jan 30/GLD and SLV remain constant/Mexican Peso and Brazilian real collapse/Brazilian economy collapses/European CPI falters to -.6% as deflation intensifies/Silver OI at the comex surprisingly rises and thus gives reason for the margin increase

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

 

Gold: $1278.50 up $23.90   (comex closing time)
Silver: $17.19 up $0.43  (comex closing time)

 

 

In the access market 5:15 pm

 

Gold $1283.50
silver $17.26

 

 

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

 

We had quite a day today.  Gold shoots up along with silver. Greek 3 year bond yields rise to 19% signifying default is in the wind. The Mexican Peso and the Brazilian real collapse.  The European CPI plummets to negative.6% and thus deflation intensifies. The Brazilian economy collapses with its twin deficits ie. a fiscal deficit along with a current account deficit.  German bund 30 yrs out falls in yield to below 1%.  Stock markets around the globe plummet.  All in all, you must say that this is a day to remember.  We will provide stories on all of the above.

 

Following is a brief outline on gold and silver figures for today:

 

The gold comex today had a poor delivery day, registering 55 notices served for 5500 oz. This is most unusual for a first day notice delivery. Silver comex registered 288 notices for 1,440,000 oz which is excellent for a non delivery month.

 

 

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 in stunning fashion rose by 1420 contracts despite Thursday’s silver price being down by a whopping $1.36. No wonder the CME raised the silver margins as they are frightened to death as to what they are witnessing at the comex silver scene. The total silver OI continues to  remain relatively high with today’s reading at 163,469 contracts. After yesterday’s monstrous raid, one would have expected that many  silver OI contracts would be  knocked off.

We had a very large 288 notices filed on this first day notice for the non active silver month.

 

In gold we again experience a large decrease in OI as we enter an active delivery month.(gold entering February, an active month) The drop in OI occurred with a decrease   in the price of gold yesterday to the tune of $31.30. The total comex gold OI rests tonight at 418,171 for a loss of 11,392 contracts. On this first day notice, we have a shocking surprise in that only 55 notices were filed upon, with a large number of OI standing for the February contract month (see below)

 

 

 

 

 

Today, we had no change in tonnage of gold inventory at the GLD/Inventory at 758.37 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: my last report on GOFO

 

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

 

Today, the LBMA will officially stop providing the GOFO rates as of midnight.

 

Jan 30 2015

 

+.065%                     +.0825%                     +.095%                +.1175%            .1525%

 

Jan 29 2014:

 

 

+.09%                   +.10%                 +.11 %             +.12%               +.1575%

 

 

end

 

 

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

 

 

Here are today’s comex results:

 

 

The total gold comex open interest collapsed again today by a rather large 11,392 contracts from  429,563 all the way down to 418,171 with gold down by $31.30  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 off the January contract month. We are now in the big delivery month of the active February contract month and here the OI fell by 20,035 contracts  from 28,490 contracts all the way down to 8,455, with many of these guys  moving to April and the rest selling outright their contracts without rolling. The next contract month of March saw it’s OI rise by 95 contracts up to 1057.  The next big active delivery month is April and here the OI rose by only 5038 contracts up to 289,233. The estimated volume today was awful at 83,713. The confirmed volume yesterday was good at 326,201 contracts. Today we had 55 notices filed for 5500 oz .

 

 

And now for the wild silver comex results. Silver OI surprisingly rose by 1,429 contracts from  162,040 up to 163,469 despite the fact that silver was down $1.36  yesterday. The front January contract month is now off the boar We are now in the non active contract month of February and here the OI fell by 14 contracts down to 316. Nobody left the silver area and thus everybody stood for delivery.  These two facts must have scared our CME boys into raising the silver margins trying to shake some of the silver leaves from the silver tree, but to no avail.  The next big active contract month is March and here the OI fell by only 868 contracts down to 100,042 as nobody left from the March delivery month arena..  The estimated volume today was awful at21,297. The confirmed volume  yesterday was huge  at 85,721. (must have been mostly HFT). We had 288 notices filed for 1,440,000 oz today.

 

February initial standings

 

Jan 30.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz 192.900 oz ( 6 kilobars)
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz nil  oz
No of oz served (contracts) today 55 contracts(5500 oz)
No of oz to be served (notices)  8400 contracts(840,000 oz)
Total monthly oz gold served (contracts) so far this month  55 contracts(5500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 92.90 oz

Today, we had 0 dealer transactions

 

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz

 

we had 0 dealer deposits:

 

 

total dealer deposit: nil oz

 

we had 1 customer withdrawal

 

i) Out of Manfra: 192.90 oz ( 6 kilobars)

 

total customer withdrawal: 192.90  oz

 

 

 

we had 0 customer deposit:

 

total customer deposits;  nil oz

 

We had 1 adjustment

i) out of JPMorgan:   1,217.112 oz was adjusted out of the customer and this landed into the customer account of JPM

 

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 55 contracts of which 2 notices were stopped (received) by JPMorgan dealer and 8 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 (55) x 100 oz  or 5500 oz , to which we add the difference between the OI for the front month of February ( 8455 contracts)  minus the number of notices served today x 100 oz (55 contracts) x 100 oz = 845,500 oz, the amount of gold oz standing for the February contract month. (26.298 tonnes)

 

Thus the initial standings:

55 (notices filed for the month x( 100 oz) or 5500 oz + { 8455 (OI for the front month of Feb)- 55 (number of notices served upon today) x 100 oz per contract} = 845,500 oz total number of ounces standing for the February contract month. (26.298 tonnes)

 

 

Total dealer inventory: 767,805.746 oz or 23.88 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 finalizes the month of January for gold.

 

end

 

 

And now for silver

 

 

 

 

 February silver: initial standings

 

 

Jan 30 2015:

 

Silver

Ounces

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 100,011.12  oz (Brinks )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 600,404.68 oz (Scotia)
No of oz served (contracts) 288 contracts  (1,440,000 oz)
No of oz to be served (notices) 28 contracts (140,000 oz)
Total monthly oz silver served (contracts) 288 contracts (1,440,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  100,011.12 oz

Today, we had 0 deposit into the dealer account:

 

total dealer deposit: nil   oz

 

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz

 

We had 1 customer deposits:

i) Into Scotia:  600,404.68 oz

 

total customer deposit 600,404.68 oz

 

 

We had 1 customer withdrawals:

 

i) Out of Brinks:  100,011.12 oz

 

 

 

total customer withdrawal: 100,011.12 oz

 

 

we had 2 adjustments

i) From CNT: a total of 1,398,541.61* oz was adjusted out of the customer and this landed into the dealer account of CNT

ii) From Delaware: a total of 328,569.575 oz was adjusted out of the dealer and this landed into the customer account of Delaware

 

*I believe that the boys were caught off guard with the larger than usual of silver contracts standing in February which is generally a very poor delivery month for silver.

 

Total dealer inventory: 67.726 million oz

Total of all silver inventory (dealer and customer) 178.118 million oz.

The total number of notices filed today is represented by 288 contracts for 1,440,000 oz. To calculate the number of silver ounces that will stand for delivery in January, we take the total number of notices filed for the month (288) x 5,000 oz    = 1,440,000 oz  to which we add the difference between the OI for the front month of February (316)- the number of notices served upon today (288) x 5,000 oz per contract = 1,580, 000 oz,  the number of silver oz standing for the February contract month

 

Initial standings for silver for the February contract month:

288 contracts x 5000 oz= 2,265,000 oz + (316) OI for the front month – (288)

number of notices served upon x 5000 oz per contract =  1,580,000 oz, the number of silver ounces standing.

 

 

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

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

 

 

end

 

 

 

The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders

ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.

 

 

And now the Gold inventory at the GLD:

 

jan 30. we had no change in gold inventory/Inventory at 758/37 tonnes

 

Jan 29/we had an addition of 5.67 tonnes of gold inventory at the GLD/Inventory at 758.37 tonnes

 

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

 

Jan 20.2015:

 

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

Tonight another 11.45 tonnes was added to inventory

 

Thus so far inventory rests at 742.24 tonnes of gold.

 

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

 

 

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

 

 

 

 

, Jan 30/2015 / we had no change in  gold inventory at the GLD/

inventory: 758.37 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 : 758.37 tonnes.

 

 

end

 

 

And now for silver (SLV):

 

jan 30  no change in silver inventory at the SLV/inventory at 319.314

million oz

 

Jan 29/no change in silver inventory/SLV inventory at 319.314 million oz

 

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 30/2015 no change in silver inventory

registers: 319.314 million oz

 

 

 

 

end

 

 

 

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

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

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

 

BIG CHANGES (NAV’s becoming less negative for CEF)

1. Central Fund of Canada: traded at Negative  2.5% percent to NAV in usa funds and Negative 2.5 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.8%

Percentage of fund in silver:37.7%

cash .5%

 

 

( Jan 30/2015)

 

 

2. Sprott silver fund (PSLV): Premium to NAV falls to + 2.97%!!!!! NAV (Jan 30/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to +.28% to NAV(Jan 30/2015)

Note: Sprott silver trust back  into positive territory at +2.97%.

Sprott physical gold trust is back in positive territory at +.28%

Central fund of Canada’s is still in jail.

 

 

end

 

At 3:30 pm we receive the COT report.

 

First the gold COT:

 

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
238,407 49,482 38,815 117,326 323,486 394,548 411,783
Change from Prior Reporting Period
15,150 -11,320 -3,665 -3,620 24,730 7,865 9,745
Traders
170 68 75 49 66 247 184
 
Small Speculators  
Long Short Open Interest  
43,731 26,496 438,279  
286 -1,594 8,151  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, January 27, 2015

 

What is wrong with our regulators!! They are totally blind!!

 

Our large specs:

Those large specs that have been long in gold added a rather large 15,150 contracts to their long side

Those large specs that have been short in gold covered a huge 11,320 contracts as they were quite concerned with the lay of the land.

 

Our commercials:

 

Those commercials that have been long in gold pitched 3620 contracts from their long side

Those commercials that have been short in gold added an earth shattering 24,730 contracts to their already burgeoning short side

 

Our small specs;

Those small specs that have been long in gold added a tiny 286 contracts to their long side

Those small specs that have been short in gold covered a rather large for them 1594 contracts.

 

conclusions:  call in the FBI, Royal Canadian Mounted Police, Serious Fraud squad etc as this is one complete farce.

 

end

 

And now for silver:

 

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
65,722 12,375 15,557 59,964 121,557
3,519 -3,554 190 -623 5,329
Traders
86 35 45 38 49
Small Speculators Open Interest Total
Long Short 162,440 Long Short
21,197 12,951 141,243 149,489
-550 571 2,536 3,086 1,965
non reportable positions Positions as of: 143 113
Tuesday, January 27, 2015

 

 Our large specs:

Those large specs that have been long in silver added 3519 contracts to their long side

Those large specs that have been short in silver covered 3554 contracts from their short side.

 

Our commercials;

Those commercials who are long in silver pitched a tiny 623 contracts from their long side

Those commercials who are short in silver added a smallish 5329 contracts to their short side  (quite a difference between silver and gold)

 

Our small specs;

Those small specs that are long in silver pitched a tiny 550 contracts to their long side

Those small specs that have been short in silver added a tiny 571 contracts to their short side.

 

conclusions; it seems our bankers are timid in providing the necessary paper.

 

 

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

 

 

 

Early gold trading from Europe early Friday  morning:

 

(courtesy Mark O’Byrne)

 

Greek citizens are buying gold coins like there is no tomorrow. Greek banks are plummeting

in share price due to depositors removing their cash.  Expect the Greeks to do a GREXIT

followed by Germany:

 

 

 

Greeks Turn to Gold on Bank Bail-in and Drachma Risks

The Greek stock market is down 36% year to date; the risk of global contagion in the event of a Greek exit is very real. Ordinarily such a crisis would require a massive coordinated effort from global stakeholders, perhaps directed by the IMF or some other pan-national financial body. But not in this case; the rhetoric is nationally-based and biased without unity of purpose across finance ministries. Recent official soundings from the UK and German governments saying that exposure to Greece is limited only underscores the depth of denial, ignorance and lack of consensus that exists within the euro area. A Greek exit from the euro would profoundly weaken the euro experiment and create a dangerous precedent for all future crises in the region.

The European economy is the largest middle class economy in the world. With over 400 million relatively affluent consumers it represents a massive portion of the net global economy and as such a breakup of part of it would be felt across the world in credit spreads and capital decisions for years to come. This would not have been because of Greek exit, but rather because of the inability of the authorities to manage the crisis as risks initially built up, then as bail outs were designed and implemented and then as these efforts surely failed.

We are witnesses to an epic failure of planning, statecraft and social justice. Regardless of where your politics lie, these elements are critical for a modern globally connected economy to function.

Sadly, the geopolitical backdrop is one of suspicion and hostility in the form of a festering proxy war between western and Russian interests in Ukraine and regional crisis and humanitarian catastrophe in the middle east as Syria and Iraq descend into stateless anarchy. These factors reduce the odds of a successful solution in Greece being found in time.

The share value of Greek banks cratered up to 30% Wednesday alone, before pulling back on Thursday as fears grew that the new government may not intend to soften their stance now that they are in office.

In what is probably the worst performance for the sector on record, the four major banks – Bank of Piraeus, Alpha Bank, National Bank of Greece and Eurobank – all closed more than 25% lower. Athens stock exchange closed 6.4% lower.

It marks an acceleration of the losses incurred over Monday and Tuesday in the immediate aftermath of the Syriza victory. From London’s Telegraph.

Greece’s banks have lost almost 40pc of their value in the three days since Syriza ascended to power in Sunday’s election as the dual threats of a bank run and the loss of support from the European Central Bank threaten a liquidity squeeze.

Forbes list five main causes for the collapse:

  1. Deposit flight has accelerated.
  2. ECB liquidity could be cut off.
  3. Potential public and private debt restructuring.
  4. Low profitability.
  5. Reliance on deferred tax assets – Forbes explains it as an over-reliance by Greek banks on liquidity from the state.

Greek banks are hemorrhaging deposits. The telegraph reports, “Banks also risk a repeat of the deposit flight seen in 2012. Up to €8bn of private sector deposits has been pulled out of Greek banks since November, according to Moody’s”, adding that bank deposits have fallen 5% in the last two months.

The Financial Times paints an even more dramatic picture of bank runs and capital flight.

The real danger is that the Greeks themselves lose confidence. There are tentative signs that money is again being sent abroad, as it was in mid-2012. Nikolaos Panigirtzoglou at JPMorgan points out that €350m was sent from Greece to Luxembourg money funds since the start of last week. Extrapolating to all cash flight, he estimates as much as a 10th of Greek deposits may have left already this year. If a Greek bank panic develops it will strengthen the German hand, and make negotiations that much harder.

In the event of any or all of these possibilities, gold and silver bullion will perform well as a currency of last resort.

Greek coin and bullion dealers with whom GoldCore spoke, confirmed an increase in demand for gold coins and bars in recent weeks and since the election.

GoldCore have Greek clients both in Greece and living in the UK and throughout the world. We have seen a definite upsurge in interest, inquiries and demand since the election last Sunday.

Concerns about bank holidays and also a return to the drachma have returned and Greeks are looking for ways to prevent further destruction of their wealth.

For Greeks, Storage in Switzerland remains a favoured way of owning gold.

The comprehensive guide to bail-ins: Protecting Your Savings in the Coming Bail-in Era

PRICE UPDATE

Today’s AM fix was USD 1,263.50, EUR 1,114.98 and GBP 837.42 per ounce.
Yesterday’s AM fix was USD 1.275.50, EUR 1,129.36 and GBP 842.25 per ounce.

Gold and silver both fell yesterday. Gold dropped 2.13% or $27.30, closing at $1,257.60/oz. Silver fell 5.78% or $1.04 and closed at $16.95/oz.

end
Wow!! gold withdrawals (which equals gold demand) from China last week totals 71 tonnes.
This includes scrap and mine production.  If you remove mining and scrap then importation is 52-58 tonnes of gold per week.  However please remember that sovereign purchases are not included here as Chinese officials purchase gold through London etc  with their unwanted dollars. And you can be rest assured it is very high.
Anyway,  Chinese demand at 71 tonnes per week equals 10.14 tonnes per day. The world produces 6.02 tonnes per day on a 7 day week ex China ex Russia. (and we have not included any sovereign purchases).
Ladies and Gentlemen:  this is huge!!
(courtesy Koos Jansen)
Posted on 30 Jan 2015 by

BOOM: SGE Withdrawals Week 3, 2015: 71 tonnes!

As I wrote last time on data from the Shanghai Gold Exchange (SGE), in week 2 of 2015 withdrawals from the vaults of the SGE (that equal Chinese wholesale demand) came in extremely high at 70 tonnes; the third highest amount ever. In week 3 (January 19 – 23), though, the Chinese withdrew even more at 71 tonnes, up 0.89 % w/w, and a new third highest amount ever. Year to date 202 tonnes have been withdrawn fro the SGE vaults, up 15 % y/y. Like last week, this was happening while the price of gold was rising sharply, staggering numbers.

Screen Shot 2015-01-30 at 3.01.34 PM

Screen Shot 2015-01-30 at 2.56.15 PM
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.

Corrected by the volume traded on the Shanghai International Gold Exchange (SGEI), withdrawals in week 3 were at least 65 tonnes (read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals). Year to date withdrawals corrected by SGEI volume were at least 189 tonnes.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 3, dips

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 3, dips

Furthermore, the end of day premium of the SGE main physical gold contract, Au9999, has been positive throughout all of week 3. This means scrap supply was not abundant over this period – a discount, or negative premium, can’t be arbitraged by foreigners as bullion export from China is prohibited. Estimating scrap/recycled gold that supplied the SGE at 4 tonnes and mine production at 9 tonnes, sets imported gold for week 3 somewhere in between 52 and 58 tonnes.

It’s still a mystery why mainstream media are not tracking weekly SGE withdrawals. I’ve read all over the news that Russia’s central bank has added 152 tonnes of gold in total to its reserves in 2014. In perspective, this is approximately the same amount of gold China has imported in the first three weeks of 2015. In my post China Continues To Drain Global Gold Inventory I have, once again, pointed out that import numbers derived from SGE withdrawals are for 95 % covered by export from the UK, Switzerland, Hong Kong and the US. These countries disclose only non-monetary gold trade, which support my assumption PBOC purchases are an invisible side show from public gold trade numbers and SGE withdrawals.

Chinese domestic mining has been roughly 27 tonnes over the first three weeks of 2015, which is not exported. All this gold (import and mine) is being sold through the SGE. Until I run into evidence that states the contrary, the PBOC does not buy any gold through the SGE, but most likely through proxies in Hong Kong or London. So, PBOC purchases have to be added to the tonnage sold through the SGE. According to Deutsche Bank the PBOC has purchased roughly 500 tonnes a year since 2010. Go figure.

Thomson Reuters GFMS released the GFMS Gold Survey 2014 – Update 2 on Thursday. The report states Chinese consumer gold demand in 2014 was 866 tonnes.

Screen Shot 2015-01-30 at 4.45.09 PM

My regular readers will not be surprised I dispute this number; in 2014 China imported at least 1,200 tonnes, mined 451 tonnes and according to GFMS’ numbers scrap accounted for 182 tonnes. So supply was at least 1,833 tonnes, yet consumer demand was 866 tonnes. Quite a gap, 967 tonnes. 

Screen Shot 2015-01-30 at 5.12.24 PMThis gap was at least 737 tonnes in 2013. In the table above taken from the Gold Yearbook 2013 published by the China Gold Association (CGA), we can see import was 1,507 tonnes (blue) and Chinese domestic and overseas mining accounted for 445 tonnes (purple), if we add GFMS’ scrap supply number for 2013, which is 144 tonnes, total supply in 2013 was 2,096. The gap between 2,096 and 1,359 tonnes is 737 tonnes. Neglecting scrap supply disclosed by the CGA (green).

In the report GFMS states “demand does not include transfers of physical gold between financial organizations or gold used to support the OTC market”.

In forthcoming posts I will expand on the differences in metrics used all across the globe (by the WGC, GFMS, CGA, CPM, me) to get a better understanding why Chinese demand numbers are so divergent.

In any case the 0.6 metric tonnes of gold sold in one day in just one shopping mall in Beijing in January, 2015, was not gold used in transfers between financial organizations…

Chinese new year gold goat 2015 1
Beijing January 3, 2015

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

 

 

 

end

 

 

 

We have highlighted this to you in the past but it is worth repeating
especially when it is coming from a major newspaper:
(courtesy Sanderson/London Financial times)

Russia buys record amounts of gold

Section:

By Henry Sanderson
Financial Times, London
Thursday, January 29, 2015

http://www.ft.com/intl/cms/s/0/13b55dd6-a7b6-11e4-be63-00144feab7de.html

Russia accounted for about one-third of central banks’ gold purchases last year as the country spent more on the metal than at any time since the break-up of the Soviet Union amid escalating tensions with the west and a collapse in the value of the rouble.

Central banks around the world bought a net 461 tonnes of gold in 2014 — 13 per cent higher than the previous year and the second-highest level since the collapse of the gold standard in 1971 — as they continued to diversify their currency reserves following the financial crisis. They have added 1,800 tonnes to their holdings in the past six years.

Moscow’s shopping spree of the yellow metal was driven by a desire to shift away from a dependency on the dollar and provide support to the beleaguered rouble. Russia’s currency has lost half its value against the dollar in the past year on the back of the plunging oil price as well as western sanctions. The central bank’s foreign currency reserves, mainly US and European government bonds, have also fallen.

“There is no attraction for the Russians to be doing anything which is helpful to the US and Europe,” said Ross Strachan of GFMS, a metals research group at Thomson Reuters, which compiled the figures. “Given the sanctions … gold is one asset which it can purchase which doesn’t do that.”

Russia’s central bank purchased 152 tonnes of gold worth $6.1 billion at today’s prices — an increase of 123 per cent compared with the previous year — in the first 11 months of 2014, according to GFMS estimates.

Analysts also said Russia’s purchases might have been due to the buying of domestically produced gold that could not be easily sold overseas due to sanctions.

“This is a clear positive for the gold price,” said Matthew Turner, analyst at Macquarie. “If central banks had not purchased that gold, it would have been bought by private investors or jewellery consumers, and this would likely have required a lower gold price.”

While Russia was a strong buyer this year, analysts say purchases could slow and the country could become a seller if it continues to liquidate its reserves to support the domestic currency.

During Russia’s last financial crisis in 1998, the central bank’s gold reserves fell by 118 tonnes as the country’s foreign exchange holdings dropped below $10 billion. Russia’s total international reserves amounted to $385 billion at the end of December, compared with more than $500 billion a year earlier.

“We are still a long way off Russia needing to sell gold,” Mr Turner said.

The Thomson Reuters survey is based on data provided to the International Monetary Fund as well as its own estimates on central banks that do not provide data.

Interest was also strong from central Asian states. Kazakhstan bought 46 tonnes through 2014 and Azerbaijan 10 tonnes, according to the survey. Iraq also acquired 48 tonnes in the first half of the year.

Gold has rallied more than 7 per cent this year due to renewed demand for a safe haven asset amid turmoil in the eurozone and weaker global growth.

“While official sector purchases are forecast to continue, it appears unlikely, given low international oil prices and growing deficits in many purchasing nations, that buying will accelerate,” the Thomson Reuters report said.

 

end

 

 

 

Have fun with this offering

(courtesy Steve Saville/Chris Powell/GATA)

 

 

Saville says gold’s flow doesn’t matter to price; U.S. and China disagree

2:58p ET Thursday, January 29, 2015

Dear Friend of GATA and Gold:

Who is buying gold and who is selling it mean nothing to the metal’s price trend, nor does it matter where the metal is coming from, financial letter writer Steve Saville maintains this week in commentary headlined “Looking for (Gold Price) Clues in All the Wrong Places,” posted at his Internet site, the Speculator Investor, here:

http://tsi-blog.com/2015/01/looking-for-gold-price-clues-in-all-the-wron…

That’s not how the U.S. government sees it. To the contrary, the U.S. government considers gold’s location to be of supreme importance to its price and the price of the U.S. dollar, the primary mechanism of U.S. power in the world.

The U.S. government’s outlook is described in detail by the minutes of a meeting at the State Department in April 1974 attended by Secretary of State Henry Kissinger and his assistant undersecretary of state for economic and business affairs, Thomas O. Enders, minutes archived by the State Department’s historian here —

http://history.state.gov/historicaldocuments/frus1969-76v31/d63

— and copied at GATA’s Internet site here:

http://www.gata.org/files/StateDeptKissingerEnders1974.txt

The meeting addressed what the State Department saw as the growing desire among Western European countries to revalue their gold reserves upward, thereby increasing gold’s role in the international financial system, while U.S. policy was to demonetize gold so as to leave the dollar unchallenged as the world reserve currency.

Secretary Kissinger asked: “Why is it against our interest to have gold in the system?”

Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings — about $11 billion — a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control …

Secretary Kissinger: But that’s a balance-of-payments problem.

Mr. Enders: Yes, but it’s a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible — no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it’s more rational in …

Secretary Kissinger: “More rational” being defined as being more in our interests or what?

Mr. Enders: More rational in the sense of more responsive to worldwide needs — but also more in our interest. …

That is: Whoever has the most gold can control its valuation, and, implicitly, can control the valuation of all currencies, and thereby create the most “reserves,” the most money — money being power.

The interest of the United States, as perceived at that meeting at the State Department, was to dominate the world through the power of money creation, a power disproportionately held then by the United States, as it is now.

Saville writes: “The amount of gold shifting into or out of exchange-traded fund inventories could be of interest, but the shift in location from an ETF inventory to somewhere else or from somewhere else to an ETF inventory is not a driver of the gold price.”

Saville’s assertion that transfer between inventories can’t drive gold’s price is contradicted by the history of the London Gold Pool, which collapsed in March 1968:

http://en.wikipedia.org/wiki/London_Gold_Pool

As always, in 1968 gold was merely changing vaults. But that it was coming out of central bank vaults, whose supplies were announced and finite, surely did drive price, as it gave buyers confidence that central bank inventories could be exhausted. If central bank inventories had been considered infinite, of course no one would have bought in such volume as developed in 1968.

Further, gold’s price, like the price of any commodity or currency, also can be driven by the policy objectives of those who would acquire it. Gold holders who underwrite vast short selling in gold, as Western central banks long have done through gold swaps and leases, may profit from maintaining a low price. And gold holders who recognize the market’s vulnerability to a short squeeze may see profit or geopolitical advantage in arranging one or threatening to.

Indeed, the government-controlled financial news media in China long have been full of commentary about the Western central bank gold price suppression scheme and the advantages to China in defying it:

http://www.gata.org/node/10380

http://www.gata.org/node/10416

For example, in April 2009 the the Chinese newspaper World News Journal wrote: “The United States and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the United States in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi.”

Of course, as Saville notes, governments can change their minds and their policies.

But gold price suppression to support the U.S. dollar as the world reserve currency has been U.S. government policy for more than half a century, and the power to issue the world reserve currency will always be desirable.

Meanwhile China’s policy of gold acquisition has been operating for maybe two decades now.

These policies and flows have been going on long enough that even a financial letter writer might discern some price clues in it — if he ever thought that evidence and experience were more dispositive than ideology.

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

 

Section:

 

end

 

this hurts Eldorado shares.  This is their flagship new mine:

 

(courtesy GATA/Reuters)

 

New Greek government opposes Canadian company’s gold mine

Section:

By Angeliki Koutantou
Reuters
Friday, January 30, 2015

ATHENS, Greece — Greece’s new left-wing government will cancel plans to sell the state natural gas utility and is firmly opposed to a Canadian-run gold mine that is among the biggest foreign investment projects in the country, the energy minister told Reuters.

The comments on Friday by Panagiotis Lafazanis, who represents the more radical wing of the ruling Syriza party, further reinforces early signs that the government is sticking to campaign pledges that have chilled investment and unnerved financial markets.

The Skouries gold mine operated by Vancouver-based Eldorado Gold Corp. in northern Greece was the flagship project of the last government’s foreign investment drive and considered a test case that would reveal whether Greece could protect foreign investors despite local opposition.

“We are absolutely against it and we will examine our next moves on it,” Lafazanis, a 63-year-old former Communist, told Reuters at his new ministerial office. He declined to say if the government would try to block the project from going ahead. …

… For the remainder of the report:

http://www.reuters.com/article/2015/01/30/us-greece-politics-investment-…

 

end

 

 

A super commentary from Bill Holter to cap this week:

 

(courtesy Bill Holter/Miles Franklin)

 

 

 

A crazy thought and a crazy good talent!

 

Let’s have some fun today!  For a change of pace I thought it a good idea to think way outside of the box and write about something that isn’t possible and wouldn’t really matter even if it was true.  I’ll finish with my wife Kathy’s latest portrait of her son Jason at the bottom of the page.

  Recently a question was posed to me by a reader, a really crazy question!  He asked regarding the fact there has been no audit of U.S. gold since 1955, “what if the reason they refuse to audit the gold is because we have much MUCH more and they don’t want anyone to know?”.  At first I just laughed and responded with a flippant answer, but then it dawned on me, would it even matter?  Let’s break this down in several pieces and then make further assumptions to see if it would really matter.
  First, the U.S. claims to have 8,400 tons of gold.  For simplicity let’s call this amount rounded as one third of a trillion dollars or $350 billion.  Let’s assume the vaults are actually bursting and have 3 times the amount of gold claimed.  This would mean there is a nice round number of $1 trillion worth of gold sitting in the vaults.  Would this amount “matter”?  Would really and truly having “$1 trillion” mean or change anything?
  Think about where we have come from and what has been done over the last 6 years to keep life as we know it going.  The Fed has increased their balance sheet by well over $3 trillion while the Treasury has borrowed some $8 trillion more.  You might also remember the Fed “secretly lent out” some $16 trillion all over the world and mainly to foreign entities.   This was discovered in 2011 I believe, it was a shocker at the time but “oh well”, it means nothing now.  My point being, in just the last 6 years, the Fed and Treasury have printed and borrowed over $10 trillion, so no, $1 trillion in the vault is no big deal.
  But wait, “this is gold and not dollars” you say?  Well yes, it is gold and we do know it can be pegged in price.  If it is pegged too low, demand will outstrip supply and if too high then supply will come in to the bidders.  Yes, there is a huge difference between sitting on $1 trillion worth of dollar bills and $1 trillion worth of gold, we can touch on this shortly but first let’s do a little more math.  We have had several individual years where our fiscal deficit was over $1 trillion, so our 25,000 tons of gold would have already evaporated many times over.  Let’s make another assumption that the rocket scientists in Washington D.C. decide to pull a “Roosevelt moment” and mark up the price of gold (since they have so much).
  Let’s assume it is decided to mark gold up to $10,000 per ounce, what would this do?  The flat out answer is “very little and certainly not enough”.  Even if we truly did have three times the amount of gold we claim to have AND marked up the price nine or ten fold to $10,000, we still only cover the lunacy of the last six years!  If we look at the big picture of Treasury debt and the Fed’s balance sheet combined, we are only halfway there.  Looking at the entire picture which includes all debt and future obligations, the number is a staggering $200 trillion.  This humongous stash of 25,000 tons of gold, priced at $10,000 per ounce is only equal to 5% of total current and future obligations!
  Do you see what we just did here?  This was a backdoor way of displaying how ridiculously cheap gold is currently compared to all of the debt that’s been underwritten.  Yes I know, there will be those who say “Holter, you are an idiot.  It doesn’t matter what the price of gold is because it’s not money anymore”.  Really?  (not the idiot part, the “money part”).  Gold IS money.  Yes, our government says it is not and does not want you to believe it is money …does that change the fact?  Let me point something out to you, China believes gold is money, many other nations believe gold is money, can the U.S. “legislate” to foreigners?  Foreigners are already “voting” their beliefs and pocketbooks by purchasing all the gold the world produces and quite a bit more.
  To wrap this part up, let me just say that no, pigs do not fly unless they are in an airplane and no, the U.S. does not have more gold than we claim to have.  Common sense tells you the gold supply and demand deficit has had to have been supplied from somewhere.  This “somewhere” is obviously where the gold had been stored.  ONLY the West, led by the U.S. had massive hoards of gold large enough to supply 1,000’s of tons of annual supply deficits.  ONLY the West, led by the U.S. has had a motive to supply these deficits to support the value of the dollar and to depress the price of gold.  Yet, all we hear from the U.S. when the topic of either the Fed or our depositories being audited are three things, either crickets, an audit is too expensive or “trust us”.  As for the “too expensive” part, I think we can equate this to last year’s 5 tons of German gold… they didn’t get more because of transportation logistics.  How funny!
  As promised for several months, below is Kathy’s latest finished portrait, “Commanding Presence”.  Forgive me if I sound like a cheerleader, I am her biggest fan!  For those who have not followed my work and don’t know, Kathy now has a whopping two years of experience.  She had never ever painted anything before and was basically self taught until last April when she began lessons once a week from a master portraitist.  This portrait of her son Jason is her 5th portrait ever.  Kathy plans to enter this in several national as well as international competitions.
  I have never before seen in any occupation a learning and improvement curve similar to what she has done.  She’s gone from zero to crazy good in only two years!  Hopefully this particular portrait will win recognition in one these contests because of the “story” behind it.  She will be competing with lifetime and internationally known artists. Any type of win amongst this type of international competition will be unheard of from someone of her experience.  Her website www.KathrynHolter.com is now up and still under construction, she can be contacted via the website should you desire a portrait done.
  I hope you enjoy this portrait, I will enjoy her next one… for my birthday we did a photo shoot with my amigo Principe’ and got a fabulous shot I’d like to call “Hi Ho Silver!”.   “Nothing doing” she said, it will be called “Rarin’ To Go!” because she hears the words silver and gold too often living with me!

Please click on the image and I urge you to expand it as much as possible because the detail is AMAZING!  Regards,  Bill Holter

image
2015-1-27 Commanding Presence 18 x 24.jpg

Kathryn Holter shared from Dropbox
Preview by Yahoo

 

And now for the important paper stories for today:

 

 

Early Friday morning trading from Europe/Asia

 

 

1. Stocks mainly down on major Asian bourses  / the  yen rises  to 117.72

1b Chinese yuan vs USA dollar/ yuan weakens  to 6.2513 ( hits upper level of peg)
2 Nikkei up 68.13 points or 0.39%

3. Europe stocks  all in the red   // USA dollar index up to 94.56/

3b Japan 10 year yield back up to .29% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.72/

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 44.95 Brent: 48.49 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen up;

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

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

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

3j Oil rises this morning for  WTI and rises for  Brent

3k deflation forces in full swing last night throughout Europe and USA

3l  Russia lowers it’s interest rate which causes the Rouble to fall almost 2 full basis points into the 70 handle

3m Gold at $1263.00. dollars/ Silver: $16.99

3n USA vs Russian rouble:  ( Russian rouble  down 1 3/5 in roubles per dollar in value)  70.64!!!!!!

3 0  oil rises into the 44 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/Greek finance minister not interested in the final release of 7 billion euros of bailout money/Tsipras promises to be cordial when meeting the Troika today.

3Q  SNB (Swiss National Bank) intervening again driving down the SF/window dressing

3r options expiry on the gold/silver OTC today/first day gold and silver notice for comex contracts

 

3s  Monte de Paschi (Italy’s 3rd largest) and world’s oldest bank needs another 1 billion transfusion.

4. USA 10 yr treasury bond at 1.72% early this morning. Thirty year rate well below 3%  (2.29%!!!!)/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: Treasury-Equity Reallocation Trade Pushes Futures Lower, 10 Year Rises To 1.72%

 

While the US daytime trading session has lately become a desperate attempt to expand multiples on the declining earnings of the S&P500, thanks to recurring BOJ intervention in the USDJPY, to keep the S&P above the 100 SMA at all costs including generous central banker verbal intervention…

… then it is during the US overnight session when global deflationary reality reasserts itself with a vengeance, and sure enough at last check, the 10 Year has rallied with 10Y yield hitting 1.71% before this morning’s 4Q GDP release, as well as following the latest deflation number of -0.6% out of Europe (worse than the -0.5% expected) which was the biggest price decline on the continent since 2009.  “Treasuries remained well bid overnight due to month-end index adjustments. Some talk of a  reallocation from equities to bonds trade going through in both Asia and continuing in Europe,” ED&F Man head of rates and credit trading Tom di Galoma wrote in a note to explain the latest Great Unrotation, if only until the Virtu HFT algos get the full blessing of the Fed to ramp the USDJPY, and thus the stock market.

The overnight session started on the right foot, with Asian equities trading mostly higher in the final trading day of the week and month with the exception of Chinese bourses, as the ongoing margin trade crackdown continues to weigh on sentiment. Consequently, the Shanghai Comp (-1.6%) is now on course for its biggest weekly loss since the Dec’13 and the Hang Seng (-0.4%) relatively flat. Elsewhere, the Nikkei 225 (+0.4%) is headed for a monthly gain while the ASX 200 (+0.7%) rose above 5,600 for the first time since Sep’14 amid increasing expectations of a rate cut by the RBA next week.

Likewise in Europe, the session saw equities open higher after the positive Wall Street close last night, however through the morning European equities have retraced these gains in line with US Index futures. The session underperformer has been the FTSE, with supermarkets Sainsbury’s (-1.5%) and Morrison’s (-1.2%) weighing on the index after comments from UK Secretary of State for Business Vince Cable yesterday proposing fines of up to 1% of turnover with regards to concerns about supermarket treatment of suppliers. Elsewhere, Banca Monte Paschi (-6.15%) are one of Europe’s laggards today after reports that the Italian bank is contemplating a EUR 1bln capital boost.

In terms of US equities, aftermarket earnings showed Google miss expectation on EPS, while Visa and Amazon both beat. The European morning has seen reports that Alibaba’s financial branch are said to IPO in 2016, with the unit valued around USD 50bln. While pre market we’ll see earnings from as well as earnings pre market from Mastercard, AbbVie and Chevron.

Fixed income markets have today seen T-Notes outperform their European counterpart, underpinned by lower US equity futures, indicative of lower open on Wall Street. In Europe, BTPs outperform on the back of strong demand said to be from touted domestic buyers, with analysts at IFR note that month-end is contributing to BTPs strength with the Italian bond contributing the most to this month’s extensions.

In FX markets, today has seen similar price action in EUR/CHF as was Monday, whereby the cross rose quickly before paring the move shortly after, today breaking the 1.05 handle to the upside to its highest levels since the SNB intervention and to trade around levels that some speculate the SNB is comfortable with. As we wrote yesterday, this is most likely an SNB month-end window-dressing trade seeking to make the EURCHF P&L losses on its balance sheet appear more manageable. Another move of note is that of the RUB, which weakened ahead of the Central Bank rate decision. Despite 31 out of 32 analysts expecting rates to be held, the rate was cut by 200 bps which saw USD/RUB break above 70.00.

The commodity complex has ebbed higher today after experiencing recent weakness. However, despite trading in positive territory on the day, WTI crude futures remain on track to reach the longest run of monthly losses since January 2009. News today has seen Libyan oil minister state that the country’s Es Sider port has 2.5mln bbl in storage tanks, with Ran Lanuf also with over 2mln bbl. The minister also stated that Libya oil refineries are processing approximately 150k bpd.

Elsewhere, the precious metals are in the green as gold retraces from recent two week lows. Interestingly, after the month in which SNB removed their floor and ECB announced a QE package over EUR 1trl, the yellow metal is on track for the biggest monthly gain since 2011.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Volatility in EUR/CHF this morning has renewed speculation of SNB intervention, as the cross trades at levels in which some suggest the central bank may be comfortable with
  • The commodity complex has ebbed higher today after experiencing recent weakness. However, despite trading in positive territory on the day, WTI crude futures remain on track to reach the longest run of monthly losses since January 2009
  • Looking ahead, this afternoon sees GDP from Canada and the US, with Chicago Purchase Manager and the final reading University of Michigan Sentiment data released, as well as pre market earnings from Mastercard, AbbVie and Chevron.
  • Russia’s central bank lowered its main interest rate as concern over a looming recession took precedence over  stabilizing the ruble and taming runaway inflation. The ruble weakened beyond 70 against the dollar
  • European Union governments moved toward imposing further economic sanctions on Russia, casting a pall over plans to resume talks Friday in Belarus over the conflict in Ukraine
  • Mario Draghi’s deflation challenge was underlined on Friday with prices plunging at a pace last seen in the depths of the recession in 2009
  • Spain’s economy expanded at its fastest pace in seven years in the fourth quarter as lower prices helped boost domestic demand
  • Prime Minister Alexis Tsipras promised not to spring any surprises on Greece’s troika of official creditors in the first face-to-face meeting with European officials since his Jan. 25 election victory
  • Finance Minister Yanis Varoufakis said he’s not interested in persuading Greece’s official creditors to release the final €7b ($8b) of bailout funds as Eurogroup Chief Jeroen Dijsselbloem headed to Athens for talks on Friday
  • Sovereign yields mostly lower, Greece 10Y falls 15bps to 10.02%  Portugal, Spain and Italy also lower. Asian stocks mostly higher; European stocks mixed, U.S.  equity-index futures gain. Brent, WTI and gold rise; copper gains

DB’s Jim Reid concludes with the comprehensive overnight summary

 

 

Today sees the business end of a month I’d like to see the back of after a cracked rib and a snapped MCL and ACL. Markets have been as wild as my skiing and we’ll review it in full on Monday but its not impossible that the S&P 500 will see a January decline (currently -1.83%) whilst the DAX might see a 10% increase (currently +9.51%). We’ve also seen a further sizeable fixed income rally, big moves in currencies, the Swiss Franc shock, sizeable Euro QE announced and the historic Greek election results.

Expect to see people discussing the January effect and its impact on the rest of the year. A good January has usually (but not always) been associated with a good year for US equities. Indeed using 87 years of data from Bloomberg, there have been 55 positive Januaries with 44 of those going on to have positive years with an average increase of about +20%. Of the 32 negative January months that we’ve had since 1928, ‘only’ 14 of those went on to finish the year higher in the end with average annual returns of around +14%. The remaining 18 negative Januaries were associated with a negative full year performance with an average return of around -14%. Clearly past performance doesn’t guarantee future returns and its a bit spurious but its always fun to look at. Indeed post crisis we’ve seen a few counter trend moves as three years (2014, 2010 and 2009) have seen the year bounce back from a bad January performance.

Yesterday’s +0.95% return for the S&P 500 was a welcome one for equity bulls following two previous sessions of 1%+ declines. The closing level actually hid what was a decent rebound off the intraday lows as markets initially traded down 0.6% with energy stocks trading weaker. A bounce in both WTI and Brent (+0.18% and +1.36% respectively at the close) helped the energy component finish in the green (+0.17%). Just on the subject of oil, we saw signs of a further subdued outlook at the micro level as ConocoPhillips reported that it plans to cut capex by 30% this year following its Q4 earnings report which also saw them post a quarterly loss. Meanwhile over in Europe, Royal Dutch Shell yesterday announced that they will reduce investment spending by $15bn over the next three years. Back to the US, macro data yesterday also helped support a better tone through the day. The initial jobless claims print in particular was strong. The 265k reading came in well ahead of expectations (300k) and was down over 40k from the previous reading. In fact the print was the lowest since April 2000 and helped drag the four-week average back below 300k to 298.5k although it’s worth pointing out that last week was a holiday-shortened week. Pending home sales on the other hand were weak with the -3.7% mom reading well below the +0.5% expected. Treasuries gave up some of the previous day’s gains with the 10y benchmark finishing 3bps higher at 1.751%. The theme of Dollar strength continues however as the DXY rose a further +0.23%.

Turning our attention to the latest Greek developments, the ASE closed +3.16% firmer and 10y Greek yields rallied some 21bps as rhetoric out of Euro-area officials helped lift sentiment. Yesterday’s meeting between PM Tsipras and the European Parliament President Schultz appeared to yield some supportive comments. Specifically Schultz was reported on Reuters as saying ‘I have seen that the government of Alexis Tsipras is not thinking about going it alone, it wants to make proposals and it wants these proposals to be discussed with partners’ as well as saying that ‘it’s important that he wants to find common ground with his peers’. Today we see the Eurogroup President Dijsselbloem meet with both finance minister Varoufakis and Deputy PM Dragasakis. This will come after comments from the Eurogroup President who yesterday was quoted on Bloomberg saying that ‘we want to keep Greece in the euro zone, the EU, but that also requires Greeks to meet their commitments’.

There was also some commentary out of ECB officials yesterday, unsurprisingly skewed towards the cautious side. In a Bloomberg report the ECB’s Jazbec was quoted as saying that the new Greek government is sending ‘very mixed signals’ and that ‘it’s too early to directly answer questions on when and how the ECB can buy Greek government bonds’. Meanwhile, the ECB’s Nouy was quoted in the Greek press saying that although ‘a lot of good work has been done to strengthen Greek banks balance sheets’ that the country’s lenders still ‘need to manage, in a conservative fashion, their liquidity positions’. DB’s resident expert George Saravelos yesterday summarized the latest developments since Greece’s election on Sunday in a note. George writes that developments and pressure on Greece have accelerated over the last few days, with a very large degree of uncertainty around both the Greek government’s and Troika’s position on how negotiations will proceed. George expects this to ultimately be resolved by a Troika request from the Greek side to commit to program completion and the broad contours of previously committed policy, particularly with regard to structural reform. The ECB/ELA financing of Greek banks however will likely determine the path Greece takes. In terms of what to look out for next week, finance minister Varoufakis will be meeting with various European finance ministers early on before we have Wednesday’s bi-weekly review of the ELA facility and then Greek parliament opening on Thursday.

In terms of the rest of Europe yesterday, the Stoxx 600 finished -0.09% although both the DAX (+0.25%) and CAC (+0.44%) closed firmer after trading between gains and losses for most of the session. There was similar volatility in fixed income markets although 10y Bunds closed relatively unchanged at 0.359% whilst peripheral yields finished 1-2bps wider. Away from Greece, German inflation caught the headlines after the region reported a -0.3% yoy headline reading, below expectations (-0.1%) and down from +0.2% previously. Our European colleagues noted that energy prices falling 9% were in line with the oil price and exchange rate movements whilst food price inflation was largely unchanged. Instead they expect that the softer number is largely as a result of lower core inflation which they estimate to have fallen to +1.1% yoy from +1.3% previously. In terms of the rest of the data yesterday, Spanish retail sales bounced (+6.5% yoy from +1.9% previously), German unemployment was unchanged at 6.5% and Eurozone money supply ticked up a notch to 3.6% yoy (from 3.1%). Confidence indicators for the Euro-area meanwhile were largely in line with consensus.

Wrapping up yesterday’s news, it was perhaps only appropriate after our review of Central Banks in yesterdays EMR for Denmark to announce another cut to their deposit rate. The Nationalbanken eased a further 15bps to take the deposit rate to -0.5%, the third easing in ten days with the Central Bank looking to defend the Krone. Elsewhere the FT reported that EU ministers yesterday failed to agree on further sanctions to be placed on Russia over the conflict in Ukraine. In an emergency meeting, the EU instead instructed the European Commission to provide more prep work around ‘appropriate action’ with a final say likely to come at a summit on February 12th

 

end

 

 

 

 

Huge story this morning as Yanis V (Greek Finance Minister) states that he does not want the 7 billion Euros of bailout money.  They already have enough debt.  He is now rethinking the whole program:  in English…they are going to be funded by China/Russia.

 

(courtesy zero hedge)

 

Greece Slams EU Bailout-ers: “We Don’t Want The $7 Billion, We Want To Rethink The Whole Program”

 

As Eurogroup chief Jeroen Dijsselbloem (of “template” foot in mouth infamy) heads to Athens for talks today, Bloomberg reports the new Greek Finance Minister Yanis Varoufakis has a clear message for his European overlords of the past: “We don’t want the 7 billion euros…We want to sit down and rethink the whole program.” While this exposes the nation’s banking system to further runs, yesterday’s revelation that Russia could step in with financing should they need it, leaves Dijsselbloem and Shulz with less and less leverage even as Spain’s chief economic advisor warns, if Greece doesn’t play along, “there will be problems on all fronts.”

“Will Greece antagonize the European union? If they don’t there won’t be any problems,” Alvaro Nadal, chief economic adviser to the Spanish prime minister, said in a radio interview in Madrid on Friday. “If they do, there will be, on all fronts.”

And, as Bloomberg reports, that is what Greece’s new government is doing (as they promised the people),

Finance Minister Yanis Varoufakis said he’s not interested in persuading Greece’s official creditors to release the final 7 billion euros ($8 billion) of bailout funds as Eurogroup Chief Jeroen Dijsselbloem headed to Athens for talks on Friday.

 

Greece wants to agree a new plan shifting from spending cuts to combating corruption and boosting public investment. The proposal hinges on the euro area and the European Central Bank agreeing to write down Greece’s public debt, a suggestion that has been met with skepticism by officials across the rest of Europe.

 

“We don’t want the 7 billion euros,” Varoufakis said in an interview with the New York Times published late on Thursday. “We want to sit down and rethink the whole program.”

 

 

“In all honesty, if you sum up all their promises then the Greek budget will very quickly be out of balance and then further debt relief won’t help anyway,” Dijsselbloem said in Amsterdam on the eve of his trip. “We want to keep Greece in the euro zone, in the European Union, but that also requires the Greeks to meet their commitments.”

Things are not going well…

European Parliament Martin Schulz confirmed the divide between Tsipras and the rest of Europe after two hours of talks with the Greek leader in Athens on Thursday.

 

In diplomatic parlance, they say that talks were constructive and honest when they have ended in disagreement,” Schulz said. “Well, I will say that talks were honest and constructive.”

*  *  *

However, it appears things just got a little more tense…

  • GREEK GOVERNMENT OFFICIAL SAYS THAT THE GOVERNMENT DOES NOT WANT THE TROIKA TO GO BACK TO GREECE OR TO INCREASE THE DEBT PROGRAM: RTRS

 

end

 

the above story cause Greek bond yields to surge.  The 3 year Greek bond is now trading with a yield of 19% signifying as sure default:

 

(courtesy zero hedge)

 

 

 

 

 

Greek Bond Yields Surge Above 19% After EU Talks

 

 

Following finance minister Varoufakis’ insistence that Greece will not accept more debt (or what EU calls a “bailout”) and talks with the Eurogroup chief end, Greek bond yields have surged (and prices dropped) with 3Y GGBs back over 19% – the highest since the crisis. Greek bank stocks – after yesterday’s exuberant penny stock squeeze – are falling once again.

 

Greek bonds are plunging…

 

Greek bank stocks have faded fast post-Troika meeting…

 

Charts:Bloomberg

 

end

 

 

 

The Central Bank of Russia surprises everyone with a rate cut, being the 14th nation to do so as the global economy sinks into an abyss.  The rouble rises to over 72 to the dollar:

 

(courtesy zero hedge)

 

 

Bank Of Russia Surprises With Unexpected Rate Cut, Brings YTD Total Of Nations Easing To 14

 

Yesterday we reported that in less than 1 month in 2015, so far a whopping 13 countries have proceeded with “surprising” rate cuts: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan. As of this morning, make that total 14, because in one of the more “surprising surprises” so far, it was none other than the Bank of Russia which cut its main interest rate from the 17% shocker it instituted at an emergency session on December 17 to halt the Ruble collapse (as a result of the crude price plunge) to 15% less than an hour ago. At the same time it cut the deposit rate to 14% and the repo rate to 16%.

More rate cuts may be coming:

  • NABIULLINA SAYS 15% RUSSIA’S KEY RATE STILL FAIRLY HIGH

Not surprisingly, the ruble tumbled in response with the USDRB jumping to 72, while the RTS stock index was down 2% at last check.

The question why Russia decided to cut rates now is relevant, and likely has to do with both the recent stabilization of crude prices in the mid-$40s, coupled with pressure from the administration to lower rates which have led to the Russian economy and banking sector grinding to a near halt.

More from the WSJ:

This was the first rate-setting meeting with Dmitry Tulin, a former deputy chairman who replaced Ksenia Yudaeva as monetary-policy chief earlier this month.

 

The statement issued after the central bank’s board meeting was the latest acknowledgment by Russia’s leadership that its economy will face protracted pain amid falling oil prices and a confrontation with the West over Ukraine.

And Bloomberg’s take:

The last time the currency weakened past 70 was on Dec. 17, a day after it tumbled past 80 in a rout that spread across emerging markets. The ruble has fallen 14 percent in January, weighed by oil’s slide and worsening violence in Ukraine. European Union foreign ministers gave the go-ahead on Thursday to prepare steps that would move beyond last year’s decisions to ban financing for Russian state-owned banks and prohibit the export of advanced energy-exploration technology.

 

“The central bank might have weighted in the risk of a further selloff in the ruble versus the repercussions of the drastic rate hike in December for the domestic banking system and decided to cut rates,” Bernd Berg, a London-based emerging-market strategist at Societe Generale SA, said by e-mail. “Official reasoning for this rate cut is a stabilization of CPI inflation expectations.”

 

“It looks to me like the wrong timing in easing monetary policy, as geopolitics remains a negative driver,” Luis Costa, the chief strategist for eastern Europe, the Middle East and Africa at Citigroup Inc. in London, said by e-mail.

The good news is that with the month of January effectively over, it will be a stretch to get any more central bank surprises in the remaining hours of the month. In February, however, expect even more capitulations from central banks around the globe as the relentless rise in the USD wreaks havoc to the global monetary system.

 

end

 

Then we received this news:

 

(courtesy zero hedge)

 

The Mexican Peso & Brazilian Real Are Collapsing

 

 

Back over 15 / USD for the first time since March 2009, the Mexican Peso is tumbling hard this morning… and the Brazilian Real is also tanking (back near 10-year lows) – no clear catalyst aside from further weakness in oil producer and EM FX sentiment.

 

Peso under pressure

 

Back to March 2009 lows..

 

And the Real is close behind (back near 10 year lows)

 

As Oil Producers FX rates push to new cycle (or record) lows…

 

 

Charts: Bloomberg

 

end

 

 

For global tensions this does not look good as Israel prepares for a war on two fronts.

Gold will the beneficiary:

 

(courtesy zero hedge)

 

The Next War In The Middle East Has Begun And Israel Vows “To Act Powerfully On All Fronts”

 

Submitted by Michael Snyder via The Economic Collapse blog,

Israel and Hezbollah are at war.  On top of everything else that is going on in the world, now we have a new war in the Middle East, and nobody is quite certain what is going to happen next.  Israel has been preparing for this moment for more than 8 years.  So has Hezbollah.  According to some reports, Hezbollah has amassed an arsenal of 50,000 rockets since the end of the Hezbollah-Israel war in 2006.  If all-out warfare does erupt, we could potentially see tens of thousands of missiles rain down into an area not too much larger than the state of New Jersey.  And of course the Israeli military is also much more sophisticated and much more powerful than it was back in 2006.  If cooler heads do not prevail, we could be on the verge of witnessing a very bloody war. But right now nobody seems to be in the mood to back down.  Hezbollah is absolutely fuming over an airstrike earlier this month that killed six fighters and a prominent Iranian general.  And Israeli Prime Minister Benjamin Netanyahu says that Israel is “prepared to act powerfully on all fronts” in response to a Hezbollah ambush that killed two Israeli soldiers and wounded seven.  Just such an incident is what sparked the war between the two sides back in 2006.  But this time, a conflict between Israel and Hezbollah could spark a full-blown regional war.

Earlier this month, Israel launched a surprise assault against a group of Hezbollah fighters that Israel believed was planning to conduct terror attacks inside their borders.

But in addition to killing six Hezbollah fighters, a very important Iranian general was also killed.  Needless to say, Iran is furious

Iran has told the United States that Israelshould expect consequences for an attack on the Syrian-controlled Golan Heights that killed an Iranian general, a senior official said on Tuesday.

 

Revolutionary Guards General Mohammad Ali Allahdadi died alongside six fighters from Lebanon’s Hezbollah group in the January 18 attack on forces supporting President Bashar al-Assad in Syria’s civil war.

And we didn’t have to wait too long for a response.  An IDF convoy was hit by anti-tank missiles near the Lebanon border.  Two Israeli soldiers were killed and seven were wounded.  The following is how the Jerusalem Postdescribed the attack.

The terrorists launched five or six anti-tank missiles from a distance of at least four kilometers from their targets, striking the vehicles as they drove two kilometers from the international border.

 

In the heavy Hezbollah ambush, a military D-Max vehicle containing a company commander and his driver from the Givati Brigade was the first vehicle hit.

 

This prompted all of those inside an IDF jeep behind it to quickly evacuate their vehicle before it, too, was hit and destroyed with missiles.

Just over an hour after that attack, mortar rounds struck an Israeli military position on Mt. Hermon.

In response to those strikes, the Israeli military hit backat Hezbollah positions on the other side of the Lebanese border…

Israel struck back with combined aerial and ground strikes on Hezbollah operational positions along the border, the military said.

 

At least 50 artillery shells were fired at the villages of Majidiyeh, Abbasiyeh and Kfar Chouba, according to Lebanese officials.

But Israel is probably not done.

Prime Minister Benjamin Netanyahu is promising a “disproportionate” response to the Hezbollah attacks, and he says that Hezbollah should consider what Israel recently did to Hamas before taking any more aggressive action…

“To all those trying to challenge us on the northern border, I suggest looking at what happened here, not far from the city of Sderot, in the Gaza strip.  Hamas absorbed the hardest blow since it was founded last summer, and the IDF is ready to act with force on any front.”

If things continue to escalate, we might not just be talking about another Hezbollah-Israel war.

In the south, tensions between Israel and Hamas remain near all-time highs.  In the event of a full-blown war, Hamas probably could be easily convinced to join the fray.  And if Hamas jumps in, the rest of the Palestinians might not be far behind.

In addition, ISIS now has territory near the border with Israel

Because of the strategic importance of the terrain, Iran and Hezbollah have been building infrastructure there for some time.  But their interest in the Golan skyrocketed in December.

 

The reason: ISIS gained a foothold therewhen the Yarmouk Martyrs Brigade of the Free Syrian Army “defected” from the de facto alliance with the U.S.-Arab coalition against Assad, and declared its allegiance to ISIS.  The Yarmouk Martyrs Brigade had been one of the most active rebel factions holding territory directly adjacent to the “area of separation” between Syria and Israel administered (in theory) by the UN.  In particular, it has held the southern line of confrontation with Syrian regime forces, in the transit corridor leading to the Quneitra border crossing.

Needless to say, ISIS would be extremely interested in any conflict with Israel.

And of course there are all of the other surrounding Islamic nations that are not too fond of Israel either.

The truth is that the Middle East is a perpetual tinderbox.  One spark could set the entire region on fire.

Meanwhile, Barack Obama continues to do all that he can to undermine Israeli Prime Minister Benjamin Netanyahu.

The animosity between the two is well known, and now an “Obama army” of political operatives has been sent to Israel to help defeat Netanyahu in the upcoming elections.

The “leader” of this “Obama army” is Jeremy Bird, who was the national field director for Barack Obama’s 2012 presidential campaign.  But he has plenty of company.  Just check out the following list that was compiled by WND

Besides Bird, the 270 Strategies team includes the following former Obama staffers:

  • Mitch Steward, a 270 Strategies founding partner who helped the Obama campaign build what the U.K. Guardian called “a historic ground operation that will provide the model for political campaigns in America and around the world for years to come.”
  • Mark Beatty, a founding partner who served as deputy battleground states director for the Obama campaign. He had primary responsibility for Obama’s election plans for the battleground states.
  • Marlon Marshall, a founding partner at 270 Strategies who joins the team after holding several key positions in national Democratic politics, most recently as deputy national field director for the 2012 Obama campaign.
  • Betsy Hoover, a founding partner who served as director of digital organizing on the Obama campaign.
  • Meg Ansara, who served as national regional director for Obama for America where she was responsible for overseeing the 2012 programs in the Midwest and southern states.
  • Bridget Halligan, who served as the engagement program manager on the digital team of the 2012 Obama campaign.
  • Kate Catherall, who served as Florida deputy field director for Obama’s re-election campaign.
  • Alex Lofton, who most recently served as the GOTV director of Cleveland, Ohio, for the 2012 Obama campaign.
  • Martha Patzer, the firm’s vice president who served as deputy email director at Obama for America.
  • Jesse Boateng, who served as the Florida voter registration director for Obama’s re-election campaign.
  • Ashley Bryant, who served most recently as the Ohio digital director for the 2012 Obama campaign.
  • Max Clermont, who formerly served as a regional field director in Florida for Obama’s re-election campaign.
  • Max Wood, who served as a deputy data director in Florida for the 2012 Obama campaign.

As the first month of 2015 wraps up, our world is becoming increasingly unstable.

In addition to the oil crash, the collapse of the euro, looming stock market troubles, civil war in Ukraine, tensions with Russia, an economic slowdown in China and imploding economies all over South America, now we have more war in the Middle East.

And if lots of missiles start flying back and forth between Israel and Hezbollah, it could potentially spark the bloodiest war in that region that any of us have ever seen.

 

 

end

 

 

 

Early this morning, Eurozone deflation worsens as  CPI falls to -.6%. The key problem for Europe is the huge debt on the balance sheet of the banks to the tune of 1 – 2 trillion euros.  As deflation sets in, this makes the debt that much worse as it cannot be serviced:

 

(courtesy zero hedge)

 

Eurozone Deflation Ties Post-Lehman Record, Worse Than Expected

 

With every central bank scrambling to export deflation, and with the Saudis doing everything in their power to definancialize crude as an investment asset and destroy the US shale patch, it is probably no surprise that the ECB is utterly hopeless to prevent Europe from sliding into an all out deflationary contraction, which this morning Eurostat confirmed when it reported that in January, Euro Area deflation was “worse” (assuming it is worse when consumers pay less for goods and services, which it only is if they are sinking in debt) than the -0.5% expected reading, instead sliding from -0.2% in December to -0.6% in January, which also happens to be tied for the worst deflationary print in the Euroarea history, matching the number from July 2009 when the world was reeling in the global Great Financial Crisis depression.

In retrospect, 6 years of money printing hasn’t done anything to improve the global economy.

The driver of this massive deflationary print: plunging energy prices, courtesy of the House of Saud:

But there’s good news: rejoice, for even more deflation means even more Q€, which also means even more QE by everyone else as the race to export re-export and re-re-export deflation is now in its final stages. From the WSJ:

Last week, the ECB said it would purchase €60 billion ($68 billion) in public and private debt securities each month, mostly government bonds, starting in March and lasting until September 2016 in a bid to bring inflation closer to the bank’s 2% target.

 

Still, the longer consumer prices persist in negative territory, the more pressure the ECB will eventually come under to extend the purchase program. Officials have said it won’t end until they are confident that inflation is on track to reach their objective.

 

The program “will end only once we get a strong sense that inflation is converging toward 2%,” ECB executive board member Benoît Coeuré said in an Italian newspaper interview this week.

 

The latest drop in inflation was driven largely by falling energy prices, but also by declining prices for manufactured goods as businesses passed on some of the savings they have made on their energy bills. Food prices also fell, while prices of services rose more slowly than in recent months.

And while core inflation rose 0.6%, hardly a glowing achievement, the drop in crude prices – which as noted yesterday is now the biggest “Hamilton Oil Shock” in history – is about to have various downstream effects:

This trend will worry ECB policy makers, who want to prevent the fall in oil prices having “second-round effects” as other businesses cut their prices to gain market share and workers settle for lower pay rises. The ECB worries that households and businesses will grow accustomed to falling prices, and postpone some spending decisions in anticipation of a better deal later in the year, in turn leading to falls in output and further drops in prices.

 

Beyond the threat of a deflationary spiral, the decline in prices could, on the other hand, help boost consumer spending power in the near term, to the extent that falling prices are driven by lower energy costs.

The WSJ tries to spin this as benefiting household spending: “A bounce in consumer spending aided an acceleration in Spain’s economy during the fourth quarter, statistics institute INE said Friday. The eurozone’s fourth-largest economy grew 0.7% in the three months to December, compared with the previous quarter, INE said. That is equivalent to an annual pace of growth of 2%, INE added. In the third quarter, it had posted 0.5% growth from the earlier period.”

Which is great, however considering the unprecedented levels of unemployment in Europe, any attempt to put a silver lining on this particular mushroom cloud will be not only short lived but, shortly, quite radioactive.

The punchline, and what the WSJ gets right:

If inflation falls deeper into negative territory and gets stuck there, it would raise even more doubts about whether eurozone debtor countries can recover without restructuring their debt that would spread more of the cost of cleaning up Europe’s crisis to creditor nations such as Germany.

Which is what we have been saying all along: Europe’s financial problem is not with QE, not with stock markets, not with the corporate bond transmission channel, but with the €1-€2 trillion in secured bad loans on the books of bank balance sheets, which the ECB can not monetize (at least not yet). And fixing this will require a global, coordinated bailout backstopped by at least on sovereign, i.e., Germany. Something tells us if and when the time comes for Germany to finally provide the payback for all those years of benefits it reaped thanks to a currency weaker than the DEM, it will call it a day and pull the switch on the great monetary and political experiment.

 

 

end

 

 

 

Germany’s 30 year bund yield plunges to under 1%…again please re read this. Investors are putting money into Germany bonds for 30 years and get less than 1% interest per year.  Why?

the global economy is sinking faster than the Titanic…

 

(courtesy zero hedge)

 

30Y German Bund Yield Plunges Under 1% – Record Low

 

 

“…but it can’t go any lower, right?” On the heels of yesterday’s German deflation and today’s near-record EU wide deflation prints… and the ongoing tumble in inflation expectations post-Q€ – the rush for the safety of Bunds continues (and with it the arb-drag on US yields) as for the first time ever, 30Y German Bunds yield below 1%…

end

 

 

A question for the Journalists:

 

Was Greece consulted on whether more sanctions were to be placed on Russia?

 

Did the EU act without Greece’s affirmation as the EU needs a unanimous vote

 

(courtesy zero hedge)

 

 

The New Greek Finance Minister Has Some Questions For The World’s Journalists

It was a confusing day for Europe, for the new Greek foreign minister, and now for Greece’s new finance minister who hours ago posted a question on his blog to the world’s journalists:

A question of respect (or lack thereof)… – the Greek veto over Russia that never was

On the first day in our ministries, the power of the media to distort hit me again. The world’s press was full of reports on how the SYRIZA government’s first foreign policy ‘move’ was to veto fresh sanctions on Russia. Now, I am not qualified to speak on foreign affairs but, nonetheless, I must share this with you at a personal level. Our Foreign Minister, Nikos Kotzias, briefed us that on his first day at the job he heard in the news bulletins that the EU had approved new sanctions on Russia unanimously. The problem was that he, andthe new Greek government, were never asked! So, clearly, the issue was not whether our new government agrees or not with fresh sanctions on Russia. The issue is whether our view can be taken for granted without even being told of what it is! From my perspective, even though (let me state it again) I am certainly not qualified to speak on foreign affairs, this is all about a question of respect for our national sovereignty. Could journalists the world over try to draw this important distinction between protesting our being neglected from protesting the sanctions themselves? Or is this too complicated?

All fair questions. And then at almost the same time we read the following, first from Bloomberg:

  • EU DECISION ON RUSSIA SANCTIONS WAS UNANIMOUS, MOGHERINI SAYS

And then from Reuters:

European Union foreign ministers extended existing sanctions against Russia on Thursday, holding off on tighter economic measures for now but winning the support of the new left-leaning government of Greece, whose position had been in doubt.

 

The run-up to the Brussels talks was dominated by Greece, whose new prime minister, Alexis Tsipras, took power on Monday and complained that his government had not been consulted before tighter sanctions were threatened. But at the meeting, colleagues said new foreign minister Nikos Kotzias had swiftly dispelled suggestions that Greece would automatically torpedo any sanctions effort.

 

According to Italy’s foreign minister, Kotzias announced to the meeting: “I am not a Russian puppet.”

It appears Greece was consulted after all:

While the Greeks did call for the decision on tighter sanctions to be delayed, they were not alone: other countries such as Italy and Austria also favored a delay, diplomats said, while Britain and the Baltic states wanted a clearer commitment to imposing new sanctions quickly. “We are not against every sanction,” Kotzias said later. “We are in the mainstream, we are not the bad boys.”

And even Germany is now “less concerned

German Foreign Minister Frank-Walter Steinmeier expressed frustration with the ambiguity of the Greek position before the talks: “It is no secret that the new stance of the Greek government has not made today’s debate any easier,” he said. After he met Kotzias in private, German officials said he was less concerned.

So following all this, we too have a few questions of our own: i) was or wasn’t Greece consulted; ii) if yes, did Greece agree to join the unanimous European statement while declaring it is “not a Russian puppet“; and finally iii) while Greece may not be a Russian puppet, is Greece still a European puppet?

end
Late in the morning came word that Brazil’s economy is on the verge of collapse as its twin deficits go deeply into the negative:  i.e. a  huge fiscal deficit as well as a huge current account deficit.  Their sales to China just dried up!!!
(courtesy zero hedge)

Brazil’s Economy Is On The Verge Of Total Collapse

Back when the BRICs were the source of marginal global growth, the punditry couldn’t stop praising them. However, in the past year, now that China’s housing bubble has burst and its shadow banking system has imploded, those who remember what BRIC actually stood for are about as rare as those who recall what it means for the Fed to hike rates. Which is precisely why nobody in the mainstream financial media has commented on the absolutely abysmal economic update reported earlier today out Brazil.

We are happy to do so because today’s data follows up quite well to our article from a month ago “Brazil’s Economy Just Imploded” and as the earlier article on the crashing Brazilian Real hinted, things for the Brazilian economy how gone from imploding to, well, worse because not only did the twin fiscal and current account deficits rise even more, hitting a whopping 11% of GDP – the worst since August 1999, but its government debt soared to 63.4% in 2014, up from 56.7% a year ago, and the highest since at least 2006. In short – the entire economy is now on the verge of total collapse.

This is what happened in a few bullet points:

  • The fiscal picture has deteriorated very sharply since 2011 at both the flow (fiscal deficit) and stock (gross public debt) levels. The primary and overall nominal fiscal surpluses at year-end 2014 were at levels last seen in the late 1990s.
  • The steady decline of the public sector savings rate is leading to a wider current account deficit despite weaker growth and low investment. In fact, the twin fiscal and current account deficits are now tracking at a combined, very troublesome 10.9% of GDP, the worst picture in 15 years (since August 1999). Repairing the severely unbalanced macro picture would require a deep, structural and permanent fiscal and quasi-fiscal adjustment and a significantly weaker BRL.
  • The new economic team faces, among other things, the very significant challenge of repairing the severely deteriorated fiscal picture.
  • The steady erosion of the fiscal stance pushed net and gross public debt up. Furthermore, fiscal and quasi-fiscal activism undermined the effectiveness of monetary policy, contributed to keep inflation very high and drove the current account deficit to a very high level despite weak growth.

More details from Goldman:

The overall public sector fiscal deficit widened to a very high 6.7% of GDP (from 3.25% of GDP in 2013 and the highest fiscal deficit since August 1999) given the very high 6.1% of GDP net interest bill and steady erosion of the primary fiscal surplus. Given the BRL depreciation during the month, the interest on the stock of Dollar swaps issued by the central bank reached R$17.0bn (adding to the R$8.7bn accrued in November).

 

Gross general government debt rose to 63.4% of GDP in 2014, up from 56.7% of GDP in 2013 and 53.4% of GDP in 2010 (the highest level since at least 2006).

 

The consolidated public sector posted a very large and worse-than-expected R$12.9bn deficit in December, driven by the unexpectedly large R$11.3bn deficit recorded by the States and Municipalities. The state-owned enterprises also posted a large deficit in December: R$2.3bn surplus.

 

Overall, the consolidated public sector posted a 0.63% of GDP primary deficit in 2014, down from surpluses of 1.9% of GDP in 2013, and 2.4% of GDP in 2012. This is the worst fiscal outturn in 16 years (since November 1998) and very significantly below the 1.9% of GDP primary surplus promised by former Finance Minister Mantega. The erosion of the primary surplus in recent years was driven chiefly by the weak fiscal numbers of the Central Government, whose primary balance declined from 1.55% of GDP in 2013, to a deficit of 0.40% of GDP in 2014.

 

However, the primary surplus of subnational government (States and Municipalities) has also been eroding, a reflection of the authorizations given by the Treasury since 2011 for increased borrowing by the States. For instance, the States and Municipalities posted a 0.15% of GDP deficit in 2014, down from 0.80% of GDP surplus in 2011.

In charts:

And the key numbers:

  1. The Consolidated Public Sector (CPS) posted a significantly worse-than-expected R$12.9bn primary deficit in December, driven by local governments and state-owned enterprises. The Central Government posted a R$755mn surplus but the States and Municipalities recorded a very large R$11.3bn deficit and the state-owned companies an also large R$2.3bn deficit.
  2. Overall, the primary balance of the CPS worsened to a 0.63% of GDP deficit in 2014 from a 1.9% of GDP surplus in 2012 and 2.4% of GDP surplus in 2012.
  3. The overall fiscal deficit (primary surplus minus interest payments) deteriorated further: to a very high 6.7% of GDP given the large 6.1% of GDP net interest bill. This is the largest overall fiscal deficit since August 1999.
  4. Net public debt worsened to 36.7% of GDP in 2014, up from 33.6% in 2013. Gross general government debt rose to a high 63.4% of GDP in December, up from 56.7% of GDP in 2013.

Good luck Brazil.

 

 

end

 

The following two stories are huge:  Chevron suspends stock buybacks as they say the economy is in awful shape.  The stock buybacks have been the key catalyst for the stock markets to rise. With the economy in rough shape, it makes no sense for the company to buy back their shares. Basically they are stating that their own shares are too high in price

 

(courtesy zero hedge)

 

It Begins: Energy Giant Chevron Suspends Stock Buyback, Blames “Cash Flow Squeeze”

 

It was less than 24 hours after we posted that either oil will double from here allowing energy companies to grow into a normal P/E multiple, or energy stocks will have to crash by over 40% for the ridiculous 23x to return to its normal, long-term average of 13.6x. Moments ago energy giant Chevron admitted that not only does it not see oil doubling any time soon, but that energy prices are almost certain to go far lower from here, and as a result the company decided that after buying back $5 billion of its shares in 2014, i.e., buying high and higher before the stock crashes may not be the best use of dwindling cash flow, and as a result has just suspended its stock buyback program of the rest of 2015. Yes, energy giant Chevron just ended its buyback!

As regular readers know, company buybacks are forecast to be the single biggest source of demand for stocks in 2015..

 

… which means this may well be the beginning of the end of the 6 year bull market. For now, the realization if only hitting Cheveron stockholders.

 

Also did we mention Chevron’s “dwindling cash flow”? Good: here’s why:

  • DRILLING RIG RATES HAVE FALLEN AS MUCH AS 50%: CHEVRON CEO
  • CHEVRON SAYS DROP IN GLOBAL OIL PRICES SQUEEZE CASH FLOW

It’s not just buybacks that are out of the window. So is CapEx..

  • CHEVRON SIGNIFICANTLY REDUCING EXPLORATION, DESIGN SPENDING
  • THIS YEAR’S CAPEX CUTS WILL IMPACT OIL OUTPUT POST-2017: CVX

… and SG&A:

  • CHEVRON REVIEWING STAFF LEVELS AROUND THE WORLD, CEO SAYS

Finally, all those who are so sure a surge in oil prices and energy stocks is just around the corner, here is a little more cold water:

  • WORLD ENERGY DEMAND FAIRLY MATCHES WORLD ECONOMIC GROWTH
  • CVX DOESN’T SEE MUCH CHANGE IN WORLD ENERGY DEMAND ON GROWTH

But the financial comedy TeeVee said it was all an “excess-OPEC supply” problem?

* * *

And for everyone who missed it yesterday, here again is “Either Oil Soars Back To $88, Or Energy Stocks Have To Tumble By Over 40%”

Several days ago we showed something remarkable: “current forward 12-month P/E ratio for the Energy sector is now well above the three most recent historical averages: 5-year (12.0), 10-year (11.9), and 15-year (13.6). In fact, this week marked the first time the forward 12-month P/E for the Energy sector has been equal to (or above) 22.4 since April 8, 2002. On that date, the closing price of the Energy sector was 225.15 and the forward 12-month EPS estimate was $10.05.”

Further refining this analysis and using the S&P Energy Sector Index data, the sector’s forward multiple is now an absolutely ridiculous, mindblowing 23x, the highest since 2002, having soared by nearly 100% in just the past few months as a result of collapsing energy sector earnings.

 

How is this possible?

Simple: as the chart below shows, since the oil’s peak in June 2014, Energy company EPS have crashed by 50%, as a result of a 60% plunge in the price of oil. What about Energy Index prices? Well, they have fallen to be sure, but nowhere near far enough to where they should, down “only” 20% from the highs.

 

So what does this mean? Simple: either the long-term PE multiple is now null and void, and the “New Normal” forward PE of 20X+ is realistic, which of course is ridiculous, or there are two alternatives:

  • Energy sector earnings have to surge by 70%, implying a near doubling of oil prices to $88, for the forward P/E multiple to return to normal, or
  • The Energy sector price has to crash from 549 today to 323, where it would trade down to its historic forward P/E multiple, suggesting a price drop of over 40%!

This is shown visually on the table below:

So which is it? Well, as the following chart showing a relationship we have grown to love over the past few months, the main reason why energy stocks are loathe to catch down to reality is the same BTFD mentality which is keeping the S&P elevated well over 100% above its fair “ex-central banker” value. Indeed, every single time even the smallest buying momentum arrives, energy stocks soar as if stung, only to recrash day after precisely to where credit says they should be trading.

 

Which means that once the ongoing euphoria of a 5 year Pavlovian BTFD reaction wears off, the pain for those long energy equities (and credit, since the above analysis implies energy credits are also massively mispriced) will be unprecedented, unless of course, by some miracle, oil does indeed double from here and on very short notice.

But wait, it gets worse, because while equities are pricing in an unsustainable 23x in foward energy P/E, another market, that of interest rate forwards, is implying oil plunging down to $35! As a reminder, oil is among other things, a function of rate differentials or said simpler, USD strength, strength which appears is not going anywhere. And as the following calculation from Cornerstone implies, should the EURUSD tumble to parity which is what Draghi’s desire seems to be, it would suggest a 22% plunge in oil from here, implying a $35.5 price of oil one year from now.

This in turn would mean that, all else equal, the forward PE multiple would rise to just shy of 30x, and/or that Energy prices as a group would have to tumble over 50% from current levels!

Of course, if and when energy prices are cut in half, this would also have devastating consequences on the rest of the S&P, and all other asset classes, and almost assuredly force the Fed to not only forget all about hiking rates, but promptly engage in QE4.

Which may be just what the market is pricing in.

The only problem is that one can’t have a world in which both QE4 is priced in (as equities are doing), as well as pricing in the 2015 Fed rate hike (as oil is doing), and is one of the main drivers of the USD strength.

One has to give, and it has to give soon.

 

 

end

 

And now the global layoffs:

 

(courtesy zero hedge)

 

Chevron Slashes 23% Of PA Workforce As US Rig Count Collapses To June 2010 Lows

For the 8th week in a row (something that hasn’t happened since June 2009), US total rig count plunged.This week’s 90 rig drop to 1543 is the largest so far(with oil rigs down 94 to 1223 – lowest since Jan 2013).  The total rig count is now down 20% in the last 8 weeks to the lowest since June 2010 as it tracks the 4-month lagged oil price perfectly. This is the 2nd biggest 8-week drop in 22 years. This – rather unsurprisingly – has ledChevron to decide to cut 23% of its Pennsylvania workforce “due to activity levels.” Not ‘unambiguously positive’ as so many in the central planning bureaus would have everyone believe.

 

The Rig Count continues to plunge along with lagged oil prices…

 

Obviously for oil prices to eventutally stabilize, production will have to slow and rig counts plunge further.. and so will jobs…

  • *CHEVRON TO CUT 23% OF PENNSYLVANIA WORKFORCE AMID CRUDE SLUMP
  • *CHEVRON JOB CUTS STEM FROM LOWER-THAN-EXPECTED ACTIVITY LEVELS

 

Charts: Bloomberg

 

end

 

 

 

I  do not think there is anything more for me to see in my lifetime:

Shockingly in Denmark, Nordea bank is offering a negative interest rate on a mortgage.  Yup your saw right..they pay you monthly to take on a mortgage:

 

(courtesy zero hedge)

 

 

 

 

In Denmark You Are Now Paid To Take Out A Mortgage

 

With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe’s insolvent governments (who can only print negative interest debt because of the ECB’s backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical – in as much as nothing is logical in the new normal – question:

Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That’s right – the negative rate mortgage is now a reality.

Thanks of Mario Draghi’s generosity with “other generations’ slavery”, and following 3 consecutive rate cuts by the Danish Central Bank, a local bank – Nordea Credit – is now offering a mortgage with a negative interest rate! This means, according to DR.dk, that Nordea have had to pay instead of charging interest to to a handful of customers, says housing economist at Nordea Kredit, Lise Nytoft Bergmann for Finance.

From DR, google-translated:

The interest rate has balanced around 0 in a level between minus 0.03 percent plus 0.03 percent. Most have paid a modest positive interest rate, but there are so few who have had a negative rate. It is quite an unusual situation, says Lise Nytoft Bergmann.

 

It is residential customers who have chosen to stick with F1-loan that now benefit from the negative interest rate. F1 loan form has otherwise been strong returns in recent years in favor of fixed interest loan.

 

Although interest rates are negative, it is not something that can be felt by customers as contributions and other costs continue to be paid. In turn, interest will be deducted from the contribution.

 

Precisely because it is an unusual situation, Nordea Kredit’s IT systems are not geared to the situation when the computers are only used to collect interest.

 

Lise Nytoft Bergmann says that there is no cause for concern, and that the new situation can be handled, “but sometimes we have to use duct tape and paste.”

This is just the beginning: according the Danish media outlet, as a result of variable-refinancing, as recently as a week from now “a greater share of customers could have a negative rate.”

Mortgage Denmark is one of the mortgage banks, where F1 rate also is close to zero, and here you are very excited about the upcoming negotiations, says Christian Hilligsøe Heinig, chief economist of the Mortgage Denmark.

 

We have an auction just around the corner and it is very exciting to see how interest rates are going. We can go and get negative interest rates, says Christian Hilligsøe Heinig to JP Financial.

And just like that, first in Denmark, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, are directly funding the negative interest rate paid to those who wish to take out debt. In fact, the more debt the greater the saver-subsidized windfall.

That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can’t wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm.

h/t @AndreasBay

Your more important currency crosses early Friday morning:

 

Eur/USA 1.1332 down  .0002

USA/JAPAN YEN 117.72  down .550

GBP/USA 1.5064 down .0014

USA/CAN 1.2648 up .0035

 

 

This morning in Europe, the euro continues to move lower, trading   now just above the 1.13 level at 1.1332 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 as this morning it settled  up again in Japan by 55 basis points and settling well below the 118 barrier to 117.72 yen to the dollar. The pound was down this morning as it now trades well below the 1.51 level at 1.5064.(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 well down again at 1.2648 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.

 

 

 

The NIKKEI: Friday morning : up 68 points or 0.39%

Trading from Europe and Asia:
1. Europe stocks all in the red (except Spain)

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

Gold very early morning trading: $1263.00

silver:$16.99

 

 

 

 

Early Friday morning USA 10 year bond yield: 1.72% !!!  down  3  in basis points from Thursday night/

 

USA dollar index early Friday morning: 94.56  down 22 cents from Thursday’s close.

 

This ends the early morning numbers.

 

 

 

 

 

 

And now for your closing numbers for Friday:

 

Closing Portuguese 10 year bond yield: 2.64% up 3 in basis points from Thursday

 

Closing Japanese 10 year bond yield: .28% !!! down 2 in basis points from Thursday

 

Your closing Spanish 10 year government bond,  Friday down 4 in basis points in yield from Thursday night.

Spanish 10 year bond yield: 1.42% !!!!!!
Your Friday closing Italian 10 year bond yield: 1.59% down  1 in basis points from Thursday:

 

trading 17 basis points higher than Spain:

 

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

 

 

Euro/USA: 1.1299  down .0039

USA/Japan: 117.42 down .851

Great Britain/USA: 1.5062 up .0015

USA/Canada: 1.2708 up .0095

 

The euro fell quite a bit this afternoon and it closed down by .0039  points finishing the day just below  the 1.13 level to 1.1299. The yen was well up in the afternoon, and it was up by closing  to the tune of 85 basis points and closing well below  the 118 cross at 117.42 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound gained a little  ground during the afternoon session and was up on  the day closing at 1.5042. The Canadian dollar recovered a bit this afternoon from the weak oil price but finished the day down at 1.2708 to the dollar.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front will no doubt produce many dead bodies.

 

end

 

 

 

 

Your closing 10 yr USA bond yield: 1.66 down 10 basis points (it collapsed as the economy tanks)

 

Your closing USA dollar index: 94.71 down 8 cents on the day.

 

 

 

 

 

European and Dow Jones stock index closes:

 

 

England FTSE  down 61.20 points or 0.90%

Paris CAC down 27.18 or 0.59%

German Dax  down 43.55 or 0.41%

Spain’s Ibex down  104.30 or 0.99%

Italian FTSE-MIB down 90.34 or 0.44% (Monte de Paschi in trouble again)

 

The Dow: down 250.68 or 1.44%

Nasdaq; down 39.88 or 0.85%

 

OIL: WTI 47.62 !!!!!!!

Brent: 52.14!!!!

 

 

Closing USA/Russian rouble cross: 69.56  down 1  rouble per dollar on the day.

 

 

 

 

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

 

Your New York trading for today:

 

 

January Jitters Jolt Stocks – S&P Loses Key 2,000 Level; Bonds’ Best Month Since June 2010

 

Given the following – Silver and Bonds win in January followed by Gold, Stocks and Oil Lose…

  • Treasury Bonds – Best month since June 2010
  • Crude Oil – 7th month lower in a row (same as 2008/9) and manic ramp to green on the week (best week since Dec 2013)
  • S&P 500 – Worst month since last January, first two-month drop since May 2012 (worst week in last 8)
  • Dow Transports – Worst month since Sept 2011
  • Gold – Best month since Jan 2012 (worst week in 6)
  • Silver – Best month since June 2014 (worst week since Sept 2013)
  • Swissy – Best month since Dec 2008 (worst week sicne Sept 2011)
  • US Dollar Index – Best month since May 2012 (up 7 months in a row)

We suspect this will help…

 

Bu, for human oil shorts this afternoon, we suspect this sums up their message to the manipulators and their machines…

 

We have to start with WTI because that was a fucking joke!!!! This 8.3% ramp into the NYMEX close was the biggest single-day ramp since June 2010… (in case you wonder what happened… read this complaint)

 

Which magicaly levitated stocks… to the NYMEX close…

 

Now where have we seen that before?

 

Crude down for the 8th month in a row… for only the 2nd time in history

 

*  *  *

Anyway… take a breath because it was quite a month/week/day…

Today’s market was domianted by fading yesterday’s Yellen pump bounce and the momo ignition from crude which was faded…NOT OFF THE LOWS

 

On the week, Trannies are the laggard… NOT OFF THE LOWS

 

On the month, stocks are ugly…

 

Since QE3, only NASDAQ is green (thanks to AAPL)

 

The S&P 500 dropped back below its 100DMA after Yellen’s intervention – that is a problem… And The S&P 500 Lost 2000 at the close

 

Obviously oil stands out on the week (thanks to today’s idiocy) but gold recovered to unch while silver was slammed…

 

Energy stocks spiked (again) – credit didn’t!! Trade Accordingly!

 

The US Dollar dropped modestly this week (down 0.5%) despite a huge drop in Swissy)

 

Treasury yields plunged on the week (new 30Y record lows)

 

Of  course stocks just kept on buying and disbelieving bonds…

 

And on the month, 3Y is -20bps and the entire rest of the curve is down around 50bps!!

 

Bonds best month since June 2010…

 

Credit continues to flash red – just like it did in 2008…

 

Charts: Bloomberg

Bonus Chart: Unless you got in at the IPO price, you are a loser in SHAK!!

 

end

 

USA treasuries crash again indicating depression like conditions inside the USA:

 

(courtesy zero hedge)

 

 

 

Treasury Yields Are Crashing (Again)

 

 

S Treasury yields are plunging again this morning. From 4Y maturities out, yields are around 10bps lower with 30Y under 2.30%, 10Y under 1.65%, 7% under 1.5%, and 3Y under 75bps!! Since QE3 ended, 30Y bond yields are 84bps lower, 2Y 3bps lower.

This week things have escalated…

 

And since the end of QE3, the curve has collapsed…

 

It’s just a good job consumer sentiment is at 11 year highs or one might suspect we are heading into recession/depression

 

Charts: Bloomberg

 

 

end

 

Fourth quarter GDP results released and we see a lot of scrambling as everyone has to adjust their forecasts downwards: why? again supposed Obamacare.  GDP growth in 4th quarter 2.6%

 

(courtesy zero hedge/following two articles)

 

 

Q4 Annualized GDP Misses, Tumbles To 2.6% From 5.0%; Surging Personal Consumption Pulled Forward From 2015

 

Following last quarter’s upward revised 5.0% GDP, driven higher mostly as a result of even more mandatory Obamacare taxation, Q4 GDP had nowhere else to go but down, the only question was how much. Wall Street estimated 3.0%. Moments ago we got the first estimate for Q4 GDP and it was a miss, printing at 2.6%, and nearly 50% below the Q3 annualized number. This also means that the final 2014 GDP is 2.4%, higher than the 2.2% in 2013 as well as the 2.3% in 2012.

And while the overall report was disappointing, with GDP dragged down mostly by Imports which contributed to -1.39% of GDP, which in turn is driven by lower crude prices. Remember when plunging crude was unambiguously good? Well, not for GDP. And what’s worse, the impact on Fixed Investment, which contributed 0.37% to GDP in Q4, down from 1.18% in Q2, is yet to be felt as energy company after company cuts its Capex spending.

  • The good news: Personal Consumption spending contributed 2.87% of the GDP number or more than the total print, growing 4.3% Q/Q, above the 4.0% expected. This was the highest annualized quarterly consumption since Q1 2006.
  • The bad news: much of the consumption that economists had expected would take place in Q1 was pulled forward, and a result Q1 GDP will now be revised even lower.

The full GDP breakdown:

end

Thanks Obamacare: This Is What Americans Spent The Most Money On In Q4

 

 

If readers need clarification on what was the primary source of spending-based “growth” for the US economy in the fourth quarter, the same source that bumped up final Q3 GDP from 3.9% to 5.0%, please ping us: we will gladly explain the chart below.  And just in case it is still unclear what Americans are spending their “gas sasvings” on, here it is one more time.

And just in case the fading impact of Obamacare is not already priced in, here is what Q4 inventories did: rising by $113.1 billion in Q4, this was the second highest quarterly increase in the 21st century, second only to September 2010. It’s all GDP-crushing liquidations from here.

 

So big in fact that even the most upbeat permabull has no choice but to admit the truth:

end
The National Chicago Manufacturing PMI beats the street but it’s index is still down dramatically year over year:
(courtesy Chicago PMI/zero hedge)

Chicago PMI Beats But Remains Lower Year-Over-Year

Having tumbled (and missed) for two straight months, hope triumped in January and pushed Chicago PMI above expectations printing 59.4 (against 57.4 consensus). This is still the 2nd worst print since July so let’s not get all excited quite yet as only 4 components rose. This is the 4th month in a row of negative YoY prints. So just to clarify – US GDP misses notably and stocks say “meh” but Chicago PMI beats and stocks smash higher on a JPY lifeboat…

 

 

Breakdown

  • Prices Paid fell compared to last month
  • New Orders rose compared to last month
  • Employment rose compared to last month
  • Inventory fell compared to last month
  • Supplier Deliveries fell compared to last month
     
  • Production rose compared to last month
     
  • Order Backlogs rose compared to last month
end
I will leave you tonight with two important commentaries: the first  from Raul Meijer/Automatic Earth Blog who discusses the situation in Greece.  This will be followed by Greg Hunter as he talks about the problems of war breaking out on many fronts:
First Raul Meijer/Automatic Earth Blog
(courtesy Raul Meijer)

How Do You Solve A Problem Like Syriza?

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

First off, no, I don’t think Syriza is a problem, I just couldn’t resist the Sound of Music link once it popped into my head, as in ‘headlines you can sing’. I think Syriza may well be a solution, if it plays its cards right. But that still leaves politicians and investors denominating Tsipras et al as a problem, if not a menace. Now, investors may not need to possess any moral values – though things would probably have been much better if that were a requirement -, but you can’t say the same for politicians. Politics is supposed to BE about moral values.

And supporting Samaras and his technocrat oligarchy, as has been the EU/Troika policy, doesn’t exactly show a high moral standard. Not just because trying to influence an election is an no-go aberration (though it’s so common in the EU you’d almost forget that), but certainly also because of what Samaras and the EU have done to the Greek people over the past few years. And neither does it show in what happens now, where the Greeks, steeped in Troika-induced misery as they are, are labeled greedy bastard cheats.

Since the EU lies as much about Greece as it does about Russia, it’s only fitting that the former should speak out for the latter. And it’s deliciously easy: the EU wants to step up sanctions against Russia (because the Ukraine shelled Mariupol?!), but EU sanctions decisions require unanimity. Since Greek-Russian relations have historically been close, Syriza resisting ever tighter sanctions should be no surprise.

At the end of the day, European taxpayers shouldn’t be angry at Greece, no matter how much their media try to stoke that anger, but at their own banks, governments and central banks. Things pertaining to Greece and its debt are not at all what they seem. Most of it is just another narrative originating in Brussels, Frankfurt and the financial media cabal. Not much is left of this narrative if we dig a little deeper. This from Mehreen Khan for the Telegraph today may be a little ambivalent in what it points to, but it certainly puts the Greek debt in a different light from the ‘official’ one:

Three Myths About Greece’s Enormous Debt Mountain

€317bn. Over 175% of national output. That’s the enormous debt mountain that faces the new Greek government. It is the issue over which the country is set to clash with other countries in the eurozone. As it stands, Greece’s debt-to-GDP ratio is the highest in the currency bloc. It has been steadily rising as the country has undergone painful austerity and experienced a severe contraction in economic output. The new far-left/right-wing coalition is now demanding a write-off of up to 50% of its liabilities. The government argues that this is the only way Greece can remain in the single currency and prosper.

 

According to the newly appointed finance minister, who first coined the term “fiscal waterboarding” to describe Greece’s plight, the EU has loaded “the largest loan in human history on the weakest of shoulders – the Greek taxpayer”. So far, the rest of the eurozone is adamant that it will not meet demands for debt forgiveness. And yet, the value of Greece’s debt mountain has been called a meaningless “accounting fiction” by Nobel laureate Paul Krugman. So what does Greece’s €317bn debt really mean for the country and its creditors? And can it ever be paid back?

 

Myth 1: They can never pay it back. Ever.Never say never. On the issue of repaying back its liabilities, it’s more a question of time, rather than money. Greece has already been the beneficiary of a number of debt extensions, and in 2012, underwent the biggest private sector debt restructuring in history. The average maturity on Greek government debt currently stands at 16.5 years. The sustainability, or otherwise, of the country’s burden relies more on the timetable for repayment rather than the overall stock of the debt, argue many economists. The chart below shows the repayment schedule on the country’s €245bn rescue package and extends all the way out to 2054.


Source: Hellenic Republic Public Debt Bulletin

Although the question of cancelling any portion of the principal owed to Greece’s creditors seems to be a firm no-go area, the idea of further debt extensions could be an option. But as noted by Ben Wright, allowing Greece more time to payback its loans is still a fiscal transfer in all but name.

 

Myth 2: Greece is paying punitive interest rates. Not really. Greece has managed to negotiate favourable terms on which it can service the cost of its loans and the interest paid by the country is far below that of Spain, Ireland, and Portugal (see chart below). Think-tank Bruegel calculates that Greece paid a sum equal to around 2.6% of its GDP (rather than the widely quoted figure of around 4%) to service its loans last year. This is because Greece will actually receive back the interest it pays to the ECB should it continue to meet its bail-out conditions.

Even without a further renegotiation on interest payments, the costs could be even lower this year. In the words of economist Zolst Darvas from Bruegel:

Given that interest rates have fallen significantly from 2014, actual interest expenditures of Greece will be likely below 2% of GDP in 2015, if Greece will meet the conditions of the bail-out programme.

It is this combination of such long maturities and rock-bottom interest rates, that has led at least one former ECB governing board member to argue that Greece’s debt burden is far more sustainable than many of its southern neighbours.


Who owns Greek debt? (Source: Open Europe)

Myth 3: Greece won’t recover without debt forgiveness. Wrong again. For all the fixation on the outstanding stock of Greek debt, kickstarting growth in the country is more likely to happen through a relaxation of budget rules rather than a debt cancellation. With the coffers looking sparse, the Syriza-led government is also asking for a renegotiation of the surplus rules imposed on the country. Greece is currently required to run a primary surplus of 4.5% of its GDP. Before taking account of its debt interest payments, it is likely to achieve a primary budget surplus of around 3% of its national output this year. This severely limits the new government’s room for fiscal manoeuvre. It also makes it almost impossible for Syriza to fulfil its pre-election promises to raise the minimum wage and create public sector jobs.

According to calculations from Paul Krugman:

Dropping the requirement that Greece run a primary surplus of 4.5% of GDP would allow spending to rise by 9% of GDP, and that this would raise GDP by 12% relative to what it would have been otherwise. Unemployment would fall by around 10% relative to no relief.

None of this is to deny that Greece would hugely benefit from a significant debt cancellation. But the politics of the eurozone means that this is virtually impossible. However, there do seem to be other ways that Greece could start tackling its enormous debt mountain.

And if that is not enough to change your mind about what the reality is in the Greek debt situation, David Weidner at MarketWatch has more, from an entirely different angle, that nevertheless hammers the official narrative just as much, if not more. Weidner refers to work by French economist Eric Dor, as cited by Mish Shedlock last week. What Dor contends is that a very substantial part of Greece’s debt to EU taxpayers was nothing but Wall Street wagers gone awry.

Not exactly something one can blame the Greeks in the street for, just perhaps the elite and oligarchy.Instead of restructuring their banks, the richer nations of Europe, like the US, decided to transfer their gambling losses to the people’s coffers. And though there are all kinds of reasons provided, which even Weidner suggests may be ‘genuine’, not to restructure a banking system, in the end it is a political choice made by those who owe their power to those same banks.

The result has been that Greece was saddled with so much debt, they had to borrow even more, and the Troika could come in and unleash a modern day chapter of the Shock Doctrine. How convenient.

How Wall Street Squeezed Greece – And Germany

Europe’s political leaders and bankers would have you believe that the conflict between Greece and the European Union is a tug of war between a deadbeat nation and its richer ones who have come to the debtor’s aid time and time again. Instead, what most of these leaders miss is that it’s a bank bailout in plain view.

 

What’s really happened is that since Greece ran into serious trouble repaying its debts four years ago, Germany, France and the EU have instituted what can only be described as a massive bailout of its own financial system – shifting the burden from banks to taxpayers. Last week, Mike Shedlock republished research by Eric Dor, a French business school director, and it shows the magnitude of the shift. To put it simply, German taxpayers are on the hook for roughly $40 billion in Greek debt. German banks? Just $181 million, though they do hold $5.9 billion in exposure to Greek banks. Those numbers are a flip-flop from where things stood less than five years ago.

German banks were heavily exposed to Greek debt when the crisis began, but they’ve been bailed out and now German taxpayers are on the hook. French banks were similarly bailed out by the European Union.

This massive shift from private gains to public losses was done through the European Financial Stability Facility. Created in 2010, this was the European Union’s answer to the U.S. Troubled Asset Relief Program, the Treasury Department’s 2008 bailout program. There are some differences. The EFSF issues bonds, for instance, but the principle is the same. Governments buy bad bank debt and hold it on the public’s books.

 

The terms set by the EFSF are basically what’s at issue when we hear about Greece’s new government being opposed to austerity in their nation. The Syriza victory, which was a sharp rebuke to the massive cost-cutting in government spending, including pensions and social welfare costs, drew warnings from leaders across Europe. “Mr. Tsipras must pay, those are the rules of the game, there is no room for unilateral behavior in Europe, that doesn’t rule out a rescheduling of the debt,” ECB’s Benoît Coeuré said.

 

“If he doesn’t pay, it’s a default and it’s a violation of the European rules.” British Prime Minister David Cameron’s Twitter account said, the Greek election results “will increase economic uncertainty across Europe.” And Jens Weidmann, president of the German central bank, warned the new ruling party thatit “should not make promises that the country cannot afford.” Those sound like very threatening words. And one wonders if these same officials made the same tough statements to Deutsche Bank, Commerzbank, Credit Agricole or SocGen when they were faced with potentially billions in losses when the banks were holding Greek debt.

 

European leaders such as Angela Merkel in Germany, Francois Hollande in France and Finnish Prime Minister Alexander Stubb have been eager to beat down Greece and stir broader support at home by making it an us-against-them game. Not to deny that Greece’s financial troubles do threaten the European Union, but today’s crisis pitting nation against nation was created by these leaders in an effort to minimize losses at their biggest lending institutions. Perhaps the move to shift Greek liabilities to state-owned banks (Germany’s export/import bank holds $17 billion in Greek debt) was necessary, but that doesn’t make it fair, or the right thing to do. Europe, like the United States, seems to be at the beck and call of its financial industry.

 

Michael Hudson recognized this early on. In 2011 he wrote that in Europe there is a belief“governments should run their economies on behalf of banks and bondholders. “They should bail out at least the senior creditors of banks that fail (that is, the big institutional investors and gamblers) and pay these debts and public debts by selling off enterprises, shifting the tax burden onto labor. To balance their budgets they are to cut back spending programs, lower public employment and wages, and charge more for public services, from medical care to education.”

 

Yes, Greece overspent. But to do so, someone had to overlend. German and French banks did so because of an implicit guarantee by the EU that all nations would stick together. Well, the bankers and politicians have stuck together. Everyone else seems to be on their own. Merkel and the austerity hawks of Europe who won’t share the responsibility for a system’s failure are doing the bidding of banks. At least in Greece, the lawmakers are put into power by the people.

And that still leaves unaddressed that Greece as a whole may have overspent and -borrowed, but it was the elite that was responsible for this, egged on by the likes of Goldman Sachs, whose involvement in the creative accounting that got Greece accepted into the EU, as well as the derivatives that are weighing down the nation as we speak, is notorious.

The world’s major banks got rich off the back of the Greek population at large, and when their wagers got so absurd they collapsed, the banks saw to it that their losses were transferred to European -and American – taxpayers. And those taxpayers are now told to vent their anger at those cheating, lazy Greeks, who are actually notoriously hard workers, who have doctors prostituting themselves, and many of whom have no access to the health care those same doctors should be providing, and whose young people have no future to speak of in their own magnificently beautiful nation.

The Troika, the EU, the IMF, and the banks whose sock puppets they have chosen to be, are a predatory force that has come a long way towards wiping Greece off the map. And we, whether we’re European or American, are complicit in that. It’s Merkel and Cameron etc., who have allowed for their banks to transfer their casino losses to the – empty – pockets of the Greeks, and of all of us. That is the problem here.

And that’s what Syriza has set out to remediate. And for that, they deserve, and probably will need, our unmitigated support. It’s not the Greek grandmas (they’re dying because they have no access to a doctor) who made out like bandits here. It’s the usual suspects, bankers and politicians. And you and I, too, are eerily close to being the usual suspects. We should do better. Or else we are dead certain of being next in line.

end
And finally Greg Hunter is worried about war on multiple fronts;
(courtesy Greg Hunter/USAWatchdog)
WNW175-Finacial War and Shooting War Intensifying-No Real Recovery, Obama Veto

By Greg Hunter

By Greg Hunter’sUSAWatchdog.com(1.30.15)

War is what I am going to concentrate on in this Weekly News Wrap-Up. There is no doubt a massive financial war is going on right now. If this keeps up, it will only lead to a shooting war and a very big one at that. The EU wants to put another round of sanctions on Russia, and get this, Greece is signaling it will veto that action. So, not only does the recently elected Greece leadership want debt forgiveness, it also looks like it is going to side with Russia over more sanctions. Greece is a NATO country, and it’s making noises that may close NATO military bases and withdraw from the alliance. All this is destabilizing the EU economy and the geopolitical situation there. There is no doubt that part of the world is inching towards more war over Ukraine. The cherry on top of the cake came from rarely heard former leader of Russia, Mikhail Gorbachev, who said, “Have they lost their minds?” Talking about actions taken recently by the U.S., Gorbachev goes on to say, “The ‘cold’ war will “lead to a ‘hot’ war.” I am not advocating war, I am just telling you it looks like one is coming.

Want more war possibilities? Look no further than the Middle East. The hottest of hot spots is looking more and more like Israel. Ever since Israel bombed Hezbollah positions in Syria near the Golan Heights, the shooting has been picking up on both sides. This is all part of the reason why the Prime Minister of Israel, Benjamin Netanyahu, is going to talk to Congress about Iran, its nuclear program and more sanctions. The President is furious over this, and I think it’s because there may be enough votes on both sides of the isle to override a veto. Congress will no doubt pass legislation to strengthen sanctions against Iran if talks fail to curtail Iran’s nuclear program. Meanwhile, Iran has vowed to attack Israel because of the airstrike that killed an Iranian General and a son of a Hezbollah leader in Syria. It is reported Iran has said it will attack Israel from the West Bank. Iran also reportedly told the U.S. State Department it was going to attack Israel. This is a new wrinkle. Iran did not say it was going to have Hezbollah or Hamas attack Israel. It stated Iran was going to attack Israel. This is a whole new level of rhetoric, and it is definitely a dangerous escalation of war talk. If Iran did directly attack Israel, what would a counterattack be for Israel? Can you see how this could spiral out of control? This is “war and rumors of war” talk, and I don’t think anyone is bluffing.

President Obama has made a record high amount of veto threats to the new Republican Congress. There are nine Obama veto threats in all. I told you that he will likely veto any additional sanctions in Iran, but his first veto is probably be going to be the Keystone XL Pipeline legislation that just passed in the Senate. Now, the House and the Senate have to get the language sorted out, and then it will be sent to the President’s desk. Former Democratic Majority Leader Harry Reid used to stop all bills in the Senate. Now, the Republicans hold the Senate, and a flurry of bills will be passing through to President Obama’s desk. Will he now become the President of “No” like the Republicans were branded? Nine Democrats voted for the Keystone bill with the Republicans in the Senate. This is the trend I told you was coming. We will see if Congress can override a veto if one comes.

The Federal Reserve said it will remain “patient” on raising interest rates. We keep hearing about the good economy, and signs abound that the economy is not good, at least for Main Street. I just want to make my point with recent bad news on housing. According to the Commerce Department, home ownership just hit fresh 20 year lows in the last quarter of 2014. How can there be a so-called “economic recovery” when homeownership is hitting fresh lows?

Finally, CNN is pushing for a North American Union in an opinion piece posted on CNN.com. Remember when people said this was crazy conspiracy theory talk a few years ago? I guess it’s not so crazy. The writers say we don’t need a Constitution, and to me, that means we don’t need any rights such as in the Constitutional Amendments. Simply outrageous, and CNN should be ashamed to be used as a New World Order propaganda tool.

Join Greg Hunter as he analyzes these stories and more in the Weekly News Wrap-Up.

Video Link

http://usawatchdog.com/wnw175-finacial-war-and-shooting-war-intensifying-no-real-recovery-obama-veto/

 end

We  will see you on Monday.

bye for now

Harvey,

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3 comments

  1. When are we going to see you on USA watchdog again Harvey?

    Like

  2. Harvey, I don’t believe Greg Hunter is ever going to invite you for an interview again, after you blew it last time.

    Like

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