Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1183.00 up $2.10 (comex closing time)
Silver: $15.73 up 7 cents (comex closing time)
In the access market 5:15 pm
Judging from the volatility in the uSA index today, I strongly believe that we had a derivative meltdown of some sort. The total USA dollar short position by major players is 9 trillion USA according to the iMF. The USA dollar has gone from 80 up to 91.5 for a 14.3% loss. Coupled with this, the players then bought oil plus other commodities and that as well as seen a huge fall. There is also a huge problem with a potential Greece exit. All of these combined could add up to a trillion dollar loss to the major USA banking system (the major banking underwriters)
The gold comex today had a poor delivery day, for the second day notice for the January contract month registering 0 notices served for nil oz. Silver comex registered 4 notices for 20,000 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 1,621 contracts despite Wednesday’s silver price fall of 68 cents. It is obvious that somebody is taking on the banks. The total silver OI still remains relatively high with today’s reading at 151,215 contracts. The January silver OI contract reads 104 contracts.
In gold we had a decrease in OI with the fall in price of gold on Wednesday to the tune of $16.30. The total comex gold OI rests tonight at 371,646 for a loss of 2332 contracts. The January gold contract reads 353 contracts
TRADING OF GOLD AND SILVER TODAY
you have more important things to read instead of how gold/silver traded today.
Today, gold inventory from the GLD remained constant/Inventory 709.02 tonnes
In silver,no change in 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:
Not reporting today.
Sometime in January the LBMA will officially stop providing the GOFO rates.
Jan 2 2015
Dec 31 2014:
-.042% -.0225% -.00 % +.025% +.13667%
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 2,336 contracts from 373,982 all the way down to 371,646 with gold down by $16.30 on Wednesday (at the comex close). . We are now onto the January contract month. The non active January contract month fell by 36 contracts down to 353. We had 2 contracts served up on Wednesday. Thus we lost 34 contracts or 3,400 additional oz will not stand. The next big delivery month is February and here the OI fell to 214,569 contracts for a loss of 2,532 contracts. The estimated volume today was poor at 62,339. The confirmed volume on Wednesday was also poor at 77,5343 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 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI rose by 1,621 contracts from 149,594 up to 151,215 despite the fact that silver was down by 68 cents on Wednesday. The front January contract month saw its OI fall by 15 contracts down to 104. We had 12 notices filed on Wednesday, so we lost 3 contracts or 15,000 oz will not stand. The estimated volume today was simply awful at 15,812. The confirmed volume on Wednesday was poor as well at 29,522. We had 4 notices filed for 20,000 oz today.
January initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||32.15 (Brinks) oz 1 kilobar|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||nil oz|
|No of oz served (contracts) today||0 contracts(nil oz)|
|No of oz to be served (notices)||353 contracts (35,300 oz)|
|Total monthly oz gold served (contracts) so far this month||2 contracts(200 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month|
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 Brinks: 32.15 oz (1 kilobar)
total customer withdrawal: 32.15 oz
we had 0 customer deposits:
total customer deposits; nil oz
We had 0 adjustments
Today, 0 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 0 contracts 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 (2) x 100 oz or 200 oz to which we add the difference between the January OI (353) minus the number of notices served upon today (0) x 100 oz =35,500 the amount of gold oz standing for the January contract month. (1.104 tonnes of gold)
Thus the initial standings:
2 (notices filed for the month x 100 oz) +OI for January (353) – 0(no. of notices served upon today) =35,500 oz (1.104 tonnes)
we lost 34 contracts or 3400 additional ounces will not stand.
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 initializes the month of January for gold.
And now for silver
Jan 2 2015:
January silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||9,662.000 (Brinks) oz|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil|
|No of oz served (contracts)||4 contracts (20,000 oz)|
|No of oz to be served (notices)||100 contracts (500,000 oz)|
|Total monthly oz silver served (contracts)||16 contracts (80,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month|
|Total accumulative withdrawal of silver from the Customer inventory this month||47,414.0 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 deposits:
total customer deposit nil oz
We had 1 customer withdrawal:
i) Out of Delaware: 9,662.000 oz ??? the farce continues!!
total customer withdrawal: 9,662.000 oz
we had 1 adjustment and this is a strange one!!
i) out of Brinks: an exact 1,164.000 oz leaves as an accounting error.
i.e. an exact amount. How could this be possible??
Total dealer inventory: 64.604 million oz
Total of all silver inventory (dealer and customer) 175.526 million oz.
The total number of notices filed today is represented by 4 contracts for 20,000 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 (16) x 5,000 oz to which we add the difference between the OI for the front month of January (104) – the Number of notices served upon today (4) x 5,000 oz = 580,000 oz the number of ounces standing so far for the January delivery month.
Initial standings for silver for the January contract month:
16 contracts x 5000 oz= 80,000 oz +OI standing so far in January (104)- no. of notices served upon today(4) x 5,000 oz = 580,000 oz
we lost 3 contracts or 15,000 additional oz will not stand
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:
Jan 2 2015: inventory remained constant/inventory 709.02 tonnes
Dec 31.2014: we lost another 1.79 tonnes of gold at the GLD today/Inventory 709.02 tonnes
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, Jan 2/2015 / no change in gold inventory at the GLD /Inventory rests tonight at 709.92 tonnes
inventory: 709.02 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 : 709.02 tonnes.
And now for silver (SLV):
jan 2.2015: no change in silver inventory/ Inventory 329.563 million oz
Dec 31.2014: we had no change in silver inventory at the SLV./Inventory
at 329.563 million oz
Dec 30.2014: we lost another 574,000 oz of silver from the SLV/Inventory at 329.564 million oz/
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
Jan 2/2015 /we had no change in silver inventory at the SLV
registers: 329.564 million oz
Central fund of Canada will update only on Monday.
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 10.1% percent to NAV in usa funds and Negative 9.9 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.0%
Percentage of fund in silver:37.5.%
( Jan 2/2015)
2. Sprott silver fund (PSLV): Premium to NAV rises to + 1.29%!!!!! NAV (Jan 2/2015)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.58% to NAV(Jan 2/2015)
Note: Sprott silver trust back into positive territory at +1.29%.
Sprott physical gold trust is back in negative territory at -0.58%
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 Friday morning:
(courtesy Mark O’Byrne/Goldcore)
Review of 2014 – Gold Second Best Currency, +13% in EUR, +6% GBP
We would like to take this opportunity to wish all our clients and our growing community of subscribers a peaceful, prosperous and healthy 2015.
At the end of each year, it is important to take stock and review how various assets have performed and what has transpired in the year gone past, as it will give indications as to how assets will perform in the coming year and, more importantly, years.
Gold Second Best Currency In 2014 – Higher In All Currencies Except Dollar
Gold was the second best performing currency in 2014, with only the U.S. dollar stronger.
The Gold fix on December 31st 2014 was USD 1,199.25, EUR 986.55 and GBP 769.84 per ounce.
The Gold fix on December 31st 2013 was USD 1,201.50, EUR 872.55 and GBP 726.99 per ounce.
Gold was marginally lower in dollars in 2014 but rose in all other major currencies. Gold in euro and pound rose 13 percent and 6 percent respectively. Gold in yen rose 15 percent in 2014.
Gold for February delivery fell $16.30, or 1.4%, to settle at $1,184.10 an ounce on the New York Mercantile Exchange on Wednesday (Dec 31st), to end the year 1.3% lower for the year. A year ago, gold’s most-active contract settled at $1,202.30 an ounce.
Gold ended the year 14% off its 2014 high of $1,379 an ounce set in mid March after the price surge at the start of the the year in January, February and March.
China’s yuan closed at 6.2040 against the dollar on Wednesday, ending 2014 with a loss of 2.4 percent against the dollar and 1% against gold. The yuan fell as China has engaged in its own QE and competitive currency devaluation – currency wars continued quietly in 2014.
Gold again protected investors in the Eurozone with the 13 percent gain. Gold rose nearly exactly €100 from EUR 876 per ounce to close at EUR 980 per ounce. Gold again acted as a classic safe haven for investors exposed to the euro, and markets and assets denominated in euros.
The gains in euro terms and move back towards EUR 1,000 per ounce may also signal concerns about some form of ECB QE or money printing and debt monetisation in the coming months.
Gold in sterling saw similar gains to those in euro but sterling was a stronger currency in 2014 and therefore gains were not as much. There was a similar chart trajectory with gains in the early part of the year followed by a retracement and consolidation and then a sell off towards the end of October, followed by a slight bounce higher.
The price falls in October and into year end in dollar terms took place despite a positive fundamental backdrop and despite the risk of contagion in the Eurozone, concerns about global economic growth, the emergence of Ebola and the twin geopolitical risks emanating from tensions and war in the Middle East and tensions with Russia leading to the economic slowdown in Russia and collapse of the rouble.
The falls on Wednesday, the last day of the year, may have been due to the usual suspects on Wall Street pushing prices lower in order to again “paint the tape” and engender further negative sentiment in the western gold market.
Indeed, trading in December had all the hallmarks of an entity or entities attempting to keep the gold price below $1,200/oz. It is worth noting that the price low last year was on December 31st.
Given that 2014 was the year that manipulation and rigging of the gold market was proven after years of allegations, it would be naive to discount the possibility of further manipulation, especially given the fact that banks found guilty of rigging markets received risible punishment – mere slaps on the wrist. These will be unlikely to prevent further price rigging.
Despite the slight loss for gold in dollar terms and very negative sentiment, globally gold had a very good year.
Many currencies were severely devalued in 2014 as currency wars continue unabated.
Gold acted as a safe haven to many people in countries around the world. Gold rose strongly in many currencies such as the Syrian pound, Ukrainian hryvnia and of course the Russian rouble.
Geopolitical risk intensified with the risk of terrorism and war ever present and gold continued to act as an important hedge against geopolitical risk and indeed currency devaluations.
– Silver Falls Despite Robust Demand
Silver was down a further 19 percent in 2014 after the sharp 36% fall in dollar terms in 2013.
Silver remains down a whopping nearly 70% from its record nominal high in 2011.
Investors are continuing to accumulate silver as it looks great value at the levels – both compared to gold and also when compared to increasingly toppy stock and bond markets.
Platinum had a 12 percent decline this year. The metal is heading for the first back-to-back yearly losses since 1997.
Palladium bucked the trend and rose 12 percent this year, the third annual gain due to concerns about supplies from Russia and South Africa – the two largest producers.
– Stock and Bond Performance In 2014
2014 was again the year of the risk asset, such as equities and bonds, with both doing well in the deep and increasingly murky sea of liquidity and cheap money created by central banks.
Risk assets favoured by banks and central banks did well, while other risk assets such as many commodities did not fare as well.
Very favourable monetary conditions did not lead to higher commodity and precious metal prices. Quite the contrary, commodities in general had a torrid year and significantly underperformed the vast majority of equity and bond markets.
The MSCI World Index rose 2.93% in the year compared with 24.1% in 2013 while MSCI’s broadest index of Asia-Pacific shares outside Japan ended the year almost exactly where it started. However, with the help of Bank of Japan money printing, the Nikkei 225 gained 7.1%.
The Dow rose 7.5% in 2014, its sixth-consecutive yearly gain. The S&P 500 added 11.4%, its third-straight annual gain. The Nasdaq Composite climbed 13.4% in 2014, also marking its third-straight annual gain.
The Dow’s 30 industrials closed at a record 38 times in 2014, while the S&P 500 did so 53 times (see chart below).
European share indices were mixed in a volatile and tumultuous year. There was a late rebound as the promise of EU QE contributed to modest gains.
The FTSEurofirst 300 index of pan-European shares, had a 3.9 percent gain for the year.
The French CAC has lost 0.5 percent and the German DAX eked out slim gains of 2.7 percent.
Britain’s FTSE 100 index, was the only major European index to eye a yearly loss, due to its high exposure to the energy and commodities sectors. It was down 2.7 percent for the year.
The Spanish IBEX 35 climbed 3.7% and the Italian FTSE MIB was little changed. Ireland’s ISEQ Index was volatile but rose by 14.5%.
Stocks in Portugal and Greece crashed. The PSI 20 lost a whopping 26.8 percent and Greek shares had a yearly loss of nearly 30 percent. Greece is heading for an early general election on January 25, which radical leftist party Syriza is tipped to win – potentially leading to a new eurozone debt crisis.
With a 21% surge, Denmark’s OMX Copenhagen 20 Index posted the biggest rise among 24 developed markets tracked by Bloomberg.
The stand out global equity performers were China and Argentina.
In China, the CSI300 index saw gains of nearly 50 percent after two months of very strong gains in November and December when hopes grew of more policy stimulus and international capital won wider access to Chinese stocks.
Despite battling a debt default and currency crisis, Argentina’s stock market won the unlikely accolade of the best performing global index of 2014.
The Buenos Aires Merval Index has logged an annual gain of an incredible 58.9%. This is the greatest percentage increase compared to other global benchmarks tracked by Reuters.
This is what frequently happens to stock markets in countries on the verge of or experiencing hyperinflation as was seen in Zimbabwe in 2009.
Emerging market stocks and bonds were generally lower and many had a second straight year in the red, especially Russia.
Europe’s government bond markets were buoyed as global flood of cheap money helped take Italian and Spanish borrowing costs to record lows and gave safer German debt its strongest year in six.
U.S. Treasuries had their best year since 2011, and returned 4.95 percent in 2014 while long bonds had a 27.23 percent return.
Benchmark 10-year note yields have dropped to 2.18 percent from 3 percent at the beginning of the year. Thirty-year bond yields have fallen to 2.76 percent, from 3.93 percent.
– Oil Prices Collapse; Energy, Copper, Sugar Fall; Coffee Surges
The year 2014 was bad for commodities in general as prices of most commodities fell.
Commodities had the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year due to concerns about global economic growth.
The CRB Commodity Index fell to its lowest level in over five years. The Bloomberg Commodity Index, which tracks 22 products from crude to copper, dropped to the lowest level since March 2009 on New Years Eve. It was down 16 percent this year, with crude, gasoline and heating oil the biggest decliners.
The fourth year of losses is the longest since at least 1991. Prices of many metals as well as major agri commodities such as soybean, soy oil and crude palm oil fell.
Copper was set to post its worst annual decline in three years on worries about global growth and growth in top consumer China.
The price of Brent crude oil halved in 2014 and had its biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the U.S. shale boom and OPEC’s refusal to cut output.
Sugar futures fell for a fourth straight year, the longest losing streak for sugar since at least 1971, as far back as CQG data go. March sugar ended the year at 14.52 cents a pound, down nearly 12% for the year.
Global production of sugar will likely outpace demand for the fifth consecutive year in the season ending Sept. 30, 2015, according to the International Sugar Organization. Oversupply and declining demand due to increased health awareness has hit prices.
Cotton futures also ended lower because of ballooning global supplies. Cotton was down 29% for the year.
The U.S. Department of Agriculture expects the world’s cotton supply to surpass demand by a record 108.08 million bales when the current season ends July 31.
It wasn’t all bad, though, as a few commodities, such as live cattle and palladium, rose. Coffee was the best-performing commodity, after a brutal bear market lasting from 2011 through 2013. Coffee surged 48% in 2014.
Orange-juice concentrate for March ended the year up 2.6%, at $1.3980 a pound. Cocoa saw its third consecutive year of gains, ending the year up 7.4% as strong demand buoyed prices.
– Regulatory Authorities Confirm Gold and Silver Rigging
2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.
UK regulators found that Barclays had manipulated gold prices . The UK’s Financial Conduct Authority fined the British bank £26 million in May.
Further proof of manipulation of gold and silver prices also came in November when Switzerland’s financial regulator (FINMA) found “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks” by UBS employees in precious metals trading, particularly with silver.
UBS settled allegations of misconduct at its gold and silver trading business in November, alongside a planned agreement between UK and US authorities and seven banks over accusations of foreign exchange market rigging.
Last week came news that Britain will widen the scope of laws which make the manipulation of market benchmarks a criminal offence. The changes will now include seven more rates covering the currency, gold, oil and silver markets, the government said last week.
Peculiar, single trade or handful of trades leading to sudden gold and silver price falls continued in 2014 and contributed to gold and silver’s weakness. Price falls were often seen at times when markets were less liquid. As ever, price falls were driven from the futures market in electronic and increasingly computer driven trading – despite no reports of any major liquidations of physical metal.
Indeed, they often came at times of strong global physical demand.
Banks continue to get mere slaps on the wrists for breaking the law. Very few traders or bankers have faced prosecution or jail time. Instead, regulators levy ineffectual fines that are tiny when compared to their annual bonuses and indeed profits.
As long as this continues, we will continue to see criminal behaviour and banks attempting to manipulate and rig markets at the expense of investors and other financial market participants.
Such behaviour is creating huge distortions in markets and will likely contribute to another financial crash and crisis.
However, it also creates opportunities as certain markets not favoured by banks and central banks are artificially held lower, thus allowing canny investors to pick up assets on the cheap.
Gold is some 37% below the nominal high in 2011 and silver some 70% below its nominal high in 2011.
– Another Year Of Paper Selling While Physical Demand Robust – Especially From China and India
Demand from China and India is set to be some 3,000 metric tonnes this year – more than the entire annual global production of gold.
India is set for demand of some 1,000 tonnes and China over 2,000 metric tonnes as measured by the benchmark Shanghai Gold Exchange (SGE) withdrawals – which is likely the single most important benchmark of global gold demand today.
Last year saw another robust year for Chinese demand despite frequent talk of weak demand and low premiums in China.
Manipulation of markets can work effectively in the short term. However, in the long term prices will be dictated by the global supply and the global demand of 7 billion people, many in Asia who believe in gold as a store of value.
Not to mention, sovereign central banks such as the People’s Bank of China and the Russian central bank – who believe in gold as an important monetary asset.
– Continuing Central Bank and Russian Central Bank Demand
In 2014, central banks continued to accumulate gold with Russia in particular and ex Soviet States – Kazakhstan, Azerbaijan, Kyrgyz Republic and other central banks continuing to diversify their foreign exchange reserves – frequently reducing dollar holdings and increasing gold holdings.
U.S. Federal Reserve employees auditing gold?
Central banks continued to be strong buyers of gold in 2014, albeit the full year data may show demand was at a slightly slower rate than the record levels seen in recent years.
Central banks have been accelerating gold purchases ever since quantitative easing began in early 2009. Central banks added 93 tons of gold to reserves in the third quarter of 2014, with more than half of all buying coming from Russia, according to the World Gold Council.
Q4 2014 will likely be the 16th consecutive quarter of net purchases of gold by central banks.
Central bank purchases are expected to hit more than 400 tons for the full year, in line with 2013.
However, the official figures do not include the ongoing clandestine and undeclared purchases of gold by the People’s Bank of China (PBOC). Conservative estimates put PBOC demand at 100 tonnes a quarter or at over 400 tonnes for the year. More radical projections are of demand of over 1,000 tonnes from the PBOC again in 2014.
China is buying huge amounts of gold as it seeks to increase its gold allocation from the current low of just 1 percent of foreign exchange reserves.
As currency wars deepen and as economic war with Russia intensifies, there is now a possibility that Russia may like China, also start accumulating gold in a clandestine manner. Rather than selling gold as some banks have suggested without any facts or reasoning to back it up, Russia may increase its gold buying in an effort to protect the rouble.
– Gold Repatriation Movements Gather Momentum
The gold repatriation movement began by Hugo Chavez of Venezuela and given added impetus by the Bundesbank in 2013, continued to gather momentum in 2014.
People in other European countries began to demand that central banks repatriate their gold reserves – frequently from the Bank of England and the Federal Reserve.
The Bundesbank is bringing back many tons of their valuable gold bars from abroad in order to store them in the vaults of the central bank in Frankfurt. By 2020 at the latest, half of Germany’s gold reserves are to be stored in Frankfurt.
At the end of last year the volume was not even one-third as the Germans struggled to have their gold returned to them – for reasons known only by the Federal Reserve and possibly the Bundesbank.
In 2014 came news that Netherlands, Belgium and Austria are seeking to repatriate their gold reserves.
Austria is the latest country to start discussing bringing its gold home. It has 280 tons of gold, 80% of which is stored in London, with another 3% held in Switzerland. In December it was reported that an Austrian audit court had ordered a review of the practicality of bringing Austrian gold reserves back to Vienna, where the central bank would have total control of it.
Last month, the leader of the populist National Front in France, Marine Le Pen, wrote an open letter to the Bank of France demanding that all the French gold be returned to Paris. For good measure, she urged the bank to take advantage of the fall in the gold price to increase French allocations to gold.
France is is one of the largest gold reserve holders in the world, with 2,435 tons.
Germany, France, Netherlands, Austria and Belgium are five of the countries at the core of the European Union and the political and financial power lies in these the“Northern block” of countries.
This could lead to a run on the global fractional reserve gold reserve system. An already tight and very small physical market may be confronted with new and very significant sources of demand for gold that has likely been sold into or leased into the market in recent years.
This along with demand from China and India and central bank demand from China, Russia and ex Soviet States has the potential be a catalyst for gold shortages and much higher prices in the coming years.
– Ebola – Threat Moves From Africa To West
Ebola was one of the biggest developments in 2014. Initially, the outbreak was confined almost completely to West African countries
Ebola struck fear into people’s hearts because of its virus potential. This is a highly contagious disease, spread through a number of vectors, with an average mortality rate of 50 percent – in some cases, it’s been as high as 90 percent. Very few antivirals can cure it. New research has shown that the virus can live on in the semen of infected, though cured, men, for months.
Ebola has the potential to turn into a global pandemic. This is especially the case in an era of mass-movement around the planet.
The crisis continues. As of early December, there were roughly 18,000 suspected cases and almost 7,000 deaths. The World Health Organisation (WHO) reckons this is under-estimated.
There were cases in Spain and the U.S, brought there by returning health workers. In Ireland, a man suspected of being infected with Ebola was given the all-clear. Ebola is being held in check – for now – but the WHO and various NGOs have urged the global community to step up their efforts.
At the time of writing came news that a British health care worker who has contracted the disease is quarantined and being treated in a hospital in London. There are concerns about all she came in contact with – including family, friends, colleagues, people on the return flight back with her and even taxi drivers.
A doctor who sat next to the nurse on the plane returning from Africa has accused health officials of jeopardising public safety by allowing at-risk volunteers to use public transport and enter crowded places once they arrive back in the UK.
Pandemics can severely affect supply chains, including food supplies, business operations and key government services such as the provision of water, electricity, education and of course health care. Travel restrictions and “stay at home” policies bordering on curfew would greatly curtail economic activity.
There is also an element of the “boy who cried wolf” regarding the ebola virus. There have been numerous alarmist campaigns and scaremongering regarding many viruses – bird flu, swine flu, H1N1 etc There have been many false alarms that when an actual pandemic commences, people may ignore the threat for longer than is prudent.
Therefore, the public will remain skeptical of the risk of ebola virus until it has been shown to be a real threat. This in itself poses risks as it means that people do not act in a precautionary manner thereby exposing themselves to potentially contracting the virus.
Is Ebola another virus scare or a real pandemic?
It is too soon to tell. Unless it is contained in the U.S. and Europe, it will likely at the very least impact consumer confidence and already fragile economic growth. Worse scenarios are possible with attendant consequences for risk assets.
– Markets Sleep as U.S. Government Debt Surges Over $18 Trillion
An important story in 2014 and yet one that was largely ignored by media, the markets and even the blogosphere was the continuing deterioration in the U.S. fiscal situation.
The continuing steady and rapid growth in the U.S. national debt led to the total U.S. national or government debt hitting a new record high on December 1st at over $18 trillion.
The total U.S. debt has increased by 70% under Obama, from $10.62 trillion in January 2009 to over $18.005 trillion today. Actually since early December the debt has increased another whopping $50.19 billion to $18,050,191,719,150.07.
The Obama administration continues to pile debt onto the back of the U.S. taxpayer at a rate that would have made George W. Bush look quite prudent.
With the U.S. national debt or government debt now at over a staggering $18 trillion, it means that each household in the U.S. now carries the burden of $124,000 in national debt alone – or $56,378 per individual.
This does not include the massive private debt or household debt burden – people’s mortgages, personal loans, credit card debt, student loans, car loans and other household debt.
In short, the federal government has borrowed, and spent, nearly $7.5 trillion more since President Obama took office than it has collected in taxes.
As ever, historical context is all important. The U.S National Debt took 43 Presidents from 1789 until 2008 to reach $10 trillion. The National Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up nearly $8 trillion since President Obama took office.
The U.S. national debt continues to spiral out of control, without any plan to reign it in …
– Ukraine, Russia, Putin – ‘Poking The Bear’
A butterfly flaps its wings and your world changes …
The tragic shooting down of a Malaysia Airlines flight over Ukraine in July brought home the scale of the conflict in the region and how intractable and dangerous it would become.
The tragic deaths of 298 innocent civilians on the Malaysian passenger jet is partly due to the dangerous game of poker currently continuing between major powers and the lack of will or complete failure to broker a meaningful ceasefire and peace negotiations.
Real people have had their lives destroyed. Many of those 298 people woke up in the comfortable homes with their families and started preparing for departure. They were excited about the prospect that they would be enjoying the beauty of a far distant land and gain a reprieve from their daily routines.
The conflict in Ukraine was probably known to them due to it being headline news for months now. It may have been a concern, but not a serious one. They probably hoped for the best and hoped that international governments would find a resolution.
In a way, they may have felt it was remote to them, not immediate, a different place with people who spoke different languages, had a different history.
In a flash that illusion was gone and their lives and the lives of the participants in the conflict became forever linked.
This is the nature of risk. Risk is born of change and it is driven by a multitude of possible variables. All of which are in a state of constant flux. We all manage risks in our daily lives. Our political leaders are meant to manage risks in our respective countries and their leaders are meant to manage risk in our respective economic blocks.
In order to manage risk we must be aware of the variables that affect us. We must know how they work, how they can be managed and how they can be diminished or leveraged?
You do this when you lock your house and set the alarm. When you put your seat belt on. When you ensure that your child wears a helmet while cycling their bike. When you buy health insurance. When you buy gold.
These are risks that you actively manage, there are other risks that you can do nothing about. These are so called acts of god, where no one is to blame, no one could have known.
The destruction of the passenger plane was not an act of god, it was an act of man.
An entire series of events had to happen, and in sequence, for this tragedy to have occurred. It is a failure of modern leadership and shows just how poor our political elites have become. It also shows how fragile our world is.
Warning signs like todays have been seen before. Local conflicts eventually boil over. Regional powers get sucked in. Powerful countries that would be better off in peaceful coexistence opt instead for conflict. Wrong choices are made.
The greatest wars in history all started with someone somewhere having an idea, taking liberties (nearly always literally taking people’s liberties and their lives), taking advantage of their neighbours, imposing their economic and military might on less powerful countries. It is when such actions go unchecked for too long and peaceful solutions are not genuinely sought that wars start.
Peaceful compromise is not sought leading to war. But “to jaw-jaw is always better than to war-war” as Sir Winston Churchill sagely put it.
Geopolitical risk is very high today and yet it is not appreciated by experts and the majority of the public . The same was true in 1914.
Very few thought that the assassination of Archduke Ferdinand would be a spark that ignited the brutal war that was World War I and the attendant economic depression. Indeed, as the Financial Times front page from the day after the assassination shows, stock markets were “scarcely affected by the assassination of the heir to the Austrian throne… there’s no evidence that stock holders took fright.”
Complacency reigned about the geopolitical risks. Six months later the Dow Jones Industrial Average was 35% lower and World War I was in its first year.
There is always a catalyst in the form of an event in history which people look back on as the start of tremendous global turmoil. Usually, there are significant pre-existing political, military and economic tensions which are the real factors leading to war.
The butterfly event can be the spark that ignites the conflagration.
The fog of war today could lead to an incident, such as the tragic airline crash yesterday or an act of terrorism, which could be the spark of a much greater conflict.
There have been many potential butterfly events in recent months, any one of which could lead to the hurricane of war.
The problem with war is that no matter how well the plans are made, strange things happen in war and there are many tragic unintended consequences.
Russia is not Syria, Libya or Iraq. Russia is a powerful, advanced military and nuclear state. Russia has good relations with one of the most powerful nations in the world today, China; and most countries in an increasingly multi polar world. History shows that poking the Russian bear can lead to negative consequences.
Political and financial complacency reigns today as it did in 1914 …
– Move To Stealth Bail-In Regime Continues
2014 was another year in which the architecture of the enveloping western bail-in regimes saw more building blocks stealthily put in place.
The EU put in place legislation that will allow depositors to have their cash confiscated in the event of banks becoming insolvent.
Just last month, credit rating agencies warned that Europe’s banks are vulnerable in 2015 due to weak macroeconomic conditions, unfinished regulatory hurdles and the risk of bail-ins.
Preparations have been or are being put in place by the international monetary and financial authorities, including the Bank of England for bail-ins.
It is now the case that in the event of bank failure, deposits of individuals and companies can be confiscated.
Let’s be crystal clear: The EU, UK, the U.S., Canada, Australia and New Zealand all have plans in place for bail-ins in the event of banks and other large financial institutions getting into difficulty.
The majority of the public are unaware of these developments, the risks and the ramifications.
Alas, little has been learnt in recent years and the era of bank bail outs is set to continue. However going forward instead of taxpayers bailing out insolvent banks, we will see savers bailing out banks in the ill thought through mechanism that is bail-ins.
Huge gold imports into Turkey: 47 tonnes for the month of November.
Thus we have China importing about 200 tonnes for November
Turkey: 47 tonnes
Russia: 18 tonnes
India: over 200 tonnes
somebody is robbing the cookie jar!!
(courtesy Anadolu news/Turkey/GATA)
Turkish gold imports surge to record in November
From Anadolu News Agency, Istanbul
Wednesday, December 31, 2014
ANKARA, Turkey — Turkey’s gold imports have surged to their highest level on record in November at 47 tons worth nearly $2 billion.
The country’s imports in November reached 46.9 tons, an increase of 609 percent from October when the country imported 6.6 tons of gold bullion, according to a statement by the Istanbul Gold Exchange on Wednesday.
The country’s gold imports increased by 127 percent to $1.997 billion compared with $879 billion in November 2013. Turkish imports stood at 19.3 tons in the same month in the previous year. …
… For the remainder of the report:
Koos Jansen reports that we had 58 tonnes of gold withdrawn ( equals demand) for gold in China. Also remember that this is not sovereign gold purchases as this is done separately. Silver volume on the Shanghai Silver Futures exchange now surpasses the comex.
Inventory at the Silver Future Exchange = 123 tonnes or 3.954 million oz.
Silver is now in contango at the exchange.
(courtesy Koos Jansen)
Posted on 2 Jan 2015 by Koos Jansen
Happy New Year from the BullionStar team!
In 2014 silver futures traded on the Shanghai Futures Exchange (SHFE) accounted for 2,908,168 tonnes. On the COMEX 2,123,387 tonnes were traded, 37 % less than in Shanghai.
First let’s have a look at the latest SGE trade report of week 52 (December 22 -26). Total SGE gold withdrawals was a staggering 58 tonnes in week 52, year to date (until December 26) SGE withdrawals have reached 2,073 tonnes. With three trading days left (December 29 – 31) total withdrawals are 124 tonnes shy of the 2013 record (2197 tonnes). The possibility 2014 withdrawals will transcend 2013 is small, though 2014 has once again been an incredible strong year for Chinese gold demand.
Regular readers of this blog are used to the tonnage being withdrawn from the SGE vaults every week, often more than 40 tonnes (in one week). The fact the mainstream media, or the World Gold Council, CPM Group or Thomson Reuters GFMS, still don’t report these numbers is getting weirder by the day.
Because gold bullion export is prohibited in china, we know by tracking SGE withdrawals, fairly accurate, how much gold is being added to Chinese non-government gold reserves. This year that amount will be about 1,700 tonnes.
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.
Some SGE data lags one week, some not; in this post all gold data is up to week 52 (December 26).
Corrected by trading volume on the Shanghai International Gold Exchange (SGEI) – read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals – SGE withdrawals in the mainland, that equal Chinese wholesale demand, were at least 44 tonnes, at most 58 tonnes. Year to date SGE withdrawals in the mainland were at least 2,006 tonnes, at most 2,073 tonnes.
My best estimates for the supply side of SGE withdrawals (2,006 tonnes):
- Domestic mining 450 tonnes.
- Import 1,206 tonnes.
- Recycled gold through the SGE 350 tonnes.
East – West Precious Metals Markets Comparison
Let us have a look at size of the precious metals (paper) markets in China relative to the COMEX.
SGE gold trading volume saw a remarkable lift-off this year, most likely because 8 SGE contracts were allowed to be traded by foreign investors.
Total volume traded in 2013 on the SGE was 5,807 tonnes (counted unilaterally). In 2014 volume has already surpassed 8,982 tonnes; an amplification of at least 55 % y/y.
Total volume traded in week 52 was 371 tonnes, down 10 % w/w.
Volume on the two largest gold futures exchanges on earth (COMEX and the SHFE) have been low in week 52. On the Shanghai Futures Exchange (SHFE) volume in week 52 dropped 56 % w/w, to 344 tonnes. On the COMEX weekly volume dropped 54 % w/w, to 1,152 tonnes (the COMEX trading week counted only four days).
The Open Interest (OI) on the SHFE closed December 26 at 101 tonnes, on the COMEX at 1,158 tonnes. The total OI on the SGE of all gold deferred contracts combined – Au(T+D), mAu(T+D), Au(T+N1) and Au(T+N2) – stood at 109 tonnes on December 26.
Let’s have a look in the silver pit. For silver we have all the data of all exchanges (SGE, SHFE, COMEX) for 2014 complete.
SGE silver volume in 2014 shows less growth relative to gold, probably because silver contracts aren’t allowed to be traded by foreigner investors. Total silver volume traded on the SGE in 2013 accounted for 215,250 tonnes, in 2014 it was 252,306, so it’s up 17 % y/y.
In week 52 SGE silver volume was down 49 % w/w, at 8,602 tonnes.
Total silver volume on the COMEX has dropped 2.5 % in 2014 relative to 2013. Total volume on the SHFE has increased 14 % compared to 2013.
Total volume traded on the COMEX in 2013 was 2,176,519 tonnes; the SHFE traded 2,557,430 tonnes in silver futures, 18 % more.
In 2014 the COMEX has traded 2,123,387 tonnes of silver futures, the SHFE 2,908,168 tonnes, 37 % more.
The OI on the COMEX closed at December 31, 2014, at 23,264 tonnes, up 27 % y/y. The OI on the SHFE closed at 3,052 tonnes, down 39 % from a year earlier.
The OI of the deferred SGE contract Ag(T+D) closed on December 31 at 2,471 tonnes, up 25 % y/y.
Silver inventory at the SGE dropped 8 % y/y, to 103 tonnes. Silver inventory on the SHFE dropped 71 % y/y, to 123 tonnes. Note, there are many other (spot) silver exchanges in China, these inventories don’t mean that much. SHFE inventory has been emptied because the cash and carry trade closed (read this post for a simplified explanation) when the silver futures curve on the SHFE went from contango to backwardation.
Currently the futures curve on the SHFE is in contango,
…which caused the discount of silver in the mainland to increase relative to London spot.
Silver export from China enjoys 17 % VAT, hence the discount is not arbitraged. (for more information on the structure of the Chinese silver market read this post).
The fun will now begin!!
(courtesy zero hedge)
“Audit The Fed” Bill Gains Momentum, Yellen Starts Damage Control
After years of being blocked by Democratic leader Harry Reid, The Washington Times reports, the Senate will finally get a chance next year to vote on legislation to force a broad audit of the Federal Reserve’s decision-making. Ron Paul’s flagship legislative efforts have been picked up by his son and now has the backing of the leader of the new Republican majority, Sen. Mitch McConnell, whose office says the legislation will earn a floor vote. While the bill is not a sure thing, it appears to have The Fed worried as Reuters reports,Yellen and other Fed officials are lobbying Capitol Hill to drop the audit push.
After years of being blocked by Democratic leader Harry Reid, the Senate will finally get a chance next year to vote on legislation to force a broad audit of the Federal Reserve’s decision-making.
Once championed in Congress by former Rep. Ron Paul, the push to force the country’s central bank to undergo a full audit has been picked up by his son, Sen. Rand Paul, and others, and has the backing of the leader of the new Republican majority, Sen. Mitch McConnell, Kentucky Republican, whose office says the legislation will earn a floor vote.
But despite overwhelming support in the House, where the legislation has twice passed, the bill is not a sure thing in the Senate, andthe Fed itself is pushing back. Chairwoman Janet L. Yellen said earlier this month the Fed remains opposed to stricter oversight of its monetary policy decisions, and Reuters reported she and other Fed officials are lobbying Capitol Hill to drop the audit push.
“Back in 1978 Congress explicitly passed legislation to ensure that there would be no GAO audits of monetary policy decision-making, namely policy audits. I certainly hope that will continue, and I will try to forcefully make the case for why that’s important,” Ms. Yellen told reporters at a press conference two weeks ago.
For supporters in Congress, the fight is a matter of constitutional prerogatives and good governance. They argue that President Obama’s 2009 Recovery Act, which totaled $800 billion in spending and tax cuts, was dwarfed by the trillions of dollars of stimulus the Federal Reserve oversaw.
And everything changed in the last election…
“[Harry Reid’s] refusal to bring popular legislation like ‘Audit the Fed’ to the floor is a major reason why he’s being demoted to minority leader,” said Mr. Singleton, who spent years as Mr. Paul’s legislative director in the House. “The change in Senate leadership does present us with the best opportunity yet to get a stand-alone vote on ‘Audit the Fed.'”
Still, he said they aren’t taking anything for granted, particularly after the report that Fed officials are quietly lobbying against more oversight.
“This is popular with 75 percent of the American people, but it’s not popular among Wall Street; it’s not popular among banks; it’s not popular among foreign central banks,” Mr. Singleton said. “These hold a fair amount of sway among both parties, so just to say that a change in party necessarily means we’ll be able to move Audit the Fed it’s better odds now than we’ve had before, but it’s not a slam dunk.”
The audit legislation would grant the Government Accountability Office, which is Congress’s chief investigative arm, the power to retroactively review – though not actually reverse – the Fed’s decision-making, particularly on monetary policy.
But the elites are worried…
Ms. Yellen and her defenders say giving the GAO audit powers could amount to having their decisions scrutinized almost in real time, which they say could influence the closed-door deliberations by the Fed.
“If board members know that their statements may become public, they may be inhibited from speaking candidly about the economic trends they are observing or the monetary policies they believe would best respond to current conditions,” Rep. Elijah E. Cummings, Maryland Democrat, said in leading the fight against the bill in September.
* * *
Accountability? Consequences? Not in the New Normal… it’s for your own good after all…
‘Free-market’ congressman misses point about secret futures trading by central banks
9:28p ET Wednesday, December 31, 2014
Dear Friend of GATA and Gold:
Zero Hedge tonight reports correspondence between Florida resident James W. Lovely and his U.S. representative, Dennis A. Ross, prompted by Lovely’s concern about surreptitious trading in U.S. futures markets by central banks, trading confirmed by the U.S. government records disclosed three months ago through Zero Hedge by the founder of the Winnetka, Illinois, market research firm Nanex, Eric Scott Hunsader:
Lovely tells the congressman that “trading the futures market against central banks is like playing no-limit poker against a billionaire. You will always be run out of the market and the market will be controlled by those who can print money for margin (or the next ante).”
Though the congressman is a member of the House Committee on Financial Services and its Subcommittee on Capital Markets and Government-Sponsored Enterprises, his reply to Lovely seems to be little more than a form drafted by a staff member who doesn’t grasp the constituent’s point — the destruction of free markets. Ironically, the biography of Ross posted on his congressional Internet site —
— recalls the severe political penalty Ross paid when he was a member of Florida’s House of Representatives — the loss of a committee chairmanship — “for voting against his party and with his free-market principles.”
Ross almost certainly is not as obtuse as his reply to Lovely suggests. More likely Ross, whose district, Florida’s 15th, covers an area east of Tampa including Lakeland, never read Lovely’s letter at all and, as with most members of Congress, his actual attention cannot be achieved through ordinary correspondence by anyone who has not recently donated at least $5,000 to his election campaign. Butrepeated correspondence or attendance at any meetings the congressman holds back in his district might start to break through, and Lovely’s effort is a start. Imagine if a few thousand Americans began writing to their congressmen seeking accountability for secret futures market trading by central banks and sent copies of that correspondence not only to Zero Hedge but to their local newspapers.
If he has a piece of paper, an envelope, and a postage stamp, even the lowliest citizen can participate meaningfully in this struggle.
Zero Hedge’s report is headlined “Congressman Confirms Foreign Central Banks Buying U.S. Stock Futures Is Good for Liquidity” and it’s posted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Ned Naylor Leyland discusses the German repatriation of gold from the USA: IT IS A MUST READ!!!
(courtesy Ned Naylor Leyland/GATA)
Ned Naylor-Leyland: Germany, gold, and ‘diplomacy’
3:30p ET Friday, January 2, 2015
Dear Friend of GATA and Gold:
Writing for the TF Metals Report, Ned Naylor-Leyland of Quilter-Cheviot Asset Management in London observes that Germany used to vault its gold in the United States out of fear of Russia but now seems to have more fear of United States and the peculiar happenings in the gold market. Naylor-Leyland adds that if developments show that the Netherlands has been able to repatriate more gold faster than Germany has been, Germany’s Bundesbank may face some inconvenient questions. Naylor-Leyland’s commentary is headlined “Germany, Gold, and ‘Diplomacy'” and it’s posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
And now for the important paper stories for today:
Early Friday morning trading from Europe/Asia
1. Stocks higher on major Asian bourses / the yen a huge fall to 120.64,
1b Chinese yuan vs USA dollar/ yuan slightly strengthens to 6.2067
2 Nikkei off
3. Europe stocks mostly lower /Euro down/ USA dollar index up to 90.82/
3b Japan 10 year yield at .33% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.49
3c Nikkei still above 17,000
3e The USA/Yen rate well above the 120 barrier
3fOil: WTI 52.37 Brent: 55.94 /all eyes are focusing on oil prices. This should cause major defaults.
3g/ Gold down/yen down;
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
3k Draghi jawbones the euro lower/ states it is clear that they will start QE and increase ECB’s balance sheet size.
3l Euro area manufacturing PMI falters badly
3m Gold at $1177. dollars/ Silver: $15.71
3n USA vs Russian rouble: ( Russian rouble up 2.0 roubles per dollar in value) 58.00!!!!!!
3 0 Fresh new peripheral yield lows (see below)
3p Bonds on a Chinese developer default (see below)
4. USA 10 yr treasury bond at 2.20% early this morning. Thirty year rate well below 3% (2.77%!!!!)
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Draghi Launches New Year With More QE Jawboning, Sending Euro To New 4 Year Low, Yields Lower, US Futures Higher
The new year has officially started because it wasn’t even a day in and Mario Draghi was once again out and about, jawboning the Euro to a lower level than where it was when he said back in 2012 he would do “whatever it takes” to push it higher. The reason, as Reuters reports, why the Euro sank to a nearly 5 year low against the USD, was “clear indications that the European Central Bank will soon embark on outright money-printing.” Actually, it was on just more hollow rhetoric by Draghi, who told German Handelsblatt that “the risk that we don’t fulfill our mandate of price stability is higher than it was six months ago.” He also added that “it’s difficult to say” how much the institution will have to spend on government-bond purchases.
Confirming yet again, that when it comes to QE the ECB is all about talk and precisely zero action, Draghi continued: “We are in technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary, to react to a too-long period of low inflation. There’s unanimity in the ECB council on that.”
On the topic of deflation he said that “the risk cannot be entirely excluded, but it is limited,” still “we have to act against such risk. A look into history shows that falling prices can endanger the prosperity and stability of our community just as much as high inflation.”
“Interest rates have been very, very low for a long time – and that will continue for another while.”
Draghi then tried to debunk recent swirling rumors that he would quit the ECB and become Italy’s next president when he said that “I don’t want to be a politician,” when asked about resignation of Italian President Napolitano; says his ECB mandate lasts until 2019. In other words, he lied. Just as a politician would.
And speaking of lying, Draghi concluded with just that when asked about the likelihood of a break-up of the euro zone. “A break-up of the euro zone? That will not happen. That’s why there is no plan B,” he said. Which, as Zero Hedge readers now know, is what Draghi told Zero Hedge back in April 2014, and as they further know, is a bold-faced lie as explained in “When The Head Of The European Central Bank Lies To Zero Hedge On The Record: Presenting Europe’s “Plan Z.” Recall, via the FT:
Unbeknown to almost the entire Greek political establishment, a small group of EU and International Monetary Fund officials had been working clandestinely for months preparing for a collapse of Greece’s banks.Their secret blueprint, known as “Plan Z”, was a detailed script of how to reconstruct Greece’s economic and financial infrastructure if it were to leave the euro. The plan was drawn up by about two dozen officials in small teams at the European Commission in Brussels, the European Central Bank in Frankfurt and the IMF in Washington. Officials who worked on the previously undisclosed plan insisted it was not a road map to force Greece out of the euro – quite the opposite. “Grexit”, they feared, would wreak havoc in European financial markets, causing bank runs in other teetering eurozone economies and raising questions of which country would be forced out next. But by early 2012, many of those same officials believed it was irresponsible not to prepare for a Greek exit. “We always said: it’s our aim to keep them inside,” said one participant. “Is the probability zero that they leave? No. If you are on the board of a company and you only have a 10 per cent probability for such an event, you prepare yourself.”
Then again, technically Draghi isn’t lying: it isn’t Plan B – it is Plan Z.
Of course, for an entire continent in dire terminal straits, we have grown to expect nothing less from its central bank than a constant barrage of lies desperate to preserve confidence (who can forget that for the ECB it is not deflation, which is going to happen after all, it is “negative inflation“… please). However, while Draghi did drive the EURUSD lower once more and in the process sent USDJPY surging to 120.5 which promptly took E-minis up by 0.4%, European stocks have been unable to rally on Draghi’s latest jawboning and adding insult to injury, Europe reported a set of PMI data that was even worse than expected, confirming Europe’s triple-dip recession, even with the “benefit” of hookers and blow, has arrived. The details from Goldman:
The final Euro area Manufacturing PMI came in at 50.6 in December, 0.2pt lower than the Flash estimate. Today’s release constitutes a 0.5pt sequential improvement in the area-wide Manufacturing PMI in December, though this serves only to reverse the index’s November decline. The monthly rise in the area-wide index is largely attributable to a 1.7pt increase in the Manufacturing PMI for Germany to 51.2 (in line with its Flash estimate). The Manufacturing PMI for France came in 0.4pts lower than its Flash estimate (with a final reading of 47.5). The Manufacturing PMI for Italy fell by 0.6pts on the month(from 49.0 in November to 48.4 in December, against consensus expectations of a small increase to 49.5) and the Manufacturing PMI for Spain fell by 0.9pts on the month(from 54.7 in November to 53.8 in December, against consensus expectations of a small increase to 54.9).
And while the ECB’s hands may in fact be tied due to the recent political Snafu in Greece (as Zero Hedge andMorgan Stanley explained previously), the bond market won’t hear any of it, and this morning pulled peripheral Eurozone yields to fresh record lows:
- Italian 10Y yield -6bps to 1.826%, least since Bloomberg began collecting the data in 1993.
- Spanish 10Y yield -5bps to 1.565%
- Belgian 10Y yield touches 0.819%, also record low
- French 10Y yield reaches 0.812%
- Portugal 10Y drops under 2.50% for the first time ever
In other news, Asian stks rise, after fluctuating at least 10 times between gain and loss, on low trading volume as region’s two largest mkts shut for holidays. MSCI Asia-Pacific ex-Japan Index gains as 5/10 index groups advance, led by financials; 4 groups drop, led by consumer discretionary. MSCI A-P Index -0.1%. New Zealand, Philippines, Taiwan, Thailand also closed for holidays.
As a result, and in summary, European shares trade mixed, having risen from intraday lows, with the personal & household and autos sectors underperforming and bank, oil & gas outperforming. Euro weakens to 2010 low, ECB President Mario Draghi says can’t exclude risk of deflation in interview with Handelsblatt. Euro-area, U.K. manufacturing PMI data below estimates. The German and Swiss markets are the worst-performing larger bourses, the Spanish the best. Portuguese 10yr bond yields fall; Irish yields decline. Commodities gain with natural gas outperforming. U.S. Markit U.S. manufacturing PMI, ISM manufacturing, construction spending due later.
Market Wrap via Bloomberg
- S&P 500 futures up 0.4% to 2061.2
- Stoxx 600 down 0.1% to 342.1
- US 10Yr yield up 3bps to 2.2%
- German 10Yr yield little changed to 0.55%
- MSCI Asia Pacific little changed to 137.9
- Gold spot little changed to $1182.6/oz
- 3 out of 19 Stoxx 600 sectors rise; bank, oil & gas outperform, personal & household, autos underperform
- 49.8% of Stoxx 600 members gain, 48.3% decline
- Eurostoxx 50 -0.1%, FTSE 100 -0%, CAC 40 -0.1%, DAX -0.6%, IBEX +0.9%, FTSEMIB +0.8%
- Asian stocks little changed, MSCI Asia Pacific at 137.9
- Nikkei 225 closed, Hang Seng up 1.1%, Kospi up 0.6%, Shanghai Composite closed, ASX up 0.5%, Sensex up 1.4%
- Euro down 0.4% to $1.2055
- Dollar Index up 0.47% to 90.7
- Italian 10Yr yield down 8bps to 1.81%
- Spanish 10Yr yield down 6bps to 1.55%
- French 10Yr yield up 1bps to 0.83%
- S&P GSCI Index up 0.7% to 420.9
- Brent Futures up 0.6% to $57.7/bbl, WTI Futures up 0.8% to $53.7/bbl
- LME 3m Copper down 0.5% to $6268.8/MT
Bulletin headline Summary
- Treasuries fall to begin the new year, led by 2Y and 3Y notes; USTs returned 6.02% in 2014, best performance since 2011, led by double-digit gains for 10Y and 30Y sectors, according to BofAML; 10Y yield began 2014 at 2.989%, 30Y at 3.922%.
- ECB’s Mario Draghi said he can’t exclude the risk of deflation in the euro area, in a sign that the likelihood of large-scale quantitative easing is increasing; EUR weakened to 2010 low while Spanish and Italian bonds gained
- U.K. manufacturing unexpectedly slowed to a three-month low in December as weak growth in overseas markets such as the euro area undermined demand
- French investors are piling into Japanese stocks again, a sign to Nomura Holdings Inc. that the market is poised to fall.
- Bonds of Kaisa Group Holdings Ltd., a developer based in the southern Chinese city of Shenzhen, plunged to record lows after the resignation of its chairman triggered a default on one of its loans
- China is investigating an assistant foreign minister suspected of disciplinary violations as President Xi Jinping continues an anti-corruption campaign that has netted thousands of officials over the past two years
- Pimco’s Total Return Fund returned 4.7% in 2014, trailing a majority of peers for the second straight year after missing a rally in longer-term bonds and betting incorrectly that inflation would rise
- Russian oil production rose to a post-Soviet record last month, showing how pumping of the nation’s biggest source of revenue has so far been unaffected by U.S. and European sanctions or crude’s price collapse
- China demanded a review of crowd-safety procedures as dozens of people remain in Shanghai’s hospitals after a deadly stampede on New Year’s Eve killed 36 and caused the cancellation of celebrations across the city
- Search teams looking for the crashed AirAsia Bhd. jetliner’s black box will deploy side-scan sonar and pinger locaters as inclement weather off Indonesia’s coast hinders efforts to recover bodies and the plane’s fuselage
- Kim Jong Un’s younger sister married the son of one of North Korea’s most powerful officials last year, Yonhap News reported, citing two people in China it didn’t identify
- Sovereign yields mostly higher. Asian and European stocks mixed, U.S. equity-index futures gain. Brent crude, gold and copper fall
Early this morning: Merkel ally, Fuchs of the German Democratic Christian party states that Draghi should stop talking about QE and also to stop pumping money into PIIGS economies.
(courtesy zero hedge)
Merkel Ally Fuchs: Draghi, Stop Talking QE, “We Shouldn’t Pump Money” Into Struggling EU Nations
As bonds rally and EUR slumps near 1.20 (the figure) following moar Draghi jawboning and suggestions of sovereign QE from the ECB, Germany has come out swinging to remind the world that it won’t stand idly by as the nation’s taxpayers are thrown under the bailout-the-EU-or-else bus. Michael Fuchs, deputy parliamentary floor leader of Angela Merkel’s Christian Democrats, told Deutschlandfunk radio on Friday: “We shouldn’t pump extra money into these states, but rather make sure they continue along the reform path.” As Reuters reports, Fuchs further added, “I’d be grateful if (ECB President Mario) Mr Draghi would make statements along these lines.”
A senior member of Angela Merkel’s party warned the European Central Bank not to pour money into Greece and other struggling euro zone states through bond purchases, saying this would reduce pressure on them to enact much-needed reforms.
Michael Fuchs, deputy parliamentary floor leader of the German chancellor’s Christian Democrats (CDU), told Deutschlandfunk radio on Friday: “We shouldn’t pump extra money into these states, but rather make sure they continue along the reform path.
“I’d be grateful if (ECB President Mario) Mr Draghi would make statements along these lines.”
“I expect there to be fierce discussion over this at the next ECB meeting,” said Fuchs, referring to opposition to the bond-buying plan by the head of the Bundesbank Jens Weidmann. The ECB’s next policy meeting is on Jan. 22.
Fuchs has frequently expressed frustration felt by many German politicians and the public about the pace of reform in twice-bailed-out Greece.
He was quoted as saying in a newspaper interview published on Wednesday that euro zone politicians were not obliged to rescue Greece as the country was no longer of systemic importance to the single currency bloc.
* * *
Un-United States Of Europe?
China starts out the new year with its first default:
(courtesy zero hedge)
And 2015 Starts Off With A Bang – First Chinese Default Of The Year Hits
Well that didn’t take long… With the smell of fireworks still lingering in the air, Bloomberg reports that Chinese developer Kaisa Group defaulted on a HK$400 million ($51.6 million) loan triggered by forced repayment terms after the firm’s chairman resigned. With shares already down over 50% in December alone, trading is suspended as the company faces what S&P calls “more challenges” ahead and the 2018 bonds have collapsed to just 43c on the dollar (yields over 42%).
The company’s $800 million of 8.875 percent notes due 2018 and sold to investors at par in March 2013 tumbled to 43.846 cents on the dollar as of 10:05 a.m. in Hong Kong, from 66.263 cents on the dollar on Dec. 31, sending yields to 42.485 percent
Its $500 million of 10.25 percent debentures due 2020 slid to 38.025 cents on the dollar to yield 39.601 percent. The securities were sold to investors at 100 cents on the dollar in January 2013.
Kaisa’s stock fell over 50 percent in December — its steepest monthly decline on record — as authorities in the southern Chinese city of Shenzhen blocked its projects and key personnel departed. Standard & Poor’s Ratings Services said after two executives resigned that Kaisa may face “more challenges” in the days ahead while Moody’s Investors Service cut the company’s credit rating to B3 from B1.
Kaisa Group failed to pay a HK$400 million ($51.6 million) loan, raising questions about the Chinese developer’s ability to pay other debts.
Automatic repayment of the August 2013 term loan facility from HSBC was triggered by the Dec. 31 resignation of Kaisa’s chairman, Kwok Ying Shing, the company said today in a Hong Kong stock exchange filing. The company is assessing whether its failure to pay the outstanding debt plus interest may trigger cross-defaults and have a material adverse impact on the company, it said.
Routine applications for licenses, permits and project approvals haven’t been accepted, while an application for a certificate allowing land acquisitions has been suspended, Kaisa said in a statement on Dec. 21. Approvals for two projects in the city’s Longgang district have been withheld.
Kaisa announced Dec. 10 that Kwok, a co-founder, would resign for health reasons at the end of the month. The company’s shares were halted from trading Dec. 29, the day after Chief Financial Officer Cheung Hung Kwong and Vice Chairman Tam Lai Ling also resigned. The stock will remain suspended pending further announcements, Kaisa said today.
* * *
The first of many we suspect…
Deaths outnumbered births in Japan. How on earth can Japan increase GDP with a declining population?
(courtesy zero hedge)
The Death Of A Nation: Japanese Births Drop To Lowest Ever, Deaths Hit All Time High
Supporters and opponents of Abenomics may debate the metaphorical death of Japanese society as a result of the terminal hyper-Keynesian, hyper-monetarist policies implemented by Abe and Kuroda for the past 2 years until they are blue in the face, but when it comes to the literal death of Japan, there is no debate: as the FT succinctly puts it “deaths outnumbered births in Japan last year by the widest margin on
record, underscoring the scale of the challenge facing the government as
it tries to ensure a dwindling pool of workers can support growing
ranks of pensioners.”
Indeed, while Japan may or may not surive the collapse in the Yen, which will send the Nikkei225 soaring although nobody will be able to enjoy this unprecedented paper wealth because nobody can afford to eat, drive or heat their house, and all Japanese companies will be long bankrupt, it now looks almost certain that the death of Japanese society will not be due to a runaway printer, but due to, well, death itself.
As the Ministry of Health, Labor and Welfare reported earlier this week, while Japan recorded 1.001 million births in 2014, or the lowest number in recorded history, this was offset by 1.27 million deaths: also the highest on record.
It’s only downhill from here. More from the FT:
[T]he broader demographic problems remain. Last weekend, as the government fulfilled an election pledge to present an extra spending package, it outlined plans to arrest population falls outside the major cities, challenging local authorities to boost births via support to women aged 20 to 39, the group most critical to rebuilding the population.
If the current nationwide fertility rate of 1.4 stays unchanged, a task force warned in November, then Japan’s population of 127m would drop by almost a third by 2060 and by two-thirds by 2110.
Even if the fertility rate were to rapidly rise to the replacement level of 2.07 by 2030 and then stay there, the population would keep falling for another 50 years before stabilising at a little less than 100m.
Relaxing the nation’s relatively strict controls on immigration could provide some relief, but Mr Abe has made it clear that he is “flatly opposed to opening the door”, said Masatoshi Kikuchi, a strategist at Mizuho Securities in Tokyo.
Not surprisingly, the finance ministry declined to comment on the reported figures, ahead of the release of the draft budget around the middle of January.
Because what is there to comment? The data says it all.
And whatever you do, don’t use the Birinyni extrapolation ruler here.
UK Banks are too weak to survive another recession according to Mervyn King, former Governor of the Bank of England. He ought to know:
(courtesy RT and special thanks to Robert H for sending this to us)
UK banks ‘too weak’ to survive another recession
Former Bank of England governor Mervyn King has warned that British banks are too weak to weather another financial crisis, adding that government officials haven’t “got to the heart” of what went wrong in 2008.
Speaking to BBC Radio 4 on Monday, King criticised current measures being taken by the BoE to stabilise the economy, including keeping interest rates at a record low – currently at 0.5 percent – for more than five years.
“I don’t think we’re yet at the point where we can be confident that the banking system would be entirely safe,” he told the programme.
“The idea that we can go on indefinitely with very low interest rates doesn’t make much sense,” he added.
However, King also warned that a sudden increase in interest rates could provide too much of a shock to the British economy, which is only beginning to recover after the global financial crisis in 2008.
King was head of the BoE’s monetary policy department from 2003-13, and was in charge of setting Britain’s interest rates and controlling its money supply.
“It was exciting and it was fascinating and it was the sort of problem that we had trained to deal with over many years” he told the BBC.
“So I think both Ben [Bernanke] and I felt that having spent a good deal of time thinking through the intellectual foundations of what to do with a banking crisis and the opportunity to deal with one was one that we were well prepared for.”
King also defended the government’s decision to bail out British banks in 2008, while calling his quantitative easing measures – designed to artificially increase the UK’s money supply – necessary in order to sustain the economy.
King, who was guest editing the Radio 4 programme, also interviewed the former chair of the US Federal Reserve, Ben Bernanke, whom he worked closely with during the financial crisis.
Bernanke told him that more transparency between central banks and the public is necessary to restore faith in the banking system, and reaffirmed the measures taken by the US and UK to revive the economy.
“By stabilising the financial system we avoided much, much worse consequences for our economy,” he said.
The financial crisis started in 2007-8 as a result of a bubble in sub-prime mortgages, with major banks providing loans to customers who were unable to pay them back and were forced to default. As a result, many major banks – including Barclays and the Royal Bank of Scotland – were forced to seek assistance from the government in order to prevent them from collapsing.
Despite the UK seeing steady growth, Britain’s Office for National Statistics (ONS) has warned that growth is slowing, prompting fears that another recession could occur in the near future.
Government already owns 85% of RBS and Barclays cannot stay on a straight path making it a black hole”
Oil crashes early this morning, testing the 51 dollar handle on WTI:
(courtesy zero hedge)
2015 Starts As 2014 Ended: Crude Crumbles To Fresh Lows, WTI Tests $51 Handle
Reading headlines and social media commentary in last night’s thin trading, one could have been excused for thinking the collapse of global crude oil prices was over and a new renaissance had begun as ‘watchers’ proclaimed WTI’s spurt above $55 (for a nanosecond) as indicative of the lows being in. However, just hours later, following weak European data (and a recognition of massively offside speculative positioning), WTI has collapsed over $3 from the highs and is testing towards a $51 handle.
Turkmenistan Devalues Currency By 18%, Armstrong Warns Of “Economic Collapse On A Global Scale”
The energy-rich former Soviet republic of Turkmenistan Thursday devalued its currency against the US dollar by 18%, as AFP notes, in the latest sign of contagion among Russia’s neighbors from the plunging ruble (following Krgyzstan’s 17% plunge in 2014 and Kazakhstan’s 14% tumble). However, as Martin Armstrong warns, this is symptomatic of a deflationary contagion that “will contribute to now force the dollar higher… We are in a major economic collapse on a global scale. Most people do not understand that this is the real threat we face.”
On Thursday, the website of Turkmenistan’s central bank published the rate of 3.50 manats to the US dollar, from 2.85 manats, a depreciation of 18.6 percent.
The devaluation came as the plunge in value of the Russian ruble, linked to Western sanctions over Ukraine and falling oil prices, sent shockwaves through former Soviet republics.
All Turkmenistan’s currency exchange offices and banks were closed Thursday, officially due to the public holiday.
The official exchange rate set by the central bank for the manat had been set at 2.85 to the US dollar since 2009. Earlier in 2009, Turkmenistan had knocked zeroes off the manat in a redenomination after the official exchange rate reached 14,250 to the dollar.
Turkmenistan has been led by President Gurbanguly Berdymukhamedov since 2006, following the death of the eccentric dictator Saparmurat Niyazov, who erected a golden statue of himself that revolved to face the sun.
But that’s not the only pain…
Earlier Thursday, Turkmenistan’s oil and gas ministry announced petrol prices had risen by 60 percent. The rising price did not immediately lead to long queues at petrol pumps.
A litre of one type of petrol on Thursday cost one manat, while previously it cost 62 tenge (22 US cents under the previous exchange rate). No immediate explanation was given for the sudden price rise.
Turkmenistan, the former Soviet republic, devalued its currency against the US dollar by 18% for the new year. Turkmenistan is energy-rich and this is the latest sign of seriousness of the collapse in oil.
This will contribute to now force the dollar higher as commodities decline, the energy producing nations will be compelled to devalue their currencies in an effort to try to make ends-meet.
Devaluations will result in an attempt to create inflation to offset the deflation.
We are in a major economic collapse on a global scale.
Most people do not understand that this is the real threat we face.
We know, we know, “too small to matter”… “contained”… etc etc etc… nothing matters until it all matters remember… and the number of straws on this camel’s back are starting to get very heavy.
Your more important currency crosses early Friday morning:
Eur/USA 1.2037 down .0050
USA/JAPAN YEN 120.64 up .757
GBP/USA 1.5423 down .0156
USA/CAN 1.1683 up .0068
This morning in Europe, the euro is well down , trading now just below the 1.21 level at 1.2037 as Europe reacts to deflation and announcements of massive stimulation . 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 down in Japan by 76 basis points and settling well above the 120 barrier to 120.64 yen to the dollar. The pound is well down this morning as it now trades just below the 1.55 level at 1.5423.(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 well down today trading at 1.1683 to the dollar. It seems that the global dollar trade is being unwound. The total dollar global short is 9 trillion Usa, and as such we should see blood on the streets as derivatives blow up.
Early Friday morning USA 10 year bond yield: 2.20% !!! up 3 in basis points from Wednesday night/
USA dollar index early Friday morning: 90.82 up 54 cents from Wednesday’s close
The NIKKEI: Friday morning : off
Trading from Europe and Asia:
1. Europe stocks mostly in the red.
2/ Asian bourses all green … Chinese bourses: Hang Sang in the green ,Shanghai in the green, Australia in the red: /Nikkei (Japan) off/India’s Sensex in the green/
Gold early morning trading: $1177
Closing Portuguese 10 year bond yield: 2.42% down 27 in basis points from Wednesday
Closing Japanese 10 year bond yield: .33% !!! par in basis points from Wednesday
Your closing Spanish 10 year government bond, Friday down 17 in basis points in yield from Wednesday night.
Spanish 10 year bond yield: 1.50% !!!!!!
Your Friday closing Italian 10 year bond yield: 1.74% down 15 in basis points from Wednesday:
trading 24 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Friday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2003 down .0082
USA/Japan: 120.36 up .470
Great Britain/USA: 1.5332 up .479
USA/Canada: 1.1752 up .0137
The euro fell a lot in value during the afternoon , and it was down by closing time , finishing just below the 1.21 level to 1.2003. The yen was down in the afternoon, and it was well down by closing to the tune of 47 basis points and closing just above the 120 cross at 120.36. The British pound lost considerable ground during the afternoon session and it was still down badly on the day closing at 1.5332. The Canadian dollar was down in the afternoon and was down on the day at 1.1852 to the dollar.
As explained above, the short dollar carry trade is being unwound and this is causing massive derivative losses.
Your closing USA dollar index: 91.07 up 80 cents from Wednesday.
your 10 year USA bond yield , down 5 in basis points on the day: 2.12%!!!!
European and Dow Jones stock index closes:
England FTSE down 18.29 points or 0.28%
Paris CAC down 20.46 or 0.48%
German Dax down 40.82 or .42%
Spain’s Ibex up 71.30 or 0.69%
Italian FTSE-MIB up 118.30 or 0.62%
The Dow: up 9.92 or 0.06%
Nasdaq; down 9.24 or 0.20%
OIL: WTI 52.62 !!!!!!!
Closing USA/Russian rouble cross: 58.75 up 1.25 roubles per dollar during the day.
And now for your more important USA economic stories for today:
Your trading today from the New York:
Dismal Data Delivers S&P’s Worst End/Start To A Year Since 2008
It is the first time since 2008 where the last day of the prior year, and the first day of the new year were both down.
This is the 4th down day in a row… we suspect everyone needs to remember the following…
The early strength this morning was what everyone expected after Friday’s flush in US equity markets but soon after this morning’s dismal data, things went just a little bit turbo... the standard 330ET ramp occurred – got the Dow and S&P green… BUT the S&P cash ended the day just red!
Catching down to Treasuries reality…
Bonds rallied significantly today and on the week…down 12-15bps and yields lower 4 days in a row…
The US Dollar rallied notably today also – closing at X year highs
USD strength today whipped PMs around and crude fell to cycle lows – another weak week…
Close up on WTI…
Post-FOMC, Crude is down almst 9%, gold and silver around 1% lower…
Some context on the ‘down on last day of prior year and first day of new year’ meme from MKM’s Jonathan Krinsky:
“[It is] the first time since 2008 where the last day of the prior year, and the first day of the new year were both down. While that may have appear to have negative connotations, this combination is actually not that unusual nor bearish. In fact, since 1980 the SPX has had this combination 10 times (’89, ’93, ’94, ’95, ’97, ’98, ’99, ’01, ’05, ’07, ’08). The average return in those years has been +7.24%, and up 7 of 10 times. Therefore while the declines on Wednesday and today are perhaps surprising, they arenot unusual nor particularly bearish from a historical context.”
Finally, EURUSD clung desparately to 1.2000 all afternoon… The Euro broke down another 100 pips today on weak EU data and even more jawboning from Draghi. EURUSD has not seen a 1.19 handle since June 2010 (very briefly) when it was considered a signal of total EU collapse. Since Draghi really began jawboning ECB sovereign QE early in 2014, EURUSD is a stunning 20 handles lower!!
EURUSD drops to 1.2002 at its lows…
It’s perhaps worth noting that while the Euro has collapsed against the USDollar… it is perfectly unchanged from a year ago against the JPY…
So… both European and Japanese currencies have collapsed at the same pace of the past year.. and so have bond yields…
Today we had a slew of bad reports. The first is a tumbling manufacturing PMI to 11 month lows
(courtesy zero hedge)
Un-Decoupling? US Manufacturing PMI Tumbles To 11-Month Lows
So much for that whole “decoupling” meme… Just as China and then Europe saw weakness in their manufacturing PMIs, so the US data just hit, printing 53.9 (missing expectations modestly) and falling for 4 straight months to the lowest since January 2014’s Polar Vortex. Production volumes are also the weakest since Jan 2014 and the employment sub-index collapsed. Markit warns, “this suggests a slowdown could become more entrenched.”
As Markit discusses,
“The big question of course is whether the pace of expansion will continue to weaken as we move into 2015. Companies are citing greater uncertainty about the outlook, especially in export markets, leading to some scaling back of expansion plans and a greater reluctance for customers to place orders compared to earlier in the year, whichsuggests a slowdown could become more entrenched unless demand revives.”
* * *
So much for that decoupling thingy…
ISM Manufacturing & Construction Spending Collapse To 6-Month Lows
Not decoupling-er. Completing this morning’s triple whammy of ugliness, US construction spending in December dropped 0.3% (against expectations of a 0.4% rise) – the biggest monthly drop since June. On the back of a crash in new orders from 66.0 to 57.3 (and prices paid plunging to 30 month lows), ISM Manufacturing also tumbled from 58.7 to 55.5 – its lowest since June (missing expectations by the most since January). Unable to find a silver lining, ISM’s Holcomb proclaimed “comments are a ‘bit mixed'”.
ISM at 6-month lows…
As Prices Paid collapses…
and Construction Spending tumbled far more than expected…
The unintended consequences of a rise in the minimum wage:
(courtesy zero hedge)
These 19 States Just Hiked The Minimum Wage: Here Come The “Unintended Consequences”
Starting on January 1, 2015, a one year-delayed component of Obamacare kicks in: according to the health care law, businesses that employ at least 100 full-time workers — or full-time equivalents, including part-time workers — must offer health benefits to at least 70% of those working at least 30 hours a week by Thursday, or pay a penalty. This will expand to by next year, when companies will have to provide insurance to 95% of their workers, and firms with 50 to 99 employees must offer coverage as well. As a result, and as even the USA Today reports, “many businesses in low-wage industries have hired more part-time workers and cut the hours of full-timers recently to soften the impact of new health law requirements that take effect Thursday.”
Businesses in low-wage sectors, such as restaurants, retail and warehousing, are feeling bigger effects because health insurance represents an outsize share of their total employee costs, says Rob Wilson, head of Employco, a human resources outsourcing firm. Many of those with just fewer than 100 staffers have hired more part-timers in recent months, while those with at least 100 are reducing the hours of existing employees, he says.
Michelle Neblett, senior director of labor and workforce policy for the National Restaurant Association, says many restaurants are being more cautious about boosting the workweek of part-timers to 30 hours or more, doling out such increases to reward top performers.
Those strategies have not had a noticeable impact on the labor market. Monthly job growth has averaged 240,000 this year, up from 194,000 in 2013. And full-time employment has increased at about twice the rate of part-time payrolls, Labor Department figures show.
Still, the number of part-time workers who say they’d prefer full-time jobs has remained stubbornly high. That can at least partly be traced to the inclination of the restaurant, retail and hotel industries to hire more part-time workers to sidestep the ACA mandate, Royal Bank of Scotland wrote in a recent report.
Of course, the reason why the BLS has not yet revealed the reality of the shifting US labor force, and why there is virtually no real wage growth across the US since the Lehman bankruptcy, is that the BLS simply backs into statistically goal-seeked results, using seasonal and statistical (birth/death) adjustments to smooth a trendline to beat a monthly bogey used by algos to bid stocks higher. Meanwhile, the reality at the micro level, is that increasingly more Americans are seeing their work status transformed from full-time to part-time status, earning less in the process, having no healthcare and retirement benefits and virtually no job security.
As a result, starting this year, some 19 states just increased their minimum wage threshold, with 3 more states due to follow later in 2015. This takes place at the state level because for numerous reasons, there simply wan’t enough of a consensus to pass this at the Federal level. The Daily Signal has the details:
In three states—Arkansas, Nebraska and South Dakota—voters approved ballot measures in November to increase the minimum wage, effective Jan. 1, according to the National Conference of State Legislatures.
Alaska voters passed an initiative raising the minimum wage in the state to begin Jan. 1. But the pay increase isn’t effective until 90 days after the election results are certified, Feb. 24.
Meanwhile, legislatures in seven states—Connecticut, Hawaii, Maryland, Massachusetts, Rhode Island, Vermont and West Virginia—approved laws boosting the minimum wage. Those laws go into effect today.
Though Delaware and Minnesota’s state lawmakers voted to raise the minimum wage, those increases won’t begin until June and August, respectively. The District of Columbia will see a minimum wage hike beginning July 1. New York raised its minimum wage to $8.75 an hour beginning yesterday and will see another increase to $9 an hour beginning Dec. 31, 2015.
Nine other states will see increases in their minimum wages today as state laws mandate automatic increases to make up for rising prices. Those states are: Arizona, Colorado, Florida, Missouri, Montana, New Jersey, Ohio, Oregon and Washington.
Among states raising the minimum wage, Washington state will boast the highest at $9.47 an hour–but only until July 1, when the District of Columbia will have the highest in the nation at $10.50 an hour.
These are the states in question:
So in the grand scheme of this this should be net neutral: more part-time jobs offset by higher wages, not too bad right? Wrong.
For one thing, For according to a recent UCSD study, for three years, researchers followed low-income workers residing in states that saw wage hikes and those that did not. The study found that minimum wage hikes had negative impacts on employment, income and income growth. In other words, the probability of part-, and full-time workers to get fired rises even more as a result of an artificial push to the wage/labor supply-demand curve.
In fact, while one can applaud the attempt to boost standards of living, one can be certain that the only thing the media will be focusing on in 2015 will be the “unintended consequences” of this action:
“Minimum wage supporters have good intentions, but those good intentions cannot repeal the law of unintended consequences,” James Sherk, an expert in labor economics at The Heritage Foundation, told The Daily Signal. He added: “Minimum-wage increases reduce the total earnings of low-wage workers — the higher pay for some workers gets completely offset by the nonexistent pay of those no longer employed.”
In its study, UCSD researchers found that after minimum-wage increases, the national employment-to-population ratio decreased by 0.7 percent points between December 2006 and December 2012.
In addition, the study found that minimum-wage increases hindered low-skilled workers’ ability to rise to lower-middle -lass earnings.
And then there are rising prices. As shown previously, just the adverse impact to the bottom line already led to increases in consumer prices across various restaurants in the US.
Another casualty of the shale bubble burst: sand companies:
(courtesy zero hedge)
Another Shale-Bubble Bursts: Oil’s Plunge Is Not ‘Unequivocally Good” For This Group
While Jim Cramer went “all-in on oil stocks” in May 2014(right before the collapse), it was the fracking sand-providers that were the most-loved stocks on many individual investors buying lists last year… until their worlds caved in. As WSJ reports, for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride. As one CEO exclaimed, “there are a lot of wide-eyed people out there right now in the industry.”
Sand is an important ingredient in hydraulic fracturing, or fracking, which has pushed American oil output above 9 million barrels a day, rivaling the production of Saudi Arabia or Russia. Sand companies’ biggest customers used to be golf courses and glass manufacturers, but the oil boom brought energy clients to their door and now roughly 60% of business is tied to fracking, according to PacWest Consulting Partners, which forecasts sand demand.
But as The Wall Street Journal reports, now that oil prices have fallen, many fracking companies are retrenching—and that is bad news for sand producers.
“This isn’t our first rodeo” has become a catchphrase among oil-industry executives who are laying off workers and dialing back spending in the wake of tumbling crude-oil prices.
But for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride, industry analysts say.
Earlier this fall PacWest projected sand use would grow by 20% each year in 2015 and 2016. But following the plunge in oil prices, PacWest now expects sand demand to stay flat.
Meanwhile, new sand mines could add another 10% on top of the existing pile, creating a glut and pushing down prices, said Samir Nangia, a principal of PacWest.
With their revenue threatened, oil drillers and fracking companies are under tremendous pressure to dial down their spending and the companies they buy sand from will be easy targets, said Karen Nickerson, an energy analyst at Moody’s . “They’re going to push on who they can,” she said.
Doug Sheridan, an analyst at EnergyPoint Research, said sand companies ought to take their cues from Halliburton Co. , Schlumberger Ltd. and other oil-field-service companies that have announced cutbacks and workforce reductions.
“Sitting on your hands and waiting isn’t what the veterans do,” Mr. Sheridan said. “There are a lot of wide-eyed people out there right now in the industry.”
“Lower oil prices are a concern. This adds a lot of uncertainty to 2015.”
* * *
So not unequivocally good then after all?
What on earth is Obama thinking?
(courtesy zero hedge)
Obama Sanctions North Korea For Sony Hack Which Was Perpetrated By Disgruntled Former Employee
US foreign policy just jumped the shark: a few days after both the FBI and the US State department were humiliated when it was revealed that it wasn’t North Korea but a disgruntled, laid off Sony employee that was responsible for the “hack”, and when the best possible course of action would have been to simply let this latest embarrassing incident fade from memory, moments ago Obama – currently not working out next to a rainbow orflashing his support of “Shaka” – just signed his first executive order of 2015, imposing even more sanctions against North Korea.
President Obama signs order imposing additional sanctions on North Korea in response to country’s “efforts to undermine U.S. cyber-security and intimidate U.S. businesses and artists exercising their right of freedom of speech,” according to Treasury Dept statement.
Sanctions target 3 entities, 10 individuals
Including North Korea’s intelligence agency, arms dealer, North Korea’s representatives in Namibia, Sudan, Iran, Syria, China
“Even as the FBI continues its investigation into the cyber-attack against Sony Pictures Entertainment, these steps underscore that we will employ a broad set of tools to defend U.S. businesses and citizens, and to respond to attempts to undermine our values or threaten the national security of the United States,” Treasury Sec. Lew says in statement
That this action is so stupid no amount of commentary would possibly do it justice is quite clear, which is why we patiently await North Korean TV to escalate its comedic feud with the “monkey in a tropical jungle.”
Perhaps the only silver lining is that Obama did not launch a nuclear attack on Pyongyang outright, although there is still a 2 year period until January 2017. And anything goes, especially once the NSA fabricates another YouTube clip.
We will see you on Monday Jan 5.2015.
Expect huge volatility as markets will go all over the place
bye for now