Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1200.20 up $18.50 (comex closing time)
Silver: $16.26 up 49 cents (comex closing time)
In the access market 5:15 pm
The gold comex today had a fair delivery day, registering 270 notices served for 27,000 oz. Silver comex registered 39 notices for 195,000 oz.
Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.58 tonnes for a loss of 57 tonnes over that period.
In silver, the open interest rose by 1,598 contracts despite Monday’s silver price fall of 37 cents. Short covering was again the attempted object of the exercise today. The total silver OI still remains relatively high with today’s reading at 150,034 contracts. The big December silver OI contract is now off the board.
In gold we had a huge fall in OI with the fall in price of gold yesterday to the tune of $13.60. The total comex gold OI rests tonight at 368,899 for a loss of 5120 contracts. The December gold contract is now off the board.
TRADING OF GOLD AND SILVER TODAY
you have more important things to read instead of how gold/silver traded today.
Yesterday we received news that the FRBNY withdrew 47 tonnes of gold of which 3 tonnes went to Holland and the remainder, most likely, was Germany. We will probably have a statement officially from Germany on that matter. If true, it would certainly kibosh the Bloomberg story earlier in the year as totally false. (Germany does not want to repatriate the gold stored at the FRBNY)
No doubt we are now seeing central banks no longer trust each other as confidence falters. As Bill Holter constantly reminds us, this is the biggest run on the banking system, the repatriation of one’s gold.
Germany is going to have a tough time explaining why Holland received its 122.5 tonnes before Germany got hers with a further question as to why it is taking longer to repatriate Germany’s gold with the added fact that Holland got their gold in less than one year.
Today, we had another loss of 1.49 tonnes of gold inventory from the GLD /Inventory 710.81 tonnes
In silver, a small loss of 574,000 oz of silver inventory/
SLV’s inventory rests tonight at 329.564 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:
GOFO rates moved slightly in both directions for today. The ONE, TWO and THREE MONTH GOFO moved slightly towards the positive direction but still remain negative. The 3 month GOFO remained constant and the 12 month moved further to the positive needle.
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 30 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
-.065% -.0475% -.0275% +.02% +.135%
Dec 29 2014:
-.08% -.055% -.040 % +.023% +.1325%
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 5,120 contracts from 374,018 all the way down to 368,899 with gold down by $13.60 yesterday (at the comex close). We are moving off the big December contract month. The non active January contract month fell by 43 contracts down to 402. The next big delivery month is February and here the OI fell dramatically to 216,738 contracts for a loss of 5,402 contracts. The estimated volume today was poor at 85,504. The confirmed volume yesterday was also poor at 93,265 even although they had some help from our high frequency traders. The comex now has no credibility and many investors have vanished from this crooked casino. Today we had 270 notices filed for 27000 oz .
And now for the wild silver comex results. Silver OI rose by 1598 contracts from 148,436 up to 150,034 even though silver was down by 37 cents yesterday. Short covering again by the banks was no doubt in full force yesterday. The big December active contract month is now off the board. The estimated volume today was simply awful at 16,100. The confirmed volume yesterday was just as bad at 28,261. We had 39 notices filed for 195,000 oz today.
December final standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||nil oz ,|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||nil oz|
|No of oz served (contracts) today||270 contracts(27,000 oz)|
|No of oz to be served (notices)||off the board|
|Total monthly oz gold served (contracts) so far this month||3381 contracts(338,100 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 0 customer withdrawals
total customer withdrawal: nil
we had 0 customer deposits:
total customer deposits; nil oz
We had 0 adjustments
Today, 0 notice was issued from JPMorgan dealer account and 139 notices were issued from their client or customer account. The total of all issuance by all participants equates to 270 contracts of which 265 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 (3381) x 100 oz = 338,100 the amount of gold oz standing for the December contract month.
Thus the final standings:
3381 (notices filed for the month x 100 oz) equals 338,100 oz or 10.51 tonnes.
we neither gained nor lost any gold ounces standing for the December contract month.
Total dealer inventory: 770,987.09 oz or 23.98 tonnes
Total gold inventory (dealer and customer) = 7.895 million oz. (245.58) 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 finalizes the month of December for gold.
And now for silver
December silver: final standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||1,000,911.73 oz (Delaware )|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil oz|
|No of oz served (contracts)||39 contracts (195,000 oz)|
|No of oz to be served (notices)||off the board|
|Total monthly oz silver served (contracts)||2975 contracts (14,875,000 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||8,597,308.7 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 0 customer deposit:
total customer deposit nil oz
We had 3 customer withdrawals:
i) Out of CNT: 100,572.08 oz
ii) Out of HSBC: 300,071.000 oz ??? perfectly exact round number!!
iii) Out of Scotia; 600,268.65 oz
total customer withdrawal: 1,000,911.73 oz
we had 0 adjustments
Total dealer inventory: 64.604 million oz
Total of all silver inventory (dealer and customer) 175.471 million oz.
The total number of notices filed today is represented by 39 contracts for 195,000 oz. To calculate the number of silver ounces that will stand for delivery in December, we take the total number of notices filed for the month (2975) x 5,000 oz = the total number of silver oz standing so far in November.
Thus: 2975 contracts x 5000 oz = 14,875,000 oz of silver that will stand for delivery in December.
We gained 95,000 silver ounces that will 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 30.2014/ we lost 1.49 tonnes of gold at the GLD today/inventory 710.81 tonnes
Dec 29.2014 no change in gold inventory at the GLD/inventory 712.30 tonnes
Dec 26.2013/ a small loss of .6 tonnes of gold. Inventory tonight at 712.30 tonnes
Dec 24.2014: wow!! somebody robbed the cookie jar/ we had a huge withdrawal of 11.65 tonnes from the GLD inventory/inventory at 712.90 tonnes. England must be bleeding badly!
Dec 23.2014; no change in gold inventory at GLD/724.55 tonnes
Dec 22.2014: no change in gold inventory at the GLD/724.55 tonnes
Dec 19.2014: a huge addition of 2.99 tonnes at the GLD/724.55 tonnes
Dec 18.2014: no change in inventory at the GLD/721.56 tonnes
Dec 17.2014: no change in inventory at the GLD/721.56 tones
Dec 16.2015 we lost 1.80 tonnes in tonnage at the GLD/721.56 tonnes
Dec 15.2014: we lost 2.39 tonnes of gold inventory at the GLD/Inventory at 723.36 tonnes
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
Today, December 30 / we lost 1.49 tonnes of gold inventory at the GLD /Inventory rests tonight at 710.81 tonnes
inventory: 710.81 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 : 710.81 tonnes.
And now for silver (SLV):
Dec 30.2014: we lost another 574,000 oz of silver from the SLV/Inventory at 329.564
Dec 29.2014 we had a small loss of 431,000 oz at the SLV to probably pay for fees/inventory 330.138 million oz.
Dec 26/ no change in silver inventory at the SLV/inventory 330.569
Dec 24.2014: we had a huge loss of 7.566 million oz/inventory 330.569 million oz
Dec 23.2014: no change in silver inventory/338.135 million oz
Dec 22.2014: today we lost 862,000 oz of silver inventory from the SLV. this left late Friday night./Inventory 338.135 million oz
Dec 19.2014; No change in silver inventory at the SLV/Inventory 338.997 million oz.
Dec 18.2014: we lost 2.012 million oz of silver from the SLV vaults/inventory 338.997 million oz
Dec 17.2014: no change in silver inventory/SLV 341.009 million oz
Dec 16.2014/ no change in silver inventory/SLV 341.009 million oz
Dec 15.2014: we lost 1.341 million oz of silver at the SLV/Inventory 341.009 million oz
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
December 30/2014 /we had a small loss of 564,000 oz at the SLV/inventory
registers: 329.564 million oz
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now for the first time into the negative 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 7.7% percent to NAV in usa funds and Negative 7.6 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.4%
Percentage of fund in silver:37.1.%
( December 30/2014)
2. Sprott silver fund (PSLV): Premium to NAV falls to – 0.36%!!!!! NAV (Dec 29/2014)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.40% to NAV(Dec 29/2014)
Note: Sprott silver trust back into negative territory at -.36%.
Sprott physical gold trust is back in negative territory at -0.40%
Central fund of Canada’s is still in jail.
And now for your most important physical stories on gold and silver today:
Early gold trading from Europe early Tuesday morning:
(courtesy Mark O’Byrne/Goldcore)
Greek Turmoil Could Spread – Risk of Bail-Ins in U.S. and Globally
By Mark O’Byrne
Greece’s financial markets are in turmoil again as a vote in parliament – failing to elect a new president – made a general election inevitable. Greek markets saw severe sell offs , with yields on Greek government bonds rising and shares prices collapsing 13% at one point yesterday and closing 7% lower on the day.
Greek bank shares collapsed by even more. Two of Greece’s largest banks, Piraeus bank and Alpha bank, shed more than 14% of their share value as concerns of bank solvency, bank runs and Cyprus style bail-ins reemerged.
Market reaction elsewhere was mixed with markets in low volume Christmas trading. Northern European stock markets, the FTSE, DAX and CAC, eked out small gains while southern markets saw renewed jitters.
The Greek result led to sell offs in Spain and Italy, which narrowly escaped the sovereign debt crisis that led to Greece’s 2010 bailout. Spanish and Italian bond yields rose, pushing Madrid’s IBEX stock market down 1 percent while Italy’s FTSE MIB fell 1.2 percent.
Greece and the risk of new Eurozone debt crisis will now – again – be a key focus for investors in 2015.
The question now is whether this will lead to wider market volatility across Europe in the run up to the Greek general election, due on January 25th, and, more importantly, what will happen after the election.
The left-wing, anti-austerity Syriza party is ahead of the incumbent New Democracy, led by prime minister Antonis Samaras, in the polls. Syriza is currently the most popular group in polls with almost 30% of Greeks saying they will vote for the anti-austerity coalition.
It will campaign on the platform of an end to austerity and a re-negotiation of Greece’s debts to the EU. This may well cause conflict with the EU and the ECB, and there is a real risk of renewed eurozone instability.
Alexis Tsipras, head of Syriza said: “With the will of our people, in a few days the bailout agreements of austerity will be history” as his group intend to renegotiate the bail-out deals.
The IMF are suspending their loans to Greece until a new government is formed.
The implications of this development could be quite dramatic for Greece and for the Euro-zone. President of the European Commission, Jean Claude Juncker had warned Greek parliamentarians not to “vote wrong.”
Goldman Sachs recently warned:
“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.”
Tsipras has insisted that he will not unilaterally restructure Greece’s financial arrangements with the troika and that any changes would be made through negotiation. In this light, Goldman’s prognostications appear alarmist.
Tsipras was quick to try to allay fears that Greeks may have about the specter Goldman raised of a “Cyprus-Style” bank-holiday, in other words the verboten word “bail-ins”.
“A Syriza government and its allies will safeguard – without any footnotes or asterisks – the deposits of citizens at Greek banks, in cooperation with the European Central Bank and European partners.”
“Let’s put an end to the horror stories.”
However, it could be that the fear-mongering of the past few weeks may become self-fulfilling prophecies if Greeks decide that their cash is safer under the mattress than in a risky Greek bank earning little or no interest.
Then the ECB would be confronted with having to “bail-out” Greece or more likely would opt for bail-ins whereby the deposits of Greek savers and companies are frozen in “bank holidays” prior to being seized in a Cyprus style cash grab.
In such a scenario, the ECB would likely be forced to abandon its proposed bond-buying scheme early next year as it could not be seen to be openly buying toxic debt. This in turn could have knock on effects for the global economy as the anticipated liquidity the ECB were to provide evaporates.
The complete lack of awareness and debate regarding the risk of bail-ins in the U.S and indeed internationally continues. Investors and savers need to take action in terms of diversification in order to protect themselves from the coming bail-in regimes.
Must read guide and research on bail-ins here:
Protecting Your Savings In The Coming Bail-In Era
Today’s AM fix was USD 1,186.50, EUR 976.54 and GBP 764.50 per ounce.
Yesterday’s AM fix was USD 1,194.00, EUR 978.29 and GBP 766.86 per ounce.
Spot gold fell $11.50 or 0.96% to $1,183.80 per ounce yesterday and silver slipped $0.26 or 1.62% to $15.77 per ounce.
Gold inched up initially yesterday as equities weakened but may have been held back by the dollar’s strength as it reached a nine year high against other fiat currencies.
The dollar is gaining support from uncertainty in Europe, after the news on Monday that Greece was unable to elect a new president. Greece will now hold an election on January 25th following the Greek Parliament’s rejection of Prime Minister Antonis Samara’s nominee for President.
Spot gold rose 0.5% to $1,188.10 an ounce by late morning in London. Yesterday, the yellow metal dropped nearly 1% after gaining almost 2% on Friday.
Gold is down nearly 1% this year in dollar terms but has made good gains in other currencies. Gold has done particularly well considering the strong headwinds of a stronger U.S. dollar coupled with the recent plummeting brent crude oil prices.
China’s bullion demand has not waned and remains extremely robust with premiums on the Shanghai Gold Exchange (SGE) climbing to $5-6 over spot prices from lows of $1-2 seen at the beginning of December.
SGE vault deliveries reached its highest in over a year at 61.6 tonnes in the week ending December 19th, increasing the year-to-date figure up to a whopping 2,016 tonnes.
Silver was up 0.8% at $15.89 an ounce, while spot platinum was up 0.7% at $1,201.25 an ounce and spot palladium was up 0.3% at $807.80 an ounce.
Get Breaking News and Updates On Gold Here
John Ing highlights the huge derivatives that threaten the globe
(courtesy John Ing/Kingworldnews/Eric King)
Governments are dangerously leveraged as derivatives threaten, Ing tells KWN
3p ET Monday, December 29, 2014
Dear Friend of GATA and Gold:
Governments, market analyst John Ing tells King World News today, have become even more leveraged than the private financial sector was in 2008, and the plunge in oil prices threatens a blowup in derivatives. An excerpt from Ing’s interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Infinite money means hyperinflation, Embry tells KWN
1p ET Tuesday, December 30, 2014
Dear Friend of GATA and Gold:
Sprott Asset Management’s John Embry today gives King World News his view of the forthcoming year, wherein central banks create infinite money to prevent markets from happening but plunge the world into hyperinflation. An excerpt from the interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
If you have time, the following Keiser report is pretty good on gold and on the negative GOFO rates:
(courtesy Max Keiser/GATA)
‘Keiser Report’ focuses on gold repatriation
1:39p ET Tuesday, December 29, 2014
Dear Friend of GATA and Gold:
Gold repatriation is the topic of the latest episode of Russia Today’s “Keiser Report” with Max Keiser and Stacy Hebert. The episode is a half hour long and can be viewed at You Tube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
“Peak Gold Production” Hits In 2015
Several days ago we reported that as a result of persistently lower gold prices, driven down by a seemingly endless supply of paper gold (in the form of ETF selling and Bank of International Settlement “price discovery“) offsetting a seemingly unbridled appetite for physical gold, not only is one of the biggest marginal suppliers of gold – Chinese producers – about to take an extended hiatus, but first one and then many “developed” gold miners are about to throw in the towel.
As UBS’ Shanghai analyst Lin Haoxiang said, “Falling prices are cutting into some high-cost private mines in China, while some big miners chose to reduce costs by reducing jobs and capital investments.” As for the North American gold miner defaults, they have already started with Canada’s San Gold warning its creditors it is about to stuff them with a lot of unrepayable paper.
However the unwind plays out, it is becoming increasingly clear that just as the crude oil market is set for some violent times ahead as producers lock into the defection phase of the Prisoner’s Dilemma and flood the market with supply in an attempt to crush the weakest competition, so the gold market is set for many upheavals, the first of which, however, may be what Goldcorp defined in a recent slideshow as Peak Gold.
The only difference is that Goldcorp does not look at it from the perspective of Game Theory, where it is every miner (and their balance sheet) for themselves, but as a function of a 20 year lead-in development time following the period of peak gold discovery which took place in 1995. End result: “Gold market forecasters are expecting peak production in ~2015.”
And then there are of course, the practical implications of gold miners who are living if not on borrowed time, then close to it. As the following chart of the gold industry’s “all-in sustaining costs”, when one takes net debt and the interest due on it into consideration, it becomes clear why gold has managed to find the $1050-$1200 region as support: drop the price of gold below that and suddenly 90% of the entire gold industry becomes unprofitable.
None of which means that gold can’t – or want – drop below any given price, or slide into the triple digits. As we showed earlier, the new normal “markets” are so rigged –with the blessing of central banks no less – that attempting any rational predictions, especially when it comes to the one susbtance most hated by central bankers through the ages, is painfully meaningless.
And we are confident that before all is said and done, gold will surely plunge to even further manipulated lows because in the current market, where one can create paper gold futures contracts out of thin air, there is nothing to prevent just that. Which is why the following table showing gold miner net leverage will be quite useful in the years to come as the race to the prisoners’ dilemma “defection” bottom – one in which only those with the best balance sheets survive – enters the final stages.
In any event when all is said and done, gold production will be far lower in a few years than where it is now. The only question is how will central bankers orchestrate a parallel decline for physical gold, because even with all the paper manipulation in the world, the supply and demand curves for the underlying commodity can be ignored only for so long.
Gold surges immediately at the onset of comex trading;
(courtesy zero hedge)
Gold Surges Above $1200 On Heavy Volume As USDJPY, Treasury Yields Tumble
USDJPY has tumbled overnight back below 119.50, dragging stocks (equity futures now at session lows) and Treasury yields with it. But it appears the Gold/Yen tradethat is reacting most significantly as a huge volume flushes through futures markets spiking Gold back above $1200…
Yen moved first then Gold reacted to keep the least famous pairs trade alive…
As USDJPY drags stocks lower…
and stocks catch down to bonds’ uneasiness…
A must view video of Chris Powell interviewed by Lars Schall:
(courtesy Chris Powell/GATA/Lars Schall./Matterhorn)
THE MATTERHORN INTERVIEW Xtra – Dec 2014:
Chris Powell of GATA
“There are NO free markets anymore, just interventions”
VIDEO INTERVIEW: On Behalf of Matterhorn Asset Management, Lars Schall recently met with Chris Powell, the Secretary/Treasurer of GATA, at the Bayerischer Hof Hotel in Munich.
The Gold Anti-Trust Action (GATA) committee seeks to expose institutional actions that undermine the freedom of gold as real money.
In this late 2014 short 20 minute video interview Schall and Powell discuss
- daily Central Bank activity in the gold market and the importance for central banks to control the gold space in order to control all major financial asset classes
- gold suppression
- the influence of Perception versus Reality
- and more
all the best in 2015!,
Koos Jansen believes that Holland actually started the process of repatriation in 2012 along with Germany:
(courtesy Koos Jansen)
The Netherlands (and likely Germany as well) made concrete plans in 2012 to switch to a new currency in case the euro would crash. Not long after the emergency currency was ready the Dutch began repatriating 122.5 tonnes of gold from New York. This can be very important as there is a possibility the Eurocrisis will ignite again. Monday we learned Greece will have new elections on January 25 that could bring the anti-bailout Syriza party to power, risking Greece’s membership of the Eurozone.
What Do We Know?
Researchers from Argos Medialogica, a Dutch TV documentary about Greece and the Eurocrisis 2010-2012 (broadcasted November 18, 2014), were told the Dutch emergency currency was called the Florijn. The voice over in the documentary states:
One of the emergency scenarios, according to anonymous sources, is the introduction of a new Dutch currency, the Florijn.
A spokesperson from the Dutch Ministry Of Finance couldn’t confirm nor deny the Florijn back-up plan. “We were prepared for everything, but our main goal was to keep the euro together”, said the spokesperson. Klaas Knot, Governor of the Dutch Central Bank since July 2011, stated the following in an interview in March 2014:
Interviewer: Where there moments on which you thought, it’s going to collapse? The euro will collapse in 2012; we’re gonna lose it?
Klaas Knot: There certainly have been moments that I thought about this. There were also moments that we started to think, within the central bank, about emergency scenarios, we made preparations.
Interviewer: You made those preparations, back to the guilder? [the guilder was the Dutch currency before the euro]
Klaas Knot: If it would have been the guilder is not sure, but yes, we were prepared for scenarios in which we were confronted with the collapse of the euro. And then you must think of course, what are we going to do? No matter how much we didn’t want this scenario to happen. You must, as a central banker, always be prepared for all possible outcomes.
Interviewer: If I would ask you in ten years, or perhaps you can answer this question now; we were, at that moment, dangerously close to a financial meltdown in Europe? And when was this?
Klaas Knot: It was in the summer of 2012, also previously in late 2011. There were two occasions on which we had to act. We had to do something that was within our mandate. We had the feeling we were in trapped a situation that we didn’t cause. We had to act, we were the only ones that could act, and we did act. It was a situation I never want to be in again.
To watch the interview with Klaas Knot, make sure captions are on.
Knot confirmed The Netherlands could switch to a new currency in 2012 if the euro would crash. Jeroen Dijsselbloem, current Minister Of Finance of The Netherlands, confirmed the same in an interview by RTL Z (November 18, 2014).
Dutch website Geenstijl.nl has submitted a WOB request (the Dutch equivalent of a FOIA request), to Dijsselbloem asking for access to all documents regarding the back-up currency. Dutch law forces the government to reply to a WOB request within four weeks, but the delivery of documents can be prorogued by the government by another four weeks. In December government officials plead to postpone access to the documents until January 18, 2015.
In the past I have submitted several WOB requests to the Dutch central bank (DNB) regarding correspondence between DNB and the Federal Reserve Bank of New York (FRBNY) and the bar numbers of all Dutch official gold reserves. DNBreplied WOB request can be submitted for just about anything, except matters regarding gold.
The Dutch-German Alliance
Most statements of Dutch politicians and the Dutch central bank at the height of the Eurocrisis were exactly the same,“We are prepared for everything, but our main goal is to keep the euro together”. Apparently, this was clearly communicated among all policy makers in The Netherlands and Germany. The next quotes are from Wolfgang Schäuble, German Minister of Finance in 2012:
We want Greece to remain in the Eurozone. But it also has to want this and to fulfill its obligations. We cannot force anyone. Europe will not sink that easily…
The idea that we would not be able to react quickly to something unforeseen is wrong. We have learned a lot and built defenses.
The Dutch and the Germans are an alliance for decades – post WWII – and certainly were at the time of the Eurocrisis. The Medialogica documentary gives a unique insight of how this alliance works out at the highest level.
During the summits that were organized in the heat of the Eurocrisis, meant to reassure the markets all would be well, the Dutch Minister Of Finance at the time, Jan Kees De Jager, closely cooperated with Wolfgang Schäuble. They discussed their views prior to the summits; subsequently, during the negotiations De Jager would do the talking, knowing Schäuble backed him. The Dutch-German strategy was to make sure Greece was pressured to reform and did not get an easy bailout. From Medialogica:
(15:07) De Jager: If someone wanted to talk about this [a Greek exit], it was being silenced in the Eurogroup because they didn’t want to talk about it or didn’t dare to talk about it. There was the danger it could leak; there were a lot of people in the Eurogroup, even more in the ECOFIN, the council of the whole European Union that is even bigger, but solely from the Eurogroup things leaked in the press, sometimes while we were still in a meeting.
(16:40) …I called extensively with my colleague in Germany, but I also had correspondence on other levels. There was sort of an agreement between us that allowed us to be very tough in negotiations. And this helped Germany a lot. So we would have a common view, discussed in advance; what could we achieve, what would be our strategy, and usually I was the one who did the talking in the meetings[at the summits].
(37:45) Voice over: … the Dutch government makes drafts of emergency scenarios. A special multidisciplinary team, which consists of lawyers, foreign policy experts and economists, meets every Friday at the Ministry Of Finance. Every possible outcome is being discussed.
(38:00) De Jager: What would happen if…? What if Greece leaves the Eurozone, what consequences would that have? Would this actually be possible, juridical, economically, what would happen to money in Greece? Large amounts of cash, which can be transported by truck or car to The Netherlands or Germany and then deposited. We thought about all kinds of scenarios, so if something terrible would happen, we could promptly secure the core function of our payment system.
The close cooperation between the two nations and Schäuble’s statement (We have … built defenses) makes me think Germany had a similar back-up plan for a new currency (perhaps they even had a joint plan). The German Ministry Of Finance did not outright deny that it made similar plans as The Netherlands when contacted by the newswireEUobserver.
Because a lot of information was leaked to the press at the height of the crisis, many countries didn’t dare to discuss Greece leaving the euro in the Eurogroup, the council of 18 European Ministers Of Finance. Emergency plans were only discussed off the record, for example by The Netherlands and Germany. If other European countries prepared emergency currencies I don’t know. The ECB, IMF and EU (the Troika) did make plans for Greece to return to the Drachme.
According to my research DNB started its operation to repatriate 122.5 tonnes from the US in late 2012 (remember Knot’s statement:“You must, as a central banker, always be prepared for all possible outcomes.”), Germany started to repatriate approximately at the same time. Although Germany had an unexplainable slow start in repatriating, presumably both countries started to repatriate concurrently to preparing emergency currencies. It’s hard to see these events separated from each other.
Are the repatriations by Europe a lack of faith in the euro? That’s hard to tell, on one hand repatriations can be seen as a lack of trust in the custodian (US):
- If The Netherlands and Germany would fully trust the US why would they repatriate their gold? Obviously they don’t trust the US.
- We must not forget the euro in itself was created to move away from the US dollar (it was not created to fail a few years down the line).
- The Eurozone has shown to go to great lengths to hold the euro together. It could have kicked out Greece on many occasions, but it didn’t.
- Since 1999 nearly all European central banks collaborate in a program called the Central Bank Gold Agreements (CBGA) to match gold policy.
- The Eurosystem is increasing its allocated official gold reserves, as published by the German central bank.
On the other hand the Eurozone still faces large obstacles, like democracy, that could throw a wrench in the whole project. Many European leaders have been willing to create a solid euro and match their gold policy, but can the euro survive? Can it overcome its problems?
In November 2014 the Financial Times got hold of a transcript of interviews Timothy Geithner, former US Treasury Secretary, gave to assistants preparing his book, Stress Test: Reflections on Financial Crises. An interesting snippet from the transcript:
Geithner: To be sympathetic to them, the Germans’ experience has been every time they buy a little bit of calm [on the] markets and the Italian spreads start to come down, Berlusconi reneges on anything he committed to do. So they were just paranoid that every act of generosity was met by sort of a “fuck you” from the establishment of the weaker countries in Europe, political establishment of those weaker countries in Europe, and so the Germans were just apoplectic. Sarkozy, who is trying to navigate between the Germans’ view of the crisis and the fact that France was suffering a fair amount of collateral damage, too, because Europe’s getting somewhat weak, he’s in election [campaigning]. He’s trying to figure out how to bridge this difference…
There’s a G20 meeting in France that Sarkozy hosts which was really incredibly interesting, fascinating thing for us and for the president and I’ll tell you just a few quick things in passing so we can come back to those things. The Europeans actually approach us softly, indirectly before the thing saying: “We basically want you to join us in forcing Berlusconi out.” They wanted us to basically say that we wouldn’t support IMF money or any further escalation for Italy if they needed it if Berlusconi was prime minister. It was cool, interesting. I said no…
Silvio Berlusconi was replaced by Mario Monti in the heat of the Eurocrisis in 2011, though Monti, a former EU commissioner, was not elected by the Italian people. This begs the question if the EU can circumvent democracy indefinitely.
The repatriation movement is foremost an act of distrust in fiat currencies in general. Whether it’s the dollar, euro, ruble or peso; they can all go to zero. Our international monetary system is detached from gold as an anchor since 1971, cracks in the system are appearing on all continents. Printing money can only buy time.
An improvised speech from Mario Draghi, Governor of the European central bank, led to the aversion of a financial meltdown in July 2012. Draghi stated in London:
Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.
According to Geithner the remarks were “off-the-cuff” and “totally impromptu”. Snippets from the transcript:
Geithner: Things deteriorated again dramatically in the summer which ultimately led to him saying in August, these things I would never write, but he off-the-cuff – he was in London at a meeting with a bunch of hedge funds and bankers. He was troubled by how direct they were in Europe, because at that point all the hedge fund community thought that Europe was coming to an end. I remember him telling me [about] this afterwards, he was just, he was alarmed by that and decided to add to his remarks, and off-the-cuff basically made a bunch of statements like ‘we’ll do whatever it takes’. Ridiculous.
Interviewer: This was just impromptu?
Geithner: Totally impromptu…. I went to see Draghi, and Draghi at that point, he had no plan. He had made this sort of naked statement of this stuff. But they stumbled into it.
As Jean-Claude Juncker, former Eurogroup leader, said in 2011 On Greece’s economic meltdown:
When it becomes serious, you have to lie.
It wouldn’t surprise me at all if Europe was saved by a firm lie. Global economics is increasingly influenced by speeches from central bankers; only words, true or false. They don’t even have to take the effort to create billions in fiat currency units with the stroke of a keyboard; the threat to flood the system with money is sufficient to steer financial markets. These are the fundamentals of our global economy today, which are terribly weak. Some policy makers know this – the ones that buy or repatriate gold.
I present the Argos Medialogica documentary, a fascinating watch inside the Eurocrisis. Most of it is spoken in English, when you hear another language please read the English subtitles (make sure captions are turned on).
Starring (titles refer to 2011 or 2012):
- Giorgos Papandreou (Greek Prime Minister)
- Giorgos Papakonstantinou (Minister Of Finance of Greece)
- Jan Kees de Jager (Minister Of Finance of The Netherlands)
- Mario Monti (Italian Prime Minister)
- Nout Wellink (Governor of the Dutch central bank)
- Jean-Claude Trichet (Governor of the European central bank)
- Jean-Claud Junker (Eurogroup leader)
- Olli Rehn (European Commissioner)
- Paul Mason (BBC, Newsnight)
- John Fraher (Bloomberg)
- Peter Spiegel (Financial Times)
- Christoph Schult (Der Spiegel)
E-mail Koos Jansen on: firstname.lastname@example.org
Craig Roberts writing on the current Russian/USA conflict.
a must read…
(courtesy Dr Paul Craig Roberts/Kingworldnews)
And now for the important paper stories for today:
Early Tuesday morning trading from Europe/Asia
1. Stocks down on major Asian bourses / the yen sees a huge rise to 119.57,
1b Chinese yuan vs USA dollar/ yuan strengthens to 6.2017
2 Nikkei down 279 points or 1.57%
3. Europe stocks all down /Euro up/ USA dollar index down to 90.04/
3b Japan 10 year yield at .33% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.47
3c Nikkei still above 17,000
3e The USA/Yen rate well below the 120 barrier
3fOil: WTI 53.23 Brent: 57.52 /all eyes are focusing on oil prices. This should cause major defaults.
3g/ Gold up/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 falls this morning for both WTI and Brent with the fall on Rouble/
3k Greek third vote on Monday failed to elect a new president with 168 votes.
Needed 180 votes/ this forces Greece into a snap election /creates havoc around the globe
3l Italian 10 year yield below 2.00% for first time ever. (1.89%
3m Gold at $1183.50 dollars/ Silver: $15.87
3n USA vs Russian rouble: ( Russian rouble up 2.0 roubles per dollar in value) 57.00!!!!!!
3 0 Turmoil on all markets
3p Greeks bank shares plummet!!
4. USA 10 yr treasury bond at 2.19% early this morning. Thirty year rate well below 3% (2.76%!!!!)
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Market Levitation Interrupted As USDJPY Tumbles
Greece may be on the verge of a Grexit, crude may be taking out all key technical support levels, and US stocks will still close higher. But let the USDJPY slide and watch as the levitation ends with a bang. And tumble overnight is precisely what the USDJPY did, pushing not only the Nikkei lower by 1.6% but also leading to what is shaping up to be an unrecord, also known as red, open in the S&P – this surely calls for a “Markets in Turmoil” flashing siren on the 9th floor of the New York Fed.
Why? it is unclear what caused the drop: was it just a delayed reaction to yesterday’s market unmoving events out of Greece and commodity land, but several billion in option expirations pinned around 120 certainly helped. Just add an extremely illiquid market and watch how a determined seller can move the pair by over 100 pips in a few hours.
As a result European shares remain lower with the oil & gas and telcos sectors underperforming and travel & leisure, retail outperforming. Crude oil falls to 5-year low, ruble swings between gains and losses. Greek 10 year bond yield rises for second day. Italy sells 10-year debt at below 2% yield for first time on record. The French and Spanish markets are the worst-performing larger bourses, the Swiss the best. The euro is little changed against the dollar. Italian 10yr bond yields fall; Spanish yields decline. Commodities decline, with natural gas, Brent crude underperforming and zinc outperforming. U.S.
- S&P 500 futures down 0.3% to 2080.6
- Stoxx 600 down 0.5% to 342.5
- US 10Yr yield down 1bps to 2.19%
- German 10Yr yield up 0bps to 0.55%
- MSCI Asia Pacific down 0.5% to 137.7
- Gold spot up 0.3% to $1187.3/oz
- Euro up 0.06% to $1.2159
- Dollar Index down 0.17% to 90.04
- Italian 10Yr yield down 9bps to 1.89%
- Spanish 10Yr yield down 8bps to 1.6%
- French 10Yr yield down 0bps to 0.83%
- S&P GSCI Index down 0.5% to 422.1
- Brent Futures down 0.8% to $57.4/bbl, WTI Futures down 0.7% to $53.2/bbl
- LME 3m Copper up 0.3% to $6310/MT
- LME 3m Nickel down 0.6% to $14955/MT
- Wheat futures down 0.6% to 611.5 USd/bu
- 2 out of 19 Stoxx 600 sectors rise; travel & leisure, retail outperform, oil & gas, telcos underperform
- 23.5% of Stoxx 600 members gain, 74.3% decline
- Eurostoxx 50 -0.9%, FTSE 100 -0.8%, CAC 40 -0.9%, DAX -0.7%, IBEX -0.9%, FTSEMIB -0.4%, SMI -0.1%
- Asian stocks fall with the Sensex outperforming and the Nikkei underperforming.
- MSCI Asia Pacific down 0.5% to 137.7
- Nikkei 225 down 1.6%, Hang Seng down 1.1%, Kospi down 0.6%, Shanghai Composite down 0.1%, ASX down 1%, Sensex up 0%
- All 10 sectors fall with staples, tech outperforming and energy, telcos underperforming
Initially the yuan moves to 6.23 yuan to the dollar but subsequently recover to 6.20 to the dollar. China’s leading index plunges to its worse level since 2009:
(courtesy zero hedge)
China Leading Index Plunges To Worst Since Feb 2009 Sending Yuan To Lower Trading Band Extreme
China’s Leading Index has fallen to its lowest since Feb 2009 this evening, down 4 straight months from credit-driven 18 month highs. This economic weakness has exaggerated the already weak tone in Yuan trading this evening pushing CNY to its weakest in almost 7 months (against the USD), its furthest on record from the CNY Fix (10-month highs), and very close to the PBOC’s upper +2% band for CNY trading. At 6.23, USDCNY is over 1000 pips weaker than the CNY fix. We suspect the weakness in Yuan is also driven by further corruption crackdowns as China will require VIP gamblers in Macau to undergo a record check.
China Leading Index hits lowest since Feb 2009…
By way of interest, The China Leading Index includes:
Hang Seng Mainland Freefloat Index, industrial sales, M2 money supply, new fixed asset investment, logistics index (total freight traffic and volume of transportation in major harbors), real estate investment (land and construction of residential properties), consumer expectations index, Treasury yield spread (spread between treasury securities with maturities of 7+ years and those with less than 1 year maturity).
Putting further pressure on the Yuan as selling pushes it to the weakest against the fix on record (over 1000 pips lower)
This extremely strange trading behavior (as JPY also pushes to cycle lows) corresponds to the surge in mainland China stocks (and slide in Hong Kong stocks)… SHCOMP +54%, HSI unch since QE-Lite
As the world and his mum ‘smartly’ try to front-run a broad-based rate-cut that China has vowed not to undertake.
Ukraine hit by 7.5% GDP fall, 100% currency devaluation — National Bank head
December 30, 11:44 UTC+3
According to the National Bank Chief, inflation has reached 21% by November since the start of the year
National Bank Chief Valeriya Gontareva
KIEV, December 30. /TASS/. Ukraine’s GDP shrank by 7.5% and inflation reached 21% by November since the start of the year, National Bank Chief Valeriya Gontareva said on Tuesday.
“The country has seen a GDP fall by 7.5% and actually 100% devaluation. Using economic terms, this is called a 50-percent devaluation (for the hryvnia). Inflation has reached 21% by November since the start of the year,” she said.
In the current conditions, it is impossible to keep a stable hryvnia exchange rate, the National Bank head said.
“This is simply an unrealistic task (to maintain exchange rate stability) because it is not even prescribed in any constitution,” she said.
“The exchange rate of our currency relative to our trade partners is a mirror of the state of our economy and our balance of payments,” she said.
Ukraine is hit by a “full-scale financial crisis,” National Bank Chief admitted.
“The level of gold and foreign exchange reserves has reached its minimum of $9.9 billion as of early December since 2009,” she said.
The following does not look good. Could we get getting another Chernobyl???
(courtesy zero hedge)
Is Ukraine Hiding A Huge Radiation Leak At The Largest Nuclear Power Plant In Europe?
Two days ago we reported of the odd coincidence of a 2nd emergency shutdown at Ukraine’s Zaporozhye Nuclear reactor – Europe’s largest nuclear power plant –following our earlier fears of disinformation. Today, we get information of a leaked report sourced from three different place – unconfirmed for now (but RT is trying to verify) – that Ukrainian nuclear scioentists misled the public and a radioactive leak has been detected – citing the country’s emergency services claiming thatlevels of radiation are 16.3 times the legally permitted norm.
A radioactive leak has been detected at Ukraine’s Zaporizhia Nuclear Power Plant, the largest in Europe, a media report says, citing the country’s emergency services. The report claims that levels of radiation are 16 times the legally permitted norm.
LifeNews published a leaked report by the State Emergency Service of Ukraine,which denies an earlier assessment by the plant’s authorities that the radiation at the facility is equal to the natural background following an incident on Sunday.
RT is trying to verify the report.
On Sunday, one reactor at the plant was automatically shut down after a glitch, becoming the second halt in operations in recent weeks. The reactor was running at 40 percent of nominal power, the plant’s official website said, adding that radiation at the facility being at the level of 8-12 microroentgens an hour.
The error was later announced to have been corrected, and the troubled unit – Power Block # 6 – was plugged back into the network.
On November 28, Zaporizhia’s Unit 3 was switched off for almost a week. The shutdown, which was reportedly caused by a short circuit, was made public five days later, when Ukrainian Prime Minister Arseny Yatsenyuk revealed it during the first meeting of his new Cabinet.
* * *
Zaporizhia nuclear power plant is one of the four nuclear power plants in the country, which together supply a large part of Ukraine’s energy needs. The Zaporizhia plant alone, Europe’s largest, supplies at least one-fifth of the country’s power needs. It is the world’s fifth-largest nuclear power plant.
Ukrainian nuclear scientists misinformed the public and the media about the real state of affairs in the Zaporizhzhya NPP. The Internet got a summary of the State Service for Emergency Situations of the 28 and 29 December, which refute the assurances leadership Zaporizhzhya that the sixth unit was put into operation in the evening on 28 December. In addition, the permissible level of radiation at the plant, according to the measurements, was above the norm by 16 times.
Both documents addressed to the Chief of State GSCHS Ukraine in Zaporozhye region – Major General Civil Protection Lepsky. In summary for December 28, reported that at six o’clock in the Zaporizhzhya NPP due to damage to the transformer emergency generator protection system worked 6th unit.
– At 6 am on December 28 at the Zaporozhye NPP operates five units (1,2,3,4,5) … The total capacity of 4278 MW nuclear power plant radiation background – 4.90 mSv / year., SVYAP – 4.76 mSv / year . – 16.3 times higher than the acceptable norm – said in a bulletin.
Recall that the press service of the Zaporizhzhya NPP and representatives of “Energoatom” in the afternoon on December 28 reported an emergency situation, noting that the background radiation in a sanitary zone around the plant remains normal.After that, the head of the Ministry of Energy of Ukraine Dmytro Demchishin stated that repair of power will take a few days.
However, on the evening of December 28 the press service of Zaporizhzhya reported the completion of repair work and emergency unit is connected to the grid.
– December 28 2014 in 22 hours 35 minutes unit number 6 Zaporizhzhya after the fault is connected to the network.Being a set of power … – said in a statement on the official website of the plant. There’s also noted that the background radiation in the vicinity of the station corresponds to the natural.
However GSCHS summary for December 29, completely refuted this statement nuclear scientists. The document says that by 6 am Monday emergency sixth unit is not connected, the total capacity remained at the level of the previous day, and the radiation level in the vicinity of nuclear power plants and the storage of radioactive materials (SVYAP) increased.
– At 6 am on December 29 at the Zaporizhzhya NPP in five units (1,2,3,4,5) … At 6 am on December 28 sixth unit is disconnected from the unified energy system … The total capacity of 4278 MW nuclear power plant radiation background – 5.05 mSv / yr., SVYAP – 4.91 mSv / year. – Exceeding 16.8 times – said GSCHS Ukraine.
Recall first of background radiation above the threshold of 14 times in the area of ??Zaporozhye NPP evening of December 28 said the deputy chairman of the People’s Council DNI Dennis Pushilin. He explained leak Ukrainian nuclear scientists attempt to install power rod blocks produced by the American company Westinghouse.
* * *
Of course, there is no way to actually know what is happening on the ground as the NPP is located close enough to the “fog of war”, that its status, and updates thereof, could merely be part of the fog of war. That said, if there is an unspoken message here by Ukraine, which recently handed over its gold to unknown “Western” interests, and suddenly feels neglected by its western allies (as its central bank head is about to find out personally), it is targeted directly at the IMF: “hand over more loans, or the nuclear power plant gets it.”
However, this appears more serious than simple false flags.
Today it is Moscow’s turn to have some protests:
(courtesy zero hedge)
Moscow Anti-Corruption Protest Escalates, Riot Police Arrive – Live Feed
Petrobras deadline prompts some bondholders to push for default
(Reuters) – Petrobras, Brazil’s state-run oil company, could be declared in technical default on some of its foreign debt as early as Tuesday if bondholders pursue efforts to force it to speed up its assessment of losses in a giant corruption scandal.
The push, led by New York-based Aurelius Capital, applies to $54 billion of Petrobras bonds governed by U.S. law in New York state. Aurelius, a “distressed debt” fund, is asking investors to put the company into default as “a precautionary step,” according to a Dec. 29 letter from the firm reviewed by Reuters.
Under the terms of those bonds, Petrobras (PETR4.SA) is required to provide third-quarter financial statements within 90 days of the end of a quarter, in this case by Monday, Dec. 29. Petrobras has not published those accounts because allegations of contract-fixing and bribery at the company have raised doubts about the true value of its assets.
For the default declaration to take effect on any of the more than 20 U.S. law bonds outstanding, investors holding at least 25 percent of any one series must request the action, Aurelius said in the letter to fellow bondholders.
Aurelius was a leading member of a group of investors that refused to accept a debt restructuring with Argentina, taking the country to court.
Petrobras, which first planned to release results in early November, has extended the deadline to Jan. 31 as new corruption allegations came to light, saying it had a waiver from investors but not giving any details.
Petrobras did not immediately respond to a request for comment.
“We believe bondholders should immediately take the prudent precaution of giving formal notice of default,” Aurelius managing director Eleanor Chan wrote. “While mere notice of default should not itself cause a crisis, bondholders cannot avoid a crisis merely by sticking their heads in the sand and accepting Petrobras’ assurances as a certainty.”
Distressed debt funds specialize in buying the debt of companies or countries at risk of default. Such hedge funds, also known as vulture funds, often use top flight lawyers to gain favorable terms in any bankruptcy.
Few have suggested Petrobras will be unable to pay its debts in the short or medium term. It has huge oil resources and the backing of the Brazilian government, whose officials have said they will backstop the company.
Petrobras, though, is already frozen out of capital markets because of the scandal and is in danger of losing its investment-grade debt rating, a situation that would reduce the pool of potential investors and raise its borrowing costs.
A notice of default will require Petrobras to provide financial statements by early March or face calls for early repayment of debt.
Even if matters do not reach that stage, the declaration will increase pressure on Petrobras executives to negotiate with bondholders and provide a credible accounting of the costs of the corruption scandal, a reckoning that Petrobras’ chief executive said could take months.
“If Petrobras releases its third-quarter financial statements by the beginning of March, the default will be cured,” Aurelius said. “If Petrobras still has not released its third-quarter financials by early March, the underlying causes of the delay may be considerably worse than is understood today.”
(Reporting by Jeb Blount; Editing by Chizu Nomiyama and Steve Orlofsky)
Now we have some serious problems in Alaska as Oil drops in price:
(courtesy zero hedge)
Alaska Governor Warns State’s Fiscal Situation “Critical” As Oil Price Drops
Narrative, we have a problem. What is billed day after day as ‘unequivocally good’ is entirely not good for Alaska (oh and Texas and Pennsylvania and…) as with oil prices dropping, AP reports Alaska Gov. Bill Walker has halted new spending on six high-profile projects, pending further review. With oil taxes and royalties expected to represent nearly 90% of Alaska’s unrestricted general fund revenue this year, officials warned, “the state’s fiscal situation demands a critical look.”
Alaska Gov. Bill Walker issued an order Friday putting the new spending on hold. He cited the state’s $3.5 billion budget deficit, which has increased as oil prices have dropped sharply.
With oil prices now around a five-year low, officials in Alaska and about a half-dozen other states already have begun paring back projections for a continued gusher of revenues. Spending cuts have started in some places, and more could be necessary if oil prices stay at lower levels.
How well the oil-rich states survive the downturn may hinge on how much they saved during the good times, and how much they depend on oil revenues. Some states, such as Texas, have diversified their economies since oil prices crashed in the mid-1980s. Others, such as Alaska, remain heavily dependent on oil and will have to tap into sizeable savings to get by.
The projects Walker halted spending on include a small-diameter gas pipeline from the North Slope, the Alaska Dispatch Newsreported. The other projects are the Kodiak rocket launch complex, the Knik Arm bridge, the Susitna-Watana hydroelectric dam, Juneau access road and the Ambler road.
“The state’s fiscal situation demands a critical look and people should be prepared for several of these projects to be delayed and/or stopped,” Walker’s budget director Pat Pitney said in an email.
According to Walker’s order, the hold on spending is pending further review. The administration intends to decide on project priorities near the start of Alaska’s legislative session Jan. 20, and no later than a Feb. 18 legal budgeting deadline, Pitney said.
State lawmakers have final authority to decide whether the projects should continue to be funded, Pitney said.
Contractually required spending and employee salaries will continue.
Walker’s order asks each agency working on the projects to stop hiring new employees, signing new contracts and committing any new funding from other sources, including the federal government.
* * *
So perhaps it is finally time to add that footnote to the “unambiguously good” qualified when pundits describe the oil crash:
it may be good for everyone… except Texaswhich is about to enter a recession. And thenPennsylvania. And then North Dakota. And then Colorado. And then West Virginia. And then Alaska. And then Wyoming. And thenOklahoma. And then Montana, and so on, until finally we find just where the new equilibrium is following the exodus of hundreds of thousands of the best-paying jobs created during the “recovery” offset by minimum-wage waiters, bartenders, retail workers and temps.
* * *
The Rigging Triangle Exposed: The JPMorgan-British Petroleum-Bank Of England Cartel Full Frontal
The name Dick Usher is familiar to regular readers: he was the head of spot foreign exchange for JPMorgan, and the bank’s alleged chief FX market manipulator, who was promptly fired after it was revealed that JPM was the bank coordinating the biggest FX rigging scheme in history, as initially revealed in “Another JPMorganite Busted For “Bandits’ Club” Market Manipulation.” Subsequent revelations – which would have been impossible without the tremendous reportingof Bloomberg’s Liam Vaughan – showed that JPM was not alone: as recent legal actions confirmed, virtuallyevery single bank was also a keen FX rigging participant. However, the undisputed ringleader was always America’s largest bank, which would make sense: having a virtually unlimited balance sheet, JPM could outlast practically any margin call, and make money while its far smaller peers were closed out of trades… and existence.
But while the past year revealed that FX rigging was a just as pervasive, if not even more profitable industry for banks than the great Libor-fixing scandal (for details see “How To Rig FX Like A Pro “Bandit”, And Make Millions In The Process“), the conventional wisdom was that it involved almost exclusively bankers at the largest global banks including JPM, Goldman, Deutsche, Barclays, RBS, HSBC, and UBS.
Now, courtesy of some more brilliant reporting by Vaughan, we can finally link banks with the other two facets of what has emerged to be an unprecedented FX-rigging “triangle” cartel: private sector companies that have no direct banking operations yet who have intimate prop trading exposure, as well as central banks themselves.
By “banks” we, of course, refer to the ringleader itself: JP Morgan, and its former head of spot forex trading in London, Dick Usher. As for the company that benefited from its heretofore secret participation in the biggest FX rigging scandal in history, it is none other than British Petroleum.
We learn about all this thanks to a story that begins with, of all thing, a story about freshwater fishing at a lake in Essex called “Wharf Pool.”
As Bloomberg reports, “an hour away by train, in London’s financial district, the lake’s owners ply their trade. Wharf Pool was purchased for about 250,000 pounds ($388,000) in 2012 by Richard Usher, the former JPMorgan Chase & Co. trader at the center of a global investigation into corruption in the foreign-exchange market, and Andrew White, a currency trader at oil company BP Plc. ”
The plot thickens: was there more than a passing connection between the head FX trader at JPM and White “who’s known in the market as Tubby, is one of half a dozen spot currency traders working for British Petroleum (BP) in London. He and his colleagues, most of them ex-bankers, decide which firms will carry out their foreign-exchange transactions. That makes them prized clients for banks seeking a slice of the business and a glimpse into potentially market-moving trades. Passing on information was a way to curry favor.”
In short, a typical Over The Counter relationship between a banker and a buyside client, one which is largely unregulated and where the bank hopes to be able to frontrun the client’s orders by providing the client with confidential market moving information, thus generating more business with the client in the future. In this case, however, the buyside client was not a typical hedge fund, but the FX trading group at one of the world’s largest energy companies: a group which trades enormous amounts of FX every single day, both with intent to hedge, and to generate a profit.
The trading unit’s primary role is to manage the firm’s exposure to financial risks, including fluctuations in interest rates and foreign exchange, according to the company’s website. Unlike at most corporations, it also is run as a profit center, which means that in addition to hedging risks, traders can place their own bets on the direction of markets.The company doesn’t break out how much money the treasury unit makes
Basically, BP’s energy operations were just a balance sheet funding cover: what its FX traders did in the front office was trade for a profit pure and simple, just like any prop trading desk or hedge fund anywhere else in the world. And it did so in collusion with a small group of market rigging individuals all located at the biggest, market-moving banks around the globe.
A quick reminder on the “Cartel”:
The four banks in the Cartel controlled about 45 percent of the global spot-currency market, according to a survey by Euromoney Institutional Investor Plc, so information about their plans was valuable. Some days they worked together to push around the 4 p.m. fix, settlements with the banks show.
The Cartel chat room was started by Usher as early as 2009, according to a person with knowledge of the matter. Usher had risen quickly to the top of his profession. After joining HBOS Plc in 2001, he was hired by Royal Bank of Scotland Group Plc in 2003 and a year later collected an industry award on his employer’s behalf…. The four members of the chat room ribbed each other like high school buddies. Usher was referred to as Feston because he resembled an overweight version of British chef Heston Blumenthal, according to people who have seen the chats. Matt Gardiner, a UBS trader based in Zurich, was called Fossil because he was a few years older than the others. Rohan Ramchandani, Citigroup’s cricket-loving head of spot trading, was called Ruggy, while Chris Ashton, the last one to join, was dubbed Robocop.
Now we can add BP too, a BP which doesn’t even hide the prop-trading nature of its FX “hedging” group, which is located two blocks away from, wait for it, JPMorgan!
The two dozen traders in BP’s treasury trading unit are housed above a Porsche showroom on the second and third floors of the company’s office in Canary Wharf, an area of reclaimed docklands three miles east of the City of London, the historic financial district. The building, two blocks from JPMorgan’s, was completed in 2003 on the cusp of an oil boom. Lights in meeting rooms flick from green to white when someone enters, in keeping with the company’s corporate colors.
And while until today the last sentence would be pure conjecture, thanks to Bloomberg’s release of exchanges between JPM and BP revealing the extent to which the “cartel” would stoop in order to make money for its members on a daily, risk-free basis, it is not a fact.
Copies of messages sent to BP traders over the course of a year were provided to Bloomberg News by a person with access to the online conversations. The person, who redacted the names of banks sending the messages and dates of conversations, said they came from firms whose senior foreign-exchange traders belonged to a chat room called “The Cartel” that was set up by Usher and included dealers at JPMorgan, Citigroup Inc., Barclays Plc and UBS Group AG.
The information offered an insight into currency moves minutes, sometimes hours before they happened. The messages could drag the U.K.’s biggest energy company into a scandal that has enveloped 11 banks and led to more than 30 traders from London to Singapore losing or being suspended from their jobs. Last month six banks were fined $4.3 billion for passing along information about their clients and working together to rig foreign-exchange markets.
Presenting BP: collusive, insider trading hedge fund extraordinaire. All comparisons and similarities to Enron are purely coincidental.
With revenue of almost $400 billion last year and operations in about 80 countries, BP trades large quantities of currency each day. Traders at the company regularly received valuable information from counterparts at some of the world’s biggest banks — including tips about forthcoming trades, details of confidential client business and discussions of stop-losses, the trigger points for a flurry of buying or selling — according to four traders with direct knowledge of the practice.
Of course, in any non-banana republic, whose regulatory and enforcement divisions were not captured by the same megacorp that is in question here, this would have been the basis for a massive lawsuit, one which would ultimately seek to break apart the company’s “profitable” FX trading division from its core energy business. But not in this republic: after all, between one of the world’s biggest banks and one of the world’s biggest corporations, and a corrupt, crony government it should be clear to everyone by now just who calls the shots.
BP of course is quick to note that it did nothing illegal: after all the last thing the company needs is its own Enron-type scandal, where an ancillary business manages to drag down the entire company. Sure enough it has promptly denied everything:
BP said in a statement that it conducted an internal review after regulators began probing currency markets. “BP’s FX desk has relationships as a customer with 26 relationship banks, including JPMorgan, Citibank and Barclays,” the London-based company said. “BP has a robust framework of compliance requirements and internal controls which are constantly reviewed, and maintains an open dialogue with the appropriate regulators.”
The firm, the third-largest publicly traded company in the U.K., hasn’t been investigated by regulators looking into currency manipulation, according to a person with knowledge of the matter. Chris Hamilton, a spokesman for the U.K. Financial Conduct Authority, declined to comment, as did representatives of JPMorgan, Barclays, Citigroup and UBS.
So how does one explain the joint equity interest in – for example – the little fishing lake ?
“BP’s Code of Conduct includes mandatory requirements for employees to disclose potential conflicts of interests internally,” the company said in response to a question about the commercial relationship between Usher and White through the fishing lake. “Following such disclosure, steps are taken to manage and monitor these appropriately. It is our policy not to comment on individuals.”
In other words, one can’t. Which is how BP likes it. Which is also why Bloomberg was quite cautious with how it phrases BP’s involvement into something that could promptly turn out to be Britain’s own Enron:
While there’s no evidence that any BP traders were members of the Cartel, Usher participated in at least one chat room with White, according to a person who has examined conversations that included both men. It couldn’t be determined from the messages reviewed by Bloomberg News who sent the information to BP or whether BP employees acted on any of the tips.
They did, and this is how we know: “Traders at BP haven’t been accused of any wrongdoing. Last year,within hours of regulators announcing probes, the chats between BP and the banks were shut down, people with knowledge of the matter said. Soon after, a compliance officer was placed on the desk for the first time, one of them said.”
Not exactly something one would do if one was, for lack of a better term, innocent.
And while we hold our breath until UK’s justice (don’t laugh please) system assigns blame – by which we mean a $19.95 one time settlement with a promise by BP it will never do it again – here is a glimpse at the full extent of just how this rigging took place:
In the clubby, lightly regulated world of foreign exchange, traders passed around tips to their circle of trusted contacts like candy. The victims: mutual-fund investors, pensioners and day traders who took the other side of a transaction at a lower price than they would have if they had the same information.
In an undated message seen by Bloomberg News, a trader at a bank told BP he would be buying U.S. dollars against Australian dollars at the WM/Reuters fix at 4 p.m. in London, the one-minute window during which traders around the world exchange billions of dollars of currency on behalf of pension funds and asset managers. The message was received at BP about 30 minutes before the fix. By tipping his hand, the sender was telling BP about a potential fall in the Australian currency
At about 3 p.m. in London on a different afternoon, BP traders were informed that banks were selling dollars against the yen at 4 p.m. In a third message, this one arriving as the oil company’s traders drank their first coffee of the morning, a trader at a bank said he had just sold a quantity of an emerging-market currency, to whom and the price he received.
The settlements the banks reached with regulators reveal that in the minutes before 4 p.m. the traders would meet on chat rooms to discuss their positions and how they planned to execute them. Sometimes they also agreed to work together to push exchange rates around to boost their profits–- something they called “double-teaming.”
All of the above would be, if proven, criminal but in line with expectations: after all when given a carte blanche to do anything they want, humans will do just that, even if it means trample every regulation known to man. In fact, the bigger one’s balance sheet, the greater one’s percevied (and realized) leeway of sneaking between the legal cracks, facilitated by the number of politicians and regulators that have been coopted and outright purchased courtesy of said big balance sheet.
However, the true punchline is this: “[Usher] joined JPMorgan as head of spot foreign exchange in 2010,where he became a member of the now-defunct Bank of England’s Chief Dealers Sub Group, a collection of about a dozen currency traders and central bank officials who met at restaurants and bank offices to discuss industry developments.”
In other words, all of this rigging, all of the FX manipulation, all of the criminal abuse of naive, innocent market participants took place with the Bank of England’s own seal of approval. Which, of course, is why the BofE itself had to scapegoat its own sacrificial lamb to avoid any further connection to this criminal cartel – something it did in early November when it fired its Chief FX dealer, Martin Mallett, who on November 12 “was dismissed by the Bank of England yesterday for “serious misconduct relating to failure to adhere to the Bank’s internal policies,” according to a statement by the central bank today.”
And just like that all loose ends have been cut off, although if we were Mr. Mallett, we would certainly keep away from loose nail guns, hot tubs or airplanes for the next several months.
In the meantime, after the mandatory pause of 3-6 months, all rigging, all manipulation, and all criminal abuse with blessing from the central bank itself will quietly return, because until the great (and as increasingly more predict, very violent) reset finally comes, nothing can possibly change in a system as corrupt as this one.
Your more important currency crosses early Tuesday morning:
Eur/USA 1.2156 up .0002
USA/JAPAN YEN 119.57 down 1.067
GBP/USA 1.5532 up .0018
USA/CAN 1.1624 down .0018
This morning in Europe, the euro is marginally up , trading now just below the 1.22 level at 1.2156 as Europe reacts to deflation and announcements of massive stimulation and tumbling bourses due to the failure in Greece to elect a new President. In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. He now wishes to give gift cards to poor people in order to spend. The yen continues to trade in yoyo fashion. This morning it settled up in Japan by 107 basis points and settling well below the 120 barrier to 119.57 yen to the dollar and causing much grief to our yen carry traders. The pound is up this morning as it now trades just below the 1.56 level at 1.5532.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold,silver oil manipulation). The Canadian dollar is up today trading at 1.1624 to the dollar.
Early Tuesday morning USA 10 year bond yield: 2.19% !!! down 3 in basis points from Monday night/
USA dollar index early Tuesday morning: 90.04 down 16 cents from Monday’s close
The NIKKEI: Tuesday morning down 279 points or 1.57%
Trading from Europe and Asia:
1. Europe stocks all in the red
2/ Asian bourses mostly down … Chinese bourses: Hang Sang in the red ,Shanghai in the red, Australia in the red: /Nikkei (Japan) red/India’s Sensex in the green/
Gold early morning trading: $1183.50
Closing Portuguese 10 year bond yield: 2.68% down 7 in basis points from Monday
Closing Japanese 10 year bond yield: .33% !!! par in basis points from Monday
Your closing Spanish 10 year government bond, Tuesday , down 6 in basis points in yield from Monday night.
Spanish 10 year bond yield: 1.61% !!!!!!
Your Tuesday closing Italian 10 year bond yield: 1.88% down 10 in basis points from Monday:
trading 27 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY (1:30 pm est)
Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2160 up .0007
USA/Japan: 119.47 down 1.163
Great Britain/USA: 1.5566 up .0052
USA/Canada: 1.1600 down .0042
The euro rose a bit in value during the afternoon , and it was up by closing time , finishing well below the 1.22 level to 1.2160. The yen was up in the afternoon, and it was well up by closing to the tune of 116 basis points and closing well below the 120 cross at 119.47. The British pound gained considerable ground during the afternoon session and it was still up on the day closing at 1.5566. The Canadian dollar was up in the afternoon and was up on the day at 1.1600 to the dollar.
Currency wars at their finest today.
Your closing USA dollar index: 89.96 down 24 cents from Monday.
your 10 year USA bond yield , down 4 in basis points on the day: 2.18%!!!!
European and Dow Jones stock index closes:
England FTSE down 86.51 points or 1.30%
Paris CAC down 72.39 or 1.68%
German Dax down 121.58 points or 1,22%
Spain’s Ibex down 115.00 or 1.11%
Italian FTSE-MIB down 118.06 points or 0.62%
The Dow: down 55.16 or 0.31%
Nasdaq; down 29.47 or 0.61%
OIL: WTI 53.69 !!!!!!!
Closing USA/Russian rouble cross: 55.32 strengthens by over 3 roubles per dollar during the day.
And now for your more important USA economic stories for today:
Your trading today from the New York:
Bonds & Bullion “Safety Bid” As Stocks Give Up Santa Rally Gains
As bulls stare inconsolable at today’s “drop” in stocks… we suspect this is the thought running through their minds…
The North Koreans Win – A Red Day In Stocks!!
By way of a rather stunning example of the “markets”, today’s 0.5% drop in the biggest in 2 weeks as stocks caught down to credit, energy, bond, and macro weakness…
Stocks gave yesterday’s levitation back and then some… despite a small bounce at the open as usual… 3rd ugly close in a row…
The S&P 500 closed back below its 5-day moving average…
Giving up the Santa Rally gains…
Stocks catching down to Treasury yields…
As Treasury yields are now down at pre-FOMC levels…
Credit markets are less impressed with whatever Yellen did… HY is 16bps wider this week
Treasury yields overall fell today but bonds were sold after Europe closed amid thin liquidty…
The USD weakened today on the back of JPY and SEK strength…
Commodities all snapped higher around 8amET with PMs leading the way…
Oil trod water near 5.5 year lows as gold jumped after JPY’s surge…
And then there’s Civeo!!! but the oil drop is “priced in”
As after a 2.5% in Europe’s Oil & Gas stocks, US Energy stocks are starting to realize Oil prices do matter after all…
Home prices see their biggest monthly drop:
(courtesy Case Shiller/zero hedge)
Home Prices See Biggest Monthly Drop Since Polar Vortex As Case-Shiller Declines For Second Month
Case-Shiller’s 20-city home price index dropped 0.1% MoM in October (on an unadjusted basis) – the second monthly drop in a row and biggest drop since the Polar Vortex. Year-over-year, home prices rose 4.5% – the weakest growth since October 2012. While this modestly beat expectations (+4.5% vs +4.4% exp.), it is the 11th month in a row of growth deceleration. Also of note: the Top 20 Composite index is now down for the second month in a row, dropping to 173.36. The question now is whether the downside momentum will pick up.
Worst annual gain since Oct 2012 and weaker 11 months in a row:
and the biggest monthly drop since The Polar Vortex:
Some more charts, showing the ongoing – and accelerating – slowdown.
And Year over Year:
And from the report:
Both the 10-City and 20-City Composites saw year-over-year declines in October compared to September. The 10-City Composite gained 4.4% year-over-year, down from 4.7% in September. The 20-City Composite gained 4.5% year-over-year, compared to 4.8% in September. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.6% annual gain in October 2014 versus 4.8% in September.
Miami and San Francisco saw prices rise 9.5% and 9.1% over the last 12 months. Eight cities, including San Francisco, Denver, and Tampa saw prices rise faster in the year to October than a month earlier. Las Vegas led the declining annual returns with a decrease of -1.2%.
The National and Composite Indices were both slightly negative in October. Both the 10 and 20-City Composites reported a slight downturn, -0.1%, while the National Index posted a -0.2% change for the month. San Francisco and Tampa led all cities in October with increases of 0.8%. Chicago and Cleveland offset those gains by reporting decreases of -1.0% and -0.7% respectively.
October recorded mixed monthly figures. Ten cities recorded lower monthly figures while eight posted increases. Detroit and San Diego both reported flat monthly changes. San Francisco had the largest increase of all 20 cities at 0.8% month-over-month.
“After a long period when home prices rose, but at a slower pace with each passing month, we are seeing hints that prices could end 2014 on a strong note and accelerate into 2015,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Two months ago, all 20 cities were experiencing weakening annual price increases., Last month, 18 experienced weakness. This time, 12 cities had weaker annual price growth, but eight saw the pace of price gains pick up. Seasonally adjusted, all 20 cities had higher prices than a month ago.
“Most national economic statistics, other than those connected to housing, posted positive reports in November and early December. Third quarter GDP was revised to 5% real growth at annual rates, and unemployment was at 5.8% as payrolls added over 300,000 jobs in November. Housing was somber: housing starts pulled back 1.6%, existing home sales were at 4.93 million, down 6.1%, and new home sales were 438,000, down 1.6%, all in November.”
Finally, the breakdown for housing:
Robert Shiller: “Fragile” Real Estate Market Is “Not A Good Investment”
In a few brief minutes, Professor Bob Shiller calmly and eloquently crushed the hopes and dreams of CNBC’s cheerleading muppetry as they desperately tried to spin today’s house price data as great news. Exuberant at gains in San Francisco and Miami, the anchor is stunned (briefly) when Shiller dares to say “things are getting too bubbly,” and warns these areas are full of speculative excess. While falling just short of calling a turn in the housing cycle (noting ), when Simon Hobbs says “my reading of this is actually very optimistic,” and begs Shiller to look at the glass-half-full side of the argument, the “anxious” Professor retorts, that home sales rates “trouble him” and warns the real estate market is “fragile.” Shiller then concludes that not only are stocks extremely expensive but that housing is not a good investment… the anchor fades to black…
Here is Professor Shiller popping the cheerleading bubble…
We suspect he will not be invited back anytime soon…
Consumer Confidence Misses 2nd Month In A Row Despite Record Stocks, Low Gas Prices
Having missed expectations by the most since June 2010 in November, The Conference Board’s measure of Consumer Confidence missed once again. The previous dip was revised higher (because ‘revisions’ is exactly what makes sense in a confidence survey) from 88.7 to 91.0 but the current level printed 92.6 against expectations of 93.9. This is the 3rd miss of the last 4 months (as stocks hit record highs and gas prices collapse?). Employment “not so plentiful” rose to its worst level in a year, employment expectations going forward dropped as did income growth expectations.
Plans to buy a car also slipped with Home purchase plans the lowest in at least 6 months.
Raising the price of chicken McNuggets does have its consequences:
have a look!!
(courtesy zero hedge)
Meanwhile, The McDonalds Riots Continue
After a customer went berserk 2 days ago over 40 cents, it appears the McDonalds Riots are contagious…
We had a suspicion that raising the price of McNuggets would have consequences…
I will see you Wednesday night
bye for now