Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1293.70 down $0.20 (comex closing time)
Silver: $18.18 up 23 cents (comex closing time)
In the access market 5:15 pm
Gold/silver trading: see kitco charts on right side of the commentary.
Today, once gold surpassed the 1300 dollar level, one could guess that the bankers were going to defend their turf and they most assuredly did with a raid this morning. Surprisingly silver did not follow gold. Silver surpassed the 18.00 dollar level and stayed there for the rest of the day.
The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 10 notices for 50,000 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 fell by 1,014 contracts with Tuesday’s silver price being up by 21 cents. The total silver OI continues to remains relatively high with today’s reading at 159,904 contracts. It seems that the bankers are very worried about silver as they covered some of their short position with the rise in the price of silver. The January silver OI contract fell by 17 contracts down to 63.
In gold we had a good increase in OI with the huge rise in price of gold yesterday to the tune of $16.40. The total comex gold OI rests tonight at 430,128 for a gain of 5,742 contracts. The January gold contract rose by 3 contracts up to 90 contracts.
Late Friday night we had a huge addition of gold inventory at the GLD to the tune of 13.74 tonnes/ Last night an additional amount of 11.35 tonnes has been added / Tonight we lost 1.79 tonnes/GLD inventory 740.45 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 except the rarely used 1 year GOFO/ All months are in contango and thus positive in rates.
Sometime in January the LBMA will officially stop providing the GOFO rates.
Jan 21 2015
+.0675% +0775% +.0825% +.095% .135%
Jan 20 2014:
+.075% +.085% +.0925 % +.10% +.1325%
Let us now head over to the comex and assess trading over there today.
Here are today’s comex results:
The total gold comex open interest rose today by 5,742 contracts from 424,386 all the way up to 430,128 with gold up by $16.40 yesterday (at the comex close). We are now onto the January contract month. The non active January contract month saw it’s OI contracts rise by 3 contracts up to 90. We had 0 contracts served yesterday. Thus we neither gained 3 gold contracts or an additional 300 oz will stand for delivery in this January contract month. The next big delivery month is February and here the OI fell b only 2,531 contracts to 181,669 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 poor at 111,359. The confirmed volume yesterday was excellent at 278,291 contracts. Today we had 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI fell by 1014 contracts from 160918 all the way down to 159,904 despite the fact that silver was up by 21 cents yesterday. We thus had considerable shortcovering. The front January contract month saw its OI fall to 63 contracts for a loss of 17 contracts. We had 37 notices filed yesterday, so we gained 20 silver contracts or an additional 100,000 oz will stand for silver in the January contract month. The next big contract month is March and here the OI fell by 1,327 contracts down to 103,918. The estimated volume today was fair at 28,426. The confirmed volume yesterday was excellent at64,131. We had 10 notices filed for 50,000 oz today. The rise in the price of silver is certainly scaring our bankers.
January initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||96.46 oz (HSBC) 3 kilobars???|
|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)||90 contracts (9000 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
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 withdrawal
i) Out of HSBC 96.46 oz (3kilobars???) do they mean 96.45 oz???
total customer withdrawal: 96.46 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 (90) minus the number of notices served upon today (0) x 100 oz = 9800 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 (90) – 0(no. of notices served upon today) 9500 oz (.304 tonnes).
we gained 300 oz of gold standing for delivery.
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 21 2015:
January silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||148,096.910 oz (Brinks,CNT, Delaware,HSBC) oz|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||717,077.38 oz (CNT,Brinks)|
|No of oz served (contracts)||10 contracts (50,000 oz)|
|No of oz to be served (notices)||53 contracts (265,,000 oz)|
|Total monthly oz silver served (contracts)||401 contracts (2,005,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month|
|Total accumulative withdrawal of silver from the Customer inventory this month||6,044,031.3 oz|
Today, we had 0 deposit into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 2 customer deposits:
i) Into CNT: 116,880.700 oz (one decimal)
ii) Into Brinks: 600,196.68 oz
total customer deposit 717,077.38 oz
We had 4 customer withdrawals:
i) Out of Brinks: 106,395.47 oz
ii) Out of CNT: 10,472.400 oz
iii) Out of Delaware: 992.800 oz
iv) Out of HSBC: 30,136.24 oz
total customer withdrawal: 148,096.910 oz
we had 1 adjustment
i) out of Delaware: 50,359.611 oz was adjusted out of the customer and this landed into the dealer account of Delaware
Total dealer inventory: 66.464 million oz
Total of all silver inventory (dealer and customer) 175.636 million oz.
The total number of notices filed today is represented by 10 contracts for 50,000 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 (401) x 5,000 oz to which we add the difference between the OI for the front month of January (63) – the Number of notices served upon today (10) x 5,000 oz = 2,270,000 oz the number of ounces standing so far for the January delivery month.
Initial standings for silver for the January contract month:
401 contracts x 5000 oz= 2,005,000 oz +OI standing so far in January (63)- no. of notices served upon today(10) x 5,000 oz equals 2,270,000 ounces standing for the January contract month.
we gained 100,000 ounces of silver standing for delivery in this January contract month.
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 21.2015: Tonight, we lost 1.79 tonnes of gold from the GLD/Inventory 740.45 tonnes
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 21/2015 / a lost 1.79 tonnes of gold inventory from the GLD tonight.
inventory: 740.45 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 : 740.45 tonnes.
And now for silver (SLV):
Jan 21 no change in silver inventory/Inventory at 325.011 million oz
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 21/2015 /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 4.4% percent to NAV in usa funds and Negative 4.8 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 60.7%
Percentage of fund in silver:38.8%
( Jan 21/2015)
2. Sprott silver fund (PSLV): Premium to NAV rises to + 3.59%!!!!! NAV (Jan 21/2015)
3. Sprott gold fund (PHYS): premium to NAV rises to +.06% to NAV(Jan 21/2015)
Note: Sprott silver trust back into positive territory at +3.59%.
Sprott physical gold trust is back in positive territory at +.06%
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 Wednesday morning:
(courtesy Mark O’Byrne)
SNB Shock Was ‘Icing On Cake’ For Gold Ahead of Draghi’s Euro ‘Bazooka’
Is gold a safe haven? Mark O’Byrne, executive and research director at GoldCore, told CNBC yesterday that yes it is. He said that the Swiss National Bank’s recent decision was “icing on the cake” for gold and shows how gold thrives in a volatile environment.
CNBC’s Seema Mody: Given the lacklustre performance of gold over the past two years, investors have been questioning whether gold is in fact a good investment. But last week’s unexpected move by the Swiss National Bank confirmed that perhaps gold is still seen as a safe-haven by investors during a time of rising volatility. Would you agree?
Mark O’Byrne: I would indeed – yes, absolutely. And I think the SNB decision is actually ‘icing on the cake’ because there were strong fundamental factors in place coming through from 2014 and gold prices had actually started to move up – particularly in Euro terms, but also in dollar and sterling terms – even prior to the SNB decision.
Then the SNB decision last week obviously caused a lot of turmoil on the markets and you just mentioned there about FXCM and Alpari and it shows again how volatile these markets are and that is an environment that very much suits gold and speaks to the need of having gold in a diversified portfolio.
Seema Mody: if you are expecting volatility going into the New Year should one be buying gold and if so how much of their portfolio should be allocated towards the shiny metal?
Mark O’Byrne: Well there is a huge amount of academic research just in recent years both coming out of academia but also out of independent research by massive allocation specialists – the likes of Ibbotson and companies like that – and a lot of the research shows that a small allocation of gold is very, very prudent.
Seema Mody: What is small?
Mark O’Byrne: 5%, 7%, 10%
Seema Mody: So 5% to 7% of your portfolio should be allocated towards gold?
Mark O’Byrne: Physical gold
Seema Mody: Physical gold
Mark O’Byrne: Yes to physical gold because the whole point of holding gold is that you hold it in the safest way possible.
It’s not really a trade. There is no point owning it as a futures contract with FXCM or with some other counterparty where there is a degree of counterparty risk.
So physical gold is a safe-haven unlike paper gold or electronic gold. The research, as I said, is actually 5% to 7% but there is an old Wall Street adage which is “you should put 10% of your money in gold and you hope to God it doesn’t work” because if it does work it generally means the rest of your portfolio is not performing very well.
The interview can be seen here
ECB’s Momentous QE As Currency Wars Intensify
Tomorrow, the ECB is generally expected to march where other central banks have marched before – and largely failed – by initiating it’s own quantitative easing or QE programme. All will be revealed at 1245 GMT/ BST tomorrow.
Round II of currency wars looks set to begin as the ECB attempts to weaken the euro in order to increase competitiveness in Europe, reduce imports and increase exports thereby creating jobs, stimulating demand and aiding economic growth. At least so it is hoped.
With Europe flirting dangerously close to recession, deflationary pressures building in some sectors and with interest rates at 0% and close to as low as they can go, the ECB is going all out in the desperate hope that further QE is the required medicine for the structurally challenged and debt riddled European economies.
Given the ECB is the central bank of a common currency with many national Central Banks as members, each with their own – and sometimes competing – national agenda, this new version of money printing will be quite different from that of the US or Japan.
At the moment, it is the scale of the program which is causing the most speculation. Insiders expect QE of around €500 billion ($580 billion) to be announced tomorrow.
Anything less would be likely to disappoint markets and could see further volatility. They are already anticipating a move by the ECB to adopt QE, causing, for example, the euro to weaken and stocks to rise despite poor fundamentals.
The central bank wants to raise the balance sheet of the Eurosystem (the ECB along with the euro zone’s 19 national central banks) from €2.2 trillion to €3 trillion.
Will it be enough to avert deflation and a Eurozone recession or Depression?
Will last week’s action by the SNB, which caused the Euro to fall to eleven year lows, discourage the ECB from devaluing the currency too aggressively?
Who will ultimately benefit from the action?
Will it be the people of Europe or only the mega-rich? For whom, we have continuously pointed out QE has greatly benefitted and as Alan Greenspan recently pointed out – has been a “terrific success.”
The intensification of currency debasement and currency wars shows the increasing importance of owning real assets such as gold in order to protect and grow wealth.
Goldcore Insight on Currency Wars: Bye Bye Petrodollar, Buy Buy Gold
Today’s AM fix was USD 1,298.00, EUR 1,121.67 and GBP 859.32 per ounce.
Yesterday’s AM fix was USD 1,292.25, EUR 1,113.63 and GBP 852.35 per ounce
Gold climbed $17.20 or 1.35% to $1,292.70 per ounce yesterday and silver rose $0.24 or 1.36% to $17.93 per ounce.
Spot gold bullion climbed as much as 0.6 percent to $1,303.63 an ounce and traded at $1,300.28 in late morning trade in London. On the Comex in New York futures for February delivery gained 0.5 percent to $1,300.50.
Gold surpassed $1,300 an ounce for the first time since August on IMF warnings of sluggish global growth which is likely to bring about more QE from central banks increasing gold’s safe haven appeal and indeed demand.
With the ECB close to announcing more QE and euro printing tomorrow, gold’s outlook looks positive for the rest of 2015. However, we would be nervous in the short term. There could be a ‘buy the rumour, sell the news’ reaction and gold could correct after its recent gains in anticipation of EU QE. Any pullback would represent a buying opportunity for those seeking to diversify and hedge euro and other currency risk.
It is important to remember that during the U.S. Fed’s QE, gold rose 70 percent in dollar terms from December 2008 through June 2011, when the Federal Reserve pumped more than $2 trillion into the financial system in its bond buying programs. Similar gains should be seen in gold in euro terms in the coming months.
Gold demand has picked up markedly in recent days. This is seen in the surge in the gold ETF holdings and dealers and mints also report a pickup in demand.
The world’s largest gold ETF, SPDR Gold Shares GLD, reported another inflow yesterday, of 11.4 tonnes. That has taken its holdings to their highest since late October, at 742.2 tonnes, up from a six-year low of 704.8 tonnes in early January. There is also a continuing move from ETFs, digital gold and unallocated accounts to safer allocated gold ownership.
Futures and options open interest on the Comex in New York is at the highest in 2 months, and money managers are the most bullish since August.
Silver climbed as much as 1.9 percent to the highest since September and was last at $18.213 an ounce. It’s up a whopping 16 percent so far the mone month and has seen its best start to a January since 1983. It is silvers best start to a year in over thirty years.
Platinum was little changed and palladium rose 0.3 percent.
Get Breaking News and Updates Here
Gold trading on this side of the pond this morning:
(courtesy zero hedge)
Stocks Stumble As Gold Tops $1,300 & 30Y Yields Push Record Lows
Gold’s 12-day swing of around 12% is the best since just before the Swiss capped the Franc in 2011 and the precious metal has topped 1,300 for the first time in 5 months this morning as, despite exuberance in Chinese stocks, it appears anxiety is setting in that tomorrow may not be all it’s cracked up to be from Draghi. Bond yields are re-tumbling with 30Y pressing to 2.36% record lows (and 2s30s at new 6 year lows). US equities have given back about half yesterday afternoon’s rampfest…
Gold is surging…
Bonds are bid…
And stocks selling off…
And EURUSD is back above 1.16…
Marc Faber believes that we should short central banks by buying gold:
(courtesy Marc Faber/CNBC)
Short fraudster central banks by buying gold, Faber tells CNBC
11:13p ET Tuesday, January 20, 2015
Dear Friend of GATA and Gold:
Newsletter writer Marc Faber, interviewed today on CNBC, heaped contempt on central banks and the financial sector that adores them, including CNBC itself, and said the trade of the century would be to “sell short central banks,” the closest approximation of which he considers buying gold. Eventually, Faber said, “central banks will be exposed for the fraud they commit.” Central bank policy has boosted stock prices, Faber said, while impoverishing most of the population.
The CNBC interview with Faber is nine minutes long and can be viewed at the CNBC archive here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Chris Powell gives a great long history of gold price suppression:
GoldSeek Radio interviews GATA secretary on the long history of gold price suppression
9:30p ET Tuesday, January 20, 2015
Dear Friend of GATA and Gold:
Your secretary/treasurer, interviewed today by GoldSeek Radio’s Chris Waltzek, discussed the German Bundesbank’s half-hearted repatration of Germany’s gold reserves, the longstanding Western central bank policy of gold price suppression as extensively documented in government archives, the many attempts to dismiss GATA as a proponent of “conspiracy theory” when secret meetings of government agencies to develop and implement secret interventions in markets actually constitute “conspiracy fact,” the possibility that collapse of the current gold price suppression scheme may lead not to the liberation of markets but to more of what even central bankers call “financial represssion,” and GATA’s serious need for financial support. The interview is 41 minutes long and can be heard at GoldSeek Radio here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
The following is very good and pay special attention to Bill White who was senior economist for the Bank of International Settlements before retiring. He states that QE is pushing the world financial system out of control. He should know!!
(courtesy Ambrose Evans Pritchard/UKTelegraph/GATA)
Central bank prophet fears QE warfare pushing world financial system out of control
5:07p ET Tuesday, January 20, 2015
Dear Friend of GATA and Gold:
The London Telegraph’s Ambrose Evans-Pritchard today interviews William White, the former official of the Bank for International Settlements who, in a speech in 2005 that he must have thought would not escape his immediate audience at the bank, admitted that a primary purpose of international central bank cooperation is to rig the gold market. White’s telling admission is posted at GATA’s Internet site here:
The Telegraph’s report is linked below.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Central Bank Prophet Fears QE Warfare Pushing World Financial System Out of Control
By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, January 20, 2015
The economic prophet who foresaw the Lehman crisis with uncanny accuracy is even more worried about the world’s financial system going into 2015.
Beggar-thy-neighbour devaluations are spreading to every region. All the major central banks are stoking asset bubbles deliberately to put off the day of reckoning. This time emerging markets have been drawn into the quagmire as well, corrupted by the leakage from quantitative easing in the West.
“We are in a world that is dangerously unanchored,” said William White, the Swiss-based chairman of the Organization of Economically Developed Countries’ Review Committee. “We’re seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.”
Mr White is a former chief economist to the Bank for International Settlements — the bank of central banks — and currently an adviser to German Chancellor Angela Merkel. …
… For the remainder of the report:
Low inflation worries prompt retreat from rate rise by Bank of England
By Denise Roland
The Telegraph, London
Wednesday, January 21, 2015
Bank of England policymakers voted unanimously to keep rates on hold in January, in a surprise about-turn for the two dissenters Martin Weale and Ian McCafferty.
All nine members of the bank’s monetary policy committee voted to hold rates at 0.5 percent.
The vote signalled a change of heart from the committee’s two main hawks — Martin Weale and Ian McCafferty — who have been pushing for a rate rise since August.
Minutes from the meeting on January 8 showed that the pair’s decision to stop voting for a rate rise was driven by concerns that a rise in interest rates would increase the risk of prolonged low inflation. …
… For the remainder of the report:
Jim believes that gold was suppressed to allow China to acquire as much gold as they needed:
(courtesy Jim Rickards/GATA)
Jim Rickards: Gold price manipulation is now a global effort to appease China
3:28p ET Tuesday, January 20, 2015
Dear Friend of GATA and Gold:
In May 2006 the economist R. Peter W. Millar of Value-Trac Research in Scotland published a study, “The Relevance and Importance of Gold in the World Monetary System,” arguing that central banks would need to revalue gold upward by from seven to 20 times “to raise the monetary value of the world monetary base and hence reduce the burden of debt” and avert a deflationary depression. GATA published that study here:
In May 2012 the U.S. economists and fund managers Paul Brodsky and Lee Quaintance postulated that central banks were suppressing the gold price while surreptitously redistributing the world’s gold among themselves in preparation for a resetting of the world financial system and a substantial upward revaluation of the monetary metal.
Gold Anti-Trust Action Committee Inc.end
We now have the exact date for the removal of the GOFO rates that I report to you each day: Jan 30.2015:
(courtesy moneymorning.com/Tara Clarke)
Gold Forward Rate to End Jan. 30 – and Trigger Change in Market
These key benchmark numbers have been published by the London Bullion Marketing Association (LBMA) for more than 20 years.
Although many gold investors aren’t aware of GOFO, its elimination will affect them. To understand just how much, first it’s important to know exactly what gold forward rates are…
What Is the Gold Forward Rate?
GOFO is the swap rate for a gold-to-U.S. dollar exchange. It was created in 1989 to stymie manipulation of the rate given to customers who borrow gold.
For instance, if you own gold and you want to borrow dollars, you can use gold as collateral to secure the loan, much in the same way you can use a house. The GOFO is the interest rate you pay on that loan.
“Gold is arguably the best collateral – it’s liquid, easy to transport, and easy to sell,” Anthem Vault founder and CEO Anthem Blanchard told Money Morning Jan. 6. “Gold forward rates show you, on a very large commercial basis, what kind of secured loan interest rate you should receive, and for how long.”
For twenty years, the LBMA has published values for one-month, two-month, three-month, six-month, and 12-month GOFOs. Typically, GOFOs are positive. But right now, some rates are negative – indicating people are willing to pay interest to borrow gold, using U.S. dollars as collateral.
Here are the GOFO values as of Dec. 31 (the most recent dataset):
|Forward Rate 1-Month||-0.04%|
|Forward Rate 2-Months||-0.02%|
|Forward Rate 3-Months||0|
|Forward Rate 6-Months||0.03%|
|Forward Rate 12-Months||0.14%|
That means right now, there’s high demand for physical gold.
“When the 12-month rate is around zero, that’s significant because it indicates a person is willing to give you an interest free loan for a 12-month period as long as you’re willing to give back collateral as gold,” Blanchard said.
GOFO rates were also in negative territory in November 2014. On Nov. 28, the one-month GOFO rate was as low as negative 0.49 (0.45 lower than the current one-month negative value). The two-month reached -0.36, the three month -0.26, the six-month -0.1, and the 12-month was slightly positive at 0.03.
HSBC Bank said to Kitco the very low rate “implies that a counter party with a long position on gold can borrow money against their gold holdings at a better rate than that from the LIBOR market.” LIBOR – the London Interbank Offered Rate – is the benchmark rate used by big banks to calculate interest rates on various loans throughout the world.
“This suggests that physical demand for the yellow metal has outpaced paper demand. Physical buyers have responded positively to cheaper prices despite continued liquidations from the gold exchange-traded funds,” HSBC said.
Indeed, negative GOFO rates signaled high physical demand, which was reflected in gold prices during the same period. The price of gold declined 15.1% to $176 an ounce between July 12 and Oct. 31. Cheaper prices then coincided with the fall months’ typically heavy demand. The gold price per ounce climbed 4.3% to $52.75 between Nov. 1 and Dec. 12:
But as of Feb. 1, the gold forward rate benchmark will no longer exist.
The LBMA nixed the benchmark after two banks, Deutsche Bank and Société Générale, decided to leave the GOFO rate-setting process in October 2014. The two banks pulled out in line with broader strategies to scale down their involvement with precious metals, according to The Bullion Desk.
The exit left only six members in the rate-setting process: Bank of Nova Scotia, Barclays Bank Plc., HSBC Bank USA London Branch, Goldman Sachs, JPMorgan Chase, and UBS AG.
“We were reaching a point where losing another member would mean losing critical mass and not being able to calculate a mean,” an LBMA spokesman told FastMarkets on Dec. 5.
The end of gold forward rates means three important things for gold investors…
3 Investor Takeaways from the Gold Forward Rate Demise
First, no more GOFO means reduced transparency and accountability in the gold market.
“This is yet another step in making important gold information opaque,” Sharps Pixley’s Ross Norman said to The Bullion Desk on Dec. 5.
But according to Blanchard, that might not be a bad thing for gold investors. Consider big financial institutions have shifted out of gold forward rate-setting means they see the value of physical gold on the rise – an important signal for gold investors.
“Lack of visibility is good for gold. Not for the economy or financial system, but the fact that big banks pulled out of GOFO shows how much stress the financial institutions are under,” Blanchard said. “There’s nothing in it for them right now – they have no collateral on the gold front. The sun is setting into some of the lowest GOFO rates we’ve ever seen. If you can get nearly 0% loan interest rate on gold that’s collateral, that doesn’t leave big banks much leverage.”
And third, absent the gold forward rate, alternative – and perhaps better – gold benchmarks may take its place.
“With GOFO absent, the market will transition into other figures. I think there’s an opportunity to have a replacement for GOFO that’s superior,” Blanchard said. He noted multiple peer-to-peer exchanges with large volume would provide a more transparent look at the gold market.
The Bottom Line: While the death of the gold forward rate means less transparency, it also signals higher gold prices and an opportunity for a better gold benchmark.
“At the end of the day, I think the elimination of the gold forward rate is going to be a good thing,” Blanchard said. “Now we can ask, ‘Instead of institutional ways to replace GOFO, what are new ways to do gold benchmarks that don’t rely on a single group of half a dozen players?'”
A better gold benchmark would bring more redundancy, and therefore less risk, to gold investors.
Another great paper from Bill Holter
(courtesy Bill Holter/Miles Franklin)
What Happens When Central Banks No Longer Trust Each Other?
Normally I don’t try to answer the question to a title until the end of a writing and after providing some evidence for the conclusion, I will today. The answer to today’s title is easy, flat out, when central banks loose trust in each other you can pretty much expect chaos because of the loss of confidence! Before laying the case out for you, please remember we have been living in a system where “confidence” is not just everything, it’s the ONLY thing!
And now for the important paper stories for today:
Early Wednesday morning trading from Europe/Asia
1. Stocks mainly up on major Asian bourses on implied QE / the yen rises to 117.49
1b Chinese yuan vs USA dollar/ yuan slightly strengthens to 6.2112
2 Nikkei down 86 points or 0.49%
3. Europe stocks mostly down except London /Euro rises slightly// USA dollar index down to 92.74/
3b Japan 10 year yield at .25% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.49/
3c Nikkei now slightly above 17,000
3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 46.56 Brent: 48.35 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.
3g/ Gold way up/yen up;
3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion
Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP
3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)
3j Oil rises this morning for both WTI and Brent
3k IMF cuts global growth/Syriza widens lead over opponents
3l China gives an implied QE comment/GDP does not rise as expected.
3m Gold at $1299.80. dollars/ Silver: $18.20
3n USA vs Russian rouble: ( Russian rouble down 4/5 rouble per dollar in value) 65.81!!!!!!
3 0 oil rises into the 46 dollar handle for WTI and 48 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 ALL EYES ON THE ECB TOMORROW
4. USA 10 yr treasury bond at 1.82% early this morning. Thirty year rate well below 3% (2.38%!!!!)/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: Futures Lower After BOJ Disappoints, ECB’s Nowotny Warns “Not To Get Overexcited”; China Soars
Three days after Chinese stocks suffered their biggest plunge in 7 years, the bubble euphoria is back and laying ruin to the banks’ best laid plans that this selloff will finally be the start of an RRR-cut, after China’s habitual gamblers promptly forget the market crash that happened just 48 hours ago and once again went all-in, sending the Shanghai Composite soaring most since October 9, 2009, which gained 4.7% overnight after yesterday’s 1.8% gain, led by financials and energy stocks with the biggest contributors being PetroChina +7.3%, Bank of China +9.9%, ICBC +6%, China Life +10%, Agbank +5.6%. The rebound means that after plunging and soaring in just about 72 hours, Chinese stocks are almost unchanged for the week, even though the 10-day volatility has surged to the highest since 2008. The reason for the surge: certainly not China’s weakest GDP in 24 years, or renewed hopes for more rates cutes, but a report by Sina yesterday that China’s central bank rolled over medium-term lending facility to Industrial Bank and Shanghai Pudong Development Bank. In other words, as China takes away from margin trading with one hand, it continues to provide “stealth QE” to China’s banks with the other.
That this won’t end well is confirmed by the fact that the PBOC itself is now very much in the western central bank camp and is utterly clueless about not only what it is doing but what it will do:
- PBOC HAS NO INTENTION TO PROVIDE TOO MUCH LIQUIDITY: ZHOU
It wasn’t just China that appears confused: so is the BOJ whose minutes disappointed markets which had been expecting at least a little additional monetary goosing from the Japanese central bank involving at least a cut of the rate on overnight excess reserves, sending both the USDJPY and US equity futures lower. Per Reuters: “The yen rebounded against the dollar on Wednesday after the Bank of Japan stood pat on monetary policy, as speculators who had anticipated more easing covered their short yen positions. The BOJ refrained from expanding its bond-buying stimulus programme, opting instead to expand loan schemes aimed at boosting lending. It also cut its inflation forecast to 1.0 percent from 1.7 percent in the wake of slumping oil prices.” This is a problem which as we will show in a subsequent post citing Goldman, means that suddenly Kuroda is flirting dangerously close with also being SNBed and losing the market’s confidence.
More details: The BoJ retained its plan for JPY 80trl annual rise in monetary base and lowered CPI forecasts as expected. The BoJ also expanded growth support funding facility by JPY 3trl to JPY 10trl and stimulating bank lending facility by 1yr as expected. Surprisingly, the BoJ was upbeat on the economy lifting 2015/16 real GDP forecasts. Nevertheless, today’s decision disappointed, with the derivatives markets pricing in some expectations for a more aggressive action including cutting of the IOER, ahead of the release which BoJ Kuroda said was not discussed. The Nikkei closed lower by 0.5%.
Finally, in the easter egg department, with the much-anticipated ECB announcement just 24 hours away, none other than the ECB’s Ewald Nowotny threw a glass of cold water in the faces of algos everywhere when he said that tomorrow’s meeting will be interesting but one “shouldn’t get overexcited about it.” He said that he saw low inflation rates but did not expect deflation. Nonetheless, inflation developments need to be monitored closely, Nowotny said. Is it possible that with more than 100% of ECB QE priced in and every pundit betting the kitchen sink it is inevitable, that Mario Draghi still doesn’t have the needed consensus and will disappoint tomorrow? If so, watch out for some serious fireworks as even more macro hedge funds blow up.
In Europe equities (Eurostoxx50 -0.02%) are off the lows of the session,
however the continental exchanges have underperformed on position
squaring ahead of the ECB tomorrow. The FTSE 100 (+0.8%) has remained
stable which has helped it to outperform its mainland European peers.
In the UK, BoE minutes surprised the market as the MPC voted 9-0 vs. Exp. 7-2, with previous dissenters McCafferty and Weale changing their views due to weak inflation data. This caused GBP/USD to fall 72 pips to break below 1.5100, gilts to rally 36 ticks and the short sterling strip moved 6 ticks higher. However it wasn’t quite enough to shift rate hike expectations and the market still expects the first rate hike in Q1 2016. The minutes completely overshadowed the UK jobs report which was pretty much in line with expectations.
Looking at rates, Bunds (-53 ticks) have trended lower throughout the session on very thin volumes as prices move away from contract highs printed last week, the absorption of EUR 5bln of Bobl supply (the auction was also bad) and the falls have been further compounded by technical selling on breaks of last week’s lows. At the lows, volumes in Bunds over a minute timeframe were three times their average. Bunds now trade at levels last seen before the SNB/CHF move last Thursday.
Away from equities, overnight, spot gold (+0.27%) reached its highest level since August 2014 and breached the USD 1,300 level supported by the forthcoming prospect of QE from the ECB and the weaker USD (-0.26%). Brent and WTI crude futures head into today’s NYMEX open in the green after yesterday saw the biggest fall in a week as US market participants reacted to news from their prolonged weekend. “Prices this morning are recovering slightly from yesterday’s price slide,” says Commerzbank analysts. “The short-term price outlook remains negative in view of the massive oversupply. We therefore expect to see falling prices in the coming wks, though marked price fluctuations in both directions may well occur from time to time.”
Elsewhere, NatGas sees its biggest gain in a week after 3 consecutive days of ending in negative territory, this comes ahead of a cold snap in the US anticipated for Friday.
In terms of today’s calendar, with the lull in data before the ECB tomorrow the focus this morning will be on the UK with the Bank of England minutes which showed that all participants have now agreed there should be no rate hike, as a result pushing the GBP sharply lower. In the US this afternoon, we have housing starts and building permits for December. All eyes will no doubt be building to what could be a monumental day in Europe.
In Summary: European shares little changed, with the personal & household and oil & gas sectors outperforming and health care, basic resources underperforming. The U.K. and Dutch markets are the best-performing larger bourses, Swiss the worst. Swiss franc trades below parity with euro. Bank of England minutes show rate decision unanimous. U.K. unemployment rate below est. Bank of Japan cut its inflation forecast, maintains stimulus, yen rallies. Obama said in State of Union address that U.S. must address income gap. Davos World Economic Forum underway. Chinese stocks posted biggest two-day rally since 2009. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Commodities gain, with copper, nickel underperforming and natural gas outperforming.
U.S. mortgage applications, housing starts, building permits due later.
- S&P 500 futures up 0% to 2017
- Stoxx 600 up 0% to 356
- US 10Yr yield up 2bps to 1.81%
- German 10Yr yield up 3bps to 0.48%
- MSCI Asia Pacific up 0.9% to 139.8
- Gold spot up 0.2% to $1297.4/oz
- Euro up 0.19% to $1.1572
- Dollar Index down 0.3% to 92.77
- Italian 10Yr yield up 1bps to 1.68%
- Spanish 10Yr yield down 1bps to 1.51%
- French 10Yr yield up 3bps to 0.68%
- S&P GSCI Index up 0.8% to 384.1
- Brent Futures up 1.8% to $48.8/bbl, WTI Futures up 1.1% to $47/bbl
- LME 3m Copper down 1.3% to $5614.5/MT
- LME 3m Nickel down 0.5% to $14700/MT
- Wheat futures up 1% to 542.5 USd/bu
Bulletin headline summary from Ransquawk and Bloomberg
- BoJ did not unveil any punchy new policies which left the market disappointed, as rumours preceding the meeting suggested that further stimulus may be on the cards, this consequently strengthened the JPY (USD/JPY -111pips)
- BoE minutes surprised showing a 9-0 vote vs. Exp. 7-2, as previous dissenters Weale and McCafferty cast doubts of a rate hike due to weak UK inflation numbers
- Looking ahead, sees US Housing Starts, BoC Rate Decision, API Crude Inventories, BoE’s Shafik, Boc Poloz, and earnings from eBay and American Express
- Treasuries decline led by 5Y and 7Y notes; German bunds also lower as markets prepare for ECB tomorrow; Governing Council member Nowotny said “one should not get overexcited” about one policy meeting.
- ECB will disappoint financial markets with a lower target for government-bond purchases than analysts are expecting, pushing up the euro and Treasury yields, Wells Fargo Asset Management predicts
- “If the ECB announces a healthy QE package, look for the bond markets across Europe to take profits which allow for a repricing of U.S. Treasuries over the next
several days,” ED&F Man head of rates and credit trading Tom di Galoma writes in client note
- UBS Group AG Chairman Axel Weber said the Swiss central bank “did the right thing” in scrapping its currency cap, a move that sent shockwaves through markets last week; “Better an end with a shock, than shocks with no end,” Weber said
- The two Bank of England policy makers pushing for rate increase dropped their call this month, leaving the bank unanimous in its decision to hold rates as inflation risks
falling below zero
- Japan’s central bank cut its inflation forecast and kept its unprecedented monetary easing unchanged as tumbling oil prices handicap efforts to reflate the world’s third-biggest economy
- Fed officials are starting to reassess their outlook for the economy as global weakness and disappointing data on American consumer spending test their resolve to raise interest rates this year
- After Switzerland shocked markets by scrapping its currency cap, investors are beginning to ask whether a policy surprise may be lurking for the dollar, too
- Sovereign yields mostly higher. Asian stocks gain, with Shanghai +4.7%; Nikkei -0.5%; European stocks, U.S. equity- index futures mixed. WTI and Brent higher; copper falls, gold steady
DB’s Jim Reid as customary concludes the overnight recap
With all the news from the SNB and the ECB over the last week, Oil has taken a back seat for a few days but yesterday we saw fresh falls for both WTI (-5.41%) and Brent (-1.74%) to $46.47/bbl and $47.99/bbl respectively – the former somewhat ‘catching up’ after US markets were closed on Monday. With the market still weighed down by record Iraq crude production and comments from the Iranian energy minister that the nation can withstand $25 prices, news at the micro level caught our attention yesterday. Indeed, following on from the announcement from Schlumberger that it will cut 9000 jobs last week, it was perhaps unsurprising to see similar moves by oil services company Baker Hughes who expect to cut 7000 jobs in Q1 this year – equivalent to 11% of the workforce. As well as the redundancies, the company also noted that it expects capital spending to be around 20% lower this year, and the number of US rigs in operation down 15% in Q1 versus Q4 last year. Yesterday we also had similar news out of Total with the company expecting a similar cut in capital spending (10%) this year as well as an accelerated asset disposal program. If that wasn’t enough, after market close, commodities giant BHP announced that they are to cut the number of rigs in US shale by 40%. So more and more evidence of pain being felt at the micro level for companies as we move through the earnings season and it’s unlikely to be the last. It’s also a risk for the economy as investment and employment fall sharply in this sector. Can consumption gains more than offset this? This is one of the big questions at the moment and shows that the consequences of the sharp drop in Oil are not straight forward.
Quickly taking a look at trading this morning, Chinese equities continue to trade firmer with both the Shanghai Composite and CSI 300 up +3.64% and +3.83% respectively as we type. Yesterday, following the GDP numbers our China economics colleagues reiterated their full year forecast of 7% growth for 2015, with growth weighed towards the second half with the fiscal shock on local governments and weak property investment in lower tier cities likely to weigh on the first half. They also expect the government to cut the RRR by 100bps and interest rates by 50bps this year. Elsewhere this morning, the Hang Seng (+1.56%) and Sensex (+0.24%) are up however the Nikkei (-0.69%) is lower after the BoJ kept its monetary policy on hold but cut its core CPI forecast from 1.7% to 1% for 2015 fiscal year. The Yen is 0.8% stronger versus the Dollar at 117.9. In terms of Obama’s State of the Union address early this morning, there was little obvious market reaction with the President focusing on initiatives to boost wages and jobs in particular.
Overnight my team put out a note on the state of play in EUR credit pre Thursday’s ECB meeting. In it we write that it has been our view that in a world where the Fed is no longer doing massive monthly QE global markets, including credit, will grow more volatile. However European IG credit is the one of the few areas where the prospect of ECB buying has dampened volatility. Nevertheless more external themes are impacting the asset class now. In fact so many factors are now exerting influence over European credit markets it is growing increasingly hard to tell what is and what is not priced in. Between the oil shock, the calling of an early Greek election and fears over Fed rate hikes on the one hand and the growing expectation of expanded ECB QE on the other the ultimate driver of the market has grown increasingly unclear. This note attempts to analyse the effects that the oil shock, Greek stress and evolving expectations of ECB QE have had on EUR credit with an eye to getting a sense for what is priced in with this week’s ECB’s meeting and Greek elections in focus. To give you a quick summary of the findings whilst it seems that EUR credit is pricing in some ECB QE expansion it remains hard to say exactly quite how much and so the initial reaction to any QE announcement is hard to call. However we still think looking to the coming months and quarters that if the ECB does announce and put into action an expansion of their QE program at least in-line with current market expectations EUR IG and especially HY credit has room to tighten.
Back to markets yesterday, US equities yesterday closed modestly firmer although generally traded between gains and losses over the bulk of the session as the Dow and S&P 500 closed +0.02% and +0.15% respectively. The latter initially traded some +0.5% higher on the back of a stronger European session, only to then pare those gains and fall 1.2% off its highs before rallying back into the close. The earlier weakness occurred after some weaker earnings prints out of Morgan Stanley and Johnson & Johnson whilst IBM reported fairly mixed earnings after the market close. Morgan Stanley in fact continued what has been a trend for banks so far with results weighed down by what was a poor quarter for FICC revenues. Energy stocks (+0.10%) proved resilient despite the weaker day for oil whilst consumer discretionary (-0.64%) and financials (-0.38%) were the notable underperformers. Credit markets were fairly subdued with CDX IG modestly wider (+0.19bps) although US HY energy names widened 5bps
It was a strong day for US Treasuries. 10y benchmark yields finished the day 4.9bps tighter at 1.788% after trading as much 8bps lower intraday. 30y yields also finished close to their all lows in yield, tightening 7.5bps yesterday to finish just above the recent lows at 2.378%. The data calendar was reasonably light with just the NAHB housing market index for January dropping one point to 57. Our US colleagues note that the latest reading is just 2 points shy of its September cyclical high however and that recovery in the index should point towards to further incremental improvement in housing starts and building permits due today.
Before this in Europe yesterday, equity markets closed firmer with both the Stoxx 600 (+0.79%) and Dax (+0.14%) up although both initially traded higher intraday. With little in the way of chatter from ECB officials ahead of tomorrow, focus was back on the data with the German ZEW survey in particular showing confidence levels rising significantly in Germany. The 48.4 reading for January came in well ahead of both the consensus (40.0) and the December print (34.9) and in fact rose to a 11-month high. Current expectations also rose – the index up to 22.4 from 10.0 last month. PPI however weakened further with the pressure of falling oil prices evident. The -0.7% mom print was below the -0.4% mom expected. Bond markets were fairly subdued. 10y Bund yields closed 1bp higher at 0.449% and 10y yields in both Spain (+0.9bp) and Italy (+0.7bps) also rose modestly.
Swiss equities (+0.32%) continue to bounce back with their second consecutive day of gains, although remaining 11% off the pre-Thursday levels. The Swiss Franc closed 0.92% stronger versus the Euro at CHF0.9886. Meanwhile in Greece, the latest opinion polls run by the University of Macedonia showed Syriza’s lead increasing to 6.5%, up from 4.5% in the same poll last week. A second survey run by Alco showed Syriza with a 4.6% lead, up from 3.5%. We’ve seen a range of some 3-6% in recent opinion polls for a Syriza lead however the latest trend appears to be that the data is lending further support to Syriza at the margin. The charm offensive by Syriza has taken an interesting twist as a column in the FT by Syriza’s leader Tsipras appears aimed at providing credibility to their economic policies. He again highlighted the need to end austerity and deep structural reforms as well maintaining that the current level of public debt is unsustainable and meeting payments difficult to do. Greek equities yesterday closed weaker, the ASE finishing -1.19%, its fourth decline in the last five sessions ahead of Sunday’s vote.
Before we move on to today’s data docket, European financials (+0.99%) led yesterdays gain in Europe after the ECB quarterly bank lending survey showed further improvement. A release by the ECB mentioned that ‘credit standards for all loan categories continued to ease in net terms in the fourth quarter of 2014’. The report also noted that net loan demand continued to pick up on the whole.
In terms of today’s calendar, with the lull in data before the ECB tomorrow the focus this morning will be on the UK with the Bank of England minutes due to be released along with the various employment reports for the country – unemployment in particular expected to tick below 6%. In the US this afternoon, we have housing starts and building permits for December. All eyes will no doubt be building to what could be a monumental day in Europe.
Is Japan ready to do a SNB by stopping the yen carry trade?
(courtesy zero hedge)
The Next SNB? Goldman Warns Bank Of Japan “At Risk Of Losing Credibility”
Over the weekend, we asked rhetorically whether “The BoJ is The Next SNB?” after one BOJ official was overheard warning that “we have caused tremendous trouble for the financial industry,” and many others growing anxious about continuing its massive purchases of government bonds and pressure from the financial industry is strengthening by the day “to scale back monetary easing soon.” Overnight, it was none other than Goldman who reiterated precisely what we said,however when looking at the BOJ from the “other” angle – that of the central bank not doing enough to convince markets it will do everything in its power, i.e., print, until inflation is a “stable” 2%.
Here is Goldman’s Naohiko Baba with why the “BOJ at risk of losing credibility over its price commitment”
The Bank of Japan (BOJ) kept its monetary policy unchanged, as we expected, at the Monetary Policy Meeting on January 20-21. Two noteworthy points from Governor Kuroda’s subsequent press conference were as follows:
1. The BOJ released its interim assessment of the October Outlook Report at the MPM, and sharply lowered its core CPI outlook – for FY2014 to +0.9% from +1.2%, and for FY2015 to +1.0% from +1.7% – reflecting the recent slide in crude oil prices. However, the BOJ maintains its view that its 2% price stability target is likely to be achieved by around FY2015.
2. The MPM did not discuss lowering the 10 bp interest rate on excess bank reserves, despite heightened expectations among foreign investors in particular ahead of the meeting.
We think the first point increases the risk of a loss of confidence in the BOJ. Like us, the BOJ expects a pickup in crude oil prices from midway through FY2015 and for this to result in renewed yoy core CPI growth. However,with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the market. We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank.
With regard to the second point, we believe a thought process has taken place within the BOJ even if the latest MPM did not discuss lowering the rate. We think the bank has weighed up the costs and benefits of cutting the rate and ultimately concluded that 10 bp is necessary to maintain the existing quantitative/qualitative easing program under which it is effectively monetizing debt by purchasing close to 100% of newly issued JGBs.
We expect the feasibility of the BOJ’s scenario to diminish over time, prompting the bank to take further easing action once it can no longer put off the inevitable, either in July 2015 (when it releases its interim assessment of the April Outlook Report) or when it publishes the October Outlook Report. In our opinion, it is getting to the point where further yen depreciation and stock market gains are the only mechanisms that might allow inflation to move nearer to the 2% price target. However, with the bank’s hands tied in terms of accelerating the pace of JGB purchases, it may search for suitable alternative financial assets to buy.
Well, there is always crude, and both Putin and Maduro (assuming there hasn’t been a military coup in Venezuela in the interim) not to mention countless shale junk bond investors, will be delighted by that kind of “out of the box” thinking.
As for the BOJ, it suddenly finds itself in a no way out situation: damned if it continues QE, and damned if it doesn’t. How long until the “market” begins discounting this, and refuses to wait until the JPY becomes the next CHF? Because as so many FX brokers and their clients found out the hard way – it is always better to close short positions when you can, not when you have to..
This hedge fund manager is sorry he lost 99.8% of client money:
(courtesy zero hedge)
Hedge Fund Manager Loses 99.8% In 9 Months, Tells Investors He Is “Sorry” For “Overzealousness”
Day after day, mainstream media proclaimed December the month to be in stocks: seasonals, Santa Claus rally, and performance-chasing funds would ‘guarantee’ upside. For Owen Li, former Raj Rajaratnam’s Galleon Group trader, and the clients of his Canarsie Capital hedge fund, December 2014 will never be forgotten.According to CNBC, from around $100 million in AUM in March 2014, Li told investors in a letter, the fund had lost all but $200,000 and he was “truly sorry,” for “acting overzealously” in the last 3 weeks.
A hedge fund manager told clients he is “truly sorry” for losing virtually all their money.
Owen Li, the founder of Canarsie Capital in New York, said Tuesday that he had lost all but $200,000 of the firm’s capital—down from the roughly $100 million it ran as of late March 2014.
“I take responsibility for this terrible outcome,” Li wrote in a letter to investors obtained by CNBC.com
“My only hope is that you understand that I acted in an attempt—however misguided—to generate higher returns for the fund and its investors. But even so, I acted overzealously, causing you devastating losses for which there is no excuse,” he added.
Li said in the letter that he made a series of “aggressive transactions” over the last three weeks to make up for poor returns in December. He said he bet on stock price options, predicated on the broader market rising. But stock indexes instead fell, causing the huge losses along with several undisclosed direct investments, according to the note.
Li is a former trader at Raj Rajaratnam’s Galleon Group, which collapsed amid insider trading charges.
Li’s lieutenant at Canarsie is Ken deRegt, who joined in 2013 after having retiring as the global head of fixed income sales and trading at Morgan Stanley.
To Mr. Li’s less than sophisticated investors we have a short clip summarizing what just happened:
As for Mr. Li, we look forward to his next “hedge” fund reincarnation so that we too can give him some of our money to manage because it really is not easy to find someone who can blow through $100 million in less than a year. And who knows: if someone is willing to fund a guy that dumb and that clueless, next time he actually is due to hit it out of the ballpark.
Your big story of the day. A leaked story from the ECB is suggesting that Europe’s Central Bank wishes to QE 50 billion euros per month (600 billion euros/year) for two years ending Dec 2016. Thus the ECB is planning to increase its balance sheet by 1.2 trillion euros. However there was no mention of shared risks which is exactly what the Bundesbank wants. If there is no shared risk, Buba and Germany would no doubt leave the European Monetary Union. Also there was no mention what they are planning to do with purchases of Greek bonds. If the ECB does not purchase Greek bonds, then Greece will leave:
The leaked story…
(courtesy zero hedge)
S&P Surges As ECB’s QE Leaked: Board Proposes €50 Billion In Bond Monetization Per Month
And so with less than 24 hours to go, the ECB has decided to leak its deliberations not only to Merkel and Hollande, but Dow Jones. To wit:
- DJ: ECB EXEC BOARD’S QE PROPOSAL CALLS FOR ROUGHLY EUR50B IN BOND BUYS A MONTH – SOURCES
- ECB SAID TO PROPOSE QE OF 50 BILLION EUROS A MONTH THROUGH 2016
More as we see it, but if indeed this will be a program without risk-mutualization and conditional and limited burden-sharing, where the hope was that Draghi would “shock and awe” the world with the size of the bond purchasing program instead, €600 billion per year looks decidedly on the low side of any “surprise” announcement where the whisper number was for €1 trillion per year, and if indeed this is the final formulation may result in a substantial disappointment for stocks after the initial kneejerk reaction.
More from the WSJ which broke the news first, and was followed by Bloomberg and Reuters:
A proposal from the European Central Bank’s Frankfurt-based executive board calls for bond purchases of roughly €50 billion ($58 billion) per month that would last for a minimum of one year, according to people familiar with the matter.
The ECB’s executive board met Tuesday to decide on the proposal, which will form the basis of deliberations by the entire 25-member governing council on Thursday. The final number and details could change after the full board weighs in on the plan.
Still, the executive board’s proposal indicates that the ECB could move more aggressively than financial markets have expected. Forecasts among analysts have recently centered on a figure of around €500 billion or higher for a quantitative-easing program, but the executive board’s proposal suggests that bond purchases could amount to at least €600 billion.
An ECB spokesman declined to comment.
The knee-jerk reaction
The second big story of the day. Generally the Bank of Canada changes interest rates etc on a Thursday. However instead of raising rates, the Bank of Canada stunned the market with a .25% cut and they basically stated that they are very confused with what is going on and the report was very negative. The Canadian dollar tanked and as I go to press it is trading at 1.23771 to the uSA dollar.
(courtesy Bank of Canada/zero hedge)
And Another Shocker: Bank Of Canada Stuns Market With Completely Unexpected Rate Cut
Unexpected to most, The Bank of Canada cut its benchmark interest rate to 0.75% citing financial stability risks and worried about downside inflation risks. The press release is extremely negative…
Prophetically noted earlier…
As Bloomberg headlines reports…
- *BANK OF CANADA CUTS BENCHMARK INTEREST RATE TO 0.75%
- *OIL SHOCK BOOSTS DOWNSIDE CPI, FINANCIAL STABILITY RISKS: BOC
- *BOC DELAYS FULL ECONOMIC RECOVERY TO AROUND END OF 2016
- *BOC CUTS AVERAGE 2015 GROWTH OUTLOOK TO 2.1% FROM 2.4%
- *BANK OF CANADA ASSUMES OIL PRICES AROUND $60 A BARREL
- *WEAKER CANADA TERMS OF TRADE TO ADVERSELY AFFECT INCOMES: BOC
- *BOC SEES ENERGY-EXPORT GROWTH FALLING TO 1%, FROM 6% IN 2014
- *OIL DROP TO HAVE SIGNIFICANT EFFECT ON PUBLIC FINANCES: BOC
- *BOC SEES ABOUT 30% CUT TO OIL AND GAS INVESTMENT IN 2015
- *MAGNITUDE OF OIL SHOCK CREATES EXCEPTIONAL UNCERTAINTY: BOC
BoC Press release:
The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.
Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.
Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies. Persistent headwinds from deleveraging and lingering uncertainty will influence the extent to which some oil-importing countries benefit from lower prices. The Bank’s base-case projection assumes oil prices around US$60 per barrel. Prices are currently lower but our belief is that prices over the medium term are likely to be higher.
The oil price shock is occurring against a backdrop of solid and more broadly-based growth in Canada in recent quarters. Outside the energy sector, we are beginning to see the anticipated sequence of increased foreign demand, stronger exports, improved business confidence and investment, and employment growth. However, there is considerable uncertainty about the speed with which this sequence will evolve and how it will be affected by the drop in oil prices. Business investment in the energy-producing sector will decline. Canada’s weaker terms of trade will have an adverse impact on incomes and wealth, reducing domestic demand growth.
Although there is considerable uncertainty around the outlook, the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015. The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response. The Bank expects Canada’s economy to gradually strengthen in the second half of this year, with real GDP growth averaging 2.1 per cent in 2015 and 2.4 per cent in 2016. The economy is expected to return to full capacity around the end of 2016, a little later than was expected in October.
Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon.
The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.
* * *
The reaction in CAD is extreme…
to its weakest since April 2009
This chart is very ominous and suggests that nothing has been fixed:
the Swiss one year bond rate is -1.11% and the negativity goes out for 14 years!!
(courtesy zero hedge)
Chart Of The Day: The Impossible Is Possible Edition
Swiss interest rates were already the lowest in the world before The Swiss National Bank de-pegged from the Euro last week but in the ensuing few days, investor demand for the ‘safety’ of Switzerland has collapsed the yield curve to levels thought impossible just weeks ago…
The Swiss yield curve is now negative to 14 year maturity – the longest in the world…
With 1Y Swiss rates trading at -1.11% today – the lowest in the world…
Does this look like ‘the crisis has passed’?
Coming to a US Treasury curve near you soon…
And now here is a second oil producer which is seeing its currency the Naira collapse. It is now trading at 200 usa dollars per Naira. During the financial collapse of 2008 it was trading at around 150 naira to the dollar.
(courtesy zero hedge)
Oil Producers Currency Collapse Continues, Nigeria’s Naira Crashes To Record Low Against Dollar
Having proclaimed it is not Zimbabwe, Nigeria’s currency is starting to look a lot like a hyper-inflating mess. After devaluing to a 168 peg in November, the Naira has crashed to 200 / USD today – smashing above the upper peg band of 176 as it appears Nigeria is losing control. The collapse of Oil Producer currencies had abated for a week or two but the last 2 days have seen the Ruble and Naira tumble (even as The USDollar weakens modestly ahead of the ECB QE tomorrow).
Nigeria’s Naira is crashing…
But Oil Producers have a long way to go to catch down to Russia..
What a farce!! The USA is trying to goad the Russians into a war.
They are not biting!
(courtesy zero hedge)
Russia Slams US/NATO Attempts To Draw It Into Military Conflict With Ukraine
NATO’s Jens Stoltenberg unleashed the latest tirade against Russia this morning proclaiming – though offering no proof – that there are Russian forces and heavy equipment in Ukraine and a high number of Russian forces on the border which “doesn’t contribute to a peaceful solution.” Apparently pre-empting this outburst,Pravda reports Anatoly Tsyganok, director of the Military Forecasting Centre, exclaims, “Ukraine reiterates that Russia is in the war, but it’s not true,” adding that in fact “the USA and the NATO have artificial satellites continuously circulating above this territory and control the situation,” concluding with a jab at The US & NATO that “Russia has never participated in the military conflict. And no attempt to involve Russia in the conflict will be crowned with success.”
Putin offered a peace plan but it was rejected…As Reuters reports,
Ukraine’s President Petro Poroshenko rejected a peace plan proposed to him last week by his Russian counterpart Vladimir Putin, Putin’s spokesman Dmitry Peskov said on Sunday evening, according to Russian media.
Peskov said the plan, contained in a letter sent by Putin on Thursday evening, proposed a ceasefire by both government forces and separatist militiamen in southeastern Ukraine, as well as the withdrawal of heavy artillery by both sides.
“In recent days, Russia has consistently undertaken efforts as an intermediary in regulating the conflict,” Peskov said in comments quoted by the ITAR TASS news agency.
“In particular, on Thursday night a written address was sent by the president of Russia to the president of Ukraine, in which a concrete plan was proposed to both sides in the conflict to withdraw heavy artillery.”
A copy of the letter was published by the Russian television channel NTV. In it, Putin proposed “urgent measures for the cessation of mutual shelling, and also the rapid withdrawal by the sides in the conflict of means of destruction with a caliber higher than 100 mm”.
Putin sought to burnish his peacemaking credentials last week by proposing a ceasefire to Ukrainian President Petro Poroshenko under which the sides would withdraw heavy artillery.
The proposal was seen by Kiev as an attempt to evade some parts of the Minsk agreement, cement rebel territorial gains and disguise the fact that Putin has no real peace plan.
“If Putin really wanted peace in east Ukraine, he would have only one ‘peace plan’, Boris Vishnevsky, an opposition member of the St Petersburg local assembly, wrote in a blog.
“A peace plan is very simple. If Putin does not propose one, it means he does not need peace.”
NATO’s Stoltenberg was vociferous…
- *NATO’S STOLTENBERG: CONCERNED ABOUT ESCALATION IN UKRAINE
- *STOLTENBERG: HAVE SEEN PRESENCE OF RUSSIAN FORCES IN UKRAINE
- *STOLTENBERG: WE CALL ON RUSSIA TO STOP SUPPORT OF SEPERATISTS
- *STOLTENBERG: WE CALL ON RUSSIA TO RESPECT INTL OBLIGATIONS
- *STOLTENBERG: CALLS ON RUSSIA TO UPHOLD MINSK AGREEMENTS
- *STOLTENBERG: SEEN INCREASE OF RUSSIA HEAVY EQUIPMENT IN UKRAINE
- *STOLTENBERG: RUSSIANS HAVE `HIGH NUMBER’ OF FORCES ON BORDER
- *STOLTENBERG: THERE ARE RUSSIAN FORCES INSIDE EASTERN UKRAINE
- *STOLTENBERG: SEEN INCREASE IN RUSSIAN EQUIPMENT IN UKRAINE
- *STOLTENBERG: THIS DOESN’T CONTRIBUTE TO PEACEFUL SOLUTION
* * *
Vladimir Putin reportedly put forward a new heavy artillery withdrawal plan to Petro Poroshenko. Kiev rejected it, but did not propose anything instead. Later Ukrainian authorities suggested that Moscow should sign a schedule for the implementation of the Minsk agreements. That is, the same thing is suggested but from different positions. Anatoly Tsyganok, director of the Military Forecasting Centre, a candidate of military sciences and an associate of the Academy of Military Sciences, explained in an interview to Pravda.Ru whether there was a way out.
“Ukraine reiterates that Russia is in the war, but it’s not true. Yes, there are certain specialists and weaponry, but Russia is not participating. If we take a closer look, the weaponry acquired by volunteer corps had been originally purchased through one oligarch. Weaponry was not only seized in battles. Not far from Donetsk there is a heavy equipment depot with around 400 tanks and 200 armoured personnel carriers. Ukraine repeats that Russia brings its troops, but in fact the USA and the NATO have artificial satellites continuously circulating above this territory and control the situation. These borders are also controlled by unmanned aerial vehicles,” Anatoly Tsyganok observed.
As the expert said in the conversation with a Pravda.Ru correspondent, whereas in summer the OSCE’s attitude to this situation was somewhat indistinct, now the OSCE clearly claims that Russia is violating all international agreements.
“Agreements that Ukraine is trying to thrust on Russia are unrealizable because Russia has never participated in the military conflict. And no attempt to involve Russia in the conflict will be crowned with success,” Anatoly Tsyganok stressed.
* * *
The propaganda battle continues…
And now an update on the Yemen situation where the rebels seem to have control of the capital. They have the President in House arrest.
(courtesy zero hedge)
Yemen’s Rebels Hold US-Backed President “Captive” In His House. Seize Country’s Largest Ballistic Missile Base
As reported yesterday, Yemen became the latest foreign policy “success” story of the US after the local minority of Iran-friendly Shi’ite Houthi militiamen stormed, and captured, the presidential palane. At the same the whereabouts of Yemen’s US-backed president Abed Rabbo Mansour Hadi were unknown. Moments ago we learned about his current location: according to AP, “two Yemeni presidential advisers say the Shiite rebels who are on a power grab campaign in the capital, Sanaa, are holding the president “captive” at his home, a day after seizing the presidential palace.”
More from AP: “The advisers say President Abed Rabbo Mansour Hadi “cannot leave his house” after the Houthi rebels removed his guards and deployed their own fighters at the premises on Wednesday.
One of the advisers says the situation in Yemen has reached the “point of no return,” that the military is in shambles while the country’s security apparatus has been “crippled” after the Houthis’ blitz.
The two advisers spoke on condition of anonymity because they are not authorized to talk to media.
As a reminder, this is what the president claimed in September regarding the state of US intervention in Yemen: “the 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.”
Meanwhile, this is what “successful” US strategy in Yemen has led to:
Yemen’s Shiite rebels pressed ahead on Wednesday with their power grab in the capital, Sanaa, capturing a military base housing ballistic missiles that overlooks the city and posting guards outside the president’s home, a day after raiding the presidential palace.
The Houthi rebels, who are trying to carve a greater share of power for their group, also issued fresh demands Wednesday, asking for the post of vice president and several key government offices.
The developments further erode the standing of U.S.-backed President Abed Rabbo Mansour Hadi, who was unharmed during the shelling of his neighborhood Tuesday and remained inside his house. The embattled Hadi appears to have run out of options amid the Houthis’ blitz, which has raised uncertainty over who is in control in Yemen and also concerns that al-Qaida’s Yemen branch could profit from the power vacuum.
Early Wednesday, the Houthis seized the country’s largest missile base on a hilltop above Sanaa, consolidating their grip over the city, which they seized in September after spreading out from their strongholds in the north.
And for those who care, here is the Houthis’ side of the story: according to Reuters, “Yemen’s minority Shi’ite Houthi fighters took up guard at President Abd-Rabbu Mansour Hadi’s home on Wednesday but said they had not toppled him, after two days of fighting which left little doubt that the enfeebled leader was now at their mercy.
The Houthis, friendly to Iran, swept into the capital four months ago and have emerged as the dominant force in the country. For now at least they appear to have decided to stop short of overthrowing Hadi, possibly preferring to exert control over a weakened leader rather than take on the burden of power.
Their defeat of the presidential guards in gunbattles and artillery duels in recent days adds to disarray in a country where the United States is also carrying out drone strikes against one of the most powerful branches of al Qaeda.
After clashes at the president’s office and home on Tuesday, the Houthis’ leader threatened in a speech overnight to take further “measures” unless Hadi bows to his demand for constitutional changes that would increase Houthi power. By early morning on Wednesday, Houthi fighters, accompanied by an armored vehicle, had replaced the guards at the president’s residence. Presidential guard sentry posts were initially empty, however a few guards later appeared and were permitted to take up positions.
“President Hadi is still in his home. There is no problem, he can leave,” Mohammed al-Bukhaiti, a member of the Houthi politburo, told Reuters.
Maybe, but not without bullet holes in his back?
Finally, for those who are new to this latest conflict hotspot, here is the background:
Yemeni military sources said the Houthis also seized the military aviation college located close to Hadi’s home, and the main missile base in Sanaa, without a fight. In the south of the country, Hadi’s home region, local officials denounced what they called a coup against him and shut the air and sea ports of the south’s main city, Aden.
Yemen, an impoverished nation of 25 million, has been plagued by Islamist insurgency, separatist conflict, sectarian strife and economic crisis for years. An “Arab Spring” popular uprising in 2011 led to the downfall of long-ruling President Ali Abdullah Saleh, bringing more chaos.
The Houthis, rebels from the north drawn from a large Shi’ite minority that ruled a 1,000-year kingdom in Yemen until 1962, stormed into the capital in September but had mostly held back from directly challenging Hadi until last week, when they detained his chief of staff.
They accuse the president of seeking to bypass a power-sharing deal signed when they seized Sanaa in September, and say they are also working to protect state institutions from corrupt civil servants and officers trying to plunder state property.
Houthi fighters battled guards at Hadi’s home and entered the presidential palace on Tuesday. In his televised speech that followed, the group’s leader Abdel-Malek al-Houthi warned Hadi that he had to implement the power-sharing deal.
“We … will not hesitate to impose any necessary measures to implement the peace and partnership agreement,” said Abdel-Malek, whose Shi’ite Muslim group is widely seen as an ally of Iran in its regional struggle for influence with Saudi Arabia.
“All the options are open and without exception and the ceiling is very, very high. And this is why, I here advise the president … Implement this deal. It is for your benefit and for the benefit of your people,” he said on live television.
The accord gives the Shi’ite Muslim group, which takes its name from the family of its leader, a role in all military and civil state bodies. The Houthis also demand changes to the divisions of regional power in a draft constitution. Their decision to stop short of toppling Hadi, an ally of the West and supporter of U.S. drone strikes, may be intended to keep regional Sunni Muslim states and the United States from rallying against them.
A government source told Reuters: “They know that if they bring about the downfall of the president, they won’t be able to rule the country, because Western and neighboring countries will gang on up on them, as well as other provinces that are not under their control.”
Abdel-Malek’s speech left little doubt however that his movement was now in effective control of the country. Al Masdar newspaper referred to him as “the president’s president”.
And with yet another international US “success story” literally up in flames, next steps include the US abandoning yet another embassy on foreign soil having fully alienated the locals, much to the delight of Dianne Feinstein.
Your more important currency crosses early Wednesday morning:
Eur/USA 1.1577 up .0035
USA/JAPAN YEN 117.49 down 1.152
GBP/USA 1.5108 down .0034
USA/CAN 1.2078 up .0033
This morning in Europe, the euro stopped its downward spiral, trading up and now just below the 1.16 level at 1.1577 as Europe reacts to deflation, announcements of massive stimulation and crumbling bourses with the exception of London. 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 way up again in Japan by 115 basis points and settling well below the 118 barrier to 117.49 yen to the dollar. The pound was down this morning as it now trades just below the 1.52 level at 1.5108.(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) but trading slightly up at 1.2078 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 Wednesday morning USA 10 year bond yield: 1.80% !!! down 1 in basis points from Tuesday night/
USA dollar index early Wednesday morning: 92.74 down 31 cents from Tuesday’s close
The NIKKEI: Wednesday morning : down 86 points or 0.49%
Trading from Europe and Asia:
1. Europe stocks all red except London.
2/ Asian bourses mostly in the green … Chinese bourses: Hang Sang in the green ,Shanghai in the green, Australia in the green: /Nikkei (Japan) red/India’s Sensex in the green/
Gold early morning trading: $1299.80
Closing Portuguese 10 year bond yield: 2.77% down 1 in basis points from Tuesday
Closing Japanese 10 year bond yield: .25% !!! up 3 in basis points from Tuesday
Your closing Spanish 10 year government bond, Wednesday up 1 in basis points in yield from Tuesday night.
Spanish 10 year bond yield: 1.53% !!!!!! (expect huge QE)
Your Wednesday closing Italian 10 year bond yield: 1.69% up 2 in basis points from Tuesday: (expect huge QE)
trading 16 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.1595 up .0051
USA/Japan: 117.86 down .789
Great Britain/USA: 1.5128 down .0014
USA/Canada: 1.2347 up .0236
The euro rose some more this afternoon and by closing time finished up for the day and just below the 1.16 level to 1.1595. The yen was well up in the afternoon, and it was up by closing to the tune of 79 basis points and closing just below the 118 cross at 117.86 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 down on the day closing at 1.5128. The Canadian dollar crashed today as it was down on the day at 1.2349 to the dollar down over 2%.
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: 92.89 down 16 cents from Tuesday.
your 10 year USA bond yield , up 5 in basis points on the day:
European and Dow Jones stock index closes:
England FTSE up 107.94 points or 1.63%
Paris CAC up 38.80 or 0.87%
German Dax up 42.10 or 0.41%
Spain’s Ibex up 51.40 or 0.50%
Italian FTSE-MIB up 322.75 or 1.64%
The Dow: up 39.05 or 0.22%
Nasdaq; up 12.58 or 0.27%
OIL: WTI 47.61 !!!!!!!
Closing USA/Russian rouble cross: 65.31 down 1/4 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):
We will see you onThursday.
bye for now