Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1285.90 down $5.80 (comex closing time)
Silver: $18.07 unchanged (comex closing time)
In the access market 5:15 pm
Gold and silver were basically treading water up until the 2:00 o’clock FOMC report was issued. Actually gold and silver were whacked 10 minutes after the report. Gold/silver equity shares also took it on the chin today as well. Today we follow developments whether Greece will play ball with the ECB boys or seek the help from Russia and China and default, leaving the west with a mess. I am convinced that they will seek the latter and we have stories that will convince you that this is where it is heading.
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 fell slightly by 8 contracts despite Tuesday’s silver price being up by 10 cents. The total silver OI continues to remain relatively high with today’s reading at 162,440 contracts. It seems that the bankers are very worried about silver as they covered again some of their short positions with the rise in the price of silver. The January silver OI contract rose by 8 contracts up to 15.
In gold we again experience a large decrease in OI as we enter an active delivery month.(gold entering February and this is an active month) The drop in OI is also puzzling with the increase in price of gold yesterday to the tune of $12.30. The total comex gold OI rests tonight at 438,279 for a loss of 16,277 contracts. It makes no sense for investors to bail on their contracts if the cost to roll to April is basically zero.
The January gold contract fell by 12 contracts down to 4 contracts.
The open interest for the upcoming February contract month remains extremely high at 84,617 with 2 days to go. I cannot recall ever seeing such a high OI with 2 days remaining coupled with extremely low volume on the comex. Something sinister is happening behind the gold scene at the comex.
Today, we had no changes in 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 (except the one year)/ All months are in contango and thus positive in rates.
On January 30/2015 the LBMA will officially stop providing the GOFO rates.
Jan 28 2015
+.085% +0975% +.1075% +.125% .16%
Jan 27 2014:
+.08% +.0955% +.105 % +.1225% +.165%
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 collapsed today by a rather large 16,277 contracts from 454,556 down to 438,279 with gold up by $12.30 yesterday (at the comex close). We have been witnessing for the past year, total OI collapse once first day notice approaches for an active precious metals contract month.We cannot explain this as it makes no sense at all. We are now onto the January contract month. The non active January contract month saw it’s OI contracts fall by 16 down to 4. We had 0 contracts served yesterday. Thus we lost 16 gold contracts or an additional 1600 oz will not stand for delivery in this January contract month. The next big delivery month is February and here the OI fell by 45,409 contracts from 130,026 contracts all the way down to 84,617, with many of these guys moving to April and the rest selling outright their contracts without rolling. First day notice is Friday Jan 30.2014 or 2 days away. The estimated volume today was fair at 153,538. The confirmed volume yesterday was good at 285,945 contracts. Today we had 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI fell slightly by 8 contracts from 162,448 down to 162,440 as silver was up by 10 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 rise to 15 contracts for a gain of 8 contracts, as somebody was in need of silver. We had 0 notices filed yesterday, so we gained 8 silver contracts or 40,000 additional ounces will stand for silver in the January contract month. The next big contract month is March and here the OI fell by 727 contracts down to 102,322. The estimated volume today was poor at 15,487. The confirmed volume yesterday was good at 37,413. 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)||4 contracts (400 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 (4) minus the number of notices served upon today (0) x 100 oz = 7,800 oz , the amount of gold oz standing for the January contract month. (0.2426 tonnes of gold)
Thus the initial standings:
74 (notices filed for the month x 100 oz) +OI for January (4) – 0 (no. of notices served upon today) = 7800 oz (0.2426 tonnes)
we lost 1200 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 28 2015:
January silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||nil|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||nil|
|No of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||15 contracts (75,000 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 0 customer deposits:
total customer deposit nil oz
total customer withdrawal: nil 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 (15) – the Number of notices served upon today (0) x 5,000 oz = 2,250,000 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 (15)- no. of notices served upon today(0) x 5,000 oz equals 2,250,000 ounces standing for the January contract month.
we gained 40,000 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 28/no changes in gold inventory at the GLD/Inventory at 952.44 tonnes
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 28/2015 / we had no changes in gold 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 28/no changes in silver inventory/SLV inventory at 319.314 million oz
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 28/2015 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 5.2% percent to NAV in usa funds and Negative 4.7 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 60.9%
Percentage of fund in silver:38.7%
( Jan 28/2015)
2. Sprott silver fund (PSLV): Premium to NAV falls to + 2.07%!!!!! NAV (Jan 28/2015)
3. Sprott gold fund (PHYS): premium to NAV rises to +.32% to NAV(Jan 28/2015)
Note: Sprott silver trust back into positive territory at +2.07%.
Sprott physical gold trust is back in positive territory at +.32%
Central fund of Canada’s is still in jail.
And now for your most important physical stories on gold and silver today:
Early gold trading from Europe early Wednesday morning:
(courtesy Mark O’Byrne)
Cyber War Poses Risk of Bail-Ins to Banks and Deposits
Cyber Attacks Growing In Frequency – Entire Western Financial System Is Vulnerable
British and US agents will carry out a mock cyber attack or ‘cyber war games’ on the Bank of England and commercial banks in City of London and on Wall Street in the coming months as part of tests on critical, but vulnerable financial infrastructure.
Should banks be hacked and customers deposit accounts compromised then the vista of potential bail ins becomes a real one. In June, JP Morgan Chase were hacked by unknown parties who stole the personal details of 83 million customers.
In July of last year Bloomberg reported that malware had been detected in the system of the Nasdaq exchange. Its purpose was unclear but it was believed to have been embedded there by Russian hackers.
There is also the alleged hacking of Sony Pictures by North Korea and the alleged hacking of Facebook, Instagram and Tinder yesterday.
David Cameron announced measures two weeks ago that he said were designed to help companies, government organisations and banks and prevent a repeat of hacking attacks.
The alleged busting of a Russian spy-ring in New York on Monday, for gathering intelligence that could be used for “destabilisation of the markets”, highlights yet again that the threat posed by cyber-warfare is a growing one.
The accused is a journalist working for The News Organisation, a Russian media company which is used by Russia’s SVR intelligence agency to gather information according to a statement issued by the U.S. Department of Justice on Monday.
The claim was made based on an intercepted conversation where the accused discusses with another Russian – a banker based in New York – what three questions he should ask the “New York Exchange.”
His associate suggests looking at ETFs: “How they are used, the mechanisms of use for destabilization of the markets.” He adds, “Then you can ask them what they think about limiting the use of trading robots. . . . You can also ask about the potential interest of the participants of the exchange to the products tied to the Russian Federation.”
While the claim that this conversation is evidence of espionage is a flimsy one, it along with recent events serves to highlight the vulnerability of the internet, our websites and the financial system – a system that has grown so vast and unwieldy that managing security has become and ad hoc process.
Yesterday morning social networks Facebook and Instagram were allegedly hacked by ‘Lizard Squad’, a group of hackers. The group have previously hacked Malaysian Airlines.
The first high-profile case of nation-states using cyber-warfare was the unleashing of the “stuxnet worm” – apparently created by Israel and the US – on Iran’s nuclear energy enrichment plant in Netanz in 2010. It almost caused a major environmental catastrophe.
In 2012, Iran devastated the computer network of Saudi Aramco in a similar attack.
From the above examples we can see a panorama of human activities which grow more vulnerable as hackers and cyber-warfare grow more sophisticated.
Russia’s Prime Minister Medvedev yesterday warned that if the U.S. succeeds in it’s plans to cut Russia out of the SWIFT banking transfer system, then the “Russian response – economically and otherwise – will know no limits.”
Given that a military confrontation is not desired by Russia it would seem that cyber-warfare will certainly be part of the mix that Medvedev alludes to.
Banks have been hacked, stock exchanges have been hacked and critical infrastructure have been hacked in recent years. It is likely that many of these small scale attacks have been merely testing of defenses.
A concerted attack on the western financial system would likely include attempts at disabling various exchanges including stock markets and foreign exchange markets. Banks could be attacked in such a way that bank balances, which are merely digital figures, could be erased.
In a worst case, scenario such attacks could be done in conjunction with countries hostile to the West dumping vast quantities of dollars onto the market.
In such an environment the West, which is so dependent on technology and the monetary system, would be economically paralysed and the primary wealth that would remain would be tangible wealth.
Tangible assets include gold and silver bullion, agricultural land, water, property etc. We are not predicting such an outcome. We are simply looking at the facts as they are, in the context of intense geopolitical tensions, and surmising that it would be prudent to take necessary precautions.
New York Mayor Bill de Blasio put it well yesterday regarding the snow storm and echoed something we have been saying for many years now: “We obviously missed the worst of the storm.” Defending actions by his office and Gov. Andrew Cuomo to shut schools and freeze regional transportation, de Blasio said that they were right to:
“Prepare for the worst but hope for the best …”
The Comprehensive Guide to Bail-ins: Protecting Your Savings in the Coming Bail-in Era
Today’s AM fix was USD 1,287, EUR 1,131.93 and GBP 846.71 per ounce.
Yesterday’s AM fix was USD 1,282.75, EUR 1,141.54 and GBP 854.60 per ounce.
Gold gained 1.12%, or $14.30, yesterday, closing at $1,294.70 per ounce. Silver rose $0.20, or 1.12%, to $18.09/oz.
Gold climbed yesterday as a slump in orders for U.S. durable goods signaled that weaker foreign economies are weighing on the American economy, boosting demand for gold as a safe haven.
Demand for all durable goods — items meant to last at least three years — declined 3.4 percent, the worst performance since August, the Commerce Department reported. Slowing expansion may prompt the Federal Reserve to hold off on raising interest rates which is bullish gold gold. Policy makers will meet this week.
In Singapore, gold for immediate delivery steadied above $1,290 an ounce. Holding gains from the previous session, as focus turned to whether a weaker U.S. and global economy will curb the US Federal Reserve’s claim that they intend raising interest rates.
Gold in New Delhi rebounded today by Rs 120 to Rs 28,420 per 10 grams, the Press Trust of India reports. There is a revival in gold buying to meet ongoing wedding season demand. That has snapped the two-day losing streak for gold.
Another bullish factor for gold is Greek Prime Minister Alexis Tsipras promising “radical” change today.
His new government swiftly moved to roll back key parts of Greece’s international ‘bailout’, prompting a third day of losses on financial markets.
A swift series of announcements signalled the newly installed government would not back down from its anti austerity and debt writedown pledges, setting it on course for a clash with the Troika. The IMF and ECB have said they will not renegotiate the aid package needed to help Greece pay its debts.
Even before the first meeting of the new cabinet, new ministers were on the airwaves reassuring voters they would honour campaign pledges to roll back the tough economic policies imposed under Greece’s 240 billion-euro bank bailout programme.
Silver for immediate delivery fell 0.1 percent to $18.11 an ounce. Platinum was unchanged at $1,263 an ounce while palladium rose 0.5 percent to $788.75 an ounce.
JPMorgan wins on the Swiss franc sweepstake to the tune of 300 million dollars. Their collective counterparties thus lost the same and we will be witnessing many of these bodies floating to the surface:
JPMorgan said to reap up to $300 million amid Swiss turmoil
By Julia Verlaine
Monday, January 27, 2015
JPMorgan Chase & Co.’s foreign-exchange traders reaped a gain of as much as $300 million after the Swiss central bank roiled markets by abolishing its cap on the franc, according to two people with knowledge of the matter.
The bank netted $250 million to $300 million on the day of the Swiss National Bank’s surprise decision to scrap the franc ceiling of 1.20 against the euro, said the people, who asked not to be identified because they weren’t authorized to speak publicly. A JPMorgan spokesman declined to comment.
The SNB’s surprise decision on Jan. 15 to remove the three-year-old cap sent the franc soaring as much as 41 percent against the euro that day. JPMorgan is one of the few to emerge from the turmoil with a profit. Citigroup Inc., Deutsche Bank AG, and Barclays Plc suffered about $400 million in cumulative trading losses, people with knowledge of the matter have said. …
… For the remainder of the report:
TF Metals Report: Inherent unfairness in the gold futures market
3:03p ET Tuesday, January 27, 2015
Dear Friend of GATA and Gold:
The TF Metals Report’s Turd Ferguson today provides his own indictment of the gold futures market, where infinite imaginary supply can be created at any moment to suppress the price. Ferguson’s commentary is headlined “Inherent Unfairness” and it’s posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Zimbabwe’s Gold Mines On Verge Of Collapse Due To Low Bullion Prices
To say that Zimbabwe has not had much luck in its recent, post Robert Mugabe-goes-berserk, history with fiat money is putting it lightly.
But did you know that with gold trading at prevailing depressed prices, driven over the past several years not by physical demand but by paper supply, Zimbabwe is about to have another “money” moment, only this time not with fiat but with real money.
The reason: the same one why every so often we show the gold cost curve: because some miners simply can not continue operating if the “market” price of gold, with or without central bank and BIS intervention, is below their blended cost.
And while not shown explicitly on the chart above, unfortunately for the south African country, the cost curve of the entire Zimbabwe gold mining industry is on thewrong side of the gold price line.
According to Reuters, Zimbabwe’s gold mining firms are suffering huge losses due to low gold prices “and could collapse unless the government reduces royalties for producers, the Chamber of Mines said.”
The problem for Zimbabwe is that after relying too much on paper printing, it is now all too reliant on gold mining: gold is the single largest export earner in the southern African country, whose economy is flatlining as a result of lack of investment, electricity shortages and high cost of capital. Losing the mining sector would likely result in another major economic and financial crisis, although the local population is quite used to these by now.
So while gold trades based entirely on where the Bank of International Settlements decides any given morning where it should close that day, physical gold production is about to lose a major source, something which in a normal world would result in a huge surge in the price and, as a reminder, is the entire premise behind Saudi Arabia’s strategy to crush the US shale industry:
More from Reuters:
In a report issued in December the mining chamber said that mines were making losses of up to $100 an ounce due to weak gold prices and high electricity charges.
Mines are charged higher electricity tariffs to ensure continuous supplies but this is not always the case in a country that produces 1,200 MW against a peak demand of 2,200 MW.
In the report by the mining chamber seen by Reuters on Tuesday, the group said lower power tariffs and uninterrupted supplies would save gold mines up to $55 an ounce.
“The above measures would have ensured the gold mining companies operate on a cash break-even basis and avert gold industry from collapse,” the chamber said.
Chinamasa said in November the mining sector, which brings in more than half of Zimbabwe’s export earnings, shrank for the first time in five years in 2014 due to low metal prices.
The government has set an ambitious target of 28 tonnes of gold in the next five years, to match a record set in 1990.Chinamasa has forecast that gold output could rise to 16 tonnes this year from 14 tonnes in 2014.
“If no immediate measures are taken, the likelihood of production reaching 1990 levels is very slim and in the extreme mines will go under care and maintenance to preserve assets,” the mining chamber said.
And even though none of this is surprising, we certainly can’t wait to see the price of gold to plummet once the news that one of Africa’s largest producers of the yellow metal turns the lights of its gold miners out. Because when it comes to that metal most hated by central planners and bankers everywhere, the laws of supply and demand have long since become inverted.
Singapore becomes the 9th country to weaken its currency because of the strength of the uSA dollar
and zero hedge also below.
Singapore becomes ninth country to weaken currency this month
Singapore Dollar Is Weakest Since 2010
By Sharon Chen
Wednesday, January 28, 2015
SINGAPORE — Singapore unexpectedly eased monetary policy, sending the currency to the weakest since 2010 against the U.S. dollar as the country joined global central banks in shoring up growth amid dwindling inflation.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, said in an unscheduled statement Wednesday it will seek a slower pace of appreciation against a basket of currencies. It cut the inflation forecast for 2015, predicting prices may fall as much as 0.5 percent.
The move was the first emergency policy change since one following the Sept. 11, 2001 attacks for the MAS — which only has two scheduled policy announcements a year — reflecting how the plunge in oil has changed the outlook in recent months. Singapore becomes at least the ninth nation to ease policy this month, as officials from Europe to Canada and India contend with escalating disinflation and faltering global growth. …
… For the remainder of the report:
As promised Part II from Bill Holter
(courtesy Bill Holter/Miles Franklin)
And now for the important paper stories for today:
Early Wednesday morning trading from Europe/Asia
1. Stocks up on major Asian bourses on ECB QE / the yen rises to 117.85
1b Chinese yuan vs USA dollar/ yuan weakens to 6.2473
2 Nikkei up 27.43 points or 0.15%
3. Europe stocks fall except German DAx // USA dollar index up to 94.16/
3b Japan 10 year yield back up to .29% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.85/
3c Nikkei now above 17,000/
3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 45.36 Brent: 49.22 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.
3g/ Gold up /yen down;
3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion
Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP
3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)
3j Oil rises this morning for WTI and rises for Brent
3k FOMC results today/expect no changes
3l Singapore dollar reacts to dollar strength by intervening lowering the Sing.dollar
3m Gold at $1291.00. dollars/ Silver: $18.07
3n USA vs Russian rouble: ( Russian rouble par in roubles per dollar in value) 67.81!!!!!!
3 0 oil rises into the 45 dollar handle for WTI and 49 handle for Brent
3p Markets react to Greece being serious about leaving the euro/worries about spread of “Greek virus” to other peripheral European nations
3Q will the uSA go NIRP and tell the world that all is not well and try to lower the uSA dollar
4. USA 10 yr treasury bond at 1.80% early this morning. Thirty year rate well below 3% (2.40%!!!!)/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: All Eyes On Yellen Who Better Not Disappoint
While all the algos are programmed and set to scan today’s FOMC statement for whether both “patient” and“considerable time” are still there (as it did last time when it supposedly sent a pseudo-hawkish message while telling Virtu and Getco to buy, buy, buy), the market is torn between the trends observed in recent days: on one hand finally succumbing to the adverse impact of USD strength, which overnight also saw the Singapore Dollar admit defeat in the ongoing currency wars, is crushing both revenues and EPS, as well as outlooks, for the bulk of US companies, even as millennials – long since given up on buying a house – allocate their meager savings to the annual incarnation of Apple’s flagship product as seen in yesterday’s record, blowout numbers by AAPL which is up 8% in the premarket and sending Nasdaq futures soaring compared to the stagnant DJIA or S&P. And then there is Europe where the mood is decidedly sour this morning, with Greece imploding on fears Tsipras really means business and concerns the Greek “virus” may spread to other peripheral nations whose bonds have also seen a lack of a bond bid this morning.
So will Yellen save the day again?
The problem is that at this point it is unclear just what that means: if she continues ignoring the global deflationary pressures and not relent to delaying the rate hike, then the USD will surge even more (which at this point is no longer a good thing as explained in “When A Soaring Dollar “Reflects Loss Of Investor Confidence And Is Potentially Devastating“”), pressuring US exports and corporations that much more until finally something snaps and the decoupling theme so prevalent for the past 6 months is ruined.
Or will she admit that the myth of a US recovery was just that, for the 5th year in a row, and hint that all else equal, the Fed may not only keep ZIRP for longer, but even go NIRP or, once the US budget deficit grows enough to allow another full-blown debt monetization by the Fed, return to a QE regime?
We don’t expect answers to all these questions, but today is certainly shaping up to be a dramatic session, one which will be that much more dramatic courtesy of the now pervasive lack of market liquidity.
Looking at markets, today’s European session saw equities open higher, with sentiment stemming from Apple (+7% pre market) posting a net profit of USD 18bln for the quarter, the largest for a public company in history and Yahoo! (+7.5% pre market) announcing plans for a tax-free sale of its remaining stake in Alibaba (BABA) into a newly formed spin-off company. However, this move was pared with little data or newsflow to sustain the sentiment, to trade in the red by the middle of the session, with Euro Stoxx down around 1%, weighed upon by Siemens who are down over 5% after two negative broker moves and volatility in Greece. This saw flows head to Bunds at the expense of equities, with the German benchmark reclaiming the 158.00 handle and T-Notes moving in tandem with its European counterpart.
Greece is still feeling the repercussions of SYRIZA’s election victory on Sunday with leader Tsipras commenting that he will aim to negotiate debt and expects radical changes, however will not target destructive conflict with creditors. This saw the GE/GR 10y spread widen by 90 bps, while the ASE is down around 7% on the day, with Greek banks the underperformers.
Looking ahead, as well the FOMC rate decision, market focus will also be on earnings today, with high profile company Facebook, QUALCOMM, Boeing and Biogen all scheduled to report.
Asian equity markets trade mixed amid a negative close on Wall Street, with sentiment lifted by stellar earnings from Apple. Consequently, the both the Hang Seng (+0.22%) and Nikkei 225 (+0.15%) pared back their initial losses, the latter further bolstered by JPY giving-up yesterday’s gains against the greenback. Elsewhere, the Shanghai Comp (-1.41%) was the session laggard falling to a 1-week low amid concerns about Umbrella Trusts after China Everbright reduced its Trust leverage ratio to no higher than 1:2:5 from next.
During the European morning, sources suggested Chinese State Regulators are restarting probes into margin trading at Chinese brokers, with probes into margin trading in China the catalyst for the sell off in the Shanghai Comp last Monday where the index closed down 7.7%.
In FX markets, AUD/USD strengthened during the Asian session, with focus particularly on the RBA’s preferred measure of CPI, the CPI Trimmed Mean, which came in at 0.7% vs Exp. 0.5% (Prev. 0.4%, Rev. 0.3%). This saw an immediate 80 pip rise, with the CPI data lowering the expectation for an RBA cut. However, the move pared some of its gains during the European morning amid rumours of a report from RBA watcher Terry McCrann stating the RBA are very likely to cut rates at their meeting next week, with the article believed to be for publication on Thursday. Elsewhere, FX markets remain relatively tentative with little of note on the calendar ahead of the FOMC rate decision after European market (1900GMT).
In the commodity complex, palladium outperforms precious metals this morning as fears over further sanctions on Russia continue to underpin price action. This comes as US Treasury Secretary Lew says that they are prepared to impose further sanctions in Russia given the recent increase in tensions in East Ukraine with palladium prices sensitive to such news as Russia are the world’s largest producer.
Looking ahead, DoE US Crude Oil Inventories are the piece of tier 1 data today at 1530GMT/0930CST after yesterday’s API’s showed a build (12700k vs. Prev. 5700k).
In summary: European shares are little changed, rallying from intraday lows, as banks and travel stocks underperform and basic resources, personal & household outperform. Most European bond yields rise. Greek PM says government to negotiate debt relief, while govt questions moves to impose more sanctions on Russia. Greek 10-yr yield spread vs bunds widens to more than 1,000 basis points. Singapore dollar fell after central bank said it will seek a slower pace of appreciation against currency basket. The euro is weaker against the dollar. Japanese 10yr bond yields rise. Apple rises as much as 8% in Frankfurt trading after results. U.S. futures are little changed to higher. Goldman cuts its near-term outlook for raw materials to underweight. decline, with natural gas, WTI crude underperforming and zinc outperforming. U.S. mortgage applications, FOMC rate decision due later.
- S&P 500 futures up 0.2% to 2032.70
- Stoxx 600 down 0.1% to 368.3
- US 10Yr yield down 3bps to 1.79%
- German 10Yr yield down 2bps to 0.36%
- MSCI Asia Pacific steady at 142.4
- Gold spot down 0.2% to $1289.5/oz
- Euro down 0.14% to $1.1365
- Dollar Index up 0.05% to 94.07
- Italian 10Yr yield up 8bps to 1.61%
- Spanish 10Yr yield up 7bps to 1.46%
- French 10Yr yield up 0bps to 0.58%
- S&P GSCI Index down 0.6% to 379.9
- Brent Futures down 0.8% to $49.2/bbl, WTI Futures down 1.7% to $45.4/bbl
- LME 3m Copper up 0.9% to $5468/MT
- LME 3m Nickel up 1.1% to $14960/MT
- Wheat futures down 0.7% to 515.3 USd/bu
Bulletin Headline Summary from RanSquawk and Bloomberg
- European equities open in the green following Apple’s impressive earnings, however the move has failed to be sustained with industrials weighing on equities as Siemens falls over 5% on negative broker moves
- Greece is still feeling the repercussions of SYRIZA’s election victory the GE/GR 10y spread widen by 90 bps, while the ASE is down around 7% on the day, with Greek banks the underperformers.
- The market awaits the latest FOMC announcement (1900GMT/1300CST) with focus remaining on the `considerable time` phrasing and whether the Fed will acknowledge the strong USD and its impact on growth.
- Treasuries gain, 30Y yield trading near record low before Fed statement scheduled for 2pm in Washington; 2Y 0.502% before U.S. sells $26b at 2pm, WI yield 0.535% vs 0.703% in Dec. 2Y FRN to be sold at 11:30am.
- Fed policy makers seen keeping “patient” language in today’s statement, according to published research and interviews with strategists
- Greek Prime Minister Alexis Tsipras promised to avoid a “catastrophic clash” with creditors and European governments, as Greece’s stock and bond markets extended declines to lows not seen since the peak of country’s debt crisis
- The yuan overtook Canada’s dollar to rank fifth for use in global payments, bolstering the case for the IMF to endorse it as a reserve currency
- Bank of England’s Andrew Haldane says new normal for interest rates may be 2%-4%, BOE rate rises will be gradual when they come
- Germany gets bids for EU1.212b vs EU2b sale goal for 30-year bonds that fall just outside eligibility for QE
- Singapore unexpectedly eased monetary policy, sending SGD to the weakest since 2010 vs USD; MAS said in an unscheduled statement it will seek a slower pace of appreciation against a basket of currencies
- As Kaisa Group Holdings Ltd. seeks to avert a debt default after a member of the controlling Kwok family left, analysts are taking a closer look at Sino Life Insurance Co., its second-largest shareholder
- Apple Inc posted a 30% jump in FY1Q revenue to $74.6b as net income rose 38% to a record $18b amid sales of larger screen iPhones and refreshed Mac computers
- Sovereign yields mostly higher, peripheral EU surges, with Greece 10Y yield approaching 10.50%; Portugal, Spain and Italy also higher. Asian stocks mixed; European stocks fall, U.S. equity-index futures gain. Brent, WTI and gold lower; copper gains
DB’s Jim Reid concludes the overnight summary
So my two days off from work have been spent moping on the sofa with my leg elevated and covered in ice. All after Saturday’s bad skiing injury when I’ve snapped knee ligaments. A non-ideal mini break culminating in watching Liverpool lose a semi-final on the telly last night! In fact in the 90 hours since the accident I’ve either been in bed or the sofa. This morning I’m hobbling away from the Alps on crutches and onto a train to Paris where I’m speaking at a conference this afternoon. If you’re going skiing over the rest of the season please be more careful than I’ve been this year!! Oh and make sure you’ve got insurance which fortunately I did. Getting carried off the mountain is expensive. Luckily it was in France and not Switzerland though!
One wonders how careful the Fed will be in 2015. We may get some early clues today after the conclusion of the first FOMC meeting of the year. This meeting isn’t going to see the release of the Fed’s Summary of Economic Projections, nor a press conference but nevertheless it will be interesting to see the Fed’s January statement. DB’s Peter Hooper expects that the Fed will use this meeting for some ‚necessary housekeeping? with just a few small language changes as he thinks the economic picture has changed moderately but not enough for any significant changes to be made. To sum up, Peter expects the statement to be much like December’s in which the Fed’s message was that as long as the labour market continues to show improvement and they continue to project inflation returning to 2% over the next few years (as indicated in their December forecast) the lift-off for Fed rates could begin around the middle of this year. Peter takes this to mean sometime between June and September and most likely June so long as (1) core PCE inflation falls at most another tenth or so in the near term, (2) wage inflation is showing signs of rising, (3) survey measures of longer term inflation expectations are holding firm, and (4) employment and unemployment continue on their recent favourable trends. He thinks that if core inflation drops by several tenths this could push the first hike out a meeting or two.
If the Fed stick to their script then the market could be in for a small shock. Market-based measures of the first Fed hike place it at around the October meeting. This is already one meeting later than was being priced in at the start of the year. After this the second hike is priced in for around March 2016, whilst we entered the year pricing in the second hike for December 2015. So there is room here for volatility as we approach the summer FOMC meetings if the Fed’s message remains unchanged. It has long been our view that the Fed will struggle to hike as soon as it wants to given global growth and inflation issues, however there’s no doubt they are keen to pull the trigger so something will have to give at some point. So any evidence either way today will be interesting.
Talking of central banks, we’ve seen another surprise move overnight as Singapore has eased monetary policy by reducing the slope of the policy band for the Singapore Dollar. The central bank also cut inflation forecasts for this year with expectations of a 0.5% decline in prices. The SGD is around 1% weaker versus the Dollar and at its lowest since September 2010. The MAS is now the ninth central bank to ease in January, most of which have been a surprise move. Who is next is the big question, and can the Fed continue to try to prime the market for rate hikes when the rest of the world is easing?
Taking a look at the early trading in Asia this morning, equity markets are generally firmer with the Hang Seng (+0.61%), Nikkei (+0.40%) and Kospi (+0.50%) up but the Shanghai Comp (-0.07%) weaker. The ASX is +0.10% and the AUD +0.69% stronger versus the US Dollar following better than expected core inflation data out of Australia.
Back to markets yesterday, equities took a sharp leg lower in the US yesterday following largely mixed economic data as well as generally weaker corporate earnings. Both the S&P 500 (-1.34%) and Dow (-1.65%) closed just inside their intraday lows whilst CDX IG closed 1bp wider. Earnings yesterday supported the weaker sentiment in markets. In particular releases from Caterpillar, Microsoft and Proctor and Gamble headlined disappointing quarterly releases with earnings generally below consensus. Thematically, Proctor and Gamble reported difficulties with a fluctuating FX market – the company release noting that it was the ‘most significant fiscal year currency impact’ in its history. US chemicals group Dupont also downgraded 2015 profit forecasts following a larger than expected currency impact as a result of the stronger Dollar. As well as currency impacts, lower oil prices has been the other key theme that we’ve seen come out of results so far and yesterday’s release from Caterpillar highlighted the subdued demand from oil and mining services companies in particular. It wasn’t all bad news however. After market close yesterday shares in both Apple and Yahoo rose 7% and 10% respectively in extended trading following better than expected earnings. The FT reported that Apple in particular reported the highest quarterly net profit ($18bn) on record for any company despite Apple’s CFO noting that ‘results would have been even stronger absent fierce foreign exchange volatility’.
Away from earnings yesterday, it was a busy day for data in the US. Durable goods orders (-3.4% mom vs. +0.3% expected) and core capital goods orders (-0.6% mom vs. +0.9%) for December disappointed. Our US team noted that the latter print means core orders for Q4 have fallen at an 11.4% saar rate which is much weaker than recent industrial production indicators have showed. As a result our colleagues have downgraded their Q4 real GDP forecast to 3.3% from 4.2% previously but maintain that the advance estimate will likely be revised higher as top-down indicators indicate stronger growth. Elsewhere new home sales (481k vs. 450k expected) surprised to the upside whilst the January consumer confidence was particularly strong at 102.9 – ahead of expectations of 95.5 and nearly 10 points up from December’s reading. The reading was the highest since August 2007 and no doubt boosted by lower gasoline prices and an improving labour market. Finally the Case-Shiller home price index was in line at +0.8% mom whilst the preliminary services PMI ticked up a notch to 54.0 (from 53.3 previously). Treasuries were volatile over the course of trading. Having opened at 1.824%, the 10y benchmark hit an intraday low of 1.746% before paring back all of those gains to close unchanged.
There was similar weakness in Europe yesterday with the Stoxx 600 finishing -0.99% and the Dax -1.57%. Crossover also closed 11bps wider. Greek equities (-3.69%) ended weaker for the second successive day since Sunday’s election with banks (-11.61%) in particular leading the declines with continued uncertainties over deposits and potential further ELA access required. Greek 3y and 10y yields closed +199bps and +38bps wider respectively. In terms of the latest updates, Tsipras announced his new cabinet yesterday including naming Yanis Varoufakis as the new finance minister. As per Reuters the new government has, as expected, halted the privatization of Greece’s biggest port yesterday which had previously been agreed under its bailout agreement to China’s Cosco Group and four other potential suitors.
It was perhaps unsurprising to see comments from Germany’s Merkel yesterday quoted on Bloomberg saying that the debate about a Greek debt cut is astonishing and that the new government has to make clear whether it’s committed to terms of the EU aid programme, specifically saying that the ball is in Greece’s court. Interestingly another article on Bloomberg reported that the new Syriza-led coalition issued a statement opposing EU sanctions for Russia over the conflict in the Ukraine. According to the report, the Greek government was reported as saying that ‘Greece doesn’t consent’ and that the announcement violated ‘proper procedure’ by not securing Greek support. Interestingly Greece’s new foreign minister Kotzias has the opportunity to block further sanctions on Russia tomorrow at an EU meeting given that sanctions require a unanimous consensus from all 28 governments. It’ll be interesting to see the developments between now and then but the meeting could provide early signs into the near term approach Greece takes to dealing with the wider Euro-area, and vice-versa.
Away from Greece it was a quiet day elsewhere in Europe with just UK Q4 GDP, which came in a touch lower than expected (+2.7% yoy vs. +2.8% expected). 10y Gilts finished 3bps lower at 1.483% and Bunds were relatively unchanged at 0.383%. Peripheral yields however were anywhere from 2-7bps wider. The Euro closed 1.27% firmer versus the Dollar at $1.138.
In terms of the day ahead, its a relatively quiet day in Europe this morning with just the German import price index and consumer confidence for the region as well as in France. In the US this afternoon with little in the way of data, focus will likely just be on the aforementioned FOMC.
Your most important story of the day. Newly crowned Prime Minister of Greece, Alexis Tsipras has already mapped out his strategy dealing with the Europe and the ECB. Tsipras is already annoyed at the sanctions applied to Russia as it is hurting their exports of olives and other agricultural products to them. Immediately after being sworn in as Prime Minister, he first visited the rifle range which was the scene where 200 Greek citizens were murdered by the Nazis on May 1/1944 and he then visited the Russian ambassador setting the move by Tsipras to align his country with Russia, China and other BRICS nations. He immediately stopped the privatization of the key port of Piraeus to Costco and other western bidders as well as the port of Thessaloniki, and he orchestrated the stoppage of the privatization of the railway lines. This has infuriated Germany.
Ladies and Gentlemen: Greece is going to ally itself with the East and stiff the EU, the ECB, Germany, and western banks as they default on their entire 240 billion euro debt. The one missing piece needed by Greece would be financing and that would be accomplished with loans from the new BRIC development bank. The defaulting on the western bonds would blow up the entire European banking system. The ECB would need to have margin calls on all 19 Euro countries to restore the health of the ECB. You can be rest assured that Italy, Spain and Portugal would also want to exit the Euro system as additional margin call payments by them would be extremely harsh on their financial balance sheet. These countries would default on the huge amounts of euro debt owed by them. They would then go back to their original monetary systems such as the Italian lira, the Spanish peseta and the Portuguese Escudo.
(courtesy zero hedge)
Greece Begins The Great Pivot Toward Russia
Ten days ago, before the smashing success of Greece’s anti-austerity party, Syriza, we noted that Russia gave Greece a modest proposal: turn your back on Europe, whom you despise so much anyway, and we will assist your farmers by lifting the food import ban.
And, sure enough, Greece’s new premier Tsipras did hint with his initial actions that Greece may indeed pivot quite aggressively away from Europe and toward Russia in general and the Eurasian Economic Union in particular (as a tangent recall “Russia’s “Startling” Proposal To Europe: Dump The US, Join The Eurasian Economic Union“).
Some recent examples of this dramatic shift in perspective were the following:
Today we got further evidence that Tsipras will substantially realign his country’s national interest away from the west and toward… the east.
First, as Reuters reported, today the new premier halted the “blue light special” liquidation of Greece to those highest bidders who have the closest access to various printing presses and stopped the privatization of Greece’s biggest port on Tuesday, “signaling he aims to stick to election pledges despite warning shots from the euro zone and financial markets.”
One of the first decisions announced by the new government was stopping the planned sale of a 67 percent stake in the Piraeus Port Authority, agreed under its international bailout deal for which China’s Cosco Group and four other suitors had been shortlisted.
“The Cosco deal will be reviewed to the benefit of the Greek people,” Thodoris Dritsas, the deputy minister in charge of the shipping portfolio, told Reuters.
Europe, for one, will be most displeased that Greece has decided to put its people first in the chain of priority over offshore bidders of Greek assets. Most displeased, especially since the liquidation sale of Greece is part of the Greek bailout agreement: an agreement which as the Troika has repeatedly stated, is not up for renegotiation.
Syriza had announced before the election it would halt the sale of state assets, a plank of the 240 billion-euro bailout agreement. Stakes in the port of Thessaloniki, the country’s second biggest, along with railway operator Trainose and rolling stock operator ROSCO are also slated to be sold.
And it wasn’t just this open act of defiance that marked the new government’s anti-European agenda:
In a separate step, the deputy minister in charge of administrative reform, George Katrougkalos said the government would reverse some layoffs of public sector workers, rolling back another key bailout measure. “It will be one of the first pieces of legislation that I will bring in as a minister,” he told Mega TV.
The Germans were not happy: A German central banker warned of dire problems should the new government call the country’s aid program into question, jeopardizing funding for the banks. “That would have fatal consequences for Greece’s financial system. Greek banks would then lose their access to central bank money,” Bundesbank board member Joachim Nagel told Handelsblatt newspaper.
Well, maybe…. Unless of course Greece finds a new, alternative source of funding, one that has nothing to do with the establishmentarian IMF, whose “bailouts” are merely a smokescreen to implement pro-western policies and to allow the rapid liquidation of any “bailed out” society.
An alternative such as the BRIC Bank for example. Recall that the “BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks.”
And yes, the BRIC are going through their own share of pain right now as a result of plunging crude prices, but remember: crude is only low as long as the US shale sector is still vibrant. Once this marginal producer of crude with a $80 cost-breakeven is out of the picture, watch as Saudi Arabia tightens the spigots and Crude surges to $100, $150 or more. The question is whether Saudi FX reserves can outlast the Fed’s ZIRP, which is the only reason – think idiots junk bond investors desperate for any ounce of yield – why the bulk of unprofitable and cash flow-bleeding US shale can still operate with WTI at $45.
Which naturally means that now Russia (and China) are set to become critical allies for Greece, which would immediately explain the logical pivot toward Moscow.
But wait, there’s more.
As Bloomberg further reports, “Foreign Minister Nikos Kotzias is due in Brussels on Thursday to discuss possible additional sanctions on Russia over the conflict in Ukraine. Before the cabinet even meets for the first time tomorrow, the Greek government said that it disagreed with an EU statement in which President Donald Tusk raised the prospect of “further restrictive measures” on Russia.”
In recent months, Kotzias wrote on Twitter that sanctions against Russia weren’t in Greece’s interests. He said in a blog that a new foreign policy for Greece should befocused on stopping the ongoing transformation of the EU “into an idiosyncratic empire, under the rule of Germany.”
And when it comes to the natural adversary of any German imperial ambitions in recent history, Europe has been able to produce only one answer…
As we highlighted above, bankers are starting to take note of the actions of Tsipras.
He is entertaining the route paved by Iceland (who are performing quite well in 2014 ) and default. Remember that the banks are gorged to the hilt on sovereign debt. Today the 3 yr Greek bond is trading at 16% as default seems the obvious course of action. We should congratulate Tsipras as he is putting his citizens ahead of the interests of bankers.
(courtesy zero hedge)
Greek Stocks Crash, Bonds Plummet, Banks Have Worst Day Ever
In the two days after Syriza’s dramatic victory in the local Greek election, global investors assumed this loud cry against European policies would mean… more of the same, and as a result not much changed in the risk assessment of Greek assets. Then, overnight, following the previous report that not only does Syriza mean business but it is actively pivoting away from Europe (and toward Russia?), and everyone started paying attention, with a waterfall of selling engulfing not only the Greek stock market but also its bonds, which are crashing in the process sending the 3 Year yield to 16.4%, the highest since the restructuring, and the 10 Year either below or above 10%, depending on which data source is used (Bloomberg has them slightly below, others reporting 10-year bond yields up 50 basis points at 10.30%).
Prime Minister Alexis Tsipras promised “radical” change on Wednesday as his new government swiftly moved to roll back key parts of Greece’s international bailout, prompting a third day of losses on financial markets.
A swift series of announcements signaled the newly installed government would not back down from its anti-austerity pledges, setting it on course for a clash with European partners, led by Germany, which has said it will not renegotiate the aid package needed to help Greece pay its debts.
Even before the first meeting of the new cabinet, ministers had hit the airwaves to reassure voters they would honor campaign pledges to roll back the tough economic policies imposed under Greece’s 240-billion-euro bailout program.
The planned sale of a 30 percent stake in Public Power Corporation of Greece (PPC), the country’s biggest utility, was halted while ministers pledged to raise pensions for those on low incomes and reinstate some fired public sector workers.
“We are coming in to radically change the way that policies and administration are conducted in this country,” Tsipras told ministers at their first cabinet meeting.
Needless to say “radically changing” is the last thing all those US hedge funds, may they rest in piece, who bet all-in on the Grecovery in 2013 and 2014 is what they wanted to hear and the resultant decimation of Greek risk is as follows:
- Greek banks continue rout as 3-yr bond yield rises to 16.5%, highest since restructuring.
- 10-yr spread vs bunds widens to more than 1,000 bps
- FTSE/Athex banks index down 19%, taking decline since election to as much as 39%
- Piraeus Bank falls as much as 23.2%; volume-at-time is 286% of 30 day average
- Eurobank Ergasias falls as much as 22%; volume-at-time is 284%
- National Bank of Greece falls as much as 20.5%; volume-at-time is 394%
- Alpha Bank falls as much as 19.5%; volume-at-time is 324%
- Those four banks account for 0.54 points of Stoxx 600 decline; index down 0.6 points, or 0.2%, to 368.11
This is what the first three days of post-election Greece look like for local stocks: the biggest weekly (so far) drop ever.
Worse, Greek bank stocks right now are having their worst day ever.
It’s amazing what happens when a country finally has a politician who truly puts the interest of the people ahead of those of the bankers or shareholders.
And of course, nobody ever said going cold turkey on years of European bailouts (bailouts which are used by Greece to mostly continue paying its obligations to the Troika) is going to be easy. If indeed Greece is intent on proceeding with the Icelandic route, we congratulate them… and wish them luck because the next 6-12 months are going to be painful. The good news: it’s all uphill from there.
More bad news for the west: the new Greek government is totally against new sanctions against Russia. For more sanctions they need all 29 members to vote in the affirmative. If one negates it is off. Germany is totally annoyed:
Greece’s Coming Clash in Europe Starts With Russia Sanctions
(Bloomberg) — Greece’s new government questioned moves to impose more sanctions on Russia, adding a foreign-policy angle to its challenge to the status quo in Europe.
Prime Minister Alexis Tsipras’s Syriza-led coalition said it opposed a European Union statement issued in Brussels Tuesday paving the way to additional curbs on the Kremlin over the conflict in Ukraine, and complained it hadn’t been consulted.
“Greece doesn’t consent,” the government said in a statement. It added that the announcement violated “proper procedure” by not first securing Greece’s agreement.
Whether the government in Athens turns that rhetoric into reality will be tested when Greece’s new foreign minister, Nikos Kotzias, has the opportunity to block further sanctions at an EU meeting in Brussels on Thursday.
Sanctions require unanimity among the 28 governments. A Greek veto would shatter the fragile European consensus over dealing with Russia, potentially robbing Syriza of early goodwill as it lobbies for easier terms for Greece’s bailout.
It would also deepen a looming stand-off with German Chancellor Angela Merkel, who has signaled her support to keep up the pressure on Russia amid an escalation in violence in eastern Ukraine.
Kotzias, a politics professor and former communist, has advocated closer ties with Russia, spoken out against a German-dominated Europe and, in the 1980s, praised the Polish government’s crackdown on the Solidarity movement.
He said the new government objected to the “rules of operation” within the EU regarding the Russia statement.
“Anyone who thinks that in the name of the debt, Greece will resign its sovereignty and its active counsel in European politics is mistaken,” Kotzias said at the ceremony to take over the Foreign Ministry. “We want to be Greeks, patriots, Europeanists, internationalists.”
He’s part of a cabinet in Greece named on Tuesday by Tsipras after he formed a coalition with Independent Greeks, a more socially conservative party that also opposes austerity. After winning the election two seats short of a majority, Syriza decided against seeking a deal with To Potami, a new party whose leader has pledged to steer a “European course.”
The new government also includes Yanis Varoufakis, an economist who has called Greece’s bailout agreement a destructive “trap,” as finance minister. Before his appointment, he has advocated defaulting on the country’s debt while remaining in the euro. He is due to speak later on Wednesday after formally taking over the ministry.
Germany warned about rolling back budget cuts, pressing Tsipras to endorse the fiscal tightening that underpins the 240 billion-euro ($272 billion) aid program for Greece.
Volker Kauder, the parliamentary caucus leader of Merkel’s Christian Democrats, told reporters in Berlin on Tuesday that Germany “bears no responsibility for what happened in Greece.”
“Tsipras’s initial decisions, especially his coalition with a nationalist-hooligan party, point toward an exit from the euro,” Luis Garicano, an economics professor at the London School of Economics, said on Twitter. “If he wanted to negotiate, he’d have teamed up with To Potami, he wouldn’t have opposed sanctions against Russia.”
Russian President Vladimir Putin is cultivating the new government in Athens as an ally within the EU, wishing Tsipras success in “difficult conditions” in a congratulatory telegram after Sunday’s election.
The sanctions controversy started with EU President Donald Tusk saying he spoke on behalf of all the bloc’s leaders in calling for the Jan. 29 meeting of foreign ministers to consider “further restrictive measures” on Russia.
Tusk issued the declaration after no EU government objected, in a “silence procedure” commonly used by international bureaucracies. Tusk’s political apprenticeship came with Solidarity, making him the ideological opposite of many members of the Syriza movement.
Foreign ministers will consider widening a blacklist of Russian political and military figures accused of destabilizing Ukraine, while a discussion of further economic sanctions awaits a Feb. 12 summit of EU leaders.
As EU president since December, Tusk has brought to Brussels the uncompromising stance toward the Kremlin which marked his seven years as prime minister of Poland.
Tusk is still working out a division of labor over foreign policy with the EU’s chief diplomat, Federica Mogherini, a former Italian foreign minister. Tusk’s appointment partly reflected a desire to offset what some eastern European governments saw as Mogherini’s softness toward Russia.
Syriza moving fast rolling back austerity: now the barricades in front of Parliament have been removed. Pensions are being restored and also minimum wages have been raised:
(courtesy zero hedge)
“The Barricades Are Down” Syriza Is Already Rolling Back Austerity “Reforms”
It didn’t take long for Syriza to start making changes in Greece. While these may be minor at the margin compared to the debt “issues”, asKeepTalkingGreece reports, Alexis Tsipras and his junior coalition partner Panos Kammenos pushed the Fast Forward button to restore a series of so-called “reforms”, that is austerity measures imposed by the country’s lenders, the Troika – among the left-wing reforms are: scrapping planned privatizations, scrapping fees in public hospitals and prescriptions, restore “the 13th pension” for low-pensioners and other actions that SYRIZA had promised before the elections.And the iron barricades in front of Parliament have been removed.
The first revolutionary move was conducted by alternate Minister responsible for Citizens’ Protection and Public Order. Yiannis Panousis removed the iron barricades in front of the Greek Parliament. The barricades were installed to protect the lawmakers from angry demonstrators after the huge anti-austerity protests from 2010 onwards.
Panousis, who is Professor for Constitutional Law, made the announcement Wednesday morning. Right after the first meeting of the new cabinet concluded, the barricades were removed.
Alternate minister Andreas Xanthos announced the “targeted enhancement of the health sector”, scrapping the 5-euro fee at public hospitals and the 1-euro fee per prescription as well as reductions in the patients’ economic participation on drugs.
The unprecedented financial burden imposed on patients had quite some people stop taking their medication or seek charity organizations for life-saving drugs. KTG has reported many times about the plight in the Greek health sector.
Alternate Minister for Social Funds, Dimitris Stratoulisannounced a stop in pension cuts and to restore the “13th pension” for pensioners receiving below €700 per month. He also said that “uninsured farmers will receive again the €360 per month.
Minister for Labor and Social Solidarity, Panos Skourletis, announced that the minimum wage will be raised to €751 gross, while the collective bargains will be restored.
Under Troika pressure in the name of so-called “competitiveness”, the minimum wage plunged down to €580 gross and €490 gross for those below 25 years old in 2012 with the effect that households could not even cover their monthly basic needs.
Rehiring in Public sector
Alternate Minister for Administrative Reform Giorgos Katrougalos announced the re-hiring of those who were laid-off from the public sector in the scheme of “mobility”. According to Katrougalos, the lay-offs were against the Constitution.
School guards, cleaners and teachers were laid-off in masses, after the Greek government decided to fire over night some 10,000 people in order to meet Troika’s demands for a lean public administration. The lay-offs were not according to meritocracy criteria, the measure affected whole groups of employees.
Greek nationality to migrants’ children
Alternate Minister for Migration policy Tasia Christodoulopoulou announced that migrants’ children born and raised in Greece will be granted Greek nationality, probably also children that came here in very young age.
Taking into consideration the SYRIZA program as announced by Alexis Tsipras on January 2oth in Thessaloniki, more anti-austerity changes are on the note book of the new government. So far all ministers made their announcements in television programs. The official announcements are expected next week in the Greek Parliament when the coalition will seek vote of confidence.
So far we heard no ministerial announcement on TV regarding the painful issue of over-taxation.
* * *
Markets are becoming quite efficient as they recognize the inevitable Greek default with all what has happened yesterday and today in Greece:
(courtesy zero hedge)
Greek Credit Risk Spikes, Default Probability Tops 70%
Greek default risk has surged in recent days and today as it becomes clear what Syriza expects from Europe, short-term CDS are at post-crisis highs with 5Y CDS implying a 76% probability of default (based on standard recovery assumptions – which may be a little high in this case). Given the domestic bank dominance in the buying of domestic government debt, Greek banks are getting hammered as everyone’s favorite hedge fund trade is an utter bloodbath. Greek stocks overall are down and GGBs are tumbling once again – back at 16 month lows(given back all the ECBQE hope bounce). Perhaps not surprising moves, given new Greek Finance Minister Yanis Varoufakis reality-exposing comments yesterday, “the problem with the bailout is that it wasn’t really a bailout… it was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which destroyed our social economy.”
Greek Default Risk is spiking…
And Greek bonds are tracking that risk…
Greek stocks are collapsing…
led by an almost halving in banks…
We leave it to new Greek Finance Minister Yanis Varoufakis to conclude:
“The problem with the bailout is that it wasn’t really a bailout,” Varoufakis, 53, said in a Bloomberg Television interview on Jan 26.
“It was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which not only destroyed our social economy but also showed that the cost of our so-called bailout for the average German, the average Italian, the average Slovak was maximized.”
* * *
Then we get this:
Now We ‘Know’ Greek Banks Are Really In Trouble
“When it gets serious, you have to lie,” were the infamous words of one J-C Juncker and today – following the 40-50% collapse in Greek Bank equity capital this week,ECB’s Bank Supervision boss Nouy has come out to calm everything down:
- *NOUY SAYS GREEK BANKS ARE ‘PRETTY STRONG’, HAVE STRENGTHENED THEIR BALANCE SHEETS
- *ECB’S NOUY SAYS GREEK BANKS WILL SURVIVE CURRENT CRISIS
Which, translated for the elites means, “sell-sell-sell.” And then – just to add even more pressure, S&P puts Greece on Watch Negative.
- *S&P SAYS GREECE ‘B/B’ RATINGS MAY BE CUT ON POLICY UNCERTAINTY
Greek bank stocks down 40-50% this week
European Central Bank Supervisory Board Chair Daniele Nouy says in interview with Bloomberg Television that:
while Greek banks are facing a difficult situation now they are “pretty strong.”
“A lot of good work has been done to strengthen their balance sheets during the last years. So I think that they will go through this crisis like they went through the previous ones”
“They need to manage, in a conservative fashion, their liquidity positions. That’s the main focus right now and they are doing it. There is no doubt about that”
“I am following them like a supervisor during a situation that is not as exactly business as usual”
* * *
Late this afternoon, we received this news which should make the Greek decision on moving to the eastern side much easier:
source Russia Today and special thanks to Robert H for sending this to us:
Russia, Turkey announce new gas route with hub in Greece borders
The first gas pipe with a capacity of 15.75 billion cubic meters will be operational by December 2016.
Six hundred and sixty kilometers of the new Turkish Stream pipeline will go through the old South Stream corridor and a further 250 kilometers will head in the direction of the European part of Turkey.
The four threads which make up the pipeline will have a capacity of 63 billion cubic meters, Gazprom said in a statement following Tuesday’s meeting between CEO Aleksey Miller and the Turkish Minister of Energy and Natural Resources Taner Yildiz.
The company will apply to carry out design and exploration work in Turkish territorial waters on Wednesday, January 28.
Russia will pay for the laying of the undersea pipeline while the capacity within Turkish territory will be developed jointly. The participating shares will be discussed at further meetings.
The first gas is expected to be delivered to Turkey in December 2016. Earlier in January, Gazprom’s Sergei Kupriyanov said the construction of Turkish Stream will take a little longer than South Stream which was planned to be completed by 2017.
The offshore part of the cancelled pipeline with the capacity of 63 billion cubic meters of gas per year was supposed to go under the Black Sea to Bulgaria with a further route through Europe, ending at Austrian gas hub in Baumgarten.
Gazprom says European companies will be able to purchase gas at a gas hub which is expected to be built on the border between Turkey and Greece.
The gas supplies via South Stream were supposed to replace about two-thirds of gas supplies, which are now transmitted through Ukraine.
(courtesy Paul Craig Roberts/again special thanks to Robert H for sending this to us)
Washington’s attack on Russia has moved beyond the boundary of the absurd into the realm of insanity.
The New Chief of the US Broadcasting Board of Governors, Andrew Lack, has declared the Russian news service, RT, which broadcasts in multiple languages, to be a terrorist organization equivalent to Boko Haram and the Islamic State, and Standard and Poor’s just downgraded Russia’s credit rating to junk status.
Today RT International interviewed me about these insane developments.
In prior days when America was still a sane country, Lack’s charge would have led to him being laughed out of office. He would have had to resign and disappear from public life. Today in the make-believe world that Western propaganda has created, Lack’s statement is taken seriously. Yet another terrorist threat has been identified–RT. (Although both Boko Haram and the Islamic State employ terror, strictly speaking they are political organizations seeking to rule, not terror organizations, but this distinction would be over Lack’s head. Yes, I know. There is a good joke that could be made here about what Lack lacks. Appropriately named and all that.)
Nevertheless, whatever Lack might lack, I doubt he believes his nonsensical statement that RT is a terrorist organization. So what is his game?
The answer is that the Western presstitute media by becoming Ministries of Propaganda for Washington, have created large markets for RT, Press TV, and Al Jazeera. As more and more of the peoples of the world turn to these more honest news sources, Washington’s ability to fabricate self-serving explanations has declined.
RT in particular has a large Western audience. The contrast between RT’s truthful reporting and the lies spewed by US media is undermining Washington’s control of the explanation. This is no longer acceptable.
Lark has sent a message to RT. The message is: pull in your horns; stop reporting differently from our line; stop contesting the facts as Washington states them and the presstitutes report them; get on board or else.
In other words, the “free speech” that Washington and its EU, Canadian, and Australian puppet states tout means: free speech for Washington’s propaganda and lies, but not for any truth. Truth is terrorism, because truth is the major threat to Washington.
Washington would prefer to avoid the embarrassment of actually shutting down RT as its UK vassal did to Press TV. Washington simply wants to shut up RT. Lark’s message to RT is: self-censure.
In my opinion, RT already understates in its coverage and reporting as does Al Jazeera. Both news organizations understand that they cannot be too forthright, at least not too often or on too many occasions.
I have often wondered why the Russian government allows 20 percent of the Russian media to function as Washington’s fifth column inside Russia. I suspect the reason is that by tolerating Washington’s blatant propaganda inside Russia, the Russian government hopes that some factual news can be reported in the US via RT and other Russian news organizations.
These hopes, like other Russian hopes about the West, are likely to be disappointed in the end. If RT is closed down or assimilated into the Western presstitute media, nothing will be said about it, but if the Russian government closes down Washington’s agents, blatant liars all, in the Russian media, we will hear forever about the evil Russians suppressing “free speech.” Remember, the only allowable “free speech” is Washington’s propaganda.
Only time will tell whether RT decides to be closed down for telling the truth or whether it adds its voice to Washington’s propaganda.
The other item in the interview was the downgrading of Russian credit to junk status.
Standard and Poor’s downgrade is, without any doubt, a political act. It proves what we already know, and that is that the American rating firms are corrupt political operations. Remember the Investment Grade rating the American rating agencies gave to obvious subprime junk? These rating agencies are paid by Wall Street, and like Wall Street they serve the US government.
A look at the facts serves to establish the political nature of the ruling. Don’t expect the corrupt US financial press to look at the facts. But right now, we will look at the facts.
Indeed, we will put the facts in context with the US debt situation.
According to the debt clocks available online, the Russian national debt as a percentage of Russian GDP is 11 percent. The American national debt as a percentage of US GDP is 105 percent, about ten times higher. My coauthors, Dave Kranzler, John Williams, and I have shown that when measured correctly, the US debt as a percent of GDP is much higher than the official figure.
The Russian national debt per capita is $1,645. The US national debt per capita is
The size of Russia’s national debt is $235 billion, less than one quarter of a trillion. The size of the US national debt is $18 trillion, 76.6 times larger than the Russian debt.
Putting this in perspective: according to the debt clocks, US GDP is $17.3 trillion and Russian GDP is $2.1 trillion. So, US GDP is 8 times greater than Russian GDP, but US national debt is 76.6 times greater than Russia’s debt.
Clearly, it is the US credit rating that should have been downgraded to junk status. But this cannot happen. Any US credit rating agency that told the truth would be closed and prosecuted. It wouldn’t matter what the absurd charges are. The rating agencies would be guilty of being anti-american, terrorist organizations like RT, etc. and so on, and they know it. Never expect any truth from any Wall Street denizen. They lie for a living.
According to this site: http://people.howstuffworks.com/5-united-states-debt-holders.htm#page=4 the US owes Russia as of January 2013 $162.9 billion. As the Russian national debt is $235 billion, 69 percent of the Russian national debt is covered by US debt obligations to Russia.
If this is a Russian Crisis, I am Alexander the Great.
As Russia has enough US dollar holdings to redeem its entire national debt and have a couple hundred billion dollars left, what is Russia’s problem?
One of Russia’s problems is its central bank. For the most part, Russian economists are the same neoliberal incompetents that exist in the Western world. The Russian economists are enamored of their contacts with the “superior” West and with the prestige that they image these contacts give them. As long as the Russian economists agree with the Western ones, they get invited to conferences abroad. These Russian economists are de facto American agents whether they realize it or not.
Currently, the Russian central bank is squandering the large Russian holdings of foreign reserves in support of the Western attack on the ruble. This is a fools’ game that no central bank should play. The Russian central bank should remember, or learn if it does not know, Soros’ attack on the Bank of England.
Russian foreign reserves should be used to retire the outstanding national debt, thus making Russia the only country in the world without a national debt. The remaining dollars should be dumped in coordinated actions with China to destroy the dollar, the power basis of American Imperialism.
Alternatively, the Russian government should announce that its reply to the economic warfare being conducted against Russia by the government in Washington and Wall Street rating agencies is default on its loans to Western creditors. Russia has nothing to lose as Russia is already cut off from Western credit by US sanctions. Russian default would cause consternation and crisis in the European banking system, which is exactly what Russia wants in order to break up Europe’s support of US sanctions.
In my opinion, the neoliberal economists who control Russian economic policy are a much greater threat to the sovereignty of Russia than economic sanctions and US missile bases. To survive Washington, Russia desperately needs people who are not romantic about the West.
To dramatize the situation, if President Putin will grant me Russian citizenship and allow me to appoint Michael Hudson and Nomi Prins as my deputies, I will take over the operation of the Russian central bank and put the West out of operation.
But that would require Russia taking risks associated with victory. The Atlanticist Integrationists inside the Russian government want victory for the West, not for Russia. A country imbued with treason inside the government itself has reduced chance against Washington, a determined player.
Another fifth column operating against Russia from within are the US and German funded NGOs. These American agents masquerade as “human rights organizations,” as “women’s rights organizations,” as “democracy organizations,” and whatever other cant titles that serve in a politically correct age and are unchallengeable.
Yet another threat to Russia comes from the percentage of the Russian youth who lust for the depraved culture of the West. Sexual license, pornography, drugs, self-absorption. These are the West’s cultural offerings. And, of course, killing Muslims.
If Russians want to kill people for the fun of it and to solidify US hegemony over themselves and the world, they should support “Atlanticist integration” and turn their backs on Russian nationalism. Why be Russian if you can be American serfs?
What better result for the American neoconservatives than to have Russia support Washington’s hegemony over the world? That is what the neoliberal Russian economists and the “European Integrationists” support. These Russians are willing to be American serfs in order to be part of the West and to be paid well for their treason.
As I was interviewed about these developments by RT, the news anchor kept trying to confront Washington’s charges with the facts. It is astonishing that the Russian journalists do not understand that facts have nothing to do with it. The Russian journalists, those independent of American bribes, think that facts matter in the disputes about Russian actions. They think that the assaults on civilians by the American supported Ukrainian Nazis is a fact. But, of course no such fact exists in the Western media. In the Western media the Russians, and only the Russians, are responsible for violence in Ukraine.
Washington’s story line is that it is the evil Putin’s intent on restoring the Soviet Empire that is the cause of the conflict. This media line in the West has no relationship to any facts.
In my opinion, Russia is in grave danger. Russians are relying on facts, and Washington is relying on propaganda. For Washington, facts are not relevant. Russian voices are small compared to Western voices.
The lack of a Russian voice is due to Russia itself. Russia accepted living in a world controlled by US financial, legal, and telecommunication services. Living in this wold means that the only voice is Washington’s.
Why Russia agreed to this strategic disadvantage is a mystery. But as a result of this strategic mistake, Russia is at a disadvantage.
Considering the inroads that Washington has into the Russian government itself, the economically powerful oligarchs and state employees with Western connections, as well as into the Russian media and Russian youth, with the hundreds of American and German financed NGOs that can put Russians into the streets to protest any defense of Russia, Russia’s future as a sovereign country is in doubt.
The American neoconservatives are relentless. Their Russian opponent is weakened by the success inside Russia of Western cold war propaganda that portrays the US as the savior and future of mankind.
The darkness from Sauron America continues to spread over the world.
This article originally appeared on paulcraigroberts.org. Reprinted with permission from the author.
(courtesy Washington Free Beacon and special thanks to Robert H for sending this to us)
January 26, 2015 1:40 pm
China is providing an economic lifeline to Russia by boosting its imports of Russian oil, the Wall Street Journal reports.
Russia’s economy has deteriorated with the recent drop in oil prices and levying of sanctions from the West in response to the Kremlin’s destabilization of Ukraine. Moscow has now turned to Beijing for support despite their long-time rivalry:
But Chinese customs data released Friday show that China’s crude imports from some big OPEC nations have plummeted, while imports from Russia surged 36% in 2014. Meanwhile, imports from Saudi Arabia fell 8% and those from Venezuela dropped 11%.
As American companies have pumped soaring amounts of oil from shale, U.S. imports of Saudi Arabia’s crude oil and petroleum products have also fallen, dropping to 25.6 million barrels a month in October, from more than 42 million barrels a year earlier.
The changing pattern in China’s imports is one result of Russian President Vladimir Putin turning to China as an economic lifeline as Moscow is shunned by the West over the Ukraine crisis.
That has tilted in China’s favor the relationship between two countries that for decades have jousted for influence in Asia.
Additionally, Russian President Vladimir Putin secured a deal last May with Chinese President Xi Jinping for Russian natural gas exports to China worth hundreds of billions of dollars. Russian businessmen met almost exclusively with their Chinese counterparts at the Davos economic forum last week.
The budding Russian-Chinese relationship could undermine the United States and Europe’s efforts to punish the Kremlin economically for its support of separatists in Ukraine.
The Baltic Dry Index is a perfect predictor of global economic activity.
It is simply the cost to move dry goods like commodities on a ship (not oil). The lower the cost, the lower global demand for goods. Today the Baltic Dry Index has never been lower: we simply have a global lack of demand and thus huge deflationary pressures:
(courtesy Baltic Dry Index/zero hedge)
Baltic Dry Index: 666
Forget The Hindenburg Omen and The Hilsenrath Omen, today we have the real deal as The Baltic Dry Index hits the ominous 666 level – the lowest print for this time of year on record. Of course, just like with oil – this is brushed off as over-supply (not under-demand) and we are sure someone will opine how positive this drastic deflation of shipping rates is for global business… but still – this is the lowest print since September 2012 (and practically the lowest since the recession).
At 666, The Baltic Dry is practically at post-recession lows…
and is the lowest ever on record for this time of year…
Medvedev is very angry at the west and states that if Russia is cut off from the SWIFT system they will retaliate by economic means or other…… (hacking into the west’s huge financial systems maybe>>???)
(courtesy zero hedge)
Medvedev Warns Of “Unlimited Reaction” If Russia Cut From SWIFT
Russia signed into law its anti-crisis plan today(though details will not be released until tomorrow). Prime Minister Dmitry Medvedev, however, was quite vociferous in some of his threats, warning The West that the “Russian response – economically and otherwise – will know no limits” if Russia is cut off from the SWIFT payments system. Additionally, as Royce, the chairman of the House foreign affairs committee, explains Iran nuclear talks “appear to be stalemated,” just days after Iran completes its de-dollarization and news today, thatRussia and Iran plan to create a mutual account for bilateral payments in national currencies.
Western countries’ threats to restrict Russia’s operations through the SWIFT international bank transaction system will prompt Russia’s counter-response without limits, Prime Minister Dmitry Medvedev said on Tuesday.
“We’ll watch developments and if such decisions are made, I want to note that our economic reaction and generally any other reaction will be without limits,” he said.
In late August 2014, media reports said the UK had proposed banning Russia from the SWIFT network as part of an upcoming new round of sanctions against Moscow over its stance on developments in neighboring Ukraine. However, this proposal was not supported by the EU countries at the time.
After recent shelling of the Ukrainian city of Mariupol some western countries again started calling to disconnect Russia from SWIFT.
SWIFT transaction system
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) transmits 1.8 billion transactions a year, remitting payment orders worth $6 trillion a day. The system comprises over 10,000 financial organizations from 210 countries.
Under the SWIFT charter, groups of members and users are set up in each country covered by the system. In Russia, these groups are united in the RosSWIFT association.
* * *
Russia intends to have its own international inter-bank system up and running by May 2015. The Central of Russia says it needs to speed up preparations for its version of SWIFT in case of possible ”challenges” from the West.
“Given the challenges, Bank of Russia is creating its own system for transmitting financial messaging… It’s time to hurry up, so in the next few months we will have certain work done. The entire project for transmitting financial messages will be completed in May 2015,” said Ramilya Kanafina, deputy head of the national payment system department at the Central Bank of Russia (CBR).
* * *
As Reuters reports, Russia’s isolation appears to be shrinking…
Russia and Iran plan to create a mutual account for bilateral payments in national currencies, RIA news agency quoted Mehdi Sanaei, Iran’s ambassador to Moscow, as saying.
“Both sides plan to create a mutual bank or a mutual account to make payments in rials and roubles possible,” the ambassador said.
* * *
Quickly followed by:
- *SHELBY SAYS MORE PRESSURE ON IRAN NEEDED FOR `VIABLE’ DEAL
- *ROYCE SAYS IRAN NUCLEAR TALKS `APPEAR TO BE STALEMATED’
- *CHAIRMAN ROYCE OF HOUSE FOREIGN AFFAIRS HOLD IRAN HEARING
- *OBAMA, SAUDI KING DISCUSSED IRAN NUCLEAR NEGOTIATIONS: OFFICIAL
Your humour story of the day: (needs no comment)
Russia May Condemn “Annexation” Of East Germany
Who says the Russians, increasingly isolated by the west (Europe and the US threatened over the past 24 hours to escalate sanctions yet again) and increasingly morewelcome by China, India and the rest of the non-western world…
… don’t have a sense of humor? Days after the speaker of the Russian Duma, Sergei Naryshkin, faced scathing criticism of Russia’s
annexation of Crimean peninsula when he spoke at the Parliament Assembly
of Europe, he has come up with a novel suggestion whenhe asked a committee to study a proposal to condemn the reunification of Germany in 1990.
The logic: (unlike in Crimea) there was no public referendum to merge the two nations, which in turn goes to the legality of the most powerful nation in Europe, a nation, which however as the following maps demonstrate, is still quite divided in most aspects despite over 25 years of unity:
More from DPA:
Russian lawmakers said Wednesday that they will discuss a proposal to condemn West Germany‘s “annexation” of East Germany.
Sergei Naryshkin, the speaker of the State Duma, ordered the lower house of parliament‘s international affairs committee to look into the proposal from a Communist Party deputy, Russian news agencies reported.
The deputy, Nikolai Ivanov, said that the committee should prepare a declaration that condemns the annexation of the German Democratic Republic by West Germany. “Other than in Crimea, no public referendum was held in the GDR,” Ivanov said according to the Duma‘s homepage.
Moscow made Crimea a part of the Russian Federation in March, after a controversial referendum that was condemned by the West for being held under the presence of Russian troops.
Naryshkin has said that it would be wrong to compare German unification with Crimea.
“By the logic of those who call (Crimea) an annexation, you can easily say that the Federal Republic of Germany annexed the German Democratic Republic,” Naryshkin said on Sunday. He added that Russia was against such logic, the RIA Novosti state news agency reported.
East and West Germany unified in 1990, one year after the fall of the Berlin Wall in 1989. The unification was explicitly approved by the Soviet Union and the Western allied powers who had overseen Germany‘s partition during the Cold War.
And, if that fails, there is always the matter of the Confederate South…
Crude oil supplies surge knocking down its price today:
(courtesy zero hedge)
Crude Supplies Surge To Highest Since At Least 1982
EIA Inventory build was double expectations at 8.87 million barrels…
With Total Crude Supply at its highest since at least 1982…
* * *
Remember how exuberant yesterday’s small gains in Crude Oil were perceived to be? Yeah – that’s all over, with WTI back near a $44 handle – following a large 12.7 million barrel inventory build according to API (EIA reports the ‘main event’ at 1030ET today – which Saxo Bank warns “a bigger-than-expected build would likely push the mkt over the cliff edge.”) Additional weakness overnight is also likely due to Goldman’s shift to a ‘sell’ for the next 3 months.
Goldman downgrades to “sell”
We downgrade commodities to Underweight on a 3-month basis and upgrade to Overweight on a 12-month basis. Despite the large declines in commodity prices, we see risks as still skewed to the downside over the near-term. Lower oil prices are also driving cost deflation across the broader commodity complex. And roll yields remain negative for most commodity markets, weighing on returns. We expect WTI oil prices close to $40/bbl for most of 1H 2015, which should slow supply growth and balance the global oil market by 2016. We then expect oil prices to move to the marginal cost of production (US$65 for WTI and US$70 for Brent). This suggests a strong recovery from current prices, but the timing is uncertain and we would wait for signs of stabilisation (less inventory build and better roll yields) before shifting to a more positive stance on commodities.
But, as Bloomberg reports, the market is “waiting on the main event of the day, which is the EIA inventory data,” says Saxo Bank head of commodity strategy Ole Hansen.
“A bigger-than-expected build would likely push the mkt over the cliff edge, while a not so strong build could be the ammunition the bulls need to trigger some sort of recovery”
“The mkt is stuck in a tight range, looking for a breakout, but it is unclear in which direction that breakout will be,” says Hansen. “The mkt is torn between general belief you don’t want to miss the opportunity to buy, while at the same time the fundamentals don’t support the recovery”
* * *
Hope springs eternal though…
A must read from this former bull:
Everything he says is correct. Pay attention to the key line:
why would an investor trade in his European bonds yielding only .4% for cash yielding -.02%.
Draghi’s QE will fail because already a major portion of the yields are in negative territory.
(courtesy zero hedge)
“Equities Will Be Devastated” Crispin Odey Warns, Looming Recession Will Be “Remembered For 100 Years”
“I think equity markets will get devastated,”warns famed $12bn AUM hedge fund manager Crispin Odey in his latest letter to investors. Having been one of the biggest bulls of this particular central bank artificial-bull cycle, his dramatic bearish tilt (as we discussed what he thinks are the biggest risks underpriced by the market previously), is notable. Finally, Odey fears major economies are entering a recession that will be “remembered in a hundred years,” adding that the “bearish opportunity” to short stocks looks as great as it was in 2007-2009.
Odey Asset Management (report for Dec 2014)
The themes I have been outlining since the second quarter of 2014 are now establishing themselves:
A faltering Chinese economy with growth ultimately slowing down to 3%.
A hard landing for those countries plugged into China’s growth – especially Australia, South Africa and Brazil.
A fall in commodity prices bringing with it pain to those heavily exposed. For oil this is the Middle East, Venezuela, Argentina, mid-west USA, Canada, Norway and Scotland.
No one forecast how fast and how far those commodity markets would fall. However, the same people who singly failed to see this coming are the first to say that the benefits of falling prices will outweigh the costs. My problem with such a hopeful outcome is that, in my experience, those that lose out from a fall in their income are quicker to adjust than those that benefit. In that intertemporal space lurks a recession.
For me, the slowdown/recession finds a secondary downturn thanks to the immediate closing down of any discretionary capital expenditure in the affected industr es and countries, something we are only just seeing. This obviously has knockon effects for incomes and employment. At that time the exchange rate is likely to be falling to give some support. In my world this slowdown in the commodity producer’s economy is felt via falling exports back in the beneficiary’s economy, which finds external markets weaken. Again, if I am right on timing, the effect can be great because it is not yet affected by a pickup in spending in the beneficiary’s economy.
As always, that is the theory and markets will show whether it works in practice. In my world, this hit to the world economy is the first experience of a business cycle since 2008. Most investors do not believe we can experi-ence such a downturn. They rely upon Central bankers who they think have solved the problem.
However, let’s also deal with three counters that I currently have to field:
1. ‘How long dare you be wrong?’
2. The opposite. ‘Do you think after a good quarter, this is all in the price?’
3. ‘But isn’t a downturn in the world economy leading to massive counter-measures in terms of liquidity, as en-visaged by Draghi and the ECB, which will push mar-kets and assets higher?’
My answers are as follows:
1. The performance of the fund since I decided that the world would end differently to my previous thinking, which was in March/April 2014, reflects that I have not been especially early in this call. It would have been rather nice to get the fall in oil spot on, but we didn’t.
2. No change in cycle lasts for nine months. This down cycle is likely to be remembered in a hundred years, when we hope it won’t be rated for “How good it looks for its age!”. Sadly this down cycle will cause a great deal of damage, precisely because it will happen despite the efforts of the central banks to thwart it.
3. We need to go back to 2008. We had seen reckless spending and reckless borrowing, fraudulently obtained credit advances and overvalued housing. And yet, de-spite the banks losing a great deal of money and house prices in the USA tanking, we hardly saw a recession in 2009. Why? Because when the Anglo-Saxon central banks lowered interest rates from 5.25% to effectively zero, they put the equivalent of 30% of net income into the hands of the overborrowed. There were other QE measures taken but this was the important one.
Today we get excited about what Draghi is going to with his QE plans for Europe. However, buying government bonds yielding 1.2% does not move the dial for European borrowers. Moreover it is almost impossible with negative short rates of 0.2%, because why would anyone sell a bond to the govern-ment, even if the yield is only 0.4%, to get a –0.2% yield on their cash? It looks like Draghi’s measures will disappoint markets. Faced with a deflationary bust, monetary policy will prove to be but “pushing on a string”.
There will be a strong temptation for individual countries to act independently of each other to soften the downturn. In this regard the story looks like it is only half way through. Russia will necessarily have to introduce exchange controls, and that really quite soon. Australia, where the average wage is over $70,000, while the USA is creating jobs at $28,000, will have to allow the currency to fall further. Japan has shown, under Abe, how it intends to react. ‘Everyman for himself’ puts enormous stress on a world trading system which has watched world trade rise from 12% to 32% of world GNP in little over 20 years.
So, where am I placing my money?
? Firstly, I think equity markets will get devastated. Un-announced business cycles ensured Japan’s stock mar-ket rating fell by two thirds over 20 years.
? Equities are priced for perfection,pushed up by SWF and high yield investors looking for higher yields and better covenants than high yield bonds.
? Commodity-related sectors look unappealing and dangerous.
? International consumer companies look overexposed to EMs.
? Fund management companies look overexposed to the wrong assets, especially EMs.
? Volatility is rising. Not every trade will work.
? Australia is still to see rates down to 0.5% at the short end, 1.5% at the long end, down from 2.5% currently.
? Currency trading is still to make the money. It made money last year as it was where the ‘tyres hit the road’ – equities are just the residual.
? Equity markets will struggle to understand the quarterly translation and transaction effects of these currency moves on corporate profits, starting with Q1 2015.
We have seen though some strange things, with economics 101 turned on its head. We’ve seen that falling prices produce more supply, as the biggest producers see that they can take market share and use the opportunity by reducing average costs through excess production. We’ve seen that in the oil, minerals and iron ore industries. We have also seen in the last couple of years that as bond yields fall, governments are able to issue more debt.
But this time round the problem we have as well is that politics will start to rear its head and we are left to deal with politi-cians who are increasingly critical of the capitalist system’s ability to allocate capital and provide for society.
For me the shorting opportunity looks as great as it was in 07/09, if only because people are still looking at what is hap-pening and believe that each event is an individual, isolated event. Whether it’s the oil price fall or the Swiss franc move, they’re seen as exceptions.
After the 1987 crash, a friend of mine, then a young Director of Sotheby’s, was sent to consult an old Partner who had been at Sotheby’s during the 1930s and was still alive, albeit in a nursing home. My friend asked the question “What was it like in the 30s?” and the man replied “It was like being bitten by a tarantula.” My friend didn’t really understand that, but later on in the conversation the old Partner said “A spasm of activity followed by a death.”
My point is that we used all our monetary firepower to avoid the first downturn in 2007-09, so we are really at a dangerous point to try to counter the effects of a slowing China, falling commodities and EM incomes, and the ultimate First World effects. This is the heart of the message. If economic activ-ity far from picks up, but falters, then there will be a pain-ful round of debt default.
We already have volatility across asset classes and as I say, equities are the residual. There is a precious little earnings growth ex-Japanese exporters and we have now reduced our US cyclical exposure as we expect the commodity-induced recession in the mid-west to effect the resilience of the greater US economy. In Europe, we are half way through the write-off process, having written off half as much as the US. Draghi will disappoint and this may cause the first Euro rally given the fall from €1.25 to €1.15 in a month.
We are in the first stage of this downturn. It is too early to see what will happen – a change of this magnitude means the darkness and mist is very great. We will make some mistakes but with our thinking we won’t make the major mistakes. The problem is where you stand – I am amazed to see so many are fully invested given that equities are already fighting the downtrend. Mid and smallcaps have moved into bear markets and much relies on large caps to keep the whole thing going and they are very exposed to international trade.
Singapore Enters The Currency Wars: Weakens SGD By Most In 3 Years
Today’s rambunctiousness in US equity markets as every company (even AAPL admitted this quarter would be more problematic from an FX perspective) rotates from ‘weather’ excuses to ‘currency’ excuses is not going to get any better as tonight, yet another world nation entered the ‘devalue-or-die’ brigade. Singapore’s MAS announced a surprise shift in the slope of their policy band – implicitly loosening policy and so the Singapore Dollar dumped over 160 pips against the USD, the biggest drop in almost 3 years, tumbling to its weakest since Mid 2010. Interestingly, against the Japanese Yen this move merely roundtrips SGD strength from yesterday as one wonders who the real enemy in the competitive devaluation game is…
The Sing Dollar weakened to 1.35 against the USD – the biggest single-day drop since Feb 2011…
A big drop for the SGD…
But against the JPY, it’s a small move…
Raising the question of just who the currency war is against…
Canada’s job growth this year has been a total fallacy:
(courtesy zero hedge)
Canada Just “Revised” All Of Its 2014 Job Gains 35% Lower
Who can forget the farce conducted by Canada’s labor statistics office back in August when, as we reported, “Canada Releases Atrocious Jobs Data; Then Revises It Above The Highest Estimate Following Public Outcry.” It was then that we got our first hint that when it comes to massaging data, Canada is on par with China and even the US.
Well, Statistics Canada just outdid itself moments ago when it reported that those 185,700 jobs gains it had previously reported for all of 2014… well, it was only kidding, and after a second look, the number has been revised a whopping 35% (!) lower to only 121,300. How long until a lightbulb goes over the BLS’ head and the US department of seasonal adjustments decides to do the same?
The “revised” numbers:
Employment gains in 2014 amounted to 121,000 or 0.7%, with the bulk of the growth in September and October. In the 12 months to December, the unemployment rate declined 0.5 percentage points to 6.7%.
Following the release of population estimates based on the most recent Census of Population, a standard revision is applied to the Labour Force Survey estimates. This review is based on these revised estimates released today, which are different from those published on January 9 (see note to readers).
The employment growth rate of 0.7% observed in 2014 was the same as that of 2013, and below the rate of 1.8% recorded in 2012.
Employment growth in the year was concentrated among men aged 25 and older.
There were more private sector employees (+88,000 or +0.8%) compared with December 2013. The number of public sector employees and self-employed was little changed. Adjusted to the concepts used in the United States, the unemployment rate in Canada was 5.7% in December, while the US rate was 5.6%
Just like in the US, Canada’s participation rate also declined:
The population aged 15 and older grew by 1.1% in 2014, a faster pace than employment. As a result, the employment rate declined 0.2 percentage points to 61.3%. The labour market participation rate trended downward throughout 2014, falling 0.6 percentage points to 65.7% in December 2014—the lowest since 2000.
The downward trend in labour force participation was partly due to population ageing. There was an increase in the share of Canadians aged 55 and older, who are less likely to participate in the labour market. Furthermore, the participation rate among people aged 55 and older declined 0.9 percentage points over the 12 months. At the same time, the rate for women aged 25 to 54 declined 0.8 percentage points, also contributing to the downward trend.
Finally, as a result of the above revisions, the Canadian unemployment rate was revised higher from 6.6% to 6.7%.
Perhaps it is about time to put the National Weather Service in charge of all “data collection and manipulation.” And while we are at it, maybe we can put them in charge of the Federal Reserve too?
The new Venezuelan entrepreneur: waiting in line for toilet paper and other necessities
is already a “good living”
(courtesy zero hedge)
The New Venezuelan Entrepreneur: Making A living Lining-Up For Toilet Paper
At two in the morning, Krisbell quietly slips out of bed so as to not wake the two small children curled up next to her.
She grabs her phone and quickly dials her friends’ numbers as she’s already headed out the door to get the day’s intelligence report.
Most importantly—where is milk, sugar, and toilet paper being sold today?
From the moment price controls were levied in the country, there were shortages of everything in Venezuela.
Each month, it’s become increasingly difficult to get basic goods. And the lines are growing longer and longer.
Not everyone can afford to wait in line half the day just to get a few supplies.
And since you can’t even get everything in one store, it takes the second half of the day to get the rest of what you need—if there’s even anything left by then.
Friends and neighbors had started coming to Krisbell, asking her if she could help them get things from the grocery store.
They all have to work just to be able to afford the food in the first place, and they can’t spare the time to stand in line.
So (as reported by Bloomberg) Krisbell started taking on clients. Now she has enough that she’s earning her entire living from waiting in line.
Imagine—an entire cottage industry (absurd as it may be) now exists in Venezuela because of destructive government polices.
Everyone in the country has to pay extra for their basic goods, while others dedicate their professional lives to the unproductive task of standing in line.
(If this seems far-fetched, consider that the US tax preparation industry takes in $6 billion annually for dedicating itself to the unproductive task of filling out Byzantine tax forms…)
There’s no limit to the stupidity and destructiveness of people in power, and Venezuela’s President Maduro is a prime example.
This man (and his predecessor) took the country with the largest oil reserves in the world and crippled it to the point that Venezuela now imports oil.
And that was before oil prices plummeted. Now the country is even weaker.
Venezuela’s government is now on the brink of defaulting on its financial obligations… just as it has already defaulted on its obligations to its citizens.
It’s a sad example of what governments do when they go bankrupt.
Almost invariably they manipulate the currency and print money.
This eventually causes inflation to get out of hand and prices to soar. They try to control it by imposing price controls.
And because it becomes unprofitable for businesses to produce at artificially low prices, shortages ensue.
Then they institute capital controls to trap money inside the country.
This movie has played out so many times before. And yet people rarely learn.
The consequences of terrible decisions creep up gradually, and then suddenly. Most people don’t realize what’s happening until it’s too late.
The resulting economic hardship often leads to extremism, or dangerous populism. Just look at what’s happening across Europe (and especially Greece with its new radical left Prime Minister).
But it all starts with a bankrupt government and decades of destructive policies.
We’ve all seen what’s happened with Venezuela. If you’re in a bankrupt nation, make sure this doesn’t affect you. Make sure you always have a Plan B.
Early Wednesday morning USA 10 year bond yield: 1.82% !!! up 2 in basis points from Tuesday night/
USA dollar index early Wednesday morning: 95.96 up another 20 cents from Tuesday’s close
The NIKKEI: Wednesday morning : up 27.43 points or 0.15%
Trading from Europe and Asia:
1. Europe stocks mostly in the red .(except Germany)
2/ Asian bourses all in the green except Shanghai … Chinese bourses: Hang Sang in the green ,Shanghai in the red, Australia in the green: /Nikkei (Japan) green/India’s Sensex in the green/
Gold early morning trading: $1291.00
Your more important currency crosses early Wednesday morning:
Eur/USA 1.1362 down .0019
USA/JAPAN YEN 117.85 up .020
GBP/USA 1.5203 up .0006
USA/CAN 1.2433 up .0033
This morning in Europe, the euro continues to move lower, trading now well above the 1.12 level at 1.1362 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 down again in Japan by 2 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 1.52 level at 1.5203.(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 1.2433 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 Wednesday morning USA 10 year bond yield: 1.82% !!! up 1 in basis points from Tuesday night/
USA dollar index early Wednesday morning: 94.10 up 8 cents from Tuesday’s close
And now for your closing numbers for Wednesday:
Closing Portuguese 10 year bond yield: 2.59% up 14 in basis points from Tuesday
Closing Japanese 10 year bond yield: .30% !!! up 4 in basis points from Tuesday
Your closing Spanish 10 year government bond, Wednesday up 5 in basis points in yield from Tuesday night.
Spanish 10 year bond yield: 1.44% !!!!!!
Your Wednesday closing Italian 10 year bond yield: 1.59% up 6 in basis points from Tuesday:
trading 15 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.1277 down .0091
USA/Japan: 117.57 down .213
Great Britain/USA: 1.5131 down .0058
USA/Canada: 1.25220 up .0125
The euro collapsed big time this afternoon and it closed down by .0091 points finishing the day well below the 1.13 level to 1.1277.(FOMC report/raising rates soon) The yen was well up in the afternoon, and it was up by closing to the tune of 21 basis points and closing well below the 118 cross at 117.57 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound lost ground during the afternoon sessions and was down on the day closing at 1.5131. The Canadian dollar collapsed this afternoon from the hawkish FOMC meeting and weak oil price.
As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system.
Your closing 10 yr USA bond yield: 1.72 down 10 basis points
Your closing USA dollar index:94.65 up 63 cents on the day.
European and Dow Jones stock index closes:
England FTSE up 14.33 points or 0.21%
Paris CAC down 13.27 or 0.29%
German Dax up 82.39 or 0.78%
Spain’s Ibex down 142.00 or 1.34%
Italian FTSE-MIB down 167.38 or 0.81%
The Dow: down 195.89 or 1.13%
Nasdaq; down 43.50 or 0.93%
OIL: WTI 44.31 !!!!!!!
Closing USA/Russian rouble cross: 67.87 up 1/8 rouble per dollar on the day.
And now for your more important USA economic stories for today:
Your New York trading for today:
Fed-nado Crushes Stocks And Crude; Long Yields Hit Record Low
How Treasury Shorts felt this afternoon…
What hungry stock market cheerleaders heard from The Fed…
Two words – Thanks Janet…
all dumping after a quick kneejerk hjigher post-FOMC
Dow dropped 400 points off the overnight highs!!
And S&P crushed 55 points from post-AAPL highs…
The S&P finished “not” off the lows…
S&P and Dow break below their 100DMA – we’re gfonna need a Fed Speaker stat!
On the week, stocks are ugly.. withg Nasdaq leading the selloff
Which leaves everthing red year-to-date…
and Dow and S&P down since the end of QE3
The USDollar gained post FOMC but remains lower on the week…
Commodities had been weaker into the FOMC statement but gold outperformed post..
A lot of turmoiling today…
Crude was smashed to new cycle lows (after record supply, big build, and Fed)
Kiwi was monkey-hammered… (and has been since SNB as carry trades are unwound)
Treasury Yields collapsed
to new record 30Y yield lows…
And finally, because a day like that would not be complete without it…
And now the words we have been waiting for:
(courtesy zero hedge)
Unanimous Fed Remains “Patient” On Target To Normalize Rates, Expects Lower Inflation – Full Statement Redline
With all eyes firmly focused on the words “patient” on rate hikes, “considerable” period of lower rates, and “transitory” oil-driven deflation, The FOMC did not disappoint
- *FED REPEATS IT CAN BE PATIENT IN STARTING TO RAISE RATES
- *FED SAYS ECONOMY HAS BEEN `EXPANDING AT A SOLID PACE’
- *FED CITES `STRONG JOB GAINS’ AND LOWER UNEMPLOYMENT RATE
- *FED SAYS INFLATION EXPECTED TO DECLINE FURTHER IN NEAR TERM
So shrugging off the global tumult, The Fed appears set to raise rates no matter what to remove themselves from the corner they are stuck in, wary of what they can do when the next ‘event’ hits home.
Pre-FOMC: S&P Futs 2024.50, Gold $1286, 10Y 1.778%, EURUSD 1.1339, Dec15 ED 99.285. Full redline below.
* * *
Liquidity disappeared into the statement
Since The Fed ended QE3, Bonds are up almost 14%, stocks flat, and precious metals up 9-11% (oil down 42%)
And since The Dec 2014 FOMC, Silver is up 15% with bonds, gold, and USD up around 7%
* * *
In light of today’s statement, we thought the following would be interesting…
What The Fed said in the past about The Dollar strength…
* * *
And the full statement redline: see zero hedge
Then the market tanks!!:
(courtesy zero hedge)
Markets Disappointed As FOMC ‘Upgrades’ Economy & Jobs In Hawkish Statement
The 3 key phrases from today’s FOMC Statement are:
- “Strong Jobs Gains” instead of “Solid Job Gains”,
- “Considerable time” sentence dropped entirely
- “Solid Pace” instead of “Moderate Pace” For Economy
- Add “Inflation is anticipated to decline further in the near term” as new language
Suggesting a bullishly economic, hawkish policy statement… and stocks, crude, and bond yields are sliding on the news.
* * *
Crude crashed to new cycle lows…
… just as the Fed predicted moments ago:
* * *
Full Statement: see zero hedge
Jeff Gundlach, a bond guru states that if the Fed raises rates it will be a big mistake. There is no way they can raise rates as this will blow up the huge interest rate swap business and that is mega trillions in derivatives.
(courtesy Jeff Gundlach/zero hedge)
Jeff Gundlach Warns “The Fed Is About To Make A Big Mistake” (& That’s Why Bond Yields Are Crashing)
Since The FOMC’s “hawkish” statement, bond yields have utterly cratered as near-record speculative short positioning in bonds unwind the long-end. However, fundamentally speaking, DoubleLine’s Jeff Gundlach explains, the Federal Reserve is on the brink of making a big mistake simply put, “if Fed Chair Janet Yellen goes ahead with this plan (to raise rates for ‘philosophical reasons’), she runs the risk of having to quickly reverse course and cut interest rates.”
Bond yields crash…
Jeffrey Gundlach says the Federal Reserve is on the brink of making a big mistake.
U.S. central bankers have been talking about raising benchmark borrowing costs this year even though the outlook for global growth is worsening as oil prices tumble. If Fed Chair Janet Yellen goes ahead with this plan, she runs the risk of having to quickly reverse course and cut interest rates, according to Gundlach.
“There’s no fundamental reason to raise interest rates,” Gundlach, chief executive officer at DoubleLine Capital LP, said at a conference yesterday in Hollywood, Florida.“My idea is the Fed raises rates for philosophical reasons. That may be short-lived.”
Despite this backdrop, most analysts expect central bankers to go through with some sort of tightening this year. Money-market derivatives traders are pricing in a rate increase in the fourth quarter, too.
“This is the triumph of hope over experience,” Gundlach said.
* * *
Still plenty more shorts to squeeze…
Get a load of this: the brokerage firm bailed out by Jefferies is going to forgive 90% of its negative balance customers, namely foreign accounts due to the huge losses they incurred because of the Swiss franc debacle:
the huge recipient of this marvelous gratitude: our HFT traders.
(courtesy zero hedge)
Another Bailout: FXCM To Forgive 90% Of Its Mostly Foreign “Negative Balance” Customers
Two weeks after FXCM was on death’s door, and only a last minute vulture investment by Jefferies prevented the company from filing, FXCM has decided that it can’t afford to blow up the bulk of its clients who traded the EURCHF on the wrong side, and as the company reported moments ago, will forgive their negative balances. In other words, another bailout for HFTs, and the rich and those habitually addicted to gambling in rigged markets, who just happen to be the lifeblood of companies like FXCM.
From the press release:
FXCM to Forgive Majority of Clients Who Incurred Negative Balances
FXCM Inc.announced today its decision to forgive approximately 90% of its clients who incurred negative balances in certain jurisdictions, on January 15, 2014 as a result of the Swiss National Bank announcement on that date. FXCM will notify the applicable clients and adjust applicable client account statements in the next 24-48 hours.
“FXCM worked diligently to reach this decision and we are extremely appreciative of our clients for their patience and loyalty as we worked through this,” said Drew Niv, CEO of FXCM.
The SNB announcement, extreme price movements and the resulting lack of liquidity were exceptional and unprecedented events causing many market participants to incur trading losses. These events were unforeseen and beyond the control of FXCM.
FXCM will also notify certain clients (such as institutional, high net worth, and experienced traders who generally maintain higher account balances) requesting payment of negative balances, pursuant to the terms of the FXCM master trading agreements. This group represents approximately 10% of clients who incurred negative balances which comprises over 60% of the total debit balances owed.
Because without whale clients, no exchange can continue to skim off the bid/ask margin while suckering in more “overnight wannabe millionaires” with 200x leverage.
So who are the generous beneficiaries of this Jefferies-funded bailout? For the answer we go to the WSJ:
Retail foreign-exchange broker FXCM Inc. was nearly felled by outsize bets made by foreign customers who aren’t subject to U.S. regulations, according to people familiar with regulators’ review of the firm.
While some U.S. clients lost money when the Swiss National Bank scrapped a cap on the country’s currency, the bulk of the losses were borne by clients at FXCM’s affiliates in London, Singapore and other locations abroad, the regulators said. Those affiliates weren’t subject to leverage caps imposed by U.S. regulators, allowing overseas clients to make bigger bets—and take bigger losses.
As a result, FXCM said its customers owed the firm about $225 million, potentially putting the company in violation of capital requirements and forcing it to take a $300 million rescue from investment firm Leucadia National Corp.
The fallout illustrates both how a firm’s losses abroad can find their way to U.S. shores and that even relatively strict U.S. regulation can’t prevent losses in less-regulated jurisdictions. While regulators don’t believe the firm’s near-collapse posed any broader risks to the financial system, the incident is prompting them to consider whether their capital and leverage requirements are adequate for firms like FXCM, the people familiar with the review said.
In the U.S., the Commodity Futures Trading Commission and the National Futures Association, a self-regulator, currently limit leverage on transactions for retail, or individual, currency investors at 50 to 1. That means an investor can borrow $50 for every dollar put in. This is because currency moves are typically small. Many overseas jurisdictions have much looser limits, particularly in Europe.
It may not be Mrs. Watanabe exactly: meet Monsier Trepreau:
Maxime Trepreau, a 33-year-old engineer from Houilles, France, placed a bet on the euro to rise against the Swiss franc several months ago, after seeing the position recommended by an analyst on Daily FX, an FXCM-owned website. On the morning of Jan. 15, Mr. Trepreau saw the value of his account rapidly declining, despite an automated order he had to exit from the position and keep losses to a minimum if the trade went the wrong way. Currency traders say liquidity evaporated as the euro made a sudden fall, which would make it difficult to execute preset orders.
By the time his order was executed, Mr. Trepreau’s loss of €50,000 (more than $56,000 at today’s rate) had eaten up all of the funds in his FXCM account and left him with a negative balance of €2,000.
Mr. Trepreau says FXCM hasn’t told him whether he is on the hook for that amount. Mr. Trepreau believes he shouldn’t be.
And just like Apple, the bulk of marginal growth when it comes to FX gambling is now in Asia:
In 2014, 41.5% of FXCM’s business by volume came from Asia; followed by 35.9% from Europe, the Middle East and Africa; 13% from the U.S.; and 9.6% from the rest of the world, according to its website.
In shart, thank you Dick Handler: Mrs. Watanabe, and Mr. Trepreau, are most grateful.
I will leave you tonight with this great piece from David Stockman
(courtesy Stockman’s Corner)
We will see you on Thursday.
bye for now