language in the spending bill was inserted by Representative Kevin Yoder, Republican of Kansas, but he did not write it. Citigroup did. In 2013, the bank and its allies were able to corral a bipartisan vote to pass the rollback out of the House Financial Services Committee. In an analysis by The New York Times of Citigroup emails, more than 70 lines of the committee’s 85-line rollback bill came from Citigroup’s recommendations.Continue reading the main story
The banking industry strongly supports the rollback measure. James C. Ballentine, an executive vice president at the American Bankers Association, said financial instruments like credit deferred swaps are used to mitigate risk, not bolster it. To force their trading into units unprotected by federal taxpayers would be onerous, he argues.
“The push-out requirement to move some swaps into separate affiliates makes one-stop shopping impossible for businesses ranging from family farms to energy companies that want to hedge against commodity price changes,” Mr. Ballentine said.
Tony Fratto, a former official in the Bush Treasury and White House, called the opposition “a lot of hyperbole” around “an incremental common-sense regulatory improvement.”
Mr. Johnson said the evocation of family farms and mom-and-pop banks was specious. The four largest banks conduct more than 93 percent of all derivatives trading in the United States. The repeal push is for them, he said.
Such banks can still deal in derivatives and credit-deferred swaps in units uninsured by the federal government, but they could charge clients a considerably higher premium if they could keep that federal backstop.
“In 2008, we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks,” said Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation, calling the repeal Congress is contemplating “illogical.”
PPI Slides, Misses Estimates, After Finished Goods Prices Tumble Most Since July 2009
that is all for today
I will see you Monday night
bye for now