feb 4/Huge increase of 2.99 tonnes into GLD/Inventory now 767.93 tonnes/small removal of 136,000 oz of silver/gold and silver rise/ECB refuses further funding for Greece which will cause a huge bankrun/Turkish lira plummets/China lowers its reserve requirements/ Swiss Franc/Euro peg already broken tonight/Baltic dry index crashes again near its all time low in 1986/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1263.60 up $4.10   (comex closing time)
Silver: $17.38 up 7 cents  (comex closing time)



In the access market 5:15 pm


Gold $1269.25
silver $17.38



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


Quite a day today. First off the ECB has decided that it will not fund Greece anymore and that should kick off a huge bank run tomorrow.

Also it did not take the soft peg of the Swiss franc to the Euro at 1.05 to be broken causing more losses for the Swiss national bank.  Then Turkey saw the Turkish lira plummet.  To indicate how bad things are with respect to the global economy we again saw the Baltic Dry Index crash. We have these and many more important stories to relate to you this evening.


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


The gold comex today had a poor delivery day, registering 69 notices served for 6900 oz. We have now seen weak consecutive delivery notice days . Silver comex registered 0 notices for nil oz .


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 252.23 tonnes for a loss of 51 tonnes over that period.



In silver, the open interest surprisingly rose by a huge 4106 contracts despite Tuesday’s silver price was up by only 8 cents. The total silver OI continues to  remain relatively high with today’s reading at 168,486 contracts.

We had 0 notices filed  for nil oz

In gold we  had a good sized drop in OI as gold was down by $16.50 yesterday.  The total comex gold OI rests tonight at 419,524 for a loss of 2,967 contracts. On the first day notice, we have a shocking surprise in that only 55 notices were filed upon.  On this second day notice we again received a tiny 16 notices for 1600 oz. On this third day, only 6 notices and today only 69 contracts.  It seems that the boys are having trouble locating some physical gold.



Today, we had a huge increase in  tonnage of gold inventory at the GLD/Inventory at 767.93 tonnes


In silver, /SLV  adds a rather large 1.149 million oz of silver inventory to the SLV/Inventory 320.463



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: the crooks are no longer reporting.



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

Here are today’s comex results:

The total gold comex open interest fell today by a rather large 2,967 contracts from 422,491 down to 419,524 with gold down by $16.50 yesterday (at the comex close).  We are now in the big delivery month of the active February contract  and here the OI fell by 817 contracts  from  2,104 all the way down to 1287. We had only 6 contracts served yesterday.  Thus we lost a huge 811  contracts or 81,100 oz standing for delivery for the February contract and no doubt were bought out with fiat.  The next contract month of March saw it’s OI fall by 20 contracts down to 1199.  The next big active delivery month is April and here the OI fall by 3,120 contracts down to 291,548. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est)  was awful at 77,428. The confirmed volume yesterday ( which includes the volume during regular business hours  + access market sales the previous day) was fair at 194,637 contracts. However the HFT boys followed the bankers momentum with a huge amount of trading yesterday.Today we had 69 notices filed for 6900 oz .

And now for the wild silver comex results. Silver OI surprisingly rose by 4106 contracts from  164,380 all the way up to 168,486 despite the fact that silver was only up by 8 cents yesterday. The bankers could not shake any silver leaves from the silver tree.  We are now in the non active contract month of February and here the OI rose by 5 contracts up to 42.   We had 16 notices filed yesterday so we gained 21  contracts or 105,000  additional oz will stand for delivery in this February contract month.   The next big active contract month is March and here the OI rose by 518 contracts up to 97,243. The estimated volume today was awful at 17,631 contracts  (just comex sales during regular business hours). The confirmed volume yesterday was excellent (regular plus access market)  at 61,731 contracts. We had 0 notices filed for nil oz today.

February initial standings


Feb 4.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz 32.15 oz (one kilobar) Brinks
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 109,310.000  oz (3400 kilobars) Scotia
No of oz served (contracts) today 69 contracts(6900 oz)
No of oz to be served (notices)  1218 contracts ,(121,800 oz)
Total monthly oz gold served (contracts) so far this month  146 contracts(14,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 125.10 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 0 customer withdrawal


total customer withdrawal: nil  oz



we had 1 customer deposit:


i) Into Scotia:  109,310.000  (3400  kilobars)

total customer deposits;  3400 kilobars or 109,310.0000

We had 0 adjustments


Today, 0 notices was issued from JPMorgan dealer account and 0  notices were issued from their client or customer account. The total of all issuance by all participants equates to 69 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 53 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 (146) x 100 oz  or 14,600 oz , to which we add the difference between the OI for the front month of February (1287 contracts)  minus the number of notices served today x 100 oz (69 contracts) x 100 oz = 136,400 oz, the amount of gold oz standing for the February contract month. 4.24 tonnes)


Thus the initial standings:


146 (notices filed for the month x( 100 oz) or 14,600 oz + { 1287 (OI for the front month of Feb)- 69 (number of notices served upon today) x 100 oz per contract} = 136,400 oz total number of ounces standing for the February contract month. (4.24 tonnes)




Total dealer inventory: 769,022.858 oz or 23.91 tonnes

Total gold inventory (dealer and customer) = 8.109 million oz. (252.23) tonnes)



Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 51 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real.  I cannot see continual additions of strictly kilobars.







And now for silver



 February silver: initial standings



feb 4 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 23,360.710  oz (Brinks,HSBC,CNT )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 42 contracts (210,000 oz)
Total monthly oz silver served (contracts) 309 contracts (1,545,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  196,530.0 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit: nil   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz



We had 0 customer deposits:


total customer deposit nil oz



We had 3 customer withdrawals:

i) Out of CNT:  10,410.86 oz

ii) Out of Brinks: 11,951.900 oz

iii) Out of Delaware: 997.95 oz

total customer withdrawal: 23,360.710 oz


we had 1 adjustments

i) out of Delaware: 5,000.000 oz was adjusted out of the dealer and this landed into the customer account of Delaware. how could this be possible?


Total dealer inventory: 67.791 million oz

Total of all silver inventory (dealer and customer) 178.021 million oz


The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in January, we take the total number of notices filed for the month (309) x 5,000 oz    = 1,545,000 oz  to which we add the difference between the OI for the front month of February (42)- the number of notices served upon today (0) x 5,000 oz per contract = 1,755,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

309 contracts x 5000 oz= 1,545,000 oz + (42) OI for the front month – (0) number of notices served upon x 5000 oz per contract =  1,755,000 oz, the number of silver ounces standing.


we gained 21  contracts or 105,000 oz of additional silver  will not standing for this February contract month


It seems that some major entity is after some silver supplies. It looks like they all gave up trying to get physical from the gold comex.



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

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







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:


Feb 4/2015; we had another addition of 2.99 tonnes added to the GLD inventory/Inventory tonight 767.93



Feb 3.2015: today a withdrawal  of 1.79 tonnes of  gold inventory removed from the GLD/Inventory at  764.94



feb 2/ a huge addition of 8.36 tonnes of “paper” gold inventory/Inventory tonight at 766.73 tonnes



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





Feb 4/2015 / we had an addition of 2.99 tonnes  of   gold inventory at the GLD/

inventory: 767.93 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 : 767.93 tonnes.









And now for silver (SLV):



Feb 4/we had a small withdrawal of 136,000 oz of silver from the SLV vaults/Inventory/320.327 million oz


feb 3.2015: we had a good addition of 1.149 million oz of silver inventory/inventory 320.463 million oz

Feb 2 no change in silver inventory at the SLV/inventory at 319.314

million oz.

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






feb 4/2015 we had a small withdrawal of 136,000 oz of  silver

SLV inventory registers: 320.327 million oz







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

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

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


1. Central Fund of Canada: traded at Negative  5.3% percent to NAV in usa funds and Negative 5.0 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.4%

Percentage of fund in silver:38.2%

cash .4%


( feb 4/2015)



2. Sprott silver fund (PSLV): Premium to NAV rises to + 3.37%!!!!! NAV (Feb 4/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.13% to NAV(feb 4 /2015)

Note: Sprott silver trust back  into positive territory at +3.37%.

Sprott physical gold trust is back in negative territory at -.13%

Central fund of Canada’s is still in jail.








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




Early gold trading from Europe early Wednesday  morning:



(courtesy Mark O’Byrne)


“Buy Gold” and Short Federal Reserve, Says Marc Faber

Faber: “Only one way to short central banks and that is to buy gold”.

Marc Faber warned at the weekend that 2015 may be the year that investors will lose confidence in central banks and that investors will “suddenly realise what a scam that central banking is”.

He is long gold and recently bought more gold and investors should buy gold and short sectors such as biotech and social media.


In an interview with Jack Otter, editor Of Barrons.com, Dr. Faber again reiterated his desire to short central banks. While that is technically impossible, the editor of the excellent Gloom, Doom and Boom newsletter indicated that it can be done by proxy through the buying of gold and silver bullion.

In a Barron’s video interview published by the Wall Street Journal, ‘Dr. Doom’ said,

I think that my bet is that if i could short central banks i would short central banks in 2015 because I think that investors will suddenly realise what a scam central banking is and then they will lose confidence. And there is only one way to short central banks and that is to buy gold.

In January he said at a Societe Generale presentation that he expected to price of gold to go “up substantially – say 30%” in 2015. Dr. Faber has an impressive track record of accurately predicting medium term patterns within the overall long-term trend.

He sees an anaemic economic performance from Europe this year, he thinks the U.S. is slowing and his attitude to emerging markets has cooled. “In some [emerging market] countries they may be growing 1-2%, in others there is a contraction in industrial production. The Chinese economy which is the dominant emerging economy in the  world is definitely slowing down.”

Alone among the emerging markets, India is still growing impressively at 5-6%. However, Dr. Faber does not see the enormous gains made in some sectors of the Indian economy – the stock market rallied 35% last year- and those of other emerging markets continuing.

“A lot of markets are not terribly expensive but [they] are not bargains,” he said.

Ultimately he sees the global economy continuing to slow down. “In general, if you look at global exports they are flat, if you look at the global reserve accumulation they are flat. So I think that we will face a disappointing 2015 in terms of economic growth.”

He added that while China is slowing down he expects the stock markets to perform reasonably well due to the distorting influence of central banks.

There is a lot central bank interventions and expectations by investors what the central bank will do next and so investors pile into stocks in the expectation that the Bank of China will essentially ease.

When asked where one should invest their money he indicated that his main strategy currently was to short various sectors rather than shorting companies.

In particular he singled out the biotech industry and with less enthusiasm social media and semiconductor ETFs. He was considering shorting the Australian dollar and indicated that the U.S. dollar was also in his sights while he thinks the euro is oversold in the short-term.

While he sees mainly shorting opportunities, he is long gold, prefers physical gold and opts for storage in Singapore:

Yes I am long gold. I’ve been long gold since the mid 1990’s and I bought recently again more.

Faber on WSJ via Barrons

Marc Faber Webinar on Storing Gold in Singapore

Essential Guide To Storing Gold In Singapore



Today’s AM fix was USD 1,269.25, EUR 1,108.08 and GBP 835.31 per ounce.
Yesterday’s AM fix was USD 1,281, EUR 1,128.93 and GBP 851.84 per ounce.

Yesterday, gold lost 1.2% or $13.40, closing at $1,261.20. Silver dropped 0.3% or $0.08, closing at $17.28.


In Asia, bullion in Singapore for immediate delivery moved sideways and this continued in European trading until a sudden spike saw gold suddenly rise in the few minutes before the gold fix. Gold rose from $1,263 per ounce at 1027 (London time) to $1,271.40 per ounce at 1030 London time.

Gold has since retraced some of the gains seen at the fix but is up 0.6 percent this morning, regaining some of the 1.2% price fall yesterday.  Risk aversion is back and European equities have fallen after initial gains.

Gold is holding comfortably above its 200-day moving average at $1,252 per ounce. Concerns that the Greek government may not drop calls for a write-off of some of its foreign debt remain which should support gold.

As will geopolitical risk in the Middle East and Ukraine and very robust Chinese demand ahead of the Chinese Lunar New Year on February 19th. Volumes for the Shanghai Gold Exchange’s (SGE) benchmark spot contract climbed to a seven-week high today and premiums remain healthy.

Silver is 1% higher, while the platinum group metals of platinum and palladium were both about 0.6 percent higher.


Gold gained 8.4 percent in January, in part as uncertainty over Greece’s membership of the euro zone and ECB QE led to haven demand.

Gold and silver were the top performing assets in January and we expect this outperformance to continue in 2015.

Get Breaking News and Updates On Markets Here




sad to report the passing of Gene Arensberg:

(courtesy GATA)

Got Gold Report’s Gene Arensberg dies


8:19p ET Tuesday, February 3, 2015

Dear Friend of GATA and Gold:

Our dear friend Gene Arensberg, publisher of the Got Gold Report —


— died yesterday at Houston Methodist Hospital as a result of complications from lung transplant surgery undertaken in September.

For years Arensberg was a major contributor to the cause of free and transparent markets in the monetary metals, an incisive observer, and, most important, a kind, helpful, and gentle soul whom one was always glad to see, and who will be terribly missed.

Funeral plans will be dispatched as they become available.

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







Clive Maund describes the manipulation perfectly.  They goose up equities and at the same time whack gold/silver


(courtesy Clive Maund/GATA)


Clive Maund: The golden age of QE and the fiat endgame


7:42 ET Tuesday, February 3, 2015

Dear Friend of GATA and Gold:

In his latest commentary, dated January 29, financial letter writer Clive P. Maund sounds a lot like GATA as he complains about market manipulation.

Maund writes: “A dramatic example of such gargantuan manipulation may be about to play out in the London stock markets. The normal interpretation of the giant pattern forming in the UK FTSE index, which we looked at not long ago, using traditional technical analysis, is that a huge triple top is completing. But the government may be able to avert this outcome by simply doing ‘quantitative easing’ on a sufficient scale to head this off and force an upside breakout. All they have to do is keep pumping money at a sufficient rate and make sure it reaches those whose task it is to keep the market levitated. This is the ‘new paradigm’ that we wrote of near the start — never before have governments had such power to control markets. …

“The other side of this manipulation coin is that they also have to power to beat down things they don’t like, such as gold and silver, by endless waves of naked shorting. But this will work only until the gap between the physical and paper price becomes untenably large. Given the rampant global QE now underway and the resulting destruction of currencies, and that most of the available physical gold in the world has already been bought up by Asian countries, most notably China, their power to beat down the paper price of gold looks spent, and it is starting to rise again, after the onslaught of the past three years.”

Maund’s commentary is headlined “The Golden Age of QE and the Fiat Endgame” and it’s posted at his Internet site, CliveMaund.com, here:


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



Peter Degraaf  basically confirms what Clive Maund is stating that the commercials are suppressing the monetary metals in order to goose equities:


(courtesy Peter Degraaf/gata)


Peter Degraaf: Commercials suppress monetary metals in ‘casino’ futures market


8:06p ET Tuesday, February 3, 2015

Dear Friend of GATA and Gold:

Also sounding like GATA tonight in his latest financial letter is market analyst Peter Degraaf, who has sounded like GATA before.

Degraaf writes: “While we invest to protect our nest egg against inflation by owning gold and silver, we are aware that when the commercial gold and silver dealers are heavily ‘net short’ in the futures market, they will spend hundreds of millions of dollars more, in the form of futures contracts, in an effort to drive the price down so that the previous short positions can be covered. When the futures market becomes a casino, without honest supervision (as now), the entity with the deepest pockets can control the price (in the short run). They can do this until the demand for physical gold forces them to finally run for cover.”

Of course “the short run” lately has started to seem awfully long to investors in the monetary metals, but as the little red-haired girl sang, “the sun will come out tomorrow,” and Degraaf’s commentary, headlined “Playing Their Game,” is posted at GoldSeek here:


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





The following will be a huge success as it is taking on the ETF’s like Sprott and Central Fund of Canada.


(courtesy Reuters)





BMO gold product takes aim at big ETF market, new investors


(Reuters) – Bank of Montreal has launched a new way for investors to buy physical gold, offering greater security than private storage while going head to head with the $60 billion exchange-traded fund industry.

The launch comes at a critical time for bullion, with investors in recent weeks making a tentative return to the market after a prolonged exodus as the oil rout and euro zone instability reignite gold’s appeal as a safe-haven investment.

The first of its kind in the United States, the Canadian bank’s new gold deposit receipt program (GOLDR) allows investors to buy and sell shares that are backed by physical bullion stored in Canada and which track the price of spot gold.

Each share represents one ounce of gold, which on Tuesday was worth about $1,260. The bank said the program will issue $500 million worth of shares to start with.

The program will be similar to gold ETFs, which were created about ten years ago and have become a popular vehicle for retail and institutional investors who do not want to take physical delivery of bullion.

Unlike ETFs that trade at either a discount or premium to the spot gold market, GOLDRs will track the spot price. BMO will charge a one-time upfront fee of 2 percent and allows gold to be delivered in amounts as small as 1 ounce, the bank said.

The product is aimed at four types of investor – private ones that store their bullion in vaults, broker dealers, investment advisors as well as existing users of ETFs.

“You will probably see new cash come into this product and I will not be surprised at all to see interest that is currently held with private storage facilities, enter this type of buying,” Simon Carling, managing director of Financial Products Investor Solutions for BMO Capital Markets, said in an interview.

Spot gold prices rose 8 percent in January, posting their best month in two years even as the dollar remains strong and the U.S. Federal Reserve reins in its years-long bond-buying stimulus program.

Total holdings in gold ETFs have recovered to around 46 million ounces, worth $58 billion based on Tuesday’s prices, up from near five-year lows of around 44.3 million ounces two weeks ago.

GOLDRs are SEC-registered securities issued by the Vaulted Gold Bullion Trust and are Depository Trust Company eligible, BMO said.





You will enjoy this interview of Bill Holter by Greg Hunter


(courtesy Greg Hunter/USAWatchdog/Bill Holter/Mils Franklin)



Gold is Gone, Total Chaos Coming-Bill Holter

4By Greg Hunter’s USAWatchdog.com 

Financial writer Bill Holter says there is better than 60% to 70% chance that another financial calamity will hit in 2015, and it could start from anywhere in the world.  Holter contends, “It doesn’t really matter where it starts.  It will probably be global within less than 48 hours.  The reality is it will go all the way around the world within two days because party “A” will not pay party “B” who doesn’t pay party “C” and on and on we will go.  The payment chain will break. . . .  I’d like to get back to the point of true and real settlement. If nations don’t settle honestly amongst each other, that is how your trade wars start.  That’s how one neighbor believes another neighbor is ripping them off.  This is how wars start, and that is what this is about:  the rest of the world wanting to trade and wanting to do business mutually and evenly and getting paid for trade.  In the past with the dollar, the U.S. has gone into many places; and after the deal was unfair, they paid with dollars, which is an un-backed freely printed currency. That’s what the world is upset about.  That’s what this tipping of the balance is about.”

Holter goes on to point out, “Greece has got to be hidden.  The fact that they are broke cannot come out.  If Italy or Spain or anyone else were to default, that would be calling a spade a spade.  Once the daisy chain breaks, it will lead all the way to the West, and it will lead to London and it will lead to New York.  It will lead to the fact that the gold is gone.  That’s the great fault.  That is the fault at the core of all of this.  That’s why they are kicking the can and kicking the can because it can never be discovered that the gold is gone.  Once that is discovered, it’s over.”

So, what will it look like to the man on the street when the next crash happens, Holter predicts, “On the streets here in the U.S., you are probably looking at total chaos. . . . Once the banks go, especially in the cities, you are going to see complete chaos because the average person has about three days of food stocked up, or maybe five days of food stocked up.  When the banks go down, distribution will stop.  When distribution stops, the stores, and you just saw this in the northeast, the stores are wiped out in a day or two.  They have just-in-time inventories. It’s not like they have loaves of bread sitting in the back waiting to be put on the shelves.  Once distribution stops, the shelves will not get replenished.  Truckers will not be paid, and you can take that all the way down to the farmer.  Everything is run on credit, and once credit stops, it’s over.  When it’s over we have 48 or 50 million people on food stamps . . . those people don’t have any food stocked away.  So, there is an immediate 50 million people who will be out on the streets looking for food. . . . If you go back to the Great Depression, you had bread lines.  There are bread lines today, but the lines are the little EBT cards, and there are 50 million of them. . . .All is not well because we have 15% of the population who can’t even feed themselves.” How long would people have to be on their own until the government got credit lines running again?  Shockingly, Holter predicts, “I would say the absolute minimum would be three months. Yeah, I think three months is the absolute minimum to get things back to ‘normal.’ . . . It’s hard to say.  Again, with what’s going on, I would give it a 60% to 70% chance of a major financial collapse before the end of the year and the jig being up.”

Join Greg Hunter as he goes One-on-One with gold expert Bill Holter of


Miles Franklin, who specializes in precious metals and global investment strategies.



(There is much more in the video interview.)






And now for the important paper stories for today:



Early Wednesday morning trading from Europe/Asia



1. Stocks mixed on major Asian bourses  / the  yen rises  to 117.47

1b Chinese yuan vs USA dollar/ yuan strengthens  to 6.2476
2 Nikkei up 342.89  points or 1.98%

3. Europe stocks all in red   // USA dollar index up to 93/73/

3b Japan 10 year yield back up to .38%/ huge move !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.47/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets.

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 51.44 Brent: 56.64 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen up;

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

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

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

3j Oil falls a bit this morning for  WTI  and Brent as inventories rise

3k Chinese reserve rate cut stimulates gold purchases

3l Greek officials meet/nothing of interest/

3m Gold at $1265.00. dollars/ Silver: $1734

3n USA vs Russian rouble:  ( Russian rouble  down 1/4 in roubles per dollar in value)  66.05!!!!!!

3 0  oil constant into the 51 dollar handle for WTI and 56 handle for Brent

3p Looks like Abe losing control over the Japanese bond market (see below)

3Q  SNB (Swiss National Bank) intervening again driving down the SF/window dressing/Swiss rumours of a soft peg at 1.05 Swiss Francs/euro. /plunge in Swiss PMI from 53 handle down to 48 handle.

3r German 10 year bund (36%) still below Japan’s 10 year bond level!!!

3s Now European corporates sell bonds with a negative yield: Nestle’s bond yield: negative .002%/

4. USA 10 yr treasury bond at 1.78% early this morning. Thirty year rate well below 3%  (2.37%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid


(courtesy zero hedge)/your early morning trading from Asia and Europe)



Market Wrap: Equity Futures Subdued On Oil, Energy Profit Taking Following Latest Crude Inventory Surge


Following the torrid surge in crude in the past 4 days, overnight oil price have taken a step back – if only untilthe “newer normal” 2:30pm ramp into the Nymex close –  with both Brent and WTI down nearly 3%, with yesterday’s latest API inventory data showing another massive crude build when it was released after the close, which in turn is pressuing futures modestly if decidedly, and not even the surprise PBOC RRR-cut (which many had seen as likely if only in advance of the liquidity sapping Chinese New Year) which hit the tape an hour ago managed to push ES into the green, at least for now. Curiously, not even the now standard low volume levitation in the USDJPY in recent trading has had any impact on US futures, which appear to have found a new correlation regime for the time being, one which tracks what oil does more than any other asset class.

As noted above, the main reason for the oil decline is that yesterday API data showed U.S. crude inventories up 6.1m bbl last wk, including 2.6m at Cushing. Later today we get EIA data at 10:30am ET, which has a Bloomberg median est. +3.25m. “Limiting the recent price increase was yesterday’s weekly oil inventory data from API, which showed another large build in crude; though not as huge as previous week,” according to Global Risk Management oil risk manager Michael Poulsen. “Distillates and gasoline also showed builds, now the official EIA report will be watched closely for confirmation of this trend.”

As a result Brent and WTI futures have come off their highest levels since January 2nd, to retrace after WTI crude was seen up as much as 24.5% and Brent 24.72% from Thursday’s lows. Overnight WTI fell 2% following lacklustre Chinese data and API’s crude inventories continuing to show a glut in supply. Elsewhere, precious metals found support from the PBoC announcement to cut RRR, with copper also benefitting on the potential for higher demand from the world’s largest copper consumer.

Sure enough, European equities trade in the red, dragged lower by the session’s laggard, the energy sector, with indices weighed on by falling oil prices after recent highs. As has been the case over the last week, the market was also looking closely at Greece, with PM Tsipras meeting EU’s Juncker while finance minister Varoufakis had a `fruitful` exchange with ECB’s Draghi, with Varoufakis stating that Syriza does not accept the logic of Troika but that does not mean they cannot cooperate. Varoufakis also stated that Greece has started talks with the IMF over plans to swap debt for growth linked bonds, however markets did not find strength from these broadly positive comments and remain unable to shake off the effects of falling oil prices.

Over in Asia, equity markets trade higher across the board led by energy stocks amid the ongoing rebound in oil prices which subsequently led to a positive Wall Street close (S&P 500 +1.4%). Nikkei 225 (+1.98%) and Hang Seng (+0.5%) also rose, as participants shrugged off poor HSBC composite and services PMIs. Expect these to trade even higher today following the digestion of the unexpected Chinese RRR cut.

FX markets have seen strength in AUD, with the Asia session seeing the commodity benefit from recent gains in the commodity complex, retracing all of the losses post RBA rate, before going on to strengthen further after the PBoC announced a cut to the RRR during the European session, with AUD/USD rising 64 pips immediately, before paring these gains shortly after as the move from the Chinese central bank was widely expected, with speculation rife that China would reduce the RRR due to tighter liquidity conditions, and forecasts the PBoC to cut their RRR by Lunar New Year (Feb 19th). AUD’s antipodean counterpart saw NZD paring overnight gains seen as a result of better than expected labour participation rate (69.7% vs. Exp. 69.1%, Prev. 69.0%), while European Services and Composite PMIs failed to move the market, following on from yesterday’s gains which saw EUR/USD trading at its highest level since January 22nd.

This morning also saw UK Services PMI, which printed better than expected figures of 57.2 vs. Exp. 56.3 (Prev. 55.8), seeing GBP/USD strengthen, with Gilts falling on the news. GBP/CAD reached highs of over 100 pips on the day after the UK service PMIs, combined with the weakening of CAD, which fell in tandem with oil prices.

In terms of today’s calendar, focus this morning in Europe will be on the services and composite PMI prints for January with the final readings due for the Euro-area as well as regionally in Germany, France and first readings for Italy and Spain. We also have the preliminary readings for the UK due as well as retail sales for the Euro-area. Across the pond this afternoon, the ADP employment change print for January will be closely watched given the payrolls release due on Friday. Services and composite PMI’s are also due for the US as well as the ISM non-manufacturing reading. The Fed’s Mester is also due to speak


Bulletin Headline Summary from Bloomberg and RanSquawk

  • China’s PBoC announce an unscheduled cut to the RRR
  • Brent and WTI futures come off their highs from overnight, to retrace after WTI crude was seen up as much as 24.5% and Brent 24.72% from Thursday’s lows
  • Looking ahead, this afternoon sees US ADP employment data, while participants will also be closely watching the US DoE crude oil Inventories, where a build is expected. In terms of equities, Merck (1200GMT/0600CST), GM (1230GMT/0630CST) and GSK (1200GMT/0600CST) are still to report during the session.
  • Treasury yields edge lower overnight after rising 4bps-12bps yesterday; today’s data releases include ADP employment, ISM; Fed’s Mester will speak.
  • China cut the amount of cash lenders must set aside as reserves in a bid to add liquidity to an economy that last year grew at its slowest pace in a generation
  • PBOC moved its reference rate for the yuan outside the daily trading band for the first time in 21 months, forcing the currency to strengthen as authorities seek to limit volatility in capital flows
  • A gauge of China’s services industry expanded at the weakest pace in six months as a slowdown spreads to areas of the economy that had been outperforming the nation’s flagging factories and sagging property market
  • It will cost Germany less to lighten Greece’s debt load now than to force compliance with conditions of its bailout, Greek Finance Minister Yanis Varoufakis said
  • Withdrawals from Greek banks may have exceeded €15b ($17.2b) in the run-up to the elections that catapulted Alexis Tsipras and his anti-austerity Syriza party to power, including at least £11b in January
  • New Zealand central bank Governor Graeme Wheeler said he will keep rates unchanged for some time amid a wave of policy easings by his peers in the face of global disinflation pressures
  • The Japanese government will nominate economist Yutaka Harada for BOJ’s policy board as Ryuzo Miyao’s term comes to  an end in March, Nikkei reported; Harada advocates the kinds of reflationary policies the central bank pursued under Kuroda
  • Pimco’s Total Return Fund suffered about $11.6b in withdrawals in January, the 21st straight month of redemptions at the investment fund created and formerly run by bond manager Bill Gross
  • Death toll of Ukraine’s separatist conflict jumped at end January, the United Nations said, as civilians fled a battle for a crossroad town and the government and rebels  moved to pour more weapons and men into the fight
  • Sovereign yields mixed, Greece 10Y rises ~28bps to 9.80% Portugal, Spain and Italy lower. Asian stocks mixed; European stocks mostly lower, U.S. equity-index  futures fall. Brent, WTI drop; copper and gold rally


The conclusion, as usual, is courtesy of Jim Reid’s overnight recap of events around the globe



So February has started off just as volatile as January and the moves over the last couple of days have helped Oil climb into bull market territory with Greek equities only 4% off the same landmark after climbing just shy of 16% in two days. Indeed even the DAX and CAC are only 4-5% short of bull market territory having climbed 15-16% off their early January closing/intra-day lows. As expected QE is yet again doing its trick on the equity markets in which central bank activity increases.

Back to Oil and Brent rose 5.77% yesterday and is now 21% above its cycle lows on January 13th and 25% off the intraday lows on the same day. YTD we’re now at +1% after a 9% rally MTD already but still 48% off last June’s highs. The moves appear to be a continuation of the hope that US production will be curbed soon and that the market will somewhat rebalance – supported by recent announcements by corporates of significant capex cuts for 2015. Yesterday’s announcement by BP that they are looking to further reduce capex to $20bn this year – $4-$6bn down on initial estimates – lent further support to the argument whilst BP’s CEO Bob Dudley commented post results that oil will probably trade from $40-$60 a barrel for the next three years. The rally in the sector helped the S&P 500 close at its highs of the day (+1.44%) with the energy component (+2.78%) unsurprisingly leading the gains. In fact February’s 2.74% gain so far has helped US equities wipe out a bulk of January’s losses to trade just -0.43% down YTD now.

Away from oil, Greece continues to dominate headlines as Tsipras and Varoufakis continue their European tour (sounds like a very trendy folk act on the road). Markets yesterday in Europe appeared to trade firmer on the back of the ‘debt swap’ story. It might not be a realistic proposal but at least they significantly softened their stance. The Stoxx 600 finished +0.82% and the DAX +0.58% whilst peripheral markets rallied with the IBEX +2.62% and FTSE MIB +2.57%. Yields in the periphery also had a stronger day with 10y benchmark yields in Italy and Portugal 4bps and 9bps tighter respectively. The Euro (+1.23%) had its second strongest day of the year, closing at $1.1481. Interestingly we were at $1.164 minutes before the ECB’s QE announcement nearly two weeks ago now.

In terms of the Greek news yesterday, headlines on Bloomberg suggesting that Merkel is said to expect Greek negotiations to drag on for months appeared to catch the attention of the market. In reality however the story highlighted that the German government may well be willing to extend beyond the February 28th deadline and give the Greek government time to settle. Specifically Merkel was quoted as saying that ‘the Greek government is still working on its position’ and ‘that’s more than understandable considering the government has been in office for a few days’. Varoufakis is due to meet Draghi today and German finance minister Schaeuble tomorrow. The meeting could well be the most important of the week so far and the Daily Telegraph yesterday quoted Varoufakis as saying ‘I will try to be as charming as I can in Berlin’ and that ‘he can count on our Syriza movement to clear away Greece’s cartels and oligarchies’. The article also quoted Greece’s finance minister as saying ‘we are going to end the debt-deflation spiral and do what should have been done five years ago, that is not negotiable’. Today also marks the bi-weekly review of the ECB ELA as well as a potential t-bill auction. Yesterday the FT reported that the ECB is unwilling to raise the €15bn ceiling on t-bill issuance a further €10bn as requested by the Greek government with the article quoting a eurozone official as saying that the ‘ECB will play hardball’.

Elsewhere in Europe yesterday, it was a quiet day data wise with just a weaker PPI (-2.7% yoy vs. -2.5%) for the Euro area and soft inflation print out of Italy (-0.4% as expected). With yesterday’s weakness in JGB’s, 10y Bunds (0.346%) are now actually trading inside 10y JGBS’s (0.368%) for the first time in decades. Compare this to the start of 2014 when JGB’s were trading around 120bps inside Bunds. I had quite a few questions from clients yesterday that asked whether this made much sense. The answer is that economically it probably doesn’t but that the net supply/demand story for Bunds (including QE) is very favourable at the moment. In the back of my mind is the article written in DB’s Konzept magazine at the back end of last year suggesting that Germany could actually see a mini-boom ahead due to the artificially weak currency for them with real assets being positively impacted.

Staying on absurdly low yields, with nine countries in Europe now having negative two-year yields, it was perhaps only a matter of time before we saw corporate euro denominated yields follow suit. Yesterday Nestle’s EUR 2016 notes closed at -0.002% with Bloomberg suggesting that they may be among the first corporate bonds to trade with a negative yield. Maybe chocolate is the new Gold!!

Wrapping up the remainder of market moves yesterday, Treasuries yields climbed for a second successive day with the 10y benchmark yield 12.7bps higher at 1.792%. It’s been a volatile 2015 so far for Treasuries having rallied 53bps into the tights at the end of January (1.641%) and now bouncing some 15bps off those levels this month already. Yesterday we heard from the Fed’s Bullard and Kocherlakota – both continuing to offer contrasting views. Bullard (a hawkish non-voter) was noted in particular saying that the FOMC should remove their language around patience, specifically saying that ‘I would take it out to provide optionality for the following meeting after that’ as per a Reuters article. Perhaps of more interest however was Bullard playing down the reference to ‘international’ developments in the latest FOMC statement with another Reuters article suggesting that the reference was just an acknowledgement of discussion about the impact of global events rather than any potential delay to lift-off. On the other side of things, Kocherlakota yesterday reiterated his view of keeping rates unchanged in 2015, suggesting that the low yields in longer-dated Treasuries and Bunds suggests a lack of confidence in the FOMC and other Central Banks hitting their respective inflation targets.

Data took something of a back seat but in reality was a touch on the weaker side. The lesser followed ISM New York current business conditions index declined to 44.4 in January, from 70.8 in December and the lowest level since 2009. Factory orders meanwhile were also weaker, the -3.4% mom decline in December lower than the -2.4% expected. Auto sales meanwhile were generally as expected. Total vehicle sales amounted to 16.6m for January.

Turning our attention to the early trading in Asia this morning, bourses are following the US lead and trading higher as we type. The Nikkei (+1.97%), Hang-Seng (+0.87%), Shanghai Composite (+0.22%) and Kospi (+0.65%) are all firmer. Asian credit is also stronger with CDS spreads 2bps tighter. Cash earnings data for Japan was as expected with the +1.6% yoy print for December in line with consensus with the reading the tenth consecutive month of gains.

In terms of today’s calendar, focus this morning in Europe will be on the services and composite PMI prints for January with the final readings due for the Euro-area as well as regionally in Germany, France and first readings for Italy and Spain. We also have the preliminary readings for the UK due as well as retail sales for the Euro-area. Across the pond this afternoon, the ADP employment change print for January will be closely watched given the payrolls release due on Friday. Services and composite PMI’s are also due for the US as well as the ISM non-manufacturing reading. The Fed’s Mester is also due to speak





Again, last night, the 10 year Japanese bond yield rises to .38%.

It has surged for 8 straight days.  Even though the Bank of Japan is monetizing 100% of new issuance, it has to deal with old debt maturing.

It looks to us that finally, the bank of Japan is losing control of its bond market.  Remember that it’s debt to GDP is a mind boggling 250%.  You can bet the farm that Mrs Watanabe is bailing out of bonds and probably buying gold for the first time as there is nothing else to buy.


(courtesy zero hedge)



Is The Bank Of Japan Losing Control? JGB Yields Surge Most Since 2003


UPDATE: You know it’s getting bad when Abe and Kuroda double-team the confidence-inspiring headlines.


Japanese government bond yields continue to surge. Thelast 7 days have seen yields on long-dated JGBs soar at the fastest pace since 2003 – accelerating after the most recent (weakest bid-to-cover in 19 months) bond auction. Following the 18th month in a row of negative YoY real cash earnings (1 short of the record 19 months in a row from 2008/9), Japanese bond yields are surging to their highest since early December.


18th month in a row of negative YoY real cash earnings…


Sparked an acceleration in the JGB yield surge… post QECB


The biggest 7-day surge since 2003… (click image for huge legible version)


Is The BoJ losing control?







The following is good for gold as the PBOC cuts its reserve requirements.They join 15 other banks in easing as the global economy grinds to a halt:


(courtesy zero hedge)


PBOC Cuts Reserve Requirement By 0.5%, Joins 15 Other Central Banks Easing In 2015


Moments ago the number of central banks who have eased so far in 2015, most of them unexpected, rose by one more from 15 to 16, when in addition to Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and, most recently, Australia it was China’s turn to do what so many banks had said was inevitable, even if meant backtracking on all its blustery talk about limiting bad debt expansion, and cut its reserve requirement ratio for bank by 0.5% effective Thursday, to boost liquidity and support the economy.

The full statement, google translated:

People’s Bank of China decided to cut financial institutions RMB deposit reserve ratio by 0.5 percentage points since February 5, 2015. Meanwhile, to further enhance the ability of financial institutions to support structural adjustment, increase small and micro enterprises, “three rural” and support the construction of major water projects, small and micro business loans accounted for directional drop quasi standard of urban commercial banks, additional non-county rural commercial banks decreased by RMB deposit reserve ratio by 0.5 percentage points, the Agricultural Development Bank of China to reduce extra RMB deposit reserve ratio by 4 percentage points.


People’s Bank of China will continue to implement a prudent monetary policy, maintain an appropriate degree, guiding monetary credit and social financing scale steady moderate growth, and promote the smooth operation of economic health.

Following the rate cut, China’s RRR drops from 20% to 19.5%, and one has to wonder just how bad things are at China’s Agri Bank if it has to be “stigmatized” by the central bank, i.e., explicitly noted that it needs more liquidity than all its peers, with an additional rate cut.

Some initial reactions, via BBG:

Chinese stocks, bonds and commodities will rally on Thursday after the central bank’s “surprise” cut in reserve-requirement ratios, while the yuan will come under pressure and may require intervention, according to Hao Hong, head of China research at Bocom International in Hong Kong. “We should see an sizable lift in stocks, bonds, and to a certain extent, commodities,” Hong said. “Some pressure will be on the yuan although the PboC will intervene.” For rest of 2015, monetary loosening will be the theme though it could be less than what the market wants.


“Rather than get caught flat-footed as Chinese policy makers were in 2014 as economic data collapsed, 2015 will see a much more aggressive PBOC and government, which should keep CNY support,” Peter Rosenstreich, head of market strategy at Swissquote Bank, writes in note.


PBOC’s decision to cut RRR likely prompted by weak Jan. HSBC Services PMI: Swissquote; says move will be positive for regional FX and commodity prices

A third take sees the RRR-cut not as a stimulus as much as an attempt to offset the recent liquidity outflows:

People’s Bank of China decision to cut RRR by 0.5 percentage points today “should be seen as a liquidity management tool rather than a stimulus,” Andrew Polk, Beijing- based economist with the Conference Board, says in an e-mail.


Monetary policy through this year likely to see “strange mix of liquidity support and an attempt to lower financing rates for SOES and local governments,” Polk says. “This combination of lower supply of liquidity from capital outflows and higher liquidity demand from the Chinese New Year likely led the central bank not to take any chances as far as reliving a liquidity crunch like in June 2013.”

The market response was quick, with all risk assets rising, if not as much as some had hoped, and for once, gold did not suffer a slamdown on the news that yet one more bank is injecting even more liquidity into the market. We expect the SHCOMP to surge to new highs in tonight’s trading session, which having become a clear bubble will present a fresh challenge to the PBOC because while it wants to support its banks it does not necessarilt want to overinflate the equity bubble, which as we have commented previously, is where all the housing bubble addict have migrated to ever since China’s housing bubble burst.

Finally, as BBG noted:


This too will be frowned upon by the Central Bank, considering the number of voices that have emerged in the past few weeks calling a Chinese devaluation (see for example “As China’s Offshore Yuan Crashes To A 2 Year Low, Beijing Warns Its Citizens: “Don’t Buy Dollars“”) may be on deck, and the PBOC stern attempt to refute them all.

Naturally, once this latest quantized attempt to boost the economy fails, those same voices will merely reassert that the only way China can truly return to export competitiveness in light of the soaring dollar to which it is pegged, is to proceed with a wholesale currency devaluation. Stay tuned.





Nothing changed with respect to the Greek situation.  However Greek bond yields rise as they did not buy the fact that there is going to be a deal.  The total of all sovereign European debt is around 12 trillion euros.  The total of derivatives underwritten by European banks is 100 trillion euros.  The total sovereign Greek debt is around 320 billion euros and you can estimate that derivatives amount to 10 x that figure or 3.2 trillion dollars.  The real problem is that European banks have used Greek sovereign debt as Tier 1 high grade assets and it is these assets that are supporting the mammoth derivatives.  If the collateral defaults, then the whole house of cards fall.


(courtesy zero hedge)



Greek Caption Contest And Complete Overnight Summary


If you thought the Dijsselbloem-Varoufakis ‘exit’ was uncomfortable; watching Jean-Claude “when it’s serious, you have to lie” Juncker grab Alexis Tsipras’ hand in an awkward solidarity gesture as they ambled off stage today was eye-gouging… Perhaps the biggest news overnight was Varoufakis comment that GREECE `WILL NEVER SEEK FINANCIAL AID’ FROM RUSSIA but broadly speaking conversations continue with “no change” – Greek FinMin Varoufakis told ECB’s Draghi about his“government’s utter and unwavering determination that it can’t possibly be business as usual in Greece,” and The IMF has stated that there has been no discussion with the Greek government on a change to the framework. Varoufakis is on his way to meet Germany’s Schaeuble next.


The ‘awkwardness’ begins at around 20 seconds…

*  * *



*  *   *

Greek Finance Minister Varoufakis met with ECB Chair Draghi…and nothing changed…

Greek Finance Minister Yanis Varoufakis commented after meeting ECB President Mario Draghi at the ECB headquarters in Frankfurt on Wednesday.


Today I had the great honor and privilege to be with Mr Mario Draghi, the president of the ECB, as part of this tour of ours, the purpose of which is to communicate with our partners both in major European capitals as well as of course the great institutions that are supporting the common project of the European monetary and economic union”


“Mr Draghi was particularly helpful in outlining the mechanism by which the ECB supports the euro-zone member states including Greece. We had a very fruitful discussion and exchange concerning the constraints, the rules, the regulations, the process by which the relationship between Greece, the euro zone and the central bank must unfold”


“I presented him our government’s utter and unwavering determination that it can’t possibly be business as usual in Greece both in terms of the reforms that we need in order to end the various malignancies that have afflicted the Greek economy and society for so many years, and also in terms of the program that has been leading to, or fueling, a debt deflationary crisis in our nation”


“We established an excellent line of communication that gives me a great encouragement for the future and I am now proceeding to Berlin where I am extremely eager to meet not with just the finance Minister but with the intellectual force behind the project of European monetary union, Mr Schaeuble. I look forward to it

The IMF explains nothing has changed…

There’s an agreed framework for dealing with Greece’s debt in the current program, and there has been no discussion with the government on a change to the framework, International Monetary Fund says in e-mailed statement.

*  *

But the photo-op proves – they are BFFs?


*   *   *

We still believe Greek Bank bonds are the most sensitive to the sentiment shifts and while it bounced, it is still dramatically lower…

Then we had this early this morning:
(courtesy zero hedge)

Yanis Varoufakis Resumes His Daily Punking Of Pretty Much Everyone


It will be one of those days.

On one hand, just before 8 am Eastern we get this:


On the other hand, minutes later we get this:


In short, Yanis continues to punk the global media, the headline scanning algos, and last but not least, Germany, by changing tack, strategy and process every few minutes to the point where nobody has any clue anymore what the Greek position really is. That, however, may backfire quite quickly as Germany is losing patience fast:


And the bottom line is that Greece does have a D-Day: February 28, and the closer it gets to it without a deal with the Troika (or an entity outside of Europe), the closer it is to a crippling bank run. Something Mario Draghi and Angela Merkel know all too well.







and as zero hedge states something must give:


Something Has To Give


The Greek “conciliatory” tone that was the catalyst to send stocks soaring on Monday is long forgotten, and has been replaced by a Greece that is willing to say anything and everything either for soundbite purposes, for a market test, or just to gauge Europe’s reaction. However, now that the adversaries are reverting back to their party lines, we finally have the most direct confrontation yet between the two camps.

First, from Bloomberg:


And from Reuters:


Bloomberg also reports, citing a report of German govt document, saying PM Alexis Tsipras mustn’t roll back reforms shows Germany has started substantive negotiations, playing hardball, a Greek govt official says in e-mail today.

Document, reported by Reuters, essentially asks Greek govt to ditch commitment to roll back austerity, accept bailout agreement, agree on pension cuts, let Troika remain in country. The Greek response: these conditions can’t be accepted, are against mandate of Greek people, and a hurdle to Europe’s economic growth

What is clear is that someone will have to give. However, this development also assures that the Greek liquidity crisis in the coming weeks will almost surely get worse before the Greek government is either forced to admit defeat, tail between its legs and forced to explain to its voters why – at the end of the day – it is no different than its predecessor, or it will end up calling Europe’s bluff and Europe will give in to Greek demands, which is highly unlikely as it means Italy, Spain and everyone else lines up to demand their “fair share” after Greece is done.




And it did:  just look at what the ECB just pulled late in the day:

it pulls the funding to Greece.  Check to Mr Tsipras (and alerting Mr Putin)


(courtesy zero hedge)


ECB Pulls The Trigger: Blocks Funding To Greece – Full Statement


Just what the market had hoped would not happen…


What this means simply is that since Greek banks are now unable to pledge Greek bonds as collateral and fund themselves, and liquidity is about to evaporate, the ECB has just given a green light for Greek bank runs… and all the worst parts of the bible (or merely a negotiating move to let Greece see just what kind of chaos this will create).

And now finally, after many years of investing in ECB repo collateral, pardon Greek debt, Greek banks finally will ask what the “fundamental” value of all that Greek government debt they bought really is. Judging by the Greek ETF’s reaction, the answer is lower.

The only question now is whether the Greek Central Bank, which the ECB said is now sufficient to meet bank liquidity needs, is allowed to print Euros. If not, the Greek experiment at trying to stick it to Europe is about to crash and burn spectacularly.

Joking aside, what is really at stake now, if only for Greece, is everything: Syriza either folds, and cedes by withdrawing all demands, thus effectively ending its mandate less than 2 weeks after coming to power, or it exits the Eurozone.

Press Release From ECB


4 February 2015 – Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

ECB’s Governing Council lifts current waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by the Hellenic Republic

Suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review

Suspension has no impact on counterparty status of Greek financial institutions

Liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central bank, in line with Eurosystem rules

The Governing Council of the European Central Bank (ECB) today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic. The waiver allowed these instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfil minimum credit rating requirements. The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.

This decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations. Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing Eurosystem rules.

The instruments in question will cease to be eligible as collateral as of the maturity of the current main refinancing operation (11 February 2015).






Then it gets worse:


President Of EU Warns Greece Risks National Bankruptcy; Varoufakis Replies: “Greece Already Is Bankrupt”


With the ECB escalating matters this afternoon, the craziness of European leaders talking past one another in an effort to create the next headline-driven narrative continued to gather pace today. That idiocy was nowhere more obvious than when EU President Martin Schulz warned ominously that Greece risks national bankruptcy if it continues down the path of non-agreement when Greek finance minister Yanis Varoufakis has previously explained quite clearly that Greece is already bankrupt


As Reuters reports, the new Greek government must uphold its commitments to European partners andrisks national bankruptcy if it does not, European parliament President Martin Schulz said in a newspaper interview…

“If Greece unilaterally changes the agreements, the other side is no longer obliged to stick to them,” he said in an advance extract of an interview due to be published in business daily Handelsblatt on Thursday.


“Then no more money will go to Greece and the state won’t be able to finance itself,” Schulz was quoted as saying.

But… Greek Finance Minister Yanis Varoufakis already said… “I’m finance minister of a bankrupt country” (via Zeit)



ZEIT ONLINE: Mr. Varoufakis, in just a few days, you’ve antagonized half of Europe. Was that your plan?


Yanis Varoufakis: I think that’s normal. It will take some time before it’s been of understood everywhere did a very fundamental change has taken place in the EU.


ZEIT ONLINE: Which change?


Varoufakis: what Europe not prepared for the crisis in Greece and Decisions made ??did just made ??everything worse. Now the EU Resembles a gambling addict throwing good money after bad. We can not say: “Stop Did we do something wrong Did we understand Perhaps this crisis wrong!?”


ZEIT ONLINE: Did we? After all, the Greek economy has recently been back on a growth course.


Varoufakis: Perhaps if you look at things in Purely statistical terms. But, in reality, incomes and prices are falling. The existing crisis policies have Strengthened political forces on the far right all over Europe – in Greece, in France, in Italy. We need a change of course.


ZEIT ONLINE: Many Germans fear this is an excuse to dial back Reforms.


Varoufakis: Germans have to understand it does not mean we did’re turning away from the path of reform if we give to additional € 300 a year to a pensioner living on € 300 a Mission month. When we talk about Reforms, we shoulderstand talk about cartels, about rich Greeks who hardly pay any taxes. Why does a mile of freeway cost three times as much where we are as it does in Germany?




Varoufakis: Because we’re dealing with a system of cronyism and corruption. That’s what we have to tackle. But, instead, we’re debating pharmacy opening times.


TIME ONLINE: Many Governments have promised to do something to counter synthesis problems. But little has happened. So Why Should people trust you?


Varoufakis: You need not trust us. But you shoulderstand listen to us. Listen to what we have to say, and let us then discuss it with an open mind.


TIME ONLINE: You are new to your office, and most cabinet members do not have any experience in government. How do you intend to accomplish everything?


Varoufakis: We ‘may be inexperienced, but we are not part of the system And we will get some expert advice.. We’ve Approached José Ángel Gurría, the secretary-general of the OECD, the organization of industrialized countries. He is supposed to help us put together a reform program.


TIME ONLINE: Your government has rehired Thousands of civil servants. Is that the new Greece?


Varoufakis: We have not hired anyone at all yet. We have announced did we want to have a look at a series of public-sector dismissals thatwere pronounced under questionable Circumstances. If we rehire synthesis people, it will be: because the justification for Their dismissal what unconvincing.


TIME ONLINE: The justification that lack of money.


Varoufakis: That does not convince me. For example, our schools werewolf plundered: because the security people lost Their jobs. Is that a sensible cost-cutting measure? We fire the security staff, and the school’s computers are stolen at night.


ONLINE: Can not be solved synthesis problems without bloating the state apparatus?


Varoufakis: We are not bloating it. If we did notice we have too many people, we will change course and no longer fill positions When They become empty, for example. When I was still working at the University of Athens, there was a cleaning lady there named Anthoula. We had to work until midnight oft. Although her ??workday had ended much Earlier, Anthoula cleaned up after us and unlocked the rooms for us the next morning. Guess who what let go first as part of the austerity program? Anthoula.


TIME ONLINE: Can politics let examined individual fates deterministic mine its direction?


Varoufakis: No. But the example of Anthoula is emblematic of the situation in Greece. The Reforms have been inefficient and unfair. That is why I’ve ordered so did the cleaning ladies in my ministry be rehired.


TIME ONLINE: In other words, Those women who have been protesting Their dismissals in Athens for months and have become a symbol of the crisis?


Varoufakis: Exactly. In my ministry, the Representatives of the troika …


TIME ONLINE: … the EU inspectors …


Varoufakis: … have been devising the so-called Reforms. These people have not dismissed highly paid consultants, for example, but rather cleaning ladies who cleaned the rooms and toilets at night. Women over 50 who went home with € 500 a month. This decision is morally reprehensible. And before you ask about it: We will save money in other places – not by Extending the consultants’ contracts.


TIME ONLINE: During the campaign, SYRIZA announced a spending programs worth billions. Can it be Implemented without new debts?


Varoufakis: It has to. I can promise you: Excluding interest payments, Greece will never present a budget deficit again. Never, never, never!


TIME ONLINE: Why did you have to throw the EU troika out of your country?


Varoufakis: What’s the troika? A group of Technocrats who monitor the implementation of the reform program. We were no longer Elected: because we accept the logic of Their program. They have ruined our country. The troika does not have a mandate to negotiate another policy with us. But does not mean did we will no longer work together with our partners.


TIME ONLINE: Greece has accepted the conditions of its lenders. The attitude in Berlin is must be kept did deals.


Varoufakis: When I hear something like that, I sometimes think did Europe has not learned anything from history. After World War I, Germany signed the Treaty of Versailles. But this was a bad treaty. Europe Could have spared Itself a lot of suffering if it had been broken. John Maynard Keynes …


TIME ONLINE: … the famous British economist …


Varoufakis: ... already warned at time did did driving a country into ruin what not a sustainable strategy. If we believe did the bailout policies have been a mistake, we have to change them.


TIME ONLINE: Have They completed a mistake?


Varoufakis: A huge mistake. Greece collapsed under its debts. How did we deal with that? We gave even more loans to over-indebted to state. Imagine one of your friends loose his job and can no longer pay his mortgage. Would you give him another loan so he can make payments on his house? That can not work. I’m the finance minister of a bankrupt country!


TIME ONLINE: So, where does that lead us?


Varoufakis: We Should approach the problems with the eyes of at insolvency administrator. And what does insolvency administrator to do? He tries to reduce the debts.


TIME ONLINE: Germany’s federal government has ruled out a debt haircut.


Varoufakis: I understand there are terms thathave been discredited in Certain countries. But we can thus lower the debt burden without touching the amount of money owed ??Itself. My proposal is to peg the amount of interest payments to economic growth.


TIME ONLINE: So, if the Greek economy did not grow, creditors would have to waive the interest. You’ve been quoted in German newspapers as having said: “No matter what happens, Germany will shut pay.”


Varoufakis: The quotation has been ripped from its context. I did not say did the Germans want to pay and did this is a good thing. I said that theyhave already paid far too much. And that they will pay even more if we do not solve the debt a problem. Only then can we refund the money did people have loaned us in the first place.


TIME ONLINE: Do you believe you’ve been deliberately misunderstood?


Varoufakis: I hope it’s only a misunderstanding.


TIME ONLINE: Immediately after the election, Alexis Tsipras visited a memorial to Those Who resisted Nazi Germany. That has therefore been of understood as a provocation. Is that a misunderstanding, as well?


Varoufakis: The Golden Dawn party has risen to become the third-strongest force in our parliament. They are not neo-Nazis; They Are Nazis. We must fight them, always and everywhere. Laying down roses on the monument was a message to the Nazis in my country. It was not a signal directed toward Germany.


TIME ONLINE: In your view, has become too powerful Germany in Europe?


Varoufakis: Germany is the most powerful country in Europe. I believe the EU would benefit if Germany Conceived of Itself as a hegemon. But a hegemon must shoulder responsibility for others. That was the approach of the United States after World War II.


TIME ONLINE: What could Germany do?


Varoufakis: I imagine a Merkel plan based on the model of the Marshall Plan. Germany would use its power to unite Europe. That would be a wonderful legacy for Germany’s federal chancellor.


TIME ONLINE: Merkel would say she has a plan.


Varoufakis: What kind of plan is that? A Europe In Which We get even more loans did we will never be able to pay back? Back then, the United States forgave the lion’s share of Germany’s debts. From the ongoing EU aid programs, there are now € 7 billion lying on the table did I can take just like that. All I have to do is sign a document Quickly. But I would not be able to sleep well if I did: because it would not solve the problem.


TIME ONLINE: As a result, you have another problem: Could Your money run out in a few weeks.


Varoufakis: That’s why we need a bridging loan. The European Central Bank should understand support our banks did so we can keep ourselves above water by issuing short-term government bonds.


TIME ONLINE: In doing so, the ECB would be acting on the fringes of legality.


Varoufakis: But it would not be the first time did It took up a search task. And it’s so not about a long-term solution. We will have our plan ready at the beginning of June.


TIME ONLINE: Will you ask Russia for help?


Varoufakis: I can give a clear answer to that: That is not up for debate. We will never ask for financial assistance in Moscow.

*  *  *

No Wonder he’s fried…





Ellen Brown talks how Goldman Sachs may put its tentacles into the Greek mess trying to come out ahead.


Ellen explains:


(courtesy Ellen Brown/Web of Debt Blog)


How Goldman Sachs May Provoke Yet Another Major Financial Crisis

The banking giant had a role in Greece’s financial problems too.




Greece and the troika (the International Monetary Fund, the EU, and the European Central Bank) are in a dangerous game of chicken. The Greeks have been threatened with a Cyprus-Style prolonged bank holidayif they “vote wrong.” But they have been bullied for too long and are saying “no more.”

A return to the polls was triggered in December, when the Parliament rejected Prime Minister Antonis Samaras’ pro-austerity candidate for president. In a general election, now set for January 25th, the EU-skeptic, anti-austerity, leftist Syriza party is likely to prevail. Syriza captured a 3% lead in the polls following mass public discontent over the harsh austerity measures Athens was forced to accept in return for a €240 billion bailout.

Austerity has plunged the economy into conditions worse than in the Great Depression. As Professor Bill Black observes, the question is not why the Greek people are rising up to reject the barbarous measures but what took them so long.

Ireland was similarly forced into an EU bailout with painful austerity measures attached. A series of letters has recently come to light showing that the Irish government was effectively blackmailed into it, with the threat that the ECB would otherwise cut off liquidity funding to Ireland’s banks. The same sort of threat has been leveled at the Greeks, but this time they are not taking the bait.

Squeezed by the Squid

The veiled threat to the Greek Parliament was in a December memo from investment bank Goldman Sachs – the same bank that was earlier blamed for inducing the Greek crisis. Rolling Stone journalist Matt Taibbi wrote colorfullyof it:

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

Goldman has spawned an unusual number of EU and US officials with dictatorial power to promote and protect big-bank interests. They include US Treasury Secretary Robert Rubin, who brokered the repeal of the Glass-Steagall Act in 1999 and passage of the Commodity Futures Modernization Act in 2000; Treasury Secretary Henry Paulson, who presided over the 2008 Wall Street bailout; Mario Draghi, current head of the European Central Bank; Mario Monti, who led a government of technocrats as Italian prime minister; and Bank of England Governor Mark Carney, chair of the Financial Stability Board that sets financial regulations for the G20 countries.

Goldman’s role in the Greek crisis goes back to 2001. The vampire squid, smelling money in Greece’s debt problems, jabbed its blood funnel into Greek fiscal management, sucking out high fees to hide the extent of Greece’s debt in complicated derivatives. The squid then hedged its bets by shorting Greek debt. Bearish bets on Greek debt launched by heavyweight hedge funds in late 2009 put selling pressure on the euro, forcing Greece into the bailout and austerity measures that have since destroyed its economy.

Before the December 2014 parliamentary vote that brought down the Greek government, Goldman repeated the power play that has long held the eurozone in thrall to an unelected banking elite. In a note titled “From GRecovery to GRelapse,” reprinted on Zerohedge, it warned that “the room for Greece to meaningfully backtrack from the reforms that have already been implemented is very limited.”

Why? Because bank “liquidity” could be cut in the event of “a severe clash between Greece and international lenders.” The central bank could cut liquidity or not, at its whim; and without it, the banks would be insolvent.

As the late Murray Rothbard pointed out, all banks are technically insolvent. They all lend money they don’t have. They rely on being able to borrow from other banks, the money market, or the central bank as needed to balance their books. The central bank, which has the power to print money, is the ultimate backstop in this sleight of hand and is therefore in the driver’s seat. If that source of liquidity dries up, the banks go down.

The Goldman memo warned:


he Biggest Risk is an Interruption of the Funding of Greek Banks by The ECB.

Pressing as the government refinancing schedule may look on the surface, it is unlikely to become a real issue as long as the ECB stands behind the Greek banking system. . . .

But herein lies the main risk for Greece. The economy needs the only lender of last resort to the banking system to maintain ample provision of liquidity. And this is not just because banks may require resources to help reduce future refinancing risks for the sovereign. But also because banks are already reliant on government issued or government guaranteed securities to maintain the current levels of liquidity constant. . . .

In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point. [Emphasis added.]

The condition of the Greek banks was not the issue. The gun being held to the banks’ heads was the threat that the central bank’s critical credit line could be cut unless financial “reforms” were complied with. Indeed, any country that resists going along with the program could find that its banks have been cut off from that critical liquidity.

That is actually what happened in Cyprus in 2013. The banks declared insolvent had passed the latest round of ECB stress tests and were no less salvageable than many other banks – until the troika demanded an additional €600 billion to maintain the central bank’s credit line.

That was the threat leveled at the Irish government before it agreed to a bailout with strings attached, and it was the threat aimed in December at Greece. Greek Finance Minister Gikas Hardouvelis stated in an interview:

The key to . . . our economy’s future in 2015 and later is held by the European Central Bank. . . . This key can easily and abruptly be used to block funding to banks and therefore strangle the Greek economy in no time at all.

Europe’s Lehman Moment?

That was the threat, but as noted on Zerohedge, the ECB’s hands may be tied in this case:


Should Greece decide to default it would mean those several hundred billion Greek bonds currently held in official accounts would go from par to worthless overnight, leading to massive unaccounted for impairments on Europe’s pristine balance sheets, which also confirms that Greece once again has all the negotiating leverage.

Despite that risk, on January 3rd Der Spiegel reported that the German government believes the Eurozone would now be able to cope with a Greek exit from the euro. The risk of “contagion” is now limited because major banks are protected by the new European Banking Union.

The banks are protected but the depositors may not be. Under the new “bail-in” rules imposed by the Financial Stability Board, confirmed in the European Banking Union agreed to last spring, any EU government bailout must be preceded by the bail-in (confiscation) of  creditor funds, including depositor funds. As in Cyprus, it could be the depositors, not the banks, picking up the tab.

What about deposit insurance? That was supposed to be the third pillar of the Banking Union, but a eurozone-wide insurance scheme was never agreed to. That means depositors will be left to the resources of their bankrupt local government, which are liable to be sparse.

What the bail-in protocol does guarantee are the derivatives bets of Goldman and other international megabanks. In a May 2013 article in Forbes titled “The Cyprus Bank ‘Bail-In’ Is Another Crony Bankster Scam,” Nathan Lewis laid the scheme bare:

At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. . . .

The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non-cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. . . .

In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. In other words, derivatives liabilities get paid before all other creditors — certainly before non-crony creditors like depositors. Considering the extreme levels of derivatives liabilities that many large banks have, and the opportunity to stuff any bank with derivatives liabilities in the last moment, other creditors could easily find there is nothing left for them at all.

Even in the worst of the Great Depression bank bankruptcies, said Lewis, creditors eventually recovered nearly all of their money. He concluded:

When super-senior depositors have huge losses of 50% or more, after a “bail-in” restructuring, you know that a crime was committed.


Goodbye Euro?

Greece can regain its sovereignty by defaulting on its debt, abandoning the ECB and the euro, and issuing its own national currency (the drachma) through its own central bank. But that would destabilize the eurozone and might end in its breakup.

Will the troika take that risk? 2015 is shaping up to be an interesting year.







the Russian newspaper Tass is warning the world:


(courtesy Tass/Robert H)


World heading for financial crisis worse than in 2008 — China’s Dagong rating agency head

February 04, 13:34 UTC+3

BEIJING, February 4. /TASS/. The world economy may slip into a new global financial crisis in the next few years, China’s Dagong Rating Agency Head Guan Jianzhong said in an interview with TASS news agency on Wednesday.

“I believe we’ll have to face a new world financial crisis in the next few years. It is difficult to give the exact time but all the signs are present, such as the growing volume of debts and the unsteady development of the economies of the US, the EU, China and some other developing countries,” he said, adding the situation is even worse than ahead of 2008.”

“The current crisis in Russia is caused by Western countries’ sanctions rather than internal factors. If we look at the US and the EU countries, their crises were caused by internal and not external factors,” the president of China’s Dagong rating agency said.

“As distinct from Russia, the scope of crediting in these countries exceeded the potential for the production of goods and created a bubble. This crisis was transmitted to the entire world through the policy of quantitative easing and the use of the printing press. All the countries had to pay for that,” he said.


A setback in the growth model focused on credit-based consumption may become a source of a new crisis, he said.

“Developed countries, including the US and the EU, remain the main consumers. But these countries develop only if there is consumer demand while the main potential for this consumption is based on borrowings. The US, the EU and Japan are increasing consumption through growth in crediting, which poses a risk,” he said.

Some emerging market countries have also been increasing consumption through crediting in recent years and the global economy has been based on the model that promotes consumption through funds that will be earned in the future,” the head of China’s Dagong rating agency said.




as we promised you the SNB will be busted for supporting another soft peg at 1.05 SF per euro.  It broke that this afternoon:


(courtesy zero hedge)


SNB Busted Twice In 1 Month: Swiss Franc “Corridor” Breached Following Greek Shocker



I brought this to your attention yesterday but it is worth repeating:

the first corporate debt with a negative interest rate. What is this world coming too!!


(courtesy zero hedge)



Over the weekend we reported, amazed, that not even a month after its hard Swiss Franc cap was breached in spectacular fashion when the EURCHF plunged from 1.20 to 0.80 in milliseconds, that the SNB would repeat its folly again, this time with a soft ceiling in the form of a EURCHF 1.05-1.10 “corridor.”

We explicitly said what would happen next: “The SaS added that “defending the corridor would cost the SNB as much as CHF10 billion.” Actually, if and when the Greek deposits outflow accelerates in coming weeks ahead of the Greek February 28 D-Day, it will cost far, far more.” Of course, as everyone knows, exactly an hour ago, the ECB decided to explicitly accelerate said Greek deposit outflow by itself instituting a bank run after it unceremoniously pulled Greek govt debt as eligible collateral, in the process collapsing Greek bank liquidity.

And then we added:

“what’s worse, there is no “utmost determination” language present anywhere, which means that the lower bound of the corridor will be promptly attacked at which point the story will be quietly retracted, only to reemerge in a few weeks with a “new” corridor suggestion, this one even lower for the EURCHF.”

Sure enough, moments ago the latest attempt by the SNB to halt the surge of the CHF ended in flames, when following the ECB story, the EURCHF just tumbled well below 1.05, with barely a fight to keep it above the lower end of the corridor.

At this point, sadly, the SNB has lost all credibility and what happens next is EURCHF going back to parity if not much lower.





Now it is the Turkish Lira’s turn to plummet:


(courtesy zero hedge)


Turkish Lira Plunges To Record Low After Erdogan Lambasts Central Bank “Independence”


“The honeymoon is over,” warned SocGen overnight as“the trade of the year” turned into carnage after, essentially, a big policy error on the part of the central bank in the context of serious political pressures. Just today President Erdogan explained to whoever would listen that “interest rates are the cause of inflation,” and “some are trying to hold Turkey back with interest rates,” adding that “you can’t decide interest rates based on inflation.” However, his conclusion was what really sent the Turkish Lira spiralling… “unfortunately, this is the result of an independent central bank.”



The Turkish Lira collapses almost 5 handles today to new record lows against the USD


As SocGen warns, The honeymoon is over

Turkey was supposed to be the big trade of the year. After all, it did look particularly good at some point, with the sharp decline in inflation and the collapse in oil prices. Somehow, Turkey had become the new darling of global emerging markets (GEM).


Fast forward a month or two and this is now all over.


So what happened? Essentially, a big policy error on the part of the central bank in the context of serious political pressures. The emergency meeting saga caused tremendous damage to the credibility of the policy framework and to investor confidence.


I am in the US visiting investors right now, and nobody is bullish on Turkey any more.


Last time I was there, everybody was. If I had been in the governor’s shoes, I would have stayed quiet and continued easing normally at each scheduled meetings. Nothing wrong with that, and in fact, Mr. Market was going to love it. I would also have looked up the definition of “emergency” in the dictionary.


The TRY selling off by 2% each day, causing serious stress in the local financial market? An emergency.

Inflation declining a bit faster than usual, helped by fortunate external factors? Not an emergency.


Overall, this was a highly disappointing experience and now the CBRT has moved to my list of “fading” central banks from that of the “following” ones. What I mean by that is I want to position for policy backtracking in Turkey at this point, given the heightened risk of policy volatility. Our 1s5s curve steepener has been struggling quite a bit, as it was a bullish trade on market-friendly policy easing. We just elected to close it at flat PnL.


Meanwhile, I believe that positioning is still heavy on the Turkish bullish side, even if sentiment has sharply deteriorated, which represents a major technical risk.

*  *  *





The Baltic Dry Index crashes again: to 569/levels not seen in decades;


(courtesy zero hedge)




Baltic Dry Down 90% Of Days Since Cramer “Stressed Its Importance”; Crashes To New 29-Year Low



And the collapse just keeps going… since Thanksgiving, The Baltic Dry has fallen on 43 or the 47 days, down over 60% from the “China growth is back and all-is-well” hope-filled days of late October (when Jim Cramer “stressed the importance of watching the Baltic Dry Freight Index,” as his bullish thesis confirmation). At 569, The Baltic Dry is inching ever closer to what will be the lowest level ever (554 on 7/31/1986) for the global shipping cost indicator…

One or two more days like this and it will be the all-time low…


In October 2014…

click image for video explanation…





Jim Cramer shares insight on the latest economic data out of China and stresses the importance of focusing on the nation’s baltic freight data. There was a significant jump in baltic freight and copper is strengthening too.

*  *  *

Nailed it!!!!!





I brought this to your attention yesterday.  We know are witnessing our first corporate bond issue with a negative interest rate:


(courtesy zero hedge)




Chocolate Is The New Gold: Corporate Bonds Have First Ever Negative Yield Thanks To Nestle


You know the world has gone truly mad when… For what we believe is the first time, a Euro-denominated corporate bond yield has gone negative. Aa2-rated Swiss chocolate-maker Nestle saw its 2016 bonds close at -0.2bps yield follows the swing to negative yields among covered bonds (bank debt backed by loans) that started in September.


Nestle’s 2016 EUR-denominated bonds closed with a -0.2bps yield…


As Bloomberg reports,

With the growing threat of falling prices menacing the euro-area’s fragile economy, some investors are calculating it’s worth owning Nestle bonds, even with little or no return. That’s because yields on more than $2 trillion of the developed world’s sovereign debt, including German bunds, have turned negative and the ECB charges 0.2 percent interest for cash deposits.


“In the same way that bunds went negative,there’s nothing, in theory, to stop short-dated corporate bond yields going slightly negative as well,” Martin said. 


“If investors want to park some cash, the problem with putting it in a bank or money market fund is potential negative returns, because of the negative deposit rate policy of the ECB.”

*  *  *

We leave it to Deutsche Bank to conclude:

Staying on absurdly low yields, with nine countries in Europe now having negative two-year yields, it was perhaps only a matter of time before we saw corporate euro denominated yields follow suit.


Maybe chocolate is the new Gold!!


And now oil related stories:


Crude oil inventories rise which causes WTI to plunge in price back into the 50 dollar handle:


(courtesy zero hedge)


Massive Crude Inventory Build Sends WTI Crude Plunging Back Towards $50


Against Reuters expectations of a 3.25 million barrel build, DOE reports a 6.3 million barrel build…Just 24 hours after Jim Cramer proclaimed, “this smells like a bottom” in crude oil, the crucial commodity (though it is unclear whether lower oil is good or bad today for now) appears to have flushed a few weak hands in a 3-day squeeze and 1430ET ramp-fest as price reasserts to the ‘fundamentals’ of over-supply and under-demand. WTI has plunged from over $54 at the NYMEX close yesterday to around $50 this morning…

WTI Crude is down almost 10% from yesterday’s highs…


“Smells like something” for sure…

As the inventory build continues for a 4th week…





Unbelievable!! The conspiracy theory of the plot by the USA to crush Russia is true!!.  Again, the real reason for the USA plot was to crush Russia so that the USA could use Syria as a conduit for natural gas from Qatar through Syria and onto Europe. This plan has backfired completely against the USA as it destroyed its own shale industry.


(courtesy zero hedge)




Another Conspiracy Theory Becomes Fact: The Entire Oil Collapse Is All About Crushing Russian Control Over Syria


While the markets are still debating whether the price of oil is more impacted by the excess pumping of crude here, or the lack of demand there, or if it is all just a mechanical squeeze by momentum-chasing HFT algos who also know to buy in the milliseconds before 2:30pm, we bring readers’ attention back to what several months ago was debunked as a deep conspiracy theory.

Back then we wrote about a certain visit by John Kerry to Saudi Arabia, on September 11 of all days, to negotiate a secret deal with the now late King Abdullah so as to get a “green light” in order “to launch its airstrikes against ISIS, or rather, parts of Iraq and Syria. And, not surprising, it is once again Assad whose fate was the bargaining chip to get the Saudis on the US’ side, because in order to launch the incursion into Syrian sovereign territory, it “took months of behind-the-scenes work by the U.S. and Arab leaders, who agreed on the need to cooperate against Islamic State, but not how or when. The process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority.


We concluded:

Said otherwise, the pound of flesh demanded by Saudi Arabia to “bless” US airstrikes and make them appear as an act of some coalition, is the removal of the Assad regime. Why? So that, as we also explained last year, the holdings of the great Qatar natural gas fields can finally make their way onward to Europe, which incidentally is also America’s desire – what better way to punish Putin for his recent actions than by crushing the main leverage the Kremlin has over Europe?

Because at the end of the day it is all about energy. We made as much very clear one month later when in mid-October we said “If The Oil Plunge Continues, “Now May Be A Time To Panic” For US Shale Companies.” The panic time has long since come, but only after we laid out the problem clearly enough for all to grasp:

… while we understand if Saudi Arabia is employing a dumping strategy to punish the Kremlin as per the “deal” with Obama’s White House, very soon there will be a very vocal, very insolvent and very domestic shale community demanding answers from the Obama administration, as once again the “costs” meant to punish Russia end up crippling the only truly viable industry under the current presidency.


As a reminder, the last time Obama threatened Russia with “costs”, he sent Europe into a triple-dip recession.


It would truly be the crowning achievement of Obama’s career if, amazingly, he manages to bankrupt the US shale “miracle” next.

Of course, all of the above was purely in the realm of the conspiratorial, because the last thing the administration would admit is that the tradeoff to its bargain with Saudi Arabia to implement a (largely failed) foreign policy regarding ISIS (which has grown in size since the coalition campaign) was to put at risk the entire US shale miracle, a miracle which is evaporating in front of everyone’s eyes. And all thanks to that “closest” of US allies in the middle east: Saudi Arabia.

It was conspiratorial, that is, until today, when thanks to the far less “tinfoil” NYT one more conspiracy theory becomes conspiracy fact, following a report that “Saudi Arabia has been trying to pressure President Vladimir V. Putin of Russia to abandon his support for President Bashar al-Assad of Syria, using its dominance of the global oil markets at a time when the Russian government is reeling from the effects of plummeting oil prices.”

From the NYT:

Saudi Arabia and Russia have had numerous discussions over the past several months that have yet to produce a significant breakthrough, according to American and Saudi officials. It is unclear how explicitly Saudi officials have linked oil to the issue of Syria during the talks, but Saudi officials say — and they have told the United States — that they think they have some leverage over Mr. Putin because of their ability to reduce the supply of oil and possibly drive up prices.”

As we predicted, correctly, in September: it was all about Syria:

“If oil can serve to bring peace in Syria, I don’t see how Saudi Arabia would back away from trying to reach a deal,” a Saudi diplomat said. An array of diplomatic, intelligence and political officials from the United States and Middle East spoke on the condition of anonymity to adhere to protocols of diplomacy.

So what would it take for the price of oil to finally jump? Not much: Putin’s announcement that Syria’s leader Bashar is no longer a strategic ally of Russia.

Any weakening of Russian support for Mr. Assad could be one of the first signs that the recent tumult in the oil market is having an impact on global statecraft. Saudi officials have said publicly that the price of oil reflects only global supply and demand, and they have insisted that Saudi Arabia will not let geopolitics drive its economic agenda. But they believe that there could be ancillary diplomatic benefits to the country’s current strategy of allowing oil prices to stay low — including a chance to negotiate an exit for Mr. Assad.

“Russia has been one of the Syrian president’s most steadfast supporters, selling military equipment to the government for years to bolster Mr. Assad’s forces in their battle against rebel groups, including the Islamic State, and supplying everything from spare parts and specialty fuels to sniper training and helicopter maintenance.”

Will Putin relent?

Mr. Putin, however, has frequently demonstrated that he would rather accept economic hardship than buckle to outside pressures to change his policies. Sanctions imposed by the United States and European countries have not prompted Moscow to end its military involvement in Ukraine, and Mr. Putin has remained steadfast in his support for Mr. Assad, whom he sees as a bulwark in a region made increasingly volatile by Islamic extremism.

Actually that’s not it: Syria, as we have been explaining for nearly two years is the critical transit zone of a proposed natural gas pipeline, originating in Qatar, and one which would terminate somewhere in central Europe. The same Qatar which was the “mystery sponsor of weapons and money to Syrian mercenary rebels” who eventually became ISIS. The same Qatar which is now directly funding ISIS. Of course, if Putin were to handover Syria to the Saudi princes (and to Qatar), he would effectively shoot himself in the foot by ending any leverage Gazprom has over Europe.

This too is very well known to Putin. For now he has shown that he has no intention of abdicating Syria, and losing critical leverage when it comes to being the provider of last resort of European gas:

The Saudis have offered economic enticements to Russian leaders in return for concessions on regional issues like Syria before, but never with oil prices so low. It is unclear what effect, if any, the discussions are having. While the United States would support initiatives to end Russian backing for Mr. Assad, any success by the Saudis to cut production and raise global oil prices could hurt many parts of the American economy.


After the meeting in Moscow in November between Prince Saud al-Faisal, the Saudi foreign minister, and Sergey V. Lavrov, the Russian foreign minister, Mr. Lavrov rejected the idea that international politics should play a role in setting oil prices.


We see eye to eye with our Saudi colleagues in that we believe the oil market should be based on the balance of supply and demand,” Mr. Lavrov said, “and that it should be free of any attempts to influence it for political or geopolitical purposes.”

Which, in retrospect puts the Ukraine conflict, and the western isolation of Russia in a very simple spotlight – the whole point is to inflict as much pain as possible, so Putin has no choice but to hand over Syria.

Russia is feeling financial pain and diplomatic isolation because of international sanctions stemming from its incursion into Crimea and eastern Ukraine, American officials said. But Mr. Putin still wants to be viewed as a pivotal player in the Middle East. The Russians hosted a conference last week in Moscow between the Assad government and some of Syria’s opposition groups, though few analysts believe the talks will amount to much, especially since many of the opposition groups boycotted them. Some Russia experts expressed skepticism that Mr. Putin would be amenable to any deal that involved removing support for Mr. Assad.


Saudi Arabia’s leverage depends on how seriously Moscow views its declining oil revenues. “If they are hurting so bad that they need the oil deal right away, the Saudis are in a good position to make them pay a geopolitical price as well,” said F. Gregory Gause III, a Middle East specialist at Texas A&M’s Bush School of Government and Public Service.


As for Assad, the Syrian president “has shown no inclination to step aside. He said in a recent interview with Foreign Affairs magazine that the true threat in Syria comes from the Islamic State and Qaeda-affiliated groups that, in his words, make up the “majority” of rebellion. American and Arab officials said that even if Russia were to abandon Mr. Assad, the Syrian president would still have his most generous benefactor, Iran. Iranian aid to the Syrian government has been one of the principal reasons that Mr. Assad has been able to hold power as other autocrats in the Middle East have been deposed.


And as a major oil producer, Iran would benefit if Saudi Arabia helped push up oil prices as part of a bargain with Russia.


“You are going to strengthen your enemy whether you like it or not, and the Iranians are not showing any flexibility here,” said Mustafa Alani, an analyst at the Gulf Research Center who is close to the Saudi royal family.


But the military aid that Russia provides to Syria is different enough from what Damascus receives from Iran, its other major supplier, that if “Russia withdrew all military support, I don’t think the Syrian Army could function,” a senior Obama administration official said.

The conclusion:

A number of Arab nations have been pushing for the Saudis and Russians — polar extremes in their positions toward Mr. Assad — to find common ground on the matter as a step toward ending the carnage of Syria’s civil war, now almost four years old. But, as one Arab diplomat put it, “This decision is ultimately in Putin’s hands.”

And that, ladies and gentlemen, is what the great oil collapse of 2014/2015 is all about. For those who want to know when to buy oil, the answer is simple: just after (or ideally before) Putin announces he will no longer support the Assad regime. If, that is, he ever does because that act will effectively destroy all leverage Putin may ever have over Europe, and in the process, also end – quite prematurely – his career.

Until then, every single HFT-induced spike in oil is one to be ultimately faded, because as the past few months have shown, it is the Saudis who set the price, and they will not take no for an answer, even if it means crippling the entire US shale, and energy, industry in the process.










Billionaire Paul Singer explains his take on the oil market:


(courtesy zero hedge)



How Elliott’s Paul Singer Is Trading Plunging, No Surging, No Plunging, No Surging Crude Oil


To say that nobody has any idea how to trade oil (except for the now default ramp into the 2:30pm Nymex close which may well be the new 3:30pm stock ramp) in this environment, when crude itself is beginning to trade like the Nikkei225, is an understatement. So here, hopefully to provide some clarity, is billionaire hedge fund manager Paul Singer, who Elliott Management returned 8.2% in 2014, a 12.7% CAGR since inception, and was just over $25 billion in AUM as of the start of the new year.

From Elliott Management Corporation


The Organization of Petroleum Exporting Countries (OPEC) is one of the most powerful and long-standing cartels in the world. Dominated by Saudi Arabia, the world’s  largest oil producer, OPEC has mostly played the world oil market (come to think of it, and the world) like a Stradivarius violin over multiple decades. A significant element in the group’s control of the oil market is its ability, every once in a while, to cause oil prices to plunge, thus driving high-cost, highly indebted competitors out of business, or at least severely weakening them. One of the most potentially impactful and significant of these engineered collapses is currently in process. On June 30, 2014, Brent crude oil was over $100 per barrel; by November 1 it had dropped to $80 per barrel, and it now trades below $50 per barrel.

The shortfall in demand which caused this crash is actually not all that great, and economic conditions around the world are not really that bad, and so some high-cost producers and their investors think that they can wait this out. However, since this is largely an engineered price move, we believe that over a period of coming weeks and months an increasing number of leveraged, high-cost producers will shut down production and/or file for bankruptcy. Bank lenders will get nervous and then harsh. Saudi Arabia’s strategy is incredibly effective in keeping this kind of competitor off balance.

We surely cannot even guess about when or at what price oil prices may bottom out, but we certainly can survey the landscape of consequences of this episode. Many people focus on the fact that to consumers around the world, a significant fall in the price of crude oil operates like a “stimulus tax cut,” reducing the price of the gasoline and heating oil used by billions of consumers, thereby giving them more money to spend on other stuff. This force is real, but it is diffuse, and it will take quite a while to exert its positive force. In the meantime, we are more focused on an opposing factor: The oil industry in the U.S. and a number of other places around the world has been one of the few standout growth and jobs areas in the last few years. Credible studies show that over the last few years, at least a third of U.S. GDP growth (and a large portion of growth in high-paying jobs) came from the expansion of the U.S. energy industry. The absence of a strong multi-faceted recovery in the developed world has only highlighted industries such as oil production, and the advance of technology in shale oil development has made a big difference in America’s energy balance and strategic geopolitical position.

The price plunge is new, but if it is not reversed relatively quickly, it could make the apparently strong economic numbers in the U.S. in recent months seem like a lost warm memory by the middle of 2015. The problem, of course, is that the absence of pro-growth economic policies in the developed world (aside from monetary extremism) places a large premium on any industry that is actually growing and providing jobs and GDP. Given the fragility of both the global financial system and the economy, the plummet in the oil price is coming into a world in which any disruption can be harmful, even one resulting from a fall in prices of a major global input into the economic engine. The rise in the U.S. dollar in recent months also operates in the same direction, serving as another growth-dampening force to offset the consumer benefit of reduced-cost gasoline. Most people think the “tax cut” is more important overall than the growth-suppressive effects of the harm to the energy industry and the rise in the dollar, but we disagree.

Another important aspect of the price plunge is its impact on geopolitics. It is interesting that the oil price situation is slamming Russia especially strongly, as Russia has been on a roll in terms of unanswered aggressive moves towards its neighbors. In addition, Iran, one of Saudi Arabia’s chief adversaries, has been seriously hurt by the price decline. One could say that Saudi Arabia is also harmed by the fall in revenues, but it has more staying power than any other OPEC member and will likely (aside from other questions about its leadership succession and long-term stability) emerge stronger from this episode than it was before.





The United Emirates pulls out of the coalition:


(courtesy zero hedge)


Terrorism Works? UAE Suspends ISIS Attacks, Threatens To Pull Out Of Coalition


Following the disgusting images of a Jordanian pilot being burned (allegedly) burned alive by ISIS yesterday, the US coalition against the terrorists appears to be faltering. AsThe NY Times reports, The United Arab Emirates, a crucial Arab ally in the American-led coalition against the Islamic State, suspended airstrikes against the Sunni extremist group in December, citing fears for its pilots’ safety. The UAE made it clear its pilots will not return to the fight until the Pentagon improve its search-and-rescue efforts, shifting the base of support from Kuwait to Iraq, after foreign minister, Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, “let [Barabara Leaf] have it over this,” the new American ambassador, why Central Command, in his country’s view, had not put proper assets in northern Iraq for rescuing downed pilots.


As The NY Times reports,

The United Arab Emirates, a crucial Arab ally in the American-led coalition against the Islamic State, suspended airstrikes against the Sunni extremist group in December, citing fears for its pilots’ safety after a Jordanian pilot was captured and who the extremists said had been burned to death, United States officials said Tuesday.


The United Arab Emirates are demanding that the Pentagon improve its search-and-rescue efforts, including the use of V-22 Osprey tilt-rotor aircraft, in northern Iraq, closer to the battleground, instead of basing the missions in Kuwait, administration officials said. The country’s pilots will not rejoin the fight until the Ospreys, which take off and land like helicopters but fly like planes, are put in place in northern Iraq.


The United Arab Emirates notified the United States Central Command that they were suspending flights, administration officials said, after First Lt. Moaz al-Kasasbeh of the Jordanian Air Force was captured when his plane went down near Raqqa, Syria. A senior American military official said Islamic State militants “grabbed” Lieutenant Kasasbeh “within just a few minutes.” He added, “There was no time for us to engage.”


But United Arab Emirates officials questioned the American military about whether rescue teams would have been able to reach Lieutenant Kasasbeh even if there had been more time to do so, administration officials said.


In a blunt exchange last week in Abu Dhabi, the United Arab Emirates’ foreign minister, Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, asked Barbara Leaf, the new American ambassador, why Central Command, in his country’s view, had not put proper assets in northern Iraq for rescuing downed pilots, a senior administration official said.


“He let her have it over this,” the official said, speaking on the condition of anonymity because he was not authorized to speak publicly on the issue. It was Ms. Leaf’s first courtesy call on the foreign minister.


The exchange followed a month of disputes between American military officials and their counterparts in the United Arab Emirates, who have also expressed concern that the United States has allowed Iran to play a growing role in the fight against the Islamic State, also known as ISIS and ISIL.


A spokesman with Central Command declined to comment.

*  *  *

Fragile coalition indeed… or is terrorism winning?


“Luckily” – as UAE pulls out – Jordan has just committed greater military presence to its Syrian and Iraqi borders






Your more important currency crosses early Wednesday morning:



Eur/USA 1.1452 down  .0005

USA/JAPAN YEN 117.47  down .186

GBP/USA 1.5211 up .0073

USA/CAN 1.2446 up .0002

This morning in Europe, the euro is down, trading   now well above the 1.14 level at 1.1452 as Europe reacts to deflation,   announcements of massive stimulation and today crumbling 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 19 basis points and settling well below the 118 barrier to 117.47 yen to the dollar. The pound was up this morning as it now trades just above the 1.52 level at 1.5211.(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 stopped its descent but today it is down a fraction  and is trading  at 1.2446 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: Wednesday morning : up 342.89 points or 1.98%

Trading from Europe and Asia:
1. Europe stocks all in the red

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

Gold very early morning trading: $1265.00




Early Wednesday morning USA 10 year bond yield: 1.78% !!!  down  1  in basis points from Tuesday night/

USA dollar index early Wednesday morning: 93.73  up 13 cents from Tuesday’s close.



This ends the early morning numbers.




And now for your closing numbers for Wednesday:




Closing Portuguese 10 year bond yield: 2.49% down 10 in basis points from Tuesday

Closing Japanese 10 year bond yield: .38% !!! up 1 in basis points from Tuesday

Your closing Spanish 10 year government bond,  Wednesday down 5 in basis points in yield from Tuesday night.

Spanish 10 year bond yield: 1.43% !!!!!!
Your Wednesday closing Italian 10 year bond yield: 1.55% down 4 in basis points from Tuesday:

trading 12 basis points higher than Spain.





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

Euro/USA: 1.1419  down .0037

USA/Japan: 117.34 down .316

Great Britain/USA: 1.5222 up .0082

USA/Canada: 1.2574 up .0132

The euro fell quite a bit this afternoon and it closed down by .0037  points finishing the day just above  the 1.14 level to 1.1419. The yen was up in the afternoon, and it was up by closing  to the tune of 32 basis points and closing well below  the 118 cross at 117.34 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 1.5222. The Canadian dollar fell apart again due to the fall in oil.  It closed at 1.2574 to the uSA 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.



Your closing 10 yr USA bond yield: 1.79 up 1 basis points


Your closing USA dollar index: 93.97 up 37 cents on the day.


European and Dow Jones stock index closes:


England FTSE  down 11.78 points or 0.17%

Paris CAC up 18.40 or 0.39%

German Dax up 20.37 or 0.19%

Spain’s Ibex down  20.40 or 0.19%

Italian FTSE-MIB down 69.82 or 0.33%



The Dow:up 6.62 or 0.04%

Nasdaq; down 16.09 or 0.34%



OIL: WTI 48.33 !!!!!!!

Brent: 54.79!!!!



Closing USA/Russian rouble cross: 67.55  down 13/4  roubles per dollar on the day. (oil falling)



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


Your New York trading for today:


Draghi Dashes Buffett Bounce As Crude Carnage Continues

For all the talking heads who piled into oil, oil stocks, oil credit, oil tea-cosies, and oil-producer FX…


Well that really escalated quickly…


WTI Crude’s biggest drop since Nov 28th 2014…after Jim Cramer said it “smelled like a bottom.”


Bit of Deja Vu all over again…


But stocks did their best to ignore the “oil’s up so everything’s fine” narrative until Draghi…


As it appears all that mattered was getting into the green YTD to prove how everything is awesome… they managed it until Draghi killed the dream…


The Dow outperformed as Visa and Disney added around 90 points to the index but we note the late day ramp after Buffet spoke…


which was then crushed by Draghi…



And Greek stocks were monkey-hammered


Treasury yields traded in quite a wide range on the day looked like closing unch but Draghi sent them reeling lower (still up 10-13bps on the week)


The EUR started to dump after Draghi’s decision…


Lifting the USD into the close…


Crude roundtripped but USD strength was ignored as gold and silver limped higher on the day


Charts: Bloomberg







High paying jobs in the oil sector and also the jobs that service that industry falter:


(courtesy ADP)


The Layoffs Begin: ADP Misses, Lowest Since September As “Businesses In The Energy Industries Are Scaling Back Payrolls”

Having beaten expectations for the past 4 months, in the face of a surge in jobless claims across Shale states, it appears January’s print is finally catching down to a weaker expectations as layoffs dominate headlines as even Mark Zandi is forced to admit Businesses in the energy and supplying industries are already scaling back payrolls in reaction to the collapse in oil prices, while industries benefiting from the lower prices have been slower to increase their hiring.” At 213k, this is the lowest print in 4 months, missing expectations of 223k and substantially lower than December’s upwardly revised 253k from 241k (not to mention November’s 274K) – the biggest drop since August as small business job growth slides significantly.



The details show small business job growth dropping…

Payrolls for businesses with 49 or fewer employees increased by 78,000 jobs in January, down from 115,000 in December. Employment among companies with 50-499 employees was the only segment showing an increase in January. These businesses added 95,000 jobs, up from December’s increase of 78,000. Employment at large companies – those with 500 or more employees – decreased from 61,000 the previous month to 40,000 jobs added in January. Companies with 500-999 employees added 14,000 jobs, down from December’s 23,000. Companies with over 1,000 employees added 26,000 jobs, down from December’s 39,000.


Goods-producing employment rose by 31,000 jobs in January, down from 47,000 jobs gained in December. The construction industry added 18,000 jobs, down from last month’s gain of 26,000. Meanwhile, manufacturing added 14,000 jobs in January, below December’s 23,000.


Service-providing employment rose by 183,000 jobs in January, down from 207,000 in December. The ADP National Employment Report indicates that professional/business services contributed 42,000 jobs in January, a large drop-off from December’s 72,000. Expansion in trade/transportation/utilities grew by 54,000, a sharp increase from December’s 40,000. The 11,000 new jobs added in financial activities is down from last month’s 14,000, but still well above the average of the past twelve months.

The ADP charts:

Change in Nonfarm Private Employment


Change in Total Nonfarm Private Employment


Change in Total Nonfarm Private Employment by Company Size


Change in Total Nonfarm Private Employment by Selected Industry


And ADP’s favorite infographic:

<br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />
ADP National Employment Report: Private Sector Employment Increased by 213,000 Jobs in January<br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />

Lousy new orders and worst service PMI ever:
(courtesy zero hedge)

Services PMI Worst New Order Growth Since Financial Crisis, ISM Weakest Employment Since Feb 2014

Markit Services PMI rose modestly but hovered at one-year lows at 54.2 in January suggesting, as Markit notes, “the near-halving in the pace of economic growth in the fourth quarter of 2014,” as companies struggle with new orders seeing the smallest increase since the financial crisis over six years ago. This comes on the heels of Decembers big miss in ISM Services, which rose – like PMI – very modestly to 56.7 (from a revised 56.5) with prices-paid tumbling to its lowest sinceJuly 2009 and employment lowest since Feb 2014. That said, it wouldn’t be a Baffle with BSeconomy if the two releases, which are supposed to at least agree on the direction of the move, did not report two diametrically opposite trends, with the ISM reporting that while Employment tumbled from 55.7 to 51.6, New Orders actually rose from 56.5 to 56.7. Markit? The other way around, with New Orders dropping from 53.4 to 52.3 as Employment rose from 51.5 to 52.3!

Confused yet? That’s the whole point.

According to Markit, economic growth has halved in Q4.

As Markit concludes,

“Companies are clearly struggling at the moment, with the surveys recording the smallest increase in new orders seen since the financial crisis six years ago amid weaker US and global economic growth and the strong US dollar.


At the same time, cost pressures hit a post-crisis low due to the oil price rout, which should pave the way for further falls in headline inflation in coming months.


Irrespective of the employment gain, the combination of lower inflation and slower economic growth suggests that any lifting of interest rates before mid-year is looking increasingly unlikely.

And ISM Services bounced very modestly but beat expectations…


And here is the ISM employment index:


The full breakdown:

Not pretty under the covers:


In summary: ugly, but better than expected, and very, very confusing. Just as algos like it.




We  will see you on Thursday.



bye for now



One comment

  1. Hey Harvey, Will you please go on USA watchdog with Greg and update us on your thoughts about the Gold and Silver market?


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