jan 20/GLD adds another 13.74 tonnes late Friday night and another 11.35 tonnes tonight/SLV inventory remains constant/Gold and silver have a good day price wise/gold up $16.40 and silver is up 21 cents/Oil falls/Yemen also falls/




Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:


Gold: $1293.90 up $16.40   (comex closing time)
Silver: $17.89 up 21 cents  (comex closing time)



In the access market 5:15 pm


Gold $1294.00
silver $17.97




Gold/silver trading:  see kitco charts on right side of the commentary.


Today gold and silver had a good day price wise as the fear factor continues to weigh in on the financial scene. Late on Friday, the SPDR gold trust released data suggesting another 13.74 tonnes of gold was added to its inventory.  The huge repatriation of gold into Germany in December of 85 tonnes also gave gold a much needed boost. Get ready for the defense of 1300.00 USA gold and 18.00 dollar silver as the bankers will continue to go all out to defend their turf.


The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 37 notices for 185,000 oz.

Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 247.23 tonnes for a loss of 56 tonnes over that period.


In silver, the open interest rose  by a large 3,905 contracts with Friday’s silver price being up by 74 cents.  The total silver OI continues to  remains relatively high with today’s reading at 160,918 contracts. However the bankers, even though they are loathe to supply much of the non backed silver paper they were forced to do so. The January silver OI contract fell by 120 contracts down to 80.


In gold we had a good increase in OI with the huge rise  in price of gold  yesterday to the tune of $12.20. The total comex gold OI rests tonight at 424,386 for a gain of 2,475 contracts. The January gold contract remains constant at 87 contracts.




Late Friday night we had a huge addition of  gold inventory at the GLD to the tune of 13.74 tonnes/ Tonight an additional amount of 11.35 tonnes has been added /Inventory tonight 742.24 tonnes


In silver, no change in silver inventory so far tonight

SLV’s inventory rests tonight at 325.011 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:


All rates moved in the negative direction/  All months are in contango and thus positive in rates.


Sometime in January the LBMA will officially stop providing the GOFO rates.


Jan 20 2015


+.075%                     +085%                       +.0925%                +.10%            .1325%


Jan 16 2014:



+.10%                   +.1025%                 +.105 %             +.1075%               +.135%






Let us now head over to the comex and assess trading over there today.



Here are today’s comex results:



The total gold comex open interest rose today by 2,475 contracts from 421,911 all the way up to 424,386 with gold up by $12.20 on Friday (at the comex close).  We are now onto the January contract month.   The non active January contract month saw it’s OI contracts remain constant at 87 for a loss of 0 contracts. We had 0 contracts served yesterday.  Thus we neither  lost nor gained any  gold contracts standing for delivery in this January contract month.   The next big delivery month is February and here the OI fell by 5,098 contracts to 184,200 contracts with many moving to April. First day notice is Friday Jan 30.2014 or less than two weeks away. The estimated volume today was not bad at 185,535. The confirmed volume on Friday was excellent at 252,769 contracts. Today we had 0 notices filed for nil oz .



And now for the wild silver comex results. Silver OI rose by 3905 contracts from 157,013 all the way up to 160,918 with  silver up by 74  cents on Friday. The front January contract month saw its OI fall to 80 contracts for a loss of 120 contracts. We had 120 notices filed on Friday, so we neither gained nor lost any silver contracts  standing for silver in the January contract month. The next big contract month is March and here the OI rose by 2813 contracts up to 105,245.  The estimated volume today was excellent at 42,672. The confirmed volume on Friday was excellent as well at 70,992. We had 37 notices filed for 185,000 oz today. The rise in silver is certainly scaring our bankers. The rise in OI for silver has seen a slow and steady rise for the past few weeks.


January initial standings


Jan 20.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz nil
Deposits to the Dealer Inventory in oz nil  oz
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts(nil  oz)
No of oz to be served (notices)  87 contracts (8700 oz)
Total monthly oz gold served (contracts) so far this month  8 contracts(800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 2539.9 oz

Today, we had 0 dealer transactions

total dealer withdrawal: nil oz


we had 0 dealer deposit:

total dealer deposit: nil oz


we had 0 customer withdrawal




total customer withdrawal: nil oz


we had 0 customer deposits:

total customer deposits; nil  oz


We had 0 adjustments


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 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 (8) x 100 oz  or 800 oz to which we add the difference between the January OI (87) minus the number of notices served upon today (0) x 100 oz  = 9500 oz , the amount of gold oz standing for the January contract month. (.2954 tonnes of gold)


Thus the initial standings:

8 (notices filed for the month x 100 oz) +OI for January (87) – 0(no. of notices served upon today) 9500 oz (.2954 tonnes).


We neither lost nor gained any gold ounces standing for delivery today.


Total dealer inventory: 770,487.09 oz or 23.96 tonnes

Total gold inventory (dealer and customer) = 7.948 million oz. (247.23) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 56 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 20 2015:



 January silver: initial standings





Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 85,338.995 oz (,SCOTIA,)  oz
Deposits to the Dealer Inventory  14,523.80 (CNT)
Deposits to the Customer Inventory 707,165.665 oz (CNT,HSBC)
No of oz served (contracts) 37 contracts  (185,000 oz)
No of oz to be served (notices) 43 contracts (215,,000 oz)
Total monthly oz silver served (contracts) 391 contracts (1,955,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  5,895,934.4 oz

Today, we had 1 deposit into the dealer account:

i) Into CNT:  14,523.8 oz (one decimal)

total dealer deposit: 14,523.8   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 2 customer deposits:


i) Into CNT:  682,719.78 oz

ii) Into HSBC: 24,445.885 oz

total customer deposit  707,165.665 oz



We had 1 customer withdrawals:

i) Out of  Scotia:  85,338.995


total customer withdrawal: 85,338.995 oz



we had 1 adjustment

i) out of Delaware:  85,966.468 oz was adjusted out of the customer and this landed into the dealer account of Delaware




Total dealer inventory: 66.413 million oz

Total of all silver inventory (dealer and customer) 175.067 million oz.

The total number of notices filed today is represented by 37 contracts for 185,000 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 (391) x 5,000 oz  to which we add the difference between the OI for the front month of January (80) – the Number of notices served upon today (37) x 5,000 oz  = 2,170,000 oz the number of ounces standing so far for the January delivery month.


Initial standings for silver for the January contract month:

391 contracts x 5000 oz= 1,955,000 oz  +OI standing so far in January  (80)- no. of notices served upon today(27) x 5,000 oz   equals 2,170,000 ounces standing for the January contract month.



we neither gained nor lost any silver standing for the January contract month.


for those wishing to see the rest of data today see:

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







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 20.2015


Late Friday night, we had another addition of 13.74 tonnes of gold on top of the earlier amount of 9.56 tonnes which were added to inventory.

Tonight another 11.45 tonnes was added to inventory


Thus so far inventory rests at 742.24 tonnes of gold.


There is no chance that these guys could have assembled 34.65 tonnes over the weekend. The addition is nothing but a paper entry!! No real physical has been received.



Jan 16.2015 we had a huge addition of 9.56 tonnes of gold into the GLD/New inventory 717.15 tonnes.  (where on earth did they obtain that quantity of physical gold??)


Jan 15/ no change in inventory at the GLD today/inventory 707.59 tonnes


Jan 14.2015  we had a small withdrawal of .23 tonnes of gold from the GLD/inventory 707.59 tonnes


Jan 13.2015 no change in gold inventory/GLD inventory tonight at 707.82 tonnes


Jan 12 no change in gold inventory/GLD inventory tonight at 707.82 tonnes


January 9.2015: an addition of 2.99 tonnes of gold/Inventory 707.82 tonnes


Jan 8.2015: no change/inventory 704.83 tonnes


Jan 7.2015: we lost another exact 2.99 tonnes of gold inventory at the GLD/Inventory at 704.83 tonnes


Jan 6.2015: we lost 2.99 tonnes of gold inventory at the GLD//inventory 707.82 tonnes





, Jan 20/2015 /a huge addition of 13.74 tonnes of   gold   inventory at the GLD/late Friday night ) Tonight another 11.35 tonnes of gold added /Inventory rests tonight at 742.24 tonnes


inventory: 742.24 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 : 742.24 tonnes.






And now for silver (SLV):


Jan 20.2015: no change in silver inventory so far tonight/Inventory at 325.011 million oz



Jan 16.2015: we had another withdrawal of 1.34 million oz of silver inventory/Inventory 325.011 million oz

(something is up!!)


Jan 15.2015 we had a huge withdrawal of 1.628 million oz/Inventory 326.391 million oz


Jan 15.2015: no change in silver inventory/327.979 million oz



Jan 13.2015 no change in silver inventory/327.979 million oz/


Jan 12.2015 we had a huge withdrawal of 1.915 million at the SLV/inventory at 327.979 million oz.


Jan 9.2015: we had a huge addition of 1.437 million oz at the SLV/Inventory 329.894 million oz


Jan 8.2015: no change in silver inventory/inventory at 328.457 million oz.

Jan 7.2015:  we had another loss of 958,000 oz of silver from the SLV/Inventory 328.457 million oz

jAN 6.2015: we had a small loss of  149,000 oz/inventory 329.415 million oz




Jan 20/2015 /no change in silver inventory at the SLV

registers: 325.011 million oz







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

Note: Sprott silver fund now for the first time into the negative to NAV

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



1. Central Fund of Canada: traded at Negative  7.0% percent to NAV in usa funds and Negative 5.6 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.1%

Percentage of fund in silver:38.4%

cash .5%



( Jan 20/2015)



2. Sprott silver fund (PSLV): Premium to NAV rises to + 3.12%!!!!! NAV (Jan 20/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.16% to NAV(Jan 20/2015)

Note: Sprott silver trust back  into positive territory at +3.12%.

Sprott physical gold trust is back in positive territory at -.16%

Central fund of Canada’s is still in jail.





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




Early gold trading from Europe early Tuesday  morning:


(courtesy Mark O’Byrne)


Gold Demand Explodes as Volatility and Fear Stalk Market

Although the extent to which the surprise move by the Swiss National Bank last week has damaged financial institutions will not be apparent until the end of the month, it is already clear that enormous damage has been wreaked on many businesses exposed to the foreign exchange markets.

On Thursday the SNB unpegged its currency from the euro without warning. The peg was put in place three years ago during the height of the euro crisis to prevent the Swiss franc from rising too much relative to its EU neighbours and damaging its exports.

Swiss Franc images by MadGeographer

The shock move caused the Swiss franc to rally almost 30% against the euro and 28% against the dollar. To maintain the peg, the SNB had been forced to accumulate around €500 billion leaving it very vulnerable to a euro devaluation.

It would seem that the move was not coordinated with the ECB or the Fed and may be endemic of a new low phase in global central bank communications. Many times throughout the financial crisis central banks have coordinated efforts to stabilise market volatility and to manage stimulus programs in concert.

The SNB shock announcement seems to have happened in isolation and could mark the start of a far less accommodative stance by national central banks. This is not surprising as with a strong dollar, the U.S. is able to reduce the costs to foreign markets of its goods and services, thereby producing a massive competitive advantage. Now that the euro is going to start debasing itself too, it is natural that the Swiss also abandon a peg which is about to become indefensible. The question “Who next?” will break ranks. Currency wars and related volatility are now in full swing.

According to Bloomberg, Citigroup, the largest currency dealer globally, lost around $150 million on the move. Deutsche bank also lost $150 million and Barclays are reported to have incurred losses of €100 million.

Some funds and FX brokers and their customers were severely hit with funds closing and other businesses going under or getting bailed out by larger institutions.

Marko Dimitrijevic, chief investment officer and founder of Everest Capital LLC - (Bloomberg)

Everest Capital had to close it’s Global Fund.

“Marko Dimitrijevic, the hedge fund manager who survived at least five emerging-market debt crises, is closing his largest hedge fund, which had about $830 million in assets at the end of the year, after losing virtually all its money on the SNB’s decision, a person familiar with the firm said last week.”

Other companies have failed completely such as Alpari in the UK and Global Brokers NZ in New Zealand.

Banks in Croatia and Poland may yet feel the pinch as many of the mortgages taken out by house-buyers were in Swiss francs. This was done to avail of low interest rates but now many homeowners will find themselves in negative equity.

The Croatian government is considering pegging it’s kuna to the Swiss franc for one year to give borrowers time to adjust. Poland’s deputy prime minister, Janusz Piechocinski, has suggested that Poland will support borrowers caught in the maelstrom if the Swiss franc remains above the 4-zloty level for an extended period.

So far there have been no reports of national governments being exposed to the move as happened when Brazil and Mexico’s treasuries had shorted the dollar before its rally.

The unsignaled move by the SNB suggests an acceleration of thecurrency wars. Many analysts expect similar moves from other central banks who have been maintaining a peg with the euro or dollar. As central banks increasingly act unilaterally and defensively it may be that confidence in the central banks themselves will be eroded.

Dr. Marc Faber of the Gloom, Boom and Doom Report believes that such an environment will be conducive to owning gold. At a Societe Generale presentation in London last week he said,

“I’m positive gold will go up substantially [in 2015] — say 30%.” He continued, “My belief is that the big surprise this year is that investor confidence in central banks collapses. And when that happens — I can’t short central banks, although I’d really like to, and the only way to short them is to go long gold, silver and platinum,” he said. “That’s the only way. That’s something I will do.”

Dr. Faber is always very measured in his forecasts. Investors the US and around the world would be wise to take note of his suggestion by holding gold in fully allocated, fully segregated accounts in fully audited vaults in the safest jurisdictions in the world.

Dr. Faber’s webinar at GoldCore: Gold and Silver Allocation in an Uncertain World

Goldcore Insight on Currency Wars: Bye Bye Petrodollar Buy Buy Gold


Today’s AM fix was USD 1,292.25, EUR 1,113.63 and GBP 852.35 per ounce.
Yesterday’s AM fix was USD 1,275.50, EUR 1,099.85 and GBP 841.41 per ounce.

Yesterday’s PM fix was USD 1,273.75, EUR 1,096.07 and GBP 839.87 per ounce. The U.S. markets were closed for a national holiday on Monday.

Gold advanced to its highest in nearly five months as precious metals climbed on safe haven demand amidst concern about sluggish global economic growth.

The International Monetary Fund cut its global growth forecast the most in three years in a note yesterday from Washington. It said slowing growth almost everywhere except the U.S. will more than offset the boost to expansion from the slump in oil prices.

The IMF noted the world economy will grow 3.5 percent in 2015, down from the 3.8 percent rate projected in October. It also revised downward its estimate for growth next year to 3.7 percent, versus  4 percent in October.

Bullion soared last week by the most since August 2013, after the Swiss National Bank ended the franc’s peg to the euro and deepened negative interest rates, causing chaos in markets. The European Central Bank may announce asset purchases on Jan. 22 before a Greek election on Sunday that has increased concern that they may leave the euro.

Spot gold climbed 1.5 percent to $1,294.26 an ounce, the highest since Aug. 28, and was at $1,292.44 early in London. Comex gold bullion for February delivery climbed 1.2 percent to $1,292.50.

Silver rose as much as 1.9 percent to $18.028 an ounce in London, the highest since Sept. 19. Palladium gained 1.1 percent to $766.90 an ounce and platinum added 0.2 percent to $1,268.50 an ounce, after reaching its highest price since Oct. 29.

At a troika conference in Dublin yesterday, Irish Finance Minister Michael Noonan stirred up the pot ahead of Draghi’s ECB meeting in Frankfort, when he said that having national central banks buy government bonds would be “ineffective”.

Mr Noonan’s remarks received a cold response from ECB executive board member Benoît Cœuré, who was sitting next to him on the same panel. However Noonan’s idea was in line with IMF chief, Christine Lagarde, who also attended the conference about Ireland’s bailout. She said, “The more efficient it is, the more mutualisation, the better”.

Lagarde admitted that Ireland had been a “learning curve” as the troika has received renewed criticism of the ECB’s refusal to allow the Irish authorities to impose losses on senior bank bondholders.

Get Breaking News and Updates Here







More fallout from the Swiss Franc unpegging;


(courtesy London Financial Times/GATA)


Swiss franc fallout claims more casualties


Philip Stafford, Caroline Binham, and Miles Johnson
Financial Times, London
Monday, January 19, 2015

LONDON — A leading European foreign exchange broker filed for administration on Monday and a Danish bank conceded it faced heavy losses as the UK’s market regulator stepped in to assess the damage wreaked on the industry by last week’s violent swing in the Swiss franc.

The Financial Conduct Authority sent letters to an unspecified number of currency brokers on Friday asking them to update the regulator about any impact the Swiss move could have had on their balance sheets, according to a person familiar with the situation.

Alpari became one of the biggest casualties when a last-minute rescue ended in failure. Meanwhile, Denmark’s Saxo Bank was forced to admit on Monday that it was likely to suffer losses. …

… For the remainder of the report:




After abandoning the peg will Switzerland now buy gold with it’s depreciating Euros?

Does any country really know what its central bank is doing?


2:50p ET Monday, January 19, 2015

Dear Friend of GATA and Gold:

The German gold news Internet site Goldreporter wonders if the Swiss National Bank was buying gold quietly in the weeks prior to the bank’s repudiation of its pegging the Swiss franc to the euro, anticipating that the bank’s move would send the gold price up fast:


Meanwhile Bullion Star market analyst and GATA consultant Koos Jansen publicizes speculation that the Swiss National Bank went short gold when it pegged the franc to the euro on September 6, 2011, and dropped the peg last week to cover its gold shorts:


Somebody went short gold in a big way on September 6, 2011, just minutes before the Swiss National Bank announced its euro peg, and Hinde Capital CEO Ben Davies remarked that day on what seemed like coordinated action by central banks to prevent gold from looking like the successor to the Swiss franc as a safe-haven currency:


In any case, the SNB’s reversal of what it had insisted was its irrevocable policy of pegging the franc should raise the biggest questions about central banking as currently practiced.

After all, did the people of Switzerland realize that they had empowered anunelected agency to undertake actions of far greater impact on their lives than the actions their elected agencies are empowered to undertake?

These actions have included, of course, the squandering of the national patrimony (the nation’s gold reserves), the steady devaluation of the currency for three years, the overnight upward revaluation of their currency by as much as 30 percent, and the destruction of the country’s export industries. Of course nobody consulted with the Swiss people or their elected representatives about these decisions. These decisions were all concocted in secret and implemented as fait accomplis, making a sham of democracy.

Indeed, as your secretary/treasurer has remarked from time to time, modern central banking is a system by which the valuation of all capital, labor, goods, and services in the world is taken away from markets and democratic processes and bestowed upon an unelected and secretive elite. Gold price suppression to support currencies is only a part of it.

Is any nominally democratic country aware of the full range of market intervention being practiced by its own central bank? Do mainstream financial news organizations even inquire about it, much less report about it?

This is essentially a totalitarian system, except that central banks are not yet shooting people for complaining, though no one in authority is complaining. Someone in authority should test them.

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







A little bit of humour today:  The Argentinian government messing with markets has caused this country to ration tampons.


Venezuela has a run on soap and yesterday, Argentina has a run on tampons.


(courtesy GATA/Reuters)



Too much government messing with markets always causes shortages or rationing


What the Tampon Rumpus Says About Troubled Argentina

By Sarah Marsh
Friday, January 16, 2015

BUENOS AIRES, Argentina — Argentines have been complaining for a while now about the country’s product shortages. And until recently the government has managed to brush aside such protests, which have centered around Argentina’s import restrictions.

Until, that is, the country’s 20.6 million women couldn’t find their favorite tampons this month — during the height of summer.

“For 20 days we simply couldn’t source any tampons from wholesalers,” said Ariel, a 29-year old pharmacy owner. …

… For the remainder of the report:






Late Friday night, the SPDR gold trust released data showing a massive 13.74 tonnes of “gold” was added to its inventory. No doubt this is paper gold as it would probably be impossible to add 13.74 tonnes of gold in one day and over 23 tonnes in two days:


(courtesy zero hedge)





Is This The Reason Why Gold Is Suddenly Surging?  (GLD tonnage 730.89 up 13.74 tonnes


Total Gold ETF physical holdings rose 0.85% on Friday (following Thursday’s 0.78% rise) combining for thebiggest 2-day rise since Nov 2011 (adding 843,000 ounces of gold in 2 days). Of course these moves came right after the SNB decision ands are the largest since the peg was announced in 2011. GLD – the largest gold ETF – saw holdings surge 1.9% on Friday, the biggest single-day surge in almost 5 years.


TotalGold ETF Holdings surged 1.65% in the last 2 days


SPDR GLD ETF Holdings spiked 1.9% on Friday and 3.3% in the last 2 days – the biggest 2-day rise since May 2010…


Of course, once again this shows that only paper gold matters for price determination… physical is irrelevant (until of course, physical is all that matters).


Charts: Bloomberg




James Turk strongly believes that we will witness another London Gold Pool II as central banks run out of gold.  The Swiss franc unpegging is a prelude as to what will happen to gold:


(courtesy zero hedge)




James Turk: Market will prevail eventually, and gold too could rise 40% in minutes


2:11p ET Tuesday, January 20, 2015

Dear Friend of GATA and Gold:

The Swiss National Bank’s unexpected repudiation of its pegging of the Swiss franc to the euro shows that market forces will prevail eventually, GoldMoney founder and GATA consultant tells King World News.

Turk adds: “The gold price can soar 40 percent in a matter of minutes just as the Swiss franc did late last week. There are a number of ways this could happen.”

He describes those ways at the KWN blog here:


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




John Embry on the Canadian housing bubble, the German repatriation and why he believes Germany and the Netherlands have officially asked for the gold back and Belgium showing an interest in doing the same:


(courtesy John Embry/Kingworldnews/Eric King)




Bubble popping will hurt Canada especially, Embry tells KWN


2:20p ET Tuesday, January 20, 2015

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry, interviewed by King World News, warns that financial bubbles are likely to pop soon, with particular damage done in Canada. Embry speculates that northern European nations are beginning to repatriate their gold to facilitate a new European currency without the drag of the southern European countries. An excerpt from the interview is posted at the KWN blog here:


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







I urge everyone to read every word carefully and act upon those words:


(courtesy Bill Holter/Miles Franklin)




A Fork in the Road is Dead Ahead!



For 95% of the world’s population, the price of gold has already begun an explosive rally.  “But gold is only $150 off the November lows” you say?  Well yes, gold in terms of dollars is not yet up 20% from mid November …but, in terms of yen, pounds, euros, (especially rubles) you name it, gold has launched in price!
  This of course is a function of the dollar strengthening an average of over 10% versus foreign currencies in just the past several months.  My question is this, are dollars “up” as a function of them being a “safe haven” or is the strength “synthetic” so to speak?  Another way to put this would be, have foreigners sold their currencies to move into dollars for “safety” or has the dollar risen because commodities have been sold?
  You see, because commodities (oil in particular) had been purchased as a speculation on the reflation trade, these trades are being reversed as the real demand diminishes because of a weak global economy.  Many of these long position have been blown up and forced via margin calls into being sold.  This “unwinding” means that as the commodities are sold, the original loans (margin) for purchase have to be paid off …with dollars…and thus the recent demand for dollars causing the dollar to inflate versus foreign currencies.
  The big argument by the deflationists has been the dollar would emerge as the “King” currency as safe haven buying entered the equation.  This has been true versus other paper currencies (now with the exception of the Swiss franc), but not versus gold.  The world is definitely experiencing a sharp slowdown economically, this is exactly why we very probably will hear from the ECB this coming week.  As I have said all along, it is either “inflate or die” and Europe’s economy is definitely dying.  In my opinion, we are standing directly in front of a fork in the road.  Please don’t mistake this, I am not saying a “decision” has to be made because there is no “two way” decision available.  The only decision is whether to do nothing, or to engage in further monetization.
  In my opinion, QE, or more printing must and will occur.  The fork in the road is how markets react to further easing.  Do markets reflate?  Or, do they throw a party for 24-48 hours and then just collapse?  In my mind, this is really the only question because we have already seen that QE does not work in the real economy.  At best, QE merely slowed or halted the economic decline, never did we see a real “recovery” of the real economy.  This fork in the road is a big one, I believe it will be highlighted by both a currency crisis and a credit seizure.  This is THE environment where gold shines and shows its true colors because it is the ultimate money.
  The recent strength of the dollar versus foreign currencies AND gold strengthening versus the dollar means further “demand” for the front runner.  Foreigners are being forced to find a safe haven because of the local “inflation” created by their weak currencies.  This is happening at a time where demand for gold and silver were already far outstripping global mine supply.  Where will the metal come from?  The answer to this is simple, “it won’t”.  Added supply will not come to market at current prices, the price must and will rise in order to coax the new supply to meet the demand, Mother Nature at her finest if you will.  Another way to explain this is that because gold has been the best performing currency, holders of these foreign currencies are being “shown the way”.  The market prices of gold in local currencies is illuminating their path to safety.
  Going one step further than the current “deflation” the world is experiencing will be the default phase.  This past week’s announcement by the Swiss was the catalyzing event.  Many firms were bankrupted and margin calls galore were issued to an overleveraged financial system.  My guess is we only have a week or two before some very important dead body(s), somewhere, floats to the surface which causes further panic, further margin calls and more breaks in the derivatives chain.
  THE most basic reason to own gold is because “it cannot go broke”.  It is in this very environment, in this very scenario that gold will perform best.  The deflationists argue “gold will go down in a deflation and can only do well during inflation”.  This is pure fallacy.  THE best environment for gold is when even the best credits are defaulting.  When default is in the air and behind every door you open, capital will flow into the only place where default is not possible, gold.
  I remind you, the “door” to gold is a very small and definitely finite one.  There is only so much of it.  There is only so much of it “willing” to be sold.  Another aspect is the newfangled “fractional reserve” position of gold.  In order to suppress price (the truth), 100 paper ounces have been sold for every one and single real ounce.  We will see not only panicked investors looking for safety trying to get through the golden door, we will also see those who previously “thought” they owned gold jamming the entrance.
  For several years I have spoken of the necessity for a “re set”, the Swiss have now begun this process officially or by decree if you will.  Many have laughed as I have written the scenario of going to bed with $1,500 gold and waking up to a bid of $4,000 gold and none offered.  This is exactly what happened to a smaller degree with the franc/euro cross.  It only took 5 minutes for a 30% move to occur.  Why do question this cannot happen with gold?  Did the Swiss not artificially depress the value of their currency by implementing the peg?  Have we not shown you time and time again, evidence of gold price suppression?  Is there any difference?
  When it becomes no longer desirable, tenable or even possible to suppress gold, what do you think will happen to price?  You have already seen your answer from the Swiss.  It is for this reason I have harped that “trading” in and out of gold is very dangerous.  You can make 100 trades, 99 of them profitable (good luck with this percentage!) and be “out” on just one… the wrong one!  When the re set of gold’s price takes place, you will either be in, or you’re out.  If you are out, you will not be allowed back in until whatever “clearing” level is found.  My guess is this clearing level will be multiples of current price!  By the way, no one will tap you on the shoulder and tell you “when” this will happen but rest assured, the price of everything will be re set versus gold.
  To finish, I believe the deflationists are 99.9% correct, the credit markets will in fact implode and be followed by outright economic depression while central banks throw a kitchen sink of printing at the debacle.  The only thing they are missing is the fact that dollars are “part” of the credit structure.  In fact, dollars are what is holding the entire credit structure up.  History shows us that “liquid cash” is the very best place to be in a credit contraction.  The only caveat to this is your “liquid cash” must be of the sort which does not and cannot “default”.  Gold is the only liquid cash that is no one’s liability and thus can never default.  Yes, we have an historic deflation dead ahead …this deflation will be in terms of gold, not dollars!
  You have now seen and been warned of what a re set looks like by the Swiss.  If you have not yet purchased all the gold and silver you desire or have the ability to, do it NOW!  The coming credit unwinding will occur with no prior notice and at lightning speed!  Regards,  Bill Holter



And now for the important paper stories for today:



Early Tuesday morning trading from Europe/Asia



1. Stocks mainly up on major Asian bourses / the  yen falls  to 118.66

1b Chinese yuan vs USA dollar/ yuan weakens  to 6.2132
2 Nikkei up 352 points or 2.07%

3. Europe stocks mostly up  /Euro falls again// USA dollar index up to 92.75/

3b WOW!!! Japan 10 year yield at .21% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.66/

3c Nikkei now slightly above 17,000

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 47.91 Brent: 49.04 /all eyes are focusing on oil prices. This should cause major defaults.

3g/ Gold way up/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 rises this morning for both WTI and Brent

3k  IMF cuts global growth/Syriza widens lead over opponents

3l better Chinese made up data for GDP

3m Gold at $1288.50. dollars/ Silver: $17.85

3n USA vs Russian rouble:  ( Russian rouble  par per dollar in value)  65.01!!!!!!

3 0  oil rises into the 47 dollar handle for WTI and 49 handle for Brent

3p  volatility high/commodity de-risking!/Europe heading into outright deflation including Germany/Germany has low unemployment/Italy very high unemployment (high jobless rate)/Germany bad factory order numbers/

3Q German confidence higher  (*ZEW)

4. USA 10 yr treasury bond at 1.83% early this morning. Thirty year rate well below 3%  (2.43%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid



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


Market Wrap: Global Markets Rebound On ECB QE Hopes After IMF Cuts Global Growth Forecast Again



Hours after the IMF cut its global economic growth forecast yet again (which for the permabullish IMF is now a quarterly tradition as we will shortly show), now expecting 3.5% and 3.7% growth in 2015 and 2016, both 0.3% lower than the previous estimate (but… but… low oil is unambiguously good for the economy) and both of which will be revised lower in coming quarters, and hours after China announced that its entirely made up 2014 GDP number (which was available not 3 weeks after the end of the quarter and year) dropped below the mandatory target of 7.5% to the lowest in 24 years, it only makes sense that stock markets around the globe are solidly green if not on expectations of another year of slowing global economies, which stopped mattering some time in 2009, but on ever rising expectations that the ECB’s QE will bethe one that will save everyone. Well, maybe not everyone: really only the 1% which as we reported yesterday will soon own more wealth than everyone else combined and who are about to get even richer than to Draghi.

Asian equity markets traded mostly higher bolstered by better than expected Chinese GDP data which saw the Y/Y print snap its 4-consecutive year slowdown (7.3% vs. Exp. 7.2% (Prev. 7.3%), although YTD (7.4% vs. Exp. 7.3% (Prev. 7.4%) marked the slowest pace since 1990. Chinese Business News seemingly broke the data embargo by reporting the figures 10 minutes early. Retail Sales and Industrial Production readings topped expectations. This saw the Shanghai Comp (+1.8%) recover from its biggest loss since 2008 despite brokerages extending yesterday’s record losses, while Hang Seng closed up 0.9%. Nikkei (+2.1%) rose for a 2nd session lifted by a weak JPY ahead of tomorrow’s BoJ rate decision.

One of the more quoted pieces was yesterday’s screed by Fed mouthpiece Jon Hilsenrath who said that the Fed is not prepared to delay rate lift-off despite Treasury bond yields trading near multi-year lows. Backing this statement was Mr QE4 himself, James Bullard, who earlier today also said that he is “eager for the Fed to raise rates soon.” We leave it to readers to decide just how credible it is.

In today’s quiet session, small positive sentiment has filtered through from Asia following Chinese GDP which has supported European equities (Eurostoxx50 +0.59%) coupled with the forthcoming prospect of ECB QE. However, the DAX (+0.14%) underperforms, albeit in positive territory, as SAP is down 4.3% after cutting their 2017 profit forecast. In fixed income, trade has been relatively quiet as light volumes persist ahead of major economic events this week (ECB, BoC, BoJ rate decisions, BoE minutes) as the Bund trades flat. Stronger German ZEW M/M 48.4 vs. Exp. 40.0 (Prev. 34.9) did cause some volatility around the release but not enough to impact the ECB’s decision of potential further stimulus.

The USD-index (-0.07%) was stronger overnight following hawkish comments from Fed Watcher Hilsenrath. However in European trade, the USD-index has weakened and currently trades in negative territory, with AUD/USD and NZD/USD rebounding off lows following positive Chinese GDP and technical buying in AUD/USD. Separately, GBP/USD extends its gains with desks noting short covering after a 12 day low was hit in Asian trade and ahead of tomorrow’s UK jobs number and the BoE minutes.

In terms of the rest of the day ahead, this morning’s highlights will likely be the German ZEW survey with the market expecting a slight pickup. Elsewhere Italian trade data and German PPI headline what is a fairly quiet morning. Over in the US the calendar is similarly light with just the NAHB housing market index for January due.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Relatively quiet session with equity markets slightly higher across the board, although the DAX underperforms as SAP is down 4.3% following earnings, GBP outperforms ahead of tomorrow’s employment data and BoE minutes and Gold prints 4 month highs as the forthcoming prospect of ECB QE ahead of ECB’s rate decision on Thursday.
  • Looking ahead, sees the absence of tier 1 data and comments from BoE’s Cunliffe (Neutral), Fed’s Powell (Voter, Neutral), ECB’s Nowotny, President Obama’s State of the Union Address and earnings from Morgan Stanley, IBM and Johnson & Johnson.
  • Treasuries gain, U.S./Germany 10Y spread at narrowest since Oct. amid expectations ECB will announce a EU550b bond-purchase plan after its meeting ends on Thursday.
  • One option being considered by Draghi and the ECB’s executive board is to ring-fence risks by country; while that may win over some of Draghi’s opponents, it might also shine a spotlight on the lack of unity within the union
  • German investor confidence rose to the highest in 11 months in January, with the Zew index climbing to 48.4 from 34.9 in December
  • Denmark is trying to silence currency speculators as the government and central bank insist the Nordic country won’t follow Switzerland in severing its euro ties after it yesterday delivered a surprise rate cut to prevent the krone  gaining further
  • Credit Suisse Group AG and Saxo Bank A/S joined the list of European financial companies warning that the abrupt end to the cap on the Swiss franc may hurt their earnings
  • Syriza, the party that has vowed to negotiate a writedown on Greek public debt, widened its lead over Prime Minister Samaras’s party in three separate opinion polls just days before the general election
  • A Greek exit isn’t insurmountable as the euro area has become much stronger in recent years due to reforms in Ireland and Portugal, Christoph Schmidt, head of Merkel’s council of independent economic advisers, says in interview
  • China’s GDP grew 7.4% in 2014, weakest annual expansion since 1990
  • Islamic State militants threatened to kill two Japanese hostages just days after Prime Minister Shinzo Abe used a Middle East trip to pledge $200 million in non-military aid to nations confronted by the al-Qaeda breakaway group.
  • Sovereign 10Y yields mixed; Greece 10Y higher by ~22bps. Asian stocks gain; European stocks, U.S. equity-index futures rise. WTI crude higher, Brent little changed; copper and gold gain


DB’s Jim Reid concludes the overnight recap


Before we take a look at markets yesterday, in Asia this morning Chinese equities have recovered part of yesterdays sell-off with the Shanghai Composite trading +0.52% firmer whilst credit spreads are also generally tighter. The better tone appears to be as a result of generally better than expected data out of the region this morning – in particular the 2014 GDP reading with the 7.4% print coming in a touch above consensus of 7.3% – albeit the lowest for 24 years. Elsewhere, retail sales were unchanged at 12.0% yoy for the year along with fixed assets (15.7%) whilst industrial production also came in a touch above consensus (8.3% vs. 8.2% expected). Bourses across the rest of Asia appear to be following the China lead with the Nikkei (+1.82%), Hang Seng (+0.43%) and Kospi (+0851%) all firmer as we go to print. Finally this morning and shortly after the China releases, the IMF released their updated forecasts for global growth this year, downgrading both 2015 and 2016 forecasts by 30bps to 3.5% and 3.7% respectively. The lower forecasts follow on from similar cuts from the World Bank earlier this month with both expecting the boost from the US and oil prices to be more than offset by lower forecasts elsewhere globally.

We’ll take a look at the day’s calendar at the end but today’s State of Union address by Obama could be worth keeping an eye this evening in the US time-zone. In terms of expectations, a Reuters article suggested that the focus will be income equality with potential agenda items including raising the tax rate on capital gains and dividends some 4% to 28%. Perhaps of more importance however will be the reaction of the now Republican controlled Congress given the somewhat divided views on fiscal policy between the parties. The speech also comes before the start of the World Economic Forum in Davos tomorrow which could well be the source of some headlines in the run up to the ECB on Thursday and Greek election on Sunday.

Taking a looking at markets yesterday, with the US shut for a public holiday it was all eyes on Europe and another decent day for equities with both the Stoxx 600 (+0.22%) and Dax (+0.73%) closing stronger. The Dax in particular closed up for the third day in a row and fifth day in six. Both markets did trade some 0.5% higher intraday before a late decline in energy stocks dragged equities down into the end of the session. Indeed, having closed on Friday at the highest level for a week, Brent (-2.65%) tumbled back below $50 to finish at $48.84/bbl. The move was not helped by news that Saudi Arabia’s exports rose to a seven-month high in November whilst stockpiles were recorded at the highest level since January 2002. News on Reuters reporting the Iranian energy minister as saying that OPEC has no immediate plans to cut production and can sustain a fall in prices to $25 perhaps also put further pressure on prices. Energy stocks were the notable underperformer with the component closing -0.19%.

With little in the way of data, focus continues to be on the ECB meeting this Thursday. Reuters yesterday reported Merkel downplaying any impact on the single currency of the upcoming ECB meeting and Greek elections, specifically saying that ‘I wouldn’t call this a week of destiny for the euro, I have also said the euro crisis has not yet been fully overcome’. Also with regards to the Greek elections there were comments out of the ECB’s Moscovici who noted that the European Commission is prepared for many different scenarios regarding Greece and downplayed any potential Grexit. Meanwhile, ex-BoE governor King – who was also reported on Reuters – was quoted saying that further monetary stimulus is unlikely to help and instead we should worry about the continual weakness in global economic demand.

Swiss equities (+3.21%) closed in the green for the first time since the SNB action, although are still down over 11% since Thursday. The Swiss Franc weakened again for a second successive day against the Euro, closing -2.67% to CHF1.0207. Meanwhile Swiss 10y government bonds moved further into negative territory – tightening 4.6bps to -0.079%. Interestingly there was more surprise Central Bank action in Europe yesterday with Denmark cutting its deposit rate by 15bps to -0.2% and matching the lows of 2012. The Nationalbanken did however maintain the Krone peg versus the Euro, after earlier unconfirmed reports circulating on the wires (Bloomberg) that the currency may have been the next target of speculation. 10y Danish yields closed nearly 7bps tighter following the news.

Just rounding up yesterday’s moves, Italian Banks were a notable outperformer yesterday after news that the Italian Government is putting together a draft legislation aimed at forcing Italy’s largest cooperative banks to become joint stock companies. The FT noted that the move would look to remove the one shareholder, one vote rule which has in the past allowed unions at the Popolari banks to block past potential consolidations. Banco Popolare (+8.33%), Banca Popolare di Milano (14.89%) and UBI (+9.68%) all closed significantly higher on the back of the news.

In terms of the rest of the day ahead, this morning’s highlights will likely be the German ZEW survey with the market expecting a slight pickup. Elsewhere Italian trade data and German PPI headline what is a fairly quiet morning. Over in the US the calendar is similarly light with just the NAHB housing market index for January due




Just look at the damage to the Hungarian and Polish housing sector as many had mortgages denominated in Swiss Franc: total devastation!!


(courtesy zero hedge)






SNB Decision Sparks Calls For Polish Mortgage Bailout; Central Bank Against It


As we noted last week, the Swiss National Bank’s decision to un-peg from the Euro (thus strengthening the CHF dramatically) will have very significant repercussions – not the least of which is for Hungarian and Polish Swiss-Franc-denominated mortgage-holders. The 20% surge in Swiss Franc translates directly into a comparable jump in the zloty value of loan principles and and monthly payments for about 575,000 Polish families owing a total $35 billion in mortgages denominated in the Swiss currency which has prompted calls for Poland’s government to bail them out. Never mind the FX risk, the low-rates were all anyone cared about and now yet another ‘risk-free’ trade has exploded, Deputy PM Piechocinski says, if the franc “remains above the 4 zloty level, the government may provide support” to debtors but Poland’s Central Bank is not supportive of the bailout.


As Bloomberg reports,

The SNB’s abandonment of its franc floor roiled markets in some eastern European countries, where policy makers have tried to wean borrowers off of foreign currency loans.


While Polish banks stopped granting franc-denominated home loans after the global economic crisis caused the zloty to plunge in 2008, mortgage holders in the country of 38 million are still paying off debt taken last decade when they saw the franc as a way to borrow cheaply in an environment of a strengthening zloty.

How big a problem is this? (via Goldman Sachs)



Total balance of SFr denominated mortgage loans in Poland stood at PLN131 bn at the end of November which corresponds to 22% and 15% of retail and total lending respectively, and some 8% of Polish GDP. The individual exposures of banks under our coverage differ significantly with MBK, PKO having >20% of Swiss franc loans while the balances of PEO and BHW amount to <5%. SFr lending remains a legacy product, the balance of which has been declining over the recent years (-22% since 2009) and is expected to fall further.


Implications from strong depreciation of PLN vs. SFr predominantly relate to the risks of asset quality and to a lesser extent capital and liquidity. Strong performance of SFr denominated exposures over the last 5 years (2009-14) that came against 28% depreciation of PLN vs. SFr is largely attributable to the fact that mortgage installments remained stable because of declining LIBOR rates. In a press release published today (January 15), the KNF disclosed that according to their stress test, the depreciation of PLN by 30% to circa 4.5 level should not have meaningful and systemic implications for the sector (CET1 – 20bp to 13.3%), while a 50% move (towards 5.1 level) could see banks’ CET1 ratios come under moderate pressure (CET1 -100bp to 12.5%).


We cut our earnings estimates for Polish banks by 3% in 2015 and -3% in 2016 to better reflect weaker asset quality and topline trends; we modestly lower our CET1 forecasts.

And despite the Polish Central Bank’s comments that:


Here come the populist politicians to the rescue…

The government will watch “further developments on the FX market,”Krystyna Skowronska, head of the parliamentary finance committee and a representative of the ruling Citizens Platform party, said in an interview with Radio 1 on Monday.


Poland’s Financial Stability Committee, whose members include the finance minister, the central bank governor and the financial market watchdog, is meeting tomorrow to discuss the loans. Some commercial banks will also attend, Jacek Bartkiewicz, a central bank management board member, said in interview with Radio 1.


“The Polish government could help borrowers with franc-denominated home loans if monthly repayments are too high compared with their income,” Bartkiewicz said. Such measures could include helping borrowers with monthly installments exceeding “say, 40 percent” of their income or the “transfer of some government aid for new home buyers to those in trouble now,” he said.


Banks should also agree to renegotiate loan contracts with clients, helping them ease the burden of higher debt costs by, for example, extending loan maturities, he said. He added the zloty may remain above 4 against franc “in the mid-term.”

*  *  *
Perhaps – just perhaps – the 575,000 mortgage holders that exposed themselves directly to FX translation risk all with the aim of lower interest rates to afford thaty bigger home – should learn a lesson from this… one which, it appears, few in the new normal are ever allowed to experience.

*  *  *

But Poland has a bigger problem than just mortgages. As Goldman Sachs goes on to explain…

Poland appears to be most exposed to CHF strength, given the size of remaining CHF debt. But although a stronger CHF will hit the budgets of households with CHF loans, CHF appreciation should not trigger systemic growth or stability problems.


At PLN131bn, the stock of the remaining CHF loans is still substantial (an equivalent of EUR30.5bn, or 7.7% of GDP), even though banks have not been extending CHF or other FX mortgages for a few years now and the vast majority of new lending has been in the Polish Zloty. Some 550 thousand households still have CHF loans, out of some 700 thousand with FX loans in total (in a country of 38 million) And, unlike in Croatia and Hungary (where FX loans had constituted larger shares of GDP), there has been no policy induced transfer of the currency exposure to banks. FX loans are one of the best performing bank assets (NPL at 3.1%, against an average NPL of 8%).


At current market pricing, a stronger CHF, even if partially offset by lower Swiss interest rates, will still have a discernible impact on household budgets, although it should not trigger a systemic growth problem. Looking at an average household with a CHF mortgage, we calculate that a combination of CHF appreciation against the PLN (some 22%), and the fall in interest rates after the cut by the SNB of around 50bps (CHF mortgages are indexed to CHF rates), will increase an average monthly mortgage payment by some PLN350, or EUR85. In total, the increase would add up to some 0.15%-0.2% of Polish GDP, or 0.25% of private consumption.


While this might not seem that much on a macro scale, an extra PLN350 in loan repayments could subtract some 9% from an average gross wage, or nearly 5% for a higher earning person (CHF loans were more popular among higher earners). Assuming the average income tax burden, higher mortgage payments would reduce disposable income for those earning twice the average salary and having an average CHF mortgage by some 6.6%.Also, more households will be pushed into negative equity (the size of the mortgage will exceed the value of the property); the negative impact on households’ net wealth could also affect consumption. And given the high growth multiplier of consumer spending, the impact could be deeper than the initial 0.2% of GDP.


According to the recent stress tests from the Polish regulator KNF and the NBP, a stronger CHF should have a limited impact on overall financial stability. Recent tests indicated that banks can handle a stronger CHF (given that households carry most of the FX risk) and the increase in non-performing loans should also be limited. Also, banks should remain well capitalized even with the CHFPLN at 5.0 (the PLN traded at around CHFPLN 3.5 ahead of the SNB decision). Given that Polish (and many European) mortgages are full recourse, a higher share of negative equity loans will not necessarily trigger a wave of defaults or banks demanding extra collateral (like deposit blocks) or insurance protection from the households. But an even higher share of households with negative equity could cause the real estate market to stagnate.


However, a large CHF depreciation would require additional hedging by banks funded through cross-currency swaps (and not by FX lending from parent banks or FX deposits). We would assume that the regulator has been monitoring these risks; high liquidity in the banking sector should also help with covering those extra funding needs. But with banks being well capitalized, the cost impact should not have a large impact on the sector, although the demand for FX may put additional, occasional pressure on the Zloty.An externally driven increase in PLN volatility increases the risk of the NBP intervening in the FX markets, should the Zloty weaken rapidly over the course of a few days, without a clear domestic driver.

*  *  *

The Repercussions are only just starting…








More fallout from the oil fall:  Last week it was Schlumberger that fired 9,000 workers.  This was followed today by Baker Hughes laying off 7,000 more employees




(courtesy zero hedge)





First Schlumberger Fires 9,000; Now Baker Hughes Unleashes 7,000 More Layoffs


Another day, another unambiguously bad announcement from America’s bettered energy sector which are bolting down ahead of the crude storm, and firing thousands. Last week it was Schlumberger which announced it would fire 9000, today it is Baker Hughes which just warned it too will hand out about 7000 pink slips in the first quarter. And as a reminder, when it comes to comp: each Baker Hughes job is equivalent to about 10 waiter and bartender jobs, which have been the basis of this “recovery.”


What happens next? If indeed confused, then please reread “Houston, You Have A Problem” – Texas Is Headed For A Recession Due To Oil Crash, and promptly thereafter “Which States Stand To Lose The Most From The Crude Collapse.”





Another way of looking at this deflationary mess:  the global dollar economy has suffered a loss of 4 trillion USA.  That is:  if you convert the GDP of countries back into the dollars, the loss would be 4 trillion:


(courtesy zero hedge)




The “Deflationary Vortex”: Global Dollar Economy Suffers Biggest Plunge Since Lehman, Down $4 Trillion


One of the macroeconomic observations that has gotten absolutely no mention in recent months is the curious fact that while global economic growth has not imploded in recent quarters, it is because GDP has been represented, as is customary, in local currency terms.Of course, this comes as a time when local currencies (at least those which are not the USD) have been plunging against the greenback on the back of the expectations that the Fed will hike rates some time in the summer or later in 2015. Which also means that in “dollar economy” terms, i.e., converted in USD, things are not nearly as good.

In fact, as the chart below shows, the global dollar economy is not only shrinking fast, but it is doing so at the fastest pace since the Lehman collapse, having shrunk by $4 trillion, or a whopping 5%, in just the last 6 months!

By way of comparison the dollar economy lost $7 trillion, or a 10% contraction, during the Lehman crisis. Should the USD continue to appreciate, the global dollar economy collapse may surpass the plunge observed just as the great financial crisis struck. SocGen calls it “a deflationary vortex“; CNBC would call it a “global recovery.”

Here is SocGen on this largely undiscussed topic with“The deflationary vortex of a shrinking dollar economy

As the ECB prepares to race faster in a bid to export deflation, the risk is that the dollar economy (world GDP measured in US dollars) will shrink further. The dollar economy is down by just over 5% since July, marking a loss of just over $4tn in nominal terms. The last sharp contraction of the dollar economy took place in 2008. Back then the economy shrank by just over $7tn, marking a loss in excess of 10%. The foreign trade mix of the US fairly closely mirrors the composition of world GDP. As such, if the trade weighted dollar is appreciating, then this exerts downward pressure on the dollar economy on a near one-to-one basis.Any offset then comes from nominal GDP growth in local currency terms. Since July, the trade weighted dollar has gained just over 10%.


Viewing the global economy from the vantage point of the dollar economy, it is hardly surprising that when the trade weighted dollar appreciates, commodity demand is eroded as economies with depreciating currencies lose purchasing power. To the extent that central banks actively seek currency depreciation, this could see further shrinkage of the dollar economy and add further downward pressure to commodity prices. Analysis by the IMF (WEO, April 2008), suggest that, as a rule of thumb, a 1% appreciation in the trade weighted dollar yields a 0.89% decline in the oil price after 1 month and 1.13% after 12 months.


There also seems to be a link between the size of the dollar economy and long bond yields. Again, this link has a sound economic rational. As major central banks ease monetary policy relative to the US, this not only lowers interest rates in the country in question, but also eases (ceteris paribus) pressure on the Fed to tighten. To the extent that foreign investors expect further dollar appreciation, this also triggers capital flows that exert further downward pressure on US interest rates. A shrinking dollar economy is also a headwind for corporate earnings.


The irony it seems is that as a growing number of central banks actively seek to export deflation, this could further exacerbate the market phenomena that have investors on edge. In a nutshell, if central bank accommodation and lower commodity prices fail to sufficiently boost GDP and inflation elsewhere in the world,the dollar economy is likely to shrink further. From a fundamental point of view, this is a clearly down side risk.

Yes, we too find it ironic that central bank policies are now actively collapsing the global economy just so they can boost stock prices a little bit higher before the rug is pulled from underneath everyone, and find it even more ironic that it took sellside pundits and the peanut gallery just about 6 years to figure it out.








Yemen falls: logistically this is bad as the Shiites will control the southern half of the Gulf Peninsula:



Obama’s “Partners” In Yemen Overthrown As Presidential Palace Falls To Local Militiamen



It seems like an eternity ago when Obama delivered the following extensively choreographed “Statement by the President on ISIL“, in which he praised US anti-terrorist tactics, giving Yemen and its “partners” as an example of “successful” US foreign intervention.  To wit:

Now, it will take time to eradicate a cancer like ISIL.  And any time we take military action, there are risks involved –- especially to the servicemen and women who carry out these missions.  But I want the American people to understand how this effort will be different from the wars in Iraq and Afghanistan.  It will not involve American combat troops fighting on foreign soil.  This counterterrorism campaign will be waged through a steady, relentless effort to take out ISIL wherever they exist, using our air power and our support for partner forces on the ground.  This strategy of taking out terrorists who threaten us, while supporting partners on the front lines, is one that we have successfully pursued in Yemen and Somalia for years.  And it is consistent with the approach I outlined earlier this year:  to use force against anyone who threatens America’s core interests, but to mobilize partners wherever possible to address broader challenges to international order.

He may want to scrub that statement because just 4 months after reading that from the Teleprompter, America’s “partners on the Yemen front lines” have officially fled quietly into that good night, abandoning the control of the nation to local Shiite militiamen.

From Reuters:

Houthi fighters entered Yemen’s presidential palace after a brief clash with the compound’s  security guards, witnesses and security sources told Reuters, a day after some of the worst battles in the capital in years.  Guards at the presidential palace housing the main office of  President Abd-Rabbu Mansour Hadi said they handed over the  compound to Houthi fighters after a brief clash. Witnesses said there was a brief clash between a Houthi force and palace guards.


Witnesses also said they saw the Houthis seize armoured vehicles that had been guarding the entrances to the palace. The Houthis on Monday fought artillery battles with the army near the presidential palace, in some of the most intense fighting in Sanaa in years, and surrounded the prime minister’s residence.

The WSJ adds that there is no information on the current whereabouts of the Yemen president:

The whereabouts of President Abed Rabbo Mansour Hadi were unknown. The number of casualties was also unknown.


The Houthis are demanding a greater say in the government and in the drafting of Yemen’s new constitution. They oppose Mr. Hadi’s recommendation that the constitution stipulate the division of Yemen into six federal states.

And with oil-prices plunging once again, which means social instability in the middle east is about to explode making the Arab spring of 2011 seem like child’s play by comparison, things around the globe are about to take a dramatic turn for the worse.




what a farce!! The Americans need a war to extricate themselves from the global messy financial scene


(courtesy zero hedge)






Ukraine Claims Russian Forces At Border, Attack Conflict Zone; Russia Replies “Complete Rubbish”


After reportedly rejecting Vladimir Putin’s peace proposaland continuing heavy shelling in the pro-Russian-held regions of Donetsk, Ukraine’s military spokesman Lysenko is reporting the Russian army is directly attacking Ukraine forces in the north conflict zone. The fight over what is now adestroyed Donetsk airport continues with Lysenko claiming to have stalled Russian forces adding thatthree Russian battallions are approaching the Ukraine border. CNN reports that the Russian Defense Ministry says, “Ukraine’s allegations that Russian troops are in Ukraine are complete rubbish.”

Reuters and Bloomberg report…


*  *  *

Reportedly Russian tanks at the Ukraine border..

*  *  *

As Bloomberg reports,

Ukrainian govt claims of Russian troops, equipment entering Ukraine Jan. 19 “absolute nonsense,” Russian Defense Ministry spokesman Igor Konashenkov says in e-mailed statement.


Allegations from Kiev are “hallucinations”: Konashenkov


Ukraine studying plan put forward by Russian President Vladimir Putin to withdraw heavy weaponry from conflict zone, RIA Novosti reports, citing Russian Ambassador Mikhail Zurabov


Zurabov says Ukrainian comments on plan mostly technical: RIA

*  *  *




Great American reconnaissance:  the ISIS leader does not exist.

The audios were done by an actor!!




(courtesy zero hedge


The US Military’s Stunning Conspiracy Theory Emerges From The Archives: “ISIS Leader Does Not Exist”





Having noted that voter angst has been riled, propagandized, and fear-mongered to the point at which the most pressing priority for Congress is to ‘fix’ terrorism, it is perhaps not entirely surprising that we discover – deep down in the archives – that giving the public someone to ‘hate’ as opposed to something may have been an entire fiction. As The New York Times exposed in 2007, Abdullah Rashid al-Baghdadi, the titular head of the Islamic State, according to Brigadier General Kevin Bergner – the chief American military spokesman at the time – never existed (and was actually a fictional character whose audio-taped declarations were provided by an elderly actor named Abu Adullah al-Naima).


Via The New York Times (2007),

For more than a year, the leader of one the most notorious insurgent groups in Iraq was said to be a mysterious Iraqi named Abdullah Rashid al-Baghdadi.


As the titular head of the Islamic State in Iraq, an organization publicly backed by Al Qaeda, Baghdadi issued a steady stream of incendiary pronouncements. Despite claims by Iraqi officials that he had been killed in May, Baghdadi appeared to have persevered unscathed.


On Wednesday, a senior American military spokesman provided a new explanation for Baghdadi’s ability to escape attack: He never existed.


Brigadier General Kevin Bergner, the chief American military spokesman, said the elusive Baghdadi was actually a fictional character whose audio-taped declarations were provided by an elderly actor named Abu Adullah al-Naima.


The ruse, Bergner said, was devised by Abu Ayub al-Masri, the Egyptian-born leader of Al Qaeda in Mesopotamia, who was trying to mask the dominant role that foreigners play in that insurgent organization.


The ploy was to invent Baghdadi, a figure whose very name establishes his Iraqi pedigree, install him as the head of a front organization called the Islamic State of Iraq and then arrange for Masri to swear allegiance to him. Ayman al-Zawahiri, Osama bin Laden’s deputy, sought to reinforce the deception by referring to Baghdadi in his video and Internet statements.


The evidence for the American assertions, Bergner announced at a news briefing, was provided by an Iraqi insurgent: Khalid Abdul Fatah Daud Mahmud al-Mashadani, who was said to have been captured by American forces in Mosul on July 4.


According to Bergner, Mashadani is the most senior Iraqi operative in Al Qaeda in Mesopotamia. He got his start in the Ansar al-Sunna insurgent group before joining Al Qaeda in Mesopotamia more than two years ago, and became the group’s “media emir” for all of Iraq. Bergner said that Mashadani was also an intermediary between Masri in Iraq and bin Laden and Zawahiri, whom the Americans assert support and guide their Iraqi affiliate.


“Mashadani confirms that al-Masri and the foreign leaders with whom he surrounds himself, not Iraqis, made the operational decisions” for Al Qaeda in Mesopotamia, Bergner said.



Bruce Riedel, a former CIA official and a Middle East expert, said that experts had long wondered whether Baghdadi actually existed. “There has been a question mark about this,” he said.


Nonetheless, Riedel suggested that the disclosures made Wednesday might not be the final word on Baghdadi and the leaders of Al Qaeda in Mesopotamia. Even Mashadani’s assertions, Riedel said, might be a cover story to protect a leader who does in fact exist.


“First, they say we have killed him,” Riedel said, referring to the statements by some Iraqi government officials. “Then we heard him after his death and now they are saying he never existed. That suggests that our intelligence on Al Qaeda in Iraq is not what we want it to be.”


American military spokesmen insist they have gotten to the truth on Baghdadi.Mashadani, they say, provided his account because he resented the role of foreign leaders in Al Qaeda in Mesopotamia. They say he has not repudiated the organization.



Read more here…









Here is one individual who should know that QE never works:


(courtesy zero hedge)






Another Former Central Banker Finally Gets It: “The Idea That Monetary Stimulus Is The Answer Doesn’t Seem Right”


What is it about central bankers who wait to tell the truthonly after they have quit their post. First it was themaestro himself, the Fed’s Alan Greenspan (most recently in “Greenspan’s Stunning Admission: “Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It“), and now it is the Bank of England’s former head, Mervyn King, who yesterday told an audience at the LSE that “more monetary stimulus will not help the world economy return to strong growth.” That this is happening just as we learn that in one year the world’s 1% will collectively own more wealth than the rest of the world combined, and two days before Goldman’s Mario Draghi unleashed up to €1 trillion (if not unlimited) in QE, is hardly as surprise, and will be surely ignored by everyone until the inevitable outcome of another “French revolution” finally arrives.

From the Telegraph:

In his first public speech in England since his term at the BoE ended in June 2013, Mr King said he was concerned about a persistent weakness in global economic demand, six years on from the depths of the financial crisis.


We should worry about that,” Mr King told an audience at the London School of Economics, where he was once a professor.


We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years … is the answer doesn’t seem (right) to me,”he added.


Unlike the US Federal Reserve and the Bank of England, the European Central Bank has until now resisted trying to boost the economy by buying government bonds with newly created money, known as quantitative easing (QE).


“There are quite serious disequilibria both between and within economies that, for good economic reasons, are depressing demand. Simply lowering rates even further or adding more monetary stimulus is unlikely to solve that problem,” he said.

Which is not only ironic but hypocritical because under King, the BoE bought £375bn of government bonds between 2009 and 2011. Mr King said this was right just after the crisis, but that using loose monetary policy to bring forward spending was not a long-term strategy.

Actually, wrong: since the entire global economy has been hijacked by the same people who would be sleeping under bridges had they not received a multi-trillion bailout in 2008, and since the global financial system now exists only to serve them, and to raise them from billionaire to trillionaire status, QE is precisely that: a long-term strategy, one which will ultimately pillage all the wealth of the middle class and hand it on a golden platter in some non-extradition country to the 0.001%.

Well, long-term at least until the 99% realize they have been subject to the most epic, historic robbery in the history of the world.  Of course, by the time what was formerly the world’s middle class realizes what happened, there will be nothing left.







Your more important currency crosses early Tuesday morning:


Eur/USA 1.1587 down .0008

USA/JAPAN YEN 118.66  up .909

GBP/USA 1.5171 up .0084

USA/CAN 1.2002 up .0050



This morning in Europe, the euro continues on  its  downward spiral, trading  down  and now well below the 1.16 level at 1.1587 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 again in Japan by 91 basis points and settling just above the 118 barrier to 118.66 yen to the dollar.  The pound was  up this morning as it now trades just below the 1.52 level at 1.5171.(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 falling apart (oil down/all of Target stores closing/all of Sony stores closing) trading at 1.2002 to the dollar. It seems that the three major global carry  trades are being unwound. (1) The total dollar global short is 9 trillion USA, and as such we now witness a sea of red blood on the streets as derivatives blow up with the massive rise in the dollar against all paper currencies.We also have the second big yen carry trade unwind as the yen refuses to blow past the 120 level.(3) the Nikkei vs gold carry trade These massive carry trades are causing deflation as the world reacts to a lack of demand. Bourses around the globe are reacting in kind to these events.





Early Tuesday morning USA 10 year bond yield: 1.83% !!!  up 1  in basis points from Friday night/


USA dollar index early Tuesday morning: 92.75  up 26  cents from Friday’s close



The NIKKEI: Tuesday morning : up 352 points or 2.07%

Trading from Europe and Asia:
1. Europe stocks all green.

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

Gold early morning trading: $1288.50





Closing Portuguese 10 year bond yield: 2.78% up 31 in basis points from Friday


Closing Japanese 10 year bond yield: .22% !!! down 4 in basis points from Friday


Your closing Spanish 10 year government bond, Thursday  up 2 in basis points in yield from Friday night.

Spanish 10 year bond yield: 1.52% !!!!!! (expect huge QE)
Your Tuesday closing Italian 10 year bond yield: 1.67% up 1 in basis points from Friday: (expect huge QE)


trading 15 basis points higher than Spain:





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



Euro/USA: 1.1549  down .0063

USA/Japan: 118.71 up 972

Great Britain/USA: 1.5160 down .0020

USA/Canada: 1.1970 up .0012

The euro fell some more this afternoon and by closing time  finished down again and well below the 1.16 level to 1.1549. The yen was well down in the afternoon, and it was done by closing  to the tune of 97 basis points and closing well above the 118 cross at 118.71 still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound lost some  ground  during the afternoon session but it was up  on the day closing at 1.5151. The Canadian dollar crashed today  as it was down on the day at 1.2110 to the dollar.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system.






Your closing USA dollar index: 93.04 up 52 cents from Friday.


your 10 year USA bond yield , down 1  in basis points on the day:








European and Dow Jones stock index closes:



England FTSE  up 34.57 points or 0.52%

Paris CAC up 51.09 or 1.16%

German Dax  up 14.78 or 0.14%

Spain’s Ibex  up  126.40 or 1.24%

Italian FTSE-MIB up 178.13 or 0.91%


The Dow: up 3.66 or 0.02%

Nasdaq; up 19.35 or 0.42%


OIL: WTI 46.65 !!!!!!!

Brent: 48.18!!!!



Closing USA/Russian rouble cross: 65.16  par in roubles per dollar on the day.





And now for your more important USA economic stories for today:



(Your trading today from the New York):


Dow Roundtrips 500 Points As Gold Surges To Best Run In Over 4 Years


Another day, another rollercoaster of crazy volatility…


The Dow rallied a few hundred points post China GDP into the US open, then collapsed 260 points… only to pump 200 points back up after Europe closed.


Cash markets all moved together but small caps were the tell into the close…


Builders and Financials lagged… Tech and Industrials led… Notice energy bounced once again even as Crude hit new lows


Biotechs at record-erer highs…


Futures ramped after the China GDP data, dumped at the US open, ramped again after Europe closed… then started to fade


USDJPY was in charge as once Europe closed, stocks ripped back up to catch it…


Treasuries were very mixed today with the long end closing near record lows (30Y -7bps at 2.38% on moar QE duration scarcity) and the short-end saw yields rise (2Y +1.5bps at 49.5bps)…


banging 2s30s to fresh 6 year flats…


The USDollar rallied (as Swissy weakened a little more)


Oilmageddon continues… with WTI back down to a $46 handle, down almost 5% from Friday’s close (but gold and silver are surging)… note the moves in commodities started after China GDP…


With gold’s best 7-day run since Aug 2011 (shifting to 5-month highs…


Quite a run for gold…


Charts: Bloomberg



We  will see you on Wednesday.

bye for now



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