Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1291.70 up $12.30 (comex closing time)
Silver: $18.07 up 10 cents (comex closing time)
In the access market 5:15 pm
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 0 notices for nil 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 again by 637 contracts despite Monday’s silver price being down by 7 cents. The total silver OI continues to remains relatively high with today’s reading at 162,448 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 fell by 1 contract down to 7.
In gold we again had a large increase in OI with the decrease in price of gold on Monday to the tune of $13.20 The total comex gold OI rests tonight at 454,556 for a gain of 5443 contracts. The bankers continue to supply the non backed paper with reckless abandon.
The January gold contract fell by 20 contracts down to 16 contracts.
The open interest for the upcoming February contract month remains extremely high at 130,026 with 3 days to go. I cannot recall ever seeing such a high OI with 3 days remaining coupled with extremely low volume on the comex. Something sinister is happening behind the gold scene at the comex.
Today, we had another huge addition of 9.26 tonnes of gold inventory at the GLD/Inventory at 752.70 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 27 2015
+.09% +0955% +.105% +.1225% .165%
Jan 26 2014:
+.09% +.0875% +.095 % +.1125% +.155%
Let us now head over to the comex and assess trading over there today.
Here are today’s comex results:
The total gold comex open interest rose today by a rather large 5,443 contracts from 449,113 up to 454,556 with gold down by $13.20 on yesterday (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 20 contracts down to 16. We had 0 contracts served yesterday. Thus we lost 20 gold contracts or an additional 2000 oz will not stand for delivery in this January contract month. The next big delivery month is February and here the OI fell by 25,272 contracts from 155,298 contracts all the way down to 130,026, with most of these guys moving to April. First day notice is Friday Jan 30.2014 or 3 days away. The estimated volume today was poor at 140,672. The confirmed volume yesterday was fair at 240,500 contracts. Today we had 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI rose by 637 contracts from 161,811 all the way up to 162,448 as silver was down by 7 cents yesterday. 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 fall to 7 contracts for a loss of 1 contract. We had 0 notices filed yesterday, so we lost 1 silver contract or 5,000 additional ounces will not stand for silver in the January contract month. The next big contract month is March and here the OI fell by 200 contracts down to 103,059. The estimated volume today was poor at 19,692. The confirmed volume yesterday was good at 39,278. We had 0 notices filed for 5,000 oz today. The rise in the price of silver is certainly scaring our bankers.
January initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||nil oz|
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||nil oz|
|No of oz served (contracts) today||0 contracts(nil oz)|
|No of oz to be served (notices)||16 contracts (1600 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
Today, we had 1 dealer transactions
we had 0 dealer withdrawals:
total dealer withdrawal: nil oz
we had 0 dealer deposits:
total dealer deposit: nil oz
we had 0 customer withdrawal
total customer withdrawal: nil oz
we had 0 customer deposit:
total customer deposits; nil oz
We had 0 adjustments
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (74) x 100 oz or 7400 oz to which we add the difference between the January OI (16) minus the number of notices served upon today (0) x 100 oz = 9,000 oz , the amount of gold oz standing for the January contract month. (0.2799 tonnes of gold)
Thus the initial standings:
74 (notices filed for the month x 100 oz) +OI for January (16) – 0 (no. of notices served upon today) = 9,000 oz (0.2799 tonnes)
we lost 2000 oz standing in this January gold delivery month.(which makes no sense late in the delivery cycle.
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.
And now for silver
Jan 27 2015:
January silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||38,469.43 oz(CNT,Delaware,HSBC)|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||702,409.510 oz (CNT,Delaware)|
|No of oz served (contracts)||0 contracts (nil 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||6,493,376.5 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 deposit:
i) Into CNT: 697,393.46 oz
total customer deposit 697.393/46 oz
We had 3 customer withdrawals:
i) Out of CNT: 5,262.98 oz
ii) Out of Delaware: 3019.15 oz
iii) Out of HSBC: 30,187.299 oz
total customer withdrawal: 38,469.43 oz
we had 0 adjustment
Total dealer inventory: 66.613 million oz
Total of all silver inventory (dealer and customer) 177.654 million oz.
The total number of notices filed today is represented by 0 contracts 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 (7) – the Number of notices served upon today (0) 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 ( 7)- no. of notices served upon today(0) x 5,000 oz equals 2,210,000 ounces standing for the January contract month.
we lost 5,000 additional silver ounces standing in this January delivery month.
for those wishing to see the rest of data today see:
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
Jan 27.we had a monstrous “paper” addition of 9.26 tonnes of gold into the GLD tonight/Inventory at 952.44 tonnes
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
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 27/2015 / we add an addition of 9.26 tonnes to inventory at the GLD
inventory: 752.44 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 : 752.44 tonnes.
And now for silver (SLV):
Jan 27/no change in silver inventory/SLV inventory at 319.314 million oz
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 27/2015 no change in silver inventory
registers: 319.314 million oz
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now for the first time into the negative to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
BIG CHANGES (NAV’s becoming less negative for CEF)
1. Central Fund of Canada: traded at Negative 4.1% percent to NAV in usa funds and Negative 3.9 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.1%
Percentage of fund in silver:38.5%
( Jan 27/2015)
2. Sprott silver fund (PSLV): Premium to NAV rises to + 2.49%!!!!! NAV (Jan 27/2015)
3. Sprott gold fund (PHYS): premium to NAV rises to +.23% to NAV(Jan 27/2015)
Note: Sprott silver trust back into positive territory at +2.49%.
Sprott physical gold trust is back in positive territory at +.23%
Central fund of Canada’s is still in jail.
And now for your most important physical stories on gold and silver today:
Early gold trading from Europe early Tuesday morning:
(courtesy Mark O’Byrne)
WOW!!!! : Russia buys a massive 20.73 tonnes of gold. The Netherland buys for the first time (after repatriating its 122.5 tonnes) 9.61 tonnes of gold. This is the first increase in official gold holdings since 1998.
Currency Wars – Russia and Netherlands Central Banks Buy 30.34 Tonnes Gold In December
Russia and surprisingly the Netherlands were the largest central bank buyers in December – accumulating a significant 30.34 tonnes between them as currency wars intensify.
Demand for gold as a diversification and monetary asset continues to be very robust and central banks remain net buyers of gold which should be supportive of prices.
The Netherlands, which has the ninth-biggest gold reserves, raised its bullion holdings for the first time in 16 years. It added 9.61 tonnes to bring total gold reserves to 622.08 tonnes.
Russia raised its gold reserves for a ninth straight month in December as the country continued its multi month gold buying spree, adding to the fifth-biggest gold holdings in the world, data from the IMF showed yesterday.
Russia continues to dollar cost average into gold and increased its bullion holdings by another hefty 20.73 tonnes to 1,208.23 tonnes in December.
The December figure for Russia, who have the fifth largest reserves in the world, brings their officially stated reserves to 1208.23 tonnes. If this trend were to continue their officially stated reserves would increase 20.6% this year.
Given that Russia perceives itself to be under financial and economic attack from the West, there is the possibility that they are accumulating more gold than they are declaring officially to the IMF.
This is what the People’s Bank of China (PBOC) has been doing in recent years and there is little reason why Russia may not adopt the Chinese practice of not being transparent in this regard.
The Chinese government have been surreptitiously accumulating vast quantities of the metal in recent years and there is no reason to believe this buying will end in the coming months as geopolitical and monetary risks intensify.
Western central banks seem to be balking at what will be seen as the disastrous policy of dumping the gold owned by their populations onto the market. The Gold Anti Trust Action Committee (GATA) have documented how this was done in order to suppress gold prices, in a bid to support and maintain faith in the dollar as reserve currency.
Already there are strong movements across Europe to have sovereign gold stored domestically. The German and Dutch central banks have recently reported the repatriation of large volumes of their gold being held by central banks of foreign nations.
It is worth bearing in mind that both these countries are on the record as having drawn up contingency plans in the event of the failure of the Euro.
The Netherlands added 9.61 tonnes to it’s official holdings in December, on top of the 122 tonnes of gold they shipped home from New York in November. This represents the first increase in their official reserves since 1998. The Dutch central bank’s holdings have been unchanged since late 2008.
This further undermines the notion that the gold repatriation was simply a “routine measure to instill public confidence in the ability of the central bank to manage crises.”
It would appear the Dutch central bank has greater concerns than public confidence and may be actively preparing for the fall out from the ECB’s QE programme – a programme to which they were opposed – and or a default by Greece, Spain, Portugal or Italy.
Among the many factors that may have motivated the Dutch central bank to buy gold may have been a shot across the bows to the ECB to remind them that the Netherlands is equipped and prepared to revert to the guilder, should Mario Draghi in the ECB go too far in terms of QE and the debasement of the euro.
It may also signal that they are concerned as to whether they will be able to repatriate the rest of their gold reserves.
This is an important development as it is the first time to our knowledge that a western central bank has actually purchased gold in volume since before the launch of the Euro. While the central banks of China, Russia and ex Soviet states have been acquiring the precious metal hand over fist since the dress rehearsal crisis of 2008, western central banks gold reserves have remain unchanged – officially any way.
The gold repatriation movement represents a turning of the tide with regards to attitudes towards central bank omnipotence in managing paper currencies.
The Dutch purchase is noteworthy and it will be important to keep an eye on their demand in the coming months to see if this was a once off or the start of a trend of the Dutch central bank and other western central banks buying gold.
The announcement will likely spur other central banks to take precautions and acquire gold.
Richard Russell – the godfather of financial newsletter writers – has recently made a stunning assertion about the gold markets. The 91 year-old, who lived through the great depression and fought in World War II, is very gentle and humane in his writing. He is not given to bouts of sensationalism.
In his most recent Dow Theory Letters he suggests that physical gold may not be available to buy at anywhere near current prices within the next year.
“There is a giant secret stirring under today’s market. China, India, Russia and almost every central bank is buying physical gold. I’m guessing that within another year, physical gold will be swept off the market.”
We have long contended that this would likely materialise given the scale of the current crisis and the very small size of the physical gold market globally. The purchase of 30 metric tonnes of gold in one month is a lot of physical gold as there is only some 170,000 metric tonnes of above ground gold.
However, in dollar, pound or euro terms it is tiny. 30 metric tonnes of gold is only worth some $1.24 billion or less than one day of ECB QE and a tiny fraction of the value of stock and bond markets today and indeed of global foreign exchange reserves.
The smart money will continue to follow the Russian central bank example of gradually accumulating gold and dollar, euro or pound cost averaging into an allocated and segregated physical gold position.
Comprehensive Guide to Currency Wars: Bye Bye Petrodollar, Buy, Buy Gold
Today’s AM fix was USD 1,279.00, EUR 1,132.96 and GBP 848.48 per ounce.
Yesterday’s AM fix was USD 1,282.75, EUR 1,141.54 and GBP 854.60 per ounce.
Gold fell $13.30 or 1.03% to $1,280.40 per ounce yesterday and silver slid $0.41 or 2.24% to $17.89 per ounce.
Gold in Singapore for immediate delivery was nearly unchanged at $1,282.55 an ounce in the evening.
Singapore, premiums have dropped to 70 cents to $1 an ounce, compared with $1.20 earlier this month. In Hong Kong, premiums were at 50-70 cents an ounce, down from $1 two weeks ago.
In London, spot gold hit $1,281.46 an ounce in early morning trading. The gold price is down with profit taking following the Greek elections and ahead of the Fed meeting starting today.
European finance ministers are meeting to consider how to prevent a Greek default. It was communicated that they want to work with new leader Alexis Tsipras, as long as he relinquishes his demands for a debt writedown.
Further turmoil in markets, sluggish global growth, ECB QE and the risk of a new Eurozone debt crisis are all bullish for gold and silver’s outlook.
Gold bullion shipments from Hong Kong to China dropped 32 percent in 2014. Chinese imports from Hong Kong were 750 metric tons last year down from 1,108.8 tons in 2013, data from the Hong Kong Census and Statistics Department showed.
Hong Kong gold export data to China gets less relevant by the month and a better benchmark for Chinese demand is now SGE withdrawals which are running at a healthy clip – both in 2014 – and so far in 2015
Chinese demand remains very robust as seen in the more than 130 tonnes of SGE withdrawals in the first two weeks of the year.
The World Gold Council said in April that its long-term Chinese demand outlook remains intact as store of wealth demand is expected to expand to at least 1,350 tons by 2017 amid rising wealth. Mainland demand was a record 1,275.1 tons in 2013, the council said in November.
China’s central bank cut interest rates for the first time in two years in November and the government accelerated the approval of infrastructure projects to spur growth, fueling a 53 percent gain in the Shanghai Composite Index last year. Gold may benefit if investors pull back from the world’s best-performing stock market in 2014, according to UBS.
While the world’s second-largest economy expanded 7.4 percent last year, the slowest pace since 1990, the global flow of gold from West to East will probably last for as long as two decades, the China Gold Association (CGA) said in June.
Silver for immediate delivery climbed 0.3 percent to $17.98 an ounce. Platinum was unchanged at $1,254.28 an ounce while palladium retreated 0.5 percent to $786.75 an ounce.
Get Breaking News and Updates Here
# @AnanthalakshmiAFollow Netherlands added to its gold reserves for the first time in 16 years. It bought nearly 10 tonnes in Dec to bring total to 622 tonnes
*) And Bloomberg: The Netherlands added to its gold reserves for the first time since 1998 as the ninth-biggest holder boosted assets to the highest in seven years, while Russia bought for a ninth month, International Monetary Fund data show. Bullion reserves in the Netherlands climbed to 20 million ounces or 622 metric tons in December, the highest since 2007, after being unchanged at 19.7 million ounces from December 2008 through November, the IMF’s website showed. Russia, with the fifth-biggest hoard, held 38.8 million ounces last month, the most in at least two decades, the data show. “Central-bank purchases may have lent some support to gold prices in the past, but it is likely short-lived,” said Barnabas Gan, an economist at OCBC in Singapore. “The most important point for gold is that speculative demand will likely stay tepid in 2015 given that a firmer dollar, higher interest-rate environment and a rosier U.S. economy will depress safe-haven demand,” he said by e-mail. After today’s absolutely abysmal micro and macro-economic data, one can debate just how “firmer” the dollar will remain, but at least on the surface, the Dutch action made sense: after all there is nothing wrong with scrambling to not only repatriate your own gold, hinting lack of trust in the most important central bank of all, the NY Fed, but also buying gold in the open amrket, hinting lack of trust in all central banks around the globe.
# Except; Moments ago Bloomberg blasted something even more unexpected. Namely that the “Dutch Central Bank Says It Did Not Increase Gold Holdings”
*) More: It adds that Reports based on IMF figures showing that the Dutch central bank increased its gold holdings are incorrect, accord. to an e-mailed statement. Gold reserves were unchanged at 19.691m troy ounces as of Dec. 2014, central bank said “This is the same information that the Dutch central bank reports to the IMF on a monthly basis,” accord. to statement, which brings up an interesting mystery with three options:
•i) did the Dutch central bank inadvertently disclose what its true gold holdings were to the IMF without meaning to do so? This certainly is likely considering the secrecy with which the central bank had been repatriating its gold.
•ii) is the IMF on purpose misrepresenting the Dutch gold holdings to generate a buying “panic”, because while it is explainable for Russia to hoard gold, it certainly does not send a good message if one of the most respected “developed nation” central banks is splintering from its peers and shifting reserves from fiat to precious metals.
•iii) this was an honest fat finger mistake and the intern who plugged in the same number for the past 7 years, and whose finger “slipped”, has now been fired.
*) Keep an eye on Dutch gold and its central bank, because none of these “explanations” are quite satisfactory enough, and considering the strange developments in the gold space in the past 6 months, there is surely more here than meets the kneejerked eye…
Russia buys gold for ninth month, but IMF was wrong about purchase by Netherlands
By A. Ananthalakshmi
Tuesday, January 27, 2015
SINGAPORE — Russia extended its buying spree of gold to a ninth straight month, and the price of gold rose for the first time in five months, data from the International Monetary Fund showed today.
The global financial institution later confirmed that the Netherlands did not increase its bullion holdings in December, contrary to the IMF’s earlier report that the bank had raised gold holdings for the first time in 16 years. …
… For the remainder of the report:
German probe finds no signs of manipulation in gold market
By Shane Strowmatt and Nicholas Comfort
Tuesday, January 27, 2015
FRANKFURT, Germany — Germany’s financial regulator BaFin has found no evidence to support allegations of manipulation in the gold market or that currency exchange rates were systematically rigged, according to its head of banking supervision, Raimund Roeseler.
Roeseler also said the watchdog is close to concluding a probe into alleged attempts to rig the London Interbank Offered Rate, a benchmark for borrowing costs. He didn’t comment on the results of that investigation.
The probe into currency markets is still under way, he said. Roeseler spoke to Handelsblatt newspaper in an interview published in Frankfurt Monday. Oliver Struck, a spokesman for BaFin, confirmed the comments in an e-mail to Bloomberg News. …
… For the remainder of the report:
Gold’s bull ride of the 1970s looks increasingly like gold’s position today, Turk tells KWN
9:15p ET Monday, January 26, 2015
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk tells King World News today that the chart of gold’s bull market of the 1970s seems increasingly to resemble the gold’s chart of the last decade or so. The gold bull market of the 1970s, Turk says, was driven by central bank money printing, and there’s even more of that today — which is why the gold price will soar again. Turk’s comments come in an interview with King World News that is excerpted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
First of a two parter:
(courtesy Bill Holter/Miles Franklin)
Is the gold really there? Part I
“Is the gold really there”? This is truly the question of all questions and at the core of everything that’s about to come! Before getting into the topic itself, it is worth breaking the simple question itself down and into parts. What gold? Who’s gold? And Where? The answers are, your gold, your country’s gold, the gold claimed to be stored and backing various “receipts” like COMEX and GLD. Is the claimed gold really sitting in New York, London, Zurich, Dubai, Shanghai and all the rest? This is a hugely broad topic and I apologize if I miss something but the question itself is now more important than ever before, I’ll explain this in Part two.
As you know, the gold market is probably the most “secret” market of all and purposely shrouded. The most obvious question regarding gold (because we are supposedly the largest holder) is “why has there been no audit of Ft Knox and the other U.S. depositories since 1955?”. We have been told because an audit would be too expensive. Really? We can afford to spend millions (billions) on bridges to uninhabited islands and studies on the effects of broccoli consumption on the sex lives of giraffes but verifying our nation’s gold holdings is “too expensive”? The obvious answer to this question is because the gold is not there and if it were proven or made public, the value of the dollar would evaporate …along with the power of those pushing and pulling the financial levers!
Over the last 2 months we have seen “movements” of gold more rapid and widespread than at any time since 1971. The Netherlands reportedly received 122.5 tons from New York and the Germans just received 85 tons from New York and Paris. Last year at this time, the Germans announced receiving only 5 tons which raised many eyebrows. We were told then, there were “logistic” problems moving large quantities of gold. I reported back then that a cargo Boeing 747 could carry 123 ton payloads (would you like to bet the Dutch received their 122.5 tons of gold in one single flight?). http://kingworldnews.com/serious-questions-surround-germanys-alleged-repatriation-120-tonnes-gold/ Last year’s 5 tons were “recast” which also raised some questions, this time around 50 tons were recast in the U.S. prior to shipment, why? Why not just send back the original bars “we were holding” all these years? It’s OK, you can say it out loud if you’d like …BECAUSE IT’S NOT THE ORIGINAL GOLD! As an additional note, isn’t it strange that Ukraine saw their 36.1 tons of gold (2 tons turned out to be painted lead) go missing just as Germany received 35 tons? Coincidence I am sure!
This past week we received the commitment of traders report showing the commercials increased their short position in COMEX gold by some 31,000 contracts …in a week! This represents 3.1 million ounces, for perspective, this is more than 2 weeks worth of global mine supply. We also have another benchmark to compare this 3.1 million ounces to, “inventory”. The COMEX registered gold category now holds 770,000 gold ounces. So, the commercials increased the amount of potential gold they are liable to deliver by more than four times what is even claimed as the total available to deliver!
Last August and again in November I wrote two articles questioning the very high open interest in COMEX gold and silver with only a few days left going into first notice day. Well, here we are again! There are only five trading days left going into first notice day for Feb. gold, currently there are 172,500 February contracts open representing over 17 million ounces of gold. With only five days left, there are roughly 25 ounces of gold contracted for potential delivery versus every one single ounce claimed to be available. Yes I know, each time this has “happened” in the past, “nothing happened”. As I believed in August last year, I still believe this position held by the longs is some sort of a “kill switch” where the longs can demand delivery and force the COMEX into default. I also believe the reason to “flip” such a switch is now more likely and could be the result of our own actions. The U.S. has pushed Russia very hard with sanctions upon sanctions, for less than $1 billion, Russia (and China) could end the Western financial system as we know it!
Will it be this time around? There is no telling but I do believe this will be done as soon as gold is no longer made available for delivery. Remember, China (and to a lesser extent Russia who just purchased another 20.73 tons last month) is importing close to 200 tons of gold per month. Koos Jansen reported that China imported 70 tons last week alone. To put this in perspective, China imported in just one week, more than three times the total amount of gold the COMEX claims they have to deliver! A run rate of 50 tons per week is what the world produces, China is buying ALL of it by themselves! (A side note regarding Koos work, he asked the Central Bank of Netherlands about their recent repatriation of 122.5 tons, whether or not the bars were the originals or recast? …to no response). One more note about COMEX before moving on, the daily volume has been very low for the last two months. Since we bottomed in November, daily volume has been less than half of what it once was. Very strange to see commercial short open interest expand and the price to rise over 10% with such low volume. Please understand the importance of this paragraph, we live in a world where a market having less than 1/3rd the inventory that China imports in a week …is “making” the price on the global markets? Maybe Rob Kirby is correct and there is a huge premium being paid for large scale purchases?
Another area we have seen large “inventory” movement has been in GLD. They once had (purportedly) 1,300 tons of gold. This number dropped all the way down to 700 tons last month and has risen to a little over 740. GLD inventory used to remain constant for several days in a row and then a change in inventory announced. Recently, their inventory has been changing nearly every single day. A week ago, they announced close to 35 tons being brought in in just 3 days. Where does tonnage of real gold like this come from? And just last year the Germans told us of the “logistical nightmare” of moving five tons of gold?
Other recent events to add that have or will change are the new “collars” and the GOFO rate reporting. As I understand it, this coming week will be the last reports we will see on the gold forward rates. Why are these being discontinued? Would they be discontinued if they were largely positive and showed physical gold supplies as very plentiful? Are they being discontinued because they are incompatible with low prices with supply being portrayed currently as very scarce? And what of the new CME “collars” on gold, silver and other metals? Why now? Why are collars even necessary unless volatility is expected to expand greatly? These are two very real questions …their simultaneous timing is even more questionable.
That does it for part one, in part two we will look more to the demand side, at the question itself and the ramifications if “the gold isn’t really there”. Regards, Bill Holter, Miles Franklin Associate writer
And now for the important paper stories for today:
Early Tuesday morning trading from Europe/Asia
1. Stocks mixed on major Asian bourses on ECB QE / the yen rises to 117.94
1b Chinese yuan vs USA dollar/ yuan strengthens to 6.2432
2 Nikkei up 300 points or 1.72%
3. Europe stocks fall /Euro surprisingly rises into 1.12 handle, Syriza / // USA dollar index up to 94.67/
3b Japan 10 year yield back up to .27% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.94/
3c Nikkei now above 17,000/
3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 45.06 Brent: 48.25 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.
3g/ Gold up /yen up;
3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion
Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP
3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)
3j Oil falls this morning for WTI and rises for Brent
3k earning disappointments/Microsoft/Procter and Gamble
3l UK grew GDP 4th quarter at .5% (annualized) /less than expected
3m Gold at $1281.00. dollars/ Silver: $17.86
3n USA vs Russian rouble: ( Russian rouble up 1 rouble per dollar in value) 67.79!!!!!!
3 0 oil falls into the 45 dollar handle for WTI and 48 handle for Brent
3p Swiss National Bank intervening in the market place/drove the SF down to 1.03 to the euro but it has now recovered to a little over parity.
IT BOUGHT EUROS and sold SF/totally ridiculous!!
3Q Blizzard in USA N/E. Hits Boston the hardest
3r Greek stock market down 3%/bond yields rise by 60 basis points/Most expect an extension of bailout agreements/Euro folks remain hard fast that there will be no haircuts.
4. USA 10 yr treasury bond at 1.81% early this morning. Thirty year rate well below 3% (2.38%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Market Wrap: Futures Slide On Spike Of “Strong Dollar” Earnings Disappointments And Profit Warnings
Following yesterday’s earnings disappointments, most notably from Microsoft which is down 7% this morning following the usual after-the-fact downgrades from JPM, Citi and Nomura, futures were already on a the back foot heading into this morning – no doubt impacted by the deja vu ridiculous move in the EURCHF noted earlier – when the latest batch of earnings just hit, of which Dow component Procter and Gamble stood out and which missed revenue of $20.16Bn (est. $20.67Bn) and EPS of $1.06 (est. $1.13).
How P&G justified the weak quarter is actually a good summary of macro events in Q4: “The October – December 2014 quarter was a challenging one with unprecedented currency devaluations. Virtually every currency in the world devalued versus the U.S. dollar, with the Russian Ruble leading the way.While we continue to make steady progress on the strategic transformation of the company – which focuses P&G on about a dozen core categories and 70 to 80 brands, on leading brand growth, on accelerating meaningful product innovation and increasing productivity savings – the considerable business portfolio, product innovation, and productivity progress was not enough to overcome foreign exchange.””
But the punchline, and in direct refutation of what Jack Lew said previously about a strong dollar being good for the US economy, was this:
“The outlook for the year will remain challenging. Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4 billion after tax. We have and will continue to offset as much of this currency impact as we can through productivity driven cost savings. And we will continue to invest in our businesses, brands and product innovation, because it is the right thing to do for the mid- and long-term, while we deliver another year of strong cash returns to shareowners. We are adjusting fiscal year earnings targets accordingly
In other words, P&G will “offset” the surge in the USD with more layoffs. So when Jack Lew said “good” he really meant “bad.”
Expect many more EPS misses and warnings in the coming days and months as the year end 2015 S&P consensus target crashes and burns and as the sellside penguins are finally forced to admit what we said in November: that 2015 earnings will be lower than 2014, which in turn were lower than 2013 on a GAAP basis. Not a pretty pattern.
In other macro news, Asian equity markets mostly rose with the exception of Chinese bourses; Shanghai Comp (-0.6%) and Hang Seng (-0.4%) both closed lower after Chinese December Industrial Profits Y/Y (-8.0% vs. Prev. -4.2%) printed their biggest fall on record. Nikkei 225 (+1.3%) approached a 1-month high underpinned by risk on sentiment and a weak JPY. ASX 200 (+0.8%) traded in the green despite weakness in basic materials after yesterday’s iron ore slump which saw prices touch a 5 and a 1/2yr low.
As previously noted, the main FX move of note this morning was a sharp rise in CHF to an intraday high of 1.0382 before paring the move later in the session. This comes amid speculation of SNB intervention after a reiteration overnight from SNB deputy Danthine, who stated once again that the central bank is prepared to conduct FX intervention. However, the move has proved very short lived with the cross now trading sub-1.0100 as the market continues to test the might of the central bank.
Analysts at IFR suggest that the SNB may prefer to focus their attention on USD/CHF rather than EUR/CHF, due to the risks attached to holding EUR reserves amid the uncertainty that has developed as a result of the Greek election and the announcement of QE by the ECB. Elsewhere, the only tier 1 data this morning was the UK Q4 advanced GDP which came in at 0.5% vs. Exp. 0.6% (Prev. 0.7%). However despite a brief fast money move lower in GBP/USD the reaction was not sustained with the pair broadly flat heading into the US session.
Over in Europe, equities spent the majority of the day in negative territory, trending lower with no fundamental reason behind the move. The SMI, however bucks this trend and currently resides in positive territory as a consequence of the weakening in CHF early in the session. Meanwhile, with regards to fixed income, the GR/GE 10y spread is over 50 bps wider today as a continuation of yesterday’s post-election price action, while Bunds have ticked higher as a consequence of weakness in equities.
Also of note, we did have supply today from both Italy and the Netherlands however this failed to impact the broader market. Both Danaher (DHR) and DuPont reported relatively weak earnings, citing the strength in the USD, with this being a theme throughout earnings season so far as Johnson & Johnson (JNJ) and United Technologies (UTX) have both said similar. Microsoft (MSFT) also announced that FX was hurting business and trade lower by around 6.5% in pre-market trade.
Today’s European session has so far been choppy in the commodity complex with WTI crude futures straddling the USD 45.00 handle, as it did for most of yesterday’s European morning as well. Later today we’ll see US API crude inventories, which last week saw a larger than expected build. In terms of news, Saudi Aramco CEO says that Saudi Arabia are not to blame for the market imbalance seen in the oil market and added that ‘nobody can dictate a fair price for oil’. (RTRS) Elsewhere, UBS have cut this year’s Brent forecast to USD 52.50/bbl from USD 69.75, and sees 2016 Brent price at USD 67.50/bbl from USD 80.00 and the bank also cuts their WTI crude price for this year to USD 49.00 from USD 64.75/bbl and next year to USD 62.50/bbl from USD 75.00/bbl.
Bulletin Headline Summary from RanSquawk and Bloomberg
- Large volatility seen in EUR/CHF which briefly touched 1.0382 this morning before paring the whole move as suggestions of SNB intervention proved decidedly short lived
- Stronger USD continues to weigh on corporate US earnings with Microsoft down 6.5% pre market.
- Looking ahead, main US data comes in the form of Durable Goods Orders, Services PMI, New Home Sales, Consumer Confidence Index and Richmond Fed Manufacturing Index
- Despite this, many European participants are anticipating a quiet US session, with volumes to be light amid heavy blizzards in the US
- Treasuries steady; trading and corporate issuance may be slow as
northeastern U.S. digs out from snowstorm that was not as bad as
anticipated; NYC may get no more than a foot of snow vs warnings for as
much as three feet.
- $26b 2Y and $15b 2Y FRN auctions rescheduled to tomorrow, while 5Y rescheduled to Thursday at 11:30am, followed by 7Y at 1pm
- Durable goods orders and new-home sales data will probably come out shortly after their scheduled release times of 8:30am and 10:00am, respectively
- The Swiss National Bank reaffirmed its willingness to intervene in markets, sending the franc to its weakest level against the euro since the institution abandoned its cap
- U.K. economic growth grew 0.5% 4Q, less than forecast, as shrinking production and construction countered strength in consumer demand
- With 100 days until the U.K. general election, Prime Minister David Cameron’s Conservatives took the lead in three polls; U.K. Independence Party leader Nigel Farage predicted his party will win at least five seats
- Chinese industrial companies’ profits declined the most in at least three years last month, underscoring the challenge facing the nation’s former growth drivers as the economy slows and commodity prices slump
- Euro area finance chiefs signaled their willingness to do a deal with Alexis Tsipras, so long as the new Greek prime minister drops his demand for a debt writedown
- EU leaders threatened to tighten sanctions on Russia as soon as Thursday in reaction to renewed attacks on eastern Ukraine by pro-Kremlin separatists
- Israel’s Netanyahu said yesterday he “strongly objects” to the terms of a proposed nuclear deal with Iran, suggesting the odds of reaching a deal to prevent Iran from developing nuclear weapons are growing longer
- Saxo Bank A/S says it is bracing itself for lawsuits from some clients who may be unhappy with its efforts to have them cover losses on their Swiss franc accounts.
- Sovereign yields mostly higher; Greek 10Y yields surge 45bps. Asian stocks mostly higher, with Nikkei gaining, Shanghai lower, European stocks fall, U.S. equity-index futures decline. Brent, WTI and gold steady; copper falls
In conclusion, here is DB’s Jim Reid with an early summary of events
Whilst the Greek election may have rated as noisy on the political spectrum, on the market spectrum beyond Greece’s own shores it has so far been a whimper. Whilst Greek 10y yields rose over 60bps to close the day at 8.8% and the Greek ASE index closed the day down over 3%, markets around the rest of the world were relatively sanguine with the Italian and Portuguese 10y government yields actually closing the day lower (although Spanish and core rates did rise around 4bps), the Stoxx 600 closing up +0.55%, led by the DAX up +1.4%, and the S&P500 up +0.3%. In European credit Itraxx Main and Xover both closed the day tighter (by -2bps and –8bps respectively) as did the financial senior and sub indices. Even EURUSD managed to bounce of its lows. Given this reaction it seems that so far markets are pricing in either that (a) Greece’s Syriza government will cut a deal with the Troika or (b) potential “Grexit” does not matter beyond Greece and we are unlikely to see a return of more broad-based periphery stresses. Especially in light of the ECB’s huge QE program announced last week, neither view seems unreasonable.
In terms of developments over the past 24 hours in Greece, first the left-wing, anti-bailout Syriza joined forces with the right-wing anti-bailout party the Independent Greeks to form a majority government and Alexis Tsipras, leader of Syriza, was sworn in as Prime Minister. On the other side of the newly dusted off European bargaining table we had a number of comments from European finance ministers who met in Brussels staking out what can broadly be described as a constructive tone with a hard edge. The Belgian Finance Minister was quoted by the VRT network saying Greece “must respect the rules of monetary union” but added that there was room for flexibility (BBC) and the Eurogroup working head Wieser said that he forecast, “that an extension of the (Greek bailout) programme will have to happen.” (Reuters). The German Foreign Minister said, “”we offer to work with the Greek government, but we expect them to stand by agreements.” (Reuters). On a similar note the chairman of the Eurogroup, Jeroen Dijsselbloem said, “There is very little support for a write-off in Europe,” From the ECB’s side, Benoit Coeure said, “There is no room for unilateral action in Europe, that doesn’t exclude a discussion, for example, on the rescheduling of this debt.” (Reuters). We have the replay details for DB’s conference call yesterday on Greece at the end.
Looking to the near horizon, the next important development in the situation will come later today when Tsipras is expected to name his government cabinet, with the focus on who he will name finance minister to head up talks with the Troika. At the moment the front runner for the post is Yanis Varoufakis (BBC). He is quoted yesterday as saying, “We will take to the eurozone a plan for minimising this Greek debacle, we are going to put three or four things on the table: genuine reforms and creating a rational plan for debt restructure.. we want to bind our repayments to our growth.” (BBC). After this focus will likely turn to whether the new Greek government can get an extension on its bailout program which expires at the end of February.
Outside of Greece there were a few other major news stories. Russia’s foreign-currency credit rating was cut to HY (BB+) by S&P, putting it below IG for the first time in 10 years. In response the ruble sold off with USDRUB rising +7.8% on the day, although the further 1% drop in WTI prices and continued fighting in eastern Ukraine also didn’t help. In terms of major macro data yesterday it was relatively quiet with no major releases from the US whilst from Europe we had Spanish PPI reads (which came in lower than expected) and the latest German IFO confidence and expectations surveys (which came in broadly higher).
Overnight in Asia markets have been mixed as despite a relatively strong open on the back of the European and US sessions many have now sunk into the red on the back of a weak industrial profits read in China, which fell 8% YoY in December. This was the biggest drop since at least October 2011. Whilst the Shanghai Composite is currently trading down around -1.8% and the MSCI Apex 50 is down around -0.5%, Japanese equities are outperforming, with the Nikkei up around +1.4%. Asian credit indices are trading marginally tighter.
Looking to the day ahead and market liquidity may be affected by the huge blizzard which hit the north east of the US today with many transport links closed down in preparation. An emergency situation has been declared in the states of New York, New Jersey, Connecticut, Rhode Island, Massachusetts and New Hampshire with some 60m people possibly affected. In terms of macro releases we will have UK Q4 GDP (expected to slip to +0.6% from +0.7% QoQ), EU finance ministers will be meeting in Brussels to discuss Ukraine and debate EC President Jean-Claude Juncker’s 315 billion-euro investment program proposal and over in the US we will have December durable goods orders (expected in at +0.4%), house price data and the January composite and services PMI. The FOMC also begins its two day meeting.
On the earnings calendar today we have Siemens and Novartis in Europe, whilst in the US we have Lockheed Martin, Pfizer, P&G, Caterpillar, AT&T and Apple all reporting.
Not good: very ominous
(courtesy zero hedge)
China Leading Index Plunges To 6 Year Lows
Just released this morning, following last night’s plunge in industrial profits, China’s Leading Index continued its freefall to its lowest level since Jan 2009…
The Swiss National Bank intervened big time this morning causing first the Swiss franc to tumble and then it soared. Expect many bodies again
(courtesy zero hedge)
Swiss Franc Tumbles Then Soars, On Suspected Failed SNB Intervention
For those who slept through the recently-downgraded to junk “Snow Tempest In A Teapot Of 2005”, you may want to check the stops of any open EURCHF trades, because, two weeks after the SNB shocked the world and blew up countless retail and institutional FX trading desks, as well as numerous macro hedge funds, the SNB – allegedly – tried to for round two earlier today, when just hours after SNB’s Danthine – the same guy who said the EURCHF floor is the bedrock of SNB policy two days before the SNB eliminated it – said that “the SNB remains ready to intervene on foreign exchange markets” that this happened: a dramatic, 250 pips surge in the EURCHF starting at 3 am Eastern.
Naturally everyone started screaming intervention: “The market is on full alert for intervention,” says Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London; “the SNB is saying they could intervene at any time; but there’s no confirmation, just speculation.”
Indeed, there was none, and with liquidity in EUR/CHF far from ample, all it took was some speculation, some momentum, and thousands of stop losses activations, and you got an inverse avalanche.
And then this happened:
Yup: a full reversal… with the EURCHF trading to below where it started before the suspected SNB intervetion, and promptly the narrative changed. The full blow by blow from Bloomberg:
- CHF Pares Losses vs EUR, USD as Intervention Talk Fades: Trader
- EUR erases gains vs CHF to fall ~2.90% from 1.03826 peak earlier, trading as much as 0.68% lower for the day at 1.00822.
- EUR/USD positioning is now less crowded, FX sales trader says
- Interbank names and some accounts that were stopped of their EUR shorts on squeeze higher sold EUR/USD, pushing the pair below 1.13
And then there was a suggestion that the EURCHF was merely trying to minimize its month-end P&L on its massive EUR holdings, however it promptly retracted its bid when it realized it was just adding fuel to the fire.
At the end of the day, it is unclear if the SNB did or did not intervene again: if it did it was simply to mimic the PBOC and keep traders off balance, to smash all stops, and to make sure nobody has any standing stop-loss orders in the pair. Of course, it may have simply tried to spread a rumor of its intervention to gauge how deep the liquidity in the pair is.
This is what the entire move looked like from start to finish.
And now we wait to learn if any more FX traders blew up on this far more modest, if just as illiquid move.
Charles Hugh Smith has got it right: Greece has nothing to lose by leaving the EMU.
(courtesy Charles Hugh Smith/zero hedge)
Greece At The Crossroads: The Oligarchs Blew It
Once one oligarchy falls, it will threaten to topple a long line of oligarch dominoes.
“Greece has failed to address (rising wealth/income inequality) because the country’s elites have a vested interest in keeping things as they are. Since the early 1990s, a handful of wealthy families — an oligarchy in all but name — has dominated Greek politics. These elites have preserved their positions through control of the media and through old-fashioned favoritism, sharing the spoils of power with the country’s politicians. Greek legislators, in turn, have held on to power by rewarding a small number of professional associations and public-sector unions that support the status quo. Even as European lenders have put the country’s finances under a microscope, this arrangement has held.”
“The fundamental problem facing Greece is not slow economic growth but political inequality. To the benefit of a favored few, cumbersome regulations and dysfunctional institutions remain largely unchanged, even as the country’s infrastructure crumbles, poverty increases, and corruption persists. Greek society also faces new dangers. Overall unemployment stands at 27 percent, and youth unemployment exceeds 50 percent, providing an ideal recruiting ground for extremist groups on both the left and the right. Meanwhile, the oligarchs are still profiting at the expense of the country — and the rest of Europe.”
Why? Once one oligarchy falls, it will threaten to topple a long line of oligarch dominoes.
Greece’s new Finance Minister Yanis Varoufakis, a professor at University of Athens provides common sense to Greece’s bankrupt state:
(courtesy Yanis Varoufakis, CNBC)
Greece’s New FinMin Explains “This Is What Happens When You Humiliate A Nation & Give It No Hope”
“This is not blackmail,” explains new Greek Finance Minister Yanis Varoufakis, “we simply want to end this seemingly never-ending Greek Crisis.” In what must be worryingly calm and simple to comprehend words for Brussels, Varoufakis tells CNBC’s Michelle Caruso-Cabrera, “this is what happens when you humilate a nation and don’t give it any hope.” Carefully noting that membership in the Euro is not imperative, Varoufakis concludes “bankruptcy cannot be dealt with by borrowing more,” asking rhetorically, “how can I look the German and Finnish taxpayer in the eye and tell them you know I can’t really pay you the money I have already borrowed from you…” but lend me more so I can pay back the ECB?
As Varoufakis explains, he believes Europe is willing to negotiate haircuts – anything else appears a waste of time.
(our apologies for the audio quality)
A terrific article on Greece and how the EU failed the country:
(courtesy Meijer/Automatic Earth Blog)
It’s Not The Greeks Who Failed, It’s The EU
In what universe is it a good thing to have over half of the young people in entire countries without work, without prospects, without a future? And then when they stand up and complain, threaten them with worse? How can that possibly be the best we can do? And how much worse would you like to make it? If a flood of suicides and miscarriages, plummeting birth rates and doctors turning tricks is not bad enough yet, what would be?
If you live in Germany or Finland, and it were indeed true that maintaining your present lifestyle depends on squeezing the population of Greece into utter misery, what would your response be? F##k ‘em? You know what, even if that were so, your nations have entered into a union with Greece (and Spain, and Portugal et al), and that means you can’t only reap the riches on your side and leave them with the bitter fruit. That would make that union pointless, even toxic. You understand that, right?
Greece is still an utterly corrupt country. Brussels knows this, but it has kept supporting a government that supports the corrupt elite, tried to steer the Greeks away from voting SYRIZA. Why? How much does Brussels like corrupt elites, exactly? The EU, and its richer member nations, want Greece to cut even more, given the suicides, miscarriages, plummeting birth rates and doctors turning tricks. How blind is that? Again, how much worse does it have to get?
Does the EU have any moral values at all? And if not, why are you, if you live in the EU, part of it? Because you don’t have any, either? And if you do, where’s your voice? There are people suffering and dying who are part of a union that you are part of. That makes you an accomplice. You can’t hide from that just because your media choose to ignore your reality from you.
And it doesn’t stop there. It’s not just a lack of morals. The powers that be within the EU deliberately unleashed shock therapy on Greece – helped along by Goldman Sachs and the IMF, granted -. All supra-national organizations tend towards zero moral values. It’s inherent in their structures. We have NATO, IMF, World Bank, EU, and there’s many more. It’s about the lack of accountability, and the attraction that very lack has for certain characters. Flies and honey.
So that’s where I would tend to differ from people like Alexis Tsipras and Yanis Varoufakis, the man seen as SYRIZA’s new finance minister, and also the man who last night very graciously, in the midst of what must have been a wild festive night in Athens, responded to my congratulations email, saying he knows what Dr Evil Brussels is capable of. I don’t see trying to appease Brussels as a successful long term move, and I think Athens should simply say thanks, but no, thanks. But I’m a writer in a glass tower, and they have to face the music, I know.
But let’s get a proper perspective on this. And for that, first let’s get back to Steve Keen (you now he’s a personal friend of The Automatic Earth). Here’s what I think is important. His piece last week lays the foundation for SYRIZA’s negotiations with the EU better than anything could. Steve blames the EU outright for the situation Greece is in. Let’s see them break down the case he makes. And then talk.
Politically paralyzed Washington talked austerity, but never actually imposed it. So who was more successful: the deliberate, policy-driven EU attempt to reduce government debt, or the “muddle through” USA? [..]muddle through was a hands-down winner: the USA’s government debt to GDP ratio has stabilized at 90% of GDP, while Spain’s has sailed past 100%. The USA’s macroeconomic performance has also been far better than Spain’s under the EU’s policy of austerity.
[..] simply on the data, the prima facie case is that all of Spain’s problems – and by inference, most of Greece’s – are due to austerity, rather than Spain’s (or Greece’s) own failings. On the data alone, the EU should “Cry Uncle”, concede Greece’s point, stop imposing austerity, and talk debt-writeoffs – especially since the Greeks can argue that at least part of its excessive public debt ratio is due to the failure of the EU’s austerity policies to reduce it.
[..] why did austerity in Europe fail to reduce the government debt ratio, while muddle-through has stabilized it in the USA? .. the key factor that I consider and mainstream economists ignore—the level and rate of change of private debt. The first clue this gives us is that the EU’s pre-crisis poster-boy, Spain, had the greatest growth in private debt of the three—far exceeding the USA’s. Its peak debt level was also much higher—225% of GDP in mid-2010 versus 170% of GDP for the USA in 2009
[..] the factor that Greece and Spain have in common is that the private sector is reducing its debt level drastically – in Spain’s case by over 20% per year. The USA, on the other hand, ended its private sector deleveraging way back in 2012. Today, Americans are increasing their private debt levels at a rate of about 5% of GDP per year—well below the peak levels prior to the crisis, but roughly in line with the rate of growth of nominal GDP.
[..] the conclusion is that Greece’s crisis is the EU’s fault, and the EU should “pay” via the debt write-offs that Syriza wants – and then some.
That’s not the attitude Berlin and Brussels go into the talks with Tsipras and Varoufakis with. They instead claim Greece owes them €240 billion, and nobody ever talks about what EU crap cost the PIIGS. But Steve is not a push-over. He made Paul Krugman look like a little girl a few years ago, when the latter chose to volunteer, and attack Steve on the issue, that – in a few words – banks have no role in credit creation.
Back to Yanis. The right wing Daily Telegraph, of all places, ran a piece today just about fully – and somewhat strangely – endorsing our left wing Greek economist. Ain’t life a party?
Syriza, a hard left party, that outrightly rejects EU-imposed austerity, has given Greek politics its greatest electoral shake-up in at least 40 years.
Hold, wait, don’t let’s ignore that 40 years ago is when Greece ended a military dictatorship. Which had been endorsed by, you know, NATO, US … So “greatest electoral shake-up” is a bit of a stretch. To say the least. There was nothing electoral about Greece pre-1975.
You might expect the frontrunner for the role of finance minister to be a radical zealot, who could throw Greece into the fire He is not. Yanis Varoufakis, the man tipped to be at the core of whatever coalition Syriza forges, is obviously a man of the left. Yet through his career, he has drawn on some of the most passionate advocates of free markets. While consulting at computer games company Valve, Mr Varoufakis cited nobel-prize winner Friedrich Hayek and classical liberal Adam Smith, in order to bring capitalism to places it had never touched.
[..] while Greece’s future minister is a fan of markets in many contexts, it is apparent that he remains a leftist, and one committed to the euro project. Speaking to the BBC on Monday, he said that it would “take an eight or nine year old” to understand the constraints which had bound Greece up since it “tragically” went bankrupt in 2010. “Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders, the Greek taxpayer,” he said.
“What we’ve been having ever since is a kind of fiscal waterboarding that have turned this nation into a debt colony,” he added. Greece’s public debt to GDP now stands at an eye watering 175%, largely the result of output having fallen off a cliff in the past few years.Stringent austerity measures have not helped, but instead likely contributed.
That last line, from a right wing paper? That’s the same thing Steve Keen said. Even the Telegraph says Brussels is to blame.
It will likely be Mr Varoufakis’ job to make the best of an impossible situation. The first thing he will seek to tackle is Greece’s humanitarian crisis. “It is preposterous that in 2015 we have people that had jobs, and homes, and some of them had shops until a couple of years ago, that are now sleeping rough”, he told Channel 4. The party may now go after multinationals and wealthy individuals that it believes do not pay their way.
[..]The single currency project has fallen under heavy criticism. The economies that formed it were poorly harmonised, and no amount of cobbling together could make the end result appear coherent. Michael Cembalest, of JP Morgan, calculated in 2012 that a union made up of all countries beginning with the letter “M” would have been more workable. The same would be true of all former countries of the Ottoman Empire circa 1800, or of a reconstituted Union of Soviet Socialist Republics, he found.
That’s just brilliant, great comparisons. Got to love that. And again, it reinforces my idea that the EU should simply be demolished, and Greece should not try and stay within eurozone parameters. It may look useful now, but down the line the euro has no future. There’s too much debt to go around. But for SYRIZA, I know, that is not the most practical stance to take right now. The demise of the euro will come in and of itself, and their immediate attention needs to go to Greece, not to some toxic politics game. Good on ‘em. But the fact remains. The euro’s done. And SYRIZA, whether it likes it or not, is very much an early warning sign of that.
[..] A disorderly break up would almost certainly result in a merciless devaluation of whatever currency Greece launched, and in turn a default on debt obligations. The country would likely be locked out of the capital markets, unable to raise new funds. As an economy, Greece has only just begun to see output growth return. GDP still remains more than 26% below the country’s pre-crisis peak. A fresh default is not the lifeline that Greece needs.
Instead, it will be up to a Syriza-led government to negotiate some sort of debt relief, whether that be in the form of a restructuring, a deal to provide leeway on repayment timings, or all out forgiveness. It will be up to Mr Varoufakis – if he is selected as finance minister – and newly sworn in Prime Minister Alex Tspiras to ensure that this can be achieved without Greece getting pushed out of the currency bloc in the process.
And whaddaya know, Steve Keen finishes it off too. Complete with history lessons, a take-and-shake down of failed economic policies, and a condemnation of the neo-liberal politics that wrecked Greek society so much they voted SYRIZA. It’s not rocket politics…
About 40 years ago, one of Maggie Thatcher’s chief advisors remarked that he wouldn’t be satisfied when the Conservative Party was in government: he would only be happy when there were two conservative parties vying for office. He got his wish of course. The UK Labour Party of the 1950s that espoused socialism gave way to Tony Blair’s New Labour, and the same shift occurred worldwide, as justified disillusionment about socialism as it was actually practiced—as opposed to the fantasies about socialism dreamed up by 19th century revolutionaries—set in.
Parties to the left of the political centre—the Democrats in the USA, Labour in the UK, even the Socialist Party that currently governs France—followed essentially the same economic theories and policies as their conservative rivals.
Differences in economic policy, which were once sharp Left-anti-market/Right-pro-market divides, became shades of grey on the pro-market side. Both sides of politics accepted the empirical fact that market systems worked better than state-run systems. The differences came down to assertions over who was better at conducting a pro-market economic agenda, plus disputes over the extent of the government’s role in the cases where a market failure could be identified.
So how do we interpret the success of Syriza in the Greek elections on Sunday, when this avowedly anti-austerity, left-wing party toppled the left-Neoliberal Pasok and right-Neoliberal New Democracy parties that, between them, had ruled Greece for the previous 4 decades? Is it a return to the pro-market/anti-market divides of the 1950s? No—or rather, it doesn’t have to be.
It can instead be a realisation that, though an actual market economy is indeed superior to an actual centrally planned one, the model of the market that both sides of politics accepted was wrong. That model—known as Neoliberalism in political circles, and Neoclassical Economics in the economic ones in which I move—exalts capitalism for a range of characteristics it doesn’t actually have, while ignoring characteristics that it does have which are the real sources of both capitalism’s vitality and its problems.
Capitalism’s paramount virtues, as espoused by the Neoliberal model of capitalism, are stability and efficiency. But ironically, the real virtue of capitalism is its creative instability—and that necessarily involves waste rather than efficiency. This creative instability is the real reason it defeated socialism, while simultaneously one of the key reasons socialism failed was because of its emphasis upon stability and efficiency.
[..] real-world capitalism trounced real-world socialism because of its real-world strength—the creative instability of the market that means to survive, firms must innovate—and not because of the Neoliberal model that politicians of both the Left and the Right fell for after the collapse of socialism.
Neoliberalism prospered in politics for the next 40 years, not because of what it got right about the economy (which is very little), but because of what it ignored—the capacity of the finance sector to blow a bubble that expanded for almost 40 years, until it burst in 2007. The Neoliberal model’s emphasis on making the government sector as small as possible could work while an expanding finance sector generated the money needed to fuel economic prosperity. When that bubble burst, leaving a huge overhang of private debt in its wake, Neoliberalism led not to prosperity but to a second Great Depression.
The Greeks rejected that false model of capitalism on Sunday—not capitalism itself. The new Syriza-led Government will have to contend with countries where politicians are still beholden to that false model, which will make their task more difficult than it is already. But Syriza’s victory may show that the days of Neoliberalism are numbered. Until Sunday, any party espousing anything other than Neoliberalism as its core economic policy could be slaughtered in campaigning by pointing out that its policies were rejected by economic authorities like the IMF and the OECD.
Syriza’s opponents did precisely that in Greece—and Syriza’s lead over them increased. This is the real takeaway from the Greek elections: a new politics that supports capitalism but rejects Neoliberalism is possible.
All Europeans, and Americans too, must now support SYRIZA. It’s not only the only hope for Greece, it is that for the entire EU. SYRIZA breaks the mold. Greeks themselves would be terribly stupid to start taking their money out of their accounts and precipitating bank runs. That’s what the EU wants you to do, create mayhem and discredit the younger generation that took over this weekend.
It’s going to be a bitter fight. The entrenched powers, guaranteed, won’t give up without bloodshed. SYRIZA stands for defeating a model, not just a government. Most of Europe today is in the hands of technocrats and their ilk, it’s all technocrats and their little helpers. And it’s no just that, it’s that the neo-liberal Brussels crowd used Athens as a test case, in the exact same way Milton Friedman and his Chicago School used the likes of Videla and Pinochet to make their point, and tens of thousands got murdered in the process.
It’s important that we all, European or not, grasp how lacking in morality the entire system prevalent in the west, including the EU, has become. This shows in East Ukraine, where sheer propaganda has shaped opinions for at least a full year now. It’s not about what is real, it’s about what ‘leaders’ would like you to think and believe. And this same immorality has conquered Greece too; there may be no guns, but there are plenty victims.
The EU is a disgrace, a predatory beast unleashed upon all corners of Europe that resist central control and, well, debt slavery really, if you live on the wrong side of the tracks.
SYRIZA may be the last chance Europe has to right its wrongs, before fighting in the streets becomes an everyday reality. Before we get there, and I don’t know that we can prevent it, hear Steve Keen: it’s not the Greeks that screwed up, it’s the EU. But they would never ever admit to that.
France’s jobseekers are now at record levels:
(courtesy zero hedge)
France ‘Proves’ Q€ Is Entirely Useless
According to the doctrine of central planners, the idea of Q€ is to lower rates to encourage borrowing (and credit creation) to spark growth and kickstart a virtuous recovery. As the following chart shows, that is total and utter crap… French jobseekers just hit a fresh record high and French rates just hit a record low – and that has been the story for 6 years. So – just as The Fed was finally forced to admit, Q€ is nothing more than wealth redistribution from all taxpayers to the ultra-rich asset owners who – it is hoped- will bless the plebeians with some trickle-down-ness… with every asset under the moon already at record highs, once again we ask – just what do you think this will achieve Draghi.
And finally, we have no words for this idiot…
- *Bank Of Italy’s PANETTA: ECB QE TO BOOST GROWTH ‘SIGNIFICANTLY’ OVER NEXT 2 YEARS
Yep – they really believe that.
Last year it was Ernst bank, today it is Raufeissen bank is serious trouble due to financing housing with borrowed Swiss Francs
The Bonds Of The Third Largest Austrian Bank Are Crashing
Last year Austria’s largest bank, Erste Bank, sent shudders of Credit Anstalt through the European Banking System. This year it is Austria’s 3rd largest bank that is scaring investors senseless. On the heels of the Swiss National Bank’s decision to un-peg from the Euro, Raiffeisen Bank’s Swiss-Franc-Denominated mortgage worries have resurfaced (along with Russian/Ukraine writedowns) and nowhere is that more evident than thetotal collapse of the bank’s bonds (from over 95c to 65c today). Even after the ECB Q€ (and some apparent intervention to weaken the Swissy) bonds kept free-falling. Perhaps, The Freedom Party’s demands for a bailout will grow louder as the contagion concerns across Europe’s banking system explode…
RAFI bonds are collapsing…
As Bloomberg reports, Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moody’s Investors Service.
The largest part of these are in Poland, where the franc has appreciated 17 percent against the zloty since Jan. 14, threatening to push up defaults on the bank’s 2.9 billion euros of mortgages in the Swiss currency.
“There’s a lot of people worried about the bank’s Swiss-franc mortgages in eastern Europe,” said Gregory Turnbull Schwartz, who helps oversee the equivalent of about $82 billion at Kames Capital in Edinburgh and doesn’t hold Raiffeisen bonds.
Raiffeisen said Jan. 15 that it can’t yet forecast the effects of the appreciation of the franc on its asset quality.
The bank “will certainly take one measure or the other in the near future,”Chief Executive Officer Karl Sevelda told reporters on the sidelines of the Euromoney CEE conference in Vienna today. He declined to elaborate. Franc loans in eastern Europe are “not a big problem,” he said.
The plunge appears focused on the potential capital shortfalls and talk of the bank selling its Russian unit – both have been denied… (as Reuters reports),
Raiffeisen Bank International has no desire to exit the Russian market, Chief Executive Karl Sevelda told a newspaper in response to market rumours it could sell its lucrative Russian business.
The Austrian lender has “absolutely no intention to sell our Russian bank”, he told Der Standard in a report printed on Tuesday. A bank spokeswoman confirmed his remarks.
He was responding to Russian media reports that Raiffeisen was in talks with Alfa Bank about a potential sale. Sevelda dismissed these “unfounded rumours” and said Raiffeisen had “absolutely no contact” with Alfa Group.
Raiffeisen, which is conducting a strategic review of its portfolio, said this month losses for 2014 could surpass 500 million euros ($561.5 million) if it had to write down goodwill in Russia, its single most profitable market.
The spokeswoman also confirmed the paper’s report that Chief Financial Officer Martin Gruell had denied market talk Raiffeisen may need to raise capital. It raised about 2.8 billion euros a year ago via a rights issue.
And for your humour story of the day:
(courtesy zero hedge)
Austrian “Freedom” Party Demands Bailout For Swiss Franc Speculators (From “Monstrous Monetary Policy”)
The phrases “it’s just not fair” and “waa waa waa” were not seen in Austria’s Freedom Party’s statement demanding a bailout for Swiss-Franc-denominated borrowers (i.e. people who were willing to speculate on FX rates with their house as collateral in order to get a lower interest rate in order to afford a bigger home that they really couldn’t afford in real risk-adjusted terms). What Austria needs, general secretary Franz Kickl exclaimed is “a general regulation and an offer to all Franc borrowers,” adding that “it cannot be that Austrian borrowers are the only ones who keep their losses even they are indemnified in Hungary, Croatia and perhaps even in Poland, the Czech Republic and Slovakia.” Which does sound oddly like ‘waa waa waa’?
Kickl: Freedom Party calls for aid package for Franken-borrower
Home builders and entrepreneurs pay bill for catastrophic monetary policy
Vienna (OTS) – The ECB monetary policy always takes monstrous forms. The bill for the absurdities pay the citizens of the economically better prepared States and Austria – especially the savers whose assets are depreciated in real terms, and in particular the extent franc borrowers. “It has to be this clear, there blame for the disaster that has increased by up to 60 percent of the debts of the borrower franc, the Chaos policies of governments in the euro area countries – and in Austria’s fault SPÖ and ÖVP and its mehrheitsbeschaffenden green and pink appendage, “said Freedom Party General Secretary NAbg. Herbert Kickl .
Although located franc borrowers had to be the speculative nature of their funding form quite aware, must surely is a legitimate apply to them, explained Kickl: “I do not think that someone who, for example, in 1995 with confidence on economic development in Austria and which resulting hard currency has taken out a loan had to reckon with the fact that 15 years later the prevailing policy begins to demolish the now common European currency intentionally by the break even given all the rules. “ Therein lies namely the cause for the dramatic decline in the value of the euro against the Swiss franc and also many other currencies.
Kickl now therefore calls on the policies a comprehensive support package for Franken-borrowers. With life extensions – bring the banks money again – it could not be done. “We should definitely have a look to Eastern Europe to throw,” said Kickl. Croatia chic at just the come under pressure borrowers financially bail out. Hungary had already done this, and other Eastern European countries could follow, as experts say. “The cost for wear, especially in Eastern Europe often Austrian banks. It can not be that, although the Hungarians, Croats, perhaps even the Poles, Czechs and Slovaks replace their losses and at the end of the Austrian borrowers are the only ones on the track and sit fully on their losses remain, “said Kickl. Austria had its banks massively helped at the outbreak of the crisis, although the cause was to search for their difficulties never in Austria itself, but especially in Eastern Europe. “Now the opportunity arises – for banks as well as the policy must set appropriate rules – to do something in this financial and economic crisis for its own citizens,” Kickl appeals to the government parties, as soon as possible to present a proposal.
The Freedom Party Secretary General also points out that many loans also legally lot was to clarify, because incorrect advice could be available by banks or by the release of stop-loss limits to fatal courses, the damage should be prevented so has widened had been. “It can not be that one, leaving the enormous risk of litigation to enforce these mistakes in the already financially ailing borrowers. We need a general scheme and an offer to all Franken-borrowers,” says Kickl. After all, it is also in the interest of the banks, which also reduce existing risk to themselves by foreign currency loans. Now to put your head in the sand and just playing for time, increase the risk of the catastrophic Euro-Politics – Tagged government bond purchases by the ECB – even further.
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Bailouts for all..
And the following set the stage for New York trading early this morning:
(courtesy zero hedge)
Dow Futures Down 250 From Overnight Highs; Greek Stocks/Bonds Plunging, Crude $44 Handle
Well that escalated quickly. While this morning’s weakness in stocks is being pegged to earnings misses (and rightly so), the selling pressure started as Europe opened and Greek stocks and bonds accelerated their freefall. Greek stocks and bonds are now below ECB QE levels and WTI Crude back at a $44 handle as CAT CEO demands Fed does not raise rates due to the “fragile” US economy…
Dow is now down 240 points from highs…
As Greek stocks and bonds plunge…
Early Tuesday morning USA 10 year bond yield: 1.80% !!! par in basis points from Monday night/
USA dollar index early Tuesday morning: 95.96 up another 20 cents from Monday’s close
The NIKKEI: Tuesday 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
Your more important currency crosses early Tuesday morning:
Eur/USA 1.1280 up .0041
USA/JAPAN YEN 117.96 down .574
GBP/USA 1.5089 up .0011
USA/CAN 1.2475 up .0001
This morning in Europe, the euro continues to move higher, trading now well above the 1.12 level at 1.1279 as Europe reacts to deflation, announcements of massive stimulation and falling 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 57 basis points and settling just below the 118 barrier to 117.96 yen to the dollar. The pound was well down this morning as it now trades well above the 1.50 level at 1.5089.(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 1.2475 to the dollar. It seems that the 4 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. (4) short Swiss Franc/long assets (European housing), the Nikkei, etc. These massive carry trades are terribly offside as they are being unwound. It is causing deflation as the world reacts to a lack of demand. Bourses around the globe are reacting in kind to these events.
Early Tuesday morning USA 10 year bond yield: 1.81% !!! down 1 in basis points from Monday night/
USA dollar index early Tuesday morning: 95.67 down 11 cents from Monday’s close
The NIKKEI: Tuesday morning : up 300 points or 1.72%
Trading from Europe and Asia:
1. Europe stocks all in the red
2/ Asian bourses mixed … Chinese bourses: Hang Sang in the red ,Shanghai in the red, Australia in the green: /Nikkei (Japan) green/India’s Sensex in the green/
Gold early morning trading: $1281.00
Closing Portuguese 10 year bond yield: 2.44% up 7 in basis points from Monday
Closing Japanese 10 year bond yield: .26% !!! up 3 in basis points from Monday
Your closing Spanish 10 year government bond, Tuesday up 1 in basis points in yield from Monday night.
Spanish 10 year bond yield: 1.39% !!!!!!
Your Tuesday closing Italian 10 year bond yield: 1.53% up 3 in basis points from Monday:
trading 14 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.1372 up .0134
USA/Japan: 117.80 down .667
Great Britain/USA: 1.5198 up .0120
USA/Canada: 1.2404 down .0067
The euro recovered big time this afternoon from a huge hits these past several days and it succeeded by closing up by .0134 finishing the day well above the 1.13 level to 1.1372.(poor USA earnings) The yen was well up in the afternoon, and it was up by closing to the tune of 67 basis points and closing well below the 118 cross at 117.80 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound gained back lost ground during the morning and afternoon sessions and was up on the day closing at 1.5198. The Canadian dollar finally recovered from its massive hits as it was up on the day at 1.2407 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. (This evening we witness severe problems with Raufeissen bank which had massive loans in Swiss Francs)
Your closing USA dollar index: 94.05 down 75 cents from Monday.
your 10 year USA bond yield , par in basis points on the day:
European and Dow Jones stock index closes:
England FTSE down 40.79 points or 0.60%
Paris CAC down 50.92 or 1.09%
German Dax down 165.75 or 1.57%
Spain’s Ibex down 97.20 or 0.91%
Italian FTSE-MIB down 110.90 or 0.53%
The Dow: down 291.49 or 1.65%
Nasdaq; down 90.27 or 1.89%
OIL: WTI 45.91 !!!!!!!
Closing USA/Russian rouble cross: 67.97 up 1/2 rouble per dollar on the day.
And now for your more important USA economic stories for today:
Your New York trading for today:
King Dollar CATastrophe: Currency War Drags Dow Down Almost 300 Points
“Earnings Truth… You can’t handle the earnings truth!!”
There are no belwethers left for talking heads to ignore…
Tech was weak on the day but we note once again financials falling…
Equity markets were weak before US earnings started…
Dragging everything red year-to-date…
As stocks were levitated higher after Europe closed until USDJPY hit 118.00…
“Most Shorted” stocks were once again squeezed… but this time they couldn’t hold it…
Which leaves The Dow perfectly unchanged since QE3 ended…
The US Dollar weakened for the 2nd day – now down 1.4% this week… (notice the clusterfuck in Swissy as Europe opened and intervention chatter dumped and pumped it)
Which somehow is merely another derivative of oil…
Treasury yields ended the day unchanged after a huge roundtrip (but were starting to drop as stocks slipped late on)…
Gold, silver, and Crude all gained on the day as Copper gave all yesterday’s “odd” gains back…
Crude ran up to yesterday’s highs running stops but ended back below $46…
Since ECB QE, Gold and Silver are green, Crude and Copper lower still…
All eyes on AAPL now… which closed “not off the lows”
The best Bellwether stock to predict global growth, Caterpiller
from Jim Cramer’s book:
“The only conference call you will ever need,” according to Jim Cramer, is Caterpillar, it “is my gospel, my go-to call on which many of my decisions are based… I trust Caterpillar’s long-term vision… it is a superb evaluator of what’s happening in each of the countries it sells in and gives you the most thorough description of each economy.” As Cramer concludes, “Caterpillar’s the primer, the sopurce for your global outlook…”
(courtesy zero hedge)
Welcome To The Wreckovery: Who Could Have Possibly Anticipated Caterpillar’s Disastrous Earnings And Guidance?
Moments ago, Caterpillar was added to the great and growing list of bellwether companies that have reported disastrous Q4 earnings misses, when it announced that not only did it wildly miss its EPS estimate of $1.55, reporting only $1.35 in Q4 Adjusted EPS (and $1.23 on a GAAP basis), but worse, slashed its 2015 sales and profit outlook as follows:
We expect world economic growth to only improve modestly in 2015. The relatively slow growth in the world economy and continued weakness in commodity prices—particularly oil, copper, coal and iron ore—are expected to be negative for our sales. We expect sales and revenues in 2015 to be about $50 billion. To provide a better understanding of our expectations for 2015 profit, we are providing our outlook with and without anticipated restructuring costs. Over the past two years, we have undertaken restructuring activities designed to lower our long-term cost structure. Additional restructuring actions are anticipated in our outlook for 2015. In total, we expect the cost of these restructuring actions in 2015 to be about $150 million or about $0.15 per share. Our profit outlook for 2015 is about $4.60 per share, or $4.75 per share excluding restructuring costs.
And they didn’t even blame the strong dollar. So what was the Street expecting: revenues of $55 billion and EPS of $6.00. Oops, and also the reason why the stock is crashing to the low $80s, down $30 from its recent highs,despite management repurchasing a whopping $4.2 billion in CAT stock in the past year.
This once again confirms what we said just moments ago, namely that when all is said and done, 2015 EPS will be lower then 2014, no only on a GAAP but non-GAAP basis.
Some other comments from CAT, which is trying to justify the collapse in its business which nobody could have possibly foreseen:
“The recent dramatic decline in the price of oil is the most significant reason for the year-over-year decline in our sales and revenues outlook. Current oil prices are a significant headwind for Energy & Transportation and negative for our construction business in the oil producing regions of the world. In addition, with lower prices for copper, coal and iron ore,we’ve reduced our expectations for sales of mining equipment. We’ve also lowered our expectations for construction equipment sales in China. While our market position in China has improved, 2015 expectations for the construction industry in China are lower,” Oberhelman said.
“Unambiguously good” low oil prices right?
Oh wait, did we say “nobody could have possibly foreseen” this CAT shocker? We take that back, because anyone who had looked at CAT’s monthly retail sales reports, for example shown here precisely a month ago in “Where The “Great Recovery” Is 25% Worse Than The “Great Recession“” would have known exactly what was coming.
And since we show them every month, why not do it again: here are the latest CAT retail sales trends around the globe. Enjoy that “recovery” folks
“Paid To Wait”? Microsoft Tumbles 10%, Destroys 4 Years Of Dividend Gains
Why but bonds when you can buy stocks that earn a higher dividend? “it’s the risk, stupid!” Microsoft is down around 10% this morning, the equivalent of almost 4 years of dividend gains… still wanna get “paid to wait.”
Seven Consecutive Downward Reivisions To New Home Sales Data Place Serious Doubts On Report Accuracy
You will pardon us if we don’t “buy” the latest attempt by the Census Department to telegraph housing euphoria with the just reported number of 481K new December home sales, a surge of 11.6% compared to November, an increase which was expected by the consensus to be only 2.7%. In fact, the 481K print is now the “highest” since June of 2008.
The reason for our disbelief? Because as we have been tracking for the past 6, and now 7 months, every single such euphoric print since May of 2014 has been revised substantially lower after the fact (and after the headline-scanning algos promptly gobbled up stocks on the initial “beat”), and sure enough, the November print of 438K, was also just “revised” downward to 431K.
Putting today’s “highest in 7 years” new home sales print in context: consider that in May 2014 the same data series was originally reported at 504K… only to be revised to 458K!
In other words, there has now been 7 consecutive downward revision to the New Home Sales data!
As we said: forgive us, but we will once again refrain from drinking the Department of Truth’s cool aid.
US Services PMI Improves But New Orders Drop To Post-Recession Low
Just when you hoped the bad news was bad enough to warrant an uber-dovish Fed statement, Markit’s US Services PMI prints 54.0, beating estimates of 53.8 and up from December’s 53.0. After 6 months of dropping, January’s preliminary data rose; however, as Markit notes, new business expansion fell to a post-recession low, “The 5.0% an nualised rate of GDP expansion in the third quarter certainly looks like a peaking in the pace of expansion, with the surveys pointing to 2.5% annualised growth at the start of the year.”
As Markit concludes,
“The January manufacturing and services surveys collectively recorded the weakest monthly increase in new orders since the recession, sending a major warning light flashing that growth of demand has continued to slow at the start of the year.
“The 5.0% an nualised rate of GDP expansion in the third quarter certainly looks like a peaking in the pace of expansion, with the surveys pointing to 2.5% annualised growth at the start of the year.
“Input costs meanwhile showed no increase for the first time since 2 009, highlighting how lower oil prices are feeding through to the economy and should drive inflation down further in coming months.
“The surveys therefore send a dovish signal for interest rates, and if official data such as Friday’s GDP report sends similar signs of the economy cooling, expectations of the first rate hikes are likely to get pushed back into late 2015 and even, as we have seen in the UK recently, early 2016
* * *
We will see you on Wednesday.
bye for now