jan 26/We had another 1.79 tonnes of gold addition to the GLD/no change in silver SLV/Huge Syriza victory spells trouble for our bankers/

 

 

 

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

 

Gold: $1279.40 down $13.20   (comex closing time)
Silver: $17.97 down 7 cents  (comex closing time)

 

 

In the access market 5:15 pm

 

Gold $1281.30
silver $17.91

 

The gold shares rebounded sharply today as the bankers covered their massive shorts in the gold/silver equity shares.  That is a sure sign that gold and silver will have a very strong day tomorrow.  The crooks are controlling the precious metals market every minute of every trading day.

 

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

 

 

 

The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 1 notices for 5,000 oz.

 

 

Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 247.83 tonnes for a loss of 55 tonnes over that period.

 

In silver, the open interest rose  by 813 contracts despite Friday’s silver price being down by 7 cents. The total silver OI continues to  remains relatively high with today’s reading at 161,811 contracts. It seems that the bankers are very worried about silver as they covered again some of their short positions with the rise in the price of silver. The January silver OI contract rose by 5 contracts up  to 8.

 

In gold we again had a small decrease in OI with the decrease  in price of gold  on Friday to the tune of $8.10 The total comex gold OI rests tonight at 449,113 for a loss of 1872 contracts. The bankers continue to supply the non backed paper with reckless abandon.

The January gold contract fell by 14 contracts down to 36 contracts.

 

 

 

Today, we had another addition of 1.79 tonnes of gold inventory at the GLD/Inventory at 743.44 tonnes

 

In silver, /SLV inventory remains constant at 319.314 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 positive direction  GOFO/  All months are in contango and thus positive in rates.

 

On January 30/2015 the LBMA will officially stop providing the GOFO rates.

 

Jan 26 2015

 

+.09%                     +0875%                     +.095%                +.1125%            .155%

 

Jan 23 2014:

 

 

+.075%                   +.0825%                 +.09 %             +.1125%               +.1475%

 

 

end

 

 

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

 

 

Here are today’s comex results:

 

 

The total gold comex open interest fell today by a rather small  1872 contracts from 450,985  down to 449,113 with gold down by $8.10 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 fall by 14 contracts down to 36. We had 12 contracts served yesterday.  Thus we lost 2  gold contracts or an additional 200 oz will not stand for delivery in this January contract month.   The next big delivery month is February and here the OI fell by 17,283 contracts to 155,298 contracts with most of these guys  moving to April. First day notice is Friday Jan 30.2014 or 4 days away. The estimated volume today was poor at 135,029. The confirmed volume on Friday was fair at 196,356 contracts. Today we had 0 notices filed for nil oz .

 

 

And now for the wild silver comex results. Silver OI rose by 813 contracts from 160,455  all the way up to 161,811 as silver was down by 7  cents on Friday. We thus had considerable shortcovering from the banking sector again today especially when you compare gold to silver OI. The front January contract month saw its OI rise to 8 contracts for a gain of 5 contracts. We had 0 notices filed on Friday, so we  gained 5 silver contracts  standing or an additional 25,000 oz will stand for silver in the January contract month. The next big contract month is March and here the OI fell by 515 contracts down to 103,259.  The estimated volume today was poor at 20,601. The confirmed volume  on Friday was good  at 37,498. We had 1 notice filed for 5,000 oz today. The rise in the price of silver is certainly scaring our bankers.

 

January initial standings

 

Jan 26.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz 96.450 oz (Manfra)3 kilobars??
Deposits to the Dealer Inventory in oz 2599.88 oz (Brinks)  oz
Deposits to the Customer Inventory, in oz 3215.000  oz (Scotia) 100 kilobars
No of oz served (contracts) today 0 contracts(nil oz)
No of oz to be served (notices)  36 contracts (3600 oz)
Total monthly oz gold served (contracts) so far this month  74 contracts(7400 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 4,051.3 oz

Today, we had 1 dealer transactions

 

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz

 

we had 1 dealer deposit:

 

Into Brinks:  2599.88 oz

total dealer deposit: 2599.88 oz

 

we had 1 customer withdrawal

 

i) Out of Manfra  96.45 oz  (3 kilobars)

 

total customer withdrawal: 96.45 oz

 

 

 

we had 1 customer deposit:

i) Into Scotia:  3215.000 oz (100 kilobars)

 

total customer deposits;  3215.000 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 (74) x 100 oz  or 7400 oz to which we add the difference between the January OI (36) minus the number of notices served upon today (0) x 100 oz  = 11,000 oz , the amount of gold oz standing for the January contract month. (0.3048 tonnes of gold)

 

Thus the initial standings:

74 (notices filed for the month x 100 oz) +OI for January (36) – 0 (no. of notices served upon today) = 11,000 oz (0.3048 tonnes)

we lost 200 oz standing in this January gold delivery month.

 

 

Total dealer inventory: 773,086.941 oz or 24.04 tonnes

Total gold inventory (dealer and customer) = 7.968 million oz. (247.83) tonnes)

 

Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 55 tonnes have been net transferred out. We will be watching this closely!

 

This initializes the month of January for gold.

 

end

 

 

And now for silver

 

Jan 26 2015:

 

 

 January silver: initial standings

 

 

Silver

Ounces

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 349,664.43  oz
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 601,411.800 oz (CNT)
No of oz served (contracts) 1 contracts  (5,000 oz)
No of oz to be served (notices) 7 contracts (35,000 oz)
Total monthly oz silver served (contracts) 436 contracts (2,180,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  6,454,907.1 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 1 customer deposits:

 

i) Into CNT:  601,411.800 oz

total customer deposit  601,411.800 oz

 

 

We had 4 customer withdrawals:

i) Out of CNT:  123,082.300 oz

ii) Out of Delaware:  6093.39 oz

iii) Out of HSBC: 160,217.710 oz

iv) Out of Scotia; 60,217.03 oz

 

total customer withdrawal: 349,664.43 oz

 

 

we had 0 adjustment

 

 

 

Total dealer inventory: 66.613 million oz

Total of all silver inventory (dealer and customer) 176.990 million oz.

The total number of notices filed today is represented by 1 contract for nil oz. To calculate the number of silver ounces that will stand for delivery in December, we take the total number of notices filed for the month (436) x 5,000 oz  to which we add the difference between the OI for the front month of January (8) – the Number of notices served upon today (1) x 5,000 oz  = 2,215,000 oz the number of ounces standing so far for the January delivery month.

 

Initial standings for silver for the January contract month:

436 contracts x 5000 oz= 2,180,000 oz  +OI standing so far in January ( 8)- no. of notices served upon today(1) x 5,000 oz   equals 2,215,000 ounces standing for the January contract month.

we gained 25,000 additional silver ounces standing in this January delivery month.

 

 

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

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

 

 

end

 

 

 

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 26.2015: another volatile day as they added  1.79 tonnes/743.44 tonnes of gold.

 

Jan 23/the action at the GLD is very volatile:  today they added 1.20 tonnes of gold to their inventory/Inventory 741.65

 

Jan 22 no change in gold inventory at the GLD/Inventory 740.45 tonnes

 

Jan 21.2015: Tonight, we lost 1.79 tonnes of gold from the GLD/Inventory 740.45 tonnes

 

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

 

 

 

 

 

 

, Jan 26/2015 / we add an addition of 1.79 tonnes to inventory at the GLD

inventory: 743.44 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 : 743.44 tonnes.

 

 

end

 

 

And now for silver (SLV):

 

 

Jan 26.2015: no change in silver inventory/SLV inventory at 319.314 million oz

 

jan 23/2015/ a  huge addition of 1.053 million oz.  This entity is also being quite volatile/Inventory at SLV 319.314 million oz.

 

Jan 22 a huge reduction of 6.75 million oz/Inventory at 318.261 million oz

 

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 23/2015 /a huge addition of 1.053 million oz of  silver inventory at the SLV

registers: 319.314 million oz

 

 

end

 

 

 

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  6.5% percent to NAV in usa funds and Negative 6.0 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.0%

Percentage of fund in silver:38.5%

cash .5%

 

 

( Jan 26/2015)

 

 

2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.66%!!!!! NAV (Jan 26/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.24% to NAV(Jan 26/2015)

Note: Sprott silver trust back  into positive territory at +1.66%.

Sprott physical gold trust is back in negative territory at -.24%

Central fund of Canada’s is still in jail.

 

 

end

 

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

 

 

 

Early gold trading from Europe early Monday  morning:

 

(courtesy Mark O’Byrne)

 

Euro Gold Surges To EUR 1,168 After Greek Election Landslide

 

 

The crushing victory of the Greek opposition party Syriza in yesterday’s Greek elections has added to jitters in already jittery financial and foreign exchange markets.

Head of Syriza, Alexis Tsipras waves after winning the elections in Athens

The euro tumbled and gold in euros surged to its highest level since April 2013, at €1,167.94/oz as markets opened in Asia. The euro has since stablized but remains near a 11 year low against the dollar and is now down 16.7 percent against gold in January alone.

Gold in Euros - 5 Days (Thomson Reuters)

U.S. stock index futures fell, as did European shares prior to slight recoveries while borrowing costs for the euro zone’s most indebted states rose due to increasing concerns that the Syriza party looked set to take on Greece’s international lenders after the landslide victory.

Greek markets saw worse losses. Ten-year yields rose 22 basis points to 8.99 percent, while Greece’s main stock index fell 0.6 percent, with shares in banks such as Alpha Bank and Piraeus Bank hit even more.

Yields on lower-rated euro zone bonds bounced off record lows, with Italian 10-year yields up 2 basis point at 1.54 percent and Spanish and Portuguese yields 2 bps higher at 1.39 percent and 2.26 percent, respectively.

Gold in Euros - 5 Years (Thomson Reuters)

A period of uncertainty and heightened market nervousness now seems likely and this should benefit gold.

Political uncertainty has already generated bank runs. Greek banks are already facing a serious liquidity problem as depositors have withdrawn billions of euros in recent days and weeks.  Four major Greek banks have already asked for Emergency Liquidity Assistance (ELA) from the European Central Bank (ECB).

Syriza leader Alexis Tsipras promised Greeks overnight that the five years of austerity imposed under bailout programs worth 240 billion euros from the European Union (EU) and the International Monetary Fund (IMF) were over.

Prime Minister-elect Alexis Tsipras, who pledged to renegotiate the nation’s international bailout, won 149 out of a possible 300 seats in Parliament. His mandate is now to confront the nation’s programme of austerity, imposed in return for pledges of 240 billion euros in aid since May 2010.

Syriza have been given the resounding backing of the Greek people to initiate reforms to the agreement the previous government negotiated with the Troika. His pledges include a writedown of Greek debt while persuading European creditors to keep aid flowing.

The left-wing group are just two seats short of a majority with means they should be able to form a government with sympathetic individuals or parties.

While Syriza have been careful to highlight their commitment to the EU and the Euro, there is no mistaking the hardline tone of Alexis Tsipras when it comes to dealing with the Troika of the IMF, the ECB and the European Commission (EC).

In Athens yesterday, Tsipras told the crowds “Your decision today has made the Troika a thing of the past,” according to London’s Telegraph.

“Our victory is a victory for all people in Europe who are fighting austerity. The new Greek government will be willing to collaborate and negotiate with our European counterparts for a fair solution so that Greece can emerge from the vicious circle of debt.”

Syriza appear to have every intention of keeping their election promises to cut taxes, raise public spending and increase the minimum wage. They maintain that this can be done while staying within budget by drastically cutting payments to their creditors.

Syriza’s likely finance minister to be, Yanus Varoufakis, told Channel 4, ” We are going to destroy the Greek oligarchy system.”

Exactly who Syriza define as being part of the oligarchy system is unclear as of now but it is likely that many banks and financial institutions – the beneficiaries of the current reform program – will be in Syriza’s sights.

The EU will be loathe to give any concessions that may weaken Europe’s already desperately fragile banking system. Brussels will be unwilling to sustain any such concessions lest other countries, like Ireland, demand a restructuring or write-down of their debts.

Irish Taoiseach, Enda Kenny, offered tacit support for renegotiation of the so called Greek bailout when in Davos, while also expressing hope that Greece remain within euro zone.

 If Syriza is blocked from improving the conditions of Greece’s working and middle classes, it may have no alternative but to leave the Euro – a very messy and chaotic process which would lead to the end of the single currency as we know it. It would also make more likely a return to drachmas, pesetas, liras and punts.

Skillful accommodations will need to be negotiated on both sides if Greece is to remain in the Euro and the banking system is to remain intact.

Tsipras’ lack of experience and Brussels’ lack of humility may not be conducive to such accommodations.

With the ECB’s admission that the Eurozone is already in a very fragile state, it seems great uncertainty lies ahead for the international monetary system.

Gold remains an essential hedge for investors at this time and an insurance policy for depositors in the euro zone and internationally – exposed to the dual risk of bail-ins and euro devaluation.

The Comprehensive Guide to Bail-ins: Protecting Your Savings in the Coming Bail-in Era

MARKET UPDATE

Today’s AM fix was USD 1,282.75, EUR 1,141.54 and GBP 854.60 per ounce.
Friday’s AM fix was USD 1,293.50, EUR 1,150.29 and GBP 863.49 per ounce

Gold and silver both performed well last week and rose 1.43% and 3.45% respectively. Gold edged down $10.0 or 0.77% to $1,293.70 per ounce Friday and silver fell $0.08 or 0.44% to $18.30 per ounce.

Today, gold has pulled back 1 percent as traders cashed in gains after the five month highs attained last week. The ripple felt in other markets on the Syriza’s party victory in the Greek elections may have squeezed some nervous traders into cashing in their positions.

Spot gold was down 1 percent at $1,280.10 an ounce by in early London trading. Comex U.S. gold futures for February delivery were down $8.70 at $1,283.90.

Silver was down 1.7 percent at $17.99  an ounce in London, while platinum was down 0.7 percent at $1,251.25 an ounce and palladium was down 0.8 percent at $770 an ounce.

Investor sentiment has improved somewhat recently due to safe haven demand for bullion. Bullion buyers are continuing to accumulate today viewing weakness as an opportunity.

Bullish bets on gold futures and options increased for a fourth week in the week ending January 20, while holdings of gold-backed ETFs have also increased.

 A new Asian gold contract by CME Group began trading in Hong Kong on today. The 1 kilogramme (kg) physically settled contract was trading at a premium of $2-$3 an ounce over the global benchmark.

The CME contract follows new contracts trading in China and Singapore. While, liquidity has been an issue, the moves again show how the gold market is moving East and Asia becoming increasingly important to both the setting of the price and to the physical bullion market in terms of supply, demand and storage.

Get Breaking News and Updates Here

 

 

end

 

Please note the huge amount of demand of gold from China this week:

 

70 tonnes of gold.  Please remember that this is citizen gold purchases and not sovereign China purchases!!

 

(courtesy Koos Jansen)

 

 

Posted on 24 Jan 2015 by

Booming SGE withdrawals In Week 2, 2015: 70 Tonnes

Withdrawals from the vaults of the Shanghai Gold Exchange (SGE) in week 2 of 2015 (12 – 16 January) accounted for an incredible 70 metric tonnes. Aggregated withdrawals in the first two weeks of this year stand at 131 tonnes.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 2, dips

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2105 week 2, dips

Corrected by the volume traded on the Shanghai International Gold Exchange (SGEI), withdrawals in week 2 were at least 65 tonnes (read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals). Year to date withdrawals corrected by SGEI volume were at least 122 tonnes.

The numbers just mentioned are truly amazing, 70 tonnes withdrawn in one week is the third highest amount ever. Only in January 2014 when the Chinese were also buying gold for the Lunar year – but the gold price in renminbi was lower, and in April 2013 when the price of gold fell of a cliff, were withdrawals stronger than last week. This is important, as illustrated in the charts above the Chinese tend to buy gold when the price is declining, last week they bought like there was no tomorrow while the price was rising sharply. Now that’s strong demand! Perhaps some investors in the mainland read the recommendations from ICBC, world’s largest bank, regarding physical gold hoarding:

ICBC gold buy reccomendations

In perspective; 65 tonnes demand (the bottom limit) can only have been met by mine supply, scrap supply or import supply. Domestic mine production was 8.7 tonnes; gold was not trading at a discount, but at a premium to London last week, which means scrap couldn’t have been abundant; estimating scrap that supplied the SGE at 4 tonnes leaves import to have been at least 52.3 tonnes (in one week). Nothing unusual if this would occur sporadically, but since 2013 China has net imported 2,838 tonnes for just non-government demand, continuously draining global above ground gold inventory – as world mine production is not sufficient. How long can this go on? Deutsche Bank estimates the PBOC imports an additional 500 tonnes a year, according to a report released in November 2014:

…But there have been a number of examples of publicly flagged large-scale official gold transactions that have had a limited market impact. In the IMF example above, gold prices rose steadily despite the IMF being a reliable seller of almost 20 tonnes each month. In another example, the Chinese government’s open market purchases of roughly 500 tonnes per year have not prevented the gold price from plummeting in recent years.

The world Gold Council (WGC) estimates there is about 170,000 tonnes of above ground gold inventory. In my opinion it’s impossible to know how much gold has been mined in the history of humanity, though I suspect it’s more than 170,000 tonnes, also because of what we are witnessing these years regarding amounts of gold moving from West to East – the WGC started counting from 10,000 tonnes since the Californian gold rush. 

The Shanghai International Gold Exchange

To my advantage for estimating Chinese wholesale demand (that equals SGE withdrawals), SGEI trading volume has been insignificant since the SGEI was launched in September 2014. SGE management of course was aiming for substantially more volume at their new subsidiary. In order to boost liquidity they took a bunch of measures. On December 29, 2014, the SGE announced free storage and no load-in and load-out fees from January 1 to June 30, 2015.

All international members and customers:       

With a view to encouraging international members and customers’ participation in trading and delivery activities on the International Board and meanwhile reducing their cost, the Shanghai Gold Exchange determines to further exempt international members and customers from fees including inventory fees, load-in and load-out fees, vault transfer fees and other service fees generated from trading contracts listed on the International Board. The exemption period shall be valid from January 1st to June 30th, 2015.  

Two days later they exempted traders from paying transaction fees on the SGEI physical gold contracts iAu99.99, iAu99.5 and iAu100g.

All Members,

With a view to promoting the liquidity and enhancing the investment function of Au(T+N) products, the Shanghai Gold Exchange (the “Exchange”) determines to reduce the transaction fees of Au(T+N1) and Au(T+N2) by 50%, from the current 2‰ to 1‰. In addition, the Exchange shall also exempt all its members from transaction fees of contracts listed on the International Board including iAu99.99, iAu99.5 and iAu100g, so as to boost the trading activities on the international board. 

The above-mentioned preferential policies shall be valid from January 1st to June 30th, 2015.

Then on January 15, they decided to collaborate with the WGC to promote SGEI trading:

Today, the Shanghai Gold Exchange and the World Gold Council, the market development organization for the gold industry, signed a ‘Memorandum of Understanding’ regarding a ‘Comprehensive Strategic Cooperation Agreement.’ The Shanghai Gold Exchange is the largest physical gold exchange worldwide and the World Gold Council is the global authority on the gold industry. Together, these two organizations are joining hands to support the development of both domestic and international gold trading in China by leveraging the opportunity provided by the internationalization of the Chinese gold market, through the Shanghai Free Trade Zone, to support market expansion. The agreement will support the development of gold investment products and solutions for the industry and investors both regionally and globally.

I’m holding my breath on the collaboration with the WGC. In my experience they could have started by making the SGEI more accessible. Since September I was trying to become a customer through a number of Chinese banks, but I didn’t succeed. Enrollment wasn’t particularly easy.

Gold Trading Volumes

Total SGE trading volume has been declining for a few weeks, in week 3 (January 19 – 23) volume accounted for 238 tonnes, down 19 % w/w.

Shanghai Gold Exchange SGE weekly gold volume

Volume on the Shanghai Futures Exchange is moving in the opposite direction, volume has been increasing since December 26. In week 3 volume was 778 tonnes, up 10 % w/w. The open interest closed at 124 tonnes at the end of the week.

On the COMEX 3,054 tonnes of gold in futures contracts changed hands, down 13 % w/w. The open interest closed at 1,403 tonnes.

COMEX vs SGE + SHFE gold volume

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

 

 

 

end

 

 

 

Koos Jansen reports on the huge import of silver throughout 2014 at 7063 tonnes or 226 million oz. This is well over 32.2% of annual silver demand ex China ex Russia (approx silver production 700 million for the globe)

 

Posted on 26 Jan 2015 by

India Silver Import 2014 At 7,063 Tonnes, Up 15 %

India’s customs department, Directorate General of Commercial Intelligence & Statistics (DGCIS), just released theQUICK ESTIMATES FOR SELECTED MAJOR COMMODITIES for December 2014. According to the DGCIS the figures for December are provisional and subject to change, however, I’ve been tracking these quick estimates for months and they are reasonably accurate, compared to the official numbers that lag a few months.

In December India imported $182.31 million in silver; divided by an average price of $16.3 an ounce this accounts for 11,188,095 ounces, or 348 tonnes, down 72 % from 1,254 tonnes in November. The total gross amount of silver imported in 2014 accounted for a whopping 7,063 tonnes, up 15 % from the shocking 6,125 tonnes in 2013. As far as my data goes back (2009) net silver import 2014, 7,055 tonnes, is a record.

Bullion Bulletin released a report in 2014, called An Empirical Study Of Silver Markets In India. In the intro it states:

Why has the silver import into India increased in 2013? We started talking to the industry. We could identify two causes – investment demand and jewelry demand. Investment demand was largely due to demand switch from gold and relative attractiveness of silver to gold.

Screen Shot 2015-01-26 at 10.30.32 AM
Courtesy of Bullion Bulletin

The quick estimates do not disclose any silver export; the official numbers do, but these are negligible as we can see in the next chart.

India Silver Import December 2014

India Yearly Net Silver Import 2009 - 2014

Note, the previous charts are build from numbers on silver as disclosed by the DGCIS, I do not know how much silver is exported in the form of jewelry or silverware. There are numbers available about the value of silver jewelry exports from India, published by the Gem & Jewelry Export Promotion Council (GJEPC), however these values can capture fabrication costs, gems and other precious metals. There for I don’t feel comfortable deriving exported silver tonnage from the GJEPC data.

According to Bullion Bulletin total silver demand in India has been strong in recent years, 3,381 tonnes in 2010, 5,519 tonnes in 2011, 3,890 tonnes in 2012 and 5,822 in 2013. This demonstrates little silver import, as disclosed by DGCIS, is exported in the form of jewelry, silverware or industrial products.

Large inflows of silver into India are often supplied by the UK; we can see a clear pattern if we compare India gross import with UK net export to India.

India vs UK Monthly Silver Trade 2009 - 2014
Eurostat has not yet released any data from December 2014

Meaning the UK, the London Bullion Market, is drained from silver by the East just like it’s drained from gold by the East. I don’t see any silver shortages in the near term in the UK, but I’ll keep an eye on it.

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

 

end

 

Eric Sprott comments on currency turbulence and how it is destructive to the globe:

 

(courtesy Eric Sprott/Geoff Rutherford)

 

Currency turbulence is destructive, will push people toward monetary metals, Sprott says

Section:

10:50a ET Saturday, January 24, 2015

Dear Friend of GATA and Gold:

Turbulence in currencies is destructive and will push people toward the monetary metals, Sprott Asset Management founder Eric Sprott remarks in his weekly interview with Geoff Rutherford of Sprott Money News. The interview is nine minutes long and can be heard at the Sprott Money Internet site here:

http://www.sprottmoney.com/sprott-money-weekly-wrap-up

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

 

 

end

 

Mike Kosares on gold vs various currencies:

 

(courtesy Mike Kosares/GATA)

 

Mike Kosares: Gold spike in major currencies is a remarkable start to 2015

Section:

By Michael J. Kosares
USAGold.com, Denver
Saturday, January 24, 2015

The new year has ushered in a remarkable and unexpected turn of events for gold. It is up significantly in four of the seven top currencies (the euro, British pound, and Australian and Canadian dollars), up respectably in two others (U.S. dollar and Japanese yen), and down slightly in the last (Swiss franc).

These charts and the significant gains in gold’s value in a very short time demonstrate amply the value of gold as a hedge, not just against inflation but against sudden currency devaluation and systemic financial and economic risks as well. …

… Though it appears that gold and quantitative easing might be directly correlated, what is really going on is that both simply are reacting to the same problem — a bad economy with the potential systemic breakdown, not the prospect of inflation. Central banks respond by printing money. Investors respond by buying gold.

… For the full commentary:

http://www.usagold.com/cpmforum/2015/01/24/238943/

 

end

 

 

 

 

Get a load of this from Goldman sachs:

 

(courtesy zero hedge/Goldman Sachs)

 

 

Goldman: It’s The Central Banks’ Fault We Can’t Be More Bearish On Gold

 

We’ve heard it all: snow, cold weather, hot weather, non one-time recurring, “one-time, non-recurring” charges, and even Bush. But when it comes to “excuses” for why one is wrong, this morning Goldman’s note “Central banks stall a more bearish gold outlook” absolutely takes the cake.

That’s right: Goldman just blamed central banks for being unable to be “more bearish” on gold.

While readers let that sink in for a bit, here is the jist of Damien Courvalin’s note.

Even more monetary stimulus has helped support gold prices… 

 

While gold prices have trended lower since mid-2013, the decline has been short of our expectations. Recently, the combined support of: (1) weaker-than-expected US economic data; (2) the run-up to the announcement of QE in Europe; and (3) the surprise SNB decision to remove the CHF/EUR cap, have seen prices rise to near $1,300/toz. While we believe that these catalysts are now mostly priced in, and that gold prices will decline in 2015-16, we are nonetheless raising our near-term forecast to current prices.

Wait, so infinitely diluting fiat money and paper claims on wealth, a process which inevitaly ends up with the paradropping of bales of cash, is favorable for hard, “traditional” stores of value? Do go on…

…but the start of the US hiking cycle is drawing near

 

We expect the decline in gold prices to resume from 3Q15, with the start of the US rate hiking cycle. Accordingly, we revised our 3, 6- and 12-month gold price forecasts higher to $1,290/toz, $1,270/toz and $1,175/toz but our year-end 2016 forecast lower to $1,000/toz. While our near-term conviction in lower gold prices has declined, our confidence in lower gold prices in the long-run has increased on the back of lower expected inflation in coming years and a declining marginal cost of gold production.

Actually Damien, your own team at Goldman wrote on Friday that ” We continue to expect a later-than-consensus first hike, with September remaining our baseline but the risks looking increasingly tilted to the later side” so it may be time to re-evaluate that whole “drawing near” assessment considering it is in fact being pushed further back!

Continuing:

Lower oil prices and USD strength to relieve mining cost pressures

 

Based on our cost curve modelling, we estimate that lower energy prices and USD strength have brought the “all-in” marginal production cost down $150/toz to $1,050/toz and that this move will be persistent. We also recognize that as we move further into the Exploitation phase of the commodity cycle, additional cost deflation forces are likely to emerge, such as wage deflation, increasing labor and capital productivity and a faster pace of technological (TFP) growth, leaving risk to our new long term gold price forecast of $1,050/toz skewed to the downside.

Oh, so lower crude prices are a disaster for crude producers but a gift for gold miners: gold miners the bulk of which are located in various third-world nations, where crude “trickle-down” economics works every time, all the time, and where striking miners are never on edge about the possibiliy of extracting even the smallest of wage concessions in a world in which some fixed cost is unexpectedly reduced. Got it.

Cost deflation, rising supply and higher real rates all intertwined

 

Importantly, while our cost-deflation work focuses on gold as a mined commodity, the drivers of this cost deflation are directly tied to the anchors of our cyclically bearish gold view. It is not a coincidence that the outperformance of US growth – enabled by the Shale revolution and driving gold prices lower – is occurring with a strengthening of the US dollar and amidst lower energy prices as the dynamics are very much self-reinforcing. We would further expect that the higher rate environmentthat will drive gold prices lower will ultimately drive gold production higher.

Ok, that really went over our heads, but with $1.4 trillion in European government debt having gone to negative interest rates since the ECB’s announcement of NIRP in June…

… just which “higher rate environment” are we talking about here?

 end
These guys take the opposite view to Goldman;
(courtesy zero hedge/Bank of America)

“Buy The Dip” In Gold; BofAML Says EURUSD Bounces Should Be Sold

“Gold is consolidating before its larger bull trend resumes,” notes BofAML’s MacNeil Curry looking for a move to $1345 and beyond. But it is today’s modest bounce in EURUSD that they believe should be sold, and “seen as temporary and corrective of the larger bear trend.”

Via BofAML,

€/$ is correcting. Bounces should be sold.

€/$ is correcting higher.

 However, this bounce should be seen as temporary and corrective of the larger bear trend. Look for topping into the 1.1325/1.1559 zone (old channel support, now resistance) before the larger downtrend resumes.

 

The initial target is 1.1000, ahead of the Sep’03 low at 1.0765. Our long-term targets are 1.0588/1.0283(secular channel support and Elliott Wave swing target). We look for greater signs of a base into here, not before. Bulls need a break of 1.1876 (old Jun’10 low) to indicate medium-term basing, while a break off 1.2235 (200m MA) is needed to confirm a turn in the medium- and long-term bull trends, neither of which is expected.

*  *  *

 

Gold consolidates before higher

Gold has been caught in a 4-day consolidation. While there is risk of a deeper pullback, weakness should be limited to the 1267/1253 area (old channel resistance, the Oct-21 high and 200d avg.). Into here, we look for a resumption of the larger bull trend toward the 1345 Jul’14 high and potentially beyond.

Buy dips. 

end
More and more people are stating that QE is destroying price signals:
(courtesy Bloomberg/GATA)

Biggest private fund in Finland says QE destroying price signals

Section:

By Kati Pohjanpalo
Bloomberg News
Sunday, January 25, 2015

HELSINKI, Finland — Finland’s biggest private investor with $45 billion under management said asset purchases by the European Central Bank are undermining investors’ ability to price bonds.

“The value of market signals has in practice plummeted,” Risto Murto, chief executive officer of Varma Mutual Pension Insurance Co., said in an interview in Helsinki on Friday. “The role of market forces is going to be particularly small in the near future.” …

… For the remainder of the report:

http://www.bloomberg.com/news/2015-01-25/biggest-private-fund-in-finland

 

end

 

 

 

The following is lengthy but important as we are finally getting clues as to the disappearance of FRBNY gold:

 

(courtesy Ronan/GATA/Bullionstar.com)

 

New York Fed’s gold vaults’ depositors and metal have been declining steadily

Section:

12:20a ET Monday, January 26, 2015

Dear Friend of GATA and Gold:

In the first of a series of articles about the gold vaults of the Federal Reserve Bank of New York, GATA consultant Ronan Manly reports that the bank’s documents indicate a huge decline over recent decades in the number of central banks vaulting gold there as well as the amount of gold vaulted. Further, Manly finds, the bank has gotten much more secretive about its gold vaulting over the years. Manly’s study is titled “The Keys to the Gold Vaults at the New York Fed, Part 1” and it’s posted at the Bullion Star Internet site here:

https://www.bullionstar.com/blog/ronan-manly/keys-gold-vaults-new-york-f…

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

 

 

 end

And now for the important paper stories for today:

 

 

Early Friday morning trading from Europe/Asia

 

 

1. Stocks all up on major Asian bourses on ECB QE / the  yen falls  to 118.27

1b Chinese yuan vs USA dollar/ yuan  weakens  to 6.2542
2 Nikkei down43 points or 0.25%

3. Europe stocks  rise on ECB QE  /Euro surprisingly rises into 1.12 handle, despite Syriza win/ // USA dollar index up to 95.96/

3b Japan 10 year yield back down to .23% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.27/

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 44.99 Brent: 48.05 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold down /yen down;

3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion

Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP

3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)

3j Oil falls this morning for both WTI and Brent

3k Huge Greek Syriza win last night/needs support of independent

3l Yields on all European bonds plummet as expected due to ECB QE

3m Gold at $1283.00. dollars/ Silver: $18.02

3n USA vs Russian rouble:  ( Russian rouble  down 1 rouble per dollar in value)  65.53!!!!!!

3 0  oil falls into the 44 dollar handle for WTI and 48 handle for Brent

3p  ECB provides emergency fund for Greece for the next two weeks.

3Q

4. USA 10 yr treasury bond at 1.80% early this morning. Thirty year rate well below 3%  (2.37%!!!!)/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 Risk Rattled By Syriza Surge To Power

 

This morning both the SNB stunner from two weeks ago, and the less than stunning ECB QE announcement from last Thursday are long forgotten, and the only topic on markets’ minds is the startling surge of Syriza and its formation of a coalition government with another anti-bailout party – a development that many in Europe never expected could happen, and which has pushed Europe to the brink of the unexpected yet again. And while there is much speculation that this time Europe is much better positioned to “handle a Grexit”, the reality is that European bank balance sheets are as bad if not worse than in 2014, 2013, 2012 or any other year for that matter, because none of ther €1+ trillion in NPLs have been addressed and the only thing that has happened is funding bank capital deficiencies with newly printed money. You know what they say about solvency and liquidity.

In any event, Syriza’s dramatic ascent to power now places Greece on collision course with the Troika, and certainly Germany, a collision that everyone will be watching closely, and none other more than various other regional breakaway powers such as Spain’s Podemos which is already riding on the coattails of Syriza’s victory.

All of this is also being manifest in sentiment toward risk this morning, which has seen a bit of a bounceback following a sharp selloff in the overnight futures, one which wiped out all the market gains since the announcement of Draghi’s Q€.

Asian markets kicked off the week on a cautious note with focus on SYRIZA’s victory in Greece. US equity futures fell with the Nikkei 225 (-0.3%) following suit amid a strong JPY, underpinned by flight to safety flows. Shanghai Comp (+0.94) and Hang Seng (+0.24%) rallied late in the session after lacking direction for most of the day, continuing on from last week’s sharp post-Chinese GDP gains.

European equities are marginally in the green after a choppy morning session following the Greek elections, with the only tier 1 data this morning, German IFO Business Climate (106.7 vs Exp. 106.5, Prev. 105.5), coming in slightly above-expected but having no sustained reaction. The FTSE is the underperformer as mining names weigh on the index as a result of falling commodity prices as well as the Athens Stock Exchange, which opened 3% lower, with banks weighing in the sector, opening 7% lower, however these losses have been mostly pared throughout the morning.

In terms of stock specific stories, news over the weekend suggested that IBM (IBM) are to lay off 26% of their global workforce this week and Pfizer (PFE) are said to have been rebuffed by Teva (TEVA) in their search for an M&A deal. This news has seen Shire (SHP LN) trade higher this morning, along with news that the US FDA have said it would license their Natpara drug.

Elsewhere, Bunds are lower on the day after failing to sustain a break above 159.00 shortly after the open and settled below the handle with little price action for the rest of the European morning, while Greek bond yields are wider to the German benchmark by 40 bps this morning. Short sterling has been weighed upon by more hawkish than usual comments from BoE’ Carney (Neutral), who warned that low interest rates may not last as long as investors expect, which echoed similar comments from Forbes (Soft Hawk) over the weekend.

Volumes may be lighter than usual heading into the US session as the North-east of the US faces a ‘potentially historic blizzard’ which would lead to 3ft of snow, with heavy snowfall forecast from Philadelphia to Maine and blizzard warnings issued in both New York and Boston.

In FX, the European session has seen a retracement of heavy selling pressure in EUR/USD following on from the pair falling below the 1.1100 handle for the first time since 2003 during Asian hours. However, this morning sees the greenback coming off its eleven year highs to see EUR/USD rise around 50 pips back above 1.1200, with European participants considering the reaction to SYRIZA’s victory over-exaggerated, as the victory has been widely anticipated in Europe. Meanwhile, the pullback in USD has not seen USD/JPY able to fall back below the 118.00 handle, which was broken overnight.

RUB currently trades around session lows as the conflict with Ukraine continued to escalate over the weekend, with Ukrainian President saying that the Russian threat to Ukraine has increased and US President Obama hinting at new Russian sanctions.

The other noteworthy currency is CHF, with volatility continuing after the SNB announced the removal of the currency floor, where EUR/CHF currently resides below parity but has seen buying pressure throughout the European morning.

The commodity complex has seen gold pull back from its post ECB-QE announcement highs to trade below USD 1,185/oz, with the yellow metal failing to break above USD 1,300/oz overnight and falling throughout the morning. The energy sector sees Brent and WTI futures both in negative territory with the latter breaking below the USD 45.00 handle and continuing to trade around the handle throughout the European morning, partially as a consequence of the strong USD.

In summary: European shares stay mixed with the travel & leisure and autos sectors outperforming and oil & gas, basic resources underperforming. Syriza to form coalition with Independent Greeks party after Greek election. Euro reverses losses, Greek stocks pare Friday’s gain, Greek bond yields rise. Ruble weakens. German IFO above estimates. The Swiss and German markets are the best-performing larger bourses, U.K. the worst. Portuguese yields decline. Commodities fall, with natural gas, silver underperforming and nickel outperforming. U.S. Dallas Fed index due later.

Market Wrap:

  • S&P 500 futures down 0.3% to 2038
  • Stoxx 600 up 0.1% to 370.8
  • US 10Yr yield down 1bps to 1.79%
  • German 10Yr yield up 0bps to 0.36%
  • MSCI Asia Pacific down 0.2% to 140.8
  • Gold spot down 0.8% to $1283.2/oz
  • Euro up 0.29% to $1.1237
  • Dollar Index up 0.17% to 94.93
  • Italian 10Yr yield down 2bps to 1.51%
  • Spanish 10Yr yield down 0bps to 1.38%
  • French 10Yr yield up 1bps to 0.55%
  • S&P GSCI Index down 0.8% to 376.8
  • Brent Futures down 1.3% to $48.1/bbl, WTI Futures down 1.3% to $45/bbl
  • LME 3m Copper down 1.3% to $5447.5/MT
  • LME 3m Nickel up 0.3% to $14400/MT
  • Wheat futures up 0.1% to 530.5 USd/bu

Bulletin Headline Summary

  • Prime Minister-elect Alexis Tsipras forged an anti-austerity alliance within hours of his election victory, challenging European peers with a declaration that the era of bowing to international demands for budget cuts is over
  • The challenge for Tsipras now is to come good on his election pledges, including a writedown of Greek debt, while persuading creditors from ECB, IMF and European Commission to keep aid flowing
  • “The Greeks have the right to vote for whom they want,” Hans-Peter Friedrich, a deputy caucus leader for Merkel’s faction in parliament, told Bild newspaper. “We have the right to no longer finance Greek debt”
  • Finland remains open to discussions on extending maturities, lowering rates on Greek loans, Prime Minister Alexander Stubb says; however, “it’s unfathomable to make Finnish taxpayers pay for Greek stimulus policies”
  • Governor Haruhiko Kuroda says the Bank of Japan may need to get creative in any further monetary stimulus. Among options analysts highlight: regional-government bonds, a type of security that could aid public support
  • German business confidence rose in Jan. with Ifo institute’s business climate index advancing to 106.7, higher than forecast, from 105.5 in Dec.
  • A blizzard forecasters call “life-threatening” that may drop three feet of snow from New York to Boston has caused more than 1,800 flight cancellations and will likely block road and rail traffic, close schools and knock out power across the U.S. Northeast
  • Sovereign yields mostly lower; Greek 10Y yields surge 50bps. Asian, European stocks mostly higher, U.S. equity-index futures fall. Brent and WTI, gold and copper fall

 

DB’s Jim Reid Concludes the overnight recap

 

 

After the polls closed last night it soon became clear from the exit polls that Syriza had claimed a stunning victory although 12 hours later and with 95% of the results counted Syriza look to have fallen just short of an outright majority. Syriza have won 36.4% of the vote compared to 27.8% for the governing New Democracy party and are projected to win 149 seats vs the 151 needed for a majority on the 300 seat parliament. Even so, DB’s George Saravelos wrote last night that, “the election outcome in Greece this evening is at the very top-end of an “anti-austerity” mandate that the electorate could deliver.” So what next? First Syriza’s leader Alexis Tsipras now has a three day long “exploratory mandate” in which his party will negotiate with other parties to secure a majority. Alternatively Syriza could form a minority government where it will need to secure a tolerance vote from parliament – this requires only a majority of those MP’s present to secure the confidence vote and so Syriza could manage this if it agrees with smaller parties for them to stay away from the vote. Early reports suggest that Syriza will look to make a deal with the right-wing anti-bailout Independent Greeks party, with a Syriza official stating that, “There was an agreement with Mr Kammenos (leader of the Independent Greeks Party) to meet on Monday at 10:30 local time to confirm the support and possible participation of the Independent Greeks in the new government.” In terms of what happens next, this same official suggested that, “most likely is that the prime minister will be sworn in on Monday and the new government will be sworn in on Tuesday evening or at the latest on Wednesday morning.” Tsipras is also expected to meet with leaders of the centrist To Potomi and the Communist party KKE before taking up government (Reuters).

In terms of the formation of this government, George thinks that, “the positions of finance minister, PM chief of staff, and chair of the council of economic advisors are likely to form the core of a new government’s negotiating team with the Troika and these appointments will therefore be closely watched.”

Looking ahead Parliament is scheduled to open on February 5th where its first job will be to elect a new President, which should take place by February 13th. Following this the new government will request a vote of confidence from parliament to allow it to begin negotiations with the Troika. After this the next big deadline for Greece is February 28th when the country’s current program expires and a major question for the new government is if they will request and whether they will be granted an extension on this. George Saravelos expects that, “it is in both sides’ interest to secure an extension of the program to July to allow negotiations to proceed, but it is important that this materializes. ” From the European side we will probably get an early flavour for how Greek-Eurogroup negotiations will pan out later today as the Eurozone finance ministers meet later and are expected to give some sign over whether they would accept an extension. If this extension can be agreed then the Troika will likely send a mission to Athens in mid-February to start negotiations although Tsipras has indicated it is an open question whether or not they will be invited.

The situation in Greece is undoubtedly delicate with the nation’s banks having already requested liquidity assistance from the ECB due to deposit outflows and the Greek government’s continuing need to issue debt. Ultimately the outcome here is going to depend on how negotiations between Syriza and the Troika go, with Syriza’s desire to achieve meaningful debt relief for Greece along with a reduction in austerity and changes to the country’s structural reforms all on Syriza’s policy platform. It is likely that the twists and turns of these negotiations will form the main narrative for Greek risk in the coming weeks. George sees a consensual outcome between the Greek government and its creditors as achievable but requiring very meaningful concessions from both sides and the chance of Greek government instability and fresh elections a possibility.

Looking slightly more widely, last night’s result marks a major political event for Europe and possibly a new era for European politics. It marks the first time that a non-mainstream party has won the reins of government in the aftermath of the crisis and may be a harbringer for more political turmoil to come for the region as non-mainstream parties grow ever closer to power. Syriza are the first to form a government. They may not be the last. How Greece under Syriza performs from here on will be an important test case for the region. Note that this still could be a slow burning issue. Our plate spinning analogy for 2015 suggested that the central banks would keep the plates spinning aggressively until a cure for gravity (sustainable growth) or a policy error or a political accident. With the ECB now being aggressive, the fall-out from yesterday’s vote is likely to be limited unless no compromise can be made. However political risk is going to be the biggest challenge to the Euro over the years ahead. It might only take one rogue election result to seriously damage the whole project.

Overnight in Asia markets have been reacting to the news. EURUSD was as much as -1% lower in overnight trading but has recovered to be sat currently -0.23% lower. Risk has so far struggled with a number of Asian equity markets currently trading down – the Nikkei is -0.3% whilst the Hang Seng is -0.12% The US 10Y has been well bid with the rate falling another 4bps.

In other news over the weekend the conflict in eastern Ukraine seemed to heat up further after a rocket attack on the port city of Mariupol on Saturday. The US, NATA and OSCE said that the launch took place in rebel-held territory. At an emergency meeting on Sunday the Ukrainian President stated that separatists are attacking along the entire front line (Bloomberg news). The growing battles in the area are a sign of the escalation in the conflict and over the weekend the US and its allies have been putting pressure on the Russian government to use its influence on the rebels to curtail the violence and adhere to the September ceasefire, with Angela Merkel speaking with Vladimir Putin on the phone yesterday to this end (Reuters).

Looking back to last Friday, markets were broadly strong as they traded with greater conviction on Thursday’s ECB move although they pared back some of their gains later in the day as Greek concerns began to rise not helped by Syriza’s Tsipras comments that Syriza doesn’t recognize commitments made by previous governments. Nevertheless the ECB impulse won out with the Stoxx600 closing the day up +1.5% and iTraxx Main and Crossover closing -1.4bps and -4.7bps respectively. Government bonds also rallied (10Y US and German yields closed the day -5bps and -9bps) and the EUR continued to fall as EURUSD lost another -1%. Even Greek 10Y bond yields managed to fall 40bps. The clearest disappointment was US equities as the S&P500 closed the day down -0.6%, partly on the back of the weaker US manufacturing PMI which fell to 53.7 its lowest read in a year vs. expectations it would rise to 54.

There are few major data points today with the December Spanish PPI data (expected to rise to -0.9% from -1.1% MoM) and the January German IFO surveys due out (all components are expected to improve) as well as the already discussed Eurogroup finance ministers meeting in Brussels. We will also get earnings reports from Microsoft. Overnight we will have Chinese industrial profits for December.

Looking ahead to the rest of the week, tomorrow the German and Italian finance ministers will speak at an EU committee and the EU finance ministers will meet. In the UK we will get Q4 GDP (expected to slip slightly to +0.6% QoQ) and France will release its latest jobseekers data. We will also get US durable goods orders, Case-Shiller house prices, composite and services PMI’s, new home sales and consumer confidence. On Wednesday we have one of the highlights of the week with the FOMC’s latest meeting – whilst there isn’t scheduled to be a press conference or the release of the Fed’s Summary of Economic Projections there will nevertheless be a statement. On Thursday we will have the latest Italian confidence and wage data, euro area confidence, German January inflation (expected in at -0.2% YoY), US initial jobless claims and Japanese inflation (expected to slip to +2.3% YoY). Finally to close the week we will have German December retail sales, Spanish Q4 GDP (expected in steady at +0.5% QoQ), euro area inflation and unemployment, and Q4 US GDP (expected to slip to +3.1% QoQ annualised) and core PCE inflation.

Whilst the current earnings season is taking a back seat given all the macro developments, we could have some interesting highlights this week as we see results from some of the major oil and gas companies. Indeed we have 9 of them reporting including names such as ConocoPhillips and Chevron. Earnings will likely be impacted from the downturn in oil but perhaps more importantly we will hear their thoughts around what lies ahead for the sector. Interestingly the four US energy companies that have reported so far aren’t doing that badly relative to the market’s earnings expectations but we suspect that’s also because most of them are oil drillers where earnings haven’t been much impacted by the downturn yet. There’s perhaps also a stronger focus on cost and balance sheet discipline in Q4 but overall the outlook still remains challenging as evinced by some of the job cuts announced by the likes of Schulumberger and Halliburton so far. We’ve updated our usual earnings tracker table in the PDF today. Whilst only 74 S&P 500 companies have reported so far, the earnings and revenue performance is largely similar to those we’ve seen in previous years. The EPS beats (73% of total) are a lot stronger than sales beats (49% of total) so far. A similar trend is also emerging on the other side of the Atlantic where EPS beats (80% of total) are much stronger than revenue beats (36% of total) although it is still very early days for the European reporting calendar.

 

 

end

 

The big event of the day is the Syriza victory yesterday. I would like to give some of the major stories from Saturday through today to give you the significance of what has happened in Greece:

 

Saturday afternoon: we learn that Syriza was leading by 7 points. Immediately the ruling parties resorted to fear mongering in order to entice voters to the “bailout” side of things i.e. the current government in power, the  New Democratic Party.

 

(courtesy zero hedge)

With Syriza Leading By 7 Points, Greek Incumbents Fear-Monger Looming “Toilet-Paper-Run”

 

Left-wing anti-EU party Syriza has extended its lead over incumbent Nea Dimokratia (ND) to 7 percentage points in the polls ahead of tomorrow’s crucial Greek election. As Keep Talking Greece reports, To Potami and Golden Dawn (the neo-Nazi party that is facing charges for being a “criminal organization”) are running 3rd with 6-7% of the vote (Syriza 33.5%, ND 26.5%) and with 20% admitting they had changed their opinion about which party to vote for in the pre-election period, it appears ND incumbents have taken up the “Scotland” strategy – fearmongery. Speaking on Greek TV, just 48 hours before the elections, ND-candidate Sofia Voultepsi implied that if Syriza wins the elections and forms a government on Monday Greeks will run out of toilet paper... and with JPMorgan noting that deposit outflows hit EUR8bn last week (double the previous 2 weeks combined), the “bank run” could easily morph into Venezuelan “toilet paper runs.”

As Keep Talking Greece explains,

If SYRIZA wins the elections and forms a government on Monday Greeks will run will run out of toilet paper. This is what ND-candidate Sofia Voultepsi implied just 48 hours before the elections.

 

“bank run”  vs “toilet paper run”?

 

Speaking to Mega TV on Friday morning, former government spokeswoman Sofia Voultepsi claimed:

 

“People believe that bankruptcy is what we experience now. Bankruptcy is when imports, fuel, raw materials and medicines are being immediately stopped.  This is something we have seen in Cyprus,  in Venezuela, in Argentina.”

 

When one of the news magazine anchors intervened and commented that “what you say sounds as if we will not have toilet paper,” Voultepsi replied:

 

“No, there is no toilet paper in Argentina and Venezuela. Therefore, I recommend, you do your supplies.”

 

 

In spite of the Nea Dimokratia fear-mongering elections strategy of “SYRIZA = default”, it is not helping the party of PM Antonis Samaras to raise its rates in polls, ND seems to have run out of convincing arguments and keeps chewing the same old candy…

And JPMorgan is seeing the other type of “run” accelerating…

As election looms, Greece sees large €8B deposit outflow this week vs €4B in first two weeks of January and €.3B in December.

*  *  *

As Bloomberg notes, Syriza’s success (or failure) will foreshadow the future of anti-austerity movements elsewhere in Europe.

The Greek vote is being closely watched in Spain, where the anti-austerity Podemos party is now running ahead of Prime Minister Mariano Rajoy’s party before a general election later this year. Podemos leader Pablo Iglesias even joined Tsipras at a rally in Athens this week. The government in Madrid has been scrambling to reassure markets that the situation in Greece won’t spread to their country. Spain and Greece are “totally different,” Spanish Economy Minister Luis de Guindos told Bloomberg Television today in Davos.

 

The bailed-out economies of Ireland and Portugal also have growing anti-austerity movements. “If a new Greek government wins concessions, then Ireland and Portugal would be first in the queue looking for similar treatment, and other countries would be looking for leeway in meeting EU targets,” columnist Cliff Taylor wrote in the Irish Times earlier this month.  But leaders of those movements will have a hard time making their case to voters  if Tsipras, Europe’s No. 1 anti-austerity poster boy,  steps back from confrontation.

*  *  *

 

end

 

 

Saturday’s news had a tremendous effect on huge Greek deposit outflow from all banks.  This necessitated emergency ELA funding from the central bank of Greece, who in turn received loans from the ECB.  Greek citizens withdrew their euros and placed them under their mattress!!

 

 

 

(courtesy zero hedge)

 

 

 

Greek Deposit Outflows Soar In Run-Up To Syriza Victory

 

Despite all the fear-mongering by Nea Demokratia (ND), Syriza’s victory over the incumbent is dramatically larger than expected (exit polls indicate a potential 12 point margin vs 7 point spreads in the run-up). However, as JPMorgan details, the fear-mongery was very evident inbank deposit runs as proxied outflows surge EUR8 billion last week – more than all of December and the rest of January combined

Via JPMorgan Flows & Liquidity

Greek deposit outflows rise sharply this week

The monthly Bank of Greece balance sheet data for the month of December revealed a significant increase in Greek bank ECB borrowing which rose by €11bn in December to €57bn (including €1bn of Emergency Liquidity Assistance). This is more than the €3bn deposit outflow reported for December. It is thus likely that Greek banks had to borrow even more in December to offset not only their lost deposits but likely reduced access to private repo markets, as it happened before during Greek crisis.

 

The approval this week by the ECB of additional ELA is encouraging. According to reports, not only did the ECB give its approval for Greek banks to borrow more funds via ELA but it also opened the door for ELA to continue post the expiration of the Greek bailout program on Feb 28th with only two conditions: that Greek banks are solvent and that they have enough collateral, i.e. the ECB did not condition ELA on the continuation of the Greek bailout program after Feb 28th.

 

As of December 2014, Greek banks had borrowed only €1bn via ELA but had a lot more collateral. The collateral that was posted with the ECB at year-end was €23bn which, assuming it includes mostly credit claims with a 50% average haircut, would be enough for Greek banks to borrow €11bn via ELA, i.e. an additional €10bn on top of the €1bn they had already borrowed by year-end. Greek banks have a lot more of credit claims, more than €100bn, to raise their ELA borrowing by even more if needed in February or beyond.

 

We argued in recent weeks that one indirect way of gauging the pace of bank deposit outflows in Greece on a high frequency basis is to look at the inflows into offshore money market funds such as those based in Luxemburg. Purchases of offshore money funds, one way for Greeks to invest their withdrawn bank deposits, spiked to very high levels this week. These purchases totaled €206m during Mon-Thu this week vs. €91m over the previous week (between Jan 9th and Jan 16th), €54m in the week before (between Jan 2nd and Jan 9th), and €107m for December as a whole (€24m per week between Dec 1st and Jan 2nd).

 

So there is a sharp acceleration this week. If the €3bn deposit outflow reported by the press for the month of December is accurate and these offshore money market purchases are a good proxy for deposit flows, we should have seen deposit outflows of around €4bn in the first two weeks of January and a large €8bn deposit outflow this week alone.

 

The fear factor, New Democracy’s biggest weapon, has thus risen sharply this week [and clearly backfired].

*  *  *

What do Greeks do with the funds they withdraw from banks? It appears they keep it under the “mattress”.

 

The quantity of banknotes placed into circulation by the Bank of Greece has increased significantly, by €2.2bn in December, suggesting that more than 70% of withdrawn Greek deposits went under the mattress.Figure 2 above also shows that of the €27bn of cash that went under the “mattress” between end of 2009 and mid 2012, only half has re-entered the Greek banking system

 

end

 

Sunday night at 4 pm est we learn that exit polls suggest a huge Syriza victory as eventually they will obtain 149 seats out of 300:

 

(Sunday night, 4 pm/zero hedge)

 

Greek Exit Polls Suggest Blowout Victory For Syriza: Live Webcasts From Greece

 

UPDATE 2:

UPDATE: Greek Government official admits electoral defeat by Syriza

As AP reports,

A senior official in Greece’s governing conservatives has conceded defeat to the radical left Syriza party in Sunday’s national elections.

 

“We lost,” Health Minister Makis Voridis told private Mega TV. “The extent of that result is not yet clear.”

 

Voridis, the conservative party’s parliamentary spokesman, says the government’s austerity policies, implemented to secure vital international bailouts, “make sense” but were cut short before they could bear fruit.

 

An exit poll on state Nerit TV projects Syriza winning by a wide margin.

*  *  *

The first Greek exit polls are out and here they are:

According to the initial exit polls, in first place, with some 35.5%-39.5% of the vote is Syriza, a huge lead over the second placing New Democracy which has 23-27% of the vote – far more than polls had indicated previously – and a spot which essentially  assures Tsipras’ party an absolute majority in parliament and the ability to take as hardline an approach as he wishes.

The other parties:

  • Golden Dawn nationalists: 6.4-8.0%
  • The new party, To Potami, also with : 6.4-8.0%
  • Venizelos’ socialist Pasok: 4.2%-5.2%
  • KKE: 4.7%-5.7%
  • Independent Greeks: 3.5%-4.5%
  • Knima: 2.2%-3.2%: probably not enough to pass the 3.0% threshold

How the parliament breakdown would look like with these numbers: SYRIZA has a 12.5 percentage point lead over New Democracy and is expected to get between 146 and 158 seats in Parliament, according to the exit polls.

  • SYRIZA 152 (146-158)
  • ND 70 ( 65- 75)
  • Golden Dawn 19.5 ( 17- 22)
  • POTAMI 19.5 ( 17- 22)
  • KKE 14.5 ( 13- 16)
  • PASOK 13.5 ( 12- 15)
  • ANEL 11.5 ( 10- 13)
  • KINIMA ( 0- 8)

 

end

 

The Greek leader, Tsipras addresses the nation stating that bailout agreements and the “Troka era” are over:

 

(courtesy zero hedge/Sunday night)

 

 

Tsipras Addresses Greece, Says Bailout Agreements, “Troika Era” Are Over

 

The first public address of Greece’s new leaders, Alexis Tsipras has begun. The key highlights of his speech so far:

  • TSIPRAS SAYS GREEK PEOPLE HAVE WRITTEN HISTORY
  • TSIPRAS SAYS GREECE IS TURNING PAGE, LEAVING AUSTERITY BEHIND
  • TSIPRAS SAYS BAILOUT AGREEMENTS HAVE ENDED FOR GREECE
  • TSIPRAS SAYS TROIKA ERA IS OVER FOR GREECE
  • TSIPRAS SAYS SYRIZA GOVT READY TO NEGOTIATE, COOPERATE ON DEBT
  • TSIPRAS SAYS OLIGARCHS, ELITES IN GREECE HAVE BEEN DEFEATED
  • TSIPRAS SAYS SYRIZA VICTORY IS VICTORY FOR PEOPLES OF EUROPE

Europe will not be pleased.

 

 

end

 

Monday morning:  huge news.  Being two seats short of majority, Syriza joins forces with the Greek Independent party whose chief platform is anti-bailout similar to Syriza.  The independent Greek party however wants to stay with the Euro.  Today the leader stated that they will join forces with Syriza to form a government.

 

(courtesy zero hedge)

 

 

 

Syriza Forms Coalition Government With Anti-Bailout Independent Greeks: What Happens Next

 

There was some excitement in the capital markets overnight, when what was initially seen as an outright victory for Syriza, giving it an absolute, 151-seat majority in parliament – a fear that briefly pushed the EURUSD under 1.11 when the Euro PPT stepped in – ended up being a placing just shy of a majority with 149 seats. However, that same excitement fizzled several hours ago when the “radical left” party agreed to form a government with the “rightwing” group of the Independent Greeks in the aftermath of Syriza’s historic win which harnessed the public backlash against years of belt-tightening, job losses and hardship.

As the FT reports, Panos Kammenos, leader of the fiercely anti-bailout Independent Greeks, said as he left Syriza’s headquarters after a meeting with Alexis Tsipras, the prime minister-elect: “The country has a government. Independent Greeks will give a vote of confidence to Alexis Tsipras.” The deal would give Syriza a comfortable working majority in parliament but Mr Tsipras has yet to confirm anything as he continued coalition negotiations with other parties.

So in a parliament in which the nationalist Golden Dawn placed third, the new leadership will be comprised of a far left and a far right group, both united by the hatred of European bailouts and the stifling Greek economy, both of which they are eager to blame on Germany and the Troika.

Despite their ideological differences, the two leaders established regular contacts while the previous centre-right New Democracy government was in office, based on their shared stance that Greece should abandon austerity and seek a debt write-off, while remaining a member of the eurozone.

 

Mr Kammenos, a former deputy merchant marine minister in a New Democracy government, left the party in 2012 to set up his own party, taking a handful of lawmakers with him.

This means that any potential agreement with the next party Tsipras is looking to work alongside, the new To Potami party, becomes of secondary importance:

Mr Tsipras was meeting Stavros Theodorakis, leader of the centre-left To Potami (The River) party later in the day to discuss possible co-operation. Mr Theodorakis has refused to participate in a Syriza-led government but could offer support even if his party is not part of a formal coalition. To Potami finished fourth in the election with 6.4 per cent of the vote and 17 seats.

And while bankers across Europe were fast to talk down the possibility of a hardline Syriza, having failed to get those two elusive seats, the fact that it has aligned itself with a just as rabid anti-Europe party will actually end up forcing Tsipras hand to deliver on at least some of his anti-bailout, anti-Troika, promises, all of which Germany has shot down apriori.

So what happens next?

Well, on one hand, as RBS’ Greg Gibbs points out, the ECB’s just announced QE “substantially” increases the incentive for Greece to stay in an acceptable EU/IMF austerity program as a decline in EUR and regional bond yields provide a draw for the country. He adds to expect a lot of “bluff and bluster” from both sides of the Greek debate in 1H2015 especially since EU members will concede little ground to Syriza-led Greek government. The problem is that Syriza can hardly agree to no concessions as it has built reputation on easing austerity.

This leads Gibbs to conclude that the most likely outcome is just enough ground conceded on both sides to save face.

Immediate focus likely to be troika review expected end-March; most important deadlines expected when Greece faces repayment pressure on large amount of bonds in July/Aug.

The take of Morgan Stanley’s Hans Redeker is less optimistic: he, alongside other fx strategists, thinks that the Greek election outcome don’t bode well for the Euro, adding overnight that investors will watch which party Syriza reaches out to. We now know that said party is the a rightwing anti-bailout organization, which weakens the compromise angle.

MS says to expect a modest core European opposition against Greek debt restructuring as no doubt current debt levels are unsustainable.

Friction with EU partners will probably be on reforms as Syriza has not only called for the end to austerity, but wants to roll back some structural reforms and re-hire in public sector.

The conclusion: it will be up to the German government to “make a difficult decision.”

So what was Germany’s kneejerk take?  Well as Michael Grosse-Broemer, chief whip of German Chancellor Angela Merkel’s party, said in a N-TV television interview, Alexis Tsipras will have to face reality “once the smoke of the election campaign lifts” adding that “you have to abide by agreements that were made in the past. Tsipras has promised a lot, but he will have to deliver if Greece wants aid disbursements to continue.” It is not quite bailoutmail but if the word fits.

Merkel’s lawmaker concludes that the Greek left is “a bit blinded by their ideology,” and that the German-led approach has worked in other euro-area countries that received bailouts.

It almost makes one wonder if it wasn’t “austerity” as much as corruption and incompetence that is behind the endless Greek drama…

In any event, both sides are now on collision course, with Tsipras knowing full well that if he dilutes his promises sufficiently his political career will also be measured in months. Speaking of Tsipras, here are some amusing snippets about his ideological positionfrom the Guardian:

As Greece descended into economic crisis, there were almost no signs that the young ideologue, an ardent admirer of Ernesto “Che” Guevara – he named the youngest of his two sons after the Argentinian Marxist revolutionary – would emerge as the wild card to challenge Europe or Athens’ own dynastic politics and vested interests.

 

 

Tsipras, perhaps more than any other Greek politician, has flourished on the back of crisis, his anti-austerity rhetoric and dexterity as a political operator becoming sharper by the day. His determination to learn English – swotting from textbooks in his spare time – helped turn him into a polished performer and earned grudging respect from his greatest opponents.

 

“Although trapped in his own rhetoric, he is very good at deflecting criticism and often using it to his advantage,”says Dr Eleni Panagiotarea, a research fellow at Greece’s leading thinktank, Eliamep. “His electoral campaign has been slick and very media-savvy.”

 

 

At 40, the former communist party youth activist, student leader, self-avowed atheist and firebrand appears determined to jolt not only his own country but also Europe. Nonconformity is part of the package. Others, say aides, will have to wake up to the reality that the radicals – for they wish to be called nothing else – will be doing things differently.

 

Under Syriza, Athens will challenge fundamentals: the politics of austerity, fiscal policies, how business is done. With the eyes of the world media on him, Tsipras rammed home that message himself on Sunday after casting his vote in Athens.

 

“Our common future in Europe is not austerity, it is the future of democracy, solidarity and cooperation,” he announced.

 

 

Greek politicians are unaccustomed to taking Europe by storm. And they are certainly not used to being seen as trailblazers capable of galvanising public opinion in the 28-nation bloc.

 

But, mixing chutzpah and charisma, Tsipras has managed to do both. From political unknown he has become the gadfly tormenting the big players in the EU.

 

“Merkelism,” he says, is in his sights.It is hard to overestimate the significance of this outcome for the left. Or Tsipras’s role in uniting groups that, famously, have remained fractured on the edge of political spectrum.

 

Deploying unrivalled communication skills, the telegenic Tsipras has allowed Syriza to speak for a whole sector of society that for decades was hounded and harassed by authoritarian rightwing rule.

 

In a nation still polarised by the fault lines of a bloody left-right civil war, both he and his alliance of Euro-communists, socialists, Maoists, Trotskyists and greens – since united into a single force – were only three years ago firmly relegated to the sidelines of Greek politics.

 

Outside the eclectic world of Syriza committee meetings, congresses and conventions, they were not a force to be reckoned with.

Maybe they are, but Europe is well-aware that any Greek renegotiation means one thing: an impairment of the ECB balance sheet, something which is also a non-starter for the central bank which is already toying dangerously close with losing all credibility as well as big losses for German taxpayers now that the bulk of Greek debt exposure has been mutualized outside of the banking sector,

Whatever happens, expect a substantial increase in volatility in coming weeks as Greek pre-election promises and the harsh European reality finally collide, and lots and lots of red flashing headlines and FX kneejerk responses.

 

 

end

 

Monday morning very important:

 

Early this morning, Greece’s new leader was sworn in as prime minister

(he refused to wear a tie).

And what was his first message to the west:

1. visit the site of German atrocities in World War II. If you will recall many Greeks were murdered by the Germans.  On May 1/1944, 200 Greek citizens were murdered at Kaisariani rifle range.  Many Greeks did not receive reparations from Germany for the human life losses. Tsipras is sending a message to Merkel.

2. He then meets the Russian ambassador. Is it possible that Greece joins the Russian/Chinese/and the remaining BRICS axis)

 

3. Interesting..after the Greek subliminal message, Merkel states that Auschwitz fills Germans with shame! Most of the  Greek Jewry population lived in  Salonika, who were rounded up in 1941 and sent to the gas chambers in Auschwitz

 

a lot of hidden messages here..

 

(courtesy zero hedge)

 

Greece’s New Leader Sends Germany A Loud Message With His First Act

 

Update:

* * *

“Hi Angela, do you hear me now?”

And perhaps on a related note, moments earlier:

  • MERKEL SAYS AUSCHWITZ ‘FILLS US WITH SHAME’

No shame, however, for switching the DEM with the EUR.

 

 

 

end

 

The following was to be expected as Greek bonds were battered as were stocks.  It looks like the market is preparing for the Greeks to leave the Euro and default on all of its bonds etc. and start all over again;

 

(courtesy zero hedge)

 

 

 

Greek Bonds Battered As Dip-Buyers Rescue Greek Stocks

 

The post-QECB euphoria in Greek asset markets was prognosticated by those who prefer to do such things as indicative that “the markets know something,” positive about Sunday’s (yesterday’s) election… because markets are efficient and always ‘price in’ events (just like 1987, 2000, 2008 etc…). However, this morning ugliness in both Greek stock (especially banks) and bond markets suggests it was nothing more than algo-driven carry-inspired short-squeezes as both stocks and bonds plunged at the open. Stocks received the ubiquitous – well it’s down so we better buy ’em treatment – but even that is fading as stocks catch back down to bonds’ weakness, having unwound most of QECB’s goodness

 

 

Chart: Bloomberg

 

 

end

 

It looks like the low price of oil is here to stay:

 

(courtesy zero hedge)

“Oil Drillers Are Going To Die” In Q2, Conway Mackenzie Warns “Expect Outright Liquidations”

 

“The second quarter is going to be devastating for the service companies,” warns Conway Mackenzie – the largest U.S. restructuring firm – adding that, despite slashing thousands of jobs, delaying (or scrapping) billions in capex amid the prolonged rout in oil prices, “there are certainly companies that are going to die.” As Bloomberg reports, oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow with oilfield-service providers are facing a “double-whammy.” As we noted here, there are more than a few candidates for this ‘death’ list as it appears increasingly clear that what was considered an “unambiguously good” narrative for the nation is anything but

 

As Bloomberg reports,

Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.

 

Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices.For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter,Young said Thursday.

 

“The second quarter is going to be devastating for the service companies,”Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”

 

Oilfield-service providers are facing a “double-whammy,” he said. Even as oil companies are demanding 20 percent to 30 percent price reductions, they’re also extending wait times before paying their bills, enlarging cash-flow gaps for the drilling and equipment firms, he said.

 

 

The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said.

 

“I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,” he said. “You’ve got to start filing liens if you see a company starting to go down.”

*  *  *

Wondering who is top of the list? As we detailed previously, there are plenty…

Readers will be most interested in the “restructuring/bankruptcy” option, most applicable for Group 4, because these are the names which,  all else equal, will file for bankruptcy first.

This is what Goldman’s Jason Gilbert has to say:

We believe oil market weakness presents H&Y E&P management teams with difficult decisions. For certain stronger companies, the challenge may be one of deciding if and when to high grade the portfolio through M&A. For some weaker companies, the decisions may be more stressful, with many lower-quality names being forced to consider (1) selling themselves, (2) restructuring/filing for bankruptcy protection, and/or (3) bolstering liquidity through asset sales and/or second lien debt issuance.

 

We have created a 2×2 matrix, shown in Exhibit 1, where we classify E&Ps according to both asset quality and balance sheet strength. In Exhibit 2, we provide the backup data on each company that justifies its classification in the chart below.

The matrix in question:

 

Group 4: Weak balance sheet/weak assets

This group includes companies with leverage above 2.5x and assets we rate “B-“ or lower. Names we highlight are Approach Resources (NC), Exco Resources (NC), Goodrich Petroleum (NC), Halcon Resources (IL), Magnum Hunter (NC), Midstates Petroleum (NC), Rex Energy (NC), Sabine Oil & Gas (U), Samson Investment (NC), Sandridge Energy (IL), and Swift Energy (U).

 

We view management teams in this group as facing the most difficult decisions. Given the general lack of “core” assets, we believe strategic interest from a larger acquirer is less likely than for Group 3. Furthermore, with the bonds in this group generally trading below $80, we believe 101% change of control provisions act as de facto “poison pills” for acquirers.

 

Given high leverage and the lack of strategic interest, we believe many companies will need to seek alternative sources of capital. While the options here will vary case by case, we note that most of these names have secured debt baskets that can be used to bolster liquidity. Based on the phone calls we receive, investor interest in this type of security remains high, which suggests to us we will see robust second-lien issuance as soon as the conclusion of 1Q earnings. The bottom line is that, for now, we think investors should tread lightly in this group, despite the average bond yield of 19% (excluding obviously distressed names Swift Energy, Samson Investment, and Sabine Oil & Gas).

*  *  *

As Conway McKenzie’s John Young concludes:

“When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,” Young said. “When it hit the $40s, I knew we were looking at outright liquidations.”

 

 

end

 

Oil had a little jump today on this comment:

(courtesy zero hedge)

 

Oil Jumps On OPEC’s El-Badri’s “$200 A Barrel Sometime” Comments

The headline-reading algos were at the top of their game this morning when milliseconds after OPEC’s general secretary Abdalla El-Badri said oil prices could reach $200 a barrel if there’s a lack of investment following this price slump… though failed to provide any timeline for his forecast. WTI prices jumped $1 from $45 to $46 even as El-Badri noted the market was still over-supplied by 1.5 million barrels per day.

 

  • *OPEC’S EL-BADRI HOPES OIL MKT WILL RECOVER IN `REASONABLE TIME’
  • *OPEC OPEN TO DISCUSSIONS WITH NON-OPEC TO BALANCE MKT: EL-BADRI
  • *OPEC TO RESUME SWING-PRODUCER ROLE EVENTUALLY: EL-BADRI
  • *EL-BADRI SEES SOME OPEC UPSTREAM PROJECTS CANCELED

 

end

 

A terrific article written by Meijer on the true recipients of European QE.  He labels Draghi and his merry men as a bunch of criminals:

 

(courtesy Meijer/Automatic Earth)

 

A Bunch Of Criminals

By Raul Ilargi Meijer of The Automatic Earth

Bunch Of Criminals!

I was going to start out saying Thursday was the saddest day in Europe in 50 years, or something like that, because of the insane and completely nonsensical largesse the ECB permits itself to launch, aimed at once again saving a banking system, but which will not only not help the European people, it will make things even much worse than they already are.

I’ve said many times that the EU in its present form should be dismantled tomorrow morning (even though it’s not the same tomorrow morning anymore), and if Draghi’s $1.1 million x million ‘stimulus’ should make anything clear, it’s that the dismantling gets more urgent by the day.

But calling it the saddest day in Europe in 50 years would show far too little respect for the people who died in former Yugoslavia, and in eastern Ukraine. It’s still a very sad day, though. And I was already thinking about that even before I read Theopi Skarlatos’ article for the BBC; that really made me want to cry.

When you read about female doctors(!) feeling forced to prostitute themselves to feed their children, about the number of miscarriages doubling, and about the overall sense of helplessness and destitution among the Greek population, especially the young, who see no way of even starting to build a family, then I can only say: Brussels is a bunch of criminals. And Draghi’s QE announcement is a criminal act. It’s a good thing the bond-buying doesn’t start until March, and that it’s on a monthly basis: that means it can still be stopped.

I’ll get back to Skarlatos’ story in a minute. First the insanity of the ECB QE itself. The problem with Europe’s economy, what drives it into high unemployment and deflation, is that people are not spending. If QE would really be aimed at reviving the economy, or at battling deflation, it would need to assume that people will start borrowing on a massive scale just because Draghi buys bonds – and soon perhaps even stocks – from bankers. There simply is no logic in that. The stated goals, pro-growth and anti-deflation, are not true. It’s a sleight of hand.

In order to achieve the stated goals, money would have to reach the real economy. As it stands, the best Draghi can do is to ‘hope’ it will. That’s not enough by a mile. This is not about doubts over its effectiveness, that’s baloney, we know it’s not effective when it comes to the stated goals. It will still leave Europe with no growth, and deeper deflation, and now €1.1 trillion deeper in debt. While banks can grow their reserves.

And it’s not as if Draghi doesn’t understand. Draghi is Goldman. And neither is it as if this is the only option. Steve Keen’s modern version of a debt jubilee, in which money is given directly to the people, under the condition that they first use it to pay off debt if they have any, would be much more effective. But it would be far less profitable for the banks, and that’s why it’s not considered. China yesterday announced a third option: they will effectively raise salaries of government workers by 60%.

Not that I’m terribly in favor of that kind of plan; I think any stimulus plan in our time should focus on reorganizing economies in such a way that jobs are created. That must mean moving away from centralization, and the return of production of essentials to communities and societies themselves, instead of emphasizing the ‘benefit’ of hauling goods halfway across the world, or an entire continent. It’s incredibly stupid that for instance most of our furniture and clothing is made in China.

We can produce those things at home, and give people jobs doing it. And China can focus on its domestic market too. And we can swap gadgets and other sheer luxuries, but not food or tables or shirts. Because we need to make those ourselves to keep our people employed.

Back to QE, or Draghi’s big swindle. I think Simon Jenkins at the Guardian had as good a go at it this morning as anyone:

QE For The Eurozone Is A Gigantic Confidence Trick. It Should Fool No One

 

The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the ECB has ridden to the rescue. No it has not.

 

Europe’s great and good, partying on the slopes of Davos, are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since. There is absolutely no requirement on these banks to release this money into private or commercial bank accounts.

 

Given the fear of over-lending that regulators have struck into bank bosses since the collapse of Lehman Brothers, the money will simply build up reserves. That is exactly what has happened to quantitative easing in Britain since 2010: there has been no surge in bank lending, except into property investment. Quantitative easing is a gigantic confidence trick.

 

It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves. Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace.

 

If no one can afford to buy anything, no one will sell anything or invest money in making anything. The chronic imbalance between northern and southern states of the eurozone, previously ameliorated by selective devaluation, has bound poor and rich countries alike in a rictus of cash starvation. Collapsing demand drives down prices and profits; there is nothing for banks to invest in. The Chinese are laughing. Greece and some other Mediterranean economies are facing poverty not seen in half a century.

 

A return to normal growth means they must declare themselves bankrupt, restructure past debts, leave the eurozone and devalue. Don’t bury money in their banks. Bury it in their wallet. The eurozone may still look great from the top of a Swiss mountain; it looks terrible from the foot of the Acropolis.

I also liked ADMISI’s Marc Ostwald’s take right after Draghi did the announcement, courtesy of Tyler Durden:

Risk sharing is very limited, with national central banks taking 80% of the risk on sovereign bond purchases, and rather un-reassuring was Draghi’s comment that “most national central banks have adequate buffers to absorb a negative event” – most being how many.

 

Not good news for Greece, while it and Cyprus will be eligible for purchases of govt under a ‘waiver’ for (bail-out) ‘programme countries’, the ECB already has a very high volume of Greek bonds on it balance sheet from the SMP programme, and given a limit on total holdings for each sovereign issuer, it will not be eligible for purchases until it redeems debt in July and August.

 

It should be added that Italy and Spain and other bail-out countries will implicitly also have a lower available volume of total purchases, until SMP holdings are redeemed.

Draghi is going the save German banks, not weaker eurozone nations. Their banks maybe.

BUT perhaps the key aspect relates to the limits on the 25% limit on purchases of a single issue, which ensures that the ECB adheres to the ECJ’s ruling about the ECB ensuring that is does not interfere with “price formation”. So here’s the key aspect, there are some $12.0 trillion of FX reserves in the world, of which roughly a quarter are held in Euros.

 

Operating on the traditional metric that roughly half of those will be invested in Govt Bills and Bonds, this means that FX reserve managers will have to be involved in the process of establishing prices for whatever is purchased under the Govt bond QE programme. Eminently anything that is sold by central banks will not find its way into the private financial sector, therefore that €60 billion figure may often overstate what is being injected into the market.

 

Last but not least, the expanded programme does not start until March 15, so “Mr Market” now has a very long waiting period to sit on holdings of EUR debt before selling to the ECB, and with plenty of event risk in the world, starting with the Greek election, and an imminent Ukrainian default. Sort this under an uncomfortably long period before the QE ‘party’ gets started.

And in case you’re still wondering whether QE works and/or how effective it is, this graph also comes from Durden:

And that doesn’t even yet include stock markets and bank reserves at the Fed. What is obvious is that the Fed’s QE3 has been a mind-boggling failure for the American people, and a smashing success for the Davos crowd.

What’s wrong in Europe is not just Draghi, it’s the entire EU. If you join into a union with other nations, you can’t let some of them sink into despair, and worse, while others sit pretty. And I know the answer from Brussels will be that what is needed is a stronger and closer union, fiscal, political, but I think that if you already let your fellow union members plunge this deep into misery in the early stages of a union, a country like Greece would be out of its mind if not outright suicidal to sign on to a closer union. Northern Europe survives by sucking the lifeblood out of the South. It’s a really simple story that nobody will tell you.

Let’s return to Theopi Skarlatos for the BBC. This is heart rendering. How can the people of Germany, Holland, France, ever have let it get this far? What could possibly be their excuse? That their media never informed them? You have the most pervasive media in history, and you didn’t know? What are you going to do? Blame the lazy Greeks? Who need to ‘reform’ their societies?

Greece was not nearly this poor before it joined the EU. And we’ve seen above that Draghi’s QE won’t do anything to relieve their misery, nothing at all. If you’re going to spend 1.1 million times a million euros, shouldn’t that go towards doing something for Greece, instead of a group of banks and their shareholders?

Love In A Time Of Crisis In Greece

 

As Greeks prepare to vote in Sunday’s general election, anti-austerity party Syriza is ahead in the polls and campaigning under the slogan, “Hope is on its way”. The average wage has fallen to €600 (£450: $690) a month; half of all young people are unemployed and the economy is barely emerging from six years of recession. But Greeks remain determined to maintain their hold on normality. “We don’t have much else,” they say, “we may as well enjoy our freddo cappuccinos.”

 

But despite the drinking, flirting and dating, since the onset of financial disaster, a fundamental change has taken place in Greek society. Deejay Tommy paints a sad picture of young Greeks waking up every day without a job. “Things have lost a little bit of their romanticism,” he says. “The crisis has forced love to become a secondary priority. There are other things to worry about. I see many women looking for someone who will have money to take them out, who’ll take them on holidays. I see this quite a lot and it saddens me.”

 

Down the road along the shoreline, the Bouzoukia clubs ring with live renditions of popular Greek love songs. Crowds sipping on vodka throw the singers red carnations and sing along to lyrics of heartbreak and pain. “We save up to come once every few months and we look forward to it,” says Katerina Fotopoulou, 30, at a table with her friends.“We don’t have the money to do much any more. We’re always talking about future plans, going on holiday, but no-one ever does anything.” Living at home, Katerina describes herself as an adult forced to live as a teenager, her life put on hold.

 

Compared with other Europeans, Greeks are still fairly traditional. For many young women, it is awkward bringing a boyfriend through the front door to meet the parents. And that poses a problem, considering the high numbers unable to afford a place of their own. “Relationships are complicated these days,” says Katerina. “No-one is even thinking about getting married or having children.”

 

Indeed, Greece’s population is shrinking at an increasing pace according to data released by the Hellenic Statistical Authority (Elstat). Since Greece first signed its EU-IMF bailout agreement the number of births has declined rapidly. In 2010 there were 114,766 live births, and by 2013 that number had declined by almost 20,000 (94,134). Obstetrician Leonidas Papadopoulos says miscarriages at the Leto maternity hospital have doubled over the past year. “Maybe it’s down to stress,” he says. “There is no proof, but you can see it in the eyes of the people, there is stress and fear for the future.”

 

He describes how a woman he had been treating with IVF came to him one day crying because she was pregnant. She had lost her job and demanded an abortion. But he felt he could not perform the procedure. “Soon,” says Dr Papadopoulos, “the population will be halved and there won’t be any young people to work and pay for the pensions of the elderly. All the social problems will rise up in front of us.”

 

Some who have children and are struggling to support them have turned to sex work, to put food on the table. Further north, in Larissa, Soula Alevridou, who owns a legal brothel, says the number of married women coming to her looking for work has doubled in the last five years. “They plead and plead but as a legal brothel we cannot employ married women,” she says. “It’s illegal. So eventually they end up as prostitutes on the streets.”

 

A doctor, Georgia, explains how she also works as an escort in the sex industry to support her family. Her private clinic currently treats three patients a week, but the peak summer season in the sex industry enables her to keep up with the rental payments on her family’s home and the healthcare bills for her elderly parents. “I live a double life and only I can know about it,” she says. “I have applied for jobs in medicine abroad and wait every day in hope of a reply.”

 

For journalist Elini Lazarou, having a baby was not something she was prepared to put on hold while waiting for a change in the political or economic climate. “Love in the time of crisis can function as a painkiller, with which someone can forget the problems they’re facing, or as a source from which someone can draw strength, energy and optimism,” she says.

 

On a wall in downtown Athens, a simple message is daubed that reads “Love or nothing”. It strikes a defiant tone amid the blighted lives hidden behind pure economics.

And against that backdrop Brussels and Frankfurt ‘heroically’ decide to prop up the banks with another €1.1 trillion. They should be dragged before judges, but what they do is presently legal (guess who makes the laws). So it’s up to the people of not just Greece in this weekend’s election, but to everyone who lives in the European Union. It’s up to the Dutch and the Germans and the Finns to end this monstrosity.

The troika is creating third world nations within the EU, and you guys are just sitting there watching them do it, and hoping that more money for your banks will mean your own petty little lives will be secure and safe, while Greek doctors are forced to prostitute themselves.

Please Syriza, please Tsipras, win the elections and fight this bunch of criminals. And please all of Europe, get up from your couches and refuse for this to be committed in your name. If not, you’re accomplices, whether anyone calls you on it or not. Shame on you, you’re a disgrace to mankind.

 

 

 

end

 

Another good article from zero hedge.  He states that Draghi as unleased a 1.4 trillion Euro negative interest rate tsunami as 20% of the European bonds outstanding are already have negative interest rates.

This should magnify deflation greatly as all collateral disappears!

How can this be anything my a monetary financing apparatus for the central governments.

 

(courtesy zero hedge)

 

 

 

How Mario Draghi Unleashed A Euro 1.4 Trillion Negative Interest Rate Tsunami

 

Once upon a time, everyone was shocked when one after another central bank adopted what previously was unthinkable: a Zero Interest Rate Policy, or ZIRP. Then, on June 5, the ECB added “awe” to the equation when it became the first major central bank to push rates negative. The move was meant to shock depositors into pulling their money out of banks and into risk assets. It failed, which is why 2 days ago the ECB took awe to the next level when it added QE to NIRP. It did however succeed in one thing: pushing  1.4 trillion Euro in Euro area government debt into negative interest rate territory and right into an abyss that screams deflation.

As JPM notes, the chart below shows an estimate of the amount of Euro area government bonds with longer than 1-year maturity trading at negative yields over time.Around €1.4tr of Euro area government bonds are currently trading with negative nominal yields, almost all of them of core euro governments of up to 5 years maturity. Back in June, before the ECB’s shift to negative depo rate, the amount of euro area government bonds with longer than 1- year maturity trading negative was virtually zero.

So yes: the ECB has failed to boost inflation in a controlled fashion, at least the type measured by seasonally-adjusted CPI metrics (if not by the price of hotdogs in Davos) for now and “controlled-fashion being the key word, because as Russell Napier warned this week, the next step in the process of fighting deflation is literally dropping money out of helicopters, one whose outcome on fiat money should be quite clear, and whose QE will further lead to an outright market collapse (asexplained earlier), but it has certainly achieved one thing:sending 20% of Europe’s universe of government bonds (according to JPM, the universe of government related securities of around €7 trillion) into negative territory.

The good news: there is still some 80% of Euro bonds that are still trading with positive coupons, if not for much longer.

 

 

end

 

And get ready for the USA to unless negative interest rates on deposits to try and get people to spend

 

(courtesy zero hedge)

 

Get Ready For Negative Interest Rates In The US

With Fed mouthpiece Jon Hilsenrath warning – in no lesser status-quo narrative-deliverer than The Wall Street Journal – that The ECB’s actions (and pre-emptive collapse in the EUR) means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad, potentially slowing both U.S. growth and inflation; and Treasury Secretary Lew coming out his crypt to mention “unfair FX moves,” it appears The Fed (and powers that be) are worrying about King Dollar. This suggests, as Mises Canada’s Patrick Barron predicts, the Fed will startcharging negative interest rates on bank reserve accounts as the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”. If savers won’t spend their money, the government will take it from them.

 

As The Wall Street Journal explains,

The European Central Bank’s launch of an aggressive program this week to buy more than €1 trillion in bonds poses important tests for the U.S. economy and the Federal Reserve.

 

Europe’s new program of money printing—and the resulting fall in the euro—means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad.

 

The stronger dollar could slow both U.S. growth and inflation, giving the Fed some incentive to hold off on its plan to raise short-term interest rates later this year from near zero.

 

 

A stronger dollar has three important implications for the U.S. economy, markets and policy makers. First, it tamps down inflation just as the Fed is trying to raise inflation closer to 2%. Second, it hurts exports and therefore economic growth. Lastly, the attraction of U.S. financial assets could heat up markets just as regulators keep watch for dangerous asset bubbles.

 

 

U.S. officials have been playing down that scenario, and, more broadly, resisting talk of a global currency war—competitive devaluations by countries eager to keep their currencies as low as possible to protect exports; but “The Fed faces a challenge having to navigate some pretty intense cross currents,” said Bruce Kasman, chief economist for J.P. Morgan Chase.

 

The U.S., in effect, is importing some of the world’s downward inflation pressure through currency movements.

Treasury Secretray Lew pipes in…

  • *LEW SAYS UNFAIR FX MOVES TO DRAW SCRUTINY FROM U.S.
  • *LEW SAYS STRONG DOLLAR IS GOOD FOR AMERICA

*  *  *

And Patrick Barron predicts (via Mises Canada)…

I predict that the Fed will start charging negative interest rates on bank reserve accounts, which will ripple through the markets and result in negative interest rates on savings at banks.

 

I make this prediction only because it is the logical action of the Keynesian managers of our economy and monetary policy.

 

Our exporters will scream that they can’t sell goods overseas, due to the stronger dollar.

 

So, what is the Fed’s option? Follow the lead of Switzerland and Denmark and impose negative interest rates in order to drive down the foreign exchange rate of the dollar.

 

It is the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”.

 

If savers won’t spend their money, the government will take it from them.

*  *  *

end

 

On the weekend we learn that supposedly pro separatis rebels launched an offensive on the Ukrainian city of Mariupol:

 

(courtesy zero hedge)

 

Pro-Separatist Rebels Launch Offensive On Ukraine City Of Mariupol, Where At Least 21 Die After Intense Shelling

Several days after a massive firefight for the Donetsk airport left the structure terminally ruined, and the Ukraine army, which until that moment had held on to its last remaining outpost in the east Ukraine city, promptly abandoned the premises, and two days after at least seven civilians died in a bus which was shelled in the same city by what the separatists claim were the Ukraine forces, the pro-Russian separatists yesterday announced they had launched “a new multipronged offensive against Ukrainian government troops.”

As AP reported yesterday, the main separatist leader in the rebellious Donetsk region vowed to push Ukrainian soldiers out of the area and said insurgents would not take part in any more cease-fire talks. Another rebel went even further, saying they would not abide by a peace deal signed in September. Separatist leader Alexander Zakharchenko said rebel fighters went on the offensive to gain more territory and forestall a Ukrainian attack. He declared they would push government troops to the border of the Donetsk region and possibly beyond.

Which, according to the latest news, is precisely what they have done. As AP followed up, indiscriminate rocket fire slammed into a market, schools and homes Saturday in the eastern Ukrainian city of Mariupol, killing at least 21 people, authorities said. Ukraine’s top rebel leader announced that an offensive had begun on the strategically important port.

The latest photos from Mariupol confirm the attack:

As a reminder, Mariupol is a critical town, and the last remaining major Ukraine outpost on the Azov Sea, between Russia and the Crimea which Russia took control over last spring.

The Russian RIA Novosti news agency cited eastern Ukrainian rebel leader Alexander Zakharchenko as saying an offensive has begun on Mariupol. He spoke Saturday as he laid a wreath at the site where at least eight civilians died when a bus stop was shelled in Donetsk, the largest rebel-held city in eastern Ukraine.

AP adds that tebel forces have positions within 10 kilometers (six miles) from Mariupol’s eastern outskirts.

The Defense Ministry said in a statement there were three separate strikes from Grad multiple rocket launchers on Mariupol and surrounding areas.

 

“The area that came under attack was massive,” Mariupol mayor Yuriy Khotlubei said in a video statement. “The shelling was carried out by militants. This is very clearly Russian aggression that has caused terrible losses for the residents of the eastern part of our city.”

 

The Donetsk region prosecutor’s office said in a mid-afternoon statement that 21 people had been killed.

 

Defense and police officials said rockets struck homes, a kindergarten, a market and shops. There was no immediate report of how many people died in various  locations.

 

A Ukrainian military checkpoint on a road leading out of the city toward rebel-held areas was also hit and one serviceman was killed, the Defense Ministry said.

The Mariupol city council denied the report that a separatist incursion was imminent and urged residents not to panic and to ignore rumors that Ukrainian armed forces were planning to withdraw.

On the contrary, all units are on fully battle-ready. Security measures in the city have been strengthened,” the council said in a statement. No armed separatist units have been noted moving toward the city, the statement added.

 

The U.N. human rights agency on Friday raised its estimate of the conflict’s overall death toll to nearly 5,100 since April.

 

On Thursday, mortars rained down on the center of the separatist stronghold of Donetsk, hitting a bus and killing several bystanders. Rebel officials said 13 were killed in that attack. Monitors from the Organization for Security and Cooperation in Europe cited city morgue officials as saying they have received eight bodies.

 

The OSCE’s special monitoring mission (SMM) in east Ukraine on Saturday expressed concern over the growing number of civilian casualties and called for restraint from all sides.

 

“The SMM strongly condemns the continuation of the fighting in residential areas. Using residential areas as firing positions attracts counter-firing to these areas, further endangering the lives of civilians,” the mission said in a statement.

About an hour ago, the European Union was quick to condemn that separatist attack on Mariupol, having said nothing at all for months over the comparable shelling, and arbitrary slaughter of citizens in separatist-controlled Donetsk. The EU’s kneejerk assessment: it’s Russia’s fault – “I call therefore openly upon Russia to use its considerable influence over separatist leaders and to stop any form of military, political or financial support.” The full statement below:

Statement by High Representative/Vice-President Federica Mogherini on the attack on Mariupol

 

Residential areas of the city of Mariupol have been fired upon today from separatist held territory, which has cost the lives of at least fifteen civilians, wounding many others and terrorising the innocent population. This comes after a series of indiscriminate attacks in the Donbas in the past few days, accompanied by the announcements of further offensives by Russia-backed separatists, who bluntly refuse to observe the cease fire.

 

This further escalation of the open armed conflict has tragic consequences for a population greatly suffering already for far too long. It would inevitably lead to a further grave deterioration of relations between the EU and Russia.

 

I call therefore openly upon Russia to use its considerable influence over separatist leaders and to stop any form of military, political or financial support. This would prevent disastrous consequences for all. Those responsible for the escalation must stop their hostile actions and live up to their commitments.

Below is a clip of what residents in the Vostochniy district of Mariupol woke up to on Saturday morning after at least least three suspected Grad rockets struck the eastern part of the city. The shelling hit a residential area, with houses and a nearby market struck in the process.

And just like that the Ukraine civil war is right back front and center, and is sure to add a level of volatility to everything else that is already taking place.

 

 

end

 

or was the attack fro the rebel side?  Why did the Ukrainian soldiers leave their eastern checkpoint ahead of the strike:

 

(courtesy Vognebroda.net/Kristina Rus)

 

 

Mariupol residents are not fooled – Ukrainian soldiers left their Eastern checkpoint ahead of the strike 

January 25, 2015
Vognebroda.net
Translated by Kristina Rus

 

In the morning of January 24 the Eastern outskirts of Mariupol were attacked near the UAF checkpoint, writes Internet news resource Donetsk Republic News. But junta fighters were not injured, because according to local residents, they left the fortification a few hours before the strike.

“In a huge number of homes there is broken glass, the situation is very serious. There is no water and electricity, it was disabled half an hour or an hour before the fire, I have not noticed the time. They have been preparing for this situation, knew about it,” – said a resident of Mariupol. He stressed that the situation is similar to a false flag.

Lifenews interviews Mariupol resident

“They wanted to create a huge reaction to set the population against our militia. We thought at first that it was a mistake, but then I realized that it was intentional. Past our windows was driving a new rotation of these banderites… They immediately turned around and pulled back”, –  says a local resident, reports Lifenews.

 

end

 

This does not look good!

 

(courtesy Debkafiles/and special thanks to Robert H for sending this to us)

 

 

 

 

Sophisticated Russian S-400 missiles for Iran under new military pact, S-300s for Egypt, Syria, Hizballah

Russian S-400 defense missiles

The cash-strapped Russians have become less choosy these days about clients for their prized S-300 defensive systems and even more advanced S-400 missiles. They are now ready to sell the former – not just to Iran, but also to Egypt, Syria and the Lebanese Shiite Hizballah.

Iran won this breakthrough with the signing of a new military cooperation pact in Tehran Tuesday, Jan. 20, between Russian Defense Minister Sergei Shoigu and his Iranian counterpart Brig. Gen. Hossein Dehqan.

“The two countries have decided to settle the S-300s problem,” the Iranian defense ministry said, while Col. Gen. Leonid Ivashov, a former ministry official, added: “A step was taken in the direction of cooperation on the economy and arms technology, at least for such defensive systems as the S-300 and S-400. Probably we will deliver them.”

The S-300 has been a bone of contention between Moscow and Tehran since 2007, when Russia contracted to sell Iran the S-300 missile system, for which Tehran paid $800 m, and never delivered because of strong objections by United States and Israel.

Today, both Iran and Russia are under Western sanctions and willing to help each other impede US Middle East interventions. President Obama is leaning hard on Europe to withhold arms and weapons systems from the Russian army, to punish President Vladimir Putin for his actions in Ukraine and his annexation of Crimea.

Until now, the Russians were wary of burning all their bridges to the US administration and sidestepped outright confrontation with Washington by keeping open controlled exit hatches, in case an opening for a fresh start presented itself.

One such hatch served to set Russia and the United States on the same side of the table in the six-power nuclear talks with Iran.

However, as the prospect receded of further let-ups in the frozen relations between Presidents Obama and Putin, Moscow began shutting those exits down.
Five months ago, Moscow signed a huge $3.5 bn arms deal with Egypt, financed by Saudi Arabia. This closed the Egyptian military market to the US munitions industry.
With its cooperation pact of Jan. 20, Russia became the Iranian armed forces’ primary supplier of new and sophisticated weapons systems,up to and including S-400 missiles – in defiance of the arms embargo against the Islamic Republic and US policies at large.

Iran’s Defense Minister Hossein Dehghan, in particular, stood up and urged greater cooperation as a means of opposing American ambitions in the region. “Iran and Russia are able to confront the expansionist intervention and greed of the United States through cooperation, synergy and activating strategic potential capacities,” Dehghan said. “As two neighbors, Iran and Russia have common viewpoints toward political, regional and global issues.”
He said that the new agreement includes expanded counter-terrorism cooperation, exchanges of military personnel for training purposes and an understanding for each country’s navy to more frequently use the other’s ports. They already cooperate in supporting Syria’s Bashar Assad.

Most of all, debkafile’s political sources note that the pact with Moscow strengthens Tehran’s hand in the ongoing nuclear talks with the six powers. Iran’s negotiators are better able to stand up to the efforts of President Obama and Secretary of State John Kerry to extract more concessions on its nuclear ambitions, in order to reach a comprehensive accord, after interminable postponements, by the next deadline of June 30, 2015.

The S-300 missile system, which is designed to intercept aircraft and missiles, including cruise missiles, was for years the emblem of the most advanced Russian weaponry, capable in Iranian hands of deterring Israel from attacking their nuclear program.

However, over the years, the Israeli Air Force will have developed and tested methods, whether by aerial or cyber warfare, for beating the S-300, whose workings became increasingly exposed as they were supplied to European countries, notably Greece.

On the quiet, as recently as 2013, Russia let Iran and Syria have components of S-300 batteries as installments in advance of supplies of complete systems.  Last year, Moscow promised to consider future supplies to Hizballah in Lebanon as well.

Russia’s policy evidently envisages Israel’s partial encirclement by batteries of S-300 missile systems from the north and south and both S-300 and S-400 batteries from Iran to the east.

end

My goodness, S and P  lowers the rating on Russia to junk:

(courtesy zero hedge_

S&P Cuts Russia To Junk, Ruble Plunges To 6-Week Lows – Full Text

 

With the Ruble having plunged 3 handles today alone, it appears perhaps more than a few could see this coming…

  • RUSSIAN FEDERATION RATINGS CUT TO JUNK BY S&P
  • RUSSIAN FEDERATION CUT TO BB+ FROM BBB- BY S&P; OUTLOOK NEG

Putting it below investment grade for the first time in a decade. Of course, this happens just 6 days after the news first leaked that S&P would pay a $1.5 billion settlement to the US DoJ over downgrading America: one wonders just what else was in the small print?

The downgrade comes on a day when The Russia Agriculcural Bank failed to sell 10Y bonds into the market. Russian stocks (ADRs) and the Ruble continue to slide on this news.

 

 

 

Here are a few countries that are now rated higher than Russia…

 

Full text of S&P report: see zero hedge)

 

end

 

 

 

And the Russian response:  (don’t forget that Russia is taking dollars earned in gas and oil sales and putting it into gold)

 

(courtesy zero hedge)

 

 

 

Russia Slams S&P Downgrade For “Excessive Pessimism”

 

Well that didn’t take long. Russian Finance Minister Siluanov has responded to S&P’s “junk” downgrade of The Russian Federation:

  • *SILUANOV: S&P DOWNGRADE OF RUSSIA SHOWS ‘EXCESSIVE PESSIMISM’
  • *SILUANOV: NO REASON TO EXPECT `MASS’ DEBT REDEMPTION REQUESTS

Adding in his statement that he “sees no reason to dramatize” the situation, Siluanov adds that the cut should not have any serious effect on Russia’s capital markets. We assume by “dramatize,” he means – they wil not be ‘visiting’ the local ratings agencies offices for a chat anytime soon.

 

Your more important currency crosses early Monday morning:

 

Eur/USA 1.1157 down .0187

USA/JAPAN YEN 117.93  down .782

GBP/USA 1.4959 down .0048

USA/CAN 1.2425 up .0038

 

 

This morning in Europe, the euro continues to crash, trading   now just above the 1.11 level at 1.1157 as Europe reacts to deflation,   announcements of massive stimulation and rising bourses.   In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31.  He now wishes to give gift cards to poor people in order to spend. The yen continues to trade in yoyo fashion.  This morning it settled  up again in Japan by 78 basis points and settling just below the 118 barrier to 117.93 yen to the dollar. The pound was well down this morning as it now trades just below the 1.50 level at 1.4959.(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) and now its yield curve is inverted. This morning the Canadian dollar is trading down at 1.2425 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.

 

 

end

 

 

 

Early Monday morning USA 10 year bond yield: 1.80% !!!  par  in basis points from Friday night/

 

USA dollar index early Monday morning: 95.96  up another 20  cents from Friday’s close

 

 

The NIKKEI: Friday morning : down 433 points or 0.25%

Trading from Europe and Asia:
1. Europe stocks mostly in the green .(except London)

2/ Asian bourses all in the green except Japan … 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: $1283.00

silver:$18.02

 

 

 

Closing Portuguese 10 year bond yield: 2.37% down 8 in basis points from Friday (all peripheral bond yields fell)

 

Closing Japanese 10 year bond yield: .23% !!! par in basis points from Friday

 

Your closing Spanish 10 year government bond,  Monday par in basis points in yield from Friday night.

Spanish 10 year bond yield: 1.38% !!!!!!
Your Monday closing Italian 10 year bond yield: 1.50% down 3 in basis points from Friday:

 

trading 12 basis points higher than Spain:

 

 

IMPORTANT CLOSES FOR TODAY

 

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

 

 

Euro/USA: 1.1249  up .0045

USA/Japan: 118.48 up .710

Great Britain/USA: 1.5088 up .0088

USA/Canada: 1.2471 up .0051

The euro tried to recover  this afternoon from a huge hit overnight and it succeeded  by closing time rising by .0045 finishing the day well  above the 1.12 level to 1.1249.(during the early morning it was trading in the 1.11 handle) The yen was well down in the afternoon, and it was down by closing  to the tune of 71 basis points and closing just above  the 118 cross at 118.48 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound tried to gain some  ground back  during the afternoon session and succeeded as it turned positive  on the day closing at 1.5088. The Canadian dollar crashed again today  as it was down on the day at 1.2471 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.

 

 

end

 

 

Your closing USA dollar index: 94.87 up 11 cents from Friday.

 

your 10 year USA bond yield , up 2  in basis points on the day:

1.82%!!!!

 

 

end

 

 

 

European and Dow Jones stock index closes:

 

 

England FTSE  up 19.57 points or 0.29%

Paris CAC up 34.44 or 0.74%

German Dax  up 148.75 or 1.40%

Spain’s Ibex  up  114.60 or 1.08%

Italian FTSE-MIB up 236.97 or 1.15%

 

The Dow: up 6.10 or 0.03%

Nasdaq; up 13.88 or 0.29%

 

OIL: WTI 45.11 !!!!!!!

Brent: 48.13!!!!

 

 

Closing USA/Russian rouble cross: 68.59  up 4 4/5  rouble per dollar on the day.

 

 

 

 

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

 

Your New York trading for today:

 

Acropolis Now: Currencies & Crude Tumble But Stocks Levitate On Massive Short Squeeze

(a good summary of today’s action)

 

Turmoiling markets… We love the smell of volatility in the morning…

 

Ari seems to sum up how the Greeks feel about Troika (and perhaps how the Germans feel about the Greeks)

 

Greek elections very definitely anti-status quo, Greek bank stocks and bonds crashing, re-plunging crude oil prices, a crashing Swiss Franc, Russian downgrade and collapsing Ruble, so BTFD in US equities…

 

Thanks to USDJPY…

 

As Small Caps were ripped…

 

Thanks to this… as Meghan Trainor might say, “it’s all about the squeeze”… “Most Shorted” stocks were squeezed from the open and lifted 2% on the day – the 2nd biggest squeeze of the year (and 3rd biggest since Bullard’s big save)…

 

With today’s rally brought to us by Homebuilders and Energy stocks!! come the fuck on!

 

But the big moves were in FX markets again…

 

Which left The USDollar lower on the day…

 

Treasury yields traded in quite wide band – lower into the European open then higher through the US afternoon…

 

Copper magically managed to gain 1.6% as Crude and PMs slid…

 

Crude’s early spike on Al-Badri’s $200 oil comment was entirely reveersed later on…

 

 

Finally, we notice (h/t AY) that VIX futures net spec position is now its longest since Nov 2009…

 

Charts: Bloomberg

 

 

 

end

 

All weekend, we heard the news that the IBM were going to lay off 25% of their workforce.

 

Here is one of those reports:

 

(courtesy Russia’s Sputnik news/and special thanks to Robert H for sending this to us:)

 

We  will see you on Tuesday.

bye for now

Harvey,

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2 comments

  1. Bye Harvey, keep us posted..

    Like

  2. Your style is unique in comparison to other people I’ve read stuff from.
    I appreciate you for posting when you’ve got the opportunity,
    Guess I’ll just bookmark this blog.

    Like

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